UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017

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

Commission File Number 001-36670

FAIRMOUNT SANTROL HOLDINGS INC.(Exact name of registrant as specified in its charter)

Delaware 34-1831554(State or Other Jurisdiction

of Incorporation or Organization) (I.R.S. Employer

Identification No.)

8834 Mayfield RoadChesterland, Ohio 44026

(Address of Principal Executive Offices) (Zip Code)

(800) 255-7263(Registrants Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(g) of the Securities Act:Title of each class: Name of each exchange on which registered:

Common Stock, par value $0.01 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Securities Act: None

Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesNoIndicatebycheckmarkiftheregistrantisnotrequiredtofilereportpursuanttoSection13orSection15(d)oftheAct.YesNoIndicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesNoIndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationS-T(232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles).YesNoIndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-K(229.405ofthischapter)isnotcontainedherein,andwillnotbecontained,tothebestoftheregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K.Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,orasmallerreportingcompany.Seethedefinitionsoflargeacceleratedfiler,acceleratedfilerandsmallerreportingcompanyinRule12b-2oftheExchangeAct(Checkone):Largeacceleratedfiler Acceleratedfiler Non-acceleratedfiler Smallerreportingcompany Emerginggrowthcompany Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).YesNoTheaggregatemarketvalueofcommonstockheldbynon-affiliatesoftheregistrantcomputedbyreferencetothelastsalesprice,$3.90asreportedontheNewYorkStockExchange,ofsuchcommonstockasoftheclosingoftradingonJune30,2017:$580,770,641NumberofsharesofCommonStockoutstanding,parvalue$0.01pershare,asofMarch9,2018:224,630,307

DOCUMENTS INCORPORATED BY REFERENCENone

Fairmount Santrol Holdings Inc. and Subsidiaries

Annual Report on Form 10-KFor the Fiscal Year Ended December 31, 2017

Table of Contents Page

Part I Item1 Business 6 Item1A RiskFactors 15 Item1B UnresolvedStaffComments 38 Item2 Properties 39 Item3 LegalProceedings 47 Item4 MineSafetyDisclosures 51

Part II Item5 MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities 52 Item6 SelectedFinancialData 54 Item7 ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations 55 Item7A QuantitativeandQualitativeDisclosuresaboutMarketRisk 73 Item8 FinancialStatementsandSupplementaryData 74 Item9 ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure 111 Item9A ControlsandProcedures 111 Item9B OtherInformation 112

Part III Item10 Directors,ExecutiveOfficers,andCorporateGovernance Item11 ExecutiveCompensation Item12 SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters Item13 CertainRelationshipsandRelatedTransactions,andDirectorIndependence Item14 PrincipalAccountingFeesandServices

Part IV Item15 ExhibitsandFinancialStatementSchedules 115 Item16 NotApplicable

Signatures 120

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Introduction to Part I, Item 1A and Item 3, and Part II, Item 7

WedefinevarioustermstosimplifythepresentationofinformationinthisAnnualReportonForm10-K(thisReport).

Unlesswestateotherwiseorthecontextotherwiserequires,thetermswe,us,our,FairmountSantrol,ourbusinessandourcompanyrefertoFairmountSantrolHoldingsInc.anditsconsolidatedsubsidiariesandpredecessorcompanies.

WeuseAdjustedEBITDAhereinasanon-GAAPmeasureofourfinancialperformance.

SeefurtherdiscussionofAdjustedEBITDAatItem7ManagementsDiscussionandAnalysis.

FORWARD-LOOKING STATEMENTS

ThisReportcontainsforward-lookingstatementsthataresubjecttorisksanduncertainties.AllstatementsotherthanstatementsofhistoricalfactincludedinthisReportareforward-lookingstatements.Forward-lookingstatementsgiveourcurrentexpectationsandprojectionsrelatingtoourfinancialcondition,resultsofoperations,plans,objectives,futureperformanceandbusiness.Youcanidentifyforward-lookingstatementsbythefactthattheydonotrelatestrictlytohistoricalorcurrentfacts.Thesestatementsmayincludewordssuchasanticipate,estimate,expect,project,plan,intend,believe,may,will,should,canhave,likelyandotherwordsandtermsofsimilarmeaninginconnectionwithanydiscussionofthetimingornatureoffutureoperatingorfinancialperformanceorotherevents.Forexample,allstatementswemakerelatingtoourestimatedandprojectedcosts,expenditures,cashflows,growthratesandfinancialresults,ourplansandobjectivesforfutureoperations,growthorinitiatives,strategiesortheexpectedoutcomeorimpactofpendingorthreatenedlitigationareforward-lookingstatements.Allforward-lookingstatementsaresubjecttorisksanduncertaintiesthatmaycauseactualresultstodiffermateriallyfromthosethatweexpected,including:

thepriceofoilandgasandthelevelofactivityintheoilandgasindustries;

thelevelofcashflowsgeneratedtoprovideadequateliquiditytomeetourworkingcapitalneeds,capitalexpenditures,andourleaseanddebtobligations;

increasingcostsoralackofdependabilityoravailabilityoftransportationservicesorinfrastructureandgeographicshiftsindemand;

changestoleasedterminalarrangementsimpactingourdistributionnetworkandabilitytodeliverourproductstoourcustomers;

actionsofourcompetitors,including,butnotlimitedto,theirabilitytoincreaseproductioncapacitytolevelsorestablishadditionalproductionfacilities,whichcauseanimbalanceinsupplyanddemandresultinginlowermarketprices;

ourrightsandabilitytomineourpropertiesandourrenewalorreceiptoftherequiredpermitsandapprovalsfromgovernmentalauthoritiesandotherthirdparties;

fluctuationsindemandandpricingforrawandcoatedsand-basedproppantsorthedevelopmentofeithereffectivealternativeproppantsornewprocessestoreplacehydraulicfracturing;

continuingpressureonmarket-basedpricing;

lowerofcostormarketinventoryadjustmentsand/orobsoleteinventory;

ourabilitytoprotectourintellectualpropertyrights;

ourabilitytocommercializePropelSSPproppants;

lossof,orreductionin,businessfromourlargestcustomers;

ourexposuretothecreditriskofourcustomersandanypotentialmaterialnonpayments,bankruptcies,and/ornonperformancebyourcustomers;

ourtransactionsin,andoperatingsubsidiarieswith,functionalcurrenciesotherthantheU.S.dollar.WeareexposedtofluctuationsinexchangeratesofthesecurrenciescomparedtotheU.S.dollar,whichistheprimarycurrencyinwhichweoperate.Thesefluctuationsmaybesignificant,andmaynotbefullymitigatedbyriskmanagementtechniques,suchasforeigncurrencyhedging;

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changesinU.S.orinternationalpoliticaloreconomicconditions,couldadverselyimpactouroperatingresults;

fluctuationsindemandforindustrialandrecreationalsand;

operatingrisksthatarebeyondourcontrol,suchaschangesinthepriceandavailabilityoftransportation,naturalgasorelectricity;unusualorunexpectedgeologicalformationsorpressures;cave-ins,pitwallfailuresorrockfalls;orunanticipatedground,gradeorwaterconditions;

ourdependenceonourWedronSilicasand-miningfacilityforasignificantportionofoursales,whichcurrentlysuppliesalargemajorityofourNorthernWhitefracsandandaportionofourIndustrial&RecreationalProducts(I&R)segmentsandsoldintoourmarkets;

theavailabilityofrawmaterialstosupportourmanufacturingofvalue-addedproppants;

diminishedaccesstowater;

challengestoourtitletoourmineralpropertiesandwaterrights;

ourabilitytomakecapitalexpenditurestomaintain,developandincreaseourassetbaseandourabilitytoobtainneededcapitalorfinancingonsatisfactoryterms,includingfinancingforexistingcommitmentssuchasfuturerailcardeliveries;

thepotentialimpairmentofourassetgroups,includingourmineralreserves,plant,equipment,goodwill,andintangibleassetsasaresultofmarketconditions;

substantialindebtedness,leaseandpensionobligations;

restrictionsimposedbyourindebtednessandleaseobligationsonourcurrentandfutureoperations;

theaccuracyofourestimatesofourmineralreservesandourabilitytominethem;

potentialdisruptionofouroperationsduetosevereweatherconditions,suchaswindstorms,icestorms,freezingtemperatures,tornadoes,electricalstorms,andfloods,whichoccurinareaswhereweoperate;

ashortageofskilledlaborandrisinglaborcostsintheminingindustry;

increasesinthepricesof,orinterruptionsinthesupplyof,naturalgasandelectricity,oranyotherenergysources;

ourabilitytoattractandretainkeypersonnel,includingtheimpactofuncertaintiesrelatingtotheplannedmergerwithUniminCorporation(Unimin);

ourabilitytomaintainsatisfactorylaborrelations;

silica-relatedhealthissuesandcorrespondinglitigationandregulation;

ourabilitytomaintaineffectivequalitycontrolsystemsatourmining,processingandproductionfacilities;

fluctuationsinoursalesandresultsofoperationsduetoseasonalityandotherfactors;

interruptionsorfailuresinourinformationtechnologysystems;

failuretocomplywiththeprovisionsoftheForeignCorruptPracticesAct(FCPA);

theimpactofaterroristattackorarmedconflict;

cybersecuritybreaches;

ourfailuretomaintainadequateinternalcontrols;

extensiveandevolvingenvironmental,mining,healthandsafety,licensing,reclamationandotherregulation(andchangesintheirenforcementorinterpretation);

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ourabilitytoacquire,maintainorrenewfinancialassurancesrelatedtothereclamationandrestorationofminingproperty;

legal,regulatoryandothermattersthatmayaffectourabilitytocompletetheplannedmergerwithUnimin,includingtheinabilitytocompletethemergerduetothefailuretoobtainstockholderapprovalorgovernmentalorregulatoryclearances;

ourabilitytosuccessfullyintegrateourbusinesswithUniminsbusinessandtoachieveanticipatedsynergies,andtheanticipatedcost,timingandcomplexityofintegrationefforts;

thefuturefinancialperformance,anticipatedliquidityandcapitalexpendituresofthecombinedcompanyandotherrisksrelatedtotheoperationofthecombinedcompany;and

otherfactorsdisclosedinthesectionentitledRiskFactorsandelsewhereinthisReport.

Wederivemanyofourforward-lookingstatementsfromouroperatingbudgetsandforecasts,whicharebasedonmanydetailedassumptions.Whilewebelievethatourassumptionsarereasonable,wecautionthatitisverydifficulttopredicttheimpactofknownfactors,anditisimpossibleforustoanticipateallfactorsthatcouldaffectouractualresults.Importantfactorsthatcouldcauseactualresultstodiffermateriallyfromourexpectations,orcautionarystatements,aredisclosedunderthesectionsentitledRiskFactorsandManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperationsinthisReport.Allwrittenandoralforward-lookingstatementsattributabletous,orpersonsactingonourbehalf,areexpresslyqualifiedintheirentiretybythesecautionarystatementsaswellasothercautionarystatementsthataremadefromtimetotimeinourotherSECfilingsandpubliccommunications.Youshouldevaluateallforward-lookingstatementsmadeinthisReportinthecontextoftheserisksanduncertainties.

Wecautionyouthattheimportantfactorsreferencedabovemaynotcontainallofthefactorsthatareimportanttoyou.Inaddition,wecannotassureyouthatwewillrealizetheresultsordevelopmentsweexpectoranticipateor,evenifsubstantiallyrealized,thattheywillresultintheconsequencesoraffectusorouroperationsinthewayweexpect.Theforward-lookingstatementsincludedinthisReportaremadeonlyasofthedatehereof.Weundertakenoobligationtoupdateorreviseanyforward-lookingstatementasaresultofnewinformation,futureeventsorotherwise,exceptasotherwiserequiredbylaw.

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ITEM 1. BUSINESS

Our Company

Business Overview

Weareoneoftheworldslargestprovidersofsand-basedproppantsolutionsandfornearly40yearshavebeenapioneerinthedevelopmentofhighperformanceproppantsusedbyExploration&Production(E&P)companiestoenhancetheproductivityoftheiroilandgaswells.Additionally,formorethan120years,weandourpredecessorcompanieshaveprovidedhighqualitysand-basedproducts,strongtechnicalleadershipandapplicationsknowledgetoendusersintheI&Rmarkets.

Asoneoftheindustryleaders,ourassetbaseatDecember31,2017included893.4milliontonsofprovenandprobablemineralreserves,whichwebelieveisoneofthelargestreservebasesintheindustry.AsofMarch2018,wehaveelevensandprocessingfacilities,tenofwhichareactive,with17.5milliontonsofannualsandprocessingcapacity.WerecentlyrestartedourWexford,Michigansandprocessingfacilitytoaccommodateincreasedcustomerdemand.Atthistime,allofourremainingsandprocessingfacilitiesareopenwiththeexceptionofHagerBay,Wisconsin.InJuly2017,weenteredintoa40-yearleaseagreementforapproximately3,250acresofsandreservesinKermit,Texas(KermitorWestTexas)toservedemandforproppantinthePermianbasin.Facilitiesonthispropertyareunderconstructionandexpectedtobecommissionedduringthesecondquarterof2018withthecapacitytoproduce3.0milliontonsofsandannually.Wealsohaveninecoatingfacilities(sixofwhichareactive)withinexcessof2.0milliontonsofannualcoatingcapacity.

Asoneofthenationslongestcontinuouslyoperatingminingorganizations,wehavedevelopedastrongcommitmenttoenvironmentalstewardshipandtothethreepillarsofSustainableDevelopment:People,PlanetandProsperity.OurstrongcommitmenttosafetyisreflectedinthehealthandsafetyofouremployeesandisillustratedbyourachievingaconsistentlylowrecordableincidentrateamongoursimilarlysizedindustrialsandcompetitorsaswellasoneofthelowestratesforallthosereportingintheIndustrialMiningAssociationofNorthAmerica.Since2012,ouremployeeshavedemonstratedourcommitmenttoourcommunitiesbydonatingover73,000hoursofcompany-paidvolunteerhours,aswellassignificantpersonalvolunteerhours,intothecommunitiesinwhichweliveandoperate.Wearefocusedonenvironmentalstewardship,and28ofourfacilitiesnowgeneratezerowastetolandfills.Additionally,weexecuteduponannualinitiativestoreduceourcarbonemissionsandhaveplantednearly540,000treessince2012inordertooffsetourremainingTierIandTier2emissions.Webelieveadheringtosustainabledevelopmentprinciplesisnotonlytherightthingtodo,butalsoresultsinahigherlevelofengagementandcommitmentfromouremployees,betterrelationshipswithourcommunitiesand,asaresult,astrongerbasefromwhichtopursueprofitablegrowthoverthelong-term.Abidingbytheseguidingprinciples,ourcorporatemottoisDoGood.DoWell.

Overaperiodofnearly40years,FairmountSantrolhasbuiltaverticallyintegratedoperationthatcombinesmining,sandprocessing,resinmanufacturingandcoatingoperationswithabroadlogisticsnetworkandstate-of-the-artresearchanddevelopmentcapabilities.Ourabilitytointegrateandleverageourassetbasetoprovidecomprehensiveproppantsolutionshasallowedustobecomealong-term,trustedpartnertoourcustomers.

WearecapableofClassIrailroaddeliveriestoeachofNorthAmericasmajoroilandgasproducingbasinsandalsohavetheflexibilitytoshipourproductviabarge,marineterminalsandtruckstoreachourcustomersasneeded.Weoperateanintegratedlogisticsplatformconsistingof44proppantdistributionterminalsandafleetofapproximately10,569railcars,whichincludes1,723customerrailcars,consideringcarreturnsthattookplacethroughouttheyearandsubleases.Ourunittraincapabilitiesincludefourproductionfacilitiesandtwelvein-basinterminals,whichreducefreightcostsandimprovecycletimesforourrailcarfleet.Inordertobetteralignourlogisticsnetworkwithcustomerdemandandtoreducecosts,wediscontinuedactivityatfourtransloadingterminalsin2017.

Ouroperationsareorganizedintotwosegmentsbasedontheprimaryendmarketsweserve:(i)ProppantSolutionsand(ii)Industrial&RecreationalProducts.OurProppantSolutionssegmentpredominantlyprovidessand-basedproppantsforuseinhydraulicfracturingoperationsthroughouttheU.S.andCanada,Argentina,Mexico,China,andnorthernEurope.OurI&Rsegmentprovidesraw,coated,andcustomblendedsandstothefoundry,buildingproducts,glass,turfandlandscapeandfiltrationindustriesprimarilyinNorthAmerica.Webelieveourtwomarketsegmentsarecomplementary.Ourabilitytoselltoawiderangeofcustomersacrossmultipleendmarketsallowsus

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tomaximizetherecoveryofourreservebasewithinourminingoperationsandtoreducethecyclicalityofourearnings.

In2017,ourProppantSolutionssegmentsold10.3milliontonsofproppantwithrevenuesof$834.7million(87%oftotalcompanyrevenues)andgrossprofitof$244.0million.Thisrepresentsanincreaseof60%,101%,and821%,respectively,from2016.Proppantsrepresentedapproximately78%and86%oftotalcompanyrevenuesfor2016and2015,respectively.For2017,ourI&Rsegmenthadsalesvolumeof2.5milliontons,flatto2016,withrevenuesof$125.0millionandgrossprofitof$56.0million,whichrepresentsanincreaseof5%and15%,respectively,from2016.

Corporate History

WewereincorporatedasaDelawarecorporationin1986.Ourpredecessorcompaniesbeganoperationsover120yearsago.OnOctober3,2014,wecompletedanInitialPublicOffering.WearelistedunderthetickersymbolFMSAontheNewYorkStockExchange(NYSE).

Ourcorporateheadquartersislocatedat8834MayfieldRoad,Chesterland,Ohio44026.Ourtelephonenumberis(800)255-7263.Ourcompanywebsiteiswww.fairmountsantrol.com.WemakeavailablefreeofchargeourannualreportonForm10-K,quarterlyreportsonForm10-Q,currentreportsonForm8-K,andamendmentstothosereportsassoonasreasonablypracticableafterwefileorfurnishsuchreportstotheSecuritiesandExchangeCommission(theSEC).TheinformationonourwebsiteisnotincorporatedbyreferenceinorconsideredtobeapartofthisAnnualReportonForm10-K.

Proposed Merger with Unimin Corporation

OnDecember11,2017,weenteredintoamergeragreementwithUniminandcertainotherpartieswithrespecttotheproposedcombinationofthebusinessesofUniminandFairmountSantrol.Themergeragreementprovidesthat,uponthesatisfactionorwaiveroftheconditionscontainedintheagreement,adirectwhollyownedsubsidiaryofUniminwillbemergedwithandintoFairmountSantrol,withFairmountSantrolsurvivingsuchmergerandbecomingadirectwhollyownedsubsidiaryofUnimin(theMerger).InaccordancewiththetermsoftheMergeragreement(MergerAgreement),FairmountSantrolstockholdersintheaggregate(includingholdersofcertainFairmountSantrolequityawards)willreceive$170millionincashand35%ofthecommonstockofUnimin,withSCR-SibelcoNV(Sibelco),theexistingparentcompanyofUnimin,owningtheremaining65%.TheMergerissubjectto,amongotherthings,approvalbyFairmountSantrolsstockholders,listingofUniminscommonstockontheNYSE,andcertainregulatoryapprovals.UponcompletionoftheMerger,FairmountSantrolwoulddelistandnolongertradeontheNYSE.Thetransactionisexpectedtocloseinmid-2018,subjecttosatisfactionoftheclosingconditions.

TheMergerAgreementcontainscertainterminationrightsandwemayberequiredtopayUniminaterminationfeeof$52million.

In2017,weincurred$8.3millioninexpensesassociatedwiththeMerger.

ForfurtherinformationontheMerger,refertotheMergerAgreement,acopyofwhichwasfiledasExhibit2.1toourCurrentReportonForm8-KfiledwiththeSEConDecember12,2017,andwhichisincorporatedbyreferenceherein.

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INDUSTRY

Overview

Thesilicasandindustryconsistsofbusinessesthatareinvolvedinthemining,processing,andsaleofsilicasandandsilicasand-basedproducts.Monocrystallinesilica,alsoreferredtoassilica,industrialsandandgravel,silicasand,andquartzsand,isatermappliedtosandsandgravelscontainingahighpercentageofsilica(alsoknownassilicondioxideorSiO2)intheformofquartz.

Thelowrelativecostandspecialpropertiesofmonocrystallinesilicachemistry,purity,grainsize,color,inertness,hardness,andresistancetohightemperaturesmakeitcriticaltoavarietyofindustriesandend-usemarkets,includingtheproductionofmoldsandcoresformetalcastings,glassproduction,andthemanufacturingofbuildingproducts.Inparticular,monocrystallinesilicaisakeyinputinthehydraulicfracturingtechniquesusedinthedevelopmentofoilandgasresourcebasins.

Frac Sand Extraction, Processing, and Distribution

Rawfracsandisanaturallyoccurringmineralthatisminedandprocessed.Whilethespecificextractionmethodutilizeddependsprimarilyonthegeologicconditions,mostrawfracsandisminedusingconventionalopen-pitextractionmethods.Thecomposition,depth,andchemicalpurityofthesandalsodictatetheprocessingmethodandequipmentutilized.Afterextraction,rawfracsandiswashedwithwatertoremovefineimpuritiessuchasclayandorganicparticles,withadditionalproceduresusedwhencontaminantsarenoteasilyremovable.Thefinalstepsintheproductionprocessinvolvethedryingandscreeningoftherawfracsandaccordingtomeshsize.

Mostfracsandisshippedinbulkfromtheprocessingfacilitytocustomersbytruck,railorbarge.Becausetransportationcostsmayrepresentasignificantportionoftheoveralldeliveredproductcost,shippinginlargequantities,particularlywhenshippingoverlongdistances,providesasignificantcostadvantagetothesuppliers,whichhighlightstheimportanceofrailorbargeaccessforlowcostdelivery.Asaresult,facilitylocationandlogisticscapabilitiesareanimportantconsiderationforsuppliersandcustomers.Inaddition,webelievethat,overtime,thelargestproppantcustomerswouldprefertoconsolidatetheirpurchasesacrossasmallergroupofsupplierswithrobustlogisticscapabilitiesandabroadofferingofhighperformanceproppants.

Oil and Gas Proppant Market

Advancesinoilandgasextractiontechniques,suchashorizontaldrillingandhydraulicfracturing,haveallowedforsignificantlygreaterextractionofoilandgastrappedwithinshaleformations.Thehydraulicfracturingprocessconsistsofpumpingfluidsdownawellatpressuressufficienttocreatefracturesinthetargetedhydrocarbon-bearingrockformationinordertoincreasetheflowrateofhydrocarbonsfromthewell.Agranularmaterial,calledproppant,issuspendedandtransportedinthefluidandfillsthefracture,proppingitopenoncehigh-pressurepumpingstops.Theproppant-filledfracturecreatesaconductivechannelthroughwhichthehydrocarbonscanflowmorefreelyfromtheformationintothewellboreandthentothesurface.Proppantsthereforeperformthevitalfunctionofpromotingtheflow,orconductivity,ofhydrocarbonsoverawellsproductivelife.Infracturingawell,operatorsselectaproppantthatistransportableintothefracture,iscompatiblewithfracandwellborefluids,permitsacceptablecleanupoffracfluidsandcanresistproppantflowback.Inaddition,theproppantmustberesistanttocrushingundertheearthsclosurestressandreservoirtemperature.

Therearethreeprimarytypesofproppantthatareutilizedinthehydraulicfracturingprocess:rawfracsand,coatedsandandmanufacturedceramicbeads.Customerschooseamongtheseproppanttypesbasedonthegeologyofthereservoir,expectedwellpressures,proppantflowbackconcerns,andproductcost.Giventhepricedifferencesbetweenthevariousproppantproductsandwell-specificconsiderations,E&Pcompaniesarecontinuallyevaluatingtheoptimalmixoflower-cost,lower-conductivityfracsandandhigher-cost,higher-conductivitycoatedsandandceramicsinordertobestaddressthegeologyofthewellandtomaximizewellproductivityandeconomicreturns.

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Proppant Industry Demand Trends

Overthepastdecade,E&PcompaniesincreasinglyfocusedonexploitingthevasthydrocarbonreservescontainedinNorthAmericasoilandgasreservoirs.Usingadvancedtechniques,suchashorizontaldrillingandhydraulicfracturing,NorthAmericanproductionofoilandgashasgrownrapidlyasthedevelopmentofhorizontaldrillingtechnologieshasevolved.Morerecently,E&Pandoilfieldservicecompanieshaverefinedtheirwelldesignsandhydraulicfracturingtechniquestoachievemoreefficientproduction.Thesechangesintechniqueshaveincreasedthedemandforproppants,byincreasingtheamountofproppantusedperfracstage(proppantintensity)associatedwithfinergradesofproppant.

Thisfocusonefficiencyandprofitabilityledtonewdevelopmenttechniques,suchasincreaseduseofpaddrillingwhichresultedinagreaternumberofwellsdrilledperrig,andincorporatedlongerlaterallengthsandshorterintervalsbetweenfracstages,whichresultedinmorefracturingstagesperwell.Inaddition,theamountofproppantusedperstageincreaseddramatically,compoundingtheincreaseintotaldemandforproppant.

Asaresultofthesetrends,NorthAmericandemandforallproppantsincreasedrapidlyoverthepasttenyears.Thisgrowthwasfueledbythecontinuedincreaseinbothwellsdrilledandproppantusedperwell.Individualwellswerebeingcompletedwithasmuchas25,000tonsofproppant.ThisrepresentedasignificantincreaseintheusageofproppantperwelloverjustafewyearsagoandwasdrivenbyimprovedrecoveryratesforE&Pcompaniesathigherlevelsofproppantintensitywithgreaterdemandforfinergradesofsand.

Inresponsetoimprovinghydrocarbonprices,oilandgasoperatorssteadilybeganincreasingrigcountsinthethirdquarterof2016andthistrendcontinuedthroughtheendof2017.AccordingtoBakerHughesrigcountdata,UnitedStateshorizontallandrigcountshavegrowntoanaverageof740rigsduring2017fromanaverageof400rigsin2016.During2017,horizontallandrigsintheUnitedStatesrangedfromalowpointof534rigsinthefirstquartertoover800inthefourthquarter2017.Thissignificantriseinhorizontalrigcountshasresultedinincreaseddrillingactivityanddemandforproppantsthroughouttheyear.Thewelldesigntrendofusingmoreproppantperlateralfootandlongerhorizontallateralscontinuedin2017andfurthercontributedtodemandforproppants.

Proppant Industry Supply Trends

Tokeeppacewithrapidlygrowingdemand,theavailablesupplyofproppantincreasedin2017throughthereactivationofidledfacilities,thebuildingofnewfacilities,andcapacityexpansionsatexistingfacilities.During2017,anumberofnewfacilitieswereannouncedinWestTexasinresponsetoincreasingdemandforproppantinthePermianbasins.ThesefacilitiesareexpectedtoresultinlowerdeliveredcostwithinthePermianbasinduetothefacilitiesclosergeographicalproximitytowellsitesrelativetoothersourcesofsupply.ThemajorityoftheseWestTexasfacilitiesareexpectedtobecommissionedin2018.

Our Proppant Products

Weabroadsuiteofproppantproductsdesignedtoaddressnearlyallwellenvironmentsandrelateddown-holechallengesfacedbyourcustomers.OurproppantproductsincludeNorthernWhitesand,meetingthemostcommonAPI-specifiedproppantcategories,aswellasregionalandlocalsandsinVoca,Texas;Kermit,Texas;andWexford,Michigan.RevenueinourProppantsolutionsbusinessspansthesecategoriesofrawsandandincludesourvalue-addedproductsofresin-coatedproppantsandPropelSSP.AllrevenuesinourProppantSolutionssegmentarederivedfromtheseproductsineachof2017,2016,and2015.

NorthernWhiteFracSand.OurNorthernWhitefracsandisminedfromdepositslocatedinourIllinois,Wisconsin,Missouri,andMinnesotafacilities.Thesereservesaregenerallycharacterizedbyhighpurity,significantroundnessandsphericity,andlowturbidity.AllofourNorthernWhiterawsandproppantproductsmeetthestandardssetbytheAPI.

API-SpecBrownFracSand.OurAPI-specbrownsandreservesarelocatedinTexasandmarketedunderthenameTexasGoldfracsand.OurTexasGoldfracsandhaslowercrushresistancethanourNorthernWhitefracsand,butitisaneffectivesolutionforlowpressurewells.Thesereservesareincloseproximitytomajoroilandgas

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producingbasinsinTexas,includingtheEagleFordShaleandthePermianBasin,whichprovidesthemwithasignificanttransportationcostadvantagerelativetoAPI-specfracsandsourcedfrommoredistantlocations.

Value-AddedProppants.WecoataportionofourAPI-specproducedsandwithresintoenhanceitsperformanceasaproppantusingproprietaryresinformulationsandcoatingtechnologies.Ourvalue-addedproppantsaregenerallyusedinhighertemperatureandhigherpressurewellenvironmentsandaremarketedtoenduserswhorequireincreasedconductivityinhigherpressurewells,highcrushresistance,and/orenhancedflowbackcontrolinordertoenhancetheproductivityoftheirwells.

Ourcoatedsandproductsaresoldasbothtempered(orpre-cured)andcurable(orbonding)products.Curablecoatedsandbondsdownholeastheformationheatcausesneighboringcoatedsandgrainstopolymerizewithoneanotherlockingproppantintoplace.Thispreventsproppantfromflowingbackoutofthefracturewhentheoilornaturalgaswellcommencesproduction.Forcertainresinproducts,theresinschemicalpropertiesaretriggeredbytheintroductionofanactivatorintothefracfluid.Weformulate,manufacture,andsellactivators,whichworkwiththespecificchemistryofourresins.Temperedproductsdonotrequireactivationbecausetheyarenotintendedtobond,ratherbringadditionalstrengthtotheproppant.

Wemanufactureproprietarycoatingsdesignedtoaddresstheevolvingneedsofourcustomers,andhavecontinuedtoinvestinourresearchanddevelopmentandtechnicalmarketingcapabilitiestomaximizethesalesofourcoatedproducts.Wealsocoatceramicproductpurchasedfromthird-partysuppliers.ThisproductismarketedasHyperPropproppantsandhasthestrengthcharacteristicsofceramicandtheflowbackperformancecharacteristicsofcoatedsand.

ProprietaryPerformanceProducts

PropelSSP.OurpatentedPropelSSPproductutilizesapolymercoatingappliedtoaproppantsubstrate.Uponcontactwithwater,thecoatinghydratesandswellsrapidlytocreateahydrogelaroundtheproppantsubstrate.Thehydrogellayer,whichisprimarilywater,isattachedtotheproppantparticleandprovidesanearlythreefoldincreaseinthehydrostaticradiusoftheproppant.Testresultsindicatethatthelowerspecificgravityallowsgreatervolumesofproppantand/orcoarsermeshsizescoatedwiththePropelSSPproducttobecarrieddeepintothefracture,whichinturnallowmorehydrocarbonstoescapeintothewellbore.Asaresult,fieldtrialshaveshownavarietyofbenefits,includingincreasedproduction,decreaseduseoffluids,andreducedpumpingtime.

In2017,weintroducedPropelSSP350,whichexpandstheabilitytoplaceproppantwithPropelSSPtechnologybysignificantlyextendingtherangeofwatercompatibilityfromfreshwatertoultra-highsalinityproducedwater.Thisextensionallowsoilandgasoperatorstoreusetheirproducedwater,thusreducingwatermanagementlogisticsandassociatedcosts.

Our Product Delivery

Wehaveestablishedanoilandgaslogisticsnetworkthatwebelieveishighlyresponsivetoourcustomersneeds.Oneofthemostimportantpurchasingcriteriaofourproppantcustomersisourabilitytodelivertheproductsourcustomersdemandattheirdesiredtimeandlocation.Webelievewehaveoneoftheindustryslargestdistributionfootprintswith44activeoilandgasdistributionterminals.Wealsohavearailcarfleetofapproximately10,569railcarsasofDecember31,2017,providingustheflexibilityfordeliveringproducttoourlocationsin-basinwhencustomersrequireit.WebelieveweareoneofthefewproppantproducerscapableofClassIrailroaddeliveriestoeachofNorthAmericasmajoroilandgas-producingbasins.In2017,weshippedapproximately74%ofourNorthAmericanproppantvolumethroughourterminalnetwork.

Theabilitytoshipproppantthroughunittrains(atraininwhichallcarscarrythesamecommodityandarenotsplituporstoredenroute)isbecomingincreasinglyimportantinordertocost-effectivelyprovidethelargequantitiesofproductrequiredbyevolvingwellcompletionmethods.Wehaveunittraincapabilitiesatfourofourproductionfacilitiesandtwelveofourdestinationterminalsandshippedover545unittrainsofproductin2017.TheproductionunittraincapabilityallowsourcustomersthatprefertopurchasetheproductFOBplanttoefficientlyshiptheproppanttotheirownfacilities.

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I&R Industry Trends

DemandintheI&Rendmarketsisrelativelystableandisprimarilyinfluencedbykeymacroeconomicdriverssuchashousingstarts,lightvehiclesales,repairandremodelactivity,andindustrialproduction.Therecenteconomicrecoveryhasincreaseddemandinthefoundry,buildingproducts,andglassmakingendmarkets.TheprimaryendmarketsservedbyourI&Rsegmentarefoundry,buildingproducts,sportsandrecreation,glassmaking,andfiltration.AllrevenuesinourI&Rsegmentarederivedfromthefollowingproductsineachof2017,2016,and2015.In2017,wefocusedoursaleseffortsinhighermargin,value-addedproductwhichcontributedtohighersalesandprofitabilitygrowthonanannualbasisoverprioryearlevels.

Our I&R Products

Foundry.Wecurrentlysupplythefoundryindustrywithmultiplegradesofhighpurity,round,angular,andsub-angularsandsformoldingandcore-makingapplications,withproductssoldprimarilyintheU.S.,Canada,Mexico,Japan,andChina.Foundrysandsarecharacterizedbyhighpurity,roundandsub-angularsandspreciselyscreenedtoperformunderavarietyofmetalcastingconditions.Thesefactorsdictatetherefractorylevelandphysicalcharacteristicsofthemoldandcore,whichhaveasignificanteffectonthequalityofthecastingsproducedinthefoundry.Ourresinbindersprovidethenecessarybondingofmoldsandcoresincastingapplicationsandaredesignedtoimproveoverallproductivityandenvironmentconditionsintheworkplace.

Ourextensiveproductionexperienceandtechnicalknowledgeofthefoundryindustryhavedrivenseveralindustryadvances.Forexample,wehavedevelopedourSignatureSeriesoflowsmoke,lowodorcoatedsandsthatprovideloweroverallemissionswhileprovidingasaferandmorefavorableworkenvironment.Ourexpertisewithcoatedsandsenablesustoprovidecoatedsandformoldsandcoreswhereexceptionaldimensionalaccuracyandsurfacefinisharerequired.AnexampleisTruCoat,whichhasbeenengineeredtodramaticallylowerin-plantsmoke,odor,andemissionsaswellasdeliversuperiorperformancemakingTruCoatoneofthemostenvironmentallysoundproductsonthemarket.

Webelievewewerethefirstsandoperatortoblendsands,whichhasprovenextremelysuccessfulforspecialtyironandaluminumapplications.Asfoundriescontinuetoutilizehighercostbinderstoimprovethequalityoftheircastings,minimizetheuseofbinderswhichalsoreducesoverallenvironmentalimpact,theindustrycontinuestodemandhigherqualitysandstorealizethevalueofthesebinders.Ourchemistsandtechnicianssupporttheseapplicationswithcustomizedproductsthatminimizebinderusage,resultinginlowercoststofoundriesandhigherpricesforourproducts.

Glass.Weprovideawidevarietyofhighpurity,lowironsilicasandstotheglassmarket.Theglassindustryusesindustrialsandconsumptionfortheproductionofwindows,electronicdisplayscreens,photovoltaicpanels,glassbottles,andotherglassproducts.

BuildingProducts.Variousgradesandtypesofoursandsareusedforroofingshingles,asphalt,industrialflooringballastsand,bridgedecking,pipelining,andtankunderlayment.Wealsoworkwithourcustomerstoblendmineralsandchemicalstocreatecoloredflooringaggregates,concretecountertops,groutandplaster,includingthenewly-introducedAcceldust-preventingpolymericpaversand.

SportsandRecreation.Wearealeadingsupplierofvariousturfandlandscapeinfillproductstocontractors,municipalities,nurseries,andmassmerchandisers.Ourturf-relatedproductsareusedinmultiplemajorsportingfacilities,includingFirstEnergyStadiumandProgressiveFieldinCleveland,Ohio,PNCParkinPittsburgh,Pennsylvania,NotreDameStadiuminNotreDame,Indiana,andADPROSportsTrainingCenterFieldhouseinOrchardPark,NewYork.Inaddition,weareasignificantsupplierofbunkersand,topdressingsands,andall-purposesandstogolfcoursesandlandscapecontractorsthroughoutNorthAmerica.Oursandsarealsosuppliedtohorsetracksandtrainingfacilities.Wealsoprovidecoloredsandtoavarietyofmajorretailersforuseasplaysandandartsandcrafts.

Filtration.Weprovidehigh-qualityindustrialsandsandgravelsinawidevarietyofwaterandwastewaterfiltrationapplications.Overthepastseveralyears,weincreasedourfocusonthefiltrationmarket.Ourfullrangeofproductsaremonitoredwithanactivestatisticalprocesscontrolprogramtoensurecompliancewithallgovernmentand

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customerspecifications,includingtheAmericanWaterWorksandNationalSanitationFoundationstandards.Duetoourefforts,wehaveemergedasaleaderinsandandgravelproductsforprivate,public,andinstitutionalwaterfiltrationsystems.

Raw Materials

Ourproductsaredependentontheavailabilityofcertainrawmaterials,includingnaturalgasorpropane,resinsandadditives,baggingsupplies,andotherrawmaterials.Thesearereadilyavailablefromavarietyofsourcesandwearenotdependentonanyonesupplierofrawmaterials.

Our Customers

Sinceourinception,wehaveremainedfocusedondevelopingandsustainingaloyal,diversifiedcustomerbase.Currently,wemaintainlong-termcontractswithmanyofthelargestNorthAmericanoilfieldservicecompanies.Webelievethestrengthofourcustomerbaseisdrivenbyourcollaborativeapproachtoproductinnovationanddevelopment,reputationforhigh-qualityproducts,andextensivelogisticsnetwork.Certainofourtopcustomerrelationshipsdatebackover30years.Wehaveover75customersforouroilandgasproppantsandover830customersacrossallourendmarkets.IntheyearendedDecember31,2017,threecustomersexceeded10%ofrevenues.Thesecustomerscollectivelyaccountedfor45%ofrevenuesin2017.IntheyearendedDecember31,2016,twocustomersexceeded10%ofrevenues.Thesecustomerscollectivelyaccountedfor42%ofrevenuesin2016.

Weprimarilysellproductsundersupplyagreementswithtermsthatvarybycontract.Certainoftheagreementsrequirethecustomertopurchaseaspecifiedpercentageofitsproppantrequirementsfromus.Otheragreementsrequirethecustomertopurchaseaminimumvolumeofproppantfromus.Theseminimumvolumecontractstypicallyincludeatake-or-payortake-or-penaltyprovisionwhichtriggerscertainpenaltiesifthepurchasedvolumedoesnotmeettherequiredminimums.Specificcustomordersaregenerallyfilleduponrequest,andbacklogisnotamaterialfactor.

Research and Development and Technical Innovation

Wehaveahistoryofpartneringwithourcustomerstodevelopinnovativesolutionstoenhancetheeffectivenessofwellcompletions,fromconventionalshallowwellstothemostcomplex,multi-stage,horizontalwells.Thenatureofourverticallyintegratedmodelallowsustoparticipateineachphaseofproppantmanufacturinganddeliveryandprovidesusauniqueperspectiveintothecurrentandfutureneedsofourcustomers.Ourtechnicalsalesteamworkscloselywithmarketparticipantstodemonstratethevaluepropositionourproppantsofferandstimulatemarketdemandusingdataindicatingenhancedhydrocarbonrecoveries.

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Thetablebelowsummarizessomeofourmostsignificantproductinnovations:Innovation Year ResultPropel SSP 350 Products 2017 AccomplishesthesameresultsastheoriginalSSPtechnologywhenfacedwithbrackish,sea,or

producedwaterCoolSet Proppants 2014 Eliminatesneedforanactivatorforwelltemperaturesaslowas100FTrueSet Proppants 2016 Provideseffectiveflowbackcontrolandenhancedproduction,idealfordownholetemperatures

between150-300F,doesnotrequireanactivator,compatiblewithstandardfracfluidsandbreaktechnologies

PowerProp Proppants 2010 Technologythatdeliversstrengthandperformancecharacteristicssimilartoalight-weightceramic(patent-pending)

Bio-based Binder System 2010 Technologyforuseinmetalcastingindustry(patent-pending)Bio-Balls Ball Sealers 2006 WatersolubleballsealersthatareenvironmentallysafeanddonotrequireretrievalaftertreatmentEncapsulated Curable Proppant 1997 Highperformancevalue-addedproductsusedinflow-backcontrolDual Coat Technology 1995 DualcoatcurablecoatedsandforenhancedconductivityandflowbackcontrolDuring2017,2016,and2015,wespent$5.3million,$3.7million,and$5.0million,respectively,onresearchanddevelopment.

AlongwithcontinuedcommercialgrowthofPropelSSPproducts,additionaltrialprogramswereinitiatedbyoilandgasoperatorsin2017.PropelSSPproductsarebeingevaluatedtoimproveoperationalefficiencyandwellproductivity.WithPropelSSP,theperformancepropertiesoftheunderlyingproppantaremaintainedwhileoptimalproppantvolumeand/orcoarsermeshsizesarecarrieddeepintothefractures,inturnallowingmorehydrocarbonstoflowintothewellbore.ExtensivefieldtestshaveshownthebenefitsofPropelSSPproducts,includingincreasedproduction,reducedfluidandchemicalusage,andreducedpumpingtime.PropelSSP350productsaccomplishthesameresults,whileallowingcustomerstousebrackishwaterorreuseproducedwater.Waterreusereducesthefull-cyclewatermanagementcostandimpactonlocalcommunities.

Competition

TherearenumerouslargeandsmallproducersinallsandproducingregionsoftheUnitedStateswithwhomwecompete.OurmaincompetitorsintherawfracsandmarketincludeBadgerMiningCorporation,CARBOCeramics,Inc.,EmergeEnergyServicesLP,Hi-CrushPartnersLP,PreferredSandsLLC,SmartSandInc.,UniminCorporation,andU.S.SilicaHoldings,Inc.ManynewentrantstotherawfracsandmarketcompeteonanFOB-plantbasisandlackcomparabletransportationinfrastructuretomeetcustomerdemandsin-basin.Ourmaincompetitorsinthevalue-addedproppantmarketincludeAtlasResinProppantsLLC,MomentivePerformanceMaterialsInc.,UniminCorporation,PreferredSandsLLC,andU.S.SilicaHoldings,Inc.Themostimportantfactorsonwhichwecompeteinbothmarketsareproductquality,performance,sandandproppantcharacteristics,transportationcapabilities,proximityofsupplytowellsite,reliabilityofsupply,andprice.OurlargestcompetitorsacrossbothmarketsareU.S.SilicaHoldings,Inc.,UniminCorporation,andBadgerMiningCorporation(whichownsAtlasResinProppantsLLC).Webelieveweareuniquelypositionedtoutilizeourscaleofrawsandproductiontosupplyhigh-qualitysubstrateforcoatedproductsandleverageourtransportationinfrastructureforreliabledeliveryin-basin.

Duetoincreaseddemandforsandbasedproppants,therehasbeenanincreaseinthenumberoffracsandproducers.Moreover,asaresultofthisincreaseddemand,existingfracsandproducershaveaddedtoorexpandedtheirfracsandproductioncapacity,therebyincreasingcompetition.Demandforsand-basedproppantsiscloselylinkedtoproppantconsumptionpatternsforthecompletionofoilandnaturalgaswellsinNorthAmerica.Theseconsumptionpatternsinaparticularbasinareinfluencedbynumerousfactors,includingthepriceofhydrocarbons,thedrillingrigcount,andhydraulicfracturingactivitylevels,includingthenumberofstagescompletedandtheamountofproppantusedperstage.Further,theseconsumptionpatternsarealsoinfluencedbythelocation,quality,

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sellingpriceandavailabilityofsand-basedproppantsandothertypesofproppantssuchasceramicproppant.Sellingpricesforsand-basedproppantsvarybybasinandaredeterminedbasedonsupplyanddemanddynamicswithineachbasin.

Asaresultofincreasingglobalsupplyofoil,thedemandforproppantdecreasedfromtheendof2014andthroughthelatterhalfof2016,resultinginproppantoversupplyanddownwardpressureonproppantsellingprices.Thiscausedsomeproppantproducerstoexitthemarketandothers,includingus,toadjustoperationsandminimizecosts.Fromtheendof2016through2017,thepriceofoilhasincreasedandtheUnitedStateshorizontallandrigcountshaveincreasedleadingtosignificantimprovementinproppantdemandandpricing.

CompetitorsintheI&RmarketsincludesomeofourlargerproppantcompetitorssuchasUniminCorporationandU.S.SilicaHoldings,Inc.butalsotypicallyincludesmaller,localorregionalproducersofsandandgravel.

Employees

AsofDecember31,2017,weemployedaworkforceof989employees.WebelieveourcultureofPeople,PlanetandProsperityhasenabledustoachievealong-tenuredworkforceandgoodrelationswithourworkforce.

Wemaintainanactivedialoguewithemployeesandprovidesalariedandhourlyemployeesacomprehensivebenefitspackageincludingmedical,life,andaccidentinsurance,incentivebonusprograms,a401(k)planwithanemployermatchanddiscretionaryemployercontribution,aswellaseducationalassistance.Certainemployeesarealsoeligibleforstock-basedcompensationprogramsthataredesignedtoencouragelong-termperformancealignedwithCompanyobjectives.

AsofDecember31,2017,approximately155ofourdomesticemployeesarepartiestocollectivebargainingcontracts.Webelievewehavestrongrelationshipswithandmaintainanactivedialoguewithunionrepresentatives.Wehavehistoricallybeenabletosuccessfullyextendandrenegotiatecollectivebargainingagreementsastheyexpire.

Seasonality

Ourbusinessisaffectedtosomeextentbyseasonalfluctuationsinweatherthatimpactourproductionlevelsandourcustomersbusinessneeds.Forexample,ourproppantsaleslevelsarelowerinthefirstandfourthquartersduetolowermarketdemandasadverseweathertendstoslowoilandgasoperationstovaryingdegreesdependingontheseverityoftheweather.Ourinabilitytomineandprocessfracsandyearroundatoursurfaceminesinnorthernstatesresultsinaseasonalbuild-upofinventoryasweexcavateexcesssandtobuildastockpilethatwillfeedourdryingfacilitiesduringthewintermonths.Additionally,inthesecondandthirdquarters,wesellmoresandtoourcustomersintheI&Rendmarketsduetotheseasonalriseindemanddrivenbymorefavorableweatherconditions.

Intellectual Property

Ourintellectualpropertyconsistsprimarilyofpatents,tradesecrets,know-how,trademarks,includingournameFairmountSantrolandproducts,including,butnotlimitedtoPowerProp,PropelSSP,HyperProp,andCoolSet.WeholdnumerousU.S.andforeign-grantedpatentsthatarestillinforceaswellasmanyU.S.andforeignpatentapplicationsthatarestillpending.Weownpatentsinmostofourmajor,differentiatedproppantproductlines.Wehavenotgrantedanythird-partyrightswithrespecttoourpatents.Themajorityofourpatentshaveanexpirationdateafter2025.Inearly2016,wereceivedapatentoncertainofthePropelSSPproppanttechnologyandhaveadditionalpatentspending.Withrespecttotradesecretsandknow-how,ourextensiveexperiencewithavarietyofdifferentproductsenablesustoofferourcustomersawiderangeofproppantsfortheirparticularapplication.

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ITEM 1A. RI SK FACTORS

Aninvestmentinoursecuritiesinvolvessignificantrisks.

Youshouldcarefullyconsidertherisksdescribedbelow,togetherwiththefinancialandotherinformationcontainedinthisReport,aswellastheinformationdiscussedunderthesectionentitled,Management'sDiscussionandAnalysisofFinancialConditionsandResultsofOperationsinevaluatingus,ourbusinessandyourinvestmentinus.

Ifanyofthefollowingrisksactuallyoccurs,ourbusiness,financialcondition,resultsofoperations,cashflows,andprospectscouldbemateriallyandadverselyaffected.

Asaresult,thetradingpriceofourcommonstockcoulddeclineandyoucouldloseallorpartofyourinvestmentinourcommonstock.

Risks Related to Our Business

Our business and financial performance depend on the level of activity in the oil and gas industries.

Approximately87%ofourrevenuesfortheyearendedDecember31,2017werederivedfromsalestocompaniesintheoilandgasindustry.Asaresult,ouroperationsaremateriallydependentonthelevelsofactivityinoilandgasexploration,development,andproduction.Morespecifically,thedemandfortheproppantsweproduceiscloselyrelatedtothenumberofoilandgaswellscompletedingeologicalformationswheresand-basedproppantsareusedinfracturingactivities.Theseactivitylevelsareaffectedbybothshort-andlong-termtrendsinoilandgasprices,amongotherfactors.

Inrecentyears,oilandgaspricesand,therefore,thelevelofexploration,development,andproductionactivity,haveexperiencedsignificantfluctuations.Worldwideeconomic,political,andmilitaryevents,includingwar,terroristactivity,eventsintheMiddleEast,growthinU.S.non-conventionaloilproduction,andinitiativesbytheOrganizationofthePetroleumExportingCountries(OPEC)andotherlargenon-OPECproducershavecontributed,andarelikelytocontinuetocontribute,topriceandvolumevolatility.In2016,OPECproducersreachedaninitialagreementtolimitproduction,andinNovember2017,theagreementwasextendedthroughDecember2018.Theseagreementscontributedtoanincreaseinglobaloilandgasprices.However,thislimitisvoluntaryandpoliticalandotherissuesmaycreatevaryingdegreesofadherencetothislimitation,whichcouldcausevolatilityandpricefluctuationsinthedemandforoilandgas.

Pricesremainsubjecttovolatility.Areturntoareductioninoilandgaspriceswouldgenerallydepressthelevelofoilandgasexploration,development,production,andwellcompletionactivityandmayresultinacorrespondingdeclineinthedemandfortheproppantsweproduce.Suchadeclinewouldhaveamaterialadverseeffectonourbusiness,resultsofoperations,andfinancialcondition,andwemaynotbeabletomeetourdebtobligations.Thecommercialdevelopmentofeconomically-viablealternativeenergysourcescouldhaveasimilareffect.Anyfuturedecreasesintherateatwhichoilandgasreservesarediscoveredordeveloped,whetherduetothepassageoflegislation,increasedgovernmentalregulationleadingtolimitations,orprohibitionsonexplorationanddrillingactivity,includinghydraulicfracturing,orotherfactors,couldhaveamaterialadverseeffectonourbusinessandfinancialcondition,eveninastrongeroilandnaturalgaspriceenvironment.

Our substantial indebtedness could adversely affect our financial flexibility and our competitive position.

Althoughourindebtednesswassignificantlyreducedin2016and2017anditsmaturityextended,itcontinuestobesubstantialandincreasestheriskthatwemaybeunabletogeneratecashsufficienttopayamountsdueinrespectofourindebtedness,orrefinancethatindebtednessonfavorableterms.AsofDecember31,2017,wehadapproximately$745.0millionofoutstandinglong-termdebtthatmaturesinMayandNovember2022.Ourindebtednesscouldhaveotherimportantconsequencesandsignificanteffectsonourbusiness.Forexample,itcould:

increaseourvulnerabilitytoadversechangesingeneraleconomic,industryandcompetitiveconditions;

requireustodedicateasubstantialportionofourcashflowfromoperationstomakepaymentsonourindebtedness,therebyreducingtheavailabilityofourcashflowtofundworkingcapital,capitalexpendituresandothergeneralcorporatepurposes;

limitourflexibilityinplanningfor,orreactingto,changesinourbusinessandtheindustryinwhichweoperate;

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restrictusfromexploitingbusinessopportunities;

makeitmoredifficulttosatisfyourfinancialobligations,includingpaymentsonourindebtedness;

placeusatadisadvantagecomparedtoourcompetitorsthathavelessdebt;and

limitourabilitytoborrowadditionalfundsforworkingcapital,capitalexpenditures,railcarorotherfuturepurchasecommitments,acquisitions,debtservicerequirements,executionofourbusinessstrategy,orothergeneralcorporatepurposes.

Increasing logistics costs, a lack of dependability or availability of transportation services or infrastructure, and geographic shifts in demand could have a materialadverse effect on our business.

Transportationandhandlingcostsareasignificantcomponentofthetotaldeliveredcostofourproducts.Inmanyinstances,transportationcostscanrepresent70%to80%ofthedeliveredcostoffracsand.Thehighrelativecostoftransportationcouldfavorsupplierslocatedincloseproximitytothecustomer.Inaddition,aswecontinuetoexpandoursand-basedproppantproduction,wewillneedincreasedinvestmentintransportationinfrastructure,includingterminalsandrailcars.Wecontractwithtruck,rail,ship,andbargeservicestomovesand-basedproppantsfromourproductionfacilitiestodistributionterminals.Labordisputes,derailments,adverseweatherconditionsorotherenvironmentalevents,increasedrailcarcongestion,andotherchangestorailfreightsystemscouldinterruptorlimitavailabletransportationservicesorresultinasignificantincreaseintransportationservicerates.Increasedcostsresultingfromthesetypesofeventsthatwearenotabletopassontoourcustomerscouldimpairourabilitytodeliverourproductseconomicallytoourcustomersortoexpandourmarkets.Accordingly,becausewearesodependentonrailinfrastructure,iftherearedisruptionsoftherailtransportationservicesutilizedbyusorourcustomers,andweorourcustomersareunabletofindalternativetransportationproviderstotransportourproducts,ourbusinessandresultsofoperationscouldbeadverselyaffected.Further,decliningvolumescouldresultinrailcarover-capacity,whichwouldleadtorailcarstoragefeeswhile,atthesametime,wewouldcontinuetoincurleasecostsforthoserailcarsinstorage.

Aportionofourdistributioninfrastructureislocatedinornearoilandgasproducingareas.Ashiftindemandawayfromareaswherewehavesignificantdistributioninfrastructureorrelocationofourcustomersbusinessestoareasfartherfromourplantsordistributioninfrastructurecouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.

Our operations are dependent on timely securing and maintaining various permits and approvals from governmental authorities and other third parties.

Weholdnumerousgovernmental,environmental,miningandotherpermits,waterrightsandapprovalsauthorizingoperationsateachofourfacilities.Adecisionbyagovernmentalagencyorotherthirdpartytodenyordelayissuinganeworrenewedpermitorapproval,ortorevokeorsubstantiallymodifyanexistingpermitorapproval,couldhaveamaterialadverseeffectonourabilitytocontinueoperationsattheaffectedfacility.Furthermore,stateandlocalgovernmentscouldimposeamoratoriumonminingoperationsincertainareas.Expansionofourexistingoperationsisalsopredicatedonsecuringthenecessaryenvironmentalorotherpermits,includingairpermitsforourcoatedmanufacturing,andwaterrightsorapprovals,whichwemaynotreceiveinatimelymanneroratall.Inaddition,ourfacilitiesarelocatednearexistingandproposedthird-partyindustrialoperationsthatcouldaffectourabilitytofullyextract,orthemannerinwhichweextract,themineralreservestowhichwehaveminingrights.

We may be adversely affected by decreased or shifted demand for sand-based proppants or the development of either effective alternative proppants or new processes toreplace hydraulic fracturing.

Fracsandandcoatedsandareproppantsusedinthecompletionandre-completionofoilandgaswellsthroughtheprocessofhydraulicfracturing.Asignificantshiftindemandfromsand-basedproppantstootherproppants,orashiftindemandfromhigher-marginsand-basedproppantstolower-marginsand-basedproppants,couldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.Thedevelopmentanduseofnewtechnologyforeffectivealternativeproppants,orthedevelopmentofnewprocessestoreplacehydraulicfracturingaltogether,couldalsocauseadeclineindemandforthesand-basedproppantsweproduceandcouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.

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Our proppant sales are subject to fluctuations in market pricing.

Substantiallyallofoursupplyagreementsinvolvingthesaleofsand-basedproppantshavemarket-basedpricingmechanisms.Accordingly,inperiodswithdecreasingprices,ourresultsofoperationsmaybelowerthanifouragreementshadfixedprices.Inperiodswithincreasingprices,ouragreementspermitustoincreaseprices;however,ourcustomersmayelecttoceasepurchasingoursand-basedproppantsiftheydonotagreewithourpriceincreasesorareabletofindalternative,cheapersourcesofsupply.Furthermore,certainvolume-basedsupplyagreementsmayinfluencetheabilitytofullycapturecurrentmarketpricings.Thesepricingprovisionsmayresultinsignificantvariabilityinourresultsofoperationsandcashflowsfromperiodtoperiod.

Changesinsupplyanddemanddynamicscouldalsoimpactmarketpricingforproppants.Anumberofexistingfracsandprovidersandnewmarketentrantshaverecentlyannouncedreserveacquisitions,processingcapacityexpansionsandgreenfieldprojects.Inperiodswheresourcesofsupplyofrawfracsandexceedmarketdemand,marketpricesforfracsandmaydeclineandourresultsofoperationsandcashflowsmaycontinuetodecline,bevolatile,orotherwisebeadverselyaffected.

We may not be able to complete greenfield development or expansion projects or, if we do, we may not realize the expected benefits.

Anygreenfielddevelopmentorexpansionprojectrequiresustospendsubstantialcapitalandobtainnumerousstateandlocalpermits.Adecisionbyanygovernmentalagencynottoissuearequiredpermitorsubstantialdelaysinthepermittingprocesscouldpreventusfrompursuingthedevelopmentorexpansionproject.InWestTexas,ourcurrentorfutureexpansionplanscouldbeslowedorhaltedbytheU.S.FishandWildlifeServiceorotheragenciesduetoconservationeffortstargetedatthehabitatofthedunessagebrushlizard.Inaddition,ifthedemandforourproductsdeclinesduringtheperiodweexperiencedelaysinraisingcapitalorcompletingthepermittingprocess,wemaynotrealizetheexpectedbenefitsfromourgreenfieldfacilityorexpansionproject.Furthermore,ournewormodifiedfacilitiesmaynotoperateatdesignedcapacityormaycostmoretooperatethanweexpect.Theinabilitytocompletegreenfielddevelopmentorexpansionprojectsortocompletethemonatimelybasisandinturngrowourbusinesscouldadverselyaffectourbusinessandresultsofoperations.

We rely upon trade secrets, contractual restrictions and patents to protect our proprietary rights. Failure to protect our intellectual property rights may undermine ourcompetitive position, and protecting our rights or defending against third-party allegations of infringement may be costly.

Ourcommercialsuccessdependsonourproprietaryinformationandtechnologies,know-howandotherintellectualproperty.Becauseofthetechnicalnatureofourbusiness,werelyonpatents,tradesecrets,trademarks,andcontractualrestrictionstoprotectourintellectualpropertyrights,particularlywithrespecttoourcoatedproducts.Themeasureswetaketoprotectourtradesecretsandotherintellectualpropertyrightsmaybeinsufficient.Failuretoprotect,monitor,andcontroltheuseofourexistingintellectualpropertyrightscouldcauseustoloseourcompetitiveadvantageandincursignificantexpenses.Itispossiblethatourcompetitorsorotherscouldindependentlydevelopthesameorsimilartechnologiesorotherwiseobtainaccesstoourunpatentedtechnologies.Insuchcase,ourtradesecretswouldnotpreventthirdpartiesfromcompetingwithus.Asaresult,ourresultsofoperationsmaybeadverselyaffected.Furthermore,thirdpartiesorouremployeesmayinfringeormisappropriateourproprietarytechnologiesorotherintellectualpropertyrights,whichcouldalsoharmourbusinessandresultsofoperations.Policingunauthorizeduseofintellectualpropertyrightscanbedifficultandexpensive,andadequateremediesmaynotbeavailable.

Inaddition,thirdpartiesmayclaimthatourproductsinfringeorotherwiseviolatetheirpatentsorotherproprietaryrightsandseekcorrespondingdamagesorinjunctiverelief.Defendingourselvesagainstsuchclaims,withorwithoutmerit,couldbetime-consumingandresultincostlylitigation.Anadverseoutcomeinanysuchlitigationcouldsubjectustosignificantliabilitytothirdparties(potentiallyincludingtrebledamages)ortemporaryorpermanentinjunctionsprohibitingthemanufactureorsaleofourproducts,theuseofourtechnologiesortheconductofourbusiness.Anyadverseoutcomecouldalsorequireustoseeklicensesfromthirdparties(whichmaynotbeavailableonacceptableterms,oratall)ortomakesubstantialone-timeorongoingroyaltypayments.Protractedlitigationcouldalsoresultinourcustomersorpotentialcustomersdeferringorlimitingtheirpurchaseoruseofourproductsuntilresolutionofsuchlitigation.Inaddition,wemaynothaveinsurancecoveragein

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connectionwithsuchlitigationandmayhavetobearallcostsarisingfromanysuchlitigationtotheextentweareunabletorecoverthemfromotherparties.Anyoftheseoutcomescouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.

The development and marketing of Propel SSP products may prove to be unsuccessful.

ThetechnologysupportingPropelSSPproductsisunproventhroughfieldtrials.Althoughtheresultsoffieldtrialshavebeenencouraging,andsomecustomersareusingPropelSSPproductsonacommercialbasisinallofthierwells,additionaltestingultimatelymaydemonstratethattheproductisineffectiveornotcommerciallyviable.Areturntooraprolongeddeclineintheoilandgasmarketmaymaketheadoptionofhigher-valueproducts,suchasPropelSSPproducts,moredifficult.Additionally,competitiveproductscouldbedevelopedandmarketed.AfailuretocapitalizeonPropelSSPproductsincommercialapplicationwouldresultinasignificantunrecoupedinvestmentandthefailuretorealizecertainanticipatedbenefits,eachofwhichcouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations,aswellasremedialactionswithregardtothecontractualagreementwithSoaneEnergyLLC.FormoreinformationonPropelSSPproducts,pleasereadManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperationsAcquisitions.

Our future performance will depend on our ability to succeed in competitive markets, and on our ability to appropriately react to potential fluctuations in demand forand supply of sand-based proppants.

Weoperateinahighlycompetitivemarketthatischaracterizedbyseverallarge,nationalproducersandalargernumberofsmall,regionalorlocalproducers.Competitionintheindustryisbasedonprice,consistencyandqualityofproduct,sitelocation,distributioncapability,customerservice,reliabilityofsupply,breadthofproductoffering,andtechnicalsupport.Intheproppantbusiness,wecompetewithproducerssuchasBadgerMiningCorporation,CARBOCeramicsInc.,EmergeEnergyServicesLP,Hi-CrushPartners,LP,MomentivePerformanceMaterialsInc.,PreferredSandsLLC,SmartSandInc.,UniminCorporation,andU.S.SilicaHoldings,Inc.Certainofourlargecompetitorsmayhavegreaterfinancialandotherresourcesthanwedo,maydeveloptechnologysuperiortooursormayhaveproductionfacilitiesthatarelocatedclosertokeycustomersthanours.

Wealsocompetewithsmaller,regionalorlocalproducers.Inrecentyearstherehasbeenanincreaseinthenumberofsmallproducersservicingthesand-basedproppantsmarketwhichcouldresultinincreasedcompetitionandpricingpressureincertainmarketconditions.Inaddition,oilandgasexplorationandproductioncompaniesandotherprovidersofhydraulicfracturingservicescouldacquiretheirownsandreserves,expandtheirexistingsand-basedproppantproductioncapacityorotherwisefulfilltheirownproppantrequirementsandexistingornewsand-basedproppantproducerscouldaddtoorexpandtheirsand-basedproppantsproductioncapacity,whichcouldincreasecompetitionintheproppantindustry.Wemaynotbeabletocompetesuccessfullyagainsteitherourlargerorsmallercompetitorsinthefuture,andcompetitioncouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.

A large portion of our sales is generated by a limited number of customers, and the loss of, or a significant reduction in purchases by, our largest customers couldadversely affect our operations.

IntheyearendedDecember31,2017,threecustomersexceeded10%ofrevenues.Thesecustomerscollectivelyaccountedfor45%ofrevenuesin2017.IntheyearendedDecember31,2016,twocustomersexceeded10%ofrevenues.Thesecustomerscollectivelyaccountedfor42%ofrevenuesin2016.Thesecustomersmaynotcontinuetopurchasethesamelevelsofoursand-basedproppantsinthefutureduetoavarietyofreasons.Overthecourseofourrelationships,wehavesoldproppanttothesecustomersonapurchaseorderbasisandpursuanttosupplyagreements.Wecurrentlyhavesupplyagreementswiththesecustomersthatcontaincustomaryterminationprovisionsforbankruptcyrelatedeventsanduncuredbreachesoftheapplicableagreement.Ifanyofourmajorcustomerssubstantiallyreducesoraltogetherceasespurchasingoursand-basedproppantsandwearenotabletogeneratereplacementsalesofsand-basedproppantsintothemarket,ourbusiness,financialcondition,andresultsofoperationscouldbeadverselyaffectedforashort-termperioduntilsuchtimeaswegeneratereplacementsalesinthemarket.

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We are exposed to the credit risk of our customers, and any material nonpayment or nonperformance by our customers could adversely affect our financial results.

Wearesubjecttotheriskoflossresultingfromnonpaymentornonperformancebyourcustomers,manyofwhoseoperationsareconcentratedsolelyintheglobaloilfieldservicesindustrywhich,asdescribedabove,issubjecttovolatilityandthereforecreditrisk.Ourcreditproceduresandpoliciesmaynotbeadequatetofullyreducecustomercreditrisk.Ifwefailtoadequatelyassessthecreditworthinessofexistingorfuturecustomersorunanticipateddeteriorationintheircreditworthiness,anyresultingincreaseinnonpaymentornonperformancebythemandourinabilitytore-marketorotherwiseusetheproductioncouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.

The demand for industrial and recreational sand fluctuates, which could adversely affect our results of operations.

Aportionofoursalesaretocustomersinindustriesthathavehistoricallybeencyclical,suchasglassmaking,buildingproductsandfoundry.Duringperiodsofeconomicslowdown,ourcustomersoftenreducetheirproductionratesandalsoreducecapitalexpendituresanddeferorcancelpendingprojects.Suchdevelopmentsoccurevenamongcustomersthatarenotexperiencingfinancialdifficulties.

Demandinmanyoftheendmarketsforindustrialandrecreationalsandisdrivenbytheconstructionandautomotiveindustries.Forexample,theflatglassmarketdependsontheautomotiveandcommercialandresidentialconstructionandremodelingmarkets.Themarketforindustrialsandusedtomanufacturebuildingproductsisdrivenprimarilybydemandintheconstructionmarkets.Thedemandforfoundrysilicasubstantiallydependsontherateofautomobile,lighttruckandheavyequipmentproduction.Otherfactorsinfluencingthedemandforindustrialandrecreationalsandinclude(i)thesubstitutionofplasticorothermaterialsforglass,(ii)competitionfromoffshoreproducersofglassproducts,(iii)changesindemandforourproductsduetotechnologicalinnovations,and(iv)prices,availability,andotherfactorsrelatingtoourproducts.

Wecannotpredictorcontrolthefactorsthataffectdemandforourproducts.Negativedevelopmentsintheabovefactors,amongothers,couldcausethedemandforindustrialandrecreationalsandtodecline,whichcouldadverselyaffectourbusiness,financialcondition,resultsofoperations,cashflows,andprospects.

Our operations are subject to operating risks that are often beyond our control and could adversely affect production levels and costs, and such risks may not becovered by insurance.

Ourmining,processingandproductionfacilitiesaresubjecttorisksnormallyencounteredintheproppantandindustrialandrecreationalsandindustries.Theserisksinclude:

changesinthepriceandavailabilityoftransportation;

changesinthepriceandavailabilityofnaturalgasorelectricity;

unusualorunexpectedgeologicalformationsorpressures;

cave-ins,pitwallfailures,orrockfalls,particularlyinundergroundmines;

unanticipatedground,grade,orwaterconditions;

extremeseasonalweatherconditions;

hazardousorcatastrophicweatherconditionsorevents,includingflooding,tornadoes,andhurricanes,andthephysicalimpactsofclimatechange;

environmentalhazards;

industrialaccidents;

changesinlawsandregulations(ortheinterpretationthereof)orincreasedpublicscrutinyrelatedtotheminingandthedrillingandwellcompletionindustries,silicadustexposureortheenvironment;

inabilitytoacquireormaintainnecessarypermitsorminingorwaterrights;

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restrictionsonblastingandminingoperations,includingpotentialmoratoriumsonminingasresultoflocalactivismorcomplaints;

inabilitytoobtainnecessaryproductionequipmentorreplacementparts;

reductionintheamountofwateravailableforprocessing;

labordisputes;

cybersecuritybreaches;

latedeliveryofsupplies;

fires,explosions,orotheraccidents;and

facilityshutdownsinresponsetoenvironmentalregulatoryactions

Anyoftheseriskscouldresultindamageto,ordestructionof,ourminingpropertiesorproductionfacilities,personalinjury,environmentaldamage,delaysinminingorprocessing,losses,orpossiblelegalliability.Anyprolongeddowntimeorshutdownsatourminingpropertiesorproductionfacilitiescouldhaveamaterialadverseeffectonus.

Notalloftheserisksarereasonablyinsurable,andourinsurancecoveragecontainslimits,deductibles,exclusions,andendorsements.Ourinsurancecoveragemaynotbesufficienttomeetourneedsintheeventoflossandanysuchlossmayhaveamaterialadverseeffectonus.

A significant portion of our sales is generated at our Wedron Silica facility. Any adverse developments at this plant could have a material adverse effect on ourbusiness, financial condition, and results of operations.

FortheyearendedDecember31,2017,approximately67%ofourtotalvolumeswereproducedatourWedronSilicaFacility.AsofDecember31,2017,thisfacilityaccountsforapproximately43%ofourannualsandprocessingcapacityandapproximately25%ofourannualcoatingcapacity.Acasualtyeventorotheradverseeventaffectingtheproductionatthisplant,includingadversedevelopmentsduetocatastrophiceventsorweather(includingfloods,windstorms,icestorms,freezingtemperatures,ortornadoes),adversegovernmentregulatoryimpacts,privateactionsbyresidentsofWedronorsurroundingcommunities,decreaseddemandfortheproductsthisplantproduces,adversedevelopmentsaffectingthisplantscustomers,ortransportation-relatedconstraints,couldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.

The manufacture of value-added proppants is an important process for us and is dependent on the availability of raw materials .

Ifweareunabletosecureadequate,costeffectivesupplycommitmentsfortherawmaterialsassociatedwithvalue-addedproppantsourabilitytosellthisproducttothemarketplaceatprofitablemarginsmaybeadverselyimpacted.Decreasedsalesofvalue-addedproppantsortheinabilitytocontrolthecostsassociatedwithmanufacturinganddistributionoftheseproductscouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsfromoperations.

Diminished access to water may adversely affect our operations or the operations of our customers.

Theminingandprocessingactivitiesinwhichweengageatanumberofourfacilitiesrequiresignificantamountsofwater,andsomeofourfacilitiesarelocatedinareasthatarewater-constrained.Additionally,thedevelopmentofoilandgaspropertiesthroughfracturestimulationlikewiserequiressignificantwateruse.Wehaveobtainedwaterrightsthatwecurrentlyusetoservicetheactivitiesonourvariousproperties,andweplantoobtainallrequiredwaterrightstoserviceotherpropertieswemaydeveloporacquireinthefuture.However,theamountofwaterthatweandourcustomersareentitledtousepursuanttoourwaterrightsmustbedeterminedbytheappropriateregulatoryauthoritiesinthejurisdictionsinwhichweandourcustomersoperate.Suchregulatoryauthoritiesmayamendtheregulationsregardingsuchwaterrights,increasethecostofmaintainingsuchwaterrightsoreliminateourcurrentwaterrights,andweandourcustomersmaybeunabletoretainalloraportionofsuchwaterrights.

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Thesenewregulations,whichcouldalsoaffectlocalmunicipalitiesandotherindustrialoperations,couldhaveamaterialadverseeffectonouroperatingcostsandeffectivenessifimplemented.Suchchangesinlaws,regulationsorgovernmentpolicyandrelatedinterpretationspertainingtowaterrightsmayaltertheenvironmentinwhichweandourcustomersdobusiness,whichmaynegativelyaffectourfinancialconditionandresultsofoperations.

Title to our mineral properties and water rights, and royalties related to our production of sand may be disputed.

Titleto,andtheareaof,mineralpropertiesandwaterrights,androyaltiesrelatedtoourproductionofsand,maybedisputed.Eventhoughweobtaintitleguaranteesonpropertiesthatwepurchase,asuccessfulclaimthatwelackappropriatemineralandwaterrightsononeormoreofourpropertiescouldcauseustoloseanyrightstoexplore,developandoperateminesonthatproperty.Anydecreaseordisruptioninourmineralrightsmayadverselyaffectouroperations.Insomeinstances,wehavereceivedaccessrightsoreasementsfromthirdparties,whichallowforamoreefficientoperationthanwouldexistwithouttheaccessoreasement.Athirdpartycouldtakeactiontosuspendtheaccessoreasement,andanysuchactioncouldbemateriallyadversetoourresultsofoperationsorfinancialcondition.

If we cannot successfully complete acquisitions or integrate acquired businesses, our growth may be limited and our financial condition may be adversely affected.

Ourbusinessstrategyincludessupplementinginternalgrowthbypursuingacquisitions.Anyacquisitionmayinvolvepotentialrisks,including,amongotherthings:

thevalidityofourassumptionsaboutmineralreservesandfutureproduction,sales,capitalexpenditures,operatingexpensesandcosts,includingsynergies;

aninabilitytosuccessfullyintegratethebusinessesweacquire;

theuseofasignificantportionofouravailablecashorborrowingcapacitytofinanceacquisitionsandthesubsequentdecreaseinourliquidity;

asignificantincreaseinourinterestexpenseorfinancialleverageifweincuradditionaldebttofinanceacquisitions;

theassumptionofunknownliabilities,lossesorcostsforwhichwearenotindemnifiedorforwhichourindemnityisinadequate;

thediversionofmanagementsattentionfromotherbusinessconcerns;

aninabilitytohire,trainorretainqualifiedpersonnelbothtomanageandtooperateourgrowingbusinessandassets;

theincurrenceofothersignificantcharges,suchasimpairmentofgoodwillorotherintangibleassets,assetdevaluation,orrestructuringcharges;

unforeseendifficultiesencounteredinoperatinginnewgeographicareas;

customerorkeyemployeelossesattheacquiredbusinesses;and

theaccuracyofdataobtainedfromproductionreportsandengineeringstudies,geophysicalandgeologicalanalyses,andotherinformationusedwhendecidingtoacquireaproperty,theresultsofwhichareofteninconclusiveandsubjecttovariousinterpretations.

Ifwecannotsuccessfullycompleteacquisitionsorintegrateacquiredbusinesses,ourgrowthmaybelimitedandourfinancialconditionmaybeadverselyaffected.

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We will be required to make substantial capital expenditures to maintain, develop and increase our asset base. The inability to obtain needed capital or financing onsatisfactory terms, or at all, could have a material adverse effect on our gro wth and profitability.

Althoughwecurrentlyuseasignificantamountofourcashreservesandcashgeneratedfromouroperationstofundthemaintenanceanddevelopmentofourexistingmineralreservesandproductioncapacityandouracquisitionsofnewmineralreservesandproductioncapacity,wemaydependontheavailabilityofcredittofundfuturecapitalexpendituresandcapitalleases.Ourabilitytoobtainfinancingortoaccessthecapitalmarketsforfutureequityordebtofferingsmaybelimitedbyourfinancialconditionatthetimeofanysuchfinancingoroffering,thecovenantscontainedinourexistingcreditfacility,termloansorfuturedebtagreements,adversemarketconditionsorothercontingenciesanduncertaintiesthatarebeyondourcontrol.Ourfailuretoobtainthefundsnecessarytomaintain,develop,andincreaseourassetbase,includingoursubstantialrailcarfleet,couldadverselyimpactourgrowthandprofitability.

Evenifweareabletoobtainfinancingoraccessthecapitalmarkets,incurringadditionaldebtmaysignificantlyincreaseourinterestexpenseandfinancialleverage,andourlevelofindebtednesscouldrestrictourabilitytofundfuturedevelopmentandacquisitionactivities.

Our asset-based revolving credit facility and term loans contain affirmative and negative covenants and substantial restrictions that may restrict our business andfinancing activities.

Ourrevolvingcreditfacilityandtermloanscontain,andanyfuturefinancingagreementsthatwemayenterintowilllikelycontainoperatingandfinancialrestrictionsandcovenantsthatmayrestrictourabilitytofinancefutureoperationsorcapitalneedsortoengagein,expand,orpursueourbusinessactivities.

Ourrevolvingcreditagreementhasavailabilitybasedonadefinedborrowingbase,whichisapercentageofaccountsreceivableandinventory.Adeclineinorrestrictionsofourborrowingbasecouldresultinourabilitytodrawadditionalamountsontherevolvingcreditfacility,aswellastriggerrepaymentsofexistingrevolverborrowings.

Ifweviolateanyoftherestrictionsorcovenantsinourdebtagreements,asignificantportionofourindebtednessmaybecomeimmediatelydueandpayableandourlenderscommitmenttomakefurtherloanstousmayterminate.Wemightnothave,orbeabletoobtain,sufficientfundstomaketheseacceleratedpayments.Inaddition,ourobligationsunderourdebtagreementsaresecuredbysubstantiallyallofourassets,andifweareunabletorepayourindebtednessundertheseagreements,thelenderscouldseektoforecloseonourassets.

We may have the need to incur substantial debt in the future to enable us to maintain or increase our production levels and to otherwise pursue our business plan. Wemay not be able to borrow funds successfully or, if we do, this debt may impair our ability to operate our business.

Asignificantamountofcapitalexpenditureswouldberequiredtogrowourproductioncapacity.Ifpricesfortheproductsweproduceweretodeclineforanextendedperiodoftime,ifthecostsofouracquisitionanddevelopmentopportunitiesweretoincreasesubstantiallyorifothereventsweretooccurwhichreducedoursalesorincreasedourcosts,wemayberequiredtoborrowinthefuturetoenableustofinancetheexpendituresnecessarytoreplacethereservesweextract.Thecostoftheborrowingsandourobligationstorepaytheborrowingscouldhaveimportantconsequencestous,because:

ourabilitytoobtainadditionalfinancing,ifnecessary,forworkingcapital,capitalexpenditures,acquisitions,orotherpurposesmaybeimpairedorsuchfinancingmaynotbeavailableonfavorableterms,oratall;

covenantscontainedinfuturecreditanddebtarrangementsmayrequireustomeetfinancialteststhatmayaffectourflexibilityinplanningfor,andreactingto,changesinourbusiness,includingpossibleacquisitionopportunities;

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wewillneedasubstantialportionofourcashflowtomakeprincipalandinterestpaymentsonourindebtedness,reducingthefundsthatwouldotherwisebeavailableforoperationsandfuturebusinessopportunities;and

ourdebtlevelwillmakeusmorevulnerablethanourlessleveragedcompetitorstocompetitivepressuresoradownturninourbusinessortheeconomygenerally.

Ourabilitytoserviceourindebtednesswilldependon,amongotherthings,ourfuturefinancialandoperatingperformance,whichwillbeaffectedbyprevailingeconomicconditionsandfinancial,business,regulatoryandotherfactors,someofwhicharebeyondourcontrol.Ifouroperatingresultsarenotsufficientgeneratecashflowsinordertoserviceourcurrentorfutureindebtedness,wewillbeforcedtotakeactionssuchasreducingordelayingbusinessactivities,acquisitions,investmentsand/orcapitalexpenditures;sellingassets;restructuringorrefinancingourindebtedness;orseekingadditionalequitycapitalorbankruptcyprotection.Wemaynotbeabletoeffectanyoftheseremediesonsatisfactorytermsoratall.

Inaccuracies in our estimates of mineral reserves could result in lower than expected sales and higher than expected costs.

Webaseourmineralreserveestimatesonengineering,economicandgeologicaldataassembledandanalyzedbyourengineersandgeologists,whicharereviewedbyoutsidefirms.However,sandreserveestimatesarenecessarilyimpreciseanddependtosomeextentonstatisticalinferencesdrawnfromavailabledrillingdata,whichmayproveunreliable.Therearenumerousuncertaintiesinherentinestimatingquantitiesandqualitiesofmineralreservesandcoststominerecoverablereserves,includingmanyfactorsbeyondourcontrol.Estimatesofeconomicallyrecoverablemineralreservesnecessarilydependonanumberoffactorsandassumptions,allofwhichmayvaryconsiderablyfromactualresults,suchas:

geologicalandminingconditionsand/oreffectsfrompriorminingthatmaynotbefullyidentifiedbyavailabledataorthatmaydifferfromexperience;

assumptionsconcerningfuturepricesofsand-basedproducts,operatingcosts,miningtechnologyimprovements,developmentcosts,andreclamationcosts;

assumptionsconcerningfutureeffectsofregulation,includingtheissuanceofrequiredpermitsandtaxesbygovernmentalagencies;and

demandforproductbygrade.

Anyinaccuracyinourestimatesrelatedtoourmineralreservescouldresultinlowerthanexpectedsalesandhigherthanexpectedcosts.

Mine closures entail substantial costs, and if we close one or more of our mines sooner than anticipated, our results of operations may be adversely affected.

Webaseourassumptionsregardingthelifeofourminesondetailedstudiesthatweperformfromtimetotime,butourstudiesandassumptionsdonotalwaysprovetobeaccurate.Ifwecloseanyofourminessoonerthanexpected,saleswilldeclineunlessweareabletoincreaseproductionatanyofourothermines,whichmaynotbepossible.Theclosureofanopenpitminealsoinvolvessignificantclosurecosts,includingacceleratedemploymentlegacycosts,severance-relatedobligations,reclamationandotherenvironmentalcosts,andthecostsofterminatinglong-termobligations,includingenergycontractsandequipmentleases.Weaccrueforthecostsofreclaimingopenpits,stockpiles,tailingsponds,roads,andotherminingsupportareasovertheestimatedmininglifeofourproperty.Ifweweretoreducetheestimatedlifeofanyofourmines,thefixedmineclosurecostswouldbeappliedtoashorterperiodofproduction,whichwouldincreaseproductioncostspertonproducedandcouldmateriallyandadverselyaffectourresultsofoperationsandfinancialcondition.

Applicablestatutesandregulationsrequirethatminingpropertybereclaimedfollowingamineclosureinaccordancewithspecifiedstandardsandanapprovedreclamationplan.Theplanaddressesmatterssuchasremovaloffacilitiesandequipment,regrading,preventionoferosionandotherformsofwaterpollution,re-vegetation,andpost-mininglanduse.Insomecases,wearerequiredtopostasuretybondorotherformoffinancialassurance

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equaltothecostofreclamationassetforthintheapprovedreclamationplan.Theestablishmentofthefinalmineclosurereclamationliabilityisbasedonpermitrequirementsandrequiresvariousestimatesandassumptions,principallyassociatedwithreclamationcostsandproductionlevels.Ifouraccrualsforexpectedreclamationandothercostsassociatedwithmineclosuresforwhichwewillberesponsiblewerelaterdeterminedtobeinsufficient,ourbusiness,resultsofoperations,andfinancialconditionwouldbeadverselyaffected.

A shortage of skilled labor together with rising labor costs in the mining industry may further increase operating costs, which could adversely affect our results ofoperations.

Efficientminingusingmoderntechniquesandequipmentrequiresskilledlaborers,preferablywithseveralyearsofexperienceandproficiencyinmultipleminingtasks,includingprocessingofminedminerals.Iftheshortageofexperiencedlaborcontinuesorworsensorifweareunabletotrainthenecessarynumberofskilledlaborers,therecouldbeanadverseimpactonourlaborproductivityandcostsandourabilitytoexpandproduction.

Our production process consumes large amounts of natural gas and electricity. An increase in the price or a significant interruption in the supply of these or any othersignificant raw material costs could have a material adverse effect on our business, financial condition, or results of operations.

Naturalgasistheprimaryfuelsourceusedfordryingsandintheproductionprocessand,assuch,ourprofitabilityisimpactedbythepriceandavailabilityofnaturalgaswepurchasefromthirdparties.Thepriceandsupplyofnaturalgasareunpredictableandcanfluctuatesignificantlybasedoninternational,politicalandeconomiccircumstances,aswellasothereventsoutsideourcontrol,suchaschangesinsupplyanddemandduetoweatherconditions,otheroilandgasproducers,regionalproductionpatterns,andenvironmentalconcerns.Furthermore,utilitycompaniescouldenforcenaturalgascurtailmentswhichaffectouroperations.Inaddition,potentialclimatechangeregulationsorcarbonoremissionstaxescouldresultinhigherproductioncostsforenergy,whichmaybepassedontousinwholeorinpart.Inthepast,thepriceofnaturalgashasbeenextremelyvolatile,andweexpectthisvolatilitytocontinue.Forexample,duringtheyearendedDecember31,2017,themonthlyclosingpriceofnaturalgasontheNewYorkMercantileExchangerangedfromahighof$3.93permillionBritishThermalUnits(BTUs)toalowof$2.63permillionBTUs.

Phenolistheprimarycomponentoftheresinswebuy,andourresinsupplyagreementscontainmarket-basedpricingprovisionsbasedonthecostofphenol.Asaresult,weareexposedtofluctuationsinthepricesforphenol.

Asignificantincreaseinthepriceofphenolorofenergythatisnotrecoveredthroughanincreaseinthepriceofourproductsoranextendedinterruptioninthesupplyofnaturalgasorelectricitytoourproductionfacilitiescouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.

Our business may suffer if we lose, or are unable to attract and retain, key personnel.

Wedependtoalargeextentontheservicesofourseniormanagementteamandotherkeypersonnel.Membersofourseniormanagementandotherkeyemployeeshaveextensiveexperienceandexpertiseinevaluatingandanalyzingindustrialmineralproperties,maximizingproductionfromsuchproperties,marketingindustrialmineralproduction,anddevelopingandexecutingfinancingandhedgingstrategies.Competitionformanagementandkeypersonnelisintense,andthepoolofqualifiedcandidatesislimited.Further,wehavenotenteredintoemploymentagreementswithanyofournamedexecutiveofficers.Thelossofanyoftheseindividualsorthefailuretoattractadditionalpersonnel,asneeded,especiallywiththeannouncedMergerwithUnimin,couldhaveamaterialadverseeffectonouroperationsandcouldleadtohigherlaborcostsortheuseofless-qualifiedpersonnel.Inaddition,duetothebroadbaseofsharesandoptionsownedbyourcurrentemployeebase,asignificantamountofreadily-accessiblewealthandliquiditymaybegeneratedinfavorablemarketconditions.Ifanyofourexecutivesorotherkeyemployeesweretoretireasaresultofthispotentialwealthcreation,joinacompetitor,orformacompetingcompany,wecouldlosecustomers,suppliers,know-how,andkeypersonnel.Wedonotmaintainkey-manlifeinsurancewithrespecttoanyofouremployees.Oursuccessisdependentonourabilitytocontinuetoattract,employ,andretainhighly-skilledpersonnel.

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Our profitability could b e negatively affected if we fail to maintain satisfactory labor relations.

AsofDecember31,2017,variouslaborunionsrepresented16%ofourdomesticemployees.Thecurrentcollectivebargainingagreementsexpirein2019.Ifweareunabletorenegotiateacceptablecollectivebargainingagreementswiththeselaborunionsinthefuture,wecouldexperience,amongotherthings,strikes,workstoppages,orotherslowdownsbyourworkersandincreasedoperatingcostsasaresultofhigherwages,healthcarecosts,orbenefitspaidtoouremployees.Aninabilitytomaintaingoodrelationswithourworkforcecouldcauseamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperations.

Silica-related health issues and litigation could have a material adverse effect on our business, reputation, or results of operations.

Theinhalationofrespirablecrystallinesilicacanleadtothelungdiseasesilicosis.Thereisdisputedevidenceofanassociationbetweenrespirablesilicaexposureandlungcanceraswellasapossibleassociationwithotherdiseases,includingimmunesystemdisorderssuchasscleroderma.Thesehealthriskshavebeen,andmaycontinuetobe,asignificantissueconfrontingthesilicaindustry.Concernsoversilicosisandotherpotentialadversehealtheffects,aswellasconcernsregardingpotentialliabilityfromtheuseofsilica,mayhavetheeffectofdiscouragingourcustomersuseofoursilicaproducts.Theactualorperceivedhealthrisksofmining,processing,andhandlingsilicacouldmateriallyandadverselyaffectsilicaproducers,includingus,throughreduceduseofsilicaproducts,thethreatofproductliabilityoremployeelawsuits,increasedscrutinybyfederal,stateandlocalregulatoryauthoritiesofusandourcustomers,orreducedfinancingsourcesavailabletothesilicaindustry.Further,anyadditionalregulationsthatreducetheallowablesilicaexposurelevelscouldmateriallyandadverselyaffectthesilicaindustry.

Weand/orourpredecessorshavebeennamedasadefendant,usuallyamongmanydefendants,innumerousproductsliabilitylawsuitsbroughtbyoronbehalfofcurrentorformeremployeesofourcustomersallegingdamagescausedbysilicaexposure.AsofDecember31,2017,weweresubjecttoapproximatelysixactivesilicaexposureclaims.AlmostalloftheclaimspendingagainstusariseoutoftheallegeduseofoursilicaproductsinfoundriesorasanabrasiveblastmediaandhavebeenfiledinthestatesofTexas,Mississippi,andIllinois,althoughcaseshavebeenbroughtinmanyotherjurisdictionsovertheyears.Inaccordancewithourinsuranceobligations,theseclaimsarebeingdefendedbyoursubsidiariesinsurancecarriers,subjecttoourpaymentofapproximately7%ofthecostsassociatedwiththeseclaims,whichisnotmaterial.Ifthelitigantsprevailandourinsurancecoverageorindemnitiesprovetobeinsufficientorunavailable,itcouldhaveamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperation.

Our competitors may develop products or services that impede our ability to compete.

Ourabilitytocompetewithcompetitorsonacost-effectiveorservicebasismaybelimitedifcompetitorsdevelopproductsorservicesforcustomersthatprovideadditionaladvantagesoverourownproductsorservices.Thisincludes,butisnotlimitedto,alogisticallastmilesolutionfordeliveringproppanttothewellsite.

Failure to maintain effective quality control systems at our mining, processing and production facilities could have a material adverse effect on our business, financialcondition, and operations.

Theperformance,qualityandsafetyofourproductsarecriticaltothesuccessofourbusiness.Thesefactorsdependsignificantlyontheeffectivenessofourqualitycontrolsystems,which,inturn,dependsonanumberoffactors,includingthedesignofourqualitycontrolsystems,ourquality-trainingprogram,andourabilitytoensurethatouremployeesadheretothequalitycontrolpoliciesandguidelines.Anysignificantfailureordeteriorationofourqualitycontrolsystemscouldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperations,andreputation.

Seasonal factors may impact our ability to process sand and our customers demand for our products.

Becauserawsandcannotbewet-processedduringextremelycoldtemperatures,fracsandistypicallywashedonlyeightmonthsoutoftheyearatoursurfaceminesinWisconsinandourMinnesotaandOhiooperations.Ourinabilitytomineandprocessfracsandyearroundinthesesurfaceminesresultsinaseasonalbuild-upofinventoryasweexcavateexcesssandtobuildastockpilethatwillfeedourdryingfacilitiesduringthewintermonths.

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Unexpectedwinterweatherconditionsmayresultinourhavinganinsufficientsandstockpiletosupplyfeedstockforourdryingplantsforthewintermonthsandresultinourbeingunabletosatisfycustomerrequirementsduringtheseperiods.Asaresultoftheseseasonalsupplyimpacts,thecashflowsofourNorthAmericanoperationscanfluctuateifplantoperationsmustremainshutdownduetoharshwinterweatherconditions.

Inadditiontosupplyconsiderations,severeweatherconditionsmaycurtailourcustomersdrillingactivitiesandimpairrailshipmentandtransportationservicesand,asaresult,oursalesvolumestocustomersmaysimilarlybeadverselyaffected.Unexpectedwinterweatherconditionsmaycompoundtheseseasonalimpacts,andcouldresultinamaterialadverseeffectonourbusiness,financialcondition,andresultsofoperation.

We may be subject to interruptions or failures in our information technology systems.

Werelyonsophisticatedinformationtechnologysystemsandinfrastructuretosupportourbusiness,includingprocesscontroltechnology.Anyofthesesystemsmaybesusceptibletooutagesduetofire,floods,powerloss,telecommunicationsfailures,usageerrorsbyemployees,computerviruses,cyber-attacksorothersecuritybreaches,orsimilarevents.Thefailureofanyofourinformationtechnologysystemsmaycausedisruptionsinouroperations,whichcouldadverselyaffectoursalesandprofitability.

Our international operations expose us to risks inherent in doing business abroad.

Weconductbusinessinmanypartsoftheworld,includingArgentina,Mexico,China,andno