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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2014

OR

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

For the transition period from        to

Commission File No.  001-35912

EMERGE ENERGY SERVICES LP

(Exact name of registrant as specified in its charter)

180 State Street, Suite 225, Southlake, Texas 76092

(Address of principal executive offices)

(817) 488-7775

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    o  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x  No

As of May 5, 2014, 23,628,208 common units were outstanding.

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FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q may constitute “forward-looking statements.”  The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature.  These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us.  While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.  All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions.  Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.  Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

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When considering forward-looking statements, you should keep in mind the known material risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2013 in “Risk Factors” and in this Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof.  We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether because of new information, future events or otherwise.

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PART I                                           FINANCIAL INFORMATION

ITEM 1.                                      FINANCIAL STATEMENTS

EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands except per unit data)

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

($ in thousands)

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

See Note 11 for supplemental disclosures.

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.              ORGANIZATION AND BASIS OF PRESENTATION

Organization

Emerge Energy Services LP (“Emerge”) is a Delaware limited partnership that completed its initial public offering (“IPO”) on May 14, 2013 to become a publicly traded partnership.  The combined entities of Superior Silica Sands LLC (“SSS”), a Texas limited liability company, Allied Energy Company LLC (“AEC”), an Alabama limited liability company, and Emerge Energy Services Operating LLC (“Emerge Operating”), a Delaware limited liability company, represent the predecessor for accounting purposes (the “Predecessor”) of Emerge.

References to the “Partnership,” “we,” “our” or “us” when used for dates or periods ended prior to the IPO, refer collectively to the Predecessor.  References to the “Partnership,” “we,” “our” or “us” when used for dates or periods ended on or after the IPO, refer collectively to Emerge and all of its subsidiaries, including Direct Fuels LLC (“Direct Fuels”), which was acquired in a business combination concurrent with our IPO.

We are a growth-oriented energy services company engaged in: (i) the business of mining, producing, and distributing silica sand that is a key input for the hydraulic fracturing of oil and gas wells; and, (ii) the business of distributing refined motor fuels, refining transportation mixture (“transmix”) and biodiesel, operating bulk motor fuel storage terminals, and providing complementary services.  We report silica sand activities through the Sand segment and motor fuel operations through the Fuel segment.  We report items of income (if any) and expense that cannot be directly associated with the Sand and Fuel segments as “corporate.”

The Sand segment conducts mining and processing operations from facilities located in Wisconsin and Texas.  In addition to mining and processing silica sand for the oil and gas industry, the Sand segment sells its product for use in building products and foundry operations.  The Fuel segment operates transmix processing facilities located in the Dallas-Fort Worth area with a second transmix unit in Birmingham, Alabama.  The Fuel segment also offers third-party bulk motor fuel storage and terminal services, bio-diesel refining, sale and distribution of wholesale motor fuels, reclamation services (which consists primarily of cleaning bulk storage tanks used by other petroleum terminal and others) and blending of renewable fuels.

Initial Public Offering of Emerge Energy Services LP

On May 8, 2013, the Partnership priced an initial public offering of 7,500,000 limited partner common units (“common units”) at a price of $17.00 per common unit ($15.85 per common unit, net of underwriting discounts and structuring fee).  The IPO was conducted pursuant to a registration statement on Form S-1 originally filed on March 22, 2013, as amended (Registration No. 333-187487) that was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on May 8, 2013.  On May 20, 2013, the underwriters exercised their option to purchase an additional 209,906 common units.  The net proceeds from the IPO of $122.2 million (including net proceeds of $3.3 million from the exercise of the underwriters’ over-allotment option), after deducting the underwriting discount and the structuring fee, were used to: (i) repay existing subsidiary debt, in the amount of $87.6 million, (ii) pay offering expenses of $10.6 million, (iii) pay and fund cash-based compensation awards to senior management of $8.9 million, (iv) provide the Partnership with working capital of $11.5 million, (v) provide a distribution to pre-IPO equity holders of $3.3 million ($2.6 million to predecessors’ owners and $0.7 million to Direct Fuels’ owners as part of the original purchase price), and (vi) pay certain prepaid items of $0.3 million.

Basis of Presentation and Consolidation

For periods prior to our IPO, the accompanying unaudited condensed consolidated financial statements and related notes present the historical accounts of the Predecessor.  To the extent they relate to periods prior to the IPO, the results are not necessarily indicative of the actual results of operations that might have occurred if we had operated as a combined entity during that pre-IPO period.

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the SEC.  Accordingly, they do not include all of the

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information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our Consolidated Financial Statements for the year ended December 31, 2013, which are included in our Annual Report on Form 10-K filed with the SEC.

In the opinion of management, all adjustments (which include only normal recurring adjustments) and disclosures necessary for a fair presentation of these interim statements have been included.  All significant intercompany transactions and balances have been eliminated in consolidation.  The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year.

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.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012.  As such, we have elected to delay adoption of new or revised accounting standards until such time that the standards would be otherwise apply to private companies, as allowed for emerging growth companies, for as long as we are an emerging growth company.

Acquisition

Concurrent with our IPO on May 14, 2013, we acquired Direct Fuels from Direct Fuels Partners, L.P. for $98.3 million, in order to expand our operations, gain new customers, improve earnings, and increase our markets through a larger geographical presence.  Direct Fuels operates a motor fuel terminal and transmix processing facilities in Texas.  Direct Fuels’ identifiable assets acquired and liabilities assumed by us were recognized based upon the fair values determined on the date of acquisition.

The financial position and results of operations of Direct Fuels are included in our consolidated financial statements from and as of the date of acquisition.  The following unaudited pro forma financial information presents the combined results of operations of the Partnership and Direct Fuels as if the transaction had occurred on January 1, 2013.  The pro forma information is not necessarily indicative of what the results of operations actually would have been had the acquisition been completed on January 1, 2013.  In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, our future operating results.  The unaudited financial information excludes acquisition and integration costs and does not give effect to any estimated and potential cost savings or other operating efficiencies, if any, that might result from the acquisition.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation, which included a $0.7 million reclassification from revenues to cost of goods sold.  These reclassifications do not impact net income and do not reflect a material change in the information previously presented in our Consolidated Statements of Operations.

2.              OTHER FINANCIAL DATA

Restricted Cash and Equivalents

We are required under agreements with our chief executive officer (“CEO”) and an officer in our Sand segment (the “Sand Officer”) to establish and maintain Rabbi Trusts which are used to fund deferred compensation as described in the agreements.  Restricted cash and equivalents are invested in short-term instruments at market rates; therefore the carrying values approximate fair value.

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Allowance for Doubtful Accounts

The allowance for doubtful accounts was $0.3 million at March 31, 2014 and December 31, 2013.

Inventories

Inventories consisted of the following:

Property, Plant and Equipment

Property, plant and equipment consisted of the following:

(1) Includes assets under capital lease

We recognized $3.7 million and $3.1 million of depreciation and depletion expense for the three months ended March 31 2014 and 2013, respectively.

Intangible Assets Other Than Goodwill

Our intangible assets other than goodwill consisted of the following:

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We recognized $2.1 million and $0.1 million of amortization expense for the three months ended March 31, 2014 and 2013, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following:

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, restricted cash and equivalents, accounts receivable, accounts payable and debt instruments.  The carrying amounts of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable are representative of their fair values due to their short maturities.  The carrying amounts of our revolving credit facility approximates fair value because the underlying instrument includes provisions that adjust our interest rates based on current market rates.

Retirement Plan

We sponsor 401(k) plans for substantially all employees, including legacy plans from our predecessor and Direct Fuels.  The plans provide for us to match 100% of the participants’ contributions up to 5% of the participant’s pay.  Additionally, we can make discretionary contributions as deemed appropriate by management.  Our employer contributions to these plans totaled $0.2 million and $0.1 million for the three months ended March 31, 2014 and 2013, respectively.

Seasonality

For our Sand segment, winter weather affects the months during which we can wash and wet-process sand in Wisconsin.  Seasonality is not a significant factor in determining our ability to supply sand to our customers because

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we accumulate a stockpile of wet sand feedstock during non-winter months.  During the winter, we process the stockpiled sand to meet customer requirements.  However, we sell sand for use in oil and natural gas production basins where severe weather conditions may curtail drilling activities.  This is particularly true in drilling areas located in the northern U.S. and western Canada.  If severe winter weather precludes drilling activities, our frac sand sales volume may be adversely affected.  Generally, severe weather episodes affect production in the first quarter with effects possibly continuing into the second quarter.  Generally, our Fuel segment does not experience dramatic seasonal shifts in quantities delivered to its customers.

Concentration of Credit Risk

We provide credit, in the normal course of business, to customers located throughout the United States and Canada.  We perform ongoing credit evaluations of our customers and generally do not require collateral.  In addition, we regularly evaluate our credit accounts for loss potential.

Our largest customer balance represented 14% of our net accounts receivable balance as of March 31, 2014 and December 31, 2013.  No other customer balance exceeded 10% of the total net accounts receivable balance as of March 31, 2014 and December 31, 2013.

Sales to one customer represented 12% of revenues for the quarter ended March 31, 2014, while a different customer represented 10% of revenues for the quarter ended March 31, 2013.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements that have had or will have a material impact on our financial position or results of operations.

3.              LONG-TERM DEBT

Following is a summary of our long-term debt:

Revolving Credit Facility

On May 14, 2013, we entered into a $150 million revolving credit and security agreement (the “Credit Agreement”) among Emerge Energy Services LP, as parent guarantor, each of its subsidiaries, as borrowers (the “Borrowers”), and PNC Bank, National Association, as administrative agent and collateral agent.  We subsequently amended the Credit Agreement to revise certain definitions and to increase the commitment amount.  The Credit Agreement, as amended, provides for a $200 million variable rate senior secured revolving credit facility (the “new credit facility”) which was available to repay our existing indebtedness on the closing date of the IPO, to fund fees and expenses incurred in connection with the IPO and the credit facility, and for general business purposes, including working capital requirements, capital expenditures, permitted acquisitions, making debt payments (but not prepayments) when due, and making distributions and dividends.  In addition, the Credit Agreement includes a sublimit of up to $15 million for the issuance of letters of credit.  Substantially all of the assets of the Borrowers are pledged as collateral under the Credit Agreement.  The new credit facility matures on May 14, 2018.

Loans under the new credit facility bear interest at our option at either:

·                  a Base Rate (as defined in the Credit Agreement), which will be the base commercial lending rate of PNC Bank, as publicly announced to be in effect from time to time, plus an applicable margin ranging from 1.75% to 2.50% based on our total leverage ratio; or

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·                  LIBOR plus an applicable margin ranging from 2.75% to 3.50% based on our total leverage ratio.

We also incur a commitment fee of 0.375% on committed amounts that are neither used for borrowings nor under letters of credit.

We initially borrowed $112.7 million to (i) make distributions of $17.0 million to Superior Silica Holdings LLC (“SSH”) and to fund the cash payment in the Direct Fuels acquisition amounting to $22.2 million; and, (ii) repay $73.5 million of existing SSH debt.  As part of the original Credit Agreement, we incurred $3.6 million of direct financing costs for professional and legal fees, which we recorded as deferred financing cost.  We subsequently incurred $0.1 million in bank fees related to amendments that were also recorded as deferred financing cost.

The Credit Agreement contains various covenants and restrictive provisions and requires maintenance of financial covenants as follows:

·                  a fixed charge coverage ratio (as defined in the Credit Agreement) of not less than 1.10 to 1.00; and

·                  total leverage ratio (as defined in the Credit Agreement) of not greater than 3.00 to 1.00.  The requirement to maintain the total leverage ratio is subject an increase to 3.50 to 1.00 in connection with certain permitted acquisitions.

At March 31, 2014, we were in compliance with our loan covenants and had undrawn availability under this credit facility totaling $76.9 million.  At March 31, 2014, our outstanding borrowings under the Credit Agreement bore interest at a weighted-average rate of 3.16%.

4.              COMMITMENTS AND CONTINGENCIES

Contractual Obligations

In addition to the contractual obligations and other commitments disclosed in our 2013 Annual Report on Form 10-K, we have entered into significant railcar lease commitments during the first quarter of 2014.  The following table presents the remaining minimum contractual obligations for these new leases as of March 31, 2014.

Environmental Matter

On November 21, 2013, the EPA issued a General Notice Letter and Information Request (“Notice”) under Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), to one of our subsidiaries operating within the Fuel segment.  The Notice provides that the subsidiary may have incurred liability with respect to the Reef Environmental site in Alabama, and requested certain information in accordance with Section 107(a) of CERCLA.  We timely responded to the Notice.  At this time, no specific claim for cost recovery has been made by the EPA (or any other potentially responsible party) against us.  There is uncertainty relating to our share of environmental remediation liability, if any, because our allocable share of wastewater is unknown and the total remediation cost is also unknown.  Consequently, management is unable to estimate the possible loss or range of loss, if any.  We have not recorded a loss contingency accrual as of March 31, 2014 or December 31, 2013.  In the opinion of management, the outcome of such matters will not have a material adverse effect on our financial position, liquidity or results of operations.

5.              RELATED PARTY TRANSACTIONS

Related party transactions included in our Consolidated Balance Sheets and Consolidated Statements of Operations are summarized in the following table:

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(1)         We do not have any employees.  Prior to May 14, 2013, our Predecessor and Direct Fuels had employees assigned directly to their respective operations.  On May 14, 2013, our general partner hired all employees of the Predecessor and Direct Fuels.  After this date, our general partner manages our human resource assets, including fringe benefits and other employee-related charges.  We routinely and regularly reimburse our general partner for any employee-related costs paid on our behalf, and report such costs as operating expenses.

(2)         Debt payable to related parties was repaid using proceeds of our IPO in May 2013.

(3)         We paid Insight Equity Management Company LLC (collectively, with its affiliated investment funds and its controlling equity owners, “Insight Equity”) certain IPO transaction-related costs and other general and administrative costs.  See discussion of the current services agreement below.

(4)         Prior to May 14, 2013, our Fuel segment paid an affiliated company for leadership services at an annual amount of $250,000 plus bonus for financial performance, if any.  Beginning May 14, 2013, these services are being performed by Insight Equity employees and are charged to us through the reimbursement process described in (1) above.

Agreements with Affiliates

Registration Rights Agreement.  In connection with closing of the IPO, we entered into a Registration Rights Agreement, dated as of May 14, 2013 (the “Registration Rights Agreement”), by and between AEC Resources LLC, Ted W. Beneski, Superior Silica Resources LLC, Kayne Anderson Development Company and LBC Sub V, LLC.  Pursuant to the Registration Rights Agreement, we agreed to register for resale the restricted common units of the Partnership (the “Restricted Units”) issued to the other parties to the Registration Rights Agreement.  We also agreed to file a registration statement providing for resale of the Restricted Units as permitted by Rule 415 of the Securities Act of 1933 no later than July 1, 2014.  We also agreed, subject to certain limitations, to allow the holders to sell Restricted Units in connection with certain registered offerings that we may conduct in the future and to provide holders of a specified number of Restricted Units the right to demand that we conduct an underwritten public offering of Restricted Units under certain circumstances.  The Registration Rights Agreement contains representations, warranties, covenants and indemnities that are customary for private placements by public companies.

Services Agreement.  On May 14, 2013, in connection with the closing of the IPO, we entered into an administrative services agreement with Insight Equity, pursuant to which Insight Equity provides specific general and administrative services to us.  Under this agreement, we reimburse Insight Equity based on agreed upon formulas for actual travel and other expenses on our behalf.  In addition, an executive employee of Insight Equity is the head of the Fuel segment.  We pay this executive for services rendered to the Fuel segment and record these costs as a charge to earnings.  The administrative services agreement will remain in force until (i) the date we and Insight Equity mutually agree to terminate it; (ii) the final distribution in liquidation of the Partnership or our subsidiaries; or (iii) the date on which either Insight Equity or its affiliates collectively controls less than 51% of our equity.

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6.              EQUITY-BASED COMPENSATION

Effective May 14, 2013, we adopted our 2013 Long-Term Incentive Plan (the “LTIP”) for providing long-term incentives for employees, directors, and consultants who provide services to us.  The plan is administered by a committee subject to oversight by the board of directors of our general partner (the “Board of Directors”).  The committee has delegated authority to: (i) designate participants; (ii) determine types of awards; (iii) determine number of units covered by the award; (iv) determine terms and conditions of awards; (v) determine how and when awards might be settled; and (vi) interpret and administer the plan and take other such actions as might be necessary for the proper administration of the plan.  The LTIP provides for the issuance of an aggregate of up to 2,321,968 common units to be granted either as options, restricted units, phantom units, distribution equivalent rights, unit appreciation rights, unit award, profits interest units, or other unit-based award granted under the plan.  All of our outstanding grants will be settled through issuance of limited partner common units.  Our CEO and our Sand Officer also participate in the LTIP plan.  On May 14, 2013, we granted 530,588 and 265,294 phantom units to our CEO and Sand Officer, respectively.  Half of these phantom units vest in one year, and the remaining half in the year after.  The agreements covering the CEO and the Sand Officer entitle them to receive dividends in an amount equal to any distributions to our common unitholders whether or not such phantom units are vested.  Independent director restricted units vest on the following anniversary of our IPO.  For other employees, we assumed a 30-month vesting period for phantom unit grants, which represents management’s estimate of the amount of time until all vesting conditions have been met.  Regarding distributions for independent directors and other employees, distributions are credited to a distribution equivalent rights account for the benefit of each participant and become payable generally within 45 days following the date of vesting.  As of March 31, 2014, the unpaid liability for distribution equivalent rights totaled $0.7 million.

The following table summarizes awards granted during the three months ended March 31, 2014.  The outstanding balance at December 31, 2013 represents total awards since IPO.  No awards were granted prior to May 14, 2013.

For the three months ended March 31, 2014, we recorded non-cash compensation expense relating to equity-based compensation of $2.1 million in selling, general and administrative expenses.  As of March 31, 2014, the unrecognized compensation expense related to the grants discussed above amounted to $10.8 million to be recognized over a weighted average of 1.2 years.

7.              INCOME TAXES

Provision for Income Taxes

Our provision for income taxes relates to: (i) Texas margin taxes for the Partnership and for Emerge Energy Distributors Inc. (“Distributor”), as well as (ii) federal and state income taxes for Distributor.  For federal income tax purposes, we report our income, expenses, gains, and losses as a partnership not subject to income taxes.  As such, each partner is responsible for his or her share of federal and state income tax.  Net earnings for financial statement purposes may differ significantly from taxable income reportable to each partner because of differences between the tax basis and financial reporting basis of assets and liabilities.  Distributor reports its income, expenses, gains, and losses as a corporation and is subject to both federal and state income taxes.

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The composition of our provision for income taxes follows:

Effective Income Tax Rate

Distributor began operations in May 2013.  For the three months ended March 31, 2014 Distributor’s effective income tax rate was 35%.  For Distributor, there were no significant differences between book and taxable income.  We are responsible for our portion of the Texas margin tax that is included in our subsidiaries’ consolidated Texas franchise tax returns.  For our operations in Texas, the effective margin tax rate is approximately 0.5% as defined by applicable state law.  The margin tax qualifies as an income tax under GAAP, which requires us to recognize the impact of this tax on the temporary differences between the financial statement assets and liabilities and their tax basis attributable to such tax.

8.              EARNINGS PER COMMON UNIT

We compute basic earnings per unit by dividing net income by the weighted-average number of common units outstanding including participating securities.  Participating securities include unvested equity-based payment awards that contain non-forfeitable rights to distributions.  For these purposes, grants to our CEO (530,588 units) and the Sand Officer (265,294 units) are deemed participating securities.

Diluted earnings per unit is computed by dividing net income by the weighted-average number of common units outstanding, including participating securities, and increased further to include the number of common units that would have been outstanding had potential dilutive units been exercised.  The dilutive effect of restricted units is reflected in diluted net income per unit by applying the treasury stock method.  Under FASB ASC 260-10-45, Contingently Issuable Shares, 291,677 of our outstanding phantom units are not currently included in basic or diluted earnings per common unit calculations.  At March 31, 2014, there were no anti-dilutive units outstanding.

Basic and diluted earnings per unit are computed as follows:

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9.              SEGMENT INFORMATION AND GEOGRAPHICAL DATA

Segment Information

We operate our business through two reportable business segments:

·                  Sand - the production and sale of various grades of sand primarily used in the extraction of oil and natural gas and the production of numerous building products and foundry materials.

·                  Fuel - the refining of transmix, distribution of finished fuel products, terminal and reclamation activities, and refining of biodiesel.

Segments have been identified based on how management makes operating decisions, assesses performance and allocates resources.  Certain items are reviewed by our management on a consolidated basis, and are therefore presented as corporate income rather than segment income:

·                  general and administrative costs related to corporate overhead, such as headquarters facilities and personnel, as well as equity-based compensation;

·                  certain other operating costs such as IPO transaction-related; and

·                  non-operating items such as interest, other income and income taxes.

Although not used by management in its performance monitoring activities, asset information is included in the following tables together with financial information concerning our reportable segments for the three months ended March 31, 2014 and 2013.

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