Heidrick & Struggles International Inc (HSII) Q4 2018 Earnings Conference Call Transcript

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Heidrick & Struggles International Inc  (NASDAQ:HSII)Q4 2018 Earnings Conference CallFeb. 25, 2019, 5:00 p.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Good afternoon. This is Heidrick & Struggles Fourth Quarter and 2018 Quarterly Conference Call. This call is being recorded. It may not be reproduced or retransmitted without the Company's consent. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be provided at that time.

Now I will turn the call over to Julie Creed, Vice President of Investor Relations and Real Estate. Please go ahead.

Julie Creed -- Vice President, Real Estate & Investor Relations

Good afternoon, everyone, and thank you for participating on Heidrick & Struggles fourth quarter and 2018 conference call. Joining me on today's call is our President and CEO, Krishnan Rajagopalan and our Chief Financial Officer, Mark Harris. We posted our fourth quarter slides on the IR homepage of our website at heidrick.com, and we encourage you to print them for additional context, but we won't be referring to specific page numbers during our opening comments.

In our opening remarks and in our quarterly slides, we are referring to adjusted EBITDA and adjusted EBITDA margin. Specific to 2017 results we will also speak to adjusted operating income, adjusted operating margin, adjusted net income and adjusted EPS. These are non-GAAP financial measures that we believe better explain some of our results. A reconciliation between GAAP and non-GAAP financial measures can be found in the last schedule of our press release and in our supporting slides.

Also, in our remarks, we'll be making forward-looking statements and ask that you please refer to the Safe Harbor language contained in our news release and on Slide 1 of our presentation.

And Krishnan, now I'll turn the call over to you.

Krishnan Rajagopalan -- President and Chief Executive Officer

Julie, thank you. Good afternoon, everyone, and thank you for joining our call. On behalf of our employees around the world, I'm pleased to report Heidrick & Struggles 2018 fourth quarter and annual results. It was a year in which we achieved a number of Company records. We were front and center on the most relevant leadership issues including succession planning, culture, diversity and inclusion and data privacy. We made great progress on our transformational journey to enhance our data-driven, tech-enabled solutions and service experience.

First, let me share some of the annual financial highlights of 2018. Net revenue was a Company record in our 65-year history, $716 million, up 15% compared to last year. This was the sixth year in a row of year-over-year revenue growth. This growth was driven by our Executive Search business for which net revenue of $653 million increased 18% compared to 2017. Every region and every practice group contributed to our growth in Executive Search.

More than 5,000 confirmed searches, productivity of nearly $1.9 million per consultant and average revenue per search of more than $127,000 were also key to revenue growth. 2018 was a transformational year for Heidrick Consulting, following the integration of Leadership Consulting and Culture Shaping. We are now going -- we are now going to our clients with a single integrated line of advisory services and are focused on growth. We are seeing a meaningful increase in the number of integrated search and consulting assignments and this is reflected in a higher quality of revenue.

Turning back to our consolidated results. We reduced general and administrative expenses to under 20% of net revenue. We increased operating income to $68.9 million. We achieved operating margin of 9.6% and delivered diluted earnings per share of $2.52. All of these, the best in 11 years.

Finally, reflecting our strong cash position and confidence in the future, we are increasing our quarterly cash dividend to $0.15 per share, an increase of more than 15%. Key to having achieved these financial results was our steadfast focus on the four priorities for our business that we communicated last year. To increase the scale and impact of our two businesses, to increase cross-enterprise collaboration, to drive a premium a data driven tech-enabled service experience for our clients and to maintain a focus on streamlining our cost structure.

Some examples of these initiatives were, we continue to increase the collaboration between our Executive Search in Heidrick Consulting businesses, driving new business opportunities through our Strategic Accounts program and numerous cross training sessions. We established a larger, broader presence in the Nordic region through an acquisition in Denmark and we expanded our footprint with a new office in Dublin, Ireland.

We trained more than 900 employees on the Heidrick Way, our platform for consistently and more effectively assessing candidate, capturing data and communicating with our search clients globally. More than 4,000 searches were executed via Heidrick Connect, our proprietary client portal for sharing and delivering our data and insights to clients and adoption continues to increase. We were the first executive search firm to publicly commit to diversity in our Board of Directors searches, recognizing that diverse leadership is a business imperative.

We launched two new practice areas. The first, the Disruptive Innovators Team supports fast-growing emerging companies with their leadership strategies and talent needs. And the second, artificial intelligence is helping our clients identify executives who can drive enterprise wide transformation through AI and machine learning solutions. We are living our values, especially to win as one firm and achieving our strategic, operational and financial goals.

I'm excited about our progress and our future potential. I'm going to turn the call over to Mark to further discuss the financial results. Then I'll finish by discussing some of our key growth initiatives in 2019. Mark?

Mark Harris -- Chief Financial Officer

Thank you, Krishnan. Good afternoon to everyone on the call, and thank you for joining us today. Krishnan hit on the annual highlights of 2018, so I'll focus on the fourth quarter results. Revenue in the fourth quarter was $185.3 million, an increase of almost $16 million or 9.4% year-over-year. This was higher than our guidance as a result of strong uptick revenue in Executive Search, which is difficult to forecast due to the variability of the market.

Irrespective Search, finished the quarter up $19.6 million or 13.2% year-over-year driven by growth in the Americas region of 20.2% as a result of higher confirmations, average retainers and upticks. Without the impact of strong performance of upticks, we would have been at the high end of our guidance. Heidrick Consulting revenue declined $3.7 million or 18% in the fourth quarter, however, $1.1 million of that decline was related to the adoption of ASC 606, which impacted our revenue recognition methodology for enterprise license agreements.

Enterprise license agreements are now recognized over five years compared to one year in previous years. However, when looking at this annually, Heidrick Consulting was impacted by ASC 606 by $3.8 million. Thus, revenue annually on a pro forma basis was only marginally down 4% year-on-year. Given we have discussed numerous times that 2018 was going to be a pivot year for the business, we were pleased with their performance in 2018 and look forward to their growth strategy in 2019.

Salaries and employee benefits increased by $8.3 million or 6.6% from 2017's fourth quarter. $7.4 million of the increase was related to fixed compensation, primarily related to higher cost per consultant talent as we continue to invest into our future. The other 900,000 of the increase was related to variable compensation associated with the strong performance in search.

For the fifth consecutive quarter, general and administrative expenses declined year-over-year. G&A was $35.3 million, down 1.6% or approximately $600,000. Much of this decline was the result of lowering our external service costs, travel and entertainment cost and office occupancy cost. G&A as a percentage of revenue fell to 19% in the fourth quarter of 2018, down from the 21.2% in the same quarter last year. It's worth noting that we will have a global consultant meeting in the second quarter of 2019 in lieu of last year's regional meetings and practice meetings. As such, we only expect incremental G&A expense of approximately $500,000 for the year pertaining to these meetings.

Now, turning to operating income. Operating income in the fourth quarter of 2018 was $16.7 million and operating margin was 9%, which improved significantly from last year's adjusted fourth quarter, 2017 operating income of $8.5 million and operating margin of 5%. We're very proud of this achievement, enabled in part through the increasing adoption of our technology platform.

Finally, net income in 2018's fourth quarter up $11.2 million and diluted earnings per share of $0.58 were also far improved to last year's adjusted fourth quarter net income of $2.8 million and diluted earnings per share of $0.15.

I know I commented to just focus on the fourth quarter, but I really want to highlight what our shareholders achieved this year. Net income for the full year was $49.3 million and diluted earnings per share of $2.52 with the highest in 11 years. This growth was nearly 2.5 times over last year's adjusted earnings per share of $1.09 and demonstrates what we can achieve.

Now turning to our balance sheet. We ended the fourth quarter and 2018 with cash and cash equivalents of $279.9 million compared to $207.5 million at the end of 2017, an increase of 35%. The increase in cash balance compared to that of 2017 reflects stronger operating cash flows and lower capital expenditures, partially offset by higher bonus payments paid in 2018, payments for severance related to late 2017 restructuring and our investment in Denmark.

As most of you know, our cash position builds throughout the year as we accrue for bonuses. Earlier this quarter, we paid approximately $14 million in compensation related to the portion of consultant bonuses that are deferred each year. And in March and April this year, we will pay out approximately $202 million in variable compensation related to last year's performance.

As a result of strong operating cash flows, we don't anticipate using any leverage in the first quarter pertaining to our working capital needs different from the past two years. We would expect free cash flow to increase in 2019 assuming improved operating performance, lower capital expenditures and absent acquisitions. Based on the above and our commitment to our shareholders, Heidrick & Struggles capital allocation strategy will always be evolving, thus we will always balance our ability to adequately invest for future growth and return excess cash to our shareholders. This strategy has led us to increase our dividend by 15% to $0.15 this quarter from our long time run rate of $0.13 a quarter.

Now let me provide you the outlook in the first quarter. As a reminder, our guidance is based on the seasonality of search confirmation trends in the fourth and first quarters, the search backlog at the end of the fourth quarter, our expectations for Heidrick Consulting assignments, anticipated confirms and fees and the economic climate.

With this, we expect that 2019 first quarter net revenue will be in the range of $165 million to $175 million compared to $160.1 million in last year's first quarter.

In summary, we delivered another outstanding quarter and finished the year with many historical achievements. We intend to maintain the same discipline we showed in 2018 -- excuse me, with regards to balancing investment for future growth, continue focus on cost reduction initiatives and deliver shareholder value.

With that, I'll turn the call back over to Krishnan.

Krishnan Rajagopalan -- President and Chief Executive Officer

Mark, thank you. We've delivered another great quarter results and we continue to see a robust market across all our regions. We experienced the usual seasonal trends around the holidays with regard to search confirmations. But as you can see in Slide 16, January was the strongest it's been in four years. We are continuing to see a solid market. Our four priorities served us well in 2018. They will continue to drive our initiatives in 2019. They are to increase the scale and impact of our two businesses, increase cross-enterprise collaboration, drive a premium service experience for our clients, and maintain a focus on cost containment initiatives to further improve our cost structure.

We will continue to opportunistically hire new consultants and strategically drive expansion into markets and practices where we see good opportunities for growth. Simultaneously, we will continue to focus on internal training and development programs for our consultant support teams.

Effective January 1st, we promoted 12 women and 12 men, in total 24 individuals to Principal consultants as part of our annual consultant promotions process, almost double the number we promoted last year and a huge testament to our internal development programs. We will announce our partner promotions in March, what a fantastic start to 2019.

In Heidrick Consulting we continued to build the business that we launched last year and we expect momentum to continue. Our backlog going into 2019 is higher than it was going into 2018. As a result of the training and development initiatives in 2018, we have a much stronger collaborative relationship between search and consulting and are bringing greater value to our clients seeking holistic leadership advisory services. Our 2018 hires are starting to hit their stride and we've increased our hiring plan for partners and principals in 2019.

Recent investments in thought leadership and solutions in the areas of digital acceleration, diversity and inclusion and organizational simplicity are in strong demand in the market. Earlier this month, we launched a new book Goliath's Revenge, which looks at how established companies are battling back in the age of disruption and how they can attract the right talent and to build a culture of continuous innovation.

And our digital acceleration offerings, which are aligned with our Accelerating Performance framework are helping business leaders understand and manage the leadership, talent, culture and human capital implications that come with ongoing digital disruption. These are just a few of the drivers of the growth we are aiming for in 2019.

To increase the impact of both our businesses, we need to continuously expand our value proposition and strengthen our overall positioning as a trusted leadership advisor, who can provide a wide range of executive talent and human capital solutions.

For example, on January 15th, we announced an exclusive agreement with a premier company called Business Talent Group to offer high-impact, on-demand executive talent solutions. BTG is absolutely the best of what they do. This is yet another way we can help our clients and candidates we place be more successful by providing seamless access to BTG's high end on-demand talent solutions that can help our clients and placements fulfill their most pressing business needs.

I'm highly energized about our priority to drive a premium service experience for our clients, one that differentiates us from our competitors. This focus has led us on an exciting transformation journey at Heidrick. Last year we finished rolling out our new data driven tech enabled assessment tools and platforms to better serve our clients and help them accelerate their performance. The response internally and externally has been incredibly positive. In 2019 you will see us capitalize on our momentum because the results are getting better and more valuable with time. It's improving the efficiency of a search and providing us with deeper assessment of candidates, allowing us to capture formidable collection of leadership data points.

Again, I want to thank our employees around the globe for their hard work this year. I'd also like to thank our Board of Directors for their continued support and guidance and welcome Stacey Rauch who joined the Board at the end of January. We're looking forward to continuing momentum in 2019 and are excited about the future.

Now, we'd be happy to take your questions.

Questions and Answers:

Operator

Thank you. At this time, we will open the floor for questions. (Operator Instructions) Our first question comes from Kevin Steinke with Barrington Research.

Kevin Steinke -- Barrington Research -- Analyst

Good afternoon. So obviously you had a really nice year in 2018 in terms of driving margin expansion and streamlining your cost base. As we look forward to 2019, are there still continued opportunities to streamline the cost base and drive operating margin expansion, assuming you get a reasonable level of top line growth going forward?

Mark Harris -- Chief Financial Officer

Sure, Kevin, it's Mark Harris. I'll take the first stab at it. The answer is yes. And I think we have to look at it in kind of two different lenses. The first one on the search side, as we looked at expanding Europe, as we look at expanding it to Asia-Pacific and we grab scale within those markets, we would expect their respective margins also to expand.

The second one would be over on Heidrick Consulting where again in 2018 we made the pivot, in 2019 we're really focused on their growth strategy, organically, for the most part, bout potentially inorganically and see again some expansion on the margin on that side of it. What those will lead you to overall would be continued expansion from an enterprise point of view. I think if I was addressing the question as it pertains to G&A, I think we're doing a heck of a job at sub 20%. I don't think there's a lot more to do on that side of the fence. But as we continue to enable our technology improvements in search and consulting, we think we'll also derive some margin from that as well.

Kevin Steinke -- Barrington Research -- Analyst

Okay. (multiple speakers) go ahead.

Krishnan Rajagopalan -- President and Chief Executive Officer

Kevin, it's Krishnan here. Let me just add. Look, I think that we are -- we're still continuing to implement our technology and see the advantages of that on the search platform. So, we expect to get some additional benefits through that as well. So, the journey is midway through, and we will continue to be driving this.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Helpful. Do you anticipate any meaningful investments in 2019? I know you referenced increasing your hiring plan for this year. I mean, could you give us a sense of the scale of that increase and perhaps touch on any other investments you have planned for this year?

Krishnan Rajagopalan -- President and Chief Executive Officer

Sure. Hey, Kevin, so just from a headcount perspective on the search side, I think that look we've got a great internal development program and we're going to be continuing to promote people. As I said, we'll be promoting a new class of partners here in March. We will be doing some hiring. It will be probably less than the levels that you've seen historically, but we'll continue to add hiring into search and strategic markets and areas, but I don't think that's going to be an extraordinary level. We need to continue to grow Heidrick Consulting, so we'll be investing in hiring partners and principals into that platform while we continue to develop our internal talent pool as well, which is also terrific in that area. So, you'll see some more aggressive growth in the Heidrick Consulting and you'll probably see modest growth on the search platform.

In addition to that, we will continue to invest in becoming a more data driven business with what we see with our H Labs and we'll be putting a little bit of money toward driving that agenda head for ourselves as well.

Kevin Steinke -- Barrington Research -- Analyst

Okay, great. And following up on Heidrick Consulting, obviously you had the headwind from ASC 606 in 2018. Mark, you mentioned potentially driving some margin expansion in Heidrick Consulting in 2019. Do you think the business is at a point now where you're pretty much done with their realignment and integration, where in the pipeline is solid enough that maybe you can start to generate some organic growth in '19 in Heidrick Consulting?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah, Kevin, it's Krishnan. Let me take that and then, Mark, you can jump in as well. Look, I think that's exactly where we are. 2018 was a pivot year for Heidrick Consulting. We created one team. This is all done. We've now got some new offerings as well and we're poised and ready to grow this business. The culture business is back. It's performing well. That next generation of talent is doing great and we've got a lot of good times here that this business can grow. Our backlog is better as we mentioned in the previous year. Our total contract value that we pulled in in 2018 was larger than 2017 for the business. Our new partners we hired are beginning to hit their strides. So, we're optimistic and -- to improve that pivot point to grow this business.

Mark, I don't know if you want to add.

Mark Harris -- Chief Financial Officer

No, well there isn't much more to add to it.

Kevin Steinke -- Barrington Research -- Analyst

Got it. Okay. Just a housekeeping question here. It seems -- did you change the presentation of the consultant headcount for Heidrick Consulting? You talked about a number in the 60s previously, you're kind of talking about, I think, partners only. Any in terms of the headcount.

Mark Harris -- Chief Financial Officer

Kevin, we did change and I think it was an important change we wanted to make. As you know, we used to report it that way. Now what it really demonstrates is, I think, when you just showed the partner level, the bench that we have, which is also a critical component which the principal side of it. We really felt like as search, we're doing the where we show both partners and principles all like and the consultants. We wanted to do the same thing on the consultancy side.

So, what this tells you when you seek up (ph) from 62 to, 64, 66, that continues to grow which was literally what Krishnan was speaking to in terms of the pivot and what we were trying to do. I think not only do we have a strong quality of partners on the partner range, but we also have very strong quality principals as well and we're going to continue that growth plan.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Good. So I guess lastly for me, there has been some signs of economic weakness in Europe. What are you hearing from your clients there? Any signs that things might be slowing at all in Europe or anywhere else globally in terms of the economic outlook and its impact on your business?

Mark Harris -- Chief Financial Officer

Yeah, Kevin, so -- I think we heard those conversations, but we haven't quite seen anything materialize is what I would tell you. Clearly in Europe, we've seen a little less volume in Europe but -- in the UK, but it's been more than offset by France, Germany and the rest. So, as we actually look at the data, that's what we're seeing. We read the same headlines and probably see some of the same conversation -- hear some of the same conversations that you're having, but our data is pretty solid on this right now.

Kevin Steinke -- Barrington Research -- Analyst

Okay, got it. Thank you very much.

Mark Harris -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Tobey Sommer with SunTrust.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thanks. One of the questions about the you decision with respect to diversification and future quality after revenue. What metrics would you , just drive that improvement? Thanks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah, there was a little bit of echo on that line. I think the question was if I can reframe int here was around the comment I made on quality of revenue. Is that right?

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

That's exactly right. Sorry for the background noise.

Mark Harris -- Chief Financial Officer

Yeah, no problem. Yeah. So, when I look at the quality of the revenue, we think about it in terms of the brands that we're working with, as well as how many of them are long-term search clients now that we are beginning to work collaboratively with across search and across Heidrick Consulting, and that's what gives us optimism there is that we're seeing a nice in uptick in that, we're seeing a nice uptick in the opportunities that are coming up as a result of that. So, when we think about how we're driving that revenue, it's going in the right side and underneath that those clients are our strong Heidrick clients. So that's what I mean by the quality of the revenue.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Okay. Sticking with the top line. Do you think that the company -- as you look at your guidance for the first quarter, are you growing in line with your end markets or how would you describe your trends and market share, understanding I guess at '18, it looks like you outgrew the market on an average (technical difficulty)?

Mark Harris -- Chief Financial Officer

I think that's absolutely right. So I think what we're able to look at from the data that we get, which is similar to yours is not only are we seeing a very good growth from the team in terms of just general revenue, but we're also seeing the fact that we're -- we made the comment, getting more than what our share was in the past and hopefully getting some increasing market share as well. We do know the engagements that we're winning and the work that we're doing, we're staying at the top, which is very important to us. We're able to grow the revenue by staying there and also I think continuing to build on our outstanding brand and reputation with our clients in terms of delivering.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

With respect to the sources of market share, can you just show (ph) where do that come from, at our larger players or it's a shift at the (technical difficulty)?

Julie Creed -- Vice President, Real Estate & Investor Relations

Tobey, this is Julie. One was the -- I mean, obviously the public press releases from Korn Ferry and Egon Zehnder and then, as the information that we see from AESC.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Okay. What's the trend then entering this year on upticks, because a couple of quarters ago, those were going very strong and I'm just curious what the kind of more recent trend has been?

Krishnan Rajagopalan -- President and Chief Executive Officer

No, as we reported in Q4 upticks were actually very strong, stronger than we anticipated and drove us a bit of our guidance that we were looking at. And it really is kind of in this market, where you have such low employment and the fact that you have to pay people a lot more to leave their current positions to kind of come across into new roles, it really does become more of an education in the market and that is in terms of what the market really wants to or thinks they want to pay for the role versus the reality of what they need to pay for the role and that's really generating the upticks. What we have seen in terms of our average retainers et cetera is those have been moving up quite strongly for us and we're believing that the market is actually internalizing appropriately in terms of what the cost of, for example, acquiring a CFO in the market versus maybe what it would cost at the beginning of the year, and that's great, because that really limits down the uptick. And then of course, you have those that are still believing that they are on the same cycle, so to speak, and that's really where the uptick revenues kind of come from.

The upticks even though it's -- the one comment I do want to make Tobey is, even though they could be chunky, so Q2 and Q4 both were a little bit unexpected, Qs one and three, the actual annual amount is pretty consistent year-over-year between '17 and '18 between 13% and 15% in terms of our total revenue. So again, we don't see it when you look at it from a trailing 12-month basis as much as you see it quarter-to-quarter.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Okay. (inaudible) talked about in the space for a long time and have had trouble kind of getting data to see whether or not (technical difficulty) potential facts of the retirement of baby boomers struggling on some elevated level of turnover in the C-suite and other executive levels? Do you have any really good sense for whether this is a driver of demand as you're experiencing right now?

Mark Harris -- Chief Financial Officer

Yeah. Look, I mean we certainly saw a greater number of what we might call CEO level searches this last year than in the past, somewhat due to CEO tenure, having been in the roles for a while and retirements, et cetera, things going on as well. So, we're definitely seeing some activity in those marketplaces, and I think continue to -- we forecast that we're going to continue to see that due to retirement ages, et cetera, things like that, that are happening in the industry. So, at that level we definitely see it.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Okay. Last question for me and I will get back in queue. The pivot the Company has been on for (inaudible) short period of time here is something that we've heard out in the marketplace from others trying to -- at least larger players trying to diversify their revenue streams and become more strategic to their clients. Could you comment on that, whether it's either connectivity separately from others and what the potential is for multiple companies pivoting kind of simultaneously and what that means for the ability to make an acquisition or higher the incremental kind of consulting employees to affect that change?

Krishnan Rajagopalan -- President and Chief Executive Officer

So, Tobey, I -- we definitely are -- it's hard for me to comment on other companies that are pivoting. We think we're somewhat pivoting uniquely in that -- in the space that we're in, the assets that we've got, the IP that we've built, how that IP connects across our service offerings to allow us to pivot from one conversation to another that supports the client. So, we kind of think of that as being unique. We believe that the uniqueness of that creates an opportunity for us to attract others onto this platform as well.

So, we think that those are all positive things we continue to focus on where our brand resonates the best which is working at the top and that's what you see with our numbers, that you see with our productivity, if you look at our average search et cetera. So that's where we're focusing our advisory services offerings as well. And I think there are opportunities there, the right types of opportunities, not just to acquire, but to partner as well. BTG represented an example of a partnership opportunity we saw over there where somebody -- BTG works approximately with 41% of the Fortune 100 as well. So, they're working with the right types of companies that we work with as well and opportunities for synergies that looks like that. So, we're looking at acquisitions and partnership opportunities as well.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thank you very much.

Operator

Thank you. (Operator Instructions) Our next question comes from Tim McHugh with William Blair & Company.

Tim McHugh -- William Blair & Company -- Analyst

Thanks. Just want to follow up on the kind of the margin topic. So the comments about the segment margin, essentially the opportunity in Europe and Asia in search and then the consulting business makes a lot of sense based on the data you guys report. But the other side of the coin, I guess would be essentially you are telling SG&A leverage is probably not going to be the driver, so it's about the leverage of salary and benefits.

And if I look at your revenue per consultants, all-time highs and well above prior highs. So I guess the argument is that I hear you talk about I guess productivity and using technology, but in another hand your productivity is already much higher than we've ever seen. So I guess can you talk about that and how you think about that factor as you -- when we think about salary and benefits us the leverage source over the next couple of years here for margins?

Krishnan Rajagopalan -- President and Chief Executive Officer

Sure. We'll also talk about in addition to that in Europe, as an example we still have a couple of offices in different regions of duplication that we think we'll be able to eliminate, we'll be able to streamline some of those office -- offices -- excuse me, et cetera we think that will help us out. So the other thing that when we looked at the 4% margin we achieved this year versus the 0% we achieved last year is we still have some one-off accruals that were required this year, that again we're hoping won't be around next year.

The scale is what it really comes down to more than salaries and benefits. So my comment would be, we're sitting at about $145 million and if we took ourselves up to similar scale of competitors, we believe we would be generating, again, around that mid-teens margin just by that alone without really the focus on the salaries and benefits component being greatly reduced or materially reduced.

The productivity would have to be similar in terms of what we're driving, as you know, the $1.9 million is in enterprise versus the regional side of it. But we believe with the current productivity that we're having in the European region and Asia-Pacific region as we continue to maintain with scale would really get us those margins that we're trying to attain. (technical difficulty)

Tim McHugh -- William Blair & Company -- Analyst

Okay. So maybe to focus on the D&A, I guess the comment you are trying to make is there is certain leverage maybe as a percentage of revenue, just I guess you're not accepting (technical difficulty) dollar reductions in G&A. (inaudible) from here?

Mark Harris -- Chief Financial Officer

I would think about -- so we're sitting below 20% and my comment, I think, was really more about how we can maintain that. So again, if we were to increase fictitiously revenue by $100 million we'd still believe we can maintain that G&A at that 19% to 20% area. So it would grow in absolute dollars, but maintain in terms of being among the lowest we've had it which is really kind of holding G&A tight, so to speak. That additional margin as you saw in 2018 really kind of comes down to the shareholders at the bottom line, it really was a significant contributor to us expanding our operating income by 320 basis points.

Tim McHugh -- William Blair & Company -- Analyst

Okay. Thanks. And the last question maybe on BTG. Can you talk how that works? I guess, are you -- are individual search consultants going to directly be cross-selling that? I guess the nature of the partnership and how you plan to deploy that across the business?

Krishnan Rajagopalan -- President and Chief Executive Officer

Sure. Yeah, great. Thank you. Yeah, we've got a partnership with them where there is cross referrals. We've got a program that cuts across each of our regions. We're starting in the Americas first and working with them to identify opportunities. There is a nice pipeline of opportunities and there is cross referrals. They're going back and forth between their clients -- our clients, our teams and that's exactly how it works. We've got it highly targeted and focused as well in a way where we're talking to our functional teams, our large accounts and have an approach to being able to drive this partnership as well.

Tim McHugh -- William Blair & Company -- Analyst

Are these the search consultants selling or the consulting or both trying to sell it?

Krishnan Rajagopalan -- President and Chief Executive Officer

Both -- yeah, both. They are predominantly search consultants right now who are but it's intended for both.

Tim McHugh -- William Blair & Company -- Analyst

Okay. Great. Thank you.

Operator

Thank you. Our next question comes from Kevin Steinke with Barrington Research.

Kevin Steinke -- Barrington Research -- Analyst

Just a couple of follow-ups here. You noted that every industry practice contributed to growth in the fourth quarter with the exception of financial services, which was down very slightly. So, would you attribute that financial services trend to any particular region, or is there anything more to read into that as we move throughout the rest of the -- throughout 2019?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah, Kevin, it's Krishnan. I don't really think there's much more to read into that. It was reasonably flat. Fourth quarter had some interesting vacation periods built into it as well. So, we don't read too much into that.

Kevin Steinke -- Barrington Research -- Analyst

Okay. And then lastly, tax rate, do you think this kind of 30%, low 30%s range is sustainable moving forward?

Mark Harris -- Chief Financial Officer

Absolutely. Our view is, given where everything is, obviously we're susceptible to the governments to which we operate in and to the states to which we operate in. But assuming on a constant basis, this is exactly where we'd expect it to be is in the low 30%.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Thank you.

Operator

Thank you. And we have no further questions at this time. I would now like to turn the conference back to our speakers for closing remarks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Okay, thank you very much. Thank you to all my Heidrick colleagues. 2018 was a terrific year for us, our clients and our shareholders. We are transforming our business, addressing the most critical human capital and leadership issues and focused on driving results. 2019 is off to a very good start and promises to be another exciting chapter on this journey. So thank you very much and everybody have a great week.

Operator

Ladies and gentlemen, this concludes today's presentation. You may now disconnect.

Duration: 41 minutes

Call participants:

Julie Creed -- Vice President, Real Estate & Investor Relations

Krishnan Rajagopalan -- President and Chief Executive Officer

Mark Harris -- Chief Financial Officer

Kevin Steinke -- Barrington Research -- Analyst

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Tim McHugh -- William Blair & Company -- Analyst

More HSII analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

What Investors Should Focus on in American Outdoor Brands' Q3 Earnings

There's good reason for investors to hope that American Outdoor Brands' (NASDAQ:AOBC) fiscal third-quarter earnings report will beat analyst expectations. Although it's doubtful the gunmaker will be shooting out the lights as it was a few years ago, the report that will come out on Thursday, Feb. 28, has a decent chance of showing that the Smith & Wesson owner is on target for growth.

A recovering gun market

Naturally, all eyes will turn first to the company's firearms division to see how gun sales fared. Handgun sales, which comprise the bulk of American Outdoor's firearms sales, fell 1.8% last quarter, and shipments to the consumer channel were also down in the first quarter. But they were appreciably better than adjusted National Instant Criminal Background Check System data indicated.

Image source: Getty Images.

While background checks don't translate one for one into gun sales, they're a good barometer of buyer demand, and the checks were depressed for most of last year. Yet for the three months that will comprise American Outdoor's fiscal quarter -- November, December, and January -- the year-over-year decline in background checks performed has greatly diminished, and January's numbers were actually up 3.4%.

That's the first monthly increase since May 2017, if you ignore the 10% gain last March following the Parkland school shooting in Florida the month before. The gun industry may have finally reached its nadir and may be ready to start growing once more.

Data source: National Shooting Sports Foundation. Chart by author.

American Outdoor has also been enjoying considerable strength in its long-gun division, having recorded double-digit growth rates over the first two quarters of the fiscal year. Now, while much of the gain the firearms segment has seen was the result of a revenue-recognition policy change, there has still been increased demand, and that may carry over now that the industry itself seems to be picking up.

As the biggest firearms manufacturer in the country, American Outdoor should necessarily rise and fall with the ebb and flow of the market in general. Further, the fall season tends to pick up as hunting becomes dominant, and then there are the holidays.

The great outdoors are getting greater

Better results might be obtained in the outdoor products and accessories segment, which is increasing in importance to the gunmaker. Last quarter, division sales accounted for a third of total sales. Part of that, of course, is because gun sales have fallen sharply from their highs a few years ago, so other products will account for more of the total. But through acquisitions, American Outdoor has cobbled together a growing collection of goods that are enjoying sales growth.

Outdoor product sales are up 8% year to date, and much of that expansion has come from shooting-sports accessories, which likely coincides with the improving firearms market. But growth also came last quarter from cutlery items, which American Outdoor attributes to new products it has introduced over the past few years. It has acquired several well-known knifemakers in that time frame. Also, the company just completed the purchase of consumer laser products and training company LaserLyte, which makes firearm training systems, laser sights, and bore sights.

Focusing on the numbers

American Outdoor surprised Wall Street last quarter by raising its guidance for the third quarter, forecasting profits of between $0.09 and $0.13 per share on revenue of between $155 million and $165 million. The midpoint of analyst estimates at the time pegged revenue at $158 million, and earnings at $0.10 per share.

The gunsmith topped not only what the market was expecting in the second quarter but its own forecasts as well, and by upping its guidance now, it is anticipating stronger results from the better environment the industry is finding itself in. That belief in better times seems to be justified, so although American Outdoor Brands may not be approaching the performance of a few years ago, investors ought to see a bigger, better, and healthier gunmaker than they've come to expect these past two years.

Nike smart sneakers experience connection issue

Sometimes, seemingly promising futuristic products don't launch without a hitch. Customers who purchased Nike's brand-new Adapt BB smart sneakers have reported experiencing this firsthand. 

Just days after the $350 self-lacing shoes were released, users are currently reporting that they are unable to connect both of their shoes to the Nike Adapt app, meaning it cannot be used to tighten the pair of shoes.

"Simply, this app doesn't work," user David Erdos wrote as a review for the app. "Whenever I try connecting my shoes, it says error try again or it says it's already connected with another pair of shoes."

Sneaker Upgrade: Future is now: Nike's next self-lacing shoe hitting shelves

Faulty Shoes: Zion Williamson's injury from rare shoe failure puts spotlight on Nike

The new Nike Adapt BB smart sneakers. (Photo11: Nike)

Twitter user @ArmaniX24 reported a similar issue, writing, "@nikestore @Nike I keep getting this error when trying to pair adapt bb."

.oembed-frame { width: 100%; height: 100%; margin: 0; border: 0; }

@nikestore@Nike I keep getting this error when trying to pair adapt bb pic.twitter.com/vwkxwZKBAj

— ArmaniX (@ArmaniX24) February 20, 2019

On a webpage for the Adapt BB smart sneakers, Nike gives users several recommendations for how to troubleshoot their shoes. These are powering the shoes off, then back on; performing a hardware reset; performing a system reset; restoring the shoes to their factory settings. Steps for each option can be found on the webpage.

Nike has also been responding to certain reviews on the Nike Adapt app in Apple's App Store. The shoe company did not immediately respond to USA TODAY's request for comment.

Follow USA TODAY intern Ben Tobin on Twitter: @TobinBen

Soybean futures expected to trade sideways to lower: Angel Commodities

Angel Commodities' report on Soybean

NCDEX Mar Soybean futures edged lower on fresh selling by the market participants. It slipped to 4-week low last week on higher production forecasts but now trend look positive. As per latest press release by SOPA, India's soybean output is likely to rise by 38% to 114.8 lakh tonnes this year due to increase in average yield across the country. Demand for Indian soymeal is growing from Europe and West Asia while Iran is emerging as one of the largest buyers. Soymeal exports up by 98% on year in January to 210,166 tonne, as per SEA press release. Overall, Soymeal exports are higher by 16% at 10.66 lakh tonnes for the Apr- Jan period compared to last year. Soymeal exports from India are expected to rise 25% on year to around 15 lakh tn in 2018-19 (Apr-Mar).

CBOT Soybean ended Wednesday with gains mainly on technical buying and support from the cut in forecast for Brazil's 2019 soy exports. Brazil is expected to export 70.2 million tonnes of soy in 2019, consultancy. The forecast for Brazil's total soybean production was revised down slightly to 116.4 mt, compared with the prior forecast earlier this month of 116.5 mt, Agroconsult said on Wednesday, cutting its previous forecast of 73 mt. US acreage estimates from Informa were trimmed by 160,000 acres to 86.044 million.

Outlook

Soybean futures expected to trade sideways to lower on expectation of more correction. However, reports of lower soy oil imports, which may need higher crushing in coming weeks.

For all commodities report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More First Published on Feb 21, 2019 11:26 am

Why Middleby, Tile Shop Holdings, and Uniti Slumped Today

The stock market had a reasonably good session on Tuesday, with market participants reacting favorably to positive news on the domestic economic front despite worries from overseas over the long weekend. Major benchmarks clawed their way out of negative territory early to post solid gains at midday, and by the end of the session, stock indexes were higher by as much as 0.2%. Yet not every company shared in that overall success. Middleby (NASDAQ:MIDD), Tile Shop Holdings (NASDAQ:TTS), and Uniti (NASDAQ:UNIT) were among the worst performers. Here's why they did so poorly.

Middleby loses its leader

Shares of Middleby dropped 7% after the maker of kitchen equipment said that its chief executive officer would retire effective immediately. Selim Bassoul, who also served as board chair in addition to being CEO, said that he will focus on his family and his Bassoul Dignity Foundation. In his place, Timothy FitzGerald will take over the CEO role, having been Middleby's CFO since 2003. Company executives all sang their praises of Bassoul's service, but given how critical the departing CEO has been to Middleby's long-term success, some shareholders question whether it can keep making progress in its transformative efforts.

Image source: Getty Images.

Tile Shop cracks

Tile retailer Tile Shop Holdings saw its stock fall 16.5% following the release of its fourth-quarter financial report. Tile Shop's results seemed solid at first glance, with revenue climbing nearly 7% on a 5% rise in comparable-store sales. However, the tile retailer wasn't able to eliminate its net loss completely during the period, and Tile Shop's guidance indicates continued careful management of expenses in an effort to try to regain profitability. The company's efforts to move toward serving more upscale customers have involved some shifts in strategy, but many believe that Tile Shop will see a payoff from them in the long run.

Uniti takes a hit from Windstream

Finally, shares of Uniti Group plunged more than 37%. The communications infrastructure real estate investment trust (REIT) issued a statement today regarding a court's ruling against Windstream Holdings subsidiary Windstream Services, noting that the decision relates to the spinoff of network assets that ended up under Uniti's corporate umbrella. With creditors going after Windstream, investors in Uniti worry that the spinoff might somehow end up getting reversed, with claims allowed against Uniti assets. Moreover, even if the spinoff is honored, the ongoing troubles that Windstream faces jeopardize the REIT's major source of income. Either way, today's decline in Uniti's share price seems justified, and investors will have to wait for the other shoe to drop to see what happens.

US Silica Holdings Inc (SLCA) Q4 2018 Earnings Conference Call Transcript

Image source: The Motley Fool.

US Silica Holdings Inc  (NYSE:SLCA)Q4 2018 Earnings Conference CallFeb. 19, 2019, 9:00 a.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Greetings, and welcome to the U.S. Silica Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operation Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Michael Lawson, Vice President of Investor Relations and Corporate Communications for U.S. Silica. Thank you. You may begin.

Michael Lawson -- Vice President of Investor Relations and Corporate Communications for U.S. Silica.

Thanks. Good morning, everyone, and thank you for joining us for U.S. Silica's fourth quarter and full year 2018 earnings conference call. With me on the call today are Bryan Shinn, President and Chief Executive Officer; and Don Merril, Executive Vice President and Chief Financial Officer.

Before we begin, I would like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks and uncertainties. For a complete discussion of these risks and uncertainties, we encourage you to read the company's press release and our documents on file with the SEC.

Additionally, we may refer to the non-GAAP measures of adjusted EBITDA and segment contribution margin during this call. Please refer to today's press release or our public filings for a full reconciliation of adjusted EBITDA to net income and the definition of segment contribution margin.

Finally, during today's question-and-answer session, we would ask that you limit your questions to one, plus a follow-up, to ensure all that who wish to ask a question may do so.

And with that, I would now like to turn the call over to our CEO, Mr. Bryan Shinn. Bryan?

Bryan Shinn -- President, Chief Executive Officer, Director

Thanks, Mike, and good morning, everyone. I'll begin today's call by reviewing our fourth quarter performance and highlighting key accomplishments in 2018. I'll then comment on our outlook for 2019 and beyond as we evolve to a more balanced portfolio by expanding our Industrial & Specialty segment with a focus on Specialty Minerals and Performance Material sales, while substantially growing our SandBox Logistics business. Don Merril will then provide additional color on segment results and review key quarterly financial metrics before we open the call for your questions.

For the total company, fourth quarter revenue of $357.4 million and adjusted EBITDA of $68 million represent sequential declines of 16% and 36% respectively. Our Industrial & Specialty segment had a very solid quarter, more than doubling its contribution margin dollars on a year-over-year basis, driven by strong sand sales and a meaningful contribution from EP Minerals.

In our Oil & Gas segment, sand proppant sales were negatively impacted by the well-reported industry headwinds related to budget exhaustion and lack of takeaway capacity, as well as further pricing pressure from a combination of low demand and additional local sand capacity coming online in the Permian.

Given that the business dynamics around increasing local sand supply displacing incumbent capacity are likely to continue for the foreseeable future, we made necessary decisions regarding a few specific sand proppant assets and the treatment of goodwill in this business during the quarter. The effect was a non-cash accounting charge of almost $266 million. We will continue to manage this important situation as the market evolves.

SandBox, our industry-leading last-mile logistics solution, had a strong finish to 2018. We ended the year with 90 crews, within the range we guided to earlier in the year. We estimate that in Q4 we had approximately 24% market share, based on the amount of sand moving through our equipment.

As sand per well has continued to rise, we believe that the most accurate way to evaluate SandBox performance and market share is to look at the volume of sand move through our SandBox system, instead of just the number of crews.

Looking at 2018 in retrospect, I believe that we did what we said we would do. And we hit a number of key milestones and achievements that I'm very proud of including record revenues and adjusted EBITDA for the company, record contribution margin dollars and contribution margin per ton for our Industrial business, record volumes of sand proppant sales as we essentially doubled our effective manufacturing capacity for these products.

We repurchased approximately 7.9 million shares for $148 million during the year, reducing our share count to approximately 73.1 million shares. In Q4 alone, we repurchased approximately 4.5 million shares for $58 million. We acquired EP Minerals in May which doubled the size of our Industrial business and expanded our product offerings, our distribution network and global footprint.

We grew SandBox as promised ending the year with 90 crews and 24% market share. We also brought a new leadership, added substantial talent and invested significantly in SandBox in 2018. SandBox also won a decisive legal battle against Arrows Up. We believe the ruling together with our recent victories against PropX challenge of some of our patent claims reaffirms the strength of SandBox intellectual property and broad patent portfolio, which we will continue to vigorously defend.

We also invested to grow several new product offerings by acquiring a former ceramic proppant plant that we're retooling to produce high-end ISP products. This acquisition enables us to lower our cost and expand our capacity to meet the growing demand for some of IP's most successful and most profitable new products. Adding this new capacity will accelerate product launches, improve product quality and facilitate important product customizations required by our industrial customers.

And finally, in Oil & Gas sand, we made significant progress in building out our two new in-basin frac sand mines and plants in West Texas. Our 4 million ton Crane County facility is now fully operational and our 6 million ton mine and plant at Lamesa will be mechanically complete by the end of the first quarter.

Let's turn now to the future which I have to say looks very bright for U.S. Silica. We expect to continue with our strategic plan to substantially grow our Industrial segment by focusing on Specialty Minerals and Performance Materials offerings. We plan to launch and expand the sales of several new offerings this year while growing the underlying base business through GDP plus, market expansion and continued price increases.

For example, we see an increased market penetration for some of our higher growth products like White Armor, an industrial roofing product that is in very high demand and both legacy ISP and EP Minerals have announced price increases for 2019 in the range of 2% to 9% depending on the product and the grade.

I'm also very excited about the prospects for SandBox in 2019 and beyond. Our existing equipment is 100% sold out for 2019 and we're building new equipment as fast as we can to meet very strong customer demand. Many of our existing and new customers are embarking on substantial high-efficiency well-completion programs and believe that SandBox is the only system that gives them the required combination of efficiency, flexibility, low NPT and the throughput capacity to achieve their objectives.

Given that, as well as our ability to offer turnkey service with sand delivered directly to the blender, I believe that we're developing very sticky customer relationships, which will result in significant volume and profitability growth. Given our current level of customer demand, I believe that our original projections of reaching 25% market share in 2019 are conservative and we should be able to do better.

We're also continuing to innovate and have developed next-generation equipment and logistical models, which should further enhance efficiency and deliver numerous additional benefits to our customers. In addition, as I previously mentioned, we expect to utilize our infrastructure and expertise to transport other products and serve other industries.

I expect that we could launch our first new SandBox offering in 2019. Regarding, our Oil & Gas sand business, we expect that annual demand for proppants in 2019 will be up 5% to 10% at around 110 million tons at $50 per barrel oil, but could increase to over 130 million tons annually at $70 per barrel oil. We expect that most in-basin sand supply under construction will start-up, but we do not forecast significant additional mine developments in the industry this year. We believe that by the end of 2019 two-thirds of the total U.S. sand proppant demand will be supplied by in-basin sand with one-third supplied by Northern White sand.

With those dynamics in mind, our recently added local Permian sand mines should operate at capacity while our Northern White mines will continue to be pressured with lower utilization and pricing. Even with these expected headwinds, we see the Oil & Gas proppant market as attractive and given our low-cost position, scale, service and product quality, we plan to continue to be one of the industry leaders in sales and profitability going forward. Given all the puts and takes across our market sectors, I expect that in 2019, we'll realize approximately 25% of company profitability from sand proppants and 75% from a combination of industrials and SandBox.

And with that, I'll now turn the call over to Don. Don?

Donald Merril -- Chief Financial Officer, Executive Vice President

Thanks, Bryan and good morning everyone. The reported adjusted EBITDA for the fourth quarter was $68 million and excludes a significant impairment charge in our Oil & Gas segment related to goodwill and specific segment assets. As Bryan stated, the decline in demand for Northern White sand impacted our business significantly in Q4 and caused us to make difficult decisions concerning the future of some of our higher cost oil and gas specific plants.

In the fourth quarter, we impaired a $102 million of assets related to facilities in our Oil & Gas segment. Additionally, the challenging pricing environment that continued throughout the quarter coupled with our customer demand shift to local sand gave rise to a goodwill impairment. In the fourth quarter we impaired a $164.2 million of goodwill attributed to our Oil & Gas segment. The remaining $86.1 million of Oil & Gas goodwill is specifically related to our SandBox acquisition which was not impaired.

Moving on to the results of our two operating segments. Fourth quarter revenue for the Industrial and Specialty segment was $113.8 million, down 6% from the third quarter of 2018, due to the normal seasonality in the markets served by the segment. The Oil & Gas segment revenue was $243.5 million, down 19% from the third quarter of 2018. This drop was not due to volume as we remained relatively flat versus the third quarter, but mostly due to a 23% reduction in proppant prices versus the third quarter of 2018.

On a per ton basis, contribution margin for the ISP segment of $47.78 represents a 4% decrease from the third quarter, again, as a result of normal seasonality. Oil & Gas segment contribution margin on a per ton basis was $14.65 compared with $23.43 for the third quarter of 2018, largely due to the pricing discussed earlier.

Let's now look at total company results. Selling general and administrative expenses in the fourth quarter of $32.2 million represented a decrease of 15% from the third quarter of 2018. This decrease was largely the result of lower business development and optimization project expenses and lower non-cash equity stock compensation expense.

We believe that SG&A expenses will approximate $34 million in Q1 of 2019. Depreciation, depletion and amortization expense in the fourth quarter totaled $46.5 million, up 25% from the third quarter of 2018. The DD&A increase was mostly due to a quarterly true up of purchase accounting for the EP Minerals acquisition. We estimate DD&A to be roughly $46 million in Q1 of 2019.

Our effective tax rate for the quarter and year ended December 31, 2018 was 13%. At this point of the year, we anticipate a tax benefit in the neighborhood of 30% in 2019.

Moving on to the balance sheet. Cash and cash equivalents as of December 31, 2018 was $202.5 million in total liquidity, including the revolving credit facility was $297.7 million. Our net debt at year-end was $1.06 billion and our term loan B has a maturity date of 2025.

Capital expenditures for the quarter were $119 million primarily associated with our Permian Basin mine sites and other growth projects, such as, additional assets for our SandBox business and the former proppant plant that Bryan mentioned earlier for specialized products within our ISP segment. We expect to keep capital expenditures in the range of $100 million to $125 million in 2019 and be funded from cash flow from operations.

Finally, we spent approximately $58 million on share repurchases during the fourth quarter bringing our total expenditure in 2018 to $148.5 million. As of December 31, 2018, we had $126.5 million available under our board-approved $200 million repurchase plan.

And with that, I'll turn the call back over to Bryan.

Bryan Shinn -- President, Chief Executive Officer, Director

Thanks, Don. Operator, would you please open the lines for questions?

Questions and Answers:

Operator

Thank you. We will now be conducing a question-and-answer session. (Operator Instructions) Thank you. Our first question comes from the line of Marc Bianchi with Cowen. Please proceed with your question.

Marc Bianchi -- Cowen -- Analyst

Hey, thanks. Bryan I just want to confirm did you -- did I hear you say that you anticipate Oil & Gas to represent 25% of contribution margin in 2019?

Bryan Shinn -- President, Chief Executive Officer, Director

So just to be clear, Marc, and good morning by the way, that is Oil & Gas sand, that's not the Oil & Gas segment, right? So, obviously, Oil & Gas segment includes sand plus SandBox and so that's going to be a substantially larger percentage of the total. So we're just referencing Oil & Gas sand in that comment.

Marc Bianchi -- Cowen -- Analyst

Certainly. Okay, great. So, I guess from here that could imply either a pretty sharp growth in your ISP and Sandbox business or some deterioration in your Oil & Gas sand business, which I'd suspect is maybe not what you're expecting? Could you talk through, how you get from that current mix right now that you reported in the fourth quarter to what you're talking about for 2019?

Bryan Shinn -- President, Chief Executive Officer, Director

Sure. So, I would expect that -- as I said in my prepared remarks that we're going to see substantial growth in Sandbox this year. The business is off to a very fast start, demand is just off the charts for Sandbox right now. So I think that's going to be a real positive for us.

If you look on the Industrial side, that's growing quickly as well. And you have to remember compared to where we were in 2018, we'll have a full year of EP Minerals in those Industrial numbers. So that substantially increases the industrial business in terms of contribution margin dollars. So, there are big improvements and growth on Sandbox and the Industrial side.

On the Oil & Gas sand side, obviously, we're seeing margins being pressured a bit. I think we'll see pretty nice growth in volumes, but pricing will be down a bit and margins will be down a bit as well there. So if I had to ascribe some weighting to it, it's probably 75% Sandbox and Industrial is growing in 25% of the Oil & Gas sand business being under a bit more pressure in terms of margins and pricing but not volume.

Marc Bianchi -- Cowen -- Analyst

Okay. And overall, would you say -- as you look to the first quarter that you see the dollars of profit from the Oil & Gas sand business continuing to decline?

Bryan Shinn -- President, Chief Executive Officer, Director

I think it may decline a little bit Q4, obviously, is always a tough quarter. So as -- just because of all the typical slowdown this year, we saw budget exhaustion and a variety of other things. So my expectation would be that there could be some deterioration in Oil & Gas profits as I look at the elements of that. We believe that volume on the sand side will be flattish from Q4 to Q1, and I would expect there will be a couple dollars per ton of price deterioration, but I will say that the local sand pricing is holding up very well.

We are seeing more pressure on the Northern White side. But on a positive note, we're actually in the last week or so starting to get some pricing traction on Northern White sand. I was talking with some of our sales team just a few days ago and it seems like things are firming up a bit on the Northern White side. So we'll wait and see but it wouldn't surprise me if contribution margin through mostly prices down $1 or $2 in Q1 versus Q2 just on the Oil & Gas sand side.

Marc Bianchi -- Cowen -- Analyst

Right. Okay, great. And then Don, if I could just ask on the CapEx here, $100 million to $125 million expected to be funded through cash flow. Can you put some buckets around how much is maintenance, how much is going toward Sandbox, maybe how much is discretionary and what the expectation would be if perhaps profitability declines more than you anticipate and maybe you have to make a decision about using cash in the credit facility to fund some of this?

Donald Merril -- Chief Financial Officer, Executive Vice President

Sure. So first of all, I don't think we have any plans to start digging into the credit facility here, but I would say -- Marc, I would say we're right around the $20 million to $25 million of maintenance capital for the year. Right now we've got about $25 million to $30 million to finish up our West Texas facility.

So all the spending there should be done in the first half of the year. And because of that our CapEx tends to be a little bit more heavily weighted toward the first half of the year than the second half of the year, right. We've got to finish up those projects.

And then the rest of it is growth capital. So right now take the difference there, the rest of that and split it between SandBox and our industrial business. And I would say, look, as we look to the year, we start to put our plans together. We always have contingency plans in place, and I would say that, we've got about $20 million-or-so -- $20 million, $25 million of what I'd call discretionary capital, that if things do not workout the way we have anticipated right now, we can ratchet capital spending back.

Marc Bianchi -- Cowen -- Analyst

Great.

Bryan Shinn -- President, Chief Executive Officer, Director

Yeah. And Marc just to add to that question, we're definitely going to manage the business within cash flow. I do expect that we will be cash flow positive this year. And -- but as Don said, if things turn worse for some reason, we have knobs to turn, my expectation though is that we will be in the enviable position again of having cash and having to decide how we allocate that whether we continue to do more growth projects, whether we continue the substantial share repurchases that we did in 2018 or variety of other options that we have to employ the capital.

Marc Bianchi -- Cowen -- Analyst

Great. Thanks, Bryan. I'll turn it back.

Bryan Shinn -- President, Chief Executive Officer, Director

Thanks, Marc.

Operator

Our next question comes from the line of Ken Sill with SunTrust. Please proceed with your question.

Ken Sill -- SunTrust -- Analyst

Yeah. Good morning, guys.

Bryan Shinn -- President, Chief Executive Officer, Director

Good morning, Ken.

Ken Sill -- SunTrust -- Analyst

Two questions really kind of unrelated, but one on SandBox. What are the trends right now in terms of driver availability inflation on that side? And are we seeing further inflation in kind of the cost of the fleets just because last quarter you talked about how they had gotten bigger and the capital requirements a little bit higher, but I'm wondering if things slowing down have eased any labor issues that you guys might be having on the driver side?

Bryan Shinn -- President, Chief Executive Officer, Director

Well, it's really interesting Ken, you asked that question, because for us things haven't really slowed down. We're taking share like crazy in the market right now. We believe that as we enter the year, we're up to 24% market share and I think that's the right way to look at this business. So we think about how much sand volume is actually pulling through our equipment, and we have put a goal in place this year to be at 25% market share, but I think we're going to blow right on through that.

So, for sure, we have a lot of sand, lot of drivers moving. We really haven't had much trouble recruiting drivers quite honestly. I think SandBox is a very desirable driving job in the oilfield just because of the predictability of the employee schedules. So we tend to be able to recruit and hold drivers very well.

Just to give you a sense of the sort of intensity out there right now, we're loading a SandBox somewhere in the U.S. every 25 seconds, 24 hours a day. So just kind of step back and think about that and I was talking to our SandBox team a week or so ago, and they said, in February, it's even faster.

So we're seeing massive increases in the SandBox volume, and I think, the reason for that is as more and more energy companies really take a hard look at the last mile and have experienced the various solutions out there, they're figuring out what we knew all along and that's that SandBox is the best solution out there when you look at efficiency, flexibility, low NPT and throughput capacity. So I couldn't be more excited about the trajectory that the SandBox business is on and what the future holds for that, a really exciting part of our company.

Ken Sill -- SunTrust -- Analyst

Yeah. And my unrelated follow-up question is, you guys have talked about having 75%, 80% of your volumes Northern White and in-basin contracted, but it seems like a contract isn't a contract in this business. So how much price erosion have you seen in the Northern White stuff, that's theoretically under contract?

And your sand in-basin pricing is holding up well. We hear a lot of anecdotal stuff and I think that kind of depends on whether you're early or later when you signed your contract, but talk about how you can make some of their -- or how sticky is some of the pricing for some of these contracted volumes?

Bryan Shinn -- President, Chief Executive Officer, Director

Yes. It's a great question. And I would say, generally, we're finding that things are pretty sticky, particularly where we've signed our latest generation of capacity reservation fee contracts, where customers have given us millions of dollars and we basically already have their cash. So we don't have to sort of beg for penalty payment or something, because we already have their money, if they don't perform.

Now, look, with that said, as we see continued pressure on Northern White volumes, there's going to be a lot of customers who look to renegotiate or find a better price. I think one of the advantages we have, though, is that in many cases, we're working with the customers to deliver that sand out to the wellhead with SandBox. So it gives us a bit more negotiating leverage. So we'll wait and see, but for sure there's going to be more pressure Ken on the Northern White side in terms of pricing than what we see on the local sand side, for example.

Ken Sill -- SunTrust -- Analyst

All right. Thank you.

Bryan Shinn -- President, Chief Executive Officer, Director

Thanks, Ken.

Operator

Our next question comes from the line of George O'Leary with Tudor Pickering Holt. Please proceed with your question.

George O'Leary -- Tudor Pickering Holt -- Analyst

Good morning, guys.

Bryan Shinn -- President, Chief Executive Officer, Director

Good morning, George.

George O'Leary -- Tudor Pickering Holt -- Analyst

As you guys think about capital allocation in organic versus inorganic growth, on the M&A front, where kind of are you most acutely focused across your business segment? Is it in line with how you characterize the general growth of the company, and the ISP and maybe logistics are where the big focus is? Or is there more kind of inorganic growth you can do in one of those buckets and the other might be the growth CapEx bucket?

Bryan Shinn -- President, Chief Executive Officer, Director

So, I think about it in a couple of different categories, George. The first is, to continue diversifying our Industrial business. So we made a big acquisition in 2018 with EP Minerals and we're still in the process of really fully developing the potential of that business. So we'll continue to do that.

I think you saw in December, we acquired for a pretty reasonable price, a ceramics proppant facility that wasn't being utilized. And so we're turning that into high-end industrial products facility. So things like that where it's a fairly small investment, but we can make big profitability gains out of it.

We have those kind of things in the pipeline that we're looking at. We're not at this point looking at some kind of transformational acquisition necessarily on the Industrial side of the business. I think we've got plenty to do with kind of blowing out the EP Minerals business and doing a few of these, sort of, one-off things, lot like we did with the ceramics facility.

On the logistics side, I'm really excited about the opportunity there. I mentioned in my prepared remarks that we're looking to take the Sandbox sort of technology and know-how and systems that we built to other products and other industry and so I think you could see us making some investment there. And my hope is that we'll have the next sort of new product line in the Sandbox portfolio rolled out sometime this year.

In terms of Oil & Gas sand, I think the investments there are more around maintaining our competitiveness, trying to reduce cost, and better serve customers in what is more of a challenging market. So, we have all kinds of different opportunities, but it's very different kind of business-to-business George.

George O'Leary -- Tudor Pickering Holt -- Analyst

Right, that's super helpful. And then just as you think about your portfolio of assets going forward, clearly some opportunity to transform some facilities maybe on the Oil & Gas side into Industrial-type facilities.

As you think about potentially shutting in mines going forward where is your focus there? Are there some kind of non-in-basin regional mines that you might shut down or is it more on the Northern White side of the equation?

Bryan Shinn -- President, Chief Executive Officer, Director

So, I think we're looking at all that as you can imagine and we pay very close attention to what's happening at the different mine sites and, of course, it's a bit different when you look at Northern White versus regional.

I would say that at this point what we're seeing is at least for our Northern White mines, there's a shift here or a shift there that we're not staffing. So, for example, in some of our mines where we used to run a 24/7 with four shifts, maybe we're running at three shift or two shifts just depending on demand. And these are typically the Northern White mines like our mine in Wisconsin, for example, that really is not suitable for the Industrial business. So, there's no sort of trade-off there where you can take tons that aren't being purchased by our Oil & Gas customers and move them to Industrials like we can, let's say, our Ottawa mine in Illinois or something like that. So, we have those kind of situations.

The regional mines we're looking at much more closely -- and -- so, for example, we have a mine in Voca, Texas which used to be in a great position to truck products into the Permian, but now it's substantially further away than the new local mines that are coming up much closer to the well. So, that's the kind of mine that we're looking at very carefully.

And quite frankly that's probably a mine that in the coming months we'll have to close just because the demand is being taken by the new mines that are coming in and I don't think that's a surprise to anybody given the position of that mine.

So, it's kind of a different situation all the way across, but we're looking at it very carefully and taking the appropriate actions as we need to.

George O'Leary -- Tudor Pickering Holt -- Analyst

Thanks very much for the color Bryan.

Bryan Shinn -- President, Chief Executive Officer, Director

Okay. Thank you.

Operator

Our next question comes from the line of Stephen Gengaro with Stifel. Please proceed with your question.

Stephen Gengaro -- Stifel -- Analyst

Thanks. Good morning gentlemen.

Bryan Shinn -- President, Chief Executive Officer, Director

Good morning.

Stephen Gengaro -- Stifel -- Analyst

Two questions, if you don't mind. Let's start with the ISP business. Can you give us a sense just kind of an update in its current form right without additional growth how should we expect just the general seasonal trends to play out? And also within the business sort of the part two was what are the biggest drivers to that business as we look at the next year plus?

Donald Merril -- Chief Financial Officer, Executive Vice President

Sure, Stephen. Two great questions. And if you look at our industrial business going back I mean literally, we've been doing this business really a big piece of it on the sand side for 119 years. Q4 is usually the lowest quarter. Many of our products are bought seasonally, so you didn't say it's Q2 and Q3 you tend to get the highest sales. But then as we get into Q4 there's seasonal impacts and then also many of our major customers like say our glass customers, they typically take holiday outages between Thanksgiving and Christmas much like the oilfield does. So Q4 is usually the lowest. Q1 is kind of the second worst and then Q2 and Q3 are typically the better quarters there.

In terms of drivers for the business, it's a fascinating business in that is frequent on the sand side you sort of look from the outside and you say geez this seems like it's a commodity business, but if you look at how we have been able to grow this business over the last six years since we really started trying to grow the Industrial business our profitability CAGR so contribution margin dollars over six years is 19%, but that's not a commodity business.

The CAGR of our contribution margin per ton in Industrials over the same period is 21%. And so that's from a combination of a couple of things, one is being very aggressive in price, we get price every year, and two we've introduced a number of new offerings. And so for example, between our Industrial sand business and EP Minerals about 15% on average of our revenue is coming -- sorry of our contribution margin is coming from products that have been introduced in the last two years.

So this -- when you're inside that business, it has a very sort of specialty performance materials kind of feel, high-end products, very sticky with customers. And we're serving a number of industries. Used to be that, we're a bit more concentrated when we just had the sand business but now with EP Minerals, we have added several growth industries a lot of things like chemicals a lot of food applications. They're just sort of in everything paints and coatings. So we really diversified the business and that was one of our goals was to diversify across more end-uses, but we want to focus much more on Specialty Minerals and Performance Materials. And so it's a very exciting business and one that I think we're going to see great things from just based on this trend and track record and all the things that I see in the pipeline.

Stephen Gengaro -- Stifel -- Analyst

That's helpful color. And just one quick follow-up as you think about the CAGR going forward for the business in general over sort of a five-year time frame is that a double-digit kind of number or is it more like sort of 5%, 6%, 7% would that be a reasonable target?

Donald Merril -- Chief Financial Officer, Executive Vice President

Well, look we've just -- we just had the sand business for the last six years. We've been growing at 10% CAGR, right? So for me internally that's my benchmark for the team. I'm pushing the team to keep our track record intact for the next many years of growing at 10%. And I'll just give you one last fact here we also have a massive amount of new business opportunities and new products. Our pipeline currently has more than 100 new projects and offerings in it. So it's a very robust pipeline and I feel like that sort of the sky is the limit for this Industrial business over the next couple of years.

Stephen Gengaro -- Stifel -- Analyst

Thank you for the color. It's very helpful.

Donald Merril -- Chief Financial Officer, Executive Vice President

Thanks, Steve.

Operator

(Operator Instructions) Our next question comes from the line of John Watson with Simmons. Please proceed with your question.

John Watson -- Simmons -- Analyst

Good morning guys.

Donald Merril -- Chief Financial Officer, Executive Vice President

Hey, good morning, John.

John Watson -- Simmons -- Analyst

Bryan, you mentioned outstanding demand for SandBox in the release and you recently press released the Chesapeake contract, so clearly impressive results there. How should we think about profitability for some of these new jobs that you've won or do you expect to win? Is the prior guidance of around $1 million of annualized contribution margin the right framework?

Bryan Shinn -- President, Chief Executive Officer, Director

So it's really interesting. A lot of the work that we've won are directly with energy companies who we're looking to source their proppant. And what we're finding is that the size of a lot of these customers wells and the work that they are doing is just substantially bigger than what we have done in the past. So when you look at the tons that we're actually moving through some of these wells, it's just an amazing amount of volume to the statistic I quoted earlier, we're now at the point of loading a SandBox every 25 seconds in the U.S. So I think that's going to drive really good profitability. And as I mentioned also the way we're thinking about this internally is not so much in terms of crews, but sand demand that we're serving.

So for example, if the market, let's say is 100 million tons of sand as we annualize as we enter the year, we think we have 24%, so that's says that 24 million tons of sand is flowing through our system. Now we expect the sand demand to grow and we're going to grow share in that growing market. So I think we'll see substantial improvement in profitability in SandBox and at the same time, we're looking to improve our efficiency there and take out cost and get more sort of streamlined in terms of operations by focusing on sort of a district-by-district model. And I think that as well is going to help us continue to improve our profitability. So I feel like there's definitely two thumbs up for SandBox growth and the profitability of that growth, John.

John Watson -- Simmons -- Analyst

Okay. That is great. Thanks, Bryan. Maybe as a follow-up thinking about Q1, you gave helpful guidance for frac sand contribution margin per ton. More SandBox systems deployed for the quarter versus Q4 and it sounds like flat or improving profitability per crew. Is -- are those puts and takes do those level out to flat contribution margin per ton quarter-over-quarter on a consolidated oil and gas basis? Is that the right way to think about that?

Bryan Shinn -- President, Chief Executive Officer, Director

Look, I think we're probably -- when you level it all out, my hope is that we'll be sort of flattish in terms of contribution margin per ton. We'll see. I mean, obviously we're still fairly long way to go in the quarter. Trend looks very positive, but my hope is that we can see the positive from SandBox offset some of the headwinds perhaps that we got in Oil & Gas sand and certainly that's what we're trying to do.

John Watson -- Simmons -- Analyst

Okay. Perfect. And then just a quick follow-up. You mentioned price increases for Northern White. We've heard about potential shortage of in-basin 40/70 in the Permian. Is that something that you have seen from your competitors and do you think that's helping to drive more Northern White demand in the Permian specifically?

Bryan Shinn -- President, Chief Executive Officer, Director

Well, I think there is a couple of things going on here. The first is that, I believe there's not going to be quite as much 40/70 produced in the Permian as some of the early models might have indicated as we survey the marketplace, I think perhaps some of our competitors were a bit overly optimistic in terms of how much 40/70 they can get out. So that's one thing.

The second thing that is bit of a challenge right now is that for some of the Northern White grades depending on where the mines are in the country it is winter right and so the mines don't run as well and there's logistics issues and things. So I think we're seeing some flow-through impacts of that. And I know you asked specifically about the Permian, but in some locations let's say the Eagle Ford in particular the 40/70 is really poor quality and we're starting to get numerous inquiries from energy companies and having conversations with them and they're all just kind of in the same vein which is we really don't want to pump this local 40/70. We tried it in a couple of wells and the well results were very poor. So I think that's a developing trend in the Eagle Ford and we'll see how that plays out.

John Watson -- Simmons -- Analyst

Thanks very much, Bryan. I'll turn it back.

Bryan Shinn -- President, Chief Executive Officer, Director

Thanks, John.

Operator

Our next question comes from the line of Chris Voie with Wells Fargo. Please proceed with your question.

Chris Voie -- Wells Fargo -- Analyst

Good morning.

Bryan Shinn -- President, Chief Executive Officer, Director

Hi, good morning, Chris.

Chris Voie -- Wells Fargo -- Analyst

Just few questions. So first on Sandbox just curious, if you have a year-end target for crews at your current bill rate in 2019?

Bryan Shinn -- President, Chief Executive Officer, Director

So we really don't. To me the concept of a crew is becoming less and less meaningful. And so just for example, we have one customer that we're working for, who has some very large acreage in one of the basins. And we're doing some special things for that customer. We're building a local transload on that property that they're going to be drilling and completing. And so on the transload we're going to have hundreds and hundreds of boxes and so that -- I don't even know how to count those as a crew. So we're doing things more and more like that to serve customers. We're customizing our offering. And so I think the right way to look at it and what you'll hear us talking about more and more is what kind of market share we have how much sand is flowing through our system and we're already at about 24%, I think a good target for us say by middle of 2020 is to get to 30% to 35% and recognize that we think the market is going to be growing. So we're growing share in a growing market, I expect we'll be very pleased with the results here in 2019.

Chris Voie -- Wells Fargo -- Analyst

Okay. And if you're transitioning to thinking about it that way are your pricing models also evolving that way where it's more oriented toward the tonnage and therefore there are new metrics that you can give us to think about what kind of profitability to do on a per ton basis instead of a per crew basis or something like that?

Bryan Shinn -- President, Chief Executive Officer, Director

So it's an interesting question. And our pricing models are very substantially on a customer-by-customer basis. And so if you look at the spectrum on one end, we still do a rent equipment -- equipment sets and equipment that we have to our customers and so that's kind of the low end where we just get money from a rental model.

And if you look at some of the other competitors in this space, mostly the silo competitors, that is their model. They rent the equipment, that's it. But we have much more sophisticated models all the way up to kind of at the other end of the spectrum, us doing everything for the customers.

We provide the sand. We provide the equipment. We run the equipment on the well sites. And so for those models, for example, we get a much larger profit and make much better returns. And so, the challenge of trying to give guidance around this is, those things flex back and forth depending on the customers and how many of which you have.

And so, it makes it a challenge to give guidance that's meaningful, but we understand that our investment community and our analyst community is looking for that. And so, we continue to think about how we can give the right kind of guidance without sort of giving away all the trade secrets and some of the confidential information that we don't want to share. So I appreciate the question and we continue to think about that, Chris.

Chris Voie -- Wells Fargo -- Analyst

Yeah. Fair enough. And then maybe one more. You put in the release that you expect about two-thirds of demand by the end of the year to be in-basin. You view the business still as attractive for proppant, but I think you previously said that you're not looking to deploy additional capital in the proppant. Can you talk about how you see that two-thirds evolving across different basins and why you would or would not deploy additional mines into basins other than the Permian?

Bryan Shinn -- President, Chief Executive Officer, Director

Yeah. It's a good question and I would say that in terms of the kind of local supply, let's take the Permian for example, I think, by the end of 2019 the Permian's probably 100% supplied by local 100 mesh, but probably more like somewhere between 50% to 60% supplied by 40/70. So it's kind of one end of the spectrum.

The Eagle Ford is probably 90% supplied by 100 mesh, but much less by 40/70 because of the low quality there. I think, maybe its only 30% or 35% of the 40/70 is supplied locally. So it does vary a lot by basins and we continue to watch those trends.

And, I think, for us we look at capital deployment and we have some really good projects on the industrial side. We have SandBox to invest in, we've got return of cash to shareholders through share repurchases and dividends. And so, for me those are probably the top three places that we might want to allocate capital going forward based on attractiveness.

Chris Voie -- Wells Fargo -- Analyst

Okay. That's helpful. Thank you.

Bryan Shinn -- President, Chief Executive Officer, Director

Okay. Thank you.

Operator

Our next question comes from the line of Lucas Pipes with FBR. Please proceed with your question.

Lucas Pipes -- FBR -- Analyst

Hi. Good morning, gentlemen. I wanted to ask a high-level industry question as well, kind of follow-up, in terms of Northern White, how much more supply do you think has to come out of the market over the course of this year, given your demand assumptions and such. Thank you very much for your perspective.

Bryan Shinn -- President, Chief Executive Officer, Director

Thanks, Lucas and it's a question that we've looked at extensively. And so, look, I'll give you a lot of different numbers here and you can sort of draw your own conclusions from this. But what we've seen at this point is, about 15 million tons that's already off-line and those are some of the higher cost mines in the industry and my expectation is that that capacity probably never gets started back up.

There's another 10 million to 15 million tons which is what I'll call idled, but it's hard to get your hands around because it's a shift here or shift there instead of working 24/7 at a mine, perhaps you're only working five days a week, those kind of things. So, we think that represents about 10 million to 15 million tons.

And then my personal belief is that we need to get out about another 10 million tons of capacity to start to rebalance things a bit. I think that today as we stand with that sort of 15 million tons idled -- sorry 15 million tons shut and 10 million tons to 15 million tons idled that puts us somewhere around 50 million tons to 55 million tons of Northern White supply. And then if we take out that extra 10 million tons that I talked about, that gets us to 40 million tons or 45 million tons and that seems like a kind of a sustainable level based on industry demand.

And when we look at Northern White demand, and I apologize for the long answer here, but I think this is important and I know a lot of people are interested in this, Northern White demand assuming we're at $50 oil is probably about 20 million tons to 25 million tons. So, said another way that Northern White capacity of 50 million tons to 55 million tons is about 50% utilized at $50 oil. We think the demand goes up at $70 oil and probably is -- capacity is about 70% utilized.

So, long story short, if you want the really short version here, $50 oil equals 50% utilization, $70 oil equals 70% utilization. That's the shorthand that I use to remember it, but I just want to give you all the kind of the math behind that so you can compare that to your own models and what you're hearing from others out in the industry.

Lucas Pipes -- FBR -- Analyst

Both the long and short version is very helpful. A quick follow-up. How soon would you expect those additional 10 million tons to come out and what's the trigger? Is it contracts rolling off either on the customer side or say like there's a transportation provider with rails? Is it pricing related? Does pricing have to drop further in order to disincentivize that capacity? How do you see this playing out over the course of this year?

Bryan Shinn -- President, Chief Executive Officer, Director

So, I think there's a couple of things. Obviously, pricing and margin pressure, but I feel like some of that capacity is just kind of companies and mines that are sort of hanging out by their fingernails at this point. So, I think time alone will drive a lot of that.

I feel like there are some mines today that are operating for short periods of time at cash losses. And my experience is in most industries especially when there's not, sort of, a ray of sunshine out there that says boy in six months or 12 months, we can see the obvious driver that's going to bring this capacity back online. Usually in those situations, people kind of fold their tent eventually. So, I feel like we just need a few more quarters of pain and we'll see that capacity come out.

Lucas Pipes -- FBR -- Analyst

Very helpful. I appreciate all the color. Thank you.

Bryan Shinn -- President, Chief Executive Officer, Director

Thank you, Lucas.

Operator

Thank you. Due to time constraints, our final question comes from the line of Saurabh Pant with Jefferies. Please proceed with your question.

Saurabh Pant -- Jefferies -- Analyst

Hi, good morning Bryan and Don.

Bryan Shinn -- President, Chief Executive Officer, Director

Good morning.

Saurabh Pant -- Jefferies -- Analyst

So, again, I think pretty much everything was answered, but I wanted a little more clarification on the volume guidance on the Oil & Gas side. So, I think you said pretty much flat volumes 4Q to 1Q, right. If I were to pass that out across different sand times, right, I think the West Texas volume is still ramping up and based on what you suggested on the last quarterly call right, I think Don you were talking about $4 million run rate in the fourth quarter, going to $6 million run rate in the first quarter right, so on a quarterly basis maybe a 500,000 ton increase 4Q to 1Q right, so does that mean that everything else declines by 500,000 tons roughly speaking 4Q to 1Q? Is that how we should look at it?

Donald Merril -- Chief Financial Officer, Executive Vice President

Yeah. So I think that's generally -- look it's a zero-sum game right, so if we say flattish volumes -- if the local sand volumes are going up then everything else is going down. And so I think that's approximately right. Obviously there's lot of puts and takes here and a lot of time left to go in the quarter, but that will be my expectation.

Saurabh Pant -- Jefferies -- Analyst

Okay, OK, OK. And again without getting into the specifics, but thinking about what margins we should expect in West Texas tons, but secondly we know that one of your competitor just renegotiated its contract side and that's implying about $16, $17 per ton contribution margin, is that a reasonable place to be if you were to think about what you should be getting out of your West Texas tons?

Bryan Shinn -- President, Chief Executive Officer, Director

Yeah. So I feel like that's not unreasonable place.

Saurabh Pant -- Jefferies -- Analyst

Okay.

Bryan Shinn -- President, Chief Executive Officer, Director

We are constantly talking with our customers. We haven't done much or anything I think in the way of renegotiations per se. So I feel like prices are holding pretty well. The other thing that helps us is we've got Sandbox, so a lot of our West Texas customers are either currently using Sandbox or planning to use it in the near future.

So all that helps and I also think that the service that we can provide with Sandbox and the lack of nonproductive time is really a big benefit and that's a major cost advantage for our customers.

For example, I was talking with an energy company customer about two weeks ago and they told me that all the vendors they have across their entire company, they felt like Sandbox was the best vendor that was serving them.

So to me that's the kind of service that we bring and that's real money, real benefit for our customers, and so I think it gives us a bit of an advantage too, sometimes customers are willing to pay a little bit more if in the end of the day for example that they have zero NPT, which we've had with a number of our Sandbox crews that's worth millions of dollars a year to those customers. So I think we have an advantage versus a lot of our competition out in West Texas.

Saurabh Pant -- Jefferies -- Analyst

Right. No, that's totally -- I totally agree with that. I think that's showing up in your 24% market share right. That's higher than anybody would have expected at this point, I think. Okay. So, I think that's it for me guys. Thank you. I'll turn it back.

Bryan Shinn -- President, Chief Executive Officer, Director

Okay. Thanks.

Operator

Thank you. We have reached the end of the question-and-answer session. Mr. Shinn, I would now like to turn the floor back over to you for closing comments.

Bryan Shinn -- President, Chief Executive Officer, Director

Well, thank you very much. I'd like to close today's call by thanking everyone who helped us deliver on our key objectives in 2018. I think, we had a strong year and we're off to a good start in 2019. Certainly we have a lot of exciting opportunities ahead. We got a chance to talk about many of them on the call today. And I look forward to talking with all of you next quarter. Thanks for dialing in and have a great day everyone.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Duration: 56 minutes

Call participants:

Michael Lawson -- Vice President of Investor Relations and Corporate Communications for U.S. Silica.

Bryan Shinn -- President, Chief Executive Officer, Director

Donald Merril -- Chief Financial Officer, Executive Vice President

Marc Bianchi -- Cowen -- Analyst

Ken Sill -- SunTrust -- Analyst

George O'Leary -- Tudor Pickering Holt -- Analyst

Stephen Gengaro -- Stifel -- Analyst

John Watson -- Simmons -- Analyst

Chris Voie -- Wells Fargo -- Analyst

Lucas Pipes -- FBR -- Analyst

Saurabh Pant -- Jefferies -- Analyst

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