NOTE 6 — IMPAIRMENTS AND OTHER CHARGES

The following table summarizes our impairments and other charges:


	Three Months Ended
	March 31,
(In millions)	2020		2019
Supply commitment charges	$	3.2	$	56.6
Employee severance costs		0.5		—
Impairment of assets		—		2.8
Inventory write-down		—		1.4
Total impairments and other charges	$	3.7	$	60.8

Supply Commitment Charges

We incur supply commitment charges when our purchases of sand from certain suppliers are less than the minimum purchase commitments in our supply contracts. According to the accounting guidance for firm purchase commitments, future losses that are considered likely are also required to be recorded in the current period.

During the first quarter of 2020 and 2019, we recorded aggregate charges under these supply contracts of $3.2 million and $56.6 million, respectively. These charges relate to actual purchase shortfalls incurred, as well as forecasted losses expected to be incurred and settled in future periods. Historically, these purchase shortfalls have been largely due to our customers choosing to procure their own sand, often from sand mines closer to their operating areas. The supply commitment charge in the first quarter of 2020 was also due to the significant reduction in customer activity expected in the second quarter of 2020 as a result of the decline in oil and gas commodity prices.

In May 2019, we restructured and amended our largest sand supply contract to reduce the total remaining commitment through 2024 by approximately $162 million. In connection with this amendment, we recorded a supply commitment charge of $55.0 million in the first quarter of 2019 to record losses on certain expected purchase shortfalls. Please refer to Note 9, “Impairments and Other Charges” in our annual report on Form 10-K for the year ended December 31, 2019, for more information regarding this amended and restated supply contract. The remaining amount of the 2019 charges represent revised estimates of our purchase shortfalls under this contract for 2019.

Estimated losses related to these supply contracts contain uncertainties, such as future customer demand and sand preferences. These uncertainties require us to use judgment to quantify these estimates. Actual results could materially differ from our estimates. For example, we could see additional charges in 2020 if current activity levels extend well into the second half of 2020 and we are unable to utilize the sand under these supply contracts.

Employee Severance Costs

In the first quarter of 2020, we incurred employee severance costs of $0.5 million in connection with our cost reduction measures to mitigate losses from the decline in customer activity levels due to the low commodity price environment. At March 31, 2020, we had a remaining liability for future severance payments of $0.5 million.

Discontinued Wireline Operations

In May 2019, we discontinued our wireline operations due to financial underperformance resulting from market conditions. As a result of this decision, we recorded an asset impairment of $2.8 million and an inventory write-down of $1.4 million in the first quarter of 2019 to adjust these assets to their estimated fair market values and net realizable values, respectively. We sold substantially all of these assets in 2019 and received net proceeds of approximately $3.7 million.

Risk of Future Impairments

As previously discussed, we have experienced a substantial downturn in our business due to the COVID-19 pandemic and Saudi-Russia price war. We concluded that this downturn was a triggering event to test our long-lived assets and indefinite-lived tradename for impairment. After testing these assets for impairment, we concluded that no impairments were required at March 31, 2020. These tests rely on two key inputs: the estimated severity and length of the current industry downturn and the magnitude of an industry recovery. If current industry conditions continue for a prolonged period or if our estimates of these key inputs are revised unfavorably in a future quarter, we will likely incur impairments of long-lived assets or our tradename in a future period.