Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 27, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-38090 | |
Entity Registrant Name | SOLARIS OILFIELD INFRASTRUCTURE, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 81-5223109 | |
Entity Address, Address Line One | 9811 Katy Freeway, Suite 700 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77024 | |
City Area Code | 281 | |
Local Phone Number | 501-3070 | |
Title of 12(b) Security | Class A Common Stock | |
Trading Symbol | SOI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Central Index Key | 0001697500 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Class A Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 29,647,125 | |
Class B Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 15,683,649 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 60,944 | $ 66,882 |
Accounts receivable, net of allowances for credit losses | 18,044 | 38,554 |
Prepaid expenses and other current assets | 2,716 | 5,002 |
Inventories | 1,073 | 7,144 |
Total current assets | 82,777 | 117,582 |
Property, plant and equipment, net | 250,454 | 306,583 |
Non-current inventories | 3,323 | |
Operating lease right-of-use assets | 4,612 | 7,871 |
Goodwill | 13,004 | 17,236 |
Intangible assets, net | 3,177 | 3,761 |
Deferred tax assets | 59,325 | 51,414 |
Other assets | 464 | 625 |
Total assets | 417,136 | 505,072 |
Current liabilities: | ||
Accounts payable | 9,122 | 3,824 |
Accrued liabilities | 8,037 | 14,447 |
Current portion of payables related to Tax Receivable Agreement | 1,416 | |
Current portion of operating lease liabilities | 570 | 596 |
Current portion of finance lease liabilities | 30 | 30 |
Other current liabilities | 75 | 74 |
Total current liabilities | 17,834 | 20,387 |
Operating lease liabilities, net of current | 7,391 | 7,855 |
Finance lease liabilities, net of current | 108 | 130 |
Payables related to Tax Receivable Agreement | 68,206 | 66,582 |
Other long-term liabilities | 742 | 460 |
Total liabilities | 94,281 | 95,414 |
Commitments and contingencies (Note 9) | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 50,000 shares authorized, none issued and outstanding | ||
Additional paid-in capital | 179,811 | 191,843 |
Retained earnings | 25,098 | 74,222 |
Treasury stock (at cost), 0 shares and 163 shares as of September 30, 2020 and December 31, 2019, respectively | (2,526) | |
Total stockholders' equity attributable to Solaris | 205,198 | 263,847 |
Non-controlling interest | 117,657 | 145,811 |
Total stockholders' equity | 322,855 | 409,658 |
Total liabilities and stockholders' equity | 417,136 | 505,072 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common stock | 289 | 308 |
Class B Common Stock | ||
Stockholders' equity: | ||
Common stock |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Allowance for credit losses | $ 1.1 | $ 0.3 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000 | 50,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Treasury stock (in shares) | 0 | 163 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 600,000 | 600,000 |
Common stock, shares issued | 28,842 | 30,928 |
Common stock, shares outstanding | 28,842 | 30,765 |
Class B Common Stock | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 180,000 | 180,000 |
Common stock, shares issued | 15,785 | 15,939 |
Common stock, shares outstanding | 15,785 | 15,939 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue: | ||||
Revenue | $ 20,531 | $ 59,604 | $ 77,700 | $ 178,829 |
Operating costs and expenses: | ||||
Depreciation and amortization | 6,594 | 6,908 | 20,378 | 19,875 |
Selling, general and administrative (excluding $172 and $146 and $324 and $265 of depreciation and amortization for the three and six months ended June 30, 2020 and 2019, respectively, shown separately) | 3,840 | 4,933 | 12,212 | 13,967 |
Impairment losses | 47,828 | |||
Other operating expenses | 1,856 | 248 | 5,329 | 529 |
Total operating costs and expenses | 26,937 | 36,811 | 134,181 | 100,985 |
Operating income (loss) | (6,406) | 22,793 | (56,481) | 77,844 |
Interest income (expense), net | (40) | (8) | 36 | (775) |
Total other expense (income) | (40) | (8) | 36 | (775) |
Income (loss) before income tax expense | (6,446) | 22,785 | (56,445) | 77,069 |
Benefit (provision) for income taxes | 843 | (3,703) | 8,193 | (12,042) |
Net income (loss) | (5,603) | 19,082 | (48,252) | 65,027 |
Less: net (income) loss related to non-controlling interests | 2,320 | (7,684) | 20,347 | (28,036) |
Net income (loss) attributable to Solaris | (3,283) | 11,398 | (27,905) | 36,991 |
System rental | ||||
Revenue: | ||||
Revenue | 9,197 | 36,638 | 40,720 | 113,726 |
Operating costs and expenses: | ||||
Cost of revenue | 1,181 | 2,838 | 4,018 | 7,737 |
Depreciation and amortization | 6,052 | 5,773 | 18,087 | 16,481 |
System services | ||||
Revenue: | ||||
Revenue | 10,855 | 18,153 | 35,231 | 48,621 |
Operating costs and expenses: | ||||
Cost of revenue | 13,126 | 21,072 | 43,269 | 56,366 |
Depreciation and amortization | 172 | 384 | 803 | 1,173 |
Transloading services | ||||
Revenue: | ||||
Revenue | 310 | 4,417 | 1,039 | 15,131 |
Operating costs and expenses: | ||||
Cost of revenue | 243 | 652 | 783 | 2,051 |
Depreciation and amortization | 0 | 411 | 411 | 1,231 |
Inventory software services | ||||
Revenue: | ||||
Revenue | 169 | 396 | 710 | 1,351 |
Operating costs and expenses: | ||||
Cost of revenue | 97 | 160 | 364 | 460 |
Depreciation and amortization | $ 193 | $ 193 | $ 579 | $ 579 |
Class A Common Stock | ||||
Operating costs and expenses: | ||||
Earnings per share of Class A common stock - basic (in dollars per share) | $ (0.12) | $ 0.36 | $ (0.97) | $ 1.33 |
Earnings per share of Class A common stock - diluted (in dollars per share) | $ (0.12) | $ 0.36 | $ (0.97) | $ 1.33 |
Basic weighted-average shares of Class A common stock outstanding (in shares) | 28,787 | 30,951 | 28,912 | 27,270 |
Diluted weighted-average shares of Class A common stock outstanding (in shares) | 28,787 | 30,980 | 28,912 | 27,317 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) $ in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2020USN ($) | Sep. 30, 2019USD ($) | Sep. 30, 2019USN ($) | |
Depreciation and amortization | $ 6,594 | $ 6,908 | $ 20,378 | $ 19,875 | ||
Stock-based compensation expense | 1,077 | 1,225 | $ 3,732 | $ 3,265 | ||
Selling, general and administrative expenses | ||||||
Depreciation and amortization | 177 | 147 | 497 | 411 | ||
Stock-based compensation expense | 1,011 | 1,139 | 3,356 | 3,042 | ||
System rental | ||||||
Depreciation and amortization | 6,052 | 5,773 | 18,087 | 16,481 | ||
Stock-based compensation expense | (14) | 10 | 16 | 24 | ||
System services | ||||||
Depreciation and amortization | 172 | 384 | 803 | 1,173 | ||
Stock-based compensation expense | 76 | 71 | 349 | 187 | ||
Transloading services | ||||||
Depreciation and amortization | 0 | 411 | 411 | 1,231 | ||
Stock-based compensation expense | 4 | 5 | $ 11 | $ 12 | ||
Inventory software services | ||||||
Depreciation and amortization | $ 193 | $ 193 | $ 579 | $ 579 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common StockClass A Common Stock | Common StockClass B Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Non-controlling Interest | Total |
Balance at beginning of year at Dec. 31, 2018 | $ 271 | $ 164,086 | $ 35,507 | $ (1,414) | $ 142,428 | $ 340,878 | |
Balance at beginning of year (in shares) at Dec. 31, 2018 | 27,091,000 | 19,627,000 | 91,000 | ||||
Changes in Stockholders' Equity | |||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 32 | 24,925 | (24,957) | ||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 3,245,000 | (3,245,000) | |||||
Net effect of deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | (1,895) | (1,895) | |||||
Stock option exercises | $ 1 | 601 | $ (427) | (336) | (161) | ||
Stock option exercises (in shares) | 65,000 | 28,000 | |||||
Stock-based compensation | 553 | 346 | 899 | ||||
Vesting of restricted stock | 2 | $ (4) | (2) | (4) | |||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,638) | (1,638) | |||||
Dividends paid Class A common stock | (3,119) | (3,119) | |||||
Net (loss) income | 12,317 | 11,118 | 23,435 | ||||
Balance at end of year at Mar. 31, 2019 | $ 304 | 188,458 | 44,173 | $ (1,845) | 126,773 | 357,863 | |
Balance at end of year (in shares) at Mar. 31, 2019 | 30,401,000 | 16,382,000 | 119,000 | ||||
Balance at beginning of year at Dec. 31, 2018 | $ 271 | 164,086 | 35,507 | $ (1,414) | 142,428 | $ 340,878 | |
Balance at beginning of year (in shares) at Dec. 31, 2018 | 27,091,000 | 19,627,000 | 91,000 | ||||
Changes in Stockholders' Equity | |||||||
Treasury stock retirements (in shares) | 0 | ||||||
Net (loss) income | $ 65,027 | ||||||
Balance at end of year at Sep. 30, 2019 | $ 310 | 194,153 | 62,517 | $ (2,522) | 137,074 | 391,532 | |
Balance at end of year (in shares) at Sep. 30, 2019 | 31,016,000 | 15,940,000 | 163,000 | ||||
Changes in Stockholders' Equity | |||||||
Effect of ASU No. 2016-02 implementation | 186 | (532) | (186) | (532) | |||
Balance at beginning of year at Mar. 31, 2019 | $ 304 | 188,458 | 44,173 | $ (1,845) | 126,773 | 357,863 | |
Balance at beginning of year (in shares) at Mar. 31, 2019 | 30,401,000 | 16,382,000 | 119,000 | ||||
Changes in Stockholders' Equity | |||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 4 | 3,571 | (3,575) | ||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 442,000 | (442,000) | |||||
Net effect of deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | (397) | (397) | |||||
Stock option exercises | 48 | (20) | 28 | ||||
Stock option exercises (in shares) | 11,000 | ||||||
Stock-based compensation | 809 | 428 | 1,237 | ||||
Vesting of restricted stock | $ 1 | 245 | $ (299) | (246) | (299) | ||
Vesting of restricted stock (in shares) | 51,000 | 16,000 | |||||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,594) | (1,594) | |||||
Dividends paid Class A common stock | (3,164) | (3,164) | |||||
Net (loss) income | 13,275 | 9,234 | 22,509 | ||||
Balance at end of year at Jun. 30, 2019 | $ 309 | 192,734 | 54,284 | $ (2,144) | 131,000 | 376,183 | |
Balance at end of year (in shares) at Jun. 30, 2019 | 30,905,000 | 15,940,000 | 135,000 | ||||
Changes in Stockholders' Equity | |||||||
Net effect of deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | 143 | 143 | |||||
Stock-based compensation | 833 | 429 | 1,262 | ||||
Vesting of restricted stock | $ 1 | 443 | $ (378) | (445) | (379) | ||
Vesting of restricted stock (in shares) | 111,000 | 28,000 | |||||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,594) | (1,594) | |||||
Dividends paid Class A common stock | (3,165) | $ (3,165) | |||||
Treasury stock retirements (in shares) | 0 | ||||||
Net (loss) income | 11,398 | 7,684 | $ 19,082 | ||||
Balance at end of year at Sep. 30, 2019 | $ 310 | 194,153 | 62,517 | $ (2,522) | 137,074 | 391,532 | |
Balance at end of year (in shares) at Sep. 30, 2019 | 31,016,000 | 15,940,000 | 163,000 | ||||
Balance at beginning of year at Dec. 31, 2019 | $ 308 | 191,843 | 74,222 | $ (2,526) | 145,811 | 409,658 | |
Balance at beginning of year (in shares) at Dec. 31, 2019 | 30,765,000 | 15,940,000 | 163,000 | ||||
Changes in Stockholders' Equity | |||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 1 | 460 | (461) | ||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 50,000 | (50,000) | |||||
Net effect of deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | (303) | (303) | |||||
Stock option exercises | 66 | $ (80) | (11) | (25) | |||
Stock option exercises (in shares) | 9,000 | 7,000 | |||||
Share and unit repurchases and retirements | $ (24) | (14,804) | (10,177) | (1,711) | (26,716) | ||
Share and unit repurchases and retirements (in shares) | (2,374,000) | ||||||
Stock-based compensation | 907 | 492 | 1,399 | ||||
Vesting of restricted stock | $ 1 | 471 | $ (373) | (473) | (374) | ||
Vesting of restricted stock (in shares) | 105,000 | 37,000 | |||||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,668) | (1,668) | |||||
Dividends paid Class A common stock | (3,087) | (3,087) | |||||
Treasury stock retirements | (1,247) | (1,732) | $ 2,979 | ||||
Treasury stock retirements (in shares) | (207,000) | ||||||
Net (loss) income | (19,081) | (14,071) | (33,152) | ||||
Balance at end of year at Mar. 31, 2020 | $ 286 | 177,393 | 40,145 | 127,908 | 345,732 | ||
Balance at end of year (in shares) at Mar. 31, 2020 | 28,555,000 | 15,890,000 | |||||
Balance at beginning of year at Dec. 31, 2019 | $ 308 | 191,843 | 74,222 | $ (2,526) | 145,811 | $ 409,658 | |
Balance at beginning of year (in shares) at Dec. 31, 2019 | 30,765,000 | 15,940,000 | 163,000 | ||||
Changes in Stockholders' Equity | |||||||
Treasury stock retirements (in shares) | (207,382) | ||||||
Net (loss) income | $ (48,252) | ||||||
Balance at end of year at Sep. 30, 2020 | $ 289 | 179,811 | 25,098 | 117,657 | 322,855 | ||
Balance at end of year (in shares) at Sep. 30, 2020 | 28,842,000 | 15,785,000 | |||||
Balance at beginning of year at Mar. 31, 2020 | $ 286 | 177,393 | 40,145 | 127,908 | 345,732 | ||
Balance at beginning of year (in shares) at Mar. 31, 2020 | 28,555,000 | 15,890,000 | |||||
Changes in Stockholders' Equity | |||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 1 | 395 | (395) | 1 | |||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 50,000 | (50,000) | |||||
Net effect of deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | (310) | (310) | |||||
Stock option exercises | 36 | (16) | 20 | ||||
Stock option exercises (in shares) | 7,000 | ||||||
Stock-based compensation | 895 | 497 | 1,392 | ||||
Vesting of restricted stock | 171 | (171) | |||||
Vesting of restricted stock (in shares) | 80,000 | ||||||
Cancelled shares withheld for taxes from RSU vesting | (69) | (38) | (107) | ||||
Cancelled shares withheld for taxes from RSU vesting (in shares) | (19,000) | ||||||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,663) | (1,663) | |||||
Dividends paid Class A common stock | (3,089) | (3,089) | |||||
Net (loss) income | (5,542) | (3,955) | (9,497) | ||||
Balance at end of year at Jun. 30, 2020 | $ 287 | 178,511 | 31,514 | 122,167 | 332,479 | ||
Balance at end of year (in shares) at Jun. 30, 2020 | 28,673,000 | 15,840,000 | |||||
Changes in Stockholders' Equity | |||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 1 | 422 | (423) | ||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 55,000 | (55,000) | |||||
Net effect of deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | (40) | (40) | |||||
Stock-based compensation | 726 | 415 | 1,141 | ||||
Vesting of restricted stock | $ 1 | 308 | (309) | ||||
Vesting of restricted stock (in shares) | 140,000 | ||||||
Cancelled shares withheld for taxes from RSU vesting | (84) | (31) | (66) | (181) | |||
Cancelled shares withheld for taxes from RSU vesting (in shares) | (26,000) | ||||||
Solaris LLC distribution paid to Solaris LLC unitholders for income tax withholding | (32) | (150) | (182) | ||||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,657) | (1,657) | |||||
Dividends paid Class A common stock | (3,102) | (3,102) | |||||
Net (loss) income | (3,283) | (2,320) | (5,603) | ||||
Balance at end of year at Sep. 30, 2020 | $ 289 | $ 179,811 | $ 25,098 | $ 117,657 | $ 322,855 | ||
Balance at end of year (in shares) at Sep. 30, 2020 | 28,842,000 | 15,785,000 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||
Distributions paid to unit holders (in dollars per unit) | $ 0.105 | $ 0.105 | $ 0.105 | $ 0.10 | $ 0.10 | $ 0.10 |
Cash dividends paid (in dollars per share) | $ 0.105 | $ 0.105 | $ 0.105 | $ 0.10 | $ 0.10 | $ 0.10 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (48,252) | $ 65,027 |
Adjustment to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization | 20,378 | 19,875 |
Loss on disposal of asset | 1,439 | 181 |
Allowance for credit losses | 2,880 | 0 |
Stock-based compensation | 3,732 | 3,265 |
Amortization of debt issuance costs | 132 | 709 |
Deferred income tax expense | (8,299) | 11,284 |
Impairment losses | 47,828 | |
Other | (151) | 37 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 17,630 | (4,369) |
Prepaid expenses and other assets | 1,876 | 2,088 |
Inventories | (359) | (2,555) |
Accounts payable | 5,245 | (3,909) |
Accrued liabilities | (6,069) | 6,424 |
Deferred revenue | (9,508) | |
Net cash provided by operating activities | 38,010 | 88,549 |
Cash flows from investing activities: | ||
Investment in property, plant and equipment | (2,901) | (32,914) |
Proceeds from disposal of assets | 724 | 130 |
Cash received from insurance proceeds | 53 | 618 |
Net cash used in investing activities | (2,124) | (32,166) |
Cash flows from financing activities: | ||
Share repurchases | (26,717) | |
Distribution and dividend paid to Solaris LLC unitholders (other than Solaris Inc.) and Class A common shareholders | (14,267) | (14,274) |
Distribution to Solaris LLC unitholders for income tax withholding | (150) | |
Payments under finance leases | (24) | (26) |
Payments under insurance premium financing | (1,443) | |
Proceeds from stock option exercises | 64 | 294 |
Payments for shares withheld for taxes from RSU vesting and cancelled | (276) | |
Payments related to purchase of treasury stock | (454) | (1,108) |
Payments related to debt issuance cost | (197) | |
Repayment of senior secured credit facility | (13,000) | |
Net cash used in financing activities | (41,824) | (29,754) |
Net increase (decrease) in cash | (5,938) | 26,629 |
Cash at beginning of period | 66,882 | 25,057 |
Cash at end of period | 60,944 | 51,686 |
Non-cash activities | ||
Capitalized depreciation in property, plant and equipment | 359 | 559 |
Capitalized stock based compensation | 198 | 133 |
Property and equipment additions incurred but not paid at period-end | 12 | 235 |
Property, plant and equipment additions transferred from inventory | 359 | 5,355 |
Insurance premium financing | 1,869 | |
Cash paid for: | ||
Interest | 99 | 200 |
Income Taxes | $ 796 | $ 663 |
Organization and Background of
Organization and Background of Business | 9 Months Ended |
Sep. 30, 2020 | |
Organization and Background of Business | |
Organization and Background of Business | 1. Organization and Background of Business Description of Business Solaris Oilfield Infrastructure, Inc. (either individually or together with its subsidiaries, as the context requires, the “Company” or “Solaris”), a Delaware corporation, is an oilfield services company that provides supply chain management and logistics solutions designed to drive efficiencies and reduce costs for the oil and natural gas industry. The Company is headquartered in Houston, Texas. Recent Developments The global response to COVID-19 as well as the actions taken by a number of global oil producers have contributed to steep declines in the demand and pricing for oil, natural gas and NGLs, negatively impacting U.S. producers and reducing demand for our services. Our revenues have decreased materially as a result of these lower activity levels. In response, we have reduced direct operating costs and selling, general and administrative (“SG&A”) expenses, including reducing workforce levels across the Company, and we have lowered our capital expenditures. We have also recognized impairments on certain assets which is discussed further in Note. 2. Although pricing has stabilized, the commodity price environment is expected to remain depressed based on over-supply, decreased demand and a potential global economic recession. In response, in addition to other measures, the Company has reduced costs and lowered its capital budget for the year. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These financial statements reflect all normal recurring adjustments that are necessary for fair presentation. Operating results for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results that may be expected for the full year or for any interim period. The unaudited interim condensed consolidated financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with Solaris Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 and notes thereto. Solaris Inc. is the managing member of Solaris Oilfield Infrastructure, LLC (“Solaris LLC”) and is responsible for all operational, management and administrative decisions relating to Solaris LLC's business. Solaris Inc. consolidates the financial results of Solaris LLC and its subsidiaries and reports non-controlling interest related to the portion of the units in Solaris LLC (the “Solaris LLC Units”) not owned by Solaris Inc., which will reduce net income attributable to the holders of Solaris Inc.’s Class A common stock. All material intercompany transactions and balances have been eliminated upon consolidation. Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these condensed consolidated financial statements include, but are not limited to, collectability of accounts receivable, stock-based compensation, depreciation associated with property, plant and equipment and related impairment considerations of those assets, impairment considerations of goodwill, determination of fair value of intangible assets acquired in business combinations, income taxes, determination of the present value of lease payments and right-of-use assets, inventory valuation and certain other assets and liabilities. Actual results could differ from management’s best estimates as additional information or actual results become available in the future, and those differences could be material. Inventories consist of materials used in the manufacturing of the Company’s systems, which include raw materials and purchased parts and is stated at the lower of cost or net realizable value. Net realizable value is determined, giving consideration to quality, excessive levels, obsolescence and other factors. Adjustments that reduce stated amounts will be recognized as impairments in the condensed consolidated statements of operations. The Company recognized a write down of the carrying value of inventory of $2.6 to its net realizable value during the nine months ended September 30, 2020. There were no impairments recorded for the three months ended September 30, 2020 and 2019 or for the nine months ended September 30, 2019. The value of our inventories not expected to be consumed or sold during our next operating cycle are classified as non-current assets in our condensed consolidated balance sheets. Goodwill Due to COVID-19 and reduced demand for our services, we performed an interim goodwill impairment assessment as of March 31, 2020. We estimated the fair value for each reporting unit using an income approach including a discounted cash flow analysis and the use of significant unobservable inputs representative of a Level 3 fair value measurement. Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions, near term declines and estimated growth rates. These estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, particularly in the current volatile market, actual results may differ from those used in the Company’s valuations which could result in additional impairment charges in the future. The discount rates used to value the Company’s reporting units were between 10.35% and 13.00%. As a result of the March 31, 2020 evaluation of goodwill, $4.2 of goodwill associated with the 2017 purchase of the assets of Railtronix was impaired during the three months ended March 31, 2020. The goodwill associated with the Loadcraft Industries Ltd. purchase was not impaired. An impairment charge would have resulted if our estimate of fair value was approximately 40% less than the amount determined. No additional facts or circumstances warranted an impairment assessment as of September 30, 2020 and no impairment charges were recognized for the three month period then ended. Due to COVID-19 and reduced demand for our services, the Company concluded that such circumstances warranted an evaluation of whether indicators of impairment are present for its asset groups as of March 31, 2020. Based on this evaluation, the Company performed tests for recoverability of the carrying value of these assets using forecasted undiscounted cash flows. The Company noted that the undiscounted cash flows as well as the fair value of the assets associated with our Kingfisher Facility exceeded their carrying values and the Company recognized impairment losses of $37.8, $2.8 and $0.4 for property, plant and equipment, ROU assets and other receivables, respectively during the three months ended March 31, 2020 and nine months ended September 30, 2020. These impairments resulted from an accumulation of factors leading to the loss of significant customers, reduced operating activities and earnings, including impacts resulting from continued volatility in global oil markets and the COVID-19 pandemic. No additional facts or circumstances indicated that indicators of impairment have become present during the three months ended September 30, 2020. However, if these conditions persist for an extended period of time, additional impairment losses may be recognized in relation to our proppant management systems and inventory management software. Given the inherent uncertainty in determining the assumptions underlying both undiscounted and discounted cash flow analyses, particularly in the current volatile market, actual results may differ which could result in additional impairment charges. We estimated the fair value of the Kingfisher Facility using an income approach including a discounted cash flow analysis and the use of significant unobservable inputs representative of a Level 3 fair value measurement. Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. These estimates are based upon assumptions believed to be reasonable. The discount rates used to value this reporting unit were between 10.35% and 13.00%. Limited marketability for the assets group exist in the current volatile market and the analysis resulted in a full impairment of the long-lived assets of the reporting unit. There were no impairment indicators for the three or nine months ended September 30, 2019 and for the three months ended September 30, 2020. Accounting Standards Recently Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires the use of a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2016-13 effective January 1, 2020, which did not have an impact on our condensed consolidated financial statements. Recently Issued Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements. |
Accounts Receivable and Allowan
Accounts Receivable and Allowance for Credit Losses | 9 Months Ended |
Sep. 30, 2020 | |
Accounts Receivable and Allowance for Credit Losses | |
Accounts Receivable and Allowance for Credit Losses | 3. Accounts Receivable and Allowance for Credit Losses Accounts receivable consists of trade receivables recorded at the invoice amount, plus accrued revenue that is not yet billed, less an estimated allowance for credit losses (if any). Accounts receivable are generally due within 60 days or less, or in accordance with terms agreed with customers. We do not accrue interest on delinquent receivables. Total unbilled revenue included in accounts receivable as of September 30, 2020 and December 31, 2019 was $4.2 and $7.4, respectively. In our determination of the allowance for credit losses, we pool receivables with similar risk characteristics and consider a number of current conditions, past events and other factors, including the length of time trade accounts receivable are past due, previous loss history, and the condition of the general economy and the industry as a whole, and apply an expected loss percentage. The expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of future economic conditions. Accounts deemed uncollectible are applied against the allowance for credit losses. The related expense was included in Other operating expense on the condensed consolidated statements of operations. The following activity related to our allowance for credit losses on customer receivables for the nine months ended September 30, 2020 reflects the estimated impact of the current economic environment on our receivable balance: Balance, December 31, 2019 $ 0.3 Credit losses 2.9 Less write-offs (2.1) Balance, September 30, 2020 $ 1.1 No allowance for credit losses were recognized in the nine months ended September 30, 2019. |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment. | |
Property, Plant and Equipment | 4. Property, Plant and Equipment Property, plant and equipment was comprised of the following at September 30, 2020 and December 31, 2019: September 30, December 31, 2020 2019 Systems and related equipment $ 297.9 $ 294.5 Systems in process 12.3 11.9 Transloading facility and equipment — 40.3 Computer hardware and software 1.0 1.3 Machinery and equipment 5.3 5.2 Vehicles 3.6 7.6 Buildings 4.4 4.3 Land 0.6 0.6 Furniture and fixtures 0.2 0.3 Property, plant and equipment, gross $ 325.3 $ 366.1 Less: accumulated depreciation (74.8) (59.5) Property, plant and equipment, net $ 250.5 $ 306.6 As described in Note 2, $37.8 , of impairment losses were recognized for property, plant and equipment, associated primarily with transloading facility and equipment during the three months ended March 31, 2020. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2020 | |
Debt | |
Debt | 5. Debt On April 26, 2019, Solaris LLC entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”) by and among Solaris LLC, as borrower, each of the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent. The 2019 Credit Agreement consists of an initial $50.0 revolving loan commitment (the “Loan”) with a $25.0 uncommitted accordion option to increase the Loan availability to $75.0. The term of the 2019 Credit Agreement expires on April 26, 2022. The 2019 Credit Agreement requires that we prepay any outstanding borrowings under the Loan in the event our total leverage ratio is greater than 1.00 to 1.00 and our consolidated cash balance exceeds $20.0, taking into account certain adjustments. At September 30, 2020, we had no borrowings under the 2019 Credit Agreement outstanding and ability to draw $50.0. Although there were no borrowings outstanding under the 2019 Credit Agreement, the applicable margin ranges from 1.75% to 2.50% for Eurodollar loans and 0.75% to 1.50% for alternate base rate loans, in each case depending on our total leverage ratio. The 2019 Credit Agreement requires that we pay a quarterly commitment fee on undrawn amounts of the Loan, ranging from 0.25% to 0.375 % depending upon the total leverage ratio. We were in compliance with all covenants in accordance with the 2019 Credit Agreement as of September 30, 2020. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity | |
Equity | 6. Equity Dividends Solaris LLC paid distributions totaling $4.8 and $4.8 to all Solaris LLC unitholders in the three months ended September 30, 2020 and 2019, respectively, of which $3.1 and $3.2 was paid to Solaris Inc. Solaris LLC paid distributions totaling $14.3 and $14.3 to all Solaris LLC unitholders in the nine months ended September 30, 2020 and 2019, respectively, of which $9.3 and $9.4 was paid to Solaris Inc. Solaris Inc. used the proceeds from the distributions to pay quarterly cash dividends to all holders of shares of Class A common stock. Share Repurchase Program During the nine months ended September 30, 2020, Solaris Inc. purchased and retired 2,374,092 shares of the Company’s Class A common stock for $26.7, or $11.27 average price per share, and, in connection therewith, Solaris LLC purchased and retired 2,374,092 Solaris LLC Units from the Company for the same amount. During the full share repurchase plan, Solaris Inc. purchased and retired 2,626,022 shares of the Company’s Class A common stock for $30.0, or $11.41 average price per share, and, in connection therewith, Solaris LLC purchased and retired 2,626,022 Solaris LLC Units from the Company for the same amount. As of March 31, 2020, the share repurchase plan was completed. No shares were purchased and retired during the three and nine months ended September 30, 2019. Treasury Stock Retirement During the nine months ended September 30, 2020, the Company cancelled and retired, 207,382 shares of treasury stock. No shares were retired during the three and nine months ended September 30, 2019. Stock-based compensation The Company’s long-term incentive plan for employees, directors and consultants (the “LTIP”) provides for the grant of all or any of the following types of equity-based awards: (1) incentive stock options qualified as such under United States federal income tax laws; (2) stock options that do not qualify as incentive stock options; (3) stock appreciation rights; (4) restricted stock awards; (5) restricted stock units; (6) bonus stock; (7) performance awards; (8) dividend equivalents; (9) other stock-based awards; (10) cash awards; and (11) substitute awards. Subject to adjustment in accordance with the terms of the LTIP, 5,118,080 shares of Solaris Inc.’s Class A common stock have been reserved for issuance pursuant to awards under the LTIP. As of September 30, 2020, 3,451,445 stock awards were available for grant. The following table summarizes activity related to restricted stock for the three and nine months ended September 30, 2020 and 2019: Restricted Stock Awards 2020 2019 Unvested at January 1, 627,251 411,497 Awarded 386,146 375,068 Vested (141,700) (706) Forfeited (32,845) (405) Unvested at March 31, 838,852 785,454 Awarded 10,194 29,847 Vested (80,203) (67,674) Forfeited (37,164) (7,896) Unvested at June 30, 731,679 739,731 Awarded 139,961 43,830 Vested (137,490) (138,821) Forfeited (29,537) (9,644) Unvested at September 30, 704,613 635,096 Of the unvested 704,613 shares restricted stock, it is expected that 1,498 shares, 344,164 shares, 254,209 shares, and 104,742 shares will vest in 2020, 2021, 2022 and 2023, respectively, in each case, subject to the applicable vesting terms governing such shares of restricted stock. There was approximately $6.8 of unrecognized compensation expense related to unvested restricted stock as of September 30, 2020. The unrecognized compensation expense will be recognized over the weighted average remaining vesting period of 2.6 years . Earnings Per Share Basic earnings per share of Class A common stock is computed by dividing net income attributable to Solaris Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share is computed giving effect to all potentially dilutive shares. The following table sets forth the calculation of earnings per share, or EPS, for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, Basic net income per share: 2020 2019 2020 2019 Numerator Net income (loss) attributable to Solaris $ (3.3) $ 11.4 $ (27.9) $ 37.0 Loss (income) attributable to participating securities (1) (0.1) (0.2) (0.2) (0.8) Net income (loss) attributable to common stockholders $ (3.4) $ 11.2 $ (28.1) $ 36.2 Denominator Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share 28,787 30,951 28,912 27,270 Effect of dilutive securities: Stock options — 29 — 47 Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share 28,787 30,980 28,912 27,317 Earnings per share of Class A common stock - basic $ (0.12) $ 0.36 $ (0.97) $ 1.33 Earnings per share of Class A common stock - diluted $ (0.12) $ 0.36 $ (0.97) $ 1.33 (1) The Company’s restricted shares of common stock are participating securities. The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Class B common stock 15,803 15,939 15,860 15,598 Restricted stock awards 703 129 718 242 Stock Options 13 — 16 — Total 16,519 16,068 16,594 15,840 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Taxes | |
Income Taxes | 7. Income Taxes Income Taxes For the three months ended September 30, 2020 and 2019, we recognized a combined United States federal and state benefit and expense for income taxes of ($0.8) and $3.7, respectively. For the nine months ended September 30, 2020 and 2019, we recognized a combined United States federal and state benefit and expense of ($8.2) and $12.0, respectively. The effective combined United States federal and state income tax rates were 13.1% and 14.8% for the three months ended September 30, 2020 and 2019, respectively. The effective combined United States federal and state income tax rates were 14.5% and 14.9% for the nine months ended September 30, 2020 and 2019, respectively. For the three and nine months ended September 30, 2020 and 2019, our effective tax rate differed from the statutory rate primarily due to Solaris LLC’s treatment as a partnership for United States federal income tax purposes. Based on our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize our deferred tax assets in the future. As the Company reassesses this position in the future, changes in cumulative earnings history, excluding non-recurring charges, or changes to forecasted taxable income may alter this expectation and may result in an increase in the valuation allowance and an increase in the effective tax rate. Payables Related to the Tax Receivable Agreement |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2020 | |
Concentrations | |
Concentrations | 8. Concentrations For the three months ended September 30, 2020, one customer accounted for 28% of the Company’s revenues. For the three months ended September 30, 2019, two customers accounted for 14% and 12 % of the Company’s revenues. For the nine months ended September 30, 2020, one customer accounted for 11 % of the Company’s revenues. For the nine months ended September 30, 2019, four customers accounted for 14%, 11%, 11% and 10% of the Company’s revenues. As of September 30, 2020, two customers accounted for 30% and 10% of the Company’s accounts receivable. As of December 31, 2019, one customer accounted for 15% of the Company’s accounts receivable. For the three months ended September 30, 2020, three suppliers accounted for 16%, 12%, and 10% of the Company’s total purchases. For the three months ended September 30, 2019, one supplier accounted for 38% of the Company’s total purchases. For the nine months ended September 30, 2020, one supplier accounted for 32 % of the Company’s total purchases. For the nine months ended September 30, 2019, one supplier accounted for 17 % of the Company’s total purchases. As of September 30, 2020, three suppliers accounted for 21%, 12% and 12% of the Company’s accounts payable. As of December 31, 2019, one supplier accounted for 44% of the Company’s accounts payable. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies In the normal course of business, the Company is subjected to various claims, legal actions, contract negotiations and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In management’s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying condensed consolidated financial statements. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions | |
Related Party Transactions | 10. Related Party Transactions The Company recognizes certain costs incurred in relation to transactions primarily incurred in connection with the amended and restated administrative services agreement, dated May 17, 2017, between Solaris LLC and Solaris Energy Management, LLC, a company partially owned by William A. Zartler, the Chief Executive Officer and Chairman of the Board. These services include rent paid for office space, travel services, personnel, consulting and administrative costs. For the three months ended September 30, 2020 and 2019, Solaris LLC paid $0.2 and $0.2, respectively, for these services. For the nine months ended September 30, 2020 and 2019, Solaris LLC paid $0.6 and $0.8, respectively, for these services. As of September 30, 2020 and December 31, 2019, the Company included $0.2 and $0.2, respectively, in prepaid expenses and other current assets on the condensed consolidated balance sheets. The Company has executed a guarantee of lease agreement with Solaris Energy Management, LLC, a related party of the Company, related to the rental of office space for the Company’s corporate headquarters. The total future guaranty under the guarantee of lease agreement with Solaris Energy Management, LLC is $4.5 as of September 30, 2020. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Summary of Significant Accounting Policies | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These financial statements reflect all normal recurring adjustments that are necessary for fair presentation. Operating results for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results that may be expected for the full year or for any interim period. The unaudited interim condensed consolidated financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with Solaris Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 and notes thereto. Solaris Inc. is the managing member of Solaris Oilfield Infrastructure, LLC (“Solaris LLC”) and is responsible for all operational, management and administrative decisions relating to Solaris LLC's business. Solaris Inc. consolidates the financial results of Solaris LLC and its subsidiaries and reports non-controlling interest related to the portion of the units in Solaris LLC (the “Solaris LLC Units”) not owned by Solaris Inc., which will reduce net income attributable to the holders of Solaris Inc.’s Class A common stock. All material intercompany transactions and balances have been eliminated upon consolidation. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these condensed consolidated financial statements include, but are not limited to, collectability of accounts receivable, stock-based compensation, depreciation associated with property, plant and equipment and related impairment considerations of those assets, impairment considerations of goodwill, determination of fair value of intangible assets acquired in business combinations, income taxes, determination of the present value of lease payments and right-of-use assets, inventory valuation and certain other assets and liabilities. Actual results could differ from management’s best estimates as additional information or actual results become available in the future, and those differences could be material. |
Inventories | Inventories consist of materials used in the manufacturing of the Company’s systems, which include raw materials and purchased parts and is stated at the lower of cost or net realizable value. Net realizable value is determined, giving consideration to quality, excessive levels, obsolescence and other factors. Adjustments that reduce stated amounts will be recognized as impairments in the condensed consolidated statements of operations. The Company recognized a write down of the carrying value of inventory of $2.6 to its net realizable value during the nine months ended September 30, 2020. There were no impairments recorded for the three months ended September 30, 2020 and 2019 or for the nine months ended September 30, 2019. The value of our inventories not expected to be consumed or sold during our next operating cycle are classified as non-current assets in our condensed consolidated balance sheets. |
Goodwill | Goodwill Due to COVID-19 and reduced demand for our services, we performed an interim goodwill impairment assessment as of March 31, 2020. We estimated the fair value for each reporting unit using an income approach including a discounted cash flow analysis and the use of significant unobservable inputs representative of a Level 3 fair value measurement. Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions, near term declines and estimated growth rates. These estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, particularly in the current volatile market, actual results may differ from those used in the Company’s valuations which could result in additional impairment charges in the future. The discount rates used to value the Company’s reporting units were between 10.35% and 13.00%. As a result of the March 31, 2020 evaluation of goodwill, $4.2 of goodwill associated with the 2017 purchase of the assets of Railtronix was impaired during the three months ended March 31, 2020. The goodwill associated with the Loadcraft Industries Ltd. purchase was not impaired. An impairment charge would have resulted if our estimate of fair value was approximately 40% less than the amount determined. No additional facts or circumstances warranted an impairment assessment as of September 30, 2020 and no impairment charges were recognized for the three month period then ended. |
Impairment of Long-Lived Assets, Definite-lived Intangible Assets and ROU Assets | Due to COVID-19 and reduced demand for our services, the Company concluded that such circumstances warranted an evaluation of whether indicators of impairment are present for its asset groups as of March 31, 2020. Based on this evaluation, the Company performed tests for recoverability of the carrying value of these assets using forecasted undiscounted cash flows. The Company noted that the undiscounted cash flows as well as the fair value of the assets associated with our Kingfisher Facility exceeded their carrying values and the Company recognized impairment losses of $37.8, $2.8 and $0.4 for property, plant and equipment, ROU assets and other receivables, respectively during the three months ended March 31, 2020 and nine months ended September 30, 2020. These impairments resulted from an accumulation of factors leading to the loss of significant customers, reduced operating activities and earnings, including impacts resulting from continued volatility in global oil markets and the COVID-19 pandemic. No additional facts or circumstances indicated that indicators of impairment have become present during the three months ended September 30, 2020. However, if these conditions persist for an extended period of time, additional impairment losses may be recognized in relation to our proppant management systems and inventory management software. Given the inherent uncertainty in determining the assumptions underlying both undiscounted and discounted cash flow analyses, particularly in the current volatile market, actual results may differ which could result in additional impairment charges. We estimated the fair value of the Kingfisher Facility using an income approach including a discounted cash flow analysis and the use of significant unobservable inputs representative of a Level 3 fair value measurement. Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. These estimates are based upon assumptions believed to be reasonable. The discount rates used to value this reporting unit were between 10.35% and 13.00%. Limited marketability for the assets group exist in the current volatile market and the analysis resulted in a full impairment of the long-lived assets of the reporting unit. There were no impairment indicators for the three or nine months ended September 30, 2019 and for the three months ended September 30, 2020. |
Recent Accounting Standards | In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires the use of a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2016-13 effective January 1, 2020, which did not have an impact on our condensed consolidated financial statements. Recently Issued Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements. |
Accounts Receivable and Allow_2
Accounts Receivable and Allowance for Credit Losses (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounts Receivable and Allowance for Credit Losses | |
Schedule of allowance for credit losses | Balance, December 31, 2019 $ 0.3 Credit losses 2.9 Less write-offs (2.1) Balance, September 30, 2020 $ 1.1 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment. | |
Schedule of property plant and equipment | September 30, December 31, 2020 2019 Systems and related equipment $ 297.9 $ 294.5 Systems in process 12.3 11.9 Transloading facility and equipment — 40.3 Computer hardware and software 1.0 1.3 Machinery and equipment 5.3 5.2 Vehicles 3.6 7.6 Buildings 4.4 4.3 Land 0.6 0.6 Furniture and fixtures 0.2 0.3 Property, plant and equipment, gross $ 325.3 $ 366.1 Less: accumulated depreciation (74.8) (59.5) Property, plant and equipment, net $ 250.5 $ 306.6 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity | |
Summary of activity related to restricted stock | Restricted Stock Awards 2020 2019 Unvested at January 1, 627,251 411,497 Awarded 386,146 375,068 Vested (141,700) (706) Forfeited (32,845) (405) Unvested at March 31, 838,852 785,454 Awarded 10,194 29,847 Vested (80,203) (67,674) Forfeited (37,164) (7,896) Unvested at June 30, 731,679 739,731 Awarded 139,961 43,830 Vested (137,490) (138,821) Forfeited (29,537) (9,644) Unvested at September 30, 704,613 635,096 |
Schedule of earnings per share calculation | Three Months Ended September 30, Nine Months Ended September 30, Basic net income per share: 2020 2019 2020 2019 Numerator Net income (loss) attributable to Solaris $ (3.3) $ 11.4 $ (27.9) $ 37.0 Loss (income) attributable to participating securities (1) (0.1) (0.2) (0.2) (0.8) Net income (loss) attributable to common stockholders $ (3.4) $ 11.2 $ (28.1) $ 36.2 Denominator Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share 28,787 30,951 28,912 27,270 Effect of dilutive securities: Stock options — 29 — 47 Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share 28,787 30,980 28,912 27,317 Earnings per share of Class A common stock - basic $ (0.12) $ 0.36 $ (0.97) $ 1.33 Earnings per share of Class A common stock - diluted $ (0.12) $ 0.36 $ (0.97) $ 1.33 (1) The Company’s restricted shares of common stock are participating securities. |
Schedule of antidilutive shares | Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Class B common stock 15,803 15,939 15,860 15,598 Restricted stock awards 703 129 718 242 Stock Options 13 — 16 — Total 16,519 16,068 16,594 15,840 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Impairments (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)item | Mar. 31, 2020USD ($)item | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | |
Intangible assets by major classification | |||||
Inventory write-down | $ 0 | $ 0 | $ 2,600 | $ 0 | |
Goodwill impairment | $ 0 | ||||
Measurement Input, Discount Rate | Minimum | |||||
Intangible assets by major classification | |||||
Asset measurement input | item | 10.35 | 10.35 | 10.35 | ||
Measurement Input, Discount Rate | Maximum | |||||
Intangible assets by major classification | |||||
Asset measurement input | item | 13 | 13 | 13 | ||
Property, Plant and Equipment | |||||
Intangible assets by major classification | |||||
Impairment of long-lived assets | $ 37,800 | $ 37,800 | |||
ROU asset | |||||
Intangible assets by major classification | |||||
Impairment of long-lived assets | 2,800 | 2,800 | |||
Accounts receivable | |||||
Intangible assets by major classification | |||||
Impairment of long-lived assets | 400 | $ 400 | |||
Railtronix LLC | |||||
Intangible assets by major classification | |||||
Goodwill impairment | $ 4,200 | ||||
Loadcraft Industries Ltd | |||||
Intangible assets by major classification | |||||
Estimate change needed (as a percent) | 40.00% |
Accounts Receivable and Allow_3
Accounts Receivable and Allowance for Credit Losses (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Accounts Receivable and Allowance for Credit Losses | |||
Accounts receivable due maximum period | 60 days | ||
Unbilled revenue | $ 4,200 | $ 7,400 | |
Allowance for credit losses, beginning | 300 | ||
Credit losses | 2,880 | $ 0 | |
Less writeoffs | (2,100) | ||
Allowance for credit losses, ending | $ 1,100 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 325,300 | $ 366,100 |
Less: accumulated depreciation | (74,800) | (59,500) |
Property, plant and equipment, net | 250,454 | 306,583 |
Systems and related equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 297,900 | 294,500 |
Systems in process | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 12,300 | 11,900 |
Transloading facility and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 40,300 | |
Computer hardware and software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 1,000 | 1,300 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 5,300 | 5,200 |
Vehicles | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 3,600 | 7,600 |
Buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 4,400 | 4,300 |
Land | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 600 | 600 |
Furniture and fixtures | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 200 | $ 300 |
Debt (Details)
Debt (Details) - 2019 Credit Agreement $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Apr. 26, 2019USD ($) | |
Debt | |||
Maximum borrowing | $ 50,000 | ||
Potential additional borrowing available | 25,000 | ||
Maximum borrowing capacity with accordion option | $ 75,000 | ||
Leverage ratio for threshold | 1 | ||
Cash threshold triggering repayment | $ 20,000 | ||
Outstanding credit facility | $ 0 | $ 0 | |
Remaining borrowing capacity | $ 50,000 | ||
Minimum | |||
Debt | |||
Commitment fee (as a percent) | 0.25% | ||
Maximum | |||
Debt | |||
Commitment fee (as a percent) | 0.375% | ||
Eurodollar | Minimum | |||
Debt | |||
Applicable margin rate | 1.75% | ||
Eurodollar | Maximum | |||
Debt | |||
Applicable margin rate | 2.50% | ||
Alternate base rate | Minimum | |||
Debt | |||
Applicable margin rate | 0.75% | ||
Alternate base rate | Maximum | |||
Debt | |||
Applicable margin rate | 1.50% |
Equity - Dividends (Details)
Equity - Dividends (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Equity | ||||
Distributions paid to unit holders | $ 14,267 | $ 14,274 | ||
Distribution received | $ 3,100 | $ 3,200 | 9,300 | 9,400 |
Solaris LLC | ||||
Equity | ||||
Distributions paid to unit holders | $ 4,800 | $ 4,800 | $ 14,300 | $ 14,300 |
Equity - Share Repurchase (Deta
Equity - Share Repurchase (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | 15 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Mar. 31, 2020 | |
Equity | ||||
Repurchased and retired (in shares) | 0 | 2,374,092 | 0 | 2,626,022 |
Repurchased and retired | $ 26.7 | $ 30 | ||
Average price (in dollars per share) | $ 11.27 | $ 11.41 | ||
Treasury stock retirements (in shares) | 0 | 207,382 | 0 | |
Solaris LLC | ||||
Equity | ||||
Repurchased and retired (in shares) | 2,374,092 | 2,626,022 |
Equity - SBC (Details)
Equity - SBC (Details) | Sep. 30, 2020shares |
Stock-based compensation | |
Available for grant (in shares) | 3,451,445 |
Class A Common Stock | |
Stock-based compensation | |
Reserved for issuance (in shares) | 5,118,080 |
Equity - Restricted stock (Deta
Equity - Restricted stock (Details) - Restricted stock - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | |
Number of Shares | |||||||
Unvested, beginning (in shares) | 731,679 | 838,852 | 627,251 | 739,731 | 785,454 | 411,497 | 627,251 |
Awarded (in shares) | 139,961 | 10,194 | 386,146 | 43,830 | 29,847 | 375,068 | |
Vested (in shares) | (137,490) | (80,203) | (141,700) | (138,821) | (67,674) | (706) | |
Forfeited (in shares) | (29,537) | (37,164) | (32,845) | (9,644) | (7,896) | (405) | |
Unvested, end (in shares) | 704,613 | 731,679 | 838,852 | 635,096 | 739,731 | 785,454 | 704,613 |
Other non-option information | |||||||
Unrecognized compensation costs | $ 6.8 | $ 6.8 | |||||
Expected period for recognizing compensation expense | 2 years 7 months 6 days | ||||||
First vesting period | |||||||
Number of Shares | |||||||
Unvested, end (in shares) | 1,498 | 1,498 | |||||
Second vesting period | |||||||
Number of Shares | |||||||
Unvested, end (in shares) | 344,164 | 344,164 | |||||
Third vesting period | |||||||
Number of Shares | |||||||
Unvested, end (in shares) | 254,209 | 254,209 | |||||
Fourth vesting period | |||||||
Number of Shares | |||||||
Unvested, end (in shares) | 104,742 | 104,742 |
Equity - EPS (Details)
Equity - EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Numerator | ||||
Net income (loss) attributable to Solaris | $ (3,283) | $ 11,398 | $ (27,905) | $ 36,991 |
Less income attributable to participating securities | (100) | (200) | (200) | (800) |
Net income attributable to common stockholders | $ (3,400) | $ 11,200 | $ (28,100) | $ 36,200 |
Class A Common Stock | ||||
Denominator | ||||
Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share (in shares) | 28,787 | 30,951 | 28,912 | 27,270 |
Effect of dilutive securities: | ||||
Stock options (in shares) | 29 | 47 | ||
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share (in shares) | 28,787 | 30,980 | 28,912 | 27,317 |
Earnings per share of Class A common stock - basic (in dollars per share) | $ (0.12) | $ 0.36 | $ (0.97) | $ 1.33 |
Earnings per share of Class A common stock - diluted (in dollars per share) | $ (0.12) | $ 0.36 | $ (0.97) | $ 1.33 |
Equity - Antidilutive (Details)
Equity - Antidilutive (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Potentially dilutive shares | ||||
Excluded from EPS calculation (in shares) | 16,519 | 16,068 | 16,594 | 15,840 |
Class B Common Stock | ||||
Potentially dilutive shares | ||||
Excluded from EPS calculation (in shares) | 15,803 | 15,939 | 15,860 | 15,598 |
Restricted stock | ||||
Potentially dilutive shares | ||||
Excluded from EPS calculation (in shares) | 703 | 129 | 718 | 242 |
Stock options | ||||
Potentially dilutive shares | ||||
Excluded from EPS calculation (in shares) | 13 | 16 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | May 17, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Tax (benefits) and expenses | $ (843) | $ 3,703 | $ (8,193) | $ 12,042 | ||
Effective tax rate | 13.10% | 14.80% | 14.50% | 14.90% | ||
Current portion of payables related to Tax Receivable Agreement | $ 1,416 | |||||
Tax Receivable Agreement | ||||||
Payments of net cash saving (as a percent) | 85.00% | |||||
Benefit of remaining cash savings (as a percent) | 15.00% | |||||
Payables related to Tax Receivable Agreement | $ 68,200 | $ 68,200 | 68,000 | |||
Current portion of payables related to Tax Receivable Agreement | $ 0 | $ 0 | $ 1,400 |
Concentrations (Details)
Concentrations (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020itemcustomer | Sep. 30, 2019customeritem | Sep. 30, 2020itemcustomer | Sep. 30, 2019customeritem | Dec. 31, 2019itemcustomer | |
Customer | Revenue | |||||
Concentrations | |||||
Number of customers | customer | 1 | 2 | 1 | 4 | |
Customer | Revenue | Customer One | |||||
Concentrations | |||||
Concentration risk (as a percent) | 28.00% | 14.00% | 11.00% | 14.00% | |
Customer | Revenue | Customer Two | |||||
Concentrations | |||||
Concentration risk (as a percent) | 12.00% | 11.00% | |||
Customer | Revenue | Customer Three | |||||
Concentrations | |||||
Concentration risk (as a percent) | 11.00% | ||||
Customer | Revenue | Customer Four | |||||
Concentrations | |||||
Concentration risk (as a percent) | 10.00% | ||||
Customer | Accounts receivable | |||||
Concentrations | |||||
Number of customers | customer | 2 | 1 | |||
Concentration risk (as a percent) | 15.00% | ||||
Customer | Accounts receivable | Customer One | |||||
Concentrations | |||||
Concentration risk (as a percent) | 30.00% | ||||
Customer | Accounts receivable | Customer Two | |||||
Concentrations | |||||
Concentration risk (as a percent) | 10.00% | ||||
Supplier | Purchases | |||||
Concentrations | |||||
Number of suppliers | item | 3 | 1 | 1 | 1 | |
Concentration risk (as a percent) | 38.00% | 32.00% | 17.00% | ||
Supplier | Purchases | Supplier One | |||||
Concentrations | |||||
Concentration risk (as a percent) | 16.00% | ||||
Supplier | Purchases | Supplier Two | |||||
Concentrations | |||||
Concentration risk (as a percent) | 12.00% | ||||
Supplier | Purchases | Supplier Three | |||||
Concentrations | |||||
Concentration risk (as a percent) | 10.00% | ||||
Supplier | Accounts payables | |||||
Concentrations | |||||
Number of suppliers | item | 3 | 1 | |||
Concentration risk (as a percent) | 44.00% | ||||
Supplier | Accounts payables | Supplier One | |||||
Concentrations | |||||
Concentration risk (as a percent) | 21.00% | ||||
Supplier | Accounts payables | Supplier Two | |||||
Concentrations | |||||
Concentration risk (as a percent) | 12.00% | ||||
Supplier | Accounts payables | Supplier Three | |||||
Concentrations | |||||
Concentration risk (as a percent) | 12.00% |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Related Party Transactions | |||||
Due from related party | $ 0.2 | $ 0.2 | $ 0.2 | ||
William A. Zartler | |||||
Related Party Transactions | |||||
Payment made to related party | 0.2 | $ 0.2 | 0.6 | $ 0.8 | |
Solaris Energy Management, LLC | |||||
Related Party Transactions | |||||
Other commitments | $ 4.5 | $ 4.5 |