Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 14, 2020 | Jun. 30, 2019 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Entity Registrant Name | SOLARIS OILFIELD INFRASTRUCTURE, INC. | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
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 Public Float | $ 467,029,613 | ||
Entity Central Index Key | 0001697500 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Class A Common Stock | |||
Document and Entity Information | |||
Entity Common Stock, Shares Outstanding | 30,218,896 | ||
Class B Common Stock | |||
Document and Entity Information | |||
Entity Common Stock, Shares Outstanding | 15,939,169 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 66,882 | $ 25,057 |
Accounts receivable, net | 38,554 | 39,746 |
Prepaid expenses and other current assets | 5,002 | 5,492 |
Inventories | 7,144 | 10,470 |
Total current assets | 117,582 | 80,765 |
Property, plant and equipment, net | 306,583 | 296,538 |
Operating lease right-of-use assets | 7,871 | |
Goodwill | 17,236 | 17,236 |
Intangible assets, net | 3,761 | 4,540 |
Deferred tax assets, net | 51,414 | 58,074 |
Other assets | 625 | 1,454 |
Total assets | 505,072 | 458,607 |
Current liabilities: | ||
Accounts payable | 3,824 | 9,127 |
Accrued liabilities | 14,447 | 12,658 |
Current portion of payables related to Tax Receivable Agreement | 1,416 | |
Current portion of deferred revenue | 12,990 | |
Current portion of operating lease liabilities | 596 | |
Current portion of finance lease liabilities | 30 | 35 |
Other current liabilities | 74 | 515 |
Total current liabilities | 20,387 | 35,325 |
Senior secured credit facility | 13,000 | |
Deferred revenue, net of current portion | 12,468 | |
Operating lease liabilities, net of current | 7,855 | |
Finance lease liabilities, net of current | 130 | 154 |
Payables related to Tax Receivable Agreement | 66,582 | 56,149 |
Other long-term liabilities | 460 | 633 |
Total liabilities | 95,414 | 117,729 |
Commitments and contingencies (Note 12) | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 50,000 shares authorized, none issued and outstanding | ||
Additional paid-in capital | 191,843 | 164,086 |
Retained earnings | 74,222 | 35,507 |
Treasury stock (at cost), 163 shares and 91 shares as of December 31, 2019 and 2018, respectively | (2,526) | (1,414) |
Total stockholders' equity attributable to Solaris | 263,847 | 198,450 |
Non-controlling interest | 145,811 | 142,428 |
Total stockholders' equity | 409,658 | 340,878 |
Total liabilities and stockholders' equity | 505,072 | 458,607 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common stock | 308 | 271 |
Class B Common Stock | ||
Stockholders' equity: | ||
Common stock |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Treasury stock (in shares) | 163,000 | 91,000 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 600,000,000 | 600,000,000 |
Common stock, shares issued | 30,928,000 | 27,182,000 |
Common stock, shares outstanding | 30,765,000 | 27,091,000 |
Class B Common Stock | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock, shares issued | 15,939,000 | 19,627,000 |
Common stock, shares outstanding | 15,939,000 | 19,627,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Revenue: | ||||
Revenue | $ 241,687 | $ 197,196 | $ 67,395 | |
Operating costs and expenses: | ||||
Depreciation and amortization | 26,925 | 18,422 | 6,635 | |
Selling, general and administrative (excluding $573, $481 and $340 of depreciation and amortization for the years ended December 31, 2019, 2018 and 2017, respectively, shown separately) | 18,586 | 16,758 | 14,286 | |
Other operating expenses | 585 | 1,827 | 4,126 | |
Total operating costs and expenses | 133,757 | 97,909 | 41,934 | |
Operating income | 107,930 | 99,287 | 25,461 | |
Interest expense, net | (634) | (374) | (97) | |
Income pursuant to Tax Receivable Agreement | 23,022 | |||
Total other income (expense) | (634) | (374) | 22,925 | |
Income before income tax expense | 107,296 | 98,913 | 48,386 | |
Provision for income taxes | (16,936) | (12,961) | (33,709) | |
Net income | 90,360 | 85,952 | 14,677 | |
Less: net income related to Solaris LLC | (3,665) | |||
Less: net income related to non-controlling interests | (38,353) | (43,521) | (15,186) | |
Net income (loss) attributable to Solaris | 52,007 | 42,431 | (4,174) | |
System rental | ||||
Revenue: | ||||
Revenue | 142,022 | 143,646 | 54,653 | |
Operating costs and expenses: | ||||
Cost of revenue | 9,707 | 7,230 | 2,627 | |
Depreciation and amortization | 22,389 | 14,920 | 5,792 | |
System services | ||||
Revenue: | ||||
Revenue | 63,871 | 43,010 | 12,537 | |
Operating costs and expenses: | ||||
Cost of revenue | 74,749 | 50,633 | 14,184 | |
Depreciation and amortization | 1,548 | 1,274 | 461 | |
Transloading services | ||||
Revenue: | ||||
Revenue | 34,105 | 8,083 | ||
Operating costs and expenses: | ||||
Cost of revenue | 2,601 | 2,242 | 76 | |
Depreciation and amortization | 1,643 | 954 | ||
Inventory software services | ||||
Revenue: | ||||
Revenue | 1,689 | 2,457 | $ 205 | |
Operating costs and expenses: | ||||
Cost of revenue | 604 | 797 | ||
Depreciation and amortization | $ 772 | $ 794 | ||
Class A Common Stock | ||||
Operating costs and expenses: | ||||
Earnings (loss) per share of Class A common stock - basic (in dollars per share) | $ 1.69 | $ 1.60 | $ (0.34) | |
Earnings (loss) per share of Class A common stock - diluted (in dollars per share) | $ 1.69 | $ 1.59 | $ (0.34) | |
Basic weighted-average shares of Class A common stock outstanding (in shares) | [1] | 30,141,000 | 25,678,000 | 12,117,000 |
Diluted weighted-average shares of Class A common stock outstanding (in shares) | [1] | 30,185,000 | 25,829,000 | 12,117,000 |
[1] | Represents earnings per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period following the May 17, 2017 Initial Public Offering. |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Depreciation and amortization | $ 26,925 | $ 18,422 | $ 6,635 |
Stock-based compensation expense | 4,476 | 3,861 | 3,701 |
Selling, general and administrative expenses | |||
Depreciation and amortization | 573 | 480 | 340 |
Stock-based compensation expense | 4,167 | 3,661 | 3,701 |
System rental | |||
Depreciation and amortization | 22,389 | 14,920 | 5,792 |
Stock-based compensation expense | 34 | 6 | |
System services | |||
Depreciation and amortization | 1,548 | 1,274 | $ 461 |
Stock-based compensation expense | 262 | 191 | |
Transloading services | |||
Depreciation and amortization | 1,643 | 954 | |
Stock-based compensation expense | 13 | 3 | |
Inventory software services | |||
Depreciation and amortization | $ 772 | $ 794 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ AND MEMBERS’ EQUITY - USD ($) $ in Thousands | Members' Equity | 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, 2016 | $ 71,346 | $ 71,346 | ||||||
Changes in Stockholders' Equity | ||||||||
Additional members’ equity related to accrued interest on notes receivable that were exchanged for membership units | 84 | 84 | ||||||
Accrued interest related to notes receivable that were exchanged for membership units | (84) | (84) | ||||||
Unit-based compensation expense | 43 | 43 | ||||||
Proceeds from pay down of promissory note related to membership units | 3,808 | 3,808 | ||||||
Net Income prior to the Reorganization | 3,665 | 3,665 | ||||||
Effect of the Reorganization | $ (78,862) | $ 101 | $ 77,256 | $ 125,056 | 123,551 | |||
Effect of the Reorganization (in shares) | 10,100,000 | 32,366,000 | ||||||
Deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the reorganization transactions in connection with the Reorganization | (19,149) | (19,149) | ||||||
Effect of the November Offering | $ 81 | 47,127 | (2,744) | 44,464 | ||||
Effect of the November Offering (in shares) | 8,050,000 | (5,050,000) | ||||||
Deferred tax asset and payables related to parties pursuant to Tax Receivable Agreement from the November Offering | 9,998 | 9,998 | ||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 8 | 3,974 | (3,982) | |||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 785,000 | (785,000) | ||||||
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 | (5,188) | $ (5,188) | ||||||
Stock option exercises | (6) | $ (261) | 267 | |||||
Stock option exercises (in shares) | 75,000 | 16,000 | 91,484 | |||||
Issuance of shares of Class B common stock in connection with the acquisition of the assets of Railtronix | 1,585 | 2,922 | $ 4,507 | |||||
Issuance of shares of Class B common stock in connection with the acquisition of the assets of Railtronix (in shares) | 280,000 | |||||||
Stock-based compensation | 1,093 | 3,645 | 4,738 | |||||
Additional members’ equity related to accrued interest on notes receivable that were exchanged for membership units subsequent to the Reorganization | 28 | 28 | ||||||
Accrued interest related to notes receivable that were exchanged for membership units subsequent to the Reorganization | (28) | (28) | ||||||
Proceeds from pay down of promissory note and interest related to membership units subsequent to the Reorganization | 948 | 500 | 1,448 | |||||
Net income (loss) subsequent to the Reorganization | $ (4,174) | 15,186 | 11,012 | |||||
Net income | 14,677 | |||||||
Balance at end of year at Dec. 31, 2017 | $ 190 | 117,638 | (4,174) | $ (261) | 140,850 | 254,243 | ||
Balance at end of year (in shares) at Dec. 31, 2017 | 19,010,000 | 26,811,000 | 16,000 | |||||
Changes in Stockholders' Equity | ||||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 72 | 39,558 | (39,630) | |||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 7,184,000 | (7,184,000) | ||||||
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 | 649 | 649 | ||||||
Stock option exercises | $ 3 | 1,530 | $ (9) | (592) | $ 932 | |||
Stock option exercises (in shares) | 327,000 | 1,000 | 327,594 | |||||
Stock-based compensation | 2,609 | 2,292 | $ 4,901 | |||||
Vesting of restricted stock | $ 6 | 2,042 | $ (1,144) | (2,050) | (1,146) | |||
Vesting of restricted stock (in shares) | 570,000 | 74,000 | ||||||
Other | 60 | 60 | ||||||
Solaris LLC distribution paid to Solaris LLC unitholders at $0.10 per Solaris LLC Unit | (1,963) | (1,963) | ||||||
Dividends paid ($0.10 per share of Class A common stock) | (2,750) | (2,750) | ||||||
Net income | 42,431 | 43,521 | 85,952 | |||||
Balance at end of year at Dec. 31, 2018 | $ 271 | 164,086 | 35,507 | $ (1,414) | 142,428 | 340,878 | ||
Balance at end 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 | $ 36 | 28,496 | (28,532) | |||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 3,687,000 | (3,687,000) | ||||||
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 | (2,383) | (2,383) | ||||||
Stock option exercises | $ 1 | 649 | $ (427) | (356) | $ (133) | |||
Stock option exercises (in shares) | 76,000 | 28,000 | 103,207 | |||||
Stock-based compensation | 3,030 | 1,633 | $ 4,663 | |||||
Vesting of restricted stock | $ 2 | 695 | $ (685) | (698) | (686) | |||
Vesting of restricted stock (in shares) | 163,000 | 44,000 | ||||||
Payments related to purchase of treasury stock | $ (2) | (2,916) | (331) | (3,249) | ||||
Payments related to purchase of treasury stock (in shares) | (252,000) | |||||||
Solaris LLC distribution paid to Solaris LLC unitholders at $0.10 per Solaris LLC Unit | (6,500) | (6,500) | ||||||
Dividends paid ($0.10 per share of Class A common stock) | (12,760) | (12,760) | ||||||
Net income | 52,007 | 38,353 | 90,360 | |||||
Balance at end of year at Dec. 31, 2019 | $ 308 | 191,843 | 74,222 | $ (2,526) | 145,811 | 409,658 | ||
Balance at end of year (in shares) at Dec. 31, 2019 | 30,765,000 | 15,940,000 | 163,000 | |||||
Changes in Stockholders' Equity | ||||||||
Effect of ASU No. 2016-02 implementation | $ 186 | $ (532) | $ (186) | $ (532) |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ AND MEMBERS’ EQUITY (Parenthetical) - $ / shares | 1 Months Ended | 12 Months Ended | |
Nov. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ AND MEMBERS’ EQUITY | |||
Distributions paid to unit holders (in dollars per unit) | $ 0.405 | $ 0.10 | |
Cash dividends paid (in dollars per share) | $ 0.105 | $ 0.405 | $ 0.1 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | |||
Net income | $ 90,360 | $ 85,952 | $ 14,677 |
Adjustment to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 26,925 | 18,422 | 6,635 |
Loss on disposal of asset | 261 | 318 | 498 |
Stock-based compensation | 4,475 | 3,861 | 3,701 |
Amortization of debt issuance costs | 753 | 296 | 51 |
Write-off of deposit | 202 | ||
Provision for bad debt | 339 | ||
Change in payables related to Tax Receivable Agreement | (23,022) | ||
Deferred income tax expense | 16,122 | 12,277 | 33,462 |
Other | (150) | 620 | (28) |
Changes in assets and liabilities: | |||
Accounts receivable | 853 | (26,766) | (8,469) |
Prepaid expenses and other assets | 2,332 | (686) | (3,273) |
Inventories | (2,744) | (10,470) | (7,532) |
Accounts payable | (3,582) | 4,469 | 4,224 |
Accrued liabilities | 4,183 | 2,614 | 5,805 |
Deferred revenue | (25,458) | 25,458 | |
Net cash provided by operating activities | 114,871 | 116,365 | 26,729 |
Cash flows from investing activities: | |||
Investment in property, plant and equipment | (34,852) | (161,079) | (93,912) |
Cash received from insurance proceeds | 618 | 540 | |
Proceeds from disposal of assets | 232 | ||
Cash paid for Railtronix® acquisition | (5,000) | ||
Investment in intangible assets | (6) | (72) | |
Net cash used in investing activities | (34,002) | (160,545) | (98,984) |
Cash flows from financing activities: | |||
Share repurchases | (3,249) | ||
Payments under finance leases | (35) | (28) | (27) |
Payments under insurance premium financing | (2,485) | (1,275) | |
Payments under notes payable | (451) | ||
Proceeds from stock option exercises | 294 | 932 | |
Payments related to purchase of treasury stock | (1,112) | (1,146) | |
Proceeds from borrowings under the senior secured credit facility | 13,000 | 3,000 | |
Repayment of senior secured credit facility | (13,000) | (5,500) | |
Payments related to debt issuance costs | (197) | (1,014) | (111) |
Proceeds from issuance of Class A common stock sold in initial public offering, net of offering costs | 111,075 | ||
Proceeds from issuance of Class A common stock sold in November Offering, net of offering costs | 44,684 | ||
Distributions paid to unitholders | (25,818) | ||
Proceeds from pay down of promissory note related to membership units | 5,256 | ||
Distribution and dividend paid to Solaris LLC unitholders and Class A common shareholders | (19,260) | (4,713) | |
Other | 60 | ||
Net cash provided by (used in) financing activities | (39,044) | 5,816 | 132,108 |
Net (decrease) increase in cash and cash equivalents | 41,825 | (38,364) | 59,853 |
Cash and cash equivalents at beginning of period | 25,057 | 63,421 | 3,568 |
Cash and cash equivalents at end of period | 66,882 | 25,057 | 63,421 |
Non-cash activities | |||
Capitalized depreciation in property, plant and equipment | 735 | 688 | 668 |
Property and equipment additions incurred but not paid at period-end | 82 | 3,909 | 7,765 |
Property, plant and equipment additions transferred from inventory | 5,882 | 7,532 | 1,365 |
Issuance of shares in acquisition | 4,507 | ||
Insurance premium financing | 1,869 | 1,552 | |
Cash paid for: | |||
Interest | 275 | 281 | 104 |
Income taxes | $ 663 | $ 314 | $ 45 |
Organization and Background of
Organization and Background of Business | 12 Months Ended |
Dec. 31, 2019 | |
Organization and Background of Business | |
Organization and Background of Business | 1. Organization and Background of Business Description of Business We are an independent provider of supply chain management and logistics solutions designed to drive efficiencies and reduce costs for the oil and natural gas industry. We manufacture and provide patented mobile proppant and chemical management systems that unload, store and deliver proppant and chemicals used in hydraulic fracturing of oil and natural gas wells. The systems are designed to address the challenges associated with transferring large quantities of proppant and chemicals to the well site, including the cost and management of last mile logistics which includes coordinating proppant delivery to systems. Our systems are deployed in most of the active oil and natural gas basins in the United States. We operate an independent, unit-train capable, high speed transload facility in Oklahoma (the “Kingfisher Facility”) that provides rail-to-truck transloading and high-efficiency sand silo storage and transloading services. Commercial operations commenced in January 2018 and we completed construction at the end of July 2018. We also provide software solutions to remotely monitor proppant inventory from the source mine to well site through our Railtronix® and Solaris Lens® inventory management systems. Our customers use data from our software to manage distribution of proppant and chemicals throughout their supply chain. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation Solaris Oilfield Infrastructure, Inc. (either individually or together with its subsidiaries, as the context requires “Solaris Inc.” or the “Company”) 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 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 consolidated financial statements include, but are not limited to, stock-based compensation, depreciation associated with property, plant and equipment and related impairment considerations of those assets, determination of fair value of intangible assets acquired in business combinations, determination of the present value of lease payments and right-of-use assets 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. Cash and Cash Equivalents For the purposes of the statements of cash flows, the Company considers all short-term, highly liquid, investments with an original maturity of three months or less to be cash equivalents. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Accounts of each institution are insured by Federal Deposit Insurance Corporation. Cash balances at times may exceed federally-insured limits. We have not incurred losses related to these deposits. Accounts Receivable Accounts receivable consists of trade receivables recorded at the invoice amount, plus accrued revenue that is not yet billed, less an estimated allowance for doubtful accounts (if any). Accounts receivable are generally due within 60 days or less, or in accordance with terms agreed with customers. The Company considers accounts outstanding longer than the payment terms past due. The Company determines the allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, the customer’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. Accounts receivable are written off when they are deemed uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Allowance for doubtful accounts was $339 and $0 as of December 31, 2019 and 2018, respectively. 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 consolidated statements of operations. There were no impairments recorded for the years ended December 31, 2019, 2018 and 2017. Business Combinations The Company accounts for business combinations using the acquisition method of accounting. Under this method, acquired assets, including separately identifiable intangible assets and any assumed liabilities, are recorded at their acquisition date estimated fair value. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions. Additional information regarding the Company’s business combinations is presented in Note 3. “–Business Combinations.” Property, Plant and Equipment Property, plant and equipment are stated at cost, or fair value for assets acquired in a business combination, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful service lives of the assets as noted below: Useful Life Systems and related equipment Up to 15 years Machinery and equipment 3-10 years Furniture and fixtures 5 years Computer hardware and software 3-10 years Vehicles 5 years Transloading facility and equipment 15-30 years Buildings and leasehold improvements 15 years Systems that are in the process of being manufactured are considered property, plant and equipment. However, the systems do not depreciate until they are fully completed. Systems in process are a culmination of material, labor and overhead. Expenditures for maintenance and repairs are charged against income as incurred. Betterments that increase the value or materially extend the life of the related assets are capitalized. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the consolidated financial statements and any resulting gain or loss is recognized in the consolidated statements of operations. Definite-lived Intangible Assets Identified intangible assets with determinable lives consist primarily of customer relationships, a non-competition agreement and software acquired in the acquisition of Railtronix, LLC (“Railtronix”) as described further in Note 3, as well as patents that were filed for our systems and other intellectual property. Amortization expense of identified intangibles is expected to be approximately $748 in each of the next five years. Amortization on these assets is calculated on the straight-line method over the estimated useful lives of the assets, which is five to fifteen years. The Company recorded amortization expense of $779, $801, and $46 for the years ended December 31, 2019, 2018 and 2017, respectively. Identified intangible assets by major classification consist of the following: Accumulated Net Book Gross Amortization Value As of December 31, 2019: Customer relationships $ 4,703 $ (1,400) $ 3,303 Software acquired in the acquisition of Railtronix 346 (103) 243 Non-competition agreement 225 (94) 131 Patents and other 114 (30) 84 Total identifiable intangibles $ 5,388 $ (1,627) $ 3,761 As of December 31, 2018: Customer relationships $ 4,703 $ (727) $ 3,976 Software acquired in the acquisition of Railtronix 346 (54) 292 Non-competition agreement 225 (49) 176 Patents and other 114 (18) 96 Total identifiable intangibles $ 5,388 $ (848) $ 4,540 Leases The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC Topic 842”) effective January 1, 2019. The Company applied ASC Topic 842 to all leases existing at or commencing after January 1, 2019 and elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of our contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company also elected the practical expedient to adopt the new lease requirements through a cumulative effect adjustment in the period of adoption and did not adjust comparative periods. As a result of the adoption of ASC Topic 842 on January 1, 2019, the Company recorded operating right-of-use (“ROU”) assets of $8,503, operating lease liabilities of $9,016 and a cumulative effect adjustment to retained earnings for operating leases of $532. We determine if an arrangement is a lease at inception. The Company made the election to not apply the recognition requirements in ASC Topic 842 to short-term leases (i.e., leases of twelve months or less). Instead, the Company recognizes the lease payments in profit or loss on a straight-line basis over the lease term. Operating leases are included in operating lease ROU assets, current portion of operating lease liabilities, and operating lease liabilities, net of current in the Company’s consolidated balance sheets. Finance leases are included in property and equipment, current portion of finance lease liabilities, and finance lease liabilities, net of current in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments based on the information available at the commencement date. Our incremental borrowing rate reflects the estimated rate of interest that we would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. We use the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. See Note 7. Goodwill Goodwill represents the excess of the purchase price of a business over the estimated fair value of the identifiable assets acquired and liabilities assumed. As of December 31, 2019 and 2018, the Company reported $17,236 of goodwill related to the 2014 purchase of the silo manufacturing business from Loadcraft Industries Ltd. and the 2017 purchase of the assets of Railtronix (See Note 3. “–Business Combinations”). The Company evaluates goodwill for impairment annually, as of October 31, or more often as facts and circumstances warrant. Factors such as unexpected adverse economic conditions, competition and market changes may require more frequent assessments. There was no impairment for the years ended December 31, 2019, 2018 and 2017. Before employing detailed impairment testing methodologies, the Company may first evaluate the likelihood of impairment by considering qualitative factors relevant to the business, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. If the Company first utilizes a qualitative approach and determines that it is more likely than not that goodwill is impaired, detailed testing methodologies are then applied. Otherwise, the Company concludes that no impairment has occurred. The Company may also choose to bypass a qualitative approach and opt instead to employ detailed testing methodologies, regardless of a possible more likely than not outcome. If the Company determines through the qualitative approach that detailed testing methodologies are required, or if the qualitative approach is bypassed, the Company compares the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Impairment of Long-Lived Assets and Definite-lived Intangible Assets Long-lived assets, such as property, plant, equipment and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, such as insufficient cash flows or plans to dispose of or sell long-lived assets before the end of their previously estimated useful lives. If the carrying amount is not recoverable, the Company recognizes an impairment loss equal to the amount by which the carrying amount exceeds fair value. The Company estimates fair value based on projected future discounted cash flows. Fair value calculations for long-lived assets and intangible assets contain uncertainties because it requires the Company to apply judgment and estimates concerning future cash flows, strategic plans, useful lives and market performance. The Company also applies judgment in the selection of a discount rate that reflects the risk inherent in the current business model. There were no impairment indicators for the years ended December 31, 2019, 2018 and 2017. Revenue Recognition In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the agreement, the following steps must be performed at contract inception: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone prices, or estimates of such prices, and recognize the related revenue as each individual service is performed, in satisfaction of the corresponding performance obligations. Revenues from system rental consist primarily of fixed monthly fees charged to customers for the use of our patented mobile proppant management systems that unload, store and deliver proppant and chemicals at oil and natural gas well sites which is considered to be our performance obligation. Contracts with customers are typically on thirty- to sixty-day payment terms. Revenues are recognized over time as the performance obligations are satisfied under the terms of the customer contract. We determined that the performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance of services, typically as our systems are used by the customer. We measure progress using an input method based on resources consumed or expended relative to the total resources expected to be consumed or expended. We typically charge our customers for the rental of our systems on a monthly basis under agreements requiring the rental of a minimum number of systems for a period of twelve months. The Company is typically entitled to short fall payments if such minimum contractual obligations are not maintained by our customers. Minimum contractual obligations have been maintained and thus the Company has not recognized revenues related to shortfalls on such take or pay contractual obligations to date. Revenues from system services consist primarily of the fees charged to customers for services including mobilization and transportation of our systems, field supervision and support and services coordinating proppant delivery to systems, each of which are considered to be separate performance obligations. Contracts with customers are typically on thirty- to sixty-day payment terms. When the Company provides system services including field supervision and support, we determined that the performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance of the services, typically based on fixed weekly or monthly contractual rates for field supervision and support and when the Company provides services coordinating proppant delivery. We measure progress using an input method based on resources consumed or expended relative to the total resources expected to be consumed or expended. When the Company provides mobilization and transportation of our systems on behalf of our customers, we determined that the performance obligation is satisfied at a point in time when the system has reached its intended destination. Revenues from transloading services consist primarily of the fees charged to customers for transloading proppant at our transloading facility, which is considered to be our performance obligation. Transloading services operations commenced in January 2018. We provide rail-to-truck transloading and high-efficiency sand silo storage and transloading services at the facility. Contracts with customers are typically on thirty- to sixty-day payment terms. Revenues are typically recognized over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance of the transloading service based on a throughput fee per ton rate for proppant delivered to and transloaded at the facility. We measure progress based on the proppant delivered and transloaded at the facility. Under our agreements at the facility, quarterly minimum throughput volumes are required and the Company is entitled to short fall payments if such minimum quarterly contractual obligations are not maintained. These shortfalls are based on fixed minimum volumes at a fixed rate and are recognized over time as throughput volumes transloaded are below minimum throughput volumes required. The Company recorded $1,332 of shortfall revenue during the year ended December 31, 2019. Revenues from inventory software services consist primarily of the fees charged to customers for the use of our Railtronix inventory management software, which is considered to be our performance obligation. Revenues are recognized over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance based on a throughput fee to monitor proppant that is loaded into a railcar, stored at a transload facility or loaded into a truck. Deferred Revenue Deferred revenue consisted of a $25,980 partial termination payment received in December 2018 in accordance with a contract modification which was accounted for prospectively and a final termination payment of $1,680 recorded as accounts receivable and recognized as revenue throughout the fourth quarter of 2019. The termination payments represented the distinct unsatisfied portion of a contract to provide transloading services and were considered part of the transaction price and were allocated to the remaining performance obligations under the contract, which was fully settled as of December 31, 2019 upon termination of the contract. The Company recognized $27,138 of deferred revenue as Revenue from transloading services in the year ended December 31, 2019, resulting in no remaining deferred revenue as of December 31, 2019. The Company recognized $522 of deferred revenue as Revenue from transloading services in the year ended December 31, 2018, resulting in $25,458 remaining deferred revenue as of December 31, 2018. Stock-based Compensation The Company accounts for its stock-based compensation including grants of restricted stock and options in the consolidated statements of operations based on their fair values on the date of grant. The Company recognizes expense on a straight-line basis over the awards’ vesting period, which is generally the requisite service period. Solaris LLC previously sponsored a stock-based management compensation program called the 2015 Membership Unit Option Plan (the “Plan”). Solaris LLC accounted for the units under the Plan as compensation cost measured at the fair value of the award on the date of grant using the Black-Scholes option-pricing model. In connection with the Offering, the options granted under the Plan were modified by a conversion into options under the Solaris Long-Term Incentive Plan (the “LTIP”). Refer also to Note 9. “–Equity”. Research and Development The Company expenses research and development costs as incurred, which is included in selling, general and administrative expenses in the consolidated statements of operations. No research and development costs were incurred for the years ended December 31, 2019 and 2018. For the year ended December 31, 2017, research and development costs were $210. Financial Instruments The carrying value of the Company’s financial instruments, consisting of cash, accounts receivable, notes receivable, accounts payable and insurance premium financing, approximates their fair value due to the short maturity of such instruments. Financial instruments also consist of a revolving credit facility and term loans, for which fair value approximates carrying value as the debt bears interest at a variable rate which is reflective of current rates otherwise available to the Company. As of December 31, 2019, we had no borrowings under the 2019 Credit Agreement (as defined below) outstanding. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Fair Value Measurements The Company’s financial assets and liabilities, as well as other recurring and nonrecurring fair value measurements such as goodwill impairment and purchase accounting, are to be measured using inputs from the three levels of the fair value hierarchy, of which the first two are considered observable and the last unobservable, which are as follows: · Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date; · Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs corroborated by observable market data for substantially the full term of the assets or liabilities; and · Level 3—Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing assets or liabilities based on the best information available. Income Taxes Solaris Inc. is a corporation and, as a result, is subject to United States federal, state and local income taxes. For the years ended December 31, 2019, 2018 and 2017, we recognized a combined United States federal and state provision for income taxes of $16,936, $12,961 and $33,709, respectively. On December 22, 2017, Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The provisions of the Tax Act that impact us include, but are not limited to, (1) reducing the United States federal corporate income tax rate from 35% to 21%, (2) eliminating the corporate alternative minimum tax (AMT); (3) allowing business to immediately expense the cost of new investments in certain qualified depreciable assets acquired after September 27, 2017 (with a phase-down of such expensing starting in 2023); and (4) reducing the maximum deduction for net operating loss (NOL) carryforwards generated in tax years beginning after December 31, 2017 to 80% of a taxpayer’s taxable income. Solaris LLC is treated as a partnership for United States federal income tax purposes and therefore does not pay United States federal income tax on its taxable income. Instead, the Solaris LLC members are liable for United States federal income tax on their respective shares of the Company’s taxable income reported on the members’ United States federal income tax returns. Our revenues are derived through transactions in several states, which may be subject to state and local taxes. Accordingly, we have recorded a liability for state and local taxes that management believes is adequate for activities as of December 31, 2019 and 2018. We are subject to a franchise tax imposed by the State of Texas. The franchise tax rate is 1%, calculated on taxable margin. Taxable margin is defined as total revenue less deductions for cost of goods sold or compensation and benefits in which the total calculated taxable margin cannot exceed 70% of total revenue. Current expenses related to Texas franchise tax were approximately $742,000, $684,000 and $247,000 for the years ended December 31, 2019, 2018 and 2017. We determine deferred tax assets and liabilities on the basis of the differences between the book value and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs. We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more-likely-than-not the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions meeting the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Interest and penalties related to income taxes are included in the benefit (provision) for income taxes in our consolidated statement of operations. We have not incurred any significant interest or penalties related to income taxes in any of the periods presented. See Note 10. “–Income Taxes” for additional information regarding income taxes. Payable Related to the Tax Receivable Agreement In connection with the IPO, Solaris Inc. entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the members of Solaris LLC immediately prior to the IPO (each such person and any permitted transferee, a “TRA Holder,” and together, the “TRA Holders”) on May 17, 2017. This agreement generally provides for the payment by Solaris Inc. to each TRA Holder of 85% of the net cash savings, if any, in United States federal, state and local income tax or franchise tax that Solaris Inc. actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the IPO as a result of (i) certain increases in tax basis that occur as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of all or a portion of such TRA Holder's Solaris LLC Units in connection with the IPO or pursuant to the exercise of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement) and (ii) imputed interest deemed to be paid by Solaris Inc. as a result of, and additional tax basis arising from, any payments Solaris makes under the Tax Receivable Agreement. Solaris Inc. will retain the benefit of the remaining 15% of these cash savings. As of December 31, 2019 and 2018, Solaris Inc. recorded a payable related to the Tax Receivable Agreement of $67,998 and $56,149, respectively, $1,416 of which has been recorded as a current liability in the year ended December 31, 2019. The increase in payables related to the Tax Receivable Agreement is a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units from TRA Holders during the year ended December 31, 2019. Environmental Matters The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. Management has established procedures for the ongoing evaluation of the Company’s operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed as incurred. Liabilities are recorded when environmental costs are probable, and the costs can be reasonably estimated. The Company maintains insurance which may cover in whole or in part certain environmental expenditures. As of December 31, 2019 and 2018, no liabilities were recorded with respect to any environmental matters as no environmental costs were deemed probable. Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company and the Chief Executive Officer view the Company’s operations and manage its business as one operating segment. All long-lived assets of the Company reside in the United States. Accounting Standards Recently Adopted In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles of ASC 740 and simplifies other areas in order to reduce simplify its application. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. The Company early adopted ASU 2019-12 during the quarter ended December 31, 2019, which did not have an impact on the consolidated financial statements. Accounting Standards Recently Issued But Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), 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. Adoption of ASU 2016-13 will be applied using a modified-retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently in the process of evaluating the impact, if any, that ASU 2016-13 will have on our condensed consolidated financial statements. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations | |
Business Combinations | 3. Business Combinations On December 6, 2017 the Company completed its acquisition of substantially all of the assets of Railtronix, a leading provider of real-time inventory management solutions for proppant mining, rail shipping and transloading operations, for $9,505 including $5,000 cash consideration, and $4,505 equity consideration of 279,655 Solaris LLC Units and 279,655 shares of Class B common stock. The equity consideration was based on the closing price of our Class A common stock on December 6, 2017 of $16.11. The purchase price was allocated based on the fair value of $4,697, $225, and $346 for identifiable intangible assets including customer relationships, a non-competition agreement and software, respectively. The amount of consideration in excess of the fair value of identifiable intangible assets of $4,237 was recognized as goodwill. The valuations to derive the allocation of purchase price included a multi period excess earnings valuation method, with or without valuation method, and relief from royalty valuation method estimates using estimates for future cash flows from customer relationships, return on workforce, customer attrition, working capital assumptions, income taxes, competition, costs saved through owning the asset and risk adjusted discount rates. The goodwill recognized is attributable to expected customer growth as well as expected synergies of integrating Railtronix with the Company’s Solaris Lens inventory management system, which we believe will uniquely position the Company to provide critical supply chain data to help our customers improve the reliability of proppant supply, save time and reduce the delivered cost of proppant by monitoring key data points and performance indicators. A portion of goodwill is expected to be deductible for corporate income tax purposes. The actual impact of this acquisition was an increase to “Total revenues” of $205 and an increase to “Net income” of $87 in the consolidated statement of operations for the year ended December 31, 2017. The unaudited pro forma results presented below have been prepared to give the effect of the acquisition discussed above on our results of operations for the year ended December 31, 2017 as if it had been consummated on January 1, 2016. The unaudited pro forma results do not purport to represent what our actual results of operations would have been if the acquisition had been completed on such date or to project our results of operation for any future date or period. For the Year Ended December 31, 2017 Actual Pro Forma Pro forma (unaudited) Total revenues $ 67,395 $ 69,252 Net income 14,677 15,207 Certain contingent performance-based cash awards totaling $2,500 are also payable to the seller upon the achievement of generating certain financial milestones. One milestone was completed and $1,625 was recognized and paid in the quarter ending March 31, 2018 and is recorded in other operating expense. The Company has not yet concluded that it is probable that the remaining milestones will be achieved and thus has not recognized the additional $875 obligation in the consolidated financial statements. |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets | 12 Months Ended |
Dec. 31, 2019 | |
Prepaid Expenses and Other Current Assets. | |
Prepaid Expenses and Other Current Assets | 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other currents assets were comprised of the following at December 31, 2019 and 2018: December 31, December 31, 2019 2018 Prepaid purchase orders $ 1,055 $ 2,802 Prepaid insurance 865 576 Deposits 1,245 882 Other assets 1,837 1,232 Prepaid expenses and other current assets $ 5,002 $ 5,492 |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment. | |
Property, Plant and Equipment | 5. Property, Plant and Equipment Property, plant and equipment was comprised of the following at December 31, 2019 and 2018: December 31, December 31, 2019 2018 Systems and related equipment $ 294,547 $ 258,600 Systems in process 11,867 11,245 Transloading facility and equipment 40,272 40,218 Computer hardware and software 1,335 1,185 Machinery and equipment 5,214 5,126 Vehicles 7,633 8,334 Buildings 4,339 4,280 Land 612 612 Furniture and fixtures 284 282 Property, plant and equipment, gross 366,103 329,882 Less: accumulated depreciation (59,520) (33,344) Property, plant and equipment, net $ 306,583 $ 296,538 Depreciation expense for the years ended December 31, 2019, 2018 and 2017 was $26,146, $17,621 and $6,589, respectively, of which $22,389, $14,920 and $5,792 is attributable to cost of system rental, $1,548, $1,274 and $461 is attributable to cost of proppant system services, $1,643, $954 and $0 is attributable to cost of transloading services, and $566, $473 and $336 is attributable to selling, general and administrative expenses, respectively. The Company capitalized $735, $688 and $668 of depreciation expense associated with machinery and equipment used in the manufacturing of its systems for the years ended December 31, 2019, 2018 and 2017, respectively. |
Accrued Liabilities
Accrued Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
Accrued Liabilities | |
Accrued Liabilities | 6. Accrued Liabilities Accrued liabilities were comprised of the following at December 31, 2019 and 2018: 2019 2018 Property, plant and equipment $ 47 $ 2,153 Employee related expenses 4,129 4,500 Selling, general and administrative 1,016 944 Cost of revenue 5,062 2,702 Excise, franchise and sales taxes 2,526 1,461 Ad valorem taxes 1,598 774 Other 69 124 Accrued liabilities $ 14,447 $ 12,658 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases | |
Leases | 7. Leases The Company leases land equipment under operating leases which expire at various dates through February 2047. These land leases included commitments related to 30-year land lease with the State of Oklahoma related to the Company’s Kingfisher Facility. Equipment leases include locomotives rented from third-parties in order to facilitate rail transloading activities at the Kingfisher Facility. Upon completion of the primary term, both parties have substantive rights to terminate the leases. As a result enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term. Additionally, the Company leases offices and storage from third-parties for our corporate and field locations under operating leases, which include commitments related to the guarantee of lease agreement with Solaris Energy Management, LLC, a related party of the Company, related to the rental to the office space for the Company’s corporate headquarters. Refer to Note 13. “Related Party Transactions” for additional information regarding related party transactions recognized. Upon completion of the primary term, both parties have substantive rights to terminate the leases. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term. Solaris LLC leases property from the City of Early, Texas under an agreement classified as a finance lease. The lease expires on February 25, 2025. The finance lease obligation is payable in monthly installments including imputed interest. The Company also leases certain office equipment with purchase options upon the end of lease terms which are accounted for as finance leases with various expiration dates. As of December 31, 2019 and 2018, the Company had property, plant and equipment under capital leases with a cost of $299 and $299, respectively, and accumulated depreciation of $105 and $85, respectively. The Company’s lease agreements do not include both lease and non-lease components, extension options or residual value guarantees, and there are no leases that have yet to commence. Additionally, our lease agreements do not impose restrictions on our ability to pay dividends or incur financing obligations. The components of lease expense were as follows: December 31, 2019 Operating lease cost (1) (2) $ 1,187 Finance lease cost Amortization of ROU assets 29 Interest on lease liabilities 6 Total finance lease cost $ 35 (1) Includes short term leases. (2) Operating lease costs of $741, $78 and $368 were reported in Selling, general and administrative, Cost of system services and Cost of transloading services for the year ended December 31, 2019. Future minimum lease payments under non-cancellable operating leases as of December 31, 2019 were as follows: Year Ending December 31, Operating Leases Finance Leases 2020 $ 1,116 35 2021 1,060 33 2022 1,091 33 2023 1,100 33 2024 1,108 33 Thereafter 8,354 11 Total future minimum lease payments 13,829 178 Less: effects of discounting (5,379) (15) Total lease liabilities $ 8,450 $ 163 Future minimum lease payments under non-cancellable operating leases as of December 31, 2018 were as follows: Year Ending December 31, Amount 2019 $ 1,432 2020 1,375 2021 1,299 2022 1,093 2023 1,092 Thereafter 9,725 Total minimum lease payments $ 16,016 Supplemental cash flow information related to leases were as follows: December 31, 2019 Supplemental Cash Flows Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,120 Financing cash flows from finance leases 35 Other information related to leases was as follows: December 31, 2019 Weighted Average Remaining Lease Term Operating leases 13.9 years Finance leases 5.4 years Weighted Average Discount Rate Operating leases Finance leases |
Senior Secured Credit Facility
Senior Secured Credit Facility | 12 Months Ended |
Dec. 31, 2019 | |
Senior Secured Credit Facility | |
Senior Secured Credit Facility | 8. Senior Secured Credit Facility 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 replaced, in its entirety, 2018 credit agreement (the “2018 Credit Agreement”) by and among the Company, as borrower, each of the lenders party thereto and Woodforest National Bank, as administrative agent. The 2019 Credit Agreement consists of an initial $50,000 revolving loan commitment (the “Loan”) with a $25,000 uncommitted accordion option to increase the Loan availability to $75,000. The term of the 2019 Credit Agreement expires on April 26, 2022. Our obligations under the Loan are generally secured by a pledge of substantially all the assets of Solaris LLC and its subsidiaries, and such obligations are guaranteed by Solaris LLC’s domestic subsidiaries other than Immaterial Subsidiaries (as defined in the 2019 Credit Agreement). We have the option to prepay the loans at any time without penalty. Borrowings under the 2019 Credit Agreement bear interest at either LIBOR or an alternate base rate plus an applicable margin, and interest is payable quarterly. 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. The 2019 Credit Agreement requires that we maintain ratios of (a) consolidated EBITDA to interest expense of not less than 2.75 to 1.00, (b) senior indebtedness to consolidated EBITDA of not more than 2.50 to 1.00 and (c) the sum of 100% of eligible accounts, inventory and fixed assets to the total revolving exposure of not less than 1.00 to 1.00 when the total leverage ratio is greater than 2.00 to 1.00 and total revolving exposure under the Loan exceeds $3,000. For the purpose of these tests, certain items are subtracted from indebtedness and senior indebtedness. EBITDA, as defined in the 2019 Credit Agreement, excludes certain noncash items and any extraordinary, unusual or nonrecurring gains, losses or expenses. The 2019 Credit Agreement also 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 $20,000, taking into account certain adjustments. Capital expenditures are not restricted unless borrowings under the Loan exceed $5,000 for any 180 consecutive day period, in which case capital expenditures will be permitted up to $100,000 plus any unused availability for capital expenditures from the immediately preceding fiscal year. As of December 31, 2019, we had no borrowings under the 2019 Credit Agreement outstanding and ability to draw $50,000. As of December 31, 2019 we were in compliance with all covenants in accordance with the 2019 Credit Agreement. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2019 | |
Equity | |
Equity | 9. Equity Dividends Solaris LLC paid distributions totaling $19,260 and $4,713 to all Solaris LLC unitholders in the years ended December 31, 2019 and 2018, respectively, of which $12,760 and $2,750 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 totaling $12,760 and $2,750 in the years ended December 31, 2019 and 2018, including $282 and $41 related to shares of restricted stock, respectively. At its November 2019 meeting, our Board of Directors increased our regular quarterly dividend by 5%, raising it to $0.105 per share. Share Repurchase Program On December 3, 2019 the Company’s board of directors authorized a share repurchase plan to repurchase up to $25,000 of the Company’s Class A common stock until the plan terminates pursuant to its provisions. During the year ended December 31, 2019, Solaris LLC purchased and retired 251,930 Solaris LLC Units from the Company for $3,254, and the Company purchased and retired 251,930 shares of Class A common stock for $3,254, or $12.90 average price per share. As of December 31, 2019, $21,746 remains authorized for future repurchases of Class A common stock under the share repurchase program. Stock-based compensation The Company’s long-term incentive plan for employees, directors and consultants of the Company and its affiliates (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. Class A common stock withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The LTIP will be administered by the Board, the Compensation Committee of the Board or an alternative committee appointed by the Board. A total of 591,261 options to purchase Class A common stock of the Company have been issued to employees, directors and consultants under the LTIP at an exercise price of $2.87 per option, and a weighted average grant date fair value of $12.04 per option. All options were vested by November 13, 2017. During the year ended December 31, 2019, 103,207 options were exercised in exchange for an equal number of shares of Class A common stock and a total of 27,578 shares were surrendered and recorded as treasury stock on the consolidated balance sheets. Cash received from option exercises for the year ended December 31, 2019 was $294. The actual tax expense realized for the tax deductions from option exercises totaled $33 for the year ended December 31, 2019. During the year ended December 31, 2018, 327,594 options were exercised in exchange for an equal number of shares of Class A common stock and a total of 539 shares were surrendered and recorded as treasury stock on the consolidated balance sheets. Cash received from option exercises for the year ended December 31, 2018 was $932. The actual tax expense realized for the tax deductions from option exercises totaled $128 for the year ended December 31, 2018. During the year ended December 31, 2017, 75,130 options were exercised in exchange for an equal number of shares of Class A common stock and a total of 16,354 shares were surrendered and recorded as treasury stock on the consolidated balance sheets. Cash received from option exercises for the year ended December 31, 2017 was $263. The actual tax expense realized for the tax deduction from option exercise totaled $20 for the year ended December 31, 2017. As of December 31, 2019, 522,285 options have been exercised, 33,350 forfeited and 35,626 remain outstanding. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from historical trading of publicly traded companies which are in the same industry sector. The simplified method is used to derive an expected term. The expected term represents an estimate of the time options are expected to remain outstanding. The risk-free rate for periods within the contractual life of the option is based on the United States treasury yield curve in effect at the time of grant. In connection with the 2017 grants, the Company used the following assumptions to determine compensation costs for options granted: 2017: Expected volatility 37.84 % Expected term (years) 4.97 Expected annual dividend yield — % Expected risk-free rate of return 1.42 % Compensation cost, as measured at the grant date fair value of the award, is recognized as an expense over the employee's requisite service period for service-based awards (generally the vesting period of the award of four years). For the year ended December 31, 2017, the Company recognized $295 of stock-based compensation expense on options in salaries, benefits and payroll taxes in the consolidated statements of operations. All options were vested in 2017 and no further options were granted in the years ended December 31, 2019 and 2018. For the years ended December 31, 2019 and 2018, the Company did not recognize stock-based compensation expense on options. The following is a summary of the option activity under the LTIP for the years ended December 31, 2019, 2018 and 2017: Options Outstanding Weighted Average Weighted Remaining Aggregate Average Exercise Contractual Intrinsic Value Options Price Term (years) (in thousands) Balance, January 1, 2017 12,938 $ 135.00 8.67 $ — Exercisable, January 1, 2017 3,235 $ 135.00 8.67 $ — Canceled (12,938) 135.00 — Granted 591,261 2.87 — Exercised (91,484) 2.87 — Forfeited (33,346) 2.87 — Balance, December 31, 2017 466,431 $ 2.87 6.79 $ 8,648 Exercisable, December 31, 2017 466,431 $ 2.87 6.79 $ 8,648 Canceled — — — Granted — — — Exercised (327,594) 2.87 — Forfeited — — — Balance, December 31, 2018 138,837 $ 2.87 7.92 $ 1,280 Exercisable, December 31, 2018 138,837 $ 2.87 7.92 $ 1,280 Canceled — — — Granted — — — Exercised (103,207) 2.87 — Forfeited (4) 2.87 — Balance, December 31, 2019 35,626 $ 2.87 7.92 $ 397 Exercisable, December 31, 2019 35,626 $ 2.87 7.92 $ 397 As of December 31, 2019, the Company had no unvested options outstanding. The Company accounts for its stock-based compensation including grants of restricted stock in the consolidated statements of operations based on their estimated fair values on the date of grant. The following table further summarizes activity related to restricted stock for the years ended December 31, 2019, 2018 and 2017: Restricted Stock Awards Weighted Average Grant Date Fair Number of Shares Value ($) Issued on May 17, 2017 648,676 $ 12.04 Awarded 584,477 13.25 Vested — — Forfeited (14,888) 12.87 Unvested at December 31, 2017 1,218,265 $ 12.61 Awarded 88,664 16.92 Vested (644,387) 12.58 Forfeited (251,045) 12.49 Unvested at December 31, 2018 411,497 $ 13.67 Awarded 448,745 16.62 Vested (208,697) 15.13 Forfeited (24,294) 15.52 Unvested at December 31, 2019 627,251 $ 15.23 For the year ended December 31, 2019, the Company recognized $34, $262, $13 and $4,167 of stock-based compensation expense on restricted stock in cost of system rental, cost of system services, cost of transloading services and selling, general and administrative, respectively, in the consolidated statements of operations and $187 within property, plant and equipment, net in the consolidated balance sheets. For the year ended December 31, 2018, the Company recognized $6, $191, $3 and $3,661 of stock-based compensation expense on restricted stock in cost of system rental, cost of system services, cost of transloading services and selling, general and administrative, respectively, in the consolidated statements of operations and $1,040 within property, plant and equipment, net in the consolidated balance sheets. For the year ended December 31, 2017, the Company recognized $3,406 of stock-based compensation expense on restricted stock in selling, general and administrative in the consolidated statements of operations and $1,080 within property, plant and equipment, net in the consolidated balance sheets. As of December 31, 2019, total unrecognized compensation cost related to non-vested restricted stock was $6,764, which is expected to be recognized over a weighted-average period of 1.81 years. 348,214 shares, 147,793 shares, and 131,243 shares of restricted stock vest in 2020, 2021 and 2022, respectively. The number of shares remaining available for future issuance under LTIP is 3,243,549. Earnings (Loss) Per Share Basic earnings (loss) per share of Class A common stock is computed by dividing net income attributable to Solaris for periods following the IPO, by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings (loss) per share is computed giving effect to all potentially dilutive shares. There were no shares of Class A or Class B common stock outstanding prior to the IPO, therefore, no earnings (loss) per share information has been presented for any period prior to that date. The following table sets forth the calculation of earnings (loss) per share, or EPS, for the years ended December 31, 2019, 2018 and 2017: Year Ended December, Basic net income (loss) per share: 2019 2018 2017 Numerator Net income (loss) attributable to Solaris $ 52,007 $ 42,431 $ (4,174) Less income attributable to participating securities (1) (1,120) (1,230) — Net income (loss) attributable to common stockholders $ 50,887 $ 41,201 $ (4,174) Denominator Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share 30,141 25,678 12,117 Effect of dilutive securities: Stock options (2) 44 151 — Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share 30,185 25,829 12,117 Earnings (loss) per share of Class A common stock - basic $ 1.69 $ 1.60 $ (0.34) Earnings (loss) per share of Class A common stock - diluted $ 1.69 $ 1.59 $ (0.34) (1) The Company's restricted shares of common stock are participating securities. (2) The years ended December 31, 2019 and 2018 include 44 and 151 shares of Class A common stock resulting from an assumed exercise of the stock options in the calculation of the denominator for diluted earnings per common share as these shares were dilutive. 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: Year Ended December, 2019 2018 2017 Class B common stock 16,688 20,727 31,100 Stock options — — 365 Restricted stock awards 320 412 225 Total 17,008 21,139 31,690 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Income Taxes | 10. Income Taxes Income Taxes On December 22, 2017, Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The provisions of the Tax Act that impact us include, but are not limited to, (1) reducing the United States federal corporate income tax rate from 35% to 21%, (2) eliminating the corporate alternative minimum tax (AMT); (3) allowing business to immediately expense the cost of new investments in certain qualified depreciable assets acquired after September 27, 2017 (with a phase-down of such expensing starting in 2023); and (4) reducing the maximum deduction for net operating loss (NOL) carryforwards generated in tax years beginning after December 31, 2017 to 80% of a taxpayer’s taxable income. Income Tax Expense The components of the income tax expense are: Year Ended December 31, 2019 2018 2017 Current: Federal $ — $ — $ — State 814 684 247 814 684 247 Deferred: Federal 14,452 11,410 32,195 State 1,670 867 1,267 16,122 12,277 33,462 Income tax expense $ 16,936 $ 12,961 $ 33,709 Income tax expense differs from the amount computed by applying the 2019 and 2018 statutory federal income tax rate of 21% and the 2017 statutory federal income tax rate of 35% to income before taxes as follows: Year Ended December 31, 2019 2018 2017 Income before income taxes $ 107,296 $ 98,913 $ 48,386 Less: net income prior to corporate reorganization — — 3,665 Less: net income before income taxes attributable to noncontrolling interest 38,353 43,521 15,439 Income attributable to Solaris Oilfield Infrastructure, Inc. stockholders before income taxes 68,943 55,392 29,282 Income tax expense (benefit) at the federal statutory rate 14,548 11,632 10,249 State income taxes, net of federal benefit 1,740 1,373 1,071 Remeasurement of federal deferred tax assets due to rate change — — 30,447 Tax Receivable Agreement adjustments — — (8,058) Other 648 (44) — Income tax (benefit) expense $ 16,936 $ 12,961 $ 33,709 Deferred Tax Assets and Liabilities The Company’s deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant components of the deferred tax assets and liabilities are as follows: December 31, 2019 2018 Assets: Investments in subsidiaries $ 7,099 $ 15,876 Imputed interest 1,587 1,366 Net operating loss carryforward 43,543 41,648 Total deferred tax assets 52,229 58,890 Liabilities: Investments in subsidiaries — — Total deferred tax liabilities — — Net deferred tax asset $ 52,229 $ 58,890 The largest components of the Company’s deferred tax position relate to the Company’s investment in Solaris LLC and net operating loss carryovers. The Company recorded a deferred tax asset and additional paid-in capital for the difference between the book value and the tax basis of the Company’s investment in Solaris LLC. This difference originates from the IPO and November Offering, exchanges of Solaris LLC Units (together with a corresponding number of shares of Class B common stock) for shares of Class A common stock and from certain stock-based compensation. As of December 31, 2019, the Company had approximately $197.3 million of federal net operating loss carryovers and $52.0 million of state net operating loss carryovers. $131.5 million of such federal net operating loss carryovers have no expiration date and the remaining federal net operating loss carryovers expire in 2037. State net operating loss carryovers will expire in varying amounts beginning in 2037. The Company regularly reviews its deferred tax assets, including net operating loss carryovers, for recoverability and a valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset may not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences are deductible. In assessing the need for a valuation allowance, the Company makes estimates and assumptions regarding projected future taxable income, its ability to carry back operating losses to prior periods, the reversal of deferred tax liabilities and the implementation of tax planning strategies. 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 these assumptions in the future, changes in forecasted taxable income may alter this expectation and may result in an increase to the valuation allowance and an increase in the effective tax rate. Uncertain Tax Benefits The Company evaluates its tax positions and recognizes only tax benefits that, more likely than not, will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax position is measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized upon settlement. As of December 31, 2019 and 2018, the Company’s uncertain tax benefits totaling $816 and $816, respectively, are reported as a component of the net deferred tax asset in the consolidated balance sheets. The full balance of unrecognized tax benefits as of December 31, 2019, if recognized, would affect the effective tax rate. However, we do not believe that any of the unrecognized tax benefits will be realized within the coming year. The Company has elected to recognize interest and penalties related to unrecognized tax benefits in income tax expense notwithstanding the fact that, as of December 31, 2019, the Company has not accrued any penalties or interest. The addition to uncertain tax benefits during the year ended December 31, 2018 related to the treatment of certain costs incurred in connection with the IPO and November Offering. Changes in the Company’s gross unrecognized tax benefits are as follows: Year Ended December 31, 2019 2018 2017 Balance, January 1, $ 816 $ 812 $ — Additions for the current year tax — — 812 Additions related to prior years — 4 — Balance, December 31, $ 816 $ 816 $ 812 Payables Related to the Tax Receivable Agreement As of December 31, 2019, our liability under the Tax Receivable Agreement was $67,998, representing 85% of the calculated net cash savings in United States federal, state and local income tax or franchise tax that Solaris Inc. anticipates realizing in future years from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units in connection with the IPO or pursuant to an exercise of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement). The projection of future taxable income involves significant judgment. Actual taxable income may differ from our estimates, which could significantly impact our liability under the Tax Receivable Agreement. We have determined it is more-likely-than-not that we will be able to utilize all of our deferred tax assets subject to the Tax Receivable Agreement; therefore, we have recorded a liability under the Tax Receivable Agreement related to the tax savings we may realize from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units in connection with the IPO or pursuant to an exercise of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement). If we determine the utilization of these deferred tax assets is not more-likely-than-not in the future, our estimate of amounts to be paid under the Tax Receivable Agreement would be reduced. In this scenario, the reduction of the liability under the Tax Receivable Agreement would result in a benefit to our consolidated statement of operations. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2019 | |
Concentrations | |
Concentrations | 11. Concentrations For the year ended December 31, 2019, two customers accounted for 19% and 10% of the Company’s revenue. For the year ended December 31, 2018, three customers accounted for 15%, 10% and 10% of the Company’s revenue. For the year ended December 31, 2017, four customers accounted for 23%, 15%, 13%, and 11% of the Company’s revenue. As of December 31, 2019, one customers accounted for 15% of the Company’s accounts receivable. As of December 31, 2018, three customers accounted for 20%, 10% and 10% of the Company’s accounts receivable. For the year ended December 31, 2019, one supplier accounted for 19% of the Company’s total purchases. For the year ended December 31, 2018, two suppliers accounted for 13% and 11% of the Company’s total purchases. For the year ended December 31, 2017, no supplier accounted for 10% or more of the Company’s total purchases. As of December 31, 2019, one supplier accounted for 44% of the Company’s accounts payable. As of December 31, 2018, one supplier accounted for 13% of the Company’s accounts payable. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 12. 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 consolidated financial statements. Other Commitments In the normal course of business, the Company has certain short-term purchase obligations and commitments for products and services, primarily related to purchases of materials used in the manufacturing of its systems. As of December 31, 2019 and 2018, the Company had commitments of approximately $2,575 and $18,998, respectively, related to these commitments. In connection with the acquisition of Railtronix, the seller is entitled to certain performance-based cash awards totaling $2,500 upon the achievement of certain financial milestones. As of December 31, 2019, one milestone had been achieved and the Company paid and recognized $1,625 in March 2018 in other operating expense in the consolidated statements of operations. However, as of December 31, 2019, the Company had not concluded that the remaining milestone will be achieved and thus has not recognized additional obligations in the consolidated financial statements. 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 $8,815 as of December 31, 2019. Refer to Note 13. “Related Party Transactions” for additional information regarding related party transactions recognized and Note 7. “Leases” for operating lease discussion. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions | |
Related Party Transactions | 13. Related Party Transactions The Company recognizes certain costs incurred in relation to transactions with entities owned or partially owned by William A. Zartler, the Chief Executive Officer and Chairman of the Board. These costs include rent paid for office space, travel services, personnel, consulting and administrative costs. For the years ended December 31, 2019, 2018 and 2017, Solaris LLC paid $1,127, $1,022 and $910 , respectively, for these services. As of December 31, 2019 and 2018, the Company included $233 and $232, respectively, in prepaid expenses and other current assets on the consolidated balance sheets. Additionally, as of December 31, 2019 and 2018, the Company included $74 and $103, respectively, of accruals to related parties in accrued liabilities on the consolidated balance sheet. These costs are primarily incurred in connection with the administrative services agreement, dated May 17, 2017, between Solaris LLC and Solaris Energy Management, LLC, a company partially owned by William A. Zartler. Payables Related to the Tax Receivable Agreement In connection with the IPO, Solaris Inc. entered into the Tax Receivable Agreement with the TRA Holders on May 17, 2017, including certain of our officers, directors and employees. See Note 10. “–Income Taxes” for further discussion of the impact of the Tax Receivable Agreement on Solaris Inc. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events | |
Subsequent Events | 14. Subsequent Events Share Repurchase Program Subsequent to the balance sheet date and through February 14, 2020, Solaris LLC purchased and retired 1,131 Solaris LLC Units from the Company for $13,912, and the Company purchased and retired 1,131 shares of Class A common stock for $13,912, or $12.29 average price per share. As of February 14, 2020, $7,834 remains authorized for future repurchases of Class A common stock under the share repurchase program. |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2019 | |
Selected Quarterly Financial Data (Unaudited) | |
Selected Quarterly Financial Data (Unaudited) | 15. Selected Quarterly Financial Data (Unaudited) Three Months Ended March 31, June 30, September 30, December 31, (in thousands, except per share amounts) 2019 Total revenue $ 55,124 $ 64,101 $ 59,604 $ 62,858 Operating income 27,727 27,323 22,793 30,087 Net income 23,435 22,509 19,082 25,334 Net income attributable to Solaris 12,317 13,275 11,398 15,017 Earnings per share of Class A common stock - basic $ 0.43 $ 0.42 $ 0.36 $ 0.48 Earnings per share of Class A common stock - diluted $ 0.43 $ 0.42 $ 0.36 $ 0.48 2018 Total revenue $ 36,018 $ 47,155 $ 56,686 $ 57,337 Operating income 15,526 24,796 30,790 28,175 Net income 13,415 21,448 26,437 24,652 Net income (loss) attributable to Solaris 5,930 10,597 13,019 12,885 Earnings (loss) per share of Class A common stock - basic $ 0.24 $ 0.40 $ 0.49 $ 0.47 Earnings (loss) per share of Class A common stock - diluted $ 0.23 $ 0.40 $ 0.49 $ 0.47 During the preparation of the financial statements for the year ended December 31, 2019, we identified that the weighted average share and Earnings per share amounts for the nine months ended September 30, 2019 and related footnote disclosures were misstated in the interim financial statements filed on Form 10-Q for the quarter ended September 30, 2019. Other than as noted above, this error had no impact on the interim financial statements for the quarter or nine months ended September 30, 2019 or the quarterly data presented above. Basic and diluted weighted average shares should have been 29,874 and 29,923, respectively, instead of 27,270 and 27,317, respectively, and earnings per share – basic and diluted should have been $1.21 instead of $1.33. Management evaluated the error on previously issued financial statements and concluded the impact was immaterial. These amounts and related footnote disclosure will be revised when the September 30, 2020 financial information is filed. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation Solaris Oilfield Infrastructure, Inc. (either individually or together with its subsidiaries, as the context requires “Solaris Inc.” or the “Company”) 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 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 consolidated financial statements include, but are not limited to, stock-based compensation, depreciation associated with property, plant and equipment and related impairment considerations of those assets, determination of fair value of intangible assets acquired in business combinations, determination of the present value of lease payments and right-of-use assets 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. |
Cash and Cash Equivalents | Cash and Cash Equivalents For the purposes of the statements of cash flows, the Company considers all short-term, highly liquid, investments with an original maturity of three months or less to be cash equivalents. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Accounts of each institution are insured by Federal Deposit Insurance Corporation. Cash balances at times may exceed federally-insured limits. We have not incurred losses related to these deposits. |
Accounts Receivable | Accounts Receivable Accounts receivable consists of trade receivables recorded at the invoice amount, plus accrued revenue that is not yet billed, less an estimated allowance for doubtful accounts (if any). Accounts receivable are generally due within 60 days or less, or in accordance with terms agreed with customers. The Company considers accounts outstanding longer than the payment terms past due. The Company determines the allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, the customer’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. Accounts receivable are written off when they are deemed uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Allowance for doubtful accounts was $339 and $0 as of December 31, 2019 and 2018, respectively. |
Inventories | 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 consolidated statements of operations. There were no impairments recorded for the years ended December 31, 2019, 2018 and 2017. |
Business Combinations | Business Combinations The Company accounts for business combinations using the acquisition method of accounting. Under this method, acquired assets, including separately identifiable intangible assets and any assumed liabilities, are recorded at their acquisition date estimated fair value. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions. Additional information regarding the Company’s business combinations is presented in Note 3. “–Business Combinations.” |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost, or fair value for assets acquired in a business combination, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful service lives of the assets as noted below: Useful Life Systems and related equipment Up to 15 years Machinery and equipment 3-10 years Furniture and fixtures 5 years Computer hardware and software 3-10 years Vehicles 5 years Transloading facility and equipment 15-30 years Buildings and leasehold improvements 15 years Systems that are in the process of being manufactured are considered property, plant and equipment. However, the systems do not depreciate until they are fully completed. Systems in process are a culmination of material, labor and overhead. Expenditures for maintenance and repairs are charged against income as incurred. Betterments that increase the value or materially extend the life of the related assets are capitalized. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the consolidated financial statements and any resulting gain or loss is recognized in the consolidated statements of operations. |
Definite-lived Intangible Assets | Definite-lived Intangible Assets Identified intangible assets with determinable lives consist primarily of customer relationships, a non-competition agreement and software acquired in the acquisition of Railtronix, LLC (“Railtronix”) as described further in Note 3, as well as patents that were filed for our systems and other intellectual property. Amortization expense of identified intangibles is expected to be approximately $748 in each of the next five years. Amortization on these assets is calculated on the straight-line method over the estimated useful lives of the assets, which is five to fifteen years. The Company recorded amortization expense of $779, $801, and $46 for the years ended December 31, 2019, 2018 and 2017, respectively. Identified intangible assets by major classification consist of the following: Accumulated Net Book Gross Amortization Value As of December 31, 2019: Customer relationships $ 4,703 $ (1,400) $ 3,303 Software acquired in the acquisition of Railtronix 346 (103) 243 Non-competition agreement 225 (94) 131 Patents and other 114 (30) 84 Total identifiable intangibles $ 5,388 $ (1,627) $ 3,761 As of December 31, 2018: Customer relationships $ 4,703 $ (727) $ 3,976 Software acquired in the acquisition of Railtronix 346 (54) 292 Non-competition agreement 225 (49) 176 Patents and other 114 (18) 96 Total identifiable intangibles $ 5,388 $ (848) $ 4,540 |
Leases | Leases The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC Topic 842”) effective January 1, 2019. The Company applied ASC Topic 842 to all leases existing at or commencing after January 1, 2019 and elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of our contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company also elected the practical expedient to adopt the new lease requirements through a cumulative effect adjustment in the period of adoption and did not adjust comparative periods. As a result of the adoption of ASC Topic 842 on January 1, 2019, the Company recorded operating right-of-use (“ROU”) assets of $8,503, operating lease liabilities of $9,016 and a cumulative effect adjustment to retained earnings for operating leases of $532. We determine if an arrangement is a lease at inception. The Company made the election to not apply the recognition requirements in ASC Topic 842 to short-term leases (i.e., leases of twelve months or less). Instead, the Company recognizes the lease payments in profit or loss on a straight-line basis over the lease term. Operating leases are included in operating lease ROU assets, current portion of operating lease liabilities, and operating lease liabilities, net of current in the Company’s consolidated balance sheets. Finance leases are included in property and equipment, current portion of finance lease liabilities, and finance lease liabilities, net of current in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments based on the information available at the commencement date. Our incremental borrowing rate reflects the estimated rate of interest that we would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. We use the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. See Note 7. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price of a business over the estimated fair value of the identifiable assets acquired and liabilities assumed. As of December 31, 2019 and 2018, the Company reported $17,236 of goodwill related to the 2014 purchase of the silo manufacturing business from Loadcraft Industries Ltd. and the 2017 purchase of the assets of Railtronix (See Note 3. “–Business Combinations”). The Company evaluates goodwill for impairment annually, as of October 31, or more often as facts and circumstances warrant. Factors such as unexpected adverse economic conditions, competition and market changes may require more frequent assessments. There was no impairment for the years ended December 31, 2019, 2018 and 2017. Before employing detailed impairment testing methodologies, the Company may first evaluate the likelihood of impairment by considering qualitative factors relevant to the business, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. If the Company first utilizes a qualitative approach and determines that it is more likely than not that goodwill is impaired, detailed testing methodologies are then applied. Otherwise, the Company concludes that no impairment has occurred. The Company may also choose to bypass a qualitative approach and opt instead to employ detailed testing methodologies, regardless of a possible more likely than not outcome. If the Company determines through the qualitative approach that detailed testing methodologies are required, or if the qualitative approach is bypassed, the Company compares the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. |
Impairment of Long-Lived Assets and Definite-lived Intangible Assets | Impairment of Long-Lived Assets and Definite-lived Intangible Assets Long-lived assets, such as property, plant, equipment and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, such as insufficient cash flows or plans to dispose of or sell long-lived assets before the end of their previously estimated useful lives. If the carrying amount is not recoverable, the Company recognizes an impairment loss equal to the amount by which the carrying amount exceeds fair value. The Company estimates fair value based on projected future discounted cash flows. Fair value calculations for long-lived assets and intangible assets contain uncertainties because it requires the Company to apply judgment and estimates concerning future cash flows, strategic plans, useful lives and market performance. The Company also applies judgment in the selection of a discount rate that reflects the risk inherent in the current business model. There were no impairment indicators for the years ended December 31, 2019, 2018 and 2017. |
Revenue Recognition | Revenue Recognition In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the agreement, the following steps must be performed at contract inception: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone prices, or estimates of such prices, and recognize the related revenue as each individual service is performed, in satisfaction of the corresponding performance obligations. Revenues from system rental consist primarily of fixed monthly fees charged to customers for the use of our patented mobile proppant management systems that unload, store and deliver proppant and chemicals at oil and natural gas well sites which is considered to be our performance obligation. Contracts with customers are typically on thirty- to sixty-day payment terms. Revenues are recognized over time as the performance obligations are satisfied under the terms of the customer contract. We determined that the performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance of services, typically as our systems are used by the customer. We measure progress using an input method based on resources consumed or expended relative to the total resources expected to be consumed or expended. We typically charge our customers for the rental of our systems on a monthly basis under agreements requiring the rental of a minimum number of systems for a period of twelve months. The Company is typically entitled to short fall payments if such minimum contractual obligations are not maintained by our customers. Minimum contractual obligations have been maintained and thus the Company has not recognized revenues related to shortfalls on such take or pay contractual obligations to date. Revenues from system services consist primarily of the fees charged to customers for services including mobilization and transportation of our systems, field supervision and support and services coordinating proppant delivery to systems, each of which are considered to be separate performance obligations. Contracts with customers are typically on thirty- to sixty-day payment terms. When the Company provides system services including field supervision and support, we determined that the performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance of the services, typically based on fixed weekly or monthly contractual rates for field supervision and support and when the Company provides services coordinating proppant delivery. We measure progress using an input method based on resources consumed or expended relative to the total resources expected to be consumed or expended. When the Company provides mobilization and transportation of our systems on behalf of our customers, we determined that the performance obligation is satisfied at a point in time when the system has reached its intended destination. Revenues from transloading services consist primarily of the fees charged to customers for transloading proppant at our transloading facility, which is considered to be our performance obligation. Transloading services operations commenced in January 2018. We provide rail-to-truck transloading and high-efficiency sand silo storage and transloading services at the facility. Contracts with customers are typically on thirty- to sixty-day payment terms. Revenues are typically recognized over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance of the transloading service based on a throughput fee per ton rate for proppant delivered to and transloaded at the facility. We measure progress based on the proppant delivered and transloaded at the facility. Under our agreements at the facility, quarterly minimum throughput volumes are required and the Company is entitled to short fall payments if such minimum quarterly contractual obligations are not maintained. These shortfalls are based on fixed minimum volumes at a fixed rate and are recognized over time as throughput volumes transloaded are below minimum throughput volumes required. The Company recorded $1,332 of shortfall revenue during the year ended December 31, 2019. Revenues from inventory software services consist primarily of the fees charged to customers for the use of our Railtronix inventory management software, which is considered to be our performance obligation. Revenues are recognized over time as the customer simultaneously receives and consumes the benefits provided by the entity’s performance based on a throughput fee to monitor proppant that is loaded into a railcar, stored at a transload facility or loaded into a truck. |
Deferred Revenue | Deferred Revenue Deferred revenue consisted of a $25,980 partial termination payment received in December 2018 in accordance with a contract modification which was accounted for prospectively and a final termination payment of $1,680 recorded as accounts receivable and recognized as revenue throughout the fourth quarter of 2019. The termination payments represented the distinct unsatisfied portion of a contract to provide transloading services and were considered part of the transaction price and were allocated to the remaining performance obligations under the contract, which was fully settled as of December 31, 2019 upon termination of the contract. The Company recognized $27,138 of deferred revenue as Revenue from transloading services in the year ended December 31, 2019, resulting in no remaining deferred revenue as of December 31, 2019. The Company recognized $522 of deferred revenue as Revenue from transloading services in the year ended December 31, 2018, resulting in $25,458 remaining deferred revenue as of December 31, 2018. |
Stock-based Compensation | Stock-based Compensation The Company accounts for its stock-based compensation including grants of restricted stock and options in the consolidated statements of operations based on their fair values on the date of grant. The Company recognizes expense on a straight-line basis over the awards’ vesting period, which is generally the requisite service period. Solaris LLC previously sponsored a stock-based management compensation program called the 2015 Membership Unit Option Plan (the “Plan”). Solaris LLC accounted for the units under the Plan as compensation cost measured at the fair value of the award on the date of grant using the Black-Scholes option-pricing model. In connection with the Offering, the options granted under the Plan were modified by a conversion into options under the Solaris Long-Term Incentive Plan (the “LTIP”). Refer also to Note 9. “–Equity”. |
Research and Development | Research and Development The Company expenses research and development costs as incurred, which is included in selling, general and administrative expenses in the consolidated statements of operations. No research and development costs were incurred for the years ended December 31, 2019 and 2018. For the year ended December 31, 2017, research and development costs were $210. |
Financial Instruments | Financial Instruments The carrying value of the Company’s financial instruments, consisting of cash, accounts receivable, notes receivable, accounts payable and insurance premium financing, approximates their fair value due to the short maturity of such instruments. Financial instruments also consist of a revolving credit facility and term loans, for which fair value approximates carrying value as the debt bears interest at a variable rate which is reflective of current rates otherwise available to the Company. As of December 31, 2019, we had no borrowings under the 2019 Credit Agreement (as defined below) outstanding. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. |
Fair Value Measurements | Fair Value Measurements The Company’s financial assets and liabilities, as well as other recurring and nonrecurring fair value measurements such as goodwill impairment and purchase accounting, are to be measured using inputs from the three levels of the fair value hierarchy, of which the first two are considered observable and the last unobservable, which are as follows: · Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date; · Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs corroborated by observable market data for substantially the full term of the assets or liabilities; and · Level 3—Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing assets or liabilities based on the best information available. |
Income Taxes | Income Taxes Solaris Inc. is a corporation and, as a result, is subject to United States federal, state and local income taxes. For the years ended December 31, 2019, 2018 and 2017, we recognized a combined United States federal and state provision for income taxes of $16,936, $12,961 and $33,709, respectively. On December 22, 2017, Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The provisions of the Tax Act that impact us include, but are not limited to, (1) reducing the United States federal corporate income tax rate from 35% to 21%, (2) eliminating the corporate alternative minimum tax (AMT); (3) allowing business to immediately expense the cost of new investments in certain qualified depreciable assets acquired after September 27, 2017 (with a phase-down of such expensing starting in 2023); and (4) reducing the maximum deduction for net operating loss (NOL) carryforwards generated in tax years beginning after December 31, 2017 to 80% of a taxpayer’s taxable income. Solaris LLC is treated as a partnership for United States federal income tax purposes and therefore does not pay United States federal income tax on its taxable income. Instead, the Solaris LLC members are liable for United States federal income tax on their respective shares of the Company’s taxable income reported on the members’ United States federal income tax returns. Our revenues are derived through transactions in several states, which may be subject to state and local taxes. Accordingly, we have recorded a liability for state and local taxes that management believes is adequate for activities as of December 31, 2019 and 2018. We are subject to a franchise tax imposed by the State of Texas. The franchise tax rate is 1%, calculated on taxable margin. Taxable margin is defined as total revenue less deductions for cost of goods sold or compensation and benefits in which the total calculated taxable margin cannot exceed 70% of total revenue. Current expenses related to Texas franchise tax were approximately $742,000, $684,000 and $247,000 for the years ended December 31, 2019, 2018 and 2017. We determine deferred tax assets and liabilities on the basis of the differences between the book value and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs. We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more-likely-than-not the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions meeting the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Interest and penalties related to income taxes are included in the benefit (provision) for income taxes in our consolidated statement of operations. We have not incurred any significant interest or penalties related to income taxes in any of the periods presented. See Note 10. “–Income Taxes” for additional information regarding income taxes. |
Payable Related to the Tax Receivable Agreement | Payable Related to the Tax Receivable Agreement In connection with the IPO, Solaris Inc. entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the members of Solaris LLC immediately prior to the IPO (each such person and any permitted transferee, a “TRA Holder,” and together, the “TRA Holders”) on May 17, 2017. This agreement generally provides for the payment by Solaris Inc. to each TRA Holder of 85% of the net cash savings, if any, in United States federal, state and local income tax or franchise tax that Solaris Inc. actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the IPO as a result of (i) certain increases in tax basis that occur as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of all or a portion of such TRA Holder's Solaris LLC Units in connection with the IPO or pursuant to the exercise of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement) and (ii) imputed interest deemed to be paid by Solaris Inc. as a result of, and additional tax basis arising from, any payments Solaris makes under the Tax Receivable Agreement. Solaris Inc. will retain the benefit of the remaining 15% of these cash savings. As of December 31, 2019 and 2018, Solaris Inc. recorded a payable related to the Tax Receivable Agreement of $67,998 and $56,149, respectively, $1,416 of which has been recorded as a current liability in the year ended December 31, 2019. The increase in payables related to the Tax Receivable Agreement is a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units from TRA Holders during the year ended December 31, 2019. |
Environmental Matters | Environmental Matters The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. Management has established procedures for the ongoing evaluation of the Company’s operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed as incurred. Liabilities are recorded when environmental costs are probable, and the costs can be reasonably estimated. The Company maintains insurance which may cover in whole or in part certain environmental expenditures. As of December 31, 2019 and 2018, no liabilities were recorded with respect to any environmental matters as no environmental costs were deemed probable. |
Segment Information | Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company and the Chief Executive Officer view the Company’s operations and manage its business as one operating segment. All long-lived assets of the Company reside in the United States. |
Recent Accounting Standards | Accounting Standards Recently Adopted In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles of ASC 740 and simplifies other areas in order to reduce simplify its application. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. The Company early adopted ASU 2019-12 during the quarter ended December 31, 2019, which did not have an impact on the consolidated financial statements. Accounting Standards Recently Issued But Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), 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. Adoption of ASU 2016-13 will be applied using a modified-retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently in the process of evaluating the impact, if any, that ASU 2016-13 will have on our condensed consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of useful life of property, plant and equipment | Useful Life Systems and related equipment Up to 15 years Machinery and equipment 3-10 years Furniture and fixtures 5 years Computer hardware and software 3-10 years Vehicles 5 years Transloading facility and equipment 15-30 years Buildings and leasehold improvements 15 years |
Schedule of intangible assets by major classification | Accumulated Net Book Gross Amortization Value As of December 31, 2019: Customer relationships $ 4,703 $ (1,400) $ 3,303 Software acquired in the acquisition of Railtronix 346 (103) 243 Non-competition agreement 225 (94) 131 Patents and other 114 (30) 84 Total identifiable intangibles $ 5,388 $ (1,627) $ 3,761 As of December 31, 2018: Customer relationships $ 4,703 $ (727) $ 3,976 Software acquired in the acquisition of Railtronix 346 (54) 292 Non-competition agreement 225 (49) 176 Patents and other 114 (18) 96 Total identifiable intangibles $ 5,388 $ (848) $ 4,540 |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations | |
Schedule of pro forma results | For the Year Ended December 31, 2017 Actual Pro Forma Pro forma (unaudited) Total revenues $ 67,395 $ 69,252 Net income 14,677 15,207 |
Prepaid Expenses and Other Cu_2
Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Prepaid Expenses and Other Current Assets. | |
Schedule of prepaid expenses and other current assets | December 31, December 31, 2019 2018 Prepaid purchase orders $ 1,055 $ 2,802 Prepaid insurance 865 576 Deposits 1,245 882 Other assets 1,837 1,232 Prepaid expenses and other current assets $ 5,002 $ 5,492 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment. | |
Schedule of property plant and equipment | December 31, December 31, 2019 2018 Systems and related equipment $ 294,547 $ 258,600 Systems in process 11,867 11,245 Transloading facility and equipment 40,272 40,218 Computer hardware and software 1,335 1,185 Machinery and equipment 5,214 5,126 Vehicles 7,633 8,334 Buildings 4,339 4,280 Land 612 612 Furniture and fixtures 284 282 Property, plant and equipment, gross 366,103 329,882 Less: accumulated depreciation (59,520) (33,344) Property, plant and equipment, net $ 306,583 $ 296,538 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accrued Liabilities | |
Schedule of accrued liabilities | 2019 2018 Property, plant and equipment $ 47 $ 2,153 Employee related expenses 4,129 4,500 Selling, general and administrative 1,016 944 Cost of revenue 5,062 2,702 Excise, franchise and sales taxes 2,526 1,461 Ad valorem taxes 1,598 774 Other 69 124 Accrued liabilities $ 14,447 $ 12,658 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases | |
Schedule of components of lease expense | December 31, 2019 Operating lease cost (1) (2) $ 1,187 Finance lease cost Amortization of ROU assets 29 Interest on lease liabilities 6 Total finance lease cost $ 35 (1) Includes short term leases. (2) Operating lease costs of $741, $78 and $368 were reported in Selling, general and administrative, Cost of system services and Cost of transloading services for the year ended December 31, 2019. |
Schedule of non-cancellable operating leases as of December 31, 2018 | Year Ending December 31, Amount 2019 $ 1,432 2020 1,375 2021 1,299 2022 1,093 2023 1,092 Thereafter 9,725 Total minimum lease payments $ 16,016 |
Schedule of future minimum operating lease payments | Future minimum lease payments under non-cancellable operating leases as of December 31, 2019 were as follows: Year Ending December 31, Operating Leases Finance Leases 2020 $ 1,116 35 2021 1,060 33 2022 1,091 33 2023 1,100 33 2024 1,108 33 Thereafter 8,354 11 Total future minimum lease payments 13,829 178 Less: effects of discounting (5,379) (15) Total lease liabilities $ 8,450 $ 163 |
Schedule of future minimum finance lease payments | Year Ending December 31, Operating Leases Finance Leases 2020 $ 1,116 35 2021 1,060 33 2022 1,091 33 2023 1,100 33 2024 1,108 33 Thereafter 8,354 11 Total future minimum lease payments 13,829 178 Less: effects of discounting (5,379) (15) Total lease liabilities $ 8,450 $ 163 |
Schedule of other information | Supplemental cash flow information related to leases were as follows: December 31, 2019 Supplemental Cash Flows Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,120 Financing cash flows from finance leases 35 Other information related to leases was as follows: December 31, 2019 Weighted Average Remaining Lease Term Operating leases 13.9 years Finance leases 5.4 years Weighted Average Discount Rate Operating leases Finance leases |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Equity | |
Schedule of assumptions used to determine compensation costs for options granted | 2017: Expected volatility 37.84 % Expected term (years) 4.97 Expected annual dividend yield — % Expected risk-free rate of return 1.42 % |
Summary of the option activity | Options Outstanding Weighted Average Weighted Remaining Aggregate Average Exercise Contractual Intrinsic Value Options Price Term (years) (in thousands) Balance, January 1, 2017 12,938 $ 135.00 8.67 $ — Exercisable, January 1, 2017 3,235 $ 135.00 8.67 $ — Canceled (12,938) 135.00 — Granted 591,261 2.87 — Exercised (91,484) 2.87 — Forfeited (33,346) 2.87 — Balance, December 31, 2017 466,431 $ 2.87 6.79 $ 8,648 Exercisable, December 31, 2017 466,431 $ 2.87 6.79 $ 8,648 Canceled — — — Granted — — — Exercised (327,594) 2.87 — Forfeited — — — Balance, December 31, 2018 138,837 $ 2.87 7.92 $ 1,280 Exercisable, December 31, 2018 138,837 $ 2.87 7.92 $ 1,280 Canceled — — — Granted — — — Exercised (103,207) 2.87 — Forfeited (4) 2.87 — Balance, December 31, 2019 35,626 $ 2.87 7.92 $ 397 Exercisable, December 31, 2019 35,626 $ 2.87 7.92 $ 397 |
Summary of activity related to restricted stock | Restricted Stock Awards Weighted Average Grant Date Fair Number of Shares Value ($) Issued on May 17, 2017 648,676 $ 12.04 Awarded 584,477 13.25 Vested — — Forfeited (14,888) 12.87 Unvested at December 31, 2017 1,218,265 $ 12.61 Awarded 88,664 16.92 Vested (644,387) 12.58 Forfeited (251,045) 12.49 Unvested at December 31, 2018 411,497 $ 13.67 Awarded 448,745 16.62 Vested (208,697) 15.13 Forfeited (24,294) 15.52 Unvested at December 31, 2019 627,251 $ 15.23 |
Schedule of earnings per share calculation | Year Ended December, Basic net income (loss) per share: 2019 2018 2017 Numerator Net income (loss) attributable to Solaris $ 52,007 $ 42,431 $ (4,174) Less income attributable to participating securities (1) (1,120) (1,230) — Net income (loss) attributable to common stockholders $ 50,887 $ 41,201 $ (4,174) Denominator Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share 30,141 25,678 12,117 Effect of dilutive securities: Stock options (2) 44 151 — Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share 30,185 25,829 12,117 Earnings (loss) per share of Class A common stock - basic $ 1.69 $ 1.60 $ (0.34) Earnings (loss) per share of Class A common stock - diluted $ 1.69 $ 1.59 $ (0.34) (1) The Company's restricted shares of common stock are participating securities. (2) The years ended December 31, 2019 and 2018 include 44 and 151 shares of Class A common stock resulting from an assumed exercise of the stock options in the calculation of the denominator for diluted earnings per common share as these shares were dilutive. |
Schedule of antidilutive shares | Year Ended December, 2019 2018 2017 Class B common stock 16,688 20,727 31,100 Stock options — — 365 Restricted stock awards 320 412 225 Total 17,008 21,139 31,690 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Schedule of components of income tax expense | Year Ended December 31, 2019 2018 2017 Current: Federal $ — $ — $ — State 814 684 247 814 684 247 Deferred: Federal 14,452 11,410 32,195 State 1,670 867 1,267 16,122 12,277 33,462 Income tax expense $ 16,936 $ 12,961 $ 33,709 |
Schedule of income tax expense differs from the amount computed by applying the statutory federal income tax rate | Year Ended December 31, 2019 2018 2017 Income before income taxes $ 107,296 $ 98,913 $ 48,386 Less: net income prior to corporate reorganization — — 3,665 Less: net income before income taxes attributable to noncontrolling interest 38,353 43,521 15,439 Income attributable to Solaris Oilfield Infrastructure, Inc. stockholders before income taxes 68,943 55,392 29,282 Income tax expense (benefit) at the federal statutory rate 14,548 11,632 10,249 State income taxes, net of federal benefit 1,740 1,373 1,071 Remeasurement of federal deferred tax assets due to rate change — — 30,447 Tax Receivable Agreement adjustments — — (8,058) Other 648 (44) — Income tax (benefit) expense $ 16,936 $ 12,961 $ 33,709 |
Schedule of deferred tax assets and liabilities | December 31, 2019 2018 Assets: Investments in subsidiaries $ 7,099 $ 15,876 Imputed interest 1,587 1,366 Net operating loss carryforward 43,543 41,648 Total deferred tax assets 52,229 58,890 Liabilities: Investments in subsidiaries — — Total deferred tax liabilities — — Net deferred tax asset $ 52,229 $ 58,890 |
Schedule of changes in gross unrecognized tax benefits | Year Ended December 31, 2019 2018 2017 Balance, January 1, $ 816 $ 812 $ — Additions for the current year tax — — 812 Additions related to prior years — 4 — Balance, December 31, $ 816 $ 816 $ 812 |
Selected Quarterly Financial _2
Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Selected Quarterly Financial Data (Unaudited) | |
Schedule of Selected Quarterly Financial Data | Three Months Ended March 31, June 30, September 30, December 31, (in thousands, except per share amounts) 2019 Total revenue $ 55,124 $ 64,101 $ 59,604 $ 62,858 Operating income 27,727 27,323 22,793 30,087 Net income 23,435 22,509 19,082 25,334 Net income attributable to Solaris 12,317 13,275 11,398 15,017 Earnings per share of Class A common stock - basic $ 0.43 $ 0.42 $ 0.36 $ 0.48 Earnings per share of Class A common stock - diluted $ 0.43 $ 0.42 $ 0.36 $ 0.48 2018 Total revenue $ 36,018 $ 47,155 $ 56,686 $ 57,337 Operating income 15,526 24,796 30,790 28,175 Net income 13,415 21,448 26,437 24,652 Net income (loss) attributable to Solaris 5,930 10,597 13,019 12,885 Earnings (loss) per share of Class A common stock - basic $ 0.24 $ 0.40 $ 0.49 $ 0.47 Earnings (loss) per share of Class A common stock - diluted $ 0.23 $ 0.40 $ 0.49 $ 0.47 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Accounts Receivable and Inventory (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Summary of Significant Accounting Policies | |||
Accounts receivable due maximum period | 60 days | ||
Allowance for doubtful accounts | $ 339 | $ 0 | |
Inventory impairment | $ 0 | $ 0 | $ 0 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Property (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Systems and related equipment | Maximum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 15 years |
Machinery and equipment | Minimum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 3 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 10 years |
Furniture and fixtures | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 5 years |
Computer hardware and software | Minimum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 3 years |
Computer hardware and software | Maximum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 10 years |
Vehicles | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 5 years |
Transloading facility and equipment | Minimum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 15 years |
Transloading facility and equipment | Maximum | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 30 years |
Buildings and leasehold improvements | |
Property, Plant and Equipment | |
Property, plant and equipment useful life | 15 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Intangibles (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Intangible assets by major classification | |||
2020 | $ 748 | ||
2021 | 748 | ||
2022 | 748 | ||
2023 | 748 | ||
2024 | 748 | ||
Intangible amortization expense | 779 | $ 801 | $ 46 |
Gross | 5,388 | 5,388 | |
Accumulated Amortization | (1,627) | (848) | |
Net Book Value | 3,761 | 4,540 | |
Goodwill | 17,236 | 17,236 | |
Goodwill impairment | 0 | 0 | 0 |
Impairment of long-lived assets | 0 | 0 | 0 |
Impairment of definite-lived intangible assets | 0 | 0 | $ 0 |
Customer relationships | |||
Intangible assets by major classification | |||
Gross | 4,703 | 4,703 | |
Accumulated Amortization | (1,400) | (727) | |
Net Book Value | 3,303 | 3,976 | |
Software acquired in the acquisition of Railtronix | |||
Intangible assets by major classification | |||
Gross | 346 | 346 | |
Accumulated Amortization | (103) | (54) | |
Net Book Value | 243 | 292 | |
Non-competition agreement | |||
Intangible assets by major classification | |||
Gross | 225 | 225 | |
Accumulated Amortization | (94) | (49) | |
Net Book Value | 131 | 176 | |
Patents and other | |||
Intangible assets by major classification | |||
Gross | 114 | 114 | |
Accumulated Amortization | (30) | (18) | |
Net Book Value | $ 84 | $ 96 | |
Minimum | |||
Intangible assets by major classification | |||
Definite-lived intangible assets useful life | 5 years | ||
Maximum | |||
Intangible assets by major classification | |||
Definite-lived intangible assets useful life | 15 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Leases (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |||
Lease, Practical Expedient, Package | true | ||
ROU assets | $ 7,871 | ||
Operating lease liabilities | 8,450 | ||
Retained earnings | $ 74,222 | $ 35,507 | |
ASU 2016-02 | Adjustment | |||
Summary of Significant Accounting Policies | |||
ROU assets | $ 8,503 | ||
Operating lease liabilities | 9,016 | ||
Retained earnings | $ (532) |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Revenue And Deferred Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Nov. 30, 2019 | |
Summary of Significant Accounting Policies | |||
Shortfall revenue | $ 1,332 | ||
Termination payment received | $ 25,980 | ||
Remaining deferred revenue | 0 | 25,458 | |
Deferred revenue recognized | 27,138 | 522 | |
Accounts receivable | $ 38,554 | $ 39,746 | $ 1,680 |
System rental | Minimum | |||
Summary of Significant Accounting Policies | |||
Payment terms | 30 days | ||
System rental | Maximum | |||
Summary of Significant Accounting Policies | |||
Payment terms | 60 days | ||
System services | Minimum | |||
Summary of Significant Accounting Policies | |||
Payment terms | 30 days | ||
System services | Maximum | |||
Summary of Significant Accounting Policies | |||
Payment terms | 60 days | ||
Transloading services | Minimum | |||
Summary of Significant Accounting Policies | |||
Payment terms | 30 days | ||
Transloading services | Maximum | |||
Summary of Significant Accounting Policies | |||
Payment terms | 60 days |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Misc (Details) | May 17, 2017 | Dec. 31, 2019USD ($)segment | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) |
Research and development expense | $ 0 | $ 0 | $ 210,000 | |
Provision for income taxes | $ 16,936,000 | $ 12,961,000 | $ 33,709,000 | |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 21.00% | 35.00% | |
Payables related to Tax Receivable Agreement | $ 66,582,000 | $ 56,149,000 | ||
Current liability | 1,416,000 | |||
Environmental matters liabilities | 0 | 0 | ||
Environmental matters deemed probable | $ 0 | 0 | ||
Number of operating segments | segment | 1 | |||
Tax Receivable Agreement | ||||
Payments of net cash saving (as a percent) | 85.00% | 85.00% | ||
Payables related to Tax Receivable Agreement | $ 67,998,000 | 56,149,000 | ||
Benefit of remaining cash savings (as a percent) | 15.00% | |||
Texas | ||||
Provision for income taxes | $ 742,000 | $ 684,000 | $ 247,000 | |
Franchise tax rate (as a percent) | 1.00% | |||
Maximum taxable margin (as a percent) | 70.00% | |||
2019 Credit Agreement | ||||
Outstanding credit facility | $ 0 |
Business Combinations (Details)
Business Combinations (Details) $ / shares in Units, $ in Thousands | Dec. 06, 2017USD ($)$ / sharesshares | Mar. 31, 2018USD ($) | Mar. 31, 2018USD ($)item | Dec. 31, 2019USD ($)item | Dec. 31, 2017USD ($) | Dec. 31, 2018USD ($) |
Business Combination | ||||||
Equity consideration | $ 4,507 | |||||
Fair value | ||||||
Goodwill | $ 17,236 | $ 17,236 | ||||
Pro forma information | ||||||
Revenue, since acquisition date | 67,395 | |||||
Net income, since acquisition date | 14,677 | |||||
Unaudited pro forma revenue | 69,252 | |||||
Unaudited pro forma net income | 15,207 | |||||
Railtronix LLC | ||||||
Business Combination | ||||||
Total consideration | $ 9,505 | |||||
Cash consideration | 5,000 | |||||
Equity consideration | 4,505 | |||||
Fair value | ||||||
Goodwill | 4,237 | |||||
Pro forma information | ||||||
Revenue, since acquisition date | 205 | |||||
Net income, since acquisition date | 87 | |||||
Performance-based cash awards liability | 2,500 | $ 875 | $ 2,500 | |||
Number of completed milestones | item | 1 | 1 | ||||
Contingent consideration payment | $ 1,625 | $ 1,625 | ||||
Railtronix LLC | Customer relationships | ||||||
Fair value | ||||||
Identifiable intangible assets | 4,697 | |||||
Railtronix LLC | Non-competition agreement | ||||||
Fair value | ||||||
Identifiable intangible assets | 225 | |||||
Railtronix LLC | Software | ||||||
Fair value | ||||||
Identifiable intangible assets | $ 346 | |||||
Railtronix LLC | Class B Common Stock | ||||||
Business Combination | ||||||
Equity consideration (in shares) | shares | 279,655 | |||||
Railtronix LLC | Class A Common Stock | ||||||
Business Combination | ||||||
Closing price (in dollars per share) | $ / shares | $ 16.11 | |||||
LLC Units | Railtronix LLC | ||||||
Business Combination | ||||||
Equity consideration (in shares) | shares | 279,655 |
Prepaid Expenses and Other Cu_3
Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Prepaid Expenses and Other Current Assets. | ||
Prepaid purchase orders | $ 1,055 | $ 2,802 |
Prepaid insurance | 865 | 576 |
Deposits | 1,245 | 882 |
Other assets | 1,837 | 1,232 |
Prepaid expenses and other current assets | $ 5,002 | $ 5,492 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 366,103 | $ 329,882 |
Less: accumulated depreciation | (59,520) | (33,344) |
Property, plant and equipment, net | 306,583 | 296,538 |
Systems and related equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 294,547 | 258,600 |
Systems in process | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 11,867 | 11,245 |
Transloading facility and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 40,272 | 40,218 |
Computer hardware and software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 1,335 | 1,185 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 5,214 | 5,126 |
Vehicles | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 7,633 | 8,334 |
Buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 4,339 | 4,280 |
Land | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 612 | 612 |
Furniture and fixtures | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 284 | $ 282 |
Property, Plant and Equipment -
Property, Plant and Equipment - Depreciation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment | |||
Depreciation expense | $ 26,146 | $ 17,621 | $ 6,589 |
Capitalized depreciation in property, plant and equipment | 735 | 688 | 668 |
Selling, general and administrative expenses | |||
Property, Plant and Equipment | |||
Depreciation expense | 566 | 473 | 336 |
System rental | |||
Property, Plant and Equipment | |||
Depreciation expense | 22,389 | 14,920 | 5,792 |
System services | |||
Property, Plant and Equipment | |||
Depreciation expense | 1,548 | 1,274 | 461 |
Transloading services | |||
Property, Plant and Equipment | |||
Depreciation expense | $ 1,643 | $ 954 | $ 0 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Accrued Liabilities | ||
Property, plant and equipment | $ 47 | $ 2,153 |
Employee related expenses | 4,129 | 4,500 |
Selling, general and administrative | 1,016 | 944 |
Cost of revenue | 5,062 | 2,702 |
Excise, franchise and sales taxes | 2,526 | 1,461 |
Ad valorem taxes | 1,598 | 774 |
Other | 69 | 124 |
Accrued liabilities | $ 14,447 | $ 12,658 |
Leases (Details)
Leases (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Leases | ||
Property, plant and equipment, cost | $ 366,103 | $ 329,882 |
Accumulated depreciation | 59,520 | 33,344 |
Finance leased assets | ||
Leases | ||
Property, plant and equipment, cost | 299 | 299 |
Accumulated depreciation | $ 105 | $ 85 |
Kingfisher Facility | ||
Leases | ||
Term | 30 years |
Leases - Lease cost (Details)
Leases - Lease cost (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Leases | |||
Operating lease cost | $ 1,187 | ||
Amortization of ROU assets | 29 | ||
Interest on lease liabilities | 6 | ||
Total finance lease cost | 35 | ||
Operating cash flows from operating leases | 1,120 | ||
Financing cash flows from finance leases | 35 | $ 28 | $ 27 |
Selling, general and administrative expenses | |||
Leases | |||
Operating lease cost | 741 | ||
Cost of sales | System rental | |||
Leases | |||
Operating lease cost | 78 | ||
Cost of sales | Transloading services | |||
Leases | |||
Operating lease cost | $ 368 |
Leases - Maturities (Details)
Leases - Maturities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Operating lease obligations | ||
2020 | $ 1,116 | |
2021 | 1,060 | |
2022 | 1,091 | |
2023 | 1,100 | |
2024 | 1,108 | |
Thereafter | 8,354 | |
Total future minimum lease payments | 13,829 | |
Less: effects of discounting | (5,379) | |
Total lease liabilities | 8,450 | |
Finance lease obligations | ||
2020 | 35 | |
2021 | 33 | |
2022 | 33 | |
2023 | 33 | |
2024 | 33 | |
Thereafter | 11 | |
Total future minimum lease payments | 178 | |
Less: effects of discounting | (15) | |
Total lease liabilities | $ 163 | |
2018 operating leases | ||
2019 | $ 1,432 | |
2020 | 1,375 | |
2021 | 1,299 | |
2022 | 1,093 | |
2023 | 1,092 | |
Thereafter | 9,725 | |
Total minimum lease payments | $ 16,016 |
Leases - Other (Details)
Leases - Other (Details) | Dec. 31, 2019 |
Leases | |
Weighted Average Remaining Lease Term - Operating leases | 13 years 10 months 24 days |
Weighted Average Remaining Lease Term - Finance leases | 5 years 4 months 24 days |
Weighted Average Discount Rate - Operating leases | 6.30% |
Weighted Average Discount Rate - Finance leases | 3.30% |
Senior Secured Credit Facility
Senior Secured Credit Facility (Details) - 2019 Credit Agreement $ in Thousands | Apr. 26, 2019USD ($) | Dec. 31, 2019USD ($) |
Senior Secured Credit Facility | ||
Maximum borrowing | $ 50,000 | |
Potential additional borrowing available | 25,000 | |
Maximum borrowing capacity with accordion option | $ 75,000 | |
Indebtedness to consolidated EBITDA | 2.75 | |
Senior indebtedness to consolidated EBITDA | 2.50 | |
Eligible accounts (as a percent) | 100.00% | |
Eligible accounts to revolving exposure ratio | 1 | |
Leverage ratio for threshold | 2 | |
Cash adjustment to net indebtedness | $ 3,000 | |
Leverage ratio for debt repayment | 1 | |
Cash threshold triggering repayment | $ 20,000 | |
Cash threshold over a period of time triggering repayment | $ 5,000 | |
Period for cash threshold repayment trigger | 180 days | |
Maximum capital expenditures allowed | $ 100,000 | |
Outstanding credit facility | $ 0 | |
Remaining borrowing capacity | $ 50,000 | |
Minimum | ||
Senior Secured Credit Facility | ||
Commitment fee (as a percent) | 0.25% | |
Maximum | ||
Senior Secured Credit Facility | ||
Commitment fee (as a percent) | 0.375% | |
Eurodollar | Minimum | ||
Senior Secured Credit Facility | ||
Applicable margin rate | 1.75% | |
Eurodollar | Maximum | ||
Senior Secured Credit Facility | ||
Applicable margin rate | 2.50% | |
Alternate base rate | Minimum | ||
Senior Secured Credit Facility | ||
Applicable margin rate | 0.75% | |
Alternate base rate | Maximum | ||
Senior Secured Credit Facility | ||
Applicable margin rate | 1.50% |
Equity - Dividends (Details)
Equity - Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |
Nov. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Equity | |||
Cash dividends paid (in dollars per share) | $ 0.105 | $ 0.405 | $ 0.1 |
Quarterly common stock dividend raise | 5.00% | ||
Distributions paid to unit holders | $ 19,260 | $ 4,713 | |
Distributions paid to unit holders (in dollars per unit) | $ 0.405 | $ 0.10 | |
Distribution received | $ 12,760 | $ 2,750 | |
Dividend paid to common stock | 12,760 | 2,750 | |
Dividends paid to restricted stock | 282 | 41 | |
Solaris LLC | |||
Equity | |||
Distributions paid to unit holders | $ 19,260 | $ 4,713 |
Equity - Share Repurchase (Deta
Equity - Share Repurchase (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 03, 2019 | |
Equity | ||
Remaining authorized for future repurchases | $ 21,746 | |
Maximum | ||
Equity | ||
Share Repurchase, Authorized | $ 25,000 | |
Solaris LLC | ||
Equity | ||
Purchased and Retired, Shares | 251,930 | |
Purchased and Retired, Value | $ 3,254 | |
Class A Common Stock | ||
Equity | ||
Purchased and Retired, Shares | 251,930 | |
Purchased and Retired, Value | $ 3,254 | |
Value repurchased shares (in dollars per share) | $ 12.90 |
Equity - SBC (Details)
Equity - SBC (Details) - USD ($) $ / shares in Units, $ in Thousands | May 17, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Stock-based compensation | |||||
Options granted (in shares) | 591,261 | ||||
Options granted (in dollars per shares) | $ 2.87 | ||||
Cash received from option exercises | $ 294 | $ 932 | |||
Options exercised (in shares) | 103,207 | 327,594 | 91,484 | ||
Forfeited (in shares) | 4 | 33,346 | |||
Options outstanding (in shares) | 35,626 | 138,837 | 466,431 | 12,938 | |
Stock-based compensation expense | $ 4,476 | $ 3,861 | $ 3,701 | ||
Stock options | |||||
Stock-based compensation | |||||
Options granted (in shares) | 591,261 | ||||
Options granted (in dollars per shares) | $ 2.87 | ||||
Options grant date fair value (in dollars per shares) | $ 12.04 | ||||
Shares surrendered and recorded as treasury stock (in shares) | 27,578 | 539 | 16,354 | ||
Cash received from option exercises | $ 294 | $ 932 | $ 263 | ||
Tax benefit (expense) realized for the tax deductions from options exercised | $ 33 | 128 | 20 | ||
Options exercised (in shares) | 522,285 | ||||
Forfeited (in shares) | 33,350 | ||||
Options outstanding (in shares) | 35,626 | ||||
Vesting period | 4 years | ||||
Stock-based compensation expense | $ 0 | $ 0 | $ 295 | ||
Class A Common Stock | |||||
Stock-based compensation | |||||
Reserved for issuance (in shares) | 5,118,080 | ||||
Class A Common Stock | Stock options | |||||
Stock-based compensation | |||||
Shares issued in exchange for options (in shares) | 103,207 | 327,594 | 75,130 |
Equity - Assumptions (Details)
Equity - Assumptions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Assumptions | |||
Stock-based compensation expense | $ 4,476 | $ 3,861 | $ 3,701 |
Stock options | |||
Assumptions | |||
Expected volatility (as a percent) | 37.84% | ||
Expected term | 4 years 11 months 19 days | ||
Expected annual dividend yield (as a percent) | 0.00% | ||
Expected risk-free rate of return (as a percent) | 1.42% | ||
Vesting period | 4 years | ||
Stock-based compensation expense | $ 0 | $ 0 | $ 295 |
Equity - Option Activity (Detai
Equity - Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Number of shares | ||||
Options outstanding, beginning (in shares) | 138,837 | 466,431 | 12,938 | |
Options canceled (in shares) | (12,938) | |||
Options granted (in shares) | 591,261 | |||
Options exercised (in shares) | (103,207) | (327,594) | (91,484) | |
Options forfeited (in shares) | (4) | (33,346) | ||
Options outstanding, end (in shares) | 35,626 | 138,837 | 466,431 | 12,938 |
Exercisable (in shares) | 35,626 | 138,837 | 466,431 | 3,235 |
Weighted average exercise price | ||||
Options outstanding, beginning (in dollars per share) | $ 2.87 | $ 2.87 | $ 135 | |
Options canceled (in dollars per shares) | 135 | |||
Options granted (in dollars per shares) | 2.87 | |||
Options exercised (in dollars per shares) | 2.87 | 2.87 | 2.87 | |
Options forfeited (in dollars per shares) | 2.87 | 2.87 | ||
Options outstanding, end (in dollars per share) | 2.87 | 2.87 | 2.87 | $ 135 |
Exercisable (in dollars per share) | $ 2.87 | $ 2.87 | $ 2.87 | $ 135 |
Weighted average remaining contractual life | ||||
Outstanding | 7 years 11 months 1 day | 7 years 11 months 1 day | 6 years 9 months 15 days | 8 years 8 months 1 day |
Exercisable | 7 years 11 months 1 day | 7 years 11 months 1 day | 6 years 9 months 15 days | 8 years 8 months 1 day |
Share Based Compensation Arrangement By Share Based Payment Award Options Aggregate Intrinsic Value Abstract | ||||
Options Outstanding, Value | $ 1,280 | $ 8,648 | ||
Exercisable | 397 | 1,280 | $ 8,648 | |
Options Outstanding, Value | $ 397 | $ 1,280 | $ 8,648 | |
Unvested options outstanding (in shares) | 0 |
Equity - Restricted stock (Deta
Equity - Restricted stock (Details) - USD ($) $ / shares in Units, $ in Thousands | 7 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Other non-option information | ||||
Stock-based compensation expense | $ 4,476 | $ 3,861 | $ 3,701 | |
Selling, general and administrative expenses | ||||
Other non-option information | ||||
Stock-based compensation expense | 4,167 | 3,661 | $ 3,701 | |
System rental | ||||
Other non-option information | ||||
Stock-based compensation expense | 34 | 6 | ||
System services | ||||
Other non-option information | ||||
Stock-based compensation expense | 262 | 191 | ||
Transloading services | ||||
Other non-option information | ||||
Stock-based compensation expense | $ 13 | $ 3 | ||
Restricted stock | ||||
Number of Shares | ||||
Unvested, beginning (in shares) | 648,676 | 411,497 | 1,218,265 | |
Awarded (in shares) | 584,477 | 448,745 | 88,664 | |
Vested (in shares) | (208,697) | (644,387) | ||
Forfeited (in shares) | (14,888) | (24,294) | (251,045) | |
Unvested, end (in shares) | 1,218,265 | 627,251 | 411,497 | 1,218,265 |
Weighted Average Grant Date Fair Value | ||||
Unvested, beginning (in dollars per share) | $ 12.04 | $ 13.67 | $ 12.61 | |
Awarded (in dollars per share) | 13.25 | 16.62 | 16.92 | |
Vested (in dollars per share) | 15.13 | 12.58 | ||
Forfeited (in dollars per share) | 12.87 | 15.52 | 12.49 | |
Unvested, end (in dollars per share) | $ 12.61 | $ 15.23 | $ 13.67 | $ 12.61 |
Other non-option information | ||||
Unrecognized compensation costs | $ 6,764 | |||
Expected period for recognizing compensation expense | 1 year 9 months 22 days | |||
Available for grant (in shares) | 3,243,549 | |||
Restricted stock | First vesting period | ||||
Other non-option information | ||||
Unrecognized compensation costs (in shares) | 348,214 | |||
Restricted stock | Second vesting period | ||||
Other non-option information | ||||
Unrecognized compensation costs (in shares) | 147,793 | |||
Restricted stock | Third vesting period | ||||
Other non-option information | ||||
Unrecognized compensation costs (in shares) | 131,243 | |||
Restricted stock | Selling, general and administrative expenses | ||||
Other non-option information | ||||
Stock-based compensation expense | $ 4,167 | $ 3,661 | $ 3,406 | |
Restricted stock | Property, Plant and Equipment | ||||
Other non-option information | ||||
Stock-based compensation expense | 187 | 1,040 | $ 1,080 | |
Restricted stock | System rental | ||||
Other non-option information | ||||
Stock-based compensation expense | 34 | 6 | ||
Restricted stock | System services | ||||
Other non-option information | ||||
Stock-based compensation expense | 262 | 191 | ||
Restricted stock | Transloading services | ||||
Other non-option information | ||||
Stock-based compensation expense | $ 13 | $ 3 |
Equity - EPS (Details)
Equity - EPS (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | May 16, 2017 | ||
Numerator | ||||||||||||||
Net income (loss) attributable to Solaris | $ 15,017 | $ 11,398 | $ 13,275 | $ 12,317 | $ 12,885 | $ 13,019 | $ 10,597 | $ 5,930 | $ 52,007 | $ 42,431 | $ (4,174) | |||
Less income attributable to participating securities | (1,120) | (1,230) | ||||||||||||
Net income (loss) attributable to common stockholders | $ 50,887 | $ 41,201 | $ (4,174) | |||||||||||
Denominator | ||||||||||||||
Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share (in shares) | 29,874 | |||||||||||||
Effect of dilutive securities: | ||||||||||||||
Stock options (in shares) | 44,000 | 151,000 | ||||||||||||
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share (in shares) | 29,923 | |||||||||||||
Options exercised (in shares) | 103,207 | 327,594 | 91,484 | |||||||||||
Class A Common Stock | ||||||||||||||
Earnings Per Share | ||||||||||||||
Common stock, shares outstanding | 30,765,000 | 27,091,000 | 30,765,000 | 27,091,000 | 0 | |||||||||
Denominator | ||||||||||||||
Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share (in shares) | [1] | 30,141,000 | 25,678,000 | 12,117,000 | ||||||||||
Effect of dilutive securities: | ||||||||||||||
Stock options (in shares) | 44,000 | 151,000 | ||||||||||||
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share (in shares) | [1] | 30,185,000 | 25,829,000 | 12,117,000 | ||||||||||
Earnings (loss) per share of Class A common stock - basic (in dollars per share) | $ 0.48 | $ 0.36 | $ 0.42 | $ 0.43 | $ 0.47 | $ 0.49 | $ 0.40 | $ 0.24 | $ 1.69 | $ 1.60 | $ (0.34) | |||
Earnings (loss) per share of Class A common stock - diluted (in dollars per share) | $ 0.48 | $ 0.36 | $ 0.42 | $ 0.43 | $ 0.47 | $ 0.49 | $ 0.40 | $ 0.23 | $ 1.69 | $ 1.59 | $ (0.34) | |||
Class B Common Stock | ||||||||||||||
Earnings Per Share | ||||||||||||||
Common stock, shares outstanding | 15,939,000 | 19,627,000 | 15,939,000 | 19,627,000 | 0 | |||||||||
[1] | Represents earnings per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period following the May 17, 2017 Initial Public Offering. |
Equity - Antidilutive (Details)
Equity - Antidilutive (Details) - shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Potentially dilutive shares | |||
Excluded from EPS calculation (in shares) | 17,008 | 21,139 | 31,690 |
Class B Common Stock | |||
Potentially dilutive shares | |||
Excluded from EPS calculation (in shares) | 16,688 | 20,727 | 31,100 |
Stock options | |||
Potentially dilutive shares | |||
Excluded from EPS calculation (in shares) | 365 | ||
Restricted stock | |||
Potentially dilutive shares | |||
Excluded from EPS calculation (in shares) | 320 | 412 | 225 |
Income Taxes (Details)
Income Taxes (Details) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | |||
U.S. federal corporate tax rate | 21.00% | 21.00% | 35.00% |
Income Taxes - Components of in
Income Taxes - Components of income tax expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | |||
State | $ 814 | $ 684 | $ 247 |
Total | 814 | 684 | 247 |
Deferred: | |||
Federal | 14,452 | 11,410 | 32,195 |
State | 1,670 | 867 | 1,267 |
Total | 16,122 | 12,277 | 33,462 |
Income tax (benefit) expense | $ 16,936 | $ 12,961 | $ 33,709 |
Income Taxes - Income tax expen
Income Taxes - Income tax expense reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | |||
U.S. federal corporate tax rate | 21.00% | 21.00% | 35.00% |
Income before income taxes | $ 107,296 | $ 98,913 | $ 48,386 |
Less: net income prior to corporate reorganization | 3,665 | ||
Less: net income before income taxes attributable to noncontrolling interest | 38,353 | 43,521 | 15,439 |
Income attributable to Solaris Oilfield Infrastructure, Inc. stockholders before income taxes | 68,943 | 55,392 | 29,282 |
Income tax expense (benefit) at the federal statutory rate | 14,548 | 11,632 | 10,249 |
State income taxes, net of federal benefit | 1,740 | 1,373 | 1,071 |
Remeasurement of federal deferred tax assets due to rate change | 30,447 | ||
Tax Receivable Agreement adjustments | (8,058) | ||
Other | 648 | (44) | |
Income tax (benefit) expense | $ 16,936 | $ 12,961 | $ 33,709 |
Income Taxes - Deferred tax ass
Income Taxes - Deferred tax assets and liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets: | ||
Investments in subsidiaries | $ 7,099 | $ 15,876 |
Imputed interest | 1,587 | 1,366 |
Net operating loss carryforward | 43,543 | 41,648 |
Total deferred tax assets | 52,229 | 58,890 |
Net deferred tax asset | $ 52,229 | $ 58,890 |
Income Taxes - NOL (Details)
Income Taxes - NOL (Details) $ in Millions | Dec. 31, 2019USD ($) |
Federal | |
Operating loss | |
Operating loss carryovers | $ 197.3 |
Operating loss carryovers, no expiration date | 131.5 |
State | |
Operating loss | |
Operating loss carryovers | $ 52 |
Income Taxes - Uncertain Tax Be
Income Taxes - Uncertain Tax Benefits (Details) - USD ($) $ in Thousands | May 17, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Uncertain Tax Benefits | ||||
Balance, beginning | $ 816 | $ 812 | ||
Additions for the current year tax | $ 812 | |||
Additions related to prior years | 4 | |||
Balance, Ending | 816 | 816 | $ 812 | |
Payables related to Tax Receivable Agreement | 66,582 | 56,149 | ||
Tax Receivable Agreement | ||||
Uncertain Tax Benefits | ||||
Payables related to Tax Receivable Agreement | $ 67,998 | $ 56,149 | ||
Payments of net cash saving (as a percent) | 85.00% | 85.00% |
Concentrations (Details)
Concentrations (Details) | 12 Months Ended | ||
Dec. 31, 2019customeritem | Dec. 31, 2018customeritem | Dec. 31, 2017customeritem | |
Customer | Revenue | |||
Concentrations | |||
Number of customers | customer | 2 | 3 | 4 |
Customer | Revenue | Customer One | |||
Concentrations | |||
Concentration risk (as a percent) | 19.00% | 15.00% | 23.00% |
Customer | Revenue | Customer Two | |||
Concentrations | |||
Concentration risk (as a percent) | 10.00% | 10.00% | 15.00% |
Customer | Revenue | Customer Three | |||
Concentrations | |||
Concentration risk (as a percent) | 10.00% | 13.00% | |
Customer | Revenue | Customer Four | |||
Concentrations | |||
Concentration risk (as a percent) | 11.00% | ||
Customer | Accounts receivable | |||
Concentrations | |||
Number of customers | customer | 1 | 3 | |
Concentration risk (as a percent) | 15.00% | ||
Customer | Accounts receivable | Customer One | |||
Concentrations | |||
Concentration risk (as a percent) | 20.00% | ||
Customer | Accounts receivable | Customer Two | |||
Concentrations | |||
Concentration risk (as a percent) | 10.00% | ||
Customer | Accounts receivable | Customer Three | |||
Concentrations | |||
Concentration risk (as a percent) | 10.00% | ||
Supplier | Purchases | |||
Concentrations | |||
Number of suppliers | item | 1 | 2 | 0 |
Concentration risk (as a percent) | 19.00% | 10.00% | |
Supplier | Purchases | Supplier One | |||
Concentrations | |||
Concentration risk (as a percent) | 13.00% | ||
Supplier | Purchases | Supplier Two | |||
Concentrations | |||
Concentration risk (as a percent) | 11.00% | ||
Supplier | Accounts payables | |||
Concentrations | |||
Number of suppliers | item | 1 | 1 | |
Concentration risk (as a percent) | 44.00% | 13.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2018USD ($) | Mar. 31, 2018USD ($)item | Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 06, 2017USD ($) | |
Solaris Energy Management, LLC | ||||||
Other Commitments | ||||||
Other commitments | $ 8,815 | |||||
Railtronix LLC | ||||||
Other Commitments | ||||||
Performance-based cash awards liability | $ 875 | $ 2,500 | $ 2,500 | |||
Number of completed milestones | item | 1 | 1 | ||||
Contingent consideration payment | $ 1,625 | $ 1,625 | ||||
Raw material purchases | ||||||
Other Commitments | ||||||
Other commitments | $ 2,575 | $ 18,998 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Related Party Transactions | |||
Due from related party | $ 233 | $ 232 | |
Due to related party | 74 | 103 | |
William A. Zartler | |||
Related Party Transactions | |||
Payment made to related party | $ 1,127 | $ 1,022 | $ 910 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands | 2 Months Ended | 12 Months Ended |
Feb. 14, 2020 | Dec. 31, 2019 | |
Subsequent Events | ||
Remaining authorized for future repurchases | $ 21,746 | |
Class A Common Stock | ||
Subsequent Events | ||
Repurchased and retired (in shares) | 251,930 | |
Repurchased and retired | $ 3,254 | |
Average price (in dollars per share) | $ 12.90 | |
Subsequent Event | ||
Subsequent Events | ||
Repurchased and retired (in shares) | 1,131 | |
Repurchased and retired | $ 13,912 | |
Average price (in dollars per share) | $ 12.29 | |
Remaining authorized for future repurchases | $ 7,834 | |
Solaris LLC | ||
Subsequent Events | ||
Repurchased and retired (in shares) | 251,930 | |
Repurchased and retired | $ 3,254 | |
Solaris LLC | Subsequent Event | ||
Subsequent Events | ||
Repurchased and retired (in shares) | 1,131 | |
Repurchased and retired | $ 13,912 |
Selected Quarterly Financial _3
Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Revenue | $ 62,858 | $ 59,604 | $ 64,101 | $ 55,124 | $ 57,337 | $ 56,686 | $ 47,155 | $ 36,018 | $ 241,687 | $ 197,196 | $ 67,395 | ||
Operating income | 30,087 | 22,793 | 27,323 | 27,727 | 28,175 | 30,790 | 24,796 | 15,526 | 107,930 | 99,287 | 25,461 | ||
Net income | 25,334 | 19,082 | 22,509 | 23,435 | 24,652 | 26,437 | 21,448 | 13,415 | 90,360 | 85,952 | 14,677 | ||
Net income (loss) attributable to Solaris | $ 15,017 | $ 11,398 | $ 13,275 | $ 12,317 | $ 12,885 | $ 13,019 | $ 10,597 | $ 5,930 | $ 52,007 | $ 42,431 | $ (4,174) | ||
Basic weighted-average shares of Class A common stock outstanding (in shares) | 29,874 | ||||||||||||
Diluted weighted-average shares of Class A common stock outstanding (in shares) | 29,923 | ||||||||||||
Earnings per share, basic and diluted (in dollars per shares) | $ 1.21 | ||||||||||||
Reported | |||||||||||||
Basic weighted-average shares of Class A common stock outstanding (in shares) | 27,270 | ||||||||||||
Diluted weighted-average shares of Class A common stock outstanding (in shares) | 27,317 | ||||||||||||
Earnings per share, basic and diluted (in dollars per shares) | $ 1.33 | ||||||||||||
Class A Common Stock | |||||||||||||
Earnings (loss) per share of Class A common stock - basic (in dollars per share) | $ 0.48 | $ 0.36 | $ 0.42 | $ 0.43 | $ 0.47 | $ 0.49 | $ 0.40 | $ 0.24 | $ 1.69 | $ 1.60 | $ (0.34) | ||
Earnings (loss) per share of Class A common stock - diluted (in dollars per share) | $ 0.48 | $ 0.36 | $ 0.42 | $ 0.43 | $ 0.47 | $ 0.49 | $ 0.40 | $ 0.23 | $ 1.69 | $ 1.59 | $ (0.34) | ||
Basic weighted-average shares of Class A common stock outstanding (in shares) | [1] | 30,141,000 | 25,678,000 | 12,117,000 | |||||||||
Diluted weighted-average shares of Class A common stock outstanding (in shares) | [1] | 30,185,000 | 25,829,000 | 12,117,000 | |||||||||
[1] | Represents earnings per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period following the May 17, 2017 Initial Public Offering. |