Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2022 | Apr. 26, 2022 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-38090 | |
Entity Registrant Name | SOLARIS OILFIELD INFRASTRUCTURE, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 81-5223109 | |
Entity Address, Address Line One | 9811 Katy Freeway, Suite 700 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77024 | |
City Area Code | 281 | |
Local Phone Number | 501-3070 | |
Title of 12(b) Security | Class A Common Stock | |
Trading Symbol | SOI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Central Index Key | 0001697500 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Class A Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 32,807,053 | |
Class B Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 13,757,438 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 25,128 | $ 36,497 |
Accounts receivable, net of allowances for credit losses of $746 and $746, respectively | 45,657 | 33,120 |
Prepaid expenses and other current assets | 8,080 | 9,797 |
Inventories | 2,136 | 1,654 |
Total current assets | 81,001 | 81,068 |
Property, plant and equipment, net | 247,622 | 240,091 |
Non-current inventories | 2,769 | 2,676 |
Operating lease right-of-use assets | 4,046 | 4,182 |
Goodwill | 13,004 | 13,004 |
Intangible assets, net | 2,008 | 2,203 |
Deferred tax assets, net | 62,099 | 62,942 |
Other assets | 352 | 57 |
Total assets | 412,901 | 406,223 |
Current liabilities: | ||
Accounts payable | 17,240 | 9,927 |
Accrued liabilities | 14,508 | 16,918 |
Current portion of payables related to Tax Receivable Agreement | 1,210 | 1,210 |
Current portion of operating lease liabilities | 729 | 717 |
Current portion of finance lease liabilities | 31 | 31 |
Other current liabilities | 250 | 496 |
Total current liabilities | 33,968 | 29,299 |
Operating lease liabilities, net of current | 6,559 | 6,702 |
Finance lease liabilities, net of current | 62 | 70 |
Payables related to Tax Receivable Agreement | 71,892 | 71,892 |
Other long-term liabilities | 381 | 384 |
Total liabilities | 112,862 | 108,347 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 50,000 shares authorized, none issued and outstanding | ||
Additional paid-in capital | 198,982 | 196,912 |
Retained earnings | 5,598 | 5,925 |
Total stockholders' equity attributable to Solaris | 204,894 | 203,149 |
Non-controlling interest | 95,145 | 94,727 |
Total stockholders' equity | 300,039 | 297,876 |
Total liabilities and stockholders' equity | 412,901 | 406,223 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common Stock | 314 | 312 |
Class B Common Stock | ||
Stockholders' equity: | ||
Common Stock |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Allowance for credit losses | $ 746 | $ 746 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000 | 50,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 600,000 | 600,000 |
Common stock, shares issued | 31,416 | 31,146 |
Common stock, shares outstanding | 31,416 | 31,146 |
Class B Common Stock | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 180,000 | 180,000 |
Common stock, shares issued | 13,770 | 13,770 |
Common stock, shares outstanding | 13,770 | 13,770 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Revenue: | ||
Revenue | $ 56,915 | $ 28,669 |
Operating costs and expenses: | ||
Cost of services (exclusive of depreciation) | 37,671 | 19,206 |
Depreciation and amortization | 6,929 | 6,693 |
Selling, general and administrative | 5,211 | 4,606 |
Other operating (income) expense | (309) | 253 |
Total operating costs and expenses | 49,502 | 30,758 |
Operating income (loss) | 7,413 | (2,089) |
Interest expense, net | (79) | (49) |
Total other expense (income) | (79) | (49) |
Income (loss) before income tax expense | 7,334 | (2,138) |
Income tax (expense) benefit | (1,612) | 213 |
Net income (loss) | 5,722 | (1,925) |
Less: net (income) loss related to non-controlling interests | (2,220) | 756 |
Net income (loss) attributable to Solaris | $ 3,502 | $ (1,169) |
Class A Common Stock | ||
Operating costs and expenses: | ||
Income (loss) per share of Class A common stock - basic (in dollars per share) | $ 0.11 | $ (0.04) |
Income (loss) per share of Class A common stock - diluted (in dollars per share) | $ 0.11 | $ (0.04) |
Basic weighted-average shares of Class A common stock outstanding (in shares) | 31,239 | 29,957 |
Diluted weighted-average shares of Class A common stock outstanding (in shares) | 31,239 | 29,957 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common StockClass A Common Stock | Common StockClass B Common Stock | Additional Paid-in Capital | Retained Earnings | Non-controlling Interest | Total |
Balance at beginning of period at Dec. 31, 2020 | $ 290 | $ 180,415 | $ 20,549 | $ 114,225 | $ 315,479 | |
Balance at beginning of period (in shares) at Dec. 31, 2020 | 28,943 | 15,685 | ||||
Changes in Stockholders' Equity | ||||||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock | $ 19 | 13,526 | (13,545) | |||
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock (in shares) | 1,865 | (1,865) | ||||
Net effect of deferred tax asset and payables related to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock and the vesting of restricted stock | (1,184) | (1,184) | ||||
Stock option exercises | 18 | (6) | 12 | |||
Stock option exercises (in shares) | 4 | |||||
Stock-based compensation | 854 | 418 | 1,272 | |||
Vesting of restricted stock | $ 2 | 407 | (409) | |||
Vesting of restricted stock (in shares) | 223 | |||||
Cancelled shares withheld for taxes from RSU vesting | $ (1) | (146) | (319) | (207) | (673) | |
Cancelled shares withheld for taxes from RSU vesting (in shares) | (57) | |||||
Solaris LLC distribution paid to Solaris LLC unitholders for income tax withholding | (1,451) | (1,451) | ||||
Dividends paid (Class A common stock) | (3,346) | (3,346) | ||||
Net income (loss) | (1,169) | (756) | (1,925) | |||
Balance at end of period at Mar. 31, 2021 | $ 310 | 193,890 | 15,715 | 98,269 | 308,184 | |
Balance at end of period (in shares) at Mar. 31, 2021 | 30,978 | 13,820 | ||||
Balance at beginning of period at Dec. 31, 2021 | $ 312 | $ 13,770 | 196,912 | 5,925 | 94,727 | 297,876 |
Balance at beginning of period (in shares) at Dec. 31, 2021 | 31,146 | |||||
Changes in Stockholders' Equity | ||||||
Net effect of deferred tax asset and payables related to the vesting of restricted stock | 610 | 610 | ||||
Stock-based compensation | 1,188 | 520 | 1,708 | |||
Vesting of restricted stock | $ 3 | 574 | (577) | |||
Vesting of restricted stock (in shares) | 366 | |||||
Cancelled shares withheld for taxes from RSU vesting | $ (1) | (302) | (388) | (299) | (990) | |
Cancelled shares withheld for taxes from RSU vesting (in shares) | (96) | |||||
Solaris LLC distribution paid to Solaris LLC unitholders | (1,446) | (1,446) | ||||
Dividends paid (Class A common stock) | (3,441) | (3,441) | ||||
Net income (loss) | 3,502 | 2,220 | 5,722 | |||
Balance at end of period at Mar. 31, 2022 | $ 314 | $ 13,770 | $ 198,982 | $ 5,598 | $ 95,145 | $ 300,039 |
Balance at end of period (in shares) at Mar. 31, 2022 | 31,416 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||
Distributions paid to unit holders (in dollars per unit) | $ 0.105 | $ 0.105 |
Cash dividends paid (in dollars per share) | $ 0.105 | $ 0.105 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 5,722 | $ (1,925) |
Adjustment to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 6,929 | 6,693 |
Loss on disposal of assets | 107 | 18 |
Allowance for credit losses | 283 | |
Stock-based compensation | 1,593 | 1,199 |
Amortization of debt issuance costs | 40 | 48 |
Deferred income tax benefit | 1,455 | (302) |
Other | (1) | 5 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (12,537) | (3,460) |
Prepaid expenses and other assets | 1,717 | 235 |
Inventories | (1,152) | (622) |
Accounts payable | 5,040 | 5,055 |
Accrued liabilities | (2,644) | (4,461) |
Net cash provided by operating activities | 6,269 | 2,766 |
Cash flows from investing activities: | ||
Investment in property, plant and equipment | (11,776) | (2,647) |
Cash received from insurance proceeds | 231 | |
Proceeds from disposal of assets | 38 | 40 |
Net cash used in investing activities | (11,507) | (2,607) |
Cash flows from financing activities: | ||
Distribution and dividend paid to Solaris LLC unitholders (other than Solaris Inc.) and Class A common shareholders | (4,887) | (4,797) |
Payments under finance leases | (8) | (7) |
Payments under insurance premium financing | (246) | |
Proceeds from stock option exercises | 12 | |
Payments for shares withheld for taxes from RSU vesting and cancelled | (990) | (673) |
Net cash used in financing activities | (6,131) | (5,465) |
Net decrease in cash | (11,369) | (5,306) |
Cash at beginning of period | 36,497 | 60,366 |
Cash at end of period | 25,128 | 55,060 |
Non-cash activities | ||
Capitalized depreciation in property, plant and equipment | 146 | 143 |
Capitalized stock based compensation | 115 | 73 |
Accrued capital expenditures | 2,827 | 604 |
Property, plant and equipment additions transferred from inventory | 575 | 392 |
Cash paid for: | ||
Interest | 37 | $ 33 |
Income Taxes | $ 22 |
Organization and Background of
Organization and Background of Business | 3 Months Ended |
Mar. 31, 2022 | |
Organization and Background of Business | |
Organization and Background of Business | 1. Organization and Background of Business Description of Business We design and manufacture specialized equipment, which combined with field technician support, logistics services and our software solutions, enables us to provide a service offering that helps oil and natural gas operators and their suppliers drive efficiencies that reduce operational footprint and costs during the completion phase of well development. Our equipment and services are deployed in most of the active oil and natural gas basins in the United States. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2022 | |
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. The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These financial statements reflect all normal recurring adjustments that are necessary for fair presentation. Operating results for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results that may be expected for the full year or for any interim period. The unaudited interim condensed consolidated financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with Solaris Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021 and notes thereto. All material intercompany transactions and balances have been eliminated upon consolidation. Global Economic, Geopolitical and Market Conditions The recent invasion of Ukraine by Russia has the potential to disrupt the supply and demand for oil and natural gas across the globe. The degree to which these and other events outside of our control adversely impacts our results will depend on future developments, which are highly uncertain, cannot be predicted and are outside of our control. The timing, extent, trajectory and duration of their impacts upon our business and the industry in which we, our customers and vendors operate could impact any subsequent recovery of normal economic and operating conditions. 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. Actual results could differ from those estimates. The most significant estimates relate to stock-based compensation, useful lives and salvage values of long-lived assets, future cash flows associated with goodwill and long-lived asset impairment, net realizable value of inventory, income taxes, Tax Receivable Agreement liability, collectability of accounts receivable and estimates of allowance for credit losses and determination of the present value of lease payments and right-of-use assets. Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenues from Contracts with Customers (“ASC Topic 606”). Under ASC Topic 606, revenue recognition is based on the transfer of control, or the customer’s The majority of our contracts contain multiple performance obligations, such as work orders containing a combination of equipment, transportation, and labor services. We allocate the transaction price to each performance obligation identified in the contract based on relative stand-alone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations. 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 assess our customers’ ability and intention to pay, which is based on a variety of factors including historical payment experience and financial condition and we typically charge our customers on a weekly or monthly basis. Contracts with customers are typically on thirty- to sixty-day payment terms. Disaggregation of Revenue The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the quarters ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 Wellsite services $ 56.6 $ 28.4 Transloading and Other 0.3 0.3 Total revenue $ 56.9 $ 28.7 Recently Issued Accounting Standards In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements and any agreements utilizing LIBOR, including the Tax Receivable Agreement, but does not currently expect to have a material impact on our financial statements. |
Property, Plant and Equipment
Property, Plant and Equipment | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | 3. Property, Plant and Equipment Property, plant and equipment are stated at cost. We manufacture or construct most of our systems. During the manufacturing of these assets, they are reflected as systems in process until complete. Modifications to existing systems, including the expenditures for upgrades and enhancements that result in additional functionality, increased efficiency, or the extension of the estimated useful life, are capitalized. Property, plant and equipment consists of the following: March 31, December 31, 2022 2021 Systems and related equipment $ 309.3 $ 306.6 Systems in process 31.1 19.9 Computer hardware and software 1.3 1.2 Machinery and equipment 5.4 5.4 Vehicles 5.7 5.6 Buildings 4.4 4.4 Land 0.6 0.6 Furniture and fixtures 0.4 0.4 Property, plant and equipment, gross $ 358.2 $ 344.1 Less: accumulated depreciation (110.6) (104.0) Property, plant and equipment, net $ 247.6 $ 240.1 |
Debt
Debt | 3 Months Ended |
Mar. 31, 2022 | |
Senior Secured Credit Facility | |
Debt | 4. Debt On February 24, 2022, Solaris LLC executed the first amendment (the “2022 Amendment”) to the Amended and Restated Credit Agreement (the “Credit Agreement”), which was originally entered into on April 26, 2019, by and among Solaris LLC, as borrower, each of the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent. The 2022 Amendment extended the term of the Credit Agreement to expire on April 26, 2025 and modified applicable interest rates and repayment requirements. The Credit Agreement consists of an initial $50.0 revolving loan commitment (the “Loan”) with a $25.0 uncommitted accordion option to increase the Loan availability to $75.0. As of March 31, 2022, we had no borrowings under the Credit Agreement outstanding and ability to draw $50.0. 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 Credit Agreement). We have the option to prepay the loans at any time without penalty. Borrowings under the Credit Agreement, following the 2022 Amendment, bear interest at either Term Secured Overnight Financing Rate (“SOFR”) or an alternate base rate plus an applicable margin, and interest is payable quarterly for alternate base rate loans or the last business day of the interest period applicable to SOFR loans. The applicable margin ranges from 2.75% to 3.50% for SOFR loans and 1.75% to 2.50% for alternate base rate loans, in each case depending on our total leverage ratio. The Credit Agreement requires that we pay a quarterly commitment fee on undrawn amounts of the Loan, ranging from 0.375% to 0.5% depending upon the total leverage ratio. The Credit Agreement requires that we maintain ratios of (i) consolidated EBITDA to interest expense of not less than 2.75 to 1.00, (ii) senior indebtedness to consolidated EBITDA of not more than 2.50 to 1.00 and (iii) 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 $3.0. For the purpose of these tests, certain items are subtracted from indebtedness and senior indebtedness. EBITDA, as defined in the Credit Agreement, excludes certain noncash items and any extraordinary, unusual or nonrecurring gains, losses or expenses. Following the 2022 Amendment, the Credit Agreement also requires that we prepay any outstanding borrowings in the event our total consolidated cash balance exceeds $20.0 on the last business day of every other calendar week, taking into account certain adjustments. Capital expenditures are not restricted unless borrowings under the Loan exceed $5.0 for any 180 consecutive day period, in which case capital expenditures will be permitted up to $100.0 plus any unused availability for capital expenditures from the immediately preceding fiscal year. As of March 31, 2022, we were in compliance with all covenants in accordance with the Credit Agreement. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2022 | |
Equity | |
Equity | 5. Equity Dividends Solaris LLC paid distributions totaling $4.9 and $4.8 to all Solaris LLC unitholders in the three months ended March 31, 2022 and 2021, respectively, of which $3.4 and $3.3 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. Stock-based compensation The Company’s long-term incentive plan for employees, directors and consultants (the “LTIP”) provides for the grant of all or any of the following types of equity-based awards: (i) incentive stock options qualified as such under United States federal income tax laws; (ii) stock options that do not qualify as incentive stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) dividend equivalents; (ix) other stock-based awards; (x) cash awards; and (xi) substitute awards. Subject to adjustment in accordance with the terms of the LTIP, 5,118,080 shares of Solaris Inc.’s Class A common stock have been reserved for issuance pursuant to awards under the LTIP. As of March 31, 2022, 1,678,322 stock awards were available for grant. The following table summarizes activity related to restricted stock for the three months ended March 31, 2022 and 2021: Restricted Stock Awards 2022 2021 Unvested at January 1, 847,315 703,115 Awarded 884,983 414,185 Vested (366,250) (223,275) Forfeited (804) (5,388) Unvested at March 31, 1,365,244 888,637 Of the unvested 1,365,244 shares of restricted stock, it is expected that 73,658 shares, 552,060 shares, 453,149 shares and 286,377 shares will vest in 2022, 2023, 2024 and 2025, respectively, in each case, subject to the applicable vesting terms governing such shares of restricted stock. There was approximately $12.6 of unrecognized compensation expense related to unvested restricted stock as of March 31, 2022. The unrecognized compensation expense will be recognized over the weighted average remaining vesting period of 1.6 years. Income (Loss) Per Share Basic income (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Solaris Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted income (loss) per share is computed giving effect to all potentially dilutive shares. The following table sets forth the calculation of income (loss) per share for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, Basic net income (loss) per share: 2022 2021 Numerator Net income (loss) attributable to Solaris $ 3.5 $ (1.2) Income (loss) attributable to participating securities (1) (0.1) (0.1) Net income (loss) attributable to common stockholders $ 3.4 $ (1.3) Denominator Weighted average number of unrestricted outstanding common shares used to calculate basic net income (loss) per share 31,239 29,957 Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income (loss) per share 31,239 29,957 Income (loss) per share of Class A common stock - basic $ 0.11 $ (0.04) Income (loss) per share of Class A common stock - diluted $ 0.11 $ (0.04) (1) The Company’s restricted shares of common stock are participating securities. The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion: Three Months Ended March 31, 2022 2021 Class B common stock 13,769 14,729 Restricted stock awards 44 113 Stock Options 7 10 Total 13,820 14,852 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2022 | |
Income Taxes | |
Income Taxes | 6. Income Taxes Income Taxes 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 equity offerings of Class A common stock, 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 issuances of Class A common stock, and corresponding Solaris LLC Units, in connection with stock-based compensation. Based on our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize our deferred tax assets in the future. As the Company reassesses this position in the future, changes in cumulative earnings history, excluding non-recurring charges, or changes to forecasted taxable income may alter this expectation and may result in an increase in the valuation allowance and an increase in the effective tax rate. Section 382 of the Internal Revenue Code of 1986, contains rules that limit the ability of a company that undergoes an “ownership change” to utilize its net operating loss and tax credit carryovers and certain built-in losses recognized in years after the “ownership change.” An “ownership change” is generally defined as any change in ownership of more than 50% of a corporation’s stock over a rolling three-year period by stockholders that own (directly or indirectly) 5% or more of the stock of a corporation, or arising from a new issuance of stock by a corporation. If an ownership change occurs, Section 382 generally imposes an annual limitation on the use of pre-ownership change net operating loss carryovers to offset taxable income earned after the ownership change. We do not believe the Section 382 annual limitation related to historical ownership changes impacts our ability to utilize our net operating losses; however, if we were to experience a future ownership change our ability to use net operating losses may be impacted. Payables Related to the Tax Receivable Agreement |
Concentrations
Concentrations | 3 Months Ended |
Mar. 31, 2022 | |
Concentrations | |
Concentrations | 7. Concentrations For the three months ended March 31, 2022, one customer accounted for 29% of the Company’s revenues. For the three months ended March 31, 2021, two customers accounted for 26% of the Company’s revenues. As of March 31, 2022, two customers accounted for 44% of the Company’s accounts receivable. As of December 31, 2021, two customers accounted for 29% and 13% of the Company’s accounts receivable, respectively. For the three months ended March 31, 2022, one supplier accounted for 11% of the Company’s total purchases. For the three months ended March 31, 2021, one supplier accounted for 12% of the Company’s total purchases. As of March 31, 2022, one supplier accounted for 11% of the Company’s accounts payable. As of December 31, 2021, no supplier accounted for 10% of the Company’s accounts payable. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies | |
Commitments and Contingencies | 8. Commitments and Contingencies In the normal course of business, the Company is subjected to various claims, legal actions, contract negotiations and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In management’s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying condensed consolidated financial statements. See Note 9 “Related Party Transactions” for contingent payments related to contracts with customers. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2022 | |
Related Party Transactions | |
Related Party Transactions | 9. Related Party Transactions The Company recognizes certain costs incurred in relation to transactions incurred in connection with the amended and restated administrative services agreement, dated May 17, 2017, between Solaris LLC and Solaris Energy Management, LLC, a company owned by William A. Zartler, the Chief Executive Officer and Chairman of the Board. These services include rent paid for office space, travel services, personnel, consulting and administrative costs. For the three months ended March 31, 2022 and 2021, Solaris LLC paid $0.2 and $0.2, respectively, for these services. As of March 31, 2022, and December 31, 2021, the Company included $0.1 and $0.1, respectively, in prepaid expenses and other current assets on the condensed consolidated balance sheets. Additionally, as of March 31, 2022 and December 31, 2021, the Company included $0.1 and $0.1, respectively, of accruals to related parties in accrued liabilities on the consolidated balance sheet The Company has executed a guarantee of lease agreement with Solaris Energy Management, LLC, a related party of the Company, related to the rental of office space for the Company’s corporate headquarters. The total future guaranty under the guarantee of lease agreement with Solaris Energy Management, LLC is $4.3 as of March 31, 2022. On March 26, 2021, THRC Holdings, LP (“THRC”), purchased shares representing an 8.5% ownership of the Company’s Class A common stock and 5.9% total shares outstanding as of December 31, 2021. On February 10, 2022, THRC purchased additional shares representing a total ownership of 10.3% of the Company’s Class A common stock and 7.2% total shares outstanding as of December 31, 2021. THRC is affiliated with certain of the Company’s customers, including ProFrac Services, LLC (“ProFrac”) and certain of the Company’s suppliers including Automatize Logistics, LLC, IOT-EQ, LLC and Cisco Logistics, LLC (“Cisco”) (together the “THRC Affiliates”). For the three months ended March 31, 2022, the Company recognized revenues related to our service offering provided to the THRC Affiliates of $5.1. Accounts receivable related to THRC Affiliates as of March 31, 2022, were $4.8. For the three months ended March 31, 2022, the Company recognized cost of services provided by THRC Affiliates of $0.8. There was $0.1 accounts payable related to THRC Affiliates as of March 31, 2022. Solaris is a dedicated wellsite sand storage provider (“Services”) to certain THRC Affiliates. Solaris provides volume-based pricing for the Services and may be required to pay up to $4.0 in payments throughout a term ending in 2024, contingent upon the ability of these affiliates to meet minimum Services revenue thresholds. During the first quarter of 2022, Solaris paid $0.5 related to these Services, which was recognized in revenues. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
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. The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These financial statements reflect all normal recurring adjustments that are necessary for fair presentation. Operating results for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results that may be expected for the full year or for any interim period. The unaudited interim condensed consolidated financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with Solaris Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021 and notes thereto. 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. Actual results could differ from those estimates. The most significant estimates relate to stock-based compensation, useful lives and salvage values of long-lived assets, future cash flows associated with goodwill and long-lived asset impairment, net realizable value of inventory, income taxes, Tax Receivable Agreement liability, collectability of accounts receivable and estimates of allowance for credit losses and determination of the present value of lease payments and right-of-use assets. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenues from Contracts with Customers (“ASC Topic 606”). Under ASC Topic 606, revenue recognition is based on the transfer of control, or the customer’s The majority of our contracts contain multiple performance obligations, such as work orders containing a combination of equipment, transportation, and labor services. We allocate the transaction price to each performance obligation identified in the contract based on relative stand-alone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations. 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 assess our customers’ ability and intention to pay, which is based on a variety of factors including historical payment experience and financial condition and we typically charge our customers on a weekly or monthly basis. Contracts with customers are typically on thirty- to sixty-day payment terms. Disaggregation of Revenue The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the quarters ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 Wellsite services $ 56.6 $ 28.4 Transloading and Other 0.3 0.3 Total revenue $ 56.9 $ 28.7 |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements and any agreements utilizing LIBOR, including the Tax Receivable Agreement, but does not currently expect to have a material impact on our financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Summary of Significant Accounting Policies | |
Schedule of disaggregated revenues from contracts | Three Months Ended March 31, 2022 2021 Wellsite services $ 56.6 $ 28.4 Transloading and Other 0.3 0.3 Total revenue $ 56.9 $ 28.7 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment | |
Schedule of property plant and equipment | March 31, December 31, 2022 2021 Systems and related equipment $ 309.3 $ 306.6 Systems in process 31.1 19.9 Computer hardware and software 1.3 1.2 Machinery and equipment 5.4 5.4 Vehicles 5.7 5.6 Buildings 4.4 4.4 Land 0.6 0.6 Furniture and fixtures 0.4 0.4 Property, plant and equipment, gross $ 358.2 $ 344.1 Less: accumulated depreciation (110.6) (104.0) Property, plant and equipment, net $ 247.6 $ 240.1 |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Equity | |
Summary of activity related to restricted stock | Restricted Stock Awards 2022 2021 Unvested at January 1, 847,315 703,115 Awarded 884,983 414,185 Vested (366,250) (223,275) Forfeited (804) (5,388) Unvested at March 31, 1,365,244 888,637 |
Schedule of earnings per share calculation | Three Months Ended March 31, Basic net income (loss) per share: 2022 2021 Numerator Net income (loss) attributable to Solaris $ 3.5 $ (1.2) Income (loss) attributable to participating securities (1) (0.1) (0.1) Net income (loss) attributable to common stockholders $ 3.4 $ (1.3) Denominator Weighted average number of unrestricted outstanding common shares used to calculate basic net income (loss) per share 31,239 29,957 Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income (loss) per share 31,239 29,957 Income (loss) per share of Class A common stock - basic $ 0.11 $ (0.04) Income (loss) per share of Class A common stock - diluted $ 0.11 $ (0.04) (1) The Company’s restricted shares of common stock are participating securities. |
Schedule of antidilutive shares | Three Months Ended March 31, 2022 2021 Class B common stock 13,769 14,729 Restricted stock awards 44 113 Stock Options 7 10 Total 13,820 14,852 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Revenues Disaggregated (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 56,915 | $ 28,669 |
Wellsite services | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 56,600 | 28,400 |
Transloading and Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 300 | $ 300 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 358,200 | $ 344,100 |
Less: accumulated depreciation | (110,600) | (104,000) |
Property, plant and equipment, net | 247,622 | 240,091 |
Systems and related equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 309,300 | 306,600 |
Systems in process | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 31,100 | 19,900 |
Computer hardware and software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 1,300 | 1,200 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 5,400 | 5,400 |
Vehicles | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 5,700 | 5,600 |
Buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 4,400 | 4,400 |
Land | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 600 | 600 |
Furniture and fixtures | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 400 | $ 400 |
Debt (Details)
Debt (Details) - 2019 Credit Agreement - USD ($) $ in Millions | Feb. 24, 2022 | Apr. 26, 2019 | Mar. 31, 2022 |
Debt | |||
Maximum borrowing | $ 50 | ||
Potential additional borrowing available | 25 | ||
Maximum borrowing capacity with accordion option | 75 | ||
Cash adjustment to net indebtedness | $ 3 | ||
Cash threshold triggering repayment | $ 20 | ||
Outstanding credit facility | $ 0 | ||
Remaining borrowing capacity | $ 50 | ||
Senior indebtedness to consolidated EBITDA | 2.50 | ||
Eligible accounts (as a percent) | 100.00% | ||
Eligible accounts to revolving exposure ratio | 1 | ||
Leverage ratio for debt repayment | 2 | ||
Cash threshold over a period of time triggering repayment | $ 5 | ||
Period for cash threshold repayment trigger | 180 days | ||
Maximum capital expenditures allowed | $ 100 | ||
Ratio of consolidated EBITDA to fixed charges | 2.75% | ||
Minimum | |||
Debt | |||
Commitment fee (as a percent) | 0.375% | ||
Maximum | |||
Debt | |||
Commitment fee (as a percent) | 0.50% | ||
SOFR | Minimum | |||
Debt | |||
Applicable margin rate | 2.75% | ||
SOFR | Maximum | |||
Debt | |||
Applicable margin rate | 3.50% | ||
Alternate base rate | Minimum | |||
Debt | |||
Applicable margin rate | 1.75% | ||
Alternate base rate | Maximum | |||
Debt | |||
Applicable margin rate | 2.50% |
Equity - Dividends (Details)
Equity - Dividends (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Equity | ||
Distributions paid to unit holders | $ 4,887 | $ 4,797 |
Distribution received | 3,400 | 3,300 |
Solaris LLC | ||
Equity | ||
Distributions paid to unit holders | $ 4,900 | $ 4,800 |
Equity - SBC (Details)
Equity - SBC (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2022 | |
Stock-based compensation | ||
Proceeds from stock option exercises | $ 12 | |
Available for grant (in shares) | 1,678,322 | |
Class A Common Stock | ||
Stock-based compensation | ||
Reserved for issuance (in shares) | 5,118,080 |
Equity - Restricted stock (Deta
Equity - Restricted stock (Details) - Restricted stock awards - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Number of Shares | ||
Unvested, beginning (in shares) | 847,315 | 703,115 |
Awarded (in shares) | 884,983 | 414,185 |
Vested (in shares) | (366,250) | (223,275) |
Forfeited (in shares) | (804) | (5,388) |
Unvested, end (in shares) | 1,365,244 | 888,637 |
Other non-option information | ||
Unrecognized compensation costs | $ 12.6 | |
Expected period for recognizing compensation expense | 1 year 7 months 6 days | |
First vesting period | ||
Number of Shares | ||
Unvested, end (in shares) | 73,658 | |
Second vesting period | ||
Number of Shares | ||
Unvested, end (in shares) | 552,060 | |
Third vesting period | ||
Number of Shares | ||
Unvested, end (in shares) | 453,149 | |
Fourth vesting period | ||
Number of Shares | ||
Unvested, end (in shares) | 286,377 |
Equity - EPS (Details)
Equity - EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Numerator | ||
Net income (loss) attributable to Solaris | $ 3,502 | $ (1,169) |
Income (loss) attributable to participating securities | (100) | (100) |
Net income (loss) attributable to common stockholders | $ 3,400 | $ (1,300) |
Class A Common Stock | ||
Denominator | ||
Weighted average number of unrestricted outstanding common shares used to calculate basic net income (loss) per share | 31,239 | 29,957 |
Diluted weighted-average shares of Class A common stock outstanding (in shares) | 31,239 | 29,957 |
Income (loss) per share of Class A common stock - basic (in dollars per share) | $ 0.11 | $ (0.04) |
Income (loss) per share of Class A common stock - diluted (in dollars per share) | $ 0.11 | $ (0.04) |
Equity - Antidilutive (Details)
Equity - Antidilutive (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 13,820 | 14,852 |
Class B Common Stock | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 13,769 | 14,729 |
Restricted stock awards | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 44 | 113 |
Stock options | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 7 | 10 |
Income Taxes - Quarter (Details
Income Taxes - Quarter (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income tax (expense) benefit | $ (1,612) | $ 213 |
Effective tax rate | 22.30% | 10.00% |
Tax Receivable Agreement | ||
Benefit of remaining cash savings (as a percent) | 85.00% | |
Payables related to Tax Receivable Agreement | $ 73,102 |
Concentrations (Details)
Concentrations (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Revenue | Customer | One Customer | |||
Concentrations | |||
Concentration risk (as a percent) | 29.00% | ||
Revenue | Customer | Two Customers | |||
Concentrations | |||
Concentration risk (as a percent) | 26.00% | ||
Accounts receivable | Customer | One Customer | |||
Concentrations | |||
Concentration risk (as a percent) | 29.00% | ||
Accounts receivable | Customer | Two Customers | |||
Concentrations | |||
Concentration risk (as a percent) | 44.00% | 13.00% | |
Purchases | Supplier | One Supplier | |||
Concentrations | |||
Concentration risk (as a percent) | 12.00% | ||
Purchases | Supplier | One Customer | |||
Concentrations | |||
Concentration risk (as a percent) | 11.00% | ||
Accounts payables | Supplier | One Supplier | |||
Concentrations | |||
Concentration risk (as a percent) | 11.00% |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | ||||
Mar. 31, 2022 | Mar. 31, 2021 | Feb. 10, 2022 | Dec. 31, 2021 | Mar. 26, 2021 | |
William A. Zartler | |||||
Related Party Transactions | |||||
Payment made to related party | $ 0.2 | $ 0.2 | |||
Due from related party | 0.1 | $ 0.1 | |||
Due to related party | 0.1 | $ 0.1 | |||
Solaris Energy Management, LLC | |||||
Related Party Transactions | |||||
Other commitments | 4.3 | ||||
THRC Affiliates | |||||
Related Party Transactions | |||||
Due from related party | 4.8 | ||||
Due to related party | 0.1 | ||||
Revenue from related party | 5.1 | ||||
Related party costs | 0.8 | ||||
THRC Affiliates - Services | |||||
Related Party Transactions | |||||
Other commitments | 4 | ||||
Revenue from related party | $ 0.5 | ||||
THRC | |||||
Related Party Transactions | |||||
Voting power (as a percent) | 7.20% | 5.90% | |||
THRC | Solaris Oilfield Infrastructure | |||||
Related Party Transactions | |||||
Noncontrolling interest (as a percent) | 10.30% | 8.50% |