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Solaris Oilfield Infrastructure Announces Third Quarter 2019 Results

HOUSTON--(BUSINESS WIRE)--

Third Quarter 2019 Highlights

  • Net income of $19.1 million, or $0.36 per diluted Class A share, for the quarter ended September 30, 2019, which includes a $0.01 per diluted Class A share charge related to severance and loss on disposal of assets
  • Adjusted pro forma net income of $17.7 million, or $0.37 per diluted share
  • Adjusted EBITDA of $31.2 million for the quarter ended September 30, 2019
  • Net cash provided by operating activities of $31.1 million for the quarter ended September 30, 2019
  • Positive free cash flow1 of $26.9 million for the quarter ended September 30, 2019
  • Paid a regular quarterly dividend of $0.10 per share on September 26, 2019

Solaris Oilfield Infrastructure, Inc. (SOI) (“Solaris” or the “Company”), a leading independent provider of supply chain management and logistics solutions designed to drive efficiencies and reduce costs for the oil and natural gas industry, today reported financial results for the third quarter 2019.

Third Quarter 2019 Financial Review

Solaris reported net income of $19.1 million, or $0.36 per diluted Class A share, for third quarter 2019, compared to net income of $22.5 million, or $0.42 per diluted Class A share, in second quarter 2019 and net income of $26.4 million, or $0.49 per diluted Class A share, in third quarter 2018. Adjusted pro forma net income for third quarter 2019 was $17.7 million, or $0.37 per fully diluted share, compared to adjusted pro forma net income in second quarter 2019 of $21.2 million, or $0.44 per fully diluted share, and $24.0 million, or $0.51 per fully diluted share in third quarter 2018. A description of adjusted pro forma net income and a reconciliation to net income attributable to Solaris, its most directly comparable generally accepted accounting principles (“GAAP”) measure, and the computation of adjusted pro forma earnings per fully diluted share are provided below.

Adjusted EBITDA for third quarter 2019 was $31.2 million, compared to adjusted EBITDA of $35.2 million in second quarter 2019 and $36.5 million in third quarter 2018. A description of adjusted EBITDA and a reconciliation to net income, its most directly comparable GAAP measure, is provided below.

Revenues were $59.6 million for third quarter 2019, a 7% decrease from second quarter 2019 and a 5% increase compared to third quarter 2018.

Capital Expenditures, Free Cash Flow and Liquidity

The Company invested $4.2 million during third quarter 2019, which included investments in its mobile proppant and chemical management systems.

Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during third quarter 2019 was $26.9 million, which represented the third consecutive quarter of positive free cash flow for the Company. Year-to-date 2019, the Company has generated $55.6 million of free cash flow.

As of September 30, 2019, the Company had approximately $51.7 million of cash on the balance sheet, which reflects over $1.00 per fully diluted share of cash. The Company currently has approximately $101.7 million of liquidity, including available cash and $50.0 million of availability under its undrawn credit facility.

Operational Update and Outlook

During the third quarter 2019, an average of 115 mobile proppant management systems were fully utilized, a 7% decrease from the 123 fully utilized systems averaged in the second quarter of 2019, and a 10% decrease compared to third quarter 2018. The sequential decrease in fully utilized systems during the third quarter of 2019 was due to a decline in active hydraulic fracturing crews as oil and gas operators reduced activity primarily to stay within budgets, as well as in response to lower natural gas prices.

Based on current industry activity levels, the Company believes it has approximately one third of overall U.S. wellsite proppant storage market share, which continues to represent the leading share.

The Company expects to end 2019 with 166 mobile proppant management systems in its rental fleet, unchanged from the third quarter, and will continue to incorporate field learnings into its fleet of 14 mobile chemical management systems. The Company expects capital expenditures for the full year 2019 to be $40.0 million or less, compared to its prior guidance range of $40.0-50.0 million.

“Towards the end of the third quarter, the industry experienced activity softness as operator activity began to reflect completion efficiency gains and commitment to capital discipline,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented. “We expect this discipline to continue in the fourth quarter, which will likely drive another step down in activity for the near term. Meanwhile, we have slowed our capital spending rate, resulting in significant free cash flow generation, which will provide flexbility for us to continue to innovate and collaborate with our customers to drive additional well site efficiencies in the future.”

Quarterly Cash Dividend

On September 9, 2019, the Company announced that its Board of Directors had declared its fourth consecutive quarterly cash dividend of $0.10 per share of Class A common stock, which was paid on September 26, 2019 to holders of record as of September 19, 2019. A distribution of $0.10 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”).

Conference Call

The Company will host a conference call to discuss its third quarter 2019 results on Thursday, October 31, 2019 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). To join the conference call from within the United States, participants may dial (844) 413-3978. To join the conference call from outside of the United States, participants may dial (412) 317-6594. When instructed, please ask the operator to be joined to the Solaris Oilfield Infrastructure, Inc. call. Participants are encouraged to log in to the webcast or dial in to the conference call approximately ten minutes prior to the start time. To listen via live webcast, please visit the Investor Relations section of the Company’s website at http://www.solarisoilfield.com.

An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately seven days. It can be accessed by dialing (877) 344-7529 within the United States or (412) 317-0088 outside of the United States. The conference call replay access code is 10135468. The replay will also be available in the Investor Relations section of the Company’s website shortly after the conclusion of the call and will remain available for approximately seven days.

About Solaris Oilfield Infrastructure, Inc.

Solaris Oilfield Infrastructure, Inc. (SOI) manufactures and rents mobile equipment that drives supply chain and execution efficiencies in the completion of oil and natural gas wells. Solaris’ patented mobile proppant and chemical systems are deployed in many of the most active oil and natural gas basins in the United States, including the Permian Basin, the Eagle Ford Shale, the STACK/SCOOP formation, the Marcellus and Utica Shales, the Haynesville Shale, the Rockies and the Bakken Shale. Additional information is available on the Solaris website, www.solarisoilfield.com.

Website Disclosure

We use our website (www.solarisoilfield.com) as a routine channel of distribution of company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under the Securities and Exchange Commission’s (the “SEC”) Regulation FD. Accordingly, investors should monitor our website in addition to following press releases, SEC filings and public conference calls and webcasts. Additionally, we provide notifications of news or announcements on our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.

None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social media channels is incorporated by reference into, or deemed to be a part of, this Current Report on Form 8-K or will be incorporated by reference into any other report or document we file with the SEC unless we expressly incorporate any such information by reference, and any references to our website are intended to be inactive textual references only.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Examples of forward-looking statements include, but are not limited to, statements we make regarding management changes, the outlook for the operation of our Kingfisher Facility, current and potential future long-term contracts and our future business and financial performance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to the factors discussed or referenced in our filings made from time to time with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

1 Free cash flow is defined as net cash provided by operating activities of $31.1 million less investment in property, plant and equipment of $4.2 million for the quarter ended September 30, 2019

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

June 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2019

 

2018

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System rental

 

$

36,638

 

$

42,031

 

$

39,740

 

$

113,726

 

$

104,563

System services

 

 

18,153

 

 

12,053

 

 

19,031

 

 

48,621

 

 

29,499

Transloading services

 

 

4,417

 

 

2,000

 

 

4,881

 

 

15,131

 

 

3,847

Inventory software services

 

 

396

 

 

602

 

 

449

 

 

1,351

 

 

1,950

Total revenue

 

 

59,604

 

 

56,686

 

 

64,101

 

 

178,829

 

 

139,859

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of system rental (excluding $5,773, $4,133 and $5,481 of depreciation and amortization for the three months ended September 30, 2019 and 2018 and June 30, 2019, respectively, and $16,481 and $10,128 of depreciation and amortization for the nine months ended September 30, 2019 and 2018, respectively, shown separately)

 

 

2,838

 

 

1,949

 

 

2,552

 

 

7,737

 

 

5,050

Cost of system services (excluding $384, $347 and $391 of depreciation and amortization for the three months ended September 30, 2019 and 2018 and June 30, 2019, respectively, and $1,173 and $889 of depreciation and amortization for the nine months ended September 30, 2019 and 2018, respectively, shown separately)

 

 

21,072

 

 

13,906

 

 

21,675

 

 

56,366

 

 

34,691

Cost of transloading services (excluding $411, $529 and $411 of depreciation and amortization for the three months ended September 30, 2019 and 2018 and June 30, 2019, respectively, and $1,231 and $544 of depreciation and amortization for the nine months ended September 30, 2019 and 2018, respectively, shown separately)

 

 

652

 

 

597

 

 

689

 

 

2,051

 

 

1,464

Cost of inventory software services (excluding $193, $193 and $193 of depreciation and amortization for the three months ended September 30, 2019 and 2018 and June 30, 2019, respectively, and $579 and $598 of depreciation and amortization for the nine months ended September 30, 2019 and 2018, respectively, shown separately)

 

 

160

 

 

191

 

 

165

 

 

460

 

 

614

Depreciation and amortization

 

 

6,908

 

 

5,328

 

 

6,622

 

 

19,875

 

 

12,514

Selling, general and administrative (excluding $147, $126 and $146 of depreciation and amortization for the three months ended September 30, 2019 and 2018 and June 30, 2019, respectively, and $411 and $355 of depreciation and amortization for the nine months ended September 30, 2019 and 2018, respectively, shown separately)

 

 

4,933

 

 

3,869

 

 

5,006

 

 

13,967

 

 

12,662

Other operating expenses

 

 

248

 

 

56

 

 

69

 

 

529

 

 

1,752

Total operating cost and expenses

 

 

36,811

 

 

25,896

 

 

36,778

 

 

100,985

 

 

68,747

Operating income

 

 

22,793

 

 

30,790

 

 

27,323

 

 

77,844

 

 

71,112

Interest expense, net

 

 

(8)

 

 

(116)

 

 

(656)

 

 

(775)

 

 

(271)

Total other expense

 

 

(8)

 

 

(116)

 

 

(656)

 

 

(775)

 

 

(271)

Income before income tax expense

 

 

22,785

 

 

30,674

 

 

26,667

 

 

77,069

 

 

70,841

Provision for income taxes

 

 

3,703

 

 

4,237

 

 

4,158

 

 

12,042

 

 

9,541

Net income

 

 

19,082

 

 

26,437

 

 

22,509

 

 

65,027

 

 

61,300

Less: net income related to non-controlling interests

 

 

(7,684)

 

 

(13,418)

 

 

(9,234)

 

 

(28,036)

 

 

(31,754)

Net income attributable to Solaris

 

$

11,398

 

$

13,019

 

$

13,275

 

$

36,991

 

$

29,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock - basic

 

$

0.36

 

$

0.49

 

$

0.42

 

$

1.33

 

$

1.13

Earnings per share of Class A common stock - diluted

 

$

0.36

 

$

0.49

 

$

0.42

 

$

1.33

 

$

1.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of Class A common stock outstanding

 

 

30,951

 

 

26,197

 

 

30,609

 

 

27,270

 

 

25,216

Diluted weighted average shares of Class A common stock outstanding

 

 

30,980

 

 

26,329

 

 

30,644

 

 

27,317

 

 

25,380

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

September 30,

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

51,686

 

$

25,057

Accounts receivable, net

 

 

44,115

 

 

39,746

Prepaid expenses and other current assets

 

 

5,246

 

 

5,492

Inventories

 

 

7,481

 

 

10,470

Total current assets

 

 

108,528

 

 

80,765

Property, plant and equipment, net

 

 

311,253

 

 

296,538

Operating lease right-of-use assets

 

 

8,032

 

 

Goodwill

 

 

17,236

 

 

17,236

Intangible assets, net

 

 

3,956

 

 

4,540

Deferred tax assets

 

 

56,475

 

 

58,074

Other assets

 

 

660

 

 

1,454

Total assets

 

$

506,140

 

$

458,607

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,502

 

$

9,127

Accrued liabilities

 

 

16,834

 

 

12,658

Current portion of deferred revenue

 

 

12,990

 

 

12,990

Current portion of operating lease liabilities

 

 

598

 

 

Current portion of finance lease liabilities

 

 

30

 

 

35

Other current liabilities

 

 

1,115

 

 

515

Total current liabilities

 

 

35,069

 

 

35,325

Senior secured credit facility

 

 

 

 

13,000

Deferred revenue, net of current

 

 

2,960

 

 

12,468

Operating lease liabilities, net of current

 

 

7,961

 

 

Finance lease liabilities, net of current

 

 

137

 

 

154

Payables related to Tax Receivable Agreement

 

 

67,987

 

 

56,149

Other long-term liabilities

 

 

494

 

 

633

Total liabilities

 

 

114,608

 

 

117,729

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.01 par value, 50,000 shares authorized, none issued and outstanding

 

 

 

 

Class A common stock, $0.01 par value, 600,000 shares authorized, 31,179 issued and 31,016 outstanding as of September 30, 2019 and 27,182 issued and 27,091 outstanding as of December 31, 2018

 

 

310

 

 

271

Class B common stock, $0.00 par value, 180,000 shares authorized, 15,940 shares issued and outstanding as of September 30, 2019 and 19,627 issued and outstanding as of December 31, 2018

 

 

 

 

 

Additional paid-in capital

 

 

194,153

 

 

164,086

Retained earnings

 

 

62,517

 

 

35,507

Treasury stock (at cost), 163 shares and 91 shares as of September 30, 2019 and December 31, 2018, respectively

 

 

(2,522)

 

 

(1,414)

Total stockholders' equity attributable to Solaris and members' equity

 

 

254,458

 

 

198,450

Non-controlling interest

 

 

137,074

 

 

142,428

Total stockholders' equity

 

 

391,532

 

 

340,878

Total liabilities and stockholders' equity

 

$

506,140

 

$

458,607

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

For the Nine Months Ended September 30,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

65,027

 

$

61,300

Adjustment to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

19,875

 

 

12,514

Loss on disposal of asset

 

 

181

 

 

222

Stock-based compensation

 

 

3,265

 

 

3,140

Amortization of debt issuance costs

 

 

709

 

 

218

Inventory and other writeoff

 

 

202

 

 

Deferred income tax expense

 

 

11,284

 

 

9,000

Other

 

 

(165)

 

 

651

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(4,369)

 

 

(21,599)

Prepaid expenses and other assets

 

 

2,088

 

 

(3,667)

Inventories

 

 

(2,555)

 

 

(8,575)

Accounts payable

 

 

(3,909)

 

 

441

Accrued liabilities

 

 

6,424

 

 

3,894

Deferred revenue

 

 

(9,508)

 

 

Net cash provided by operating activities

 

 

88,549

 

 

57,539

Cash flows from investing activities:

 

 

 

 

 

 

Investment in property, plant and equipment

 

 

(32,914)

 

 

(125,013)

Proceeds from disposal of assets

 

 

130

 

 

Investment in intangible assets

 

 

 

 

(6)

Cash received from insurance proceeds

 

 

618

 

 

160

Net cash used in investing activities

 

 

(32,166)

 

 

(124,859)

Cash flows from financing activities:

 

 

 

 

 

 

Payments under finance leases

 

 

(26)

 

 

(21)

Payments under insurance premium financing

 

 

(1,443)

 

 

(841)

Proceeds from stock option exercises

 

 

294

 

 

932

Payments related to purchase of treasury stock

 

 

(1,108)

 

 

(1,140)

Repayment of senior secured credit facility

 

 

(13,000)

 

 

8,000

Payments related to debt issuance costs

 

 

(197)

 

 

(1,014)

Distribution and dividend paid to Solaris LLC unitholders and Class A common shareholders

 

 

(14,274)

 

 

Other

 

 

 

 

60

Net cash provided by financing activities

 

 

(29,754)

 

 

5,976

Net increase (decrease) in cash

 

 

26,629

 

 

(61,344)

Cash at beginning of period

 

 

25,057

 

 

63,421

Cash at end of period

 

$

51,686

 

$

2,077

Non-cash activities

 

 

 

 

 

 

Investing:

 

 

 

 

 

 

Capitalized depreciation in property, plant and equipment

 

$

559

 

$

501

Property and equipment additions incurred but not paid at period-end

 

 

235

 

 

6,309

Property, plant and equipment additions transferred from inventory

 

 

5,355

 

 

7,532

Financing:

 

 

 

 

 

 

Insurance premium financing

 

 

1,869

 

 

1,552

Cash paid for (received from):

 

 

 

 

 

 

Interest

 

 

200

 

 

118

Income taxes

 

 

663

 

 

314

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION — ADJUSTED EBITDA

(In thousands)

(Unaudited)

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income, plus (i) depreciation and amortization expense, (ii) interest expense and (iii) income tax expense, including franchise taxes. We define Adjusted EBITDA as EBITDA plus (i) stock-based compensation expense and (ii) certain non-cash items and extraordinary, unusual or non-recurring gains, losses or expenses.

We believe that our presentation of EBITDA and Adjusted EBITDA provides useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for each of the periods indicated.

 

 

Three months ended

 

Nine months ended

 

 

September 30,

 

June 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,082

 

$

26,437

 

$

22,509

 

$

65,027

 

$

61,300

Depreciation and amortization

 

 

6,908

 

 

5,328

 

 

6,622

 

 

19,875

 

 

12,514

Interest expense, net

 

 

8

 

 

116

 

 

656

 

 

775

 

 

271

Income taxes (1)

 

 

3,703

 

 

4,237

 

 

4,158

 

 

12,042

 

 

9,541

EBITDA

 

$

29,701

 

$

36,118

 

$

33,945

 

$

97,719

 

$

83,626

Stock-based compensation expense (2)

 

 

1,225

 

 

338

 

 

1,178

 

 

3,263

 

 

2,200

Loss on disposal of assets

 

 

99

 

 

51

 

 

71

 

 

383

 

 

77

Severance expense

 

 

154

 

 

 

 

 

 

154

 

 

Non-recurring cash bonuses (3)

 

 

 

 

 

 

 

 

 

 

1,679

IPO bonuses (4)

 

 

 

 

 

 

 

 

 

 

896

Adjusted EBITDA

 

$

31,179

 

$

36,507

 

$

35,194

 

$

101,519

 

$

88,478

_________________________

(1)

Federal and state income taxes.

 

 

(2)

Represents stock-based compensation expense related to restricted stock awards.

 

 

(3)

Certain performance-based cash awards paid in connection with the purchase of Railtronix upon the achievement of certain financial milestones.

 

 

(4)

Represents stock-based compensation expense related to restricted stock awards with one-year vesting of $896 in the nine months ended September 30, 2018 that were granted to certain employees and consultants in connection with the IPO.

 

 

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION — ADJUSTED PRO FORMA NET INCOME AND ADJUSTED PRO FORMA EARNINGS PER FULLY DILUTED SHARE

(In thousands)

(Unaudited)

Adjusted pro forma net income represents net income attributable to Solaris assuming the full exchange of all outstanding membership interests in Solaris LLC not held by Solaris Oilfield Infrastructure, Inc. for shares of Class A common stock, adjusted for certain non-recurring items that the Company doesn't believe directly reflect its core operations and may not be indicative of ongoing business operations. Adjusted pro forma earnings per fully diluted share is calculated by dividing adjusted pro forma net income by the weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding Solaris LLC Units, after giving effect to the dilutive effect of outstanding equity-based awards.

When used in conjunction with GAAP financial measures, adjusted pro forma net income and adjusted pro forma earnings per fully diluted share are supplemental measures of operating performance that the Company believes are useful measures to evaluate performance period over period and relative to its competitors. By assuming the full exchange of all outstanding Solaris LLC Units, the Company believes these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in net income attributable to Solaris as a result of increases in its ownership of Solaris LLC, which are unrelated to the Company's operating performance, and excludes items that are non-recurring or may not be indicative of ongoing operating performance.

Adjusted pro forma net income and adjusted pro forma earnings per fully diluted share are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Presentation of adjusted pro forma net income and adjusted pro forma earnings per fully diluted share should not be considered alternatives to net income and earnings per share, as determined under GAAP. While these measures are useful in evaluating the Company's performance, it does not account for the earnings attributable to the non-controlling interest holders and therefore does not provide a complete understanding of the net income attributable to Solaris. Adjusted pro forma net income and adjusted pro forma earnings per fully diluted share should be evaluated in conjunction with GAAP financial results. A reconciliation of adjusted pro forma net income to net income attributable to Solaris, the most directly comparable GAAP measure, and the computation of adjusted pro forma earnings per fully diluted share are set forth below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

September 30,

 

June 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2019

 

2018

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Solaris

 

$

11,398

 

$

13,019

 

$

13,275

 

$

36,991

 

$

29,546

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation of net income attributable to non-controlling interests from the assumed exchange of LLC Interests(1)

 

 

7,684

 

 

13,418

 

 

9,234

 

 

28,036

 

 

31,754

Loss on disposal of assets

 

 

99

 

 

51

 

 

71

 

 

383

 

 

77

Non-recurring write-off of debt issuance costs (2)

 

 

 

 

 

 

528

 

 

528

 

 

Non-recurring cash bonuses (3)

 

 

 

 

 

 

 

 

 

 

1,679

IPO bonuses (4)

 

 

 

 

 

 

 

 

 

 

896

Severance expense

 

 

154

 

 

 

 

 

 

154

 

 

Income tax expense

 

 

(1,631)

 

 

(2,465)

 

 

(1,937)

 

 

(5,718)

 

 

(5,622)

Adjusted pro forma net income

 

$

17,704

 

$

24,023

 

$

21,171

 

$

60,374

 

$

58,330

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding - diluted

 

 

30,980

 

 

26,329

 

 

30,644

 

 

27,317

 

 

25,380

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assumed exchange of Solaris LLC Units for shares of Class A common stock (1)

 

 

16,603

 

 

20,781

 

 

16,936

 

 

20,165

 

 

21,843

Adjusted pro forma fully weighted average shares of Class A common stock outstanding - diluted

 

 

47,583

 

 

47,110

 

 

47,580

 

 

47,482

 

 

47,223

Adjusted pro forma earnings per share - diluted

 

$

0.37

 

$

0.51

 

$

0.44

 

$

1.27

 

$

1.24

(1)

Assumes the exchange of all outstanding Solaris LLC Units for shares of Class A common stock at the beginning of the relevant reporting period, resulting in the elimination of the non-controlling interest and recognition of the net income attributable to non-controlling interests.

 

 

(2)

Write-off of certain unamortized debt issuance costs related to lenders under the 2018 Credit Agreement which are no longer parties to the 2019 Credit Agreement.

 

 

(3)

Certain performance-based cash awards paid in connection with the purchase of Railtronix upon the achievement of certain financial milestones.

 

 

(4)

Represents stock-based compensation expense related to restricted stock awards with one-year vesting of $896 in the nine months ended September 30, 2019 and 2018, respectively, that were granted to certain employees and consultants in connection with the IPO.

 

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