Solaris Oilfield Infrastructure Announces Second Quarter 2020 Results

Second Quarter 2020 Highlights

  • Net loss of $(5.5) million, or $(0.20) per diluted Class A share, for the quarter ended June 30, 2020; Adjusted pro forma net income of $(7.0) million, or $(0.16) per diluted share for the quarter ended June 30, 2020 (see below for a reconciliation of adjusted pro forma net income to net income attributable to Solaris)
  • Adjusted EBITDA of $(0.4) million for the quarter ended June 30, 2020
  • Net cash provided by operating activities of $22.6 million for the quarter ended June 30, 2020
  • Positive free cash flow of $21.8 million for the quarter ended June 30, 2020
  • Paid a regular quarterly dividend of $0.105 per share on June 16, 2020

HOUSTON--()--Solaris Oilfield Infrastructure, Inc. (NYSE: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 second quarter 2020.

Operational Update and Outlook

During the second quarter 2020, an average of 20 mobile proppant management systems were fully utilized, a 76% decrease from the 83 fully utilized systems averaged in the first quarter of 2020. The decrease in fully utilized systems was primarily due to a sharp decline in active hydraulic fracturing crews that began in March and bottomed in May as oil and gas operators reduced budgets and activity in response to lower oil and gas demand and prices. Activity has since increased and the Company expects activity could increase by 35-45% sequentially in the third quarter 2020 as many operators resume a modest level of completions activity.

“I’m pleased that the Solaris team was able to respond quickly to the global pandemic pressures and produce a near breakeven Adjusted EBITDA result at what we believe was the bottom of the cycle while continuing to generate significant free cash flow,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented. “While the pace and the ultimate level of this recovery are still unknown, we are encouraged by the modest return to activity we are seeing from our customers. Our debt free balance sheet, ample cash and liquidity allow us to continue offering our customers the highest level of service quality and vendor dependability while continuing to invest in our business and return cash to shareholders.”

Second Quarter 2020 Financial Review

Solaris reported a net loss of $(5.5) million, or $(0.20) per diluted Class A share, for second quarter 2020, compared to a net loss of ($19.1) million, or $(0.65) per diluted Class A share, in first quarter 2020 and net income of $13.3 million, or $0.42 per diluted Class A share, in second quarter 2019. Adjusted pro forma net income for second quarter 2020 was $(7.0) million, or $(0.16) per fully diluted share, compared to adjusted pro forma net income in first quarter 2020 of $7.7 million, or $0.17 per fully diluted share, and $18.0 million, or $0.38 per fully diluted share in second quarter 2019.

Adjusted EBITDA for second quarter 2020 was $(0.4) million, compared to adjusted EBITDA of $18.0 million in first quarter 2020 and $32.5 million in second quarter 2019.

Revenues were $9.3 million for second quarter 2020, which were down 80% from first quarter 2020 and down 85% compared to second quarter 2019.

Capital Expenditures, Free Cash Flow and Liquidity

Capital expenditures in second quarter 2020 were $0.9 million compared to capital expenditures of $0.7 million during first quarter 2020. The Company expects capital expenditures for full year 2020 to be $5-$10 million.

Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during second quarter 2020 was $21.8 million, which represented the sixth consecutive quarter of positive free cash flow for the Company.

As of June 30, 2020, the Company had approximately $63.6 million of cash on the balance sheet, which reflects approximately $1.40 per fully diluted share of available cash. The Company’s $50.0 million credit facility remains undrawn.

Shareholder Returns

On May 18, 2020, the Company’s Board of Directors declared a cash dividend of $0.105 per share of Class A common stock, which was paid on June 16, 2020 to holders of record as of June 2, 2020. A distribution of $0.105 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”). Since initiating the dividend in December 2018, the Company has paid 7 consecutive quarterly dividends. Cumulatively, the Company has returned approximately $63 million in cash to shareholders through dividends and share repurchases since December of 2018.

Conference Call

The Company will host a conference call to discuss its second quarter 2020 results on Friday, July 31, 2020 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 10146188. 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. (NYSE: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 our business strategy, our industry, our future profitability, the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the volatility in global oil markets and the COVID-19 pandemic, expected capital expenditures and the impact of such expenditures on performance, management changes, 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.

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2020

 

2019

 

2020

 

2020

 

2019

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System rental

 

$

5,463

 

 

$

39,740

 

 

$

26,059

 

 

$

31,522

 

 

$

77,088

 

System services

 

 

3,419

 

 

 

19,031

 

 

 

20,957

 

 

 

24,376

 

 

 

30,468

 

Transloading services

 

 

264

 

 

 

4,881

 

 

 

465

 

 

 

729

 

 

 

10,714

 

Inventory software services

 

 

192

 

 

 

449

 

 

 

349

 

 

 

542

 

 

 

955

 

Total revenue

 

 

9,339

 

 

 

64,101

 

 

 

47,830

 

 

 

57,169

 

 

 

119,225

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of system rental (excluding depreciation and amortization)

 

 

823

 

 

 

2,552

 

 

 

2,013

 

 

 

2,836

 

 

 

4,899

 

Cost of system services (excluding depreciation and amortization)

 

 

6,013

 

 

 

21,675

 

 

 

24,130

 

 

 

30,143

 

 

 

35,294

 

Cost of transloading services (excluding depreciation and amortization)

 

 

202

 

 

 

689

 

 

 

337

 

 

 

540

 

 

 

1,399

 

Cost of inventory software services (excluding depreciation and amortization)

 

 

122

 

 

 

165

 

 

 

145

 

 

 

267

 

 

 

300

 

Depreciation and amortization

 

 

6,671

 

 

 

6,622

 

 

 

7,114

 

 

 

13,785

 

 

 

12,967

 

Selling, general and administrative (excluding depreciation and amortization)

 

 

3,967

 

 

 

5,006

 

 

 

4,406

 

 

 

8,373

 

 

 

9,034

 

Impairment loss

 

 

 

 

 

 

 

 

47,828

 

 

 

47,828

 

 

 

 

Other operating expenses (1)

 

 

2,274

 

 

 

69

 

 

 

1,198

 

 

 

3,472

 

 

 

282

 

Total operating cost and expenses

 

 

20,072

 

 

 

36,778

 

 

 

87,171

 

 

 

107,244

 

 

 

64,175

 

Operating income (loss)

 

 

(10,733

)

 

 

27,323

 

 

 

(39,341

)

 

 

(50,075

)

 

 

55,050

 

Interest income (expense), net

 

 

(35

)

 

 

(656

)

 

 

111

 

 

 

76

 

 

 

(767

)

Total other income (expense)

 

 

(35

)

 

 

(656

)

 

 

111

 

 

 

76

 

 

 

(767

)

Income (loss) before income tax expense

 

 

(10,768

)

 

 

26,667

 

 

 

(39,230

)

 

 

(49,999

)

 

 

54,283

 

Provision (benefit) for income taxes

 

 

(1,272

)

 

 

4,158

 

 

 

(6,078

)

 

 

(7,350

)

 

 

8,339

 

Net income (loss)

 

 

(9,496

)

 

 

22,509

 

 

 

(33,152

)

 

 

(42,649

)

 

 

45,944

 

Less: net (income) loss related to non-controlling interests

 

 

3,956

 

 

 

(9,234

)

 

 

14,071

 

 

 

18,026

 

 

 

(20,352

)

Net income (loss) attributable to Solaris

 

$

(5,540

)

 

$

13,275

 

 

$

(19,081

)

 

$

(24,623

)

 

$

25,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock - basic

 

$

(0.20

)

 

$

0.42

 

 

$

(0.65

)

 

$

(0.85

)

 

$

0.85

 

Earnings per share of Class A common stock - diluted

 

$

(0.20

)

 

$

0.42

 

 

$

(0.65

)

 

$

(0.85

)

 

$

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of Class A common stock outstanding

 

 

28,638

 

 

 

30,609

 

 

 

29,312

 

 

 

28,975

 

 

 

29,326

 

Diluted weighted average shares of Class A common stock outstanding

 

 

28,638

 

 

 

30,644

 

 

 

29,312

 

 

 

28,975

 

 

 

29,387

 

1)

Other operating expenses are primarily related to credit losses, loss on sale of assets and costs associated with workforce reductions.

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2020

 

2019

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

63,632

 

$

66,882

 

Accounts receivable, net of allowances for credit losses of $1,076 and $339 as of June 30, 2020 and December 31, 2019, respectively

 

 

11,160

 

 

38,554

 

Prepaid expenses and other current assets

 

 

4,809

 

 

5,002

 

Inventories

 

 

1,016

 

 

7,144

 

Total current assets

 

 

80,617

 

 

117,582

 

Property, plant and equipment, net

 

 

255,539

 

 

306,583

 

Non-current inventories

 

 

3,555

 

 

 

Operating lease right-of-use assets

 

 

4,738

 

 

7,871

 

Goodwill

 

 

13,004

 

 

17,236

 

Intangible assets, net

 

 

3,372

 

 

3,761

 

Deferred tax assets

 

 

58,478

 

 

51,414

 

Other assets

 

 

545

 

 

625

 

Total assets

 

$

419,848

 

$

505,072

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,998

 

$

3,824

 

Accrued liabilities

 

 

6,333

 

 

14,447

 

Current portion of payables related to Tax Receivable Agreement

 

 

 

 

1,416

 

Current portion of operating lease liabilities

 

 

579

 

 

596

 

Current portion of finance lease liabilities

 

 

30

 

 

30

 

Other current liabilities

 

 

75

 

 

74

 

Total current liabilities

 

 

11,015

 

 

20,387

 

Operating lease liabilities, net of current

 

 

7,499

 

 

7,855

 

Finance lease liabilities, net of current

 

 

115

 

 

130

 

Payables related to Tax Receivable Agreement

 

 

68,132

 

 

66,582

 

Other long-term liabilities

 

 

607

 

 

460

 

Total liabilities

 

 

87,368

 

 

95,414

 

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, 28,673 shares issued and outstanding as of June 30, 2020 and 30,928 shares issued and 30,765 shares outstanding as of December 31, 2019

 

 

287

 

 

308

 

Class B common stock, $0.00 par value, 180,000 shares authorized, 15,839 shares issued and outstanding as of June 30, 2020 and 180,000 shares authorized, 15,939 issued and outstanding as of December 31, 2019

 

 

 

 

 

Additional paid-in capital

 

 

178,511

 

 

191,843

 

Retained earnings

 

 

31,516

 

 

74,222

 

Treasury stock (at cost), 0 shares and 163 shares as of June 30, 2020 and December 31, 2019, respectively

 

 

 

 

(2,526

)

Total stockholders' equity attributable to Solaris and members' equity

 

 

210,314

 

 

263,847

 

Non-controlling interest

 

 

122,166

 

 

145,811

 

Total stockholders' equity

 

 

332,480

 

 

409,658

 

Total liabilities and stockholders' equity

 

$

419,848

 

$

505,072

 

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Three Months
Ended

 

 

6/30/20

 

6/30/19

 

6/30/20

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(42,649

)

 

$

45,944

 

 

$

(9,496

)

Adjustment to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,785

 

 

 

12,967

 

 

 

6,671

 

Loss on disposal of asset

 

 

1,402

 

 

 

284

 

 

 

1,345

 

Allowance for credit losses

 

 

1,633

 

 

 

 

 

 

740

 

Stock-based compensation

 

 

2,656

 

 

 

2,040

 

 

 

1,327

 

Amortization of debt issuance costs

 

 

88

 

 

 

665

 

 

 

44

 

Deferred income tax expense

 

 

(7,369

)

 

 

7,880

 

 

 

(1,594

)

Impairment loss

 

 

47,828

 

 

 

 

 

 

 

Other

 

 

(145

)

 

 

(169

)

 

 

(168

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

25,760

 

 

 

(4,597

)

 

 

36,001

 

Prepaid expenses and other assets

 

 

(217

)

 

 

1,990

 

 

 

(760

)

Inventories

 

 

(533

)

 

 

(3,296

)

 

 

354

 

Accounts payable

 

 

147

 

 

 

(4,661

)

 

 

(3,037

)

Accrued liabilities

 

 

(8,063

)

 

 

4,696

 

 

 

(8,808

)

Deferred revenue

 

 

 

 

 

(6,304

)

 

 

 

Net cash provided by operating activities

 

 

34,323

 

 

 

57,439

 

 

 

22,619

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Investment in property, plant and equipment

 

 

(1,558

)

 

 

(28,717

)

 

 

(859

)

Cash received from insurance proceeds

 

 

713

 

 

 

38

 

 

 

687

 

Net cash used in investing activities

 

 

(845

)

 

 

(28,679

)

 

 

(172

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Share repurchases

 

 

(26,717

)

 

 

 

 

 

6

 

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

 

 

(9,507

)

 

 

(9,515

)

 

 

(4,752

)

Payments under finance leases

 

 

(18

)

 

 

(18

)

 

 

(9

)

Payments under insurance premium financing

 

 

 

 

 

(932

)

 

 

 

Proceeds from stock option exercises

 

 

64

 

 

 

294

 

 

 

9

 

Payments for shares withheld for taxes from RSU vesting and cancelled

 

 

(96

)

 

 

 

 

 

(96

)

Payments related to purchase of treasury stock

 

 

(454

)

 

 

(730

)

 

 

 

Payments related to debt issuance costs

 

 

 

 

 

(197

)

 

 

 

Repayment of senior secured credit facility

 

 

 

 

 

(13,000

)

 

 

 

Net cash used in financing activities

 

 

(36,728

)

 

 

(24,098

)

 

 

(4,842

)

Net decrease in cash and cash equivalents

 

 

(3,250

)

 

 

4,662

 

 

 

17,605

 

Cash and cash equivalents at beginning of period

 

 

66,882

 

 

 

25,057

 

 

 

46,027

 

Cash and cash equivalents at end of period

 

$

63,632

 

 

$

29,719

 

 

$

63,632

 

Non-cash activities

 

 

 

 

 

 

 

 

 

Investing:

 

 

 

 

 

 

 

 

 

Capitalized depreciation in property, plant and equipment

 

$

316

 

 

$

372

 

 

$

155

 

Capitalized stock based compensation

 

 

135

 

 

 

96

 

 

 

65

 

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

 

 

6

 

 

 

829

 

 

 

(159

)

Property, plant and equipment additions transferred from inventory

 

 

356

 

 

 

4,939

 

 

 

127

 

Financing:

 

 

 

 

 

 

 

 

 

Insurance premium financing

 

 

 

 

 

1,812

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

 

Interest

 

 

66

 

 

 

183

 

 

 

33

 

Income taxes

 

 

813

 

 

 

663

 

 

 

813

 

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

 

Six months ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2020

 

2019

 

2020

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(9,496

)

 

$

22,509

 

 

$

(33,152

)

 

$

(42,649

)

 

$

45,944

 

Depreciation and amortization

 

 

6,671

 

 

 

6,622

 

 

 

7,114

 

 

 

13,785

 

 

 

12,967

 

Interest (income) expense, net

 

 

35

 

 

 

656

 

 

 

(111

)

 

 

(76

)

 

 

767

 

Income taxes (1)

 

 

(1,272

)

 

 

4,158

 

 

 

(6,078

)

 

 

(7,350

)

 

 

8,339

 

EBITDA

 

$

(4,062

)

 

$

33,945

 

 

$

(32,227

)

 

$

(36,290

)

 

$

68,017

 

Stock-based compensation expense (2)

 

 

1,326

 

 

 

1,178

 

 

 

1,329

 

 

 

2,656

 

 

 

2,040

 

Loss on disposal of assets

 

 

1,345

 

 

 

71

 

 

 

68

 

 

 

1,413

 

 

 

284

 

Credit losses

 

 

740

 

 

 

 

 

 

711

 

 

 

1,451

 

 

 

 

Impairment loss

 

 

 

 

 

 

 

 

47,828

 

 

 

47,828

 

 

 

 

Severance expense and other

 

 

211

 

 

 

 

 

 

331

 

 

 

542

 

 

 

 

Write-off of debt issuance costs (3)

 

 

 

 

 

528

 

 

 

 

 

 

 

 

 

528

 

Transload contract termination (4)

 

 

 

 

 

(3,169

)

 

 

 

 

 

 

 

 

(6,303

)

Adjusted EBITDA

 

$

(440

)

 

$

32,553

 

 

$

18,040

 

 

$

17,600

 

 

$

64,566

 


1)

Federal and state income taxes.

 

2)

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

 

3)

Write-off of certain unamortized debt issuance costs when the Amended and Restated Credit Agreement, dated as of January 19, 2018, was replaced in its entirety by the Agreement 2019 Credit Agreement.

 

4)

Deferred revenue related to full termination of a sand storage and transloading agreement; no deferred revenue balance remained as of December 31, 2019.

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

 

Six months ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2020

 

2019

 

2020

 

2020

 

2019

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Solaris

 

$

(5,540

)

 

$

13,275

 

 

$

(19,081

)

 

$

(24,623

)

 

$

25,592

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(3,956

)

 

 

9,234

 

 

 

(14,071

)

 

 

(18,026

)

 

 

20,352

 

Transload contract termination (2)

 

 

 

 

 

(3,169

)

 

 

 

 

 

 

 

 

(6,303

)

Loss on disposal of assets

 

 

1,345

 

 

 

71

 

 

 

68

 

 

 

1,413

 

 

 

284

 

Credit losses

 

 

740

 

 

 

 

 

 

711

 

 

 

1,451

 

 

 

 

Impairment loss

 

 

 

 

 

 

 

 

47,828

 

 

 

47,828

 

 

 

 

Severance expense and other

 

 

211

 

 

 

 

 

 

331

 

 

 

542

 

 

 

 

write-off of debt issuance costs (3)

 

 

 

 

 

528

 

 

 

 

 

 

 

 

 

528

 

Income tax (benefit) expense (4)

 

 

182

 

 

 

(1,937

)

 

 

(8,101

)

 

 

(7,920

)

 

 

(3,973

)

Adjusted pro forma net income (loss) (4)

 

$

(7,018

)

 

$

18,002

 

 

$

7,685

 

 

$

666

 

 

$

36,480

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding - diluted

 

 

28,638

 

 

 

30,644

 

 

 

29,312

 

 

 

28,975

 

 

 

29,387

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

16,616

 

 

 

16,936

 

 

 

16,614

 

 

 

16,615

 

 

 

18,044

 

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

 

 

45,254

 

 

 

47,580

 

 

 

45,926

 

 

 

45,590

 

 

 

47,431

 

Adjusted pro forma earnings per share - diluted (4)

 

$

(0.16

)

 

$

0.38

 

 

$

0.17

 

 

$

0.01

 

 

$

0.77

 

(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)

Deferred revenue related to full termination of a sand storage and transloading agreement; no deferred revenue balance remained as of December 31, 2019.

 

(3)

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

 

(4)

The Company revised Credit losses, Income tax (benefit) expense, Adjusted pro forma net income and Adjusted pro forma earnings per share for the quarter ended March 31, 2020 to $0.7 million, $(8.1) million, $7.7 million and $0.17 from the previously published $0.0 million, $0.3 million, $14.8 million and $0.32, respectively, following the correction of an inadvertent omission of credit losses and error to reflect the tax impact related to Impairment loss.

 

Contacts

Yvonne Fletcher
Senior Vice President, Finance and Investor Relations
(281) 501-3070
IR@solarisoilfield.com

Release Summary

SOI reports second quarter 2020 net loss of $(0.20) per diluted Class A share and $(0.16) per diluted share on an adjusted pro forma basis.

Contacts

Yvonne Fletcher
Senior Vice President, Finance and Investor Relations
(281) 501-3070
IR@solarisoilfield.com