Solaris Oilfield Infrastructure Announces Fourth Quarter 2021 Results

Fourth Quarter 2021 Highlights

  • Net income of $1.1 million, or $0.01 per diluted Class A share, for the quarter ended December 31, 2021; Adjusted pro forma net income of $1.0 million, or $0.02 per diluted share for the quarter ended December 31, 2021
  • Adjusted EBITDA of $9.8 million for the quarter ended December 31, 2021
  • Paid a regular quarterly dividend of $0.105 per share on December 17, 2021

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 fourth quarter and full year 2021.

Operational Update and Outlook

During the fourth quarter of 2021, an average of 63 mobile proppant management systems were fully utilized, which was up 7% from average third quarter 2021 levels. Deployed proppant system count during the fourth quarter was 98. For full year 2021, an average of 57 mobile proppant management systems were fully utilized, representing a 27% increase from 45 fully utilized systems averaged in 2020.

“2021 was an exciting year for Solaris. We redeployed systems to meet growing demand and also introduced our new AutoBlend™ integrated e-blender and top fill equipment technologies,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented. “Our fourth quarter results demonstrate the early success we are seeing as we begin commercializing these innovative offerings. Given these results, we are even more excited about the prospects for 2022 as we continue to invest in and benefit from new technology, while continuing to pay our dividend and maintain our strong balance sheet.”

Fourth Quarter 2021 Financial Review

Solaris reported net income of $1.1 million, or $0.01 per diluted Class A share, for fourth quarter 2021, compared to third quarter 2021 net income of $1.4 million, or $0.03 per diluted Class A share. Adjusted pro forma net income for fourth quarter 2021 was $1.0 million, or $0.02 per fully diluted share, compared to third quarter 2021 adjusted pro forma net loss of $0.6 million, or $(0.01) per fully diluted share. 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.

Revenues were $46.0 million for fourth quarter 2021, which were down 6% from third quarter 2021, driven by a decrease in last mile trucking logistics activity and modestly offset by the increase in systems deployed.

Adjusted EBITDA for fourth quarter 2021 was $9.8 million, which was up 27% from third quarter 2021. The increase in Adjusted EBITDA was driven by an increase in the number of fully utilized systems, mix improvement and contribution from new technologies. A description of Adjusted EBITDA and a reconciliation to net income, its most directly comparable GAAP measure, is provided below.

Full Year 2021 Financial Review

Solaris reported net loss of $1.3 million, or $(0.04) per diluted Class A share, for full year 2021, compared to full year 2020 net loss of $51.1 million, or $(1.03) per diluted Class A share. Adjusted pro forma net loss for full year 2021 was $2.6 million, or $(0.06) per fully diluted share, compared to full year 2020 adjusted pro forma net loss of $6.6 million, or $(0.15) per fully diluted share.

Revenues were $159.2 million for full year 2021, which were up 55% from full year 2020, primarily driven by an increase in both systems deployed and last mile logistics activity.

Adjusted EBITDA for full year 2021 was $30.1 million, which was up 18% from full year 2020.

Capital Expenditures, Free Cash Flow and Liquidity

Capital expenditures in the fourth quarter 2021 were $5.9 million and for full year 2021 were $19.6 million. The Company expects maintenance capital expenditures for full year 2022 to be approximately $10 million, approximately flat with 2021 and has committed to growth capital expenditures between $20 million and $30 million for the first half of 2022. Growth capital expenditures will include investments in additional AutoBlend™ and top fill units.

Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during fourth quarter 2021 was $(1.2) million and for full year 2021 was $(3.2) million. Distributable cash flow (defined as Adjusted EBITDA less maintenance capital expenditures) was approximately $20 million for full year 2021 and covered full year dividend distributions of approximately $19 million.

The Company expects to complete an amendment to its revolving credit facility to extend the term through 2025. The total capacity of the credit facility will remain unchanged at $50 million, with a $25 million uncommitted accordion option to increase the loan availability to $75 million. No significant changes are expected to be made to the financial covenants governing the Company’s borrowing capabilities.

As of December 31, 2021, the Company had approximately $36.5 million of cash on the balance sheet. The Company’s credit facility remains undrawn, and total liquidity, including availability under the credit facility, was $86.5 million as of the end of the fourth quarter 2021.

Shareholder Returns

On November 18, 2021, the Company’s Board of Directors declared a cash dividend of $0.105 per share of Class A common stock, which was paid on December 17, 2021 to holders of record as of December 7, 2021. 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 13 consecutive quarterly dividends. Cumulatively, the Company has returned approximately $92 million in cash to shareholders through dividends and share repurchases since December 2018.

Conference Call

The Company will host a conference call to discuss its fourth quarter and full year 2021 results on Tuesday, February 22, 2022 at 8:00 a.m. Central Time (9:00 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 8943512. 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) provides mobile equipment that drives supply chain and execution efficiencies in the completion of oil and natural gas wells. Solaris’ patented equipment and systems are deployed in many of the most active oil and natural gas basins in the United States. Additional information is available on our 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 U.S. 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, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to, 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

 

Year Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2021

 

2020

 

2021

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

45,964

 

 

 

25,276

 

 

 

49,377

 

 

 

159,189

 

 

 

102,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (excluding depreciation and amortization)

 

 

32,658

 

 

 

17,330

 

 

 

38,460

 

 

 

115,459

 

 

 

65,764

 

Depreciation and amortization

 

 

6,923

 

 

 

6,643

 

 

 

6,842

 

 

 

27,210

 

 

 

27,021

 

Selling, general and administrative

 

 

4,934

 

 

 

4,269

 

 

 

4,760

 

 

 

19,264

 

 

 

16,481

 

Impairment loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,828

 

Other operating (income) expenses (1)

 

 

(280

)

 

 

453

 

 

 

(2,690

)

 

 

(2,357

)

 

 

5,782

 

Total operating costs and expenses

 

 

44,235

 

 

 

28,695

 

 

 

47,372

 

 

 

159,576

 

 

 

162,876

 

Operating income (loss)

 

 

1,729

 

 

 

(3,419

)

 

 

2,005

 

 

 

(387

)

 

 

(59,900

)

Interest expense, net

 

 

(77

)

 

 

(198

)

 

 

(66

)

 

 

(247

)

 

 

(162

)

Total other expense

 

 

(77

)

 

 

(198

)

 

 

(66

)

 

 

(247

)

 

 

(162

)

Income (loss) before income tax expense

 

 

1,652

 

 

 

(3,617

)

 

 

1,939

 

 

 

(634

)

 

 

(60,062

)

Provision (benefit) for income taxes

 

 

549

 

 

 

(776

)

 

 

507

 

 

 

626

 

 

 

(8,969

)

Net income (loss)

 

 

1,103

 

 

 

(2,841

)

 

 

1,432

 

 

 

(1,260

)

 

 

(51,093

)

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

 

 

(465

)

 

 

1,405

 

 

 

(558

)

 

 

392

 

 

 

21,752

 

Net income (loss) attributable to Solaris

 

$

638

 

 

$

(1,436

)

 

$

874

 

 

$

(868

)

 

$

(29,341

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock - basic

 

$

0.01

 

 

$

(0.06

)

 

$

0.03

 

 

$

(0.04

)

 

$

(1.03

)

Earnings per share of Class A common stock - diluted

 

$

0.01

 

 

$

(0.06

)

 

$

0.03

 

 

$

(0.04

)

 

$

(1.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of Class A common stock outstanding

 

 

31,129

 

 

 

28,944

 

 

 

31,058

 

 

 

30,786

 

 

 

28,915

 

Diluted weighted average shares of Class A common stock outstanding

 

 

31,129

 

 

 

28,944

 

 

 

31,058

 

 

 

30,786

 

 

 

28,915

 

1)

Other operating (income) expenses are primarily related to a gain from employee retention credits, offset by 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)

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2021

 

2020

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,497

 

$

60,366

Accounts receivable, net of allowances for credit losses of $746 and $1,099, respectively

 

 

33,120

 

 

18,243

Prepaid expenses and other current assets

 

 

9,797

 

 

2,169

Inventories

 

 

1,654

 

 

954

Total current assets

 

 

81,068

 

 

81,732

Property, plant and equipment, net

 

 

240,091

 

 

245,884

Non-current inventories

 

 

2,676

 

 

3,318

Operating lease right-of-use assets

 

 

4,182

 

 

4,708

Goodwill

 

 

13,004

 

 

13,004

Intangible assets, net

 

 

2,203

 

 

2,982

Deferred tax assets

 

 

62,942

 

 

59,805

Other assets

 

 

57

 

 

463

Total assets

 

$

406,223

 

$

411,896

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

9,927

 

$

6,863

Accrued liabilities

 

 

16,918

 

 

11,986

Current portion of payables related to Tax Receivable Agreement

 

 

1,210

 

 

606

Current portion of lease liabilities

 

 

717

 

 

647

Current portion of finance lease liabilities

 

 

31

 

 

30

Other current liabilities

 

 

496

 

 

75

Total current liabilities

 

 

29,299

 

 

20,207

Lease liabilities, net of current

 

 

6,702

 

 

7,419

Finance lease liabilities, net of current

 

 

70

 

 

100

Payables related to Tax Receivable Agreement

 

 

71,892

 

 

68,097

Other long-term liabilities

 

 

384

 

 

594

Total liabilities

 

 

108,347

 

 

96,417

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, 31,146 shares issued and outstanding as of December 31, 2021 and 28,943 shares issued and outstanding as of December 31, 2020

 

 

312

 

 

290

Class B common stock, $0.00 par value, 180,000 shares authorized, 13,770 shares issued and outstanding as of December 30, 2021 and 15,685 issued and outstanding as of December 31, 2020

 

 

 

 

Additional paid-in capital

 

 

196,912

 

 

180,415

Retained earnings

 

 

5,925

 

 

20,549

Total stockholders' equity attributable to Solaris and members' equity

 

 

203,149

 

 

201,254

Non-controlling interest

 

 

94,727

 

 

114,225

Total stockholders' equity

 

 

297,876

 

 

315,479

Total liabilities and stockholders' equity

 

$

406,223

 

$

411,896

 

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

December 30,

 

Three Months

Ended

December 31,

 

Three

Months

Ended

September 30,

 

 

2021

 

2020

 

2021

 

2021

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(1,260

)

 

$

(51,093

)

 

$

1,103

 

 

$

1,432

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

27,210

 

 

 

27,021

 

 

 

6,922

 

 

 

6,843

 

Impairment loss

 

 

 

 

 

47,828

 

 

 

 

 

 

 

Loss on disposal of asset

 

 

125

 

 

 

1,428

 

 

 

12

 

 

 

(4

)

Stock-based compensation

 

 

5,210

 

 

 

4,735

 

 

 

1,303

 

 

 

1,355

 

Amortization of debt issuance costs

 

 

176

 

 

 

176

 

 

 

44

 

 

 

44

 

Allowance for credit losses

 

 

365

 

 

 

2,910

 

 

 

(265

)

 

 

31

 

Deferred income tax expense

 

 

132

 

 

 

(9,153

)

 

 

405

 

 

 

334

 

Other

 

 

(150

)

 

 

(193

)

 

 

3

 

 

 

(8

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(15,242

)

 

 

17,400

 

 

 

4,605

 

 

 

(6,150

)

Prepaid expenses and other assets

 

 

(6,726

)

 

 

2,423

 

 

 

(3,460

)

 

 

(2,524

)

Inventories

 

 

(978

)

 

 

(235

)

 

 

(264

)

 

 

371

 

Accounts payable

 

 

2,959

 

 

 

3,051

 

 

 

(4,117

)

 

 

(164

)

Accrued liabilities

 

 

4,652

 

 

 

(2,445

)

 

 

(1,515

)

 

 

6,096

 

Net cash provided by operating activities

 

 

16,473

 

 

 

43,853

 

 

 

4,776

 

 

 

7,656

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Investment in property, plant and equipment

 

 

(19,638

)

 

 

(4,661

)

 

 

(5,936

)

 

 

(5,985

)

Proceeds from disposal of assets

 

 

80

 

 

 

786

 

 

 

38

 

 

 

2

 

Cash received from insurance proceeds

 

 

34

 

 

 

100

 

 

 

(1

)

 

 

29

 

Net cash used in investing activities

 

 

(19,524

)

 

 

(3,775

)

 

 

(5,899

)

 

 

(5,954

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(19,205

)

 

 

(19,026

)

 

 

(4,805

)

 

 

(4,806

)

Share repurchases

 

 

 

 

 

(26,717

)

 

 

 

 

 

 

Payments under finance leases

 

 

(30

)

 

 

(35

)

 

 

(7

)

 

 

(11

)

Payments under insurance premium financing

 

 

(657

)

 

 

 

 

 

(247

)

 

 

(246

)

Proceeds from stock option exercises

 

 

13

 

 

 

64

 

 

 

1

 

 

 

 

Payments for shares withheld for taxes from RSU vesting and cancelled

 

 

(786

)

 

 

(276

)

 

 

 

 

 

(84

)

Payments related to purchase of treasury stock

 

 

 

 

 

(454

)

 

 

 

 

 

 

Distribution to Solaris LLC unitholders for income tax withholding

 

 

(153

)

 

 

(150

)

 

 

(153

)

 

 

 

Net cash used in financing activities

 

 

(20,818

)

 

 

(46,594

)

 

 

(5,211

)

 

 

(5,147

)

Net decrease in cash and cash equivalents

 

 

(23,869

)

 

 

(6,516

)

 

 

(6,334

)

 

 

(3,445

)

Cash and cash equivalents at beginning of period

 

 

60,366

 

 

 

66,882

 

 

 

42,831

 

 

 

46,276

 

Cash and cash equivalents at end of period

 

$

36,497

 

 

$

60,366

 

 

$

36,497

 

 

$

42,831

 

Non-cash activities

 

 

 

 

 

 

 

 

 

 

 

 

Operating:

 

 

 

 

 

 

 

 

 

 

 

 

Employee retention credit

 

$

1,900

 

 

$

 

 

$

 

 

$

1,900

 

Investing:

 

 

 

 

 

 

 

 

 

 

 

 

Capitalized depreciation in property, plant and equipment

 

 

3,129

 

 

 

613

 

 

 

869

 

 

 

1,971

 

Capitalized stock based compensation

 

 

299

 

 

 

255

 

 

 

71

 

 

 

77

 

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

 

 

206

 

 

 

172

 

 

 

206

 

 

 

323

 

Property, plant and equipment additions transferred from inventory

 

 

920

 

 

 

358

 

 

 

(38

)

 

 

30

 

Financing:

 

 

 

 

 

 

 

 

 

 

 

 

Insurance premium financing

 

 

246

 

 

 

 

 

 

246

 

 

 

410

 

Cash paid for:

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

132

 

 

 

282

 

 

 

33

 

 

 

33

 

Income taxes

 

 

325

 

 

 

796

 

 

 

 

 

 

 

SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES

RECONCILIATION AND CALCULATION OF NON-GAAP FINANCIAL AND OPERATIONAL MEASURES

(In thousands)

(Unaudited)

EBITDA AND ADJUSTED EBITDA

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

 

Year ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2021

 

2020

 

2021

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,103

 

 

$

(2,841

)

 

$

1,432

 

 

$

(1,260

)

 

$

(51,093

)

Depreciation and amortization

 

 

6,923

 

 

 

6,643

 

 

 

6,842

 

 

 

27,210

 

 

 

27,021

 

Interest expense, net

 

 

77

 

 

 

198

 

 

 

66

 

 

 

247

 

 

 

162

 

Income taxes (1)

 

 

549

 

 

 

(776

)

 

 

507

 

 

 

626

 

 

 

(8,969

)

 

EBITDA

 

$

8,652

 

 

$

3,224

 

 

$

8,847

 

 

$

26,823

 

 

$

(32,879

)

Stock-based compensation expense (2)

 

 

1,303

 

 

 

1,003

 

 

 

1,355

 

 

 

5,210

 

 

 

4,735

 

Employee retention credit (3)

 

 

35

 

 

 

 

 

 

(2,992

)

 

 

(2,957

)

 

 

 

Loss on disposal of assets

 

 

12

 

 

 

(23

)

 

 

(4

)

 

 

125

 

 

 

1,428

 

Impairment loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,828

 

Severance expense

 

 

 

 

 

5

 

 

 

41

 

 

 

41

 

 

 

547

 

Credit losses

 

 

(264

)

 

 

30

 

 

 

30

 

 

 

365

 

 

 

2,728

 

Other write-offs (4)

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

601

 

Transaction costs (5)

 

 

49

 

 

 

603

 

 

 

385

 

 

 

459

 

 

 

603

 

Adjusted EBITDA

 

$

9,787

 

 

$

4,854

 

 

$

7,662

 

 

$

30,066

 

 

$

25,591

 

 

1)

Federal and state income taxes.

2)

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

3)

Employee retention credit as part of Consolidated Appropriations Act of 2021, net of administrative fees.

4)

Write-off of certain prepaid and cancelled purchase orders.

5)

Costs related to the evaluation of potential acquisitions.

ADJUSTED PRO FORMA NET INCOME AND ADJUSTED PRO FORMA EARNINGS PER FULLY DILUTED SHARE

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 units of Solaris LLC (“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

 

Year ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2021

 

2020

 

2021

 

2021

 

2020

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Solaris

 

$

638

 

 

$

(1,436

)

 

$

874

 

 

$

(868

)

 

$

(29,341

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

465

 

 

 

(1,405

)

 

 

558

 

 

 

(392

)

 

 

(21,752

)

Employee retention credit (2)

 

 

35

 

 

 

 

 

 

(2,992

)

 

 

(2,957

)

 

 

 

Loss on disposal of assets

 

 

12

 

 

 

(23

)

 

 

(4

)

 

 

125

 

 

 

1,428

 

Credit losses

 

 

(264

)

 

 

30

 

 

 

30

 

 

 

365

 

 

 

2,728

 

Impairment loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,828

 

Severance expense

 

 

 

 

 

5

 

 

 

41

 

 

 

41

 

 

 

547

 

Other write-offs (3)

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

601

 

Transaction costs (4)

 

 

49

 

 

 

603

 

 

 

385

 

 

 

459

 

 

 

603

 

Incremental income tax benefit (expense)

 

 

102

 

 

 

(136

)

 

 

515

 

 

 

672

 

 

 

(9,281

)

Adjusted pro forma net income (loss)

 

$

1,037

 

 

$

(2,350

)

 

$

(593

)

 

$

(2,555

)

 

$

(6,639

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

31,129

 

 

 

28,944

 

 

 

31,058

 

 

 

30,786

 

 

 

28,915

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

13,785

 

 

 

15,683

 

 

 

13,819

 

 

 

14,034

 

 

 

15,842

 

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

 

 

44,914

 

 

 

44,627

 

 

 

44,877

 

 

 

44,820

 

 

 

44,757

 

Adjusted pro forma earnings per share - diluted

 

$

0.02

 

 

$

(0.05

)

 

$

(0.01

)

 

$

(0.06

)

 

$

(0.15

)

(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)

Employee retention credit as part of Consolidated Appropriations Act of 2021, net of administrative fees.

(3)

Write-off of certain prepaid and cancelled purchase orders.

(4)

Costs related to the evaluation of potential acquisitions.

 

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