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AESI

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41828

 

Atlas Energy Solutions Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

93-2154509

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

5918 W. Courtyard Drive, Suite 500

Austin, Texas

78730

(Address of principal executive offices)

(Zip Code)

(512) 220-1200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A common stock, par value $0.01 per share

 

AESI

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 30, 2023, the registrant had 100,025,584 shares of common stock, $0.01 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholders' and Members' Equity and Redeemable Noncontrolling Interest

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

43

 

 

 

PART II.

OTHER INFORMATION

44

 

 

 

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

44

Item 6.

Exhibits

44

SIGNATURES

46

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Atlas Energy Solutions Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

 

 

September 30,

 

 

December 31,

 

 

2023

 

 

2022

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

264,538

 

 

$

82,010

 

Accounts receivable

 

 

102,234

 

 

 

73,341

 

Accounts receivable - related parties

 

 

 

 

 

1,051

 

Inventories

 

 

3,961

 

 

 

5,614

 

Spare part inventories

 

 

14,911

 

 

 

10,797

 

Prepaid expenses and other current assets

 

 

15,880

 

 

 

5,918

 

Total current assets

 

 

401,524

 

 

 

178,731

 

Property, plant and equipment, net

 

 

828,997

 

 

 

541,524

 

Finance lease right-of-use assets

 

 

496

 

 

 

19,173

 

Operating lease right-of-use assets

 

 

3,960

 

 

 

4,049

 

Other long-term assets

 

 

4,294

 

 

 

7,522

 

Total assets

 

$

1,239,271

 

 

$

750,999

 

Liabilities, redeemable noncontrolling interest, and stockholders' and members' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

57,520

 

 

$

31,645

 

Accounts payable - related parties

 

 

247

 

 

 

154

 

Accrued liabilities

 

 

38,836

 

 

 

30,630

 

Current portion of long-term debt

 

 

 

 

 

20,586

 

Other current liabilities

 

 

3,956

 

 

 

5,659

 

Total current liabilities

 

 

100,559

 

 

 

88,674

 

Long-term debt, net of discount and deferred financing costs

 

 

172,511

 

 

 

126,588

 

Deferred tax liabilities

 

 

48,679

 

 

 

1,906

 

Other long-term liabilities

 

 

6,363

 

 

 

22,474

 

Total liabilities

 

 

328,112

 

 

 

239,642

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

987,151

 

 

 

 

Stockholders’ / members’ equity:

 

 

 

 

 

 

Members' equity

 

 

 

 

 

511,357

 

Preferred stock, $0.01 par value; 500,000,000 authorized; no shares issued and outstanding as of September 30, 2023

 

 

 

 

 

 

Class A common stock, $0.01 par value, 1,000,000,000 shares authorized, 57,767,399 shares issued and outstanding as of September 30, 2023

 

 

577

 

 

 

 

Class B common stock, $0.01 par value, 500,000,000 shares authorized, 42,258,185 shares issued and outstanding as of September 30, 2023

 

 

423

 

 

 

 

Additional paid-in-capital

 

 

 

 

 

 

Accumulated deficit

 

 

(76,992

)

 

 

 

Total stockholders' and members' equity

 

 

(75,992

)

 

 

511,357

 

Total liabilities, redeemable noncontrolling interest and stockholders’ and members’ equity

 

$

1,239,271

 

 

$

750,999

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Product sales

 

$

114,773

 

 

$

119,222

 

 

$

368,131

 

 

$

286,565

 

Service sales

 

 

42,843

 

 

 

22,460

 

 

 

104,691

 

 

 

46,294

 

Total sales

 

 

157,616

 

 

 

141,682

 

 

 

472,822

 

 

 

332,859

 

Cost of sales (excluding depreciation, depletion and accretion expense)

 

 

67,770

 

 

 

60,138

 

 

 

193,829

 

 

 

131,633

 

Depreciation, depletion and accretion expense

 

 

10,221

 

 

 

7,136

 

 

 

28,173

 

 

 

19,707

 

Gross profit

 

 

79,625

 

 

 

74,408

 

 

 

250,820

 

 

 

181,519

 

Selling, general and administrative expense (including stock and unit-based compensation expense of $1,414, $160, $3,660, and $543, respectively.)

 

 

14,301

 

 

 

5,774

 

 

 

34,988

 

 

 

16,414

 

Operating income

 

 

65,324

 

 

 

68,634

 

 

 

215,832

 

 

 

165,105

 

Interest expense, net

 

 

(1,496

)

 

 

(3,876

)

 

 

(5,459

)

 

 

(11,770

)

Other income

 

 

136

 

 

 

902

 

 

 

438

 

 

 

2,510

 

Income before income taxes

 

 

63,964

 

 

 

65,660

 

 

 

210,811

 

 

 

155,845

 

Income tax expense

 

 

7,637

 

 

 

604

 

 

 

20,368

 

 

 

1,422

 

Net income

 

$

56,327

 

 

$

65,056

 

 

$

190,443

 

 

$

154,423

 

Less: Pre-IPO net income attributable to Atlas Sand Company, LLC

 

 

 

 

 

 

 

 

54,561

 

 

 

 

Less: Net income attributable to redeemable noncontrolling interest

 

 

26,887

 

 

 

 

 

 

66,190

 

 

 

 

Net income attributable to Atlas Energy Solutions, Inc.

 

$

29,440

 

 

 

 

 

$

69,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per Class A common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

 

 

 

 

$

1.22

 

 

 

 

Diluted

 

$

0.51

 

 

 

 

 

$

1.21

 

 

 

 

Weighted average Class A common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,237

 

 

 

 

 

 

57,189

 

 

 

 

Diluted

 

 

57,928

 

 

 

 

 

 

57,746

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Stockholders' and Members' Equity and Redeemable Noncontrolling Interest

(Unaudited)

(In thousands)

 

 

Redeemable

 

 

 

Members'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders'

 

 

 

Noncontrolling

 

 

 

Equity

 

 

Class A

 

 

Class B

 

 

Additional

 

 

Accumulated

 

 

and Members'

 

 

Interest

 

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Paid-In-Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

$

 

 

 

$

511,357

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

511,357

 

Member distributions
 prior to IPO

 

 

 

 

 

 

(15,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,000

)

Net income prior
 to IPO and Reorganization

 

 

 

 

 

 

54,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54,561

 

Effect of Reorganization and reclassification to redeemable noncontrolling interest (Note 1)

 

 

771,345

 

 

 

 

(550,918

)

 

 

39,148

 

 

 

391

 

 

 

42,852

 

 

 

429

 

 

 

(221,247

)

 

 

 

 

 

(771,345

)

Issuance of common stock in
IPO, net of offering costs

 

 

 

 

 

 

 

 

 

18,000

 

 

 

180

 

 

 

 

 

 

 

 

 

291,056

 

 

 

 

 

 

291,236

 

Deferred tax liability arising
from the IPO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,537

)

 

 

 

 

 

(27,537

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,290

 

 

 

 

 

 

3,290

 

Net income after IPO
 and Reorganization

 

 

66,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69,692

 

 

 

69,692

 

$0.35/share Class A common stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,002

)

 

 

(20,002

)

$0.35/unit distribution to Atlas Sand Operating, LLC unitholders

 

 

(14,998

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend equivalent rights ($0.35 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(296

)

 

 

(296

)

Other distributions to redeemable non-controlling interest unitholders

 

 

(7,158

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of operating units of Atlas Sand Operating, LLC for Class A common stock

 

 

(13,640

)

 

 

 

 

 

 

594

 

 

 

6

 

 

 

(594

)

 

 

(6

)

 

 

13,640

 

 

 

 

 

 

13,640

 

Deferred tax liability arising
from the redemption of operating units of Atlas Sand Operating, LLC for Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(176

)

 

 

 

 

 

(176

)

Issuance of common stock upon vesting of RSUs, net of shares withheld for income taxes

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment of redeemable noncontrolling interest to redemption amount

 

 

185,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(59,026

)

 

 

(126,386

)

 

 

(185,412

)

Balance at September 30, 2023

 

$

987,151

 

 

 

$

 

 

$

57,767

 

 

$

577

 

 

$

42,258

 

 

$

423

 

 

$

 

 

$

(76,992

)

 

$

(75,992

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Stockholders' and Members' Equity and Redeemable Noncontrolling Interest (Continued)

(Unaudited)

(In thousands)

 

 

Redeemable

 

 

 

Members'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling

 

 

 

Equity

 

 

Class A

 

 

Class B

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

Interest

 

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Paid-In-Capital

 

 

Deficit

 

 

and Members'

 

Balance at December 31, 2021

 

$

 

 

 

$

338,697

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

338,697

 

Member distributions

 

 

 

 

 

 

(30,024

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,024

)

Unit-based compensation
expense

 

 

 

 

 

 

543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

543

 

Net income

 

 

 

 

 

 

154,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

154,423

 

Balance at September 30, 2022

 

$

 

 

 

$

463,639

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

463,639

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Atlas Energy Solutions Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

 

 

 

Net income

 

$

190,443

 

 

$

154,423

 

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

 

 

 

 

 

 

Depreciation, depletion and accretion expense

 

 

29,368

 

 

 

20,528

 

Amortization of debt discount

 

 

469

 

 

 

338

 

Amortization of deferred financing costs

 

 

270

 

 

 

332

 

Stock and unit-based compensation

 

 

3,660

 

 

 

543

 

Deferred income tax

 

 

19,059

 

 

 

 

Commodity derivatives gain

 

 

 

 

 

(1,857

)

Settlements on commodity derivatives

 

 

 

 

 

1,996

 

Other

 

 

143

 

 

 

61

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(28,893

)

 

 

(43,144

)

Accounts receivable - related party

 

 

868

 

 

 

90

 

Inventories

 

 

1,653

 

 

 

(481

)

Spare part inventories

 

 

(4,141

)

 

 

(3,333

)

Prepaid expenses and other current assets

 

 

(10,355

)

 

 

1,205

 

Other long-term assets

 

 

(1,681

)

 

 

(5,150

)

Accounts payable

 

 

3,877

 

 

 

7,301

 

Accounts payable - related parties

 

 

93

 

 

 

(433

)

Deferred revenue

 

 

 

 

 

6,703

 

Accrued liabilities and other liabilities

 

 

8,691

 

 

 

16,878

 

Net cash provided by operating activities

 

 

213,524

 

 

 

156,000

 

Investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(245,693

)

 

 

(54,164

)

Net cash used in investing activities

 

 

(245,693

)

 

 

(54,164

)

Financing Activities:

 

 

 

 

 

 

Net proceeds from IPO

 

 

303,426

 

 

 

 

Payment of offering costs

 

 

(6,020

)

 

 

 

Member distributions prior to IPO

 

 

(15,000

)

 

 

(30,024

)

Principal payments on term loan borrowings

 

 

(16,573

)

 

 

(20,557

)

Prepayment fee on 2021 Term Loan Credit Facility

 

 

(2,649

)

 

 

 

Issuance costs associated with debt financing

 

 

(4,397

)

 

 

(233

)

Payments under finance leases

 

 

(1,932

)

 

 

(703

)

Dividends paid to Class A common stockholders

 

 

(20,002

)

 

 

 

Distributions paid to Atlas Sand Operating, LLC unitholders

 

 

(22,156

)

 

 

 

Net cash provided by (used in) financing activities