AESI
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 1, 2024, the registrant had
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 |
Item 3. |
50 |
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Item 4. |
50 |
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PART II. |
51 |
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Item 1. |
51 |
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Item 1A. |
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Item 2. |
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Item 3. |
51 |
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Item 4. |
51 |
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Item 5. |
51 |
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Item 6. |
52 |
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53 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Atlas Energy Solutions Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
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June 30, |
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December 31, |
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2024 |
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2023 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Inventories |
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Spare part inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Goodwill |
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Intangible assets |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accounts payable - related parties |
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Accrued liabilities |
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Current portion of long-term debt |
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Current portion of operating lease liabilities |
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Current portion of finance lease liabilities |
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Current portion of deferred revenue |
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Other current liabilities |
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Total current liabilities |
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Long-term debt, net of discount and deferred financing costs |
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Deferred tax liabilities |
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Operating lease liabilities |
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Finance lease liabilities |
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Deferred revenue |
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Asset retirement obligation |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common Stock, $ |
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Additional paid-in-capital |
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Retained earnings (Accumulated deficit) |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Product sales |
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$ |
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$ |
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$ |
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$ |
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Service sales |
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Total sales |
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Cost of sales (excluding depreciation, depletion and accretion expense) |
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Depreciation, depletion and accretion expense |
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Gross profit |
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Selling, general and administrative expense (including stock and unit-based compensation expense of $ |
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Amortization expense of acquired intangible assets |
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Loss on disposal of assets |
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Insurance recovery (gain) |
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( |
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( |
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Operating income |
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Interest (expense), net |
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( |
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( |
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( |
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( |
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Other income |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Less: Pre-IPO net income attributable to Atlas Sand Company, LLC |
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Less: Net income attributable to redeemable noncontrolling interest |
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Net income attributable to Atlas Energy Solutions Inc. |
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$ |
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$ |
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$ |
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$ |
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Net income per common share |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding |
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Basic |
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Diluted |
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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)
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Redeemable |
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Members' |
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Old Atlas |
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Old Atlas |
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New Atlas |
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Additional |
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Stockholders' |
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Noncontrolling |
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Equity |
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Class A |
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Class B |
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Common Stock |
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Paid-In- |
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Retained Earnings |
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and Members' |
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Interest |
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Value |
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Shares |
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Value |
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Shares |
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Value |
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Shares |
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Value |
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Capital |
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(Accumulated Deficit) |
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Equity |
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Balance at December 31, 2023 |
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$ |
— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Dividend equivalent rights |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common Stock upon vesting of RSUs |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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Equity issued in connection with Hi-Crush Transaction |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at June 30, 2024 |
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$ |
— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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Redeemable |
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Members' |
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Old Atlas |
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Old Atlas |
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New Atlas |
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Additional |
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Stockholders' |
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Noncontrolling |
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Equity |
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Class A |
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Class B |
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Common Stock |
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Paid-In- |
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Retained Earnings |
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and Members' |
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Interest |
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Value |
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Shares |
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Value |
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Shares |
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Value |
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Shares |
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Value |
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Capital |
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(Accumulated Deficit) |
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Equity |
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Balance at December 31, 2022 |
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$ |
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$ |
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— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
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Member distributions |
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— |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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Net income prior |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Effect of Reorganization and reclassification to redeemable noncontrolling interest |
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( |
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— |
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— |
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( |
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— |
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( |
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Issuance of Class A common stock in |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Deferred tax liability arising |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income after IPO |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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$ |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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$ |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividend equivalent rights ($ |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other distributions to redeemable non-controlling interest unitholders |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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$ |
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$ |
— |
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$ |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Atlas Energy Solutions Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
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|||||
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|
2024 |
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2023 |
|
||
Operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation, depletion and accretion expense |
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Amortization expense of acquired intangible assets |
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Amortization of debt discount |
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Amortization of deferred financing costs |
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Loss on disposal of assets |
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Insurance recovery (gain) |
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( |
) |
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Stock and unit-based compensation |
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Deferred income tax |
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Other |
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( |
) |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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( |
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Accounts receivable - related party |
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Inventories |
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( |
) |
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Spare part inventories |
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( |
) |
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( |
) |
Prepaid expenses and other current assets |
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( |
) |
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( |
) |
Other long-term assets |
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( |
) |
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( |
) |
Accounts payable |
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Accounts payable - related parties |
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( |
) |
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Deferred revenue |
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( |
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Accrued liabilities and other liabilities |
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Net cash provided by operating activities |
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Investing activities: |
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Purchases of property, plant and equipment |
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( |
) |
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( |
) |
Hi-Crush acquisition, net of cash acquired |
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( |
) |
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Net cash used in investing activities |
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( |
) |
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( |
) |
Financing Activities: |
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Principal payments on term loan borrowings |
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( |
) |
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( |
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Proceeds from borrowings |
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Issuance costs associated with debt financing |
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( |
) |
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( |
) |
Payments under finance leases |
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( |
) |
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( |
) |
Repayment of notes payable |
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( |
) |
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Dividends and distributions |
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( |
) |
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( |
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Net proceeds from IPO |
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Payment of offering costs |
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( |
) |
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Member distributions |
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( |
) |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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( |
) |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental cash flow information |
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Cash paid during the period for: |
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Interest |
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$ |
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$ |
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Taxes |
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$ |
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$ |
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Supplemental disclosure of non-cash investing activities: |
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Property, plant and equipment in accounts payable and accrued liabilities |
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$ |
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$ |
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Asset retirement obligations incurred |
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$ |
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|
$ |
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||
Hi-Crush acquisition consideration, equity issuance |
|
$ |
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$ |
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||
Hi-Crush acquisition consideration, Deferred Cash Consideration Note |
|
$ |
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|
$ |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Atlas Energy Solutions Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 – Business and Organization
Atlas Energy Solutions Inc., a Delaware corporation (f/k/a New Atlas HoldCo. Inc.) (“New Atlas” and together with its subsidiaries “we,” “us,” “our,” or the “Company”), was formed on June 28, 2023, pursuant to the laws of the State of Delaware, and is the successor to AESI Holdings Inc. (f/k/a Atlas Energy Solutions Inc.), a Delaware corporation (“Old Atlas”). New Atlas is a holding company and the ultimate parent company of Atlas Sand Company, LLC (“Atlas LLC”), a Delaware limited liability company formed on April 20, 2017. Atlas LLC is a producer of high-quality, locally sourced 100 mesh and 40/70 sand used as a proppant during the well completion process. Proppant is necessary to facilitate the recovery of hydrocarbons from oil and natural gas wells. One hundred percent of Atlas LLC’s sand reserves are located in Texas within the Permian Basin and operations consist of proppant production and processing facilities, including four facilities near Kermit, Texas (together, the “Kermit facilities”), a fifth facility near Monahans, Texas (the “Monahans facility”), and the OnCore distributed mining network.
We are currently building a logistics platform with the goal of increasing the efficiency, safety and sustainability of the oil and natural gas industry within the Permian Basin. This will include the Dune Express, an overland conveyor infrastructure solution currently under construction, coupled with our growing fleet of fit-for-purpose trucks and trailers.
We sell products and services primarily to oil and natural gas exploration and production companies and oilfield services companies primarily under supply agreements and also through spot sales on the open market.
Initial Public Offering
On March 13, 2023, Old Atlas completed its initial public offering (the “IPO”) of
Reorganization
In connection with the IPO and pursuant to a master reorganization agreement dated March 8, 2023, by and among Old Atlas, Atlas Sand Management Company, LLC, a Texas limited liability company (“ASMC”), Atlas LLC, Atlas Sand Holdings, LLC, a Delaware limited liability company (“Holdings”), Atlas Sand Operating, LLC, a Delaware limited liability company (“Atlas Operating”), Atlas Sand Holdings II, LLC, a Delaware limited liability company (“Holdings II”), Atlas Sand Management Company II, LLC, a Delaware limited liability company (“ASMC II”), and Atlas Sand Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), Old Atlas and the parties thereto completed certain restructuring transactions (the “Reorganization”). As part of the Reorganization:
5
As a result of the Reorganization, (i) Old Atlas’s sole material asset consisted, and still consists, of Operating Units, (ii) Atlas Operating’s sole material asset consisted, and still consists, of 100% of the membership interests in Atlas LLC and (iii) Atlas LLC owned, and still owns, all of the Company’s operating assets. Old Atlas is the managing member of Atlas Operating and is responsible for all operational, management and administrative decisions relating to Atlas LLC’s business and consolidates the financial results of Atlas LLC and its subsidiaries.
As a result of the IPO and Reorganization:
On March 13, 2023, the date on which Old Atlas closed the IPO, a corresponding deferred tax liability of approximately $
On September 13, 2023, we distributed the Operating Units and shares of Old Atlas Common Stock previously held by the HoldCos to the Legacy Owners in accordance with the distribution provisions of each respective HoldCo operating agreement. Immediately following the distribution, the Legacy Owners held shares of Old Atlas Class A Common Stock or Old Atlas Class B Common Stock (and corresponding Operating Units) directly.
Up-C Simplification
On October 2, 2023, Old Atlas and the Company completed the Up-C Simplification (as defined below) contemplated by the Master Reorganization Agreement (the “Master Reorganization Agreement”), dated as of July 31, 2023, by and among the Company, Old Atlas, Atlas Operating, AESI Merger Sub Inc., a Delaware corporation (“PubCo Merger Sub”), Atlas Operating Merger Sub, LLC, a Delaware limited liability company (“Opco Merger Sub” and, together with PubCo Merger Sub, the “Merger Subs”), and Holdings, in order to, among other things, reorganize under a new public holding company (the “Up-C Simplification”).
Pursuant to the Master Reorganization Agreement, (a) PubCo Merger Sub merged with and into Old Atlas (the “PubCo Merger”), as a result of which (i) each share of Old Atlas Class A Common Stock then issued and outstanding was exchanged for one share of Common Stock of New Atlas, par value $
In connection with the Up-C Simplification:
6
After completion of the Up-C Simplification, New Atlas replaced Old Atlas as the publicly held entity and, through its subsidiaries, conducts all of the operations previously conducted by Old Atlas, and Old Atlas remains the managing member of Atlas Operating.
The Up-C Simplification was a common control transaction; therefore, the redeemable noncontrolling interest was acquired as an equity transaction. The redeemable noncontrolling interest was adjusted to the maximum redemption amount based on the 10-day volume-weighted average closing price of shares of Old Atlas Class A Common Stock at the redemption date. The carrying amount of the redeemable noncontrolling interest was reclassified to reflect the change in the Company’s ownership interest with an offsetting entry to additional paid-in capital. On October 2, 2023, the date the Up-C Simplification was completed, a corresponding deferred tax liability of approximately $
Hi-Crush Transaction
On March 5, 2024 (“Closing Date”), the Company completed the acquisition of the Permian Basin proppant production and logistics businesses and operations of Hi-Crush Inc., a Delaware corporation (“Hi-Crush”), in exchange for mixed consideration totaling $
The foregoing description of the Hi-Crush Transaction and the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2024.
Kermit Facility Operational Update
On April 14, 2024, a mechanical fire occurred at one of the Company's plants in Kermit, Texas. The fire primarily impacted the feed system of the processing facility, which transports sand from the dryers and separators to storage silos. During the second quarter of 2024, the Company utilized temporary loadout equipment at the plant to continue production.
7
The Company performed an impairment analysis on the Kermit asset group as a result of the fire and determined that no impairment was required. The disposal of the damaged assets from the fire had a net book value of $
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the requirements of the SEC. All adjustments necessary for a fair presentation of the Financial Statements have been included. Such adjustments are of a normal, recurring nature. These Financial Statements include the accounts of New Atlas, Old Atlas, Atlas Operating, Atlas LLC, and Atlas LLC’s wholly-owned subsidiaries: Atlas Sand Employee Company, LLC; Atlas OLC Employee Company, LLC; Atlas Construction Employee Company, LLC; Atlas Sand Employee Holding Company, LLC; Fountainhead Logistics Employee Company, LLC; Atlas Sand Construction, LLC; OLC Kermit, LLC; OLC Monahans, LLC; Fountainhead Logistics, LLC; Fountainhead Transportation Services, LLC; and Fountainhead Equipment Leasing, LLC.
The Company acquired Hi-Crush and certain of its wholly-owned subsidiaries on March 5, 2024. These Financial Statements include the accounts of Hi-Crush Operating, LLC (“Hi-Crush Operating”) (f/k/a Hi-Crush Inc.) and the following wholly-owned subsidiaries of Hi-Crush Operating: Hi-Crush LMS LLC; Hi-Crush Investments LLC; OnCore Processing LLC; Hi-Crush Permian Sand LLC; Hi-Crush PODS LLC; NexStage LLC; FB Logistics LLC; BulkTracer Holdings LLC; PropDispatch LLC; Pronghorn Logistics Holdings, LLC; and Pronghorn Logistics, LLC. Refer to Note 3- Hi-Crush Transaction for further discussion.
The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other period. The Financial Statements and these notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included within the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Reorganization
As discussed in Note 1 - Business and Organization, as a result of our IPO and the Reorganization and prior to the Up-C Simplification, Old Atlas became the managing member of Atlas Operating and consolidated entities in which it had a controlling financial interest. The Reorganization was considered a transaction between entities under common control. As a result, the Financial Statements for periods prior to the IPO and the Reorganization have been adjusted to combine the previously separate entities for presentation purposes. However, Old Atlas and Atlas Operating had no operations or assets and liabilities prior to our IPO. As such, for periods prior to the completion of our IPO, the Financial Statements represent the historical financial position and results of operations of Atlas LLC and its subsidiaries. For periods after the completion of our IPO through the end of the reporting period, the financial position and results of operations include those of Old Atlas and New Atlas.
Up-C Simplification
As discussed in Note 1 - Business and Organization, as a result of the Up-C Simplification, New Atlas replaced Old Atlas as the publicly held entity and, through its subsidiaries, conducts all of the operations previously conducted by Old Atlas, and Old Atlas remains the managing member of Atlas Operating. The Up-C Simplification was considered an acquisition of noncontrolling interest transaction between entities under common control. As such, the condensed consolidated financial statements and results of operations of Old Atlas are included in the Financial Statements of New Atlas on the same basis as previously presented except for the acquisition of noncontrolling interest which was accounted for as an equity transaction.
Consolidation
The Financial Statements include the accounts of the Company and controlled subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.
8
Use of Estimates
The preparation of the Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these Financial Statements include, but are not limited to: the proppant reserves and their impact on calculating the depletion expense under the units-of-production method; the depreciation and amortization associated with property, plant and equipment; stock-based and unit-based compensation; asset retirement obligations; business combinations; valuation of goodwill and acquired intangible assets; and certain liabilities. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Business Combination
Business combinations are accounted for using the acquisition method of accounting in accordance with the Accounting Standards Codification (“ASC”) 805, “Business Combinations.” The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Fair value of the acquired assets and liabilities is measured in accordance with the guidance of ASC 820, “Fair Value Measurement.” Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill. Any acquisition-related costs incurred by the Company are expensed as incurred. Operating results of an acquired business are included in the Company’s results of operations from the date of acquisition. We use all available information to estimate fair values, including quoted market prices, the carrying value of acquired assets and assumed liabilities and valuation techniques such as discounted cash flows, relief-from-royalty method, with or without method, or multi-period excess earnings method. We engage third-party appraisal firms to assist in the fair value determination of identifiable long-lived assets, identifiable intangible assets, as well as any contingent consideration that provides for additional consideration to be paid to the seller if certain future conditions are met. These estimates are reviewed during the 12-month measurement period and adjusted as soon as the necessary information becomes available but no later than one year from the acquisition date. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our financial condition or results of operations. The purchase price in the Hi-Crush Transaction includes a holdback, which is measured at fair value. The holdback is subject to changes from estimated to actual net working capital amounts and other customary purchase price adjustments. The holdback amount is based on management's best estimate as of the date of this filing and may be subject to further adjustments. This amount is recorded in other current liabilities on our condensed consolidated balance sheets.
Since the Closing Date, the acquired companies have adopted all of the Company's accounting policies.
Cash and Cash Equivalents
Cash and cash equivalents consist of all highly liquid investments that are readily convertible into cash and have original maturities of three months or less when purchased. As of June 30, 2024, we have deposits of $
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at cost when earned and represent claims against third parties that will be settled in cash. These receivables generally do not bear interest. The carrying value of our receivables, net of allowance for credit losses, represents the estimated collectable amount. If events or changes in circumstances indicate specific receivable balances may be impaired, further consideration is given to our ability to collect those balances and the allowance is adjusted accordingly. We perform credit evaluations of new customers, and sometimes require deposits and prepayments, to mitigate credit risk. When it is probable that all or part of an outstanding balance will not be collected, we establish an allowance for credit losses.
On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments,” which replaced the prior incurred loss impairment model with an expected credit loss impairment model for financial instruments, including accounts receivable. The adoption of ASU 2016-13 did not result in a material cumulative-effect adjustment to retained earnings on January 1, 2023.
We are exposed to credit losses primarily through sales of products and services. We analyze accounts receivable on an individual customer and overall basis through review of historical collection experience and current aging status of our customer accounts. We also consider the financial condition and economic environment of our customers in evaluating the need for an allowance. As of June 30, 2024 and December 31, 2023, we had $
9
As of June 30, 2024, three customers represented
Goodwill and Acquired Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment annually during the fourth quarter or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Judgments regarding indicators of potential impairment are based on market conditions and operational performance of our business. We may assess our goodwill for impairment initially using a qualitative approach to determine whether conditions exist that indicate it is more likely than not that a reporting unit’s carrying value is greater than its fair value, and if such conditions are identified, then a quantitative analysis will be performed to determine if there is any impairment.
The Company amortizes the cost of definite-lived intangible assets on a straight-line basis over their estimated useful lives of
Other Intangible Assets
Other intangible assets consist of internal-use software. The Company applies the provisions of ASC 350, “Intangibles-Goodwill and Other.” Costs associated with the acquisition of an internal-use software are capitalized when incurred and amortized over the estimated useful life of the license or application, which is generally
Amortization associated with the other intangibles was $
Property, Plant and Equipment, Including Depreciation and Depletion
Property, plant and equipment are recorded at cost and depreciated over their estimated useful lives using either the straight-line method or the units of production method. Construction in progress is comprised of assets which have not been placed into service and is not depreciated until the related assets or improvements are ready to be placed into service.
Costs of improvements that extend economic life or improve service potential are capitalized and depreciated over the remaining useful life of the asset, with routine repairs and maintenance expensed as incurred.
Fixed assets are carried at historical cost.
Plant facilities and equipment |
|
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Furniture and office equipment |
|
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Computer and network equipment |
|
|
Buildings and leasehold improvements |
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Logistic equipment |
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Mine development project costs are capitalized once the deposit is classified as a proven and probable reserve. Mine development costs include engineering, mineralogical studies, drilling and other related costs to develop the mine and remove the overburden to initially expose the mineral and allow for the construction of an access way. Exploration costs are expensed as incurred and classified as exploration expense.
10
Mining property and development costs are amortized using the units of production method on estimated recoverable tonnage, which equals estimated proven and probable reserves. The impact to reserve estimates is recognized on a prospective basis. Drilling and related costs are capitalized for deposits where proven and probable reserves exist. These activities are directed at obtaining additional information on the deposit or converting non-reserve minerals to proven and probable reserves, with the benefit being realized over a period greater than one year.
Impairment or Disposal of Property, Plant and Equipment
The Company periodically evaluates whether current events or circumstances indicate that the carrying value of our property, plant and equipment assets may not be recoverable. If circumstances indicate that the carrying value may not be recoverable, the Company estimates future undiscounted net cash flows using estimates, including but not limited to estimates of proven and probable sand reserves, estimated future sales prices (considering historical and current prices, price trends and related factors), operating costs and anticipated capital expenditures. If the undiscounted cash flows are less than the carrying value of the assets, the Company recognizes an impairment loss equal to the amount by which the carrying value exceeds the fair value of the assets.
The recoverability of the carrying value of the Company’s mining property and development costs are dependent upon the successful development and commercial production of the Company’s mineral deposit and the related processing facilities. The Company’s evaluation of mineral properties for potential impairment primarily includes evaluating changes in the mineral reserves, or the underlying estimates and assumptions, including estimated production costs. Assessing the economic feasibility requires certain estimates including the prices of products to be produced and processing recovery rates, as well as operating and capital costs.
Asset Retirement Obligations
In accordance with ASC 410-20, “Asset Retirement Obligations”, the Company records a liability for asset retirement obligations at the fair value of the estimated costs to retire a tangible long-lived asset at the time the liability is incurred, when there is a legal obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the obligation can be made. The Company has asset retirement obligations with respect to certain assets due to various contractual obligations to clean and/or dispose of those assets at the time they are retired.
A liability for the fair value of an asset retirement obligation, with a corresponding increase to the carrying value of related long-lived assets, is recognized at the time of an obligating event. The asset is depreciated using the straight-line method, and the discounted liability is increased through accretion over the expected timing of settlement.
The estimated liability is based on third-party estimates of costs to abandon, including estimated economic lives and external estimates as to the cost to bring the land to a state required by the lease agreements. The Company utilized a discounted rate reflecting management’s best estimate of the credit-adjusted risk-free rate. Revisions to the liability could occur due to changes in the estimated costs, changes in the economic life or if federal or state regulators enact new requirements regarding the abandonment. Accretion expense was $
Changes in the asset retirement obligations are as follows (in thousands):
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