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Business Combinations | 6 Months Ended
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Jun. 30, 2024
Business Combinations [Abstract] |
Business Combinations | 3. BUSINESS COMBINATIONS Current Year Acquisitions In April 2024, we acquired all of the remaining equity interests of Basin Production and Completion LLC (“BPC”). BPC is the parent company of FHE USA LLC, which manufactures equipment used in the hydraulic fracturing industry. The total purchase consideration was $39.8 million, consisting of cash consideration of $14.9 million and our pre-existing equity investment of $24.9 million. For the three and six months ended June 30, 2024, revenues and pretax earnings included in the Company's operating results related to the BPC acquired operations were $5.9 million and a loss of $1.5 million, respectively. BPC is included in our manufacturing reportable segment. In June 2024, we acquired 100% of the issued and outstanding capital stock of Advanced Stimulation Technologies, Inc. (“AST”), a pressure pumping services provider serving the Permian Basin, for total purchase consideration of $174.0 million in cash. For the six months ended June 30, 2024, revenues and pretax earnings included in the Company's operating results related to the AST acquired operations were $15.0 million and $0.1 million, respectively. AST is included in our stimulation services reportable segment. In June 2024, we acquired 100% of the issued and outstanding common stock of NRG Manufacturing, Inc., which manufactures equipment used in the hydraulic fracturing industry, and its affiliate, AMI US Holdings, Inc., which develops commercial software used in hydraulic fracturing industry (collectively “NRG”), for total purchase consideration of $6.0 million in cash. R evenues and pretax earnings included in the Company's operating results related to the NRG acquired operations were immaterial for the three and six months ended June 30, 2024. NRG is included in our manufacturing reportable segment. The following table represents our preliminary allocation of total purchase consideration of AST, BPC and NRG to the identifiable assets acquired and liabilities assumed based on the fair values on their acquisition dates:
|  | AST |  |  | BPC |  |  | NRG |
Cash and cash equivalents |  | $ | — |  |  | $ | 0.1 |  |  | $ | 0.4 |
Accounts receivable |  |  | 26.0 |  |  |  | 4.2 |  |  |  | 1.2 |
Prepaid expenses and other assets |  |  | 4.0 |  |  |  | 0.3 |  |  |  | 0.3 |
Operating lease assets |  |  | — |  |  |  | 1.5 |  |  |  | 10.7 |
Inventories |  |  | 13.1 |  |  |  | 12.2 |  |  |  | 3.9 |
Property, plant and equipment |  |  | 158.4 |  |  |  | 39.8 |  |  |  | 2.0 |
Intangible assets |  |  | — |  |  |  | 5.8 |  |  |  | — |
Total identifiable assets acquired |  |  | 201.5 |  |  |  | 63.9 |  |  |  | 18.5 |
Accounts payable |  |  | 13.9 |  |  |  | 5.5 |  |  |  | 1.5 |
Accrued expenses |  |  | 2.9 |  |  |  | 0.3 |  |  |  | — |
Current portion of long-term debt |  |  | — |  |  |  | 0.5 |  |  |  | — |
Current portion of operating lease liabilities |  |  | — |  |  |  | 0.4 |  |  |  | 1.0 |
Other current liabilities |  |  | — |  |  |  | 3.1 |  |  |  | — |
Non-current portion of debt |  |  | — |  |  |  | 20.4 |  |  |  | — |
Deferred tax liability |  |  | 27.4 |  |  |  | — |  |  |  | — |
Operating lease liabilities |  |  | — |  |  |  | 1.2 |  |  |  | 10.0 |
Total liabilities assumed |  |  | 44.2 |  |  |  | 31.4 |  |  |  | 12.5 |
Noncontrolling interest |  |  | — |  |  |  | 2.2 |  |  |  | — |
Goodwill |  |  | 16.7 |  |  |  | 9.5 |  |  |  | — |
Total purchase consideration |  | $ | 174.0 |  |  | $ | 39.8 |  |  | $ | 6.0 |
We generally used the cost approach to value acquired property, plant and equipment adjusted for the age, condition an d utility of the associated assets. The market approach valuation technique was used for assets that had comparable market data available. The intangible assets related to the BPC acquisition represent customer relationships and a trade name. The fair value of the customer relationships was determined using the income approach, which is predicated upon the value of the future cash flows that these customers will generate over an estimated time period. The fair value of the trade name was determined using a relief from royalty methodology. The amounts allocated to goodwill are attributable to the organized workforce and potential or expected synergies. We estimate that the goodwill acquired in the BPC acquisition will be deductible for income tax purposes. The allocations of purchase price to the identifiable assets acquired and liabilities assumed for these acquisitions are preliminary and subject to revisions during the measurement period, up to one year from the date the acquisition closed. These determinations include the use of estimates based on information that was available at the time these unaudited condensed consolidated financial statements were prepared. We believe that the estimates used are reasonable; however, the estimates are subject to change as additional information becomes available. Prior Year Acquisitions On January 3, 2023, we acquired 100% of the issued and outstanding membership interests of Producers Service Holdings LLC (“Producers”), an employee-owned pressure pumping services provider serving Appalachia and the Mid-Continent, for a total purchase consideration of $36.5 million. We accounted for this acquisition as a business combination. On February 24, 2023, we acquired 100% of the issued and outstanding membership interests in (i) Performance Proppants, LLC, (ii) Red River Land Holdings, LLC, (iii) Performance Royalty, LLC, (iv) Performance Proppants International, LLC, and (v) Sunny Point Aggregates, LLC (together, “Performance Proppants”) for a total purchase consideration of $462.8 million. We accounted for this acquisition as a business combination. Pro Forma Disclosures The following table reflects pro forma revenues and net income for the three and six months ended June 30, 2024 and 2023 as if our 2023 and 2024 acquisitions had taken place on January 1, 2022 and 2023, respectively. These unaudited pro forma amounts are not necessarily indicative of results that would have actually been obtained during the periods presented or that may be obtained in the future.
|  | Three Months Ended June 30, |  |  | For the Six Months Ended June 30, |
(unaudited) |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Revenues |  | $ | 643.0 |  |  | $ | 836.1 |  |  | $ | 1,324.9 |  |  | $ | 1,839.2 |
Net income (loss) |  | $ | (69.4 | ) |  | $ | 18.0 |  |  | $ | (64.6 | ) |  | $ | 99.0 |
The changes in the carrying amount of goodwill by reportable segment were as follows:
|  | Stimulation Services |  |  | Proppant Production |  |  | Manufacturing |  |  | Other |  |  | Total |
Balance, December 31, 2023 |  | $ | 169.7 |  |  | $ | 74.5 |  |  | $ | — |  |  | $ | 81.7 |  |  | $ | 325.9 |
Adjustment |  |  | 16.4 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 16.4 |
Impairment of goodwill |  |  | — |  |  |  | (67.7 | ) |  |  | — |  |  |  | — |  |  |  | (67.7 | )
Acquisitions |  |  | 16.7 |  |  |  | — |  |  |  | 9.5 |  |  |  | — |  |  |  | 26.2 |
Balance, June 30, 2024 |  | $ | 202.8 |  |  | $ | 6.8 |  |  | $ | 9.5 |  |  | $ | 81.7 |  |  | $ | 300.8 |
The adjustment to goodwill in our stimulation services reportable segment was to correct an immaterial error for the three months ended March 31, 2024 related to the accounting for our acquisition of U.S. Well Services, which decreased property, plant, and equipment and increased goodwill. Goodwill Impairment We perform our annual goodwill impairment test for each of our reporting units in the fourth quarter of each fiscal year. In addition to our annual impairment test, we also test goodwill for impairment between annual impairment dates whenever events or circumstances occur which could more likely than not reduce the fair value of one or more reporting units below its carrying value. In 2024 a decline in natural gas prices reduced our customers’ activity levels in the Haynesville, which is heavily concentrated with natural gas wells. This activity downturn significantly reduced the operating results of our Haynesville Proppant reporting unit. In the second quarter of 2024, we noted that our customers’ activity levels were not expected to significantly recover in the short-term. The reduced operating results of our Haynesville Proppant reporting unit therefore resulted in a triggering event and, accordingly, we performed an interim quantitative impairment test in the second quarter of 2024. We did not identify a triggering event for our other reporting units. In performing the interim quantitative impairment test, we determined the fair value of our Haynesville Proppant reporting unit using a combination of the income approach and the market approach. Under the income approach, the fair value for this reporting unit was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Due to the inherent uncertainties involved in making estimates and assumptions, actual results and discount rates may differ from those assumed in our forecasts. Based upon the results of our interim quantitative impairment test, we concluded that the carrying value of the Haynesville Proppant reporting unit exceeded its estimated fair value, which resulted in a goodwill impairment charge of $67.7 million, which represented all of the goodwill recorded on the Haynesville Proppant reporting unit.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
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