On March 5, 2024, the Company completed the Hi-Crush Transaction and acquired 100% of Hi-Crush's ownership interest and certain of its wholly-owned subsidiaries. The Hi-Crush Transaction expanded the Company's position as a leading provider of proppant and proppant logistics in the Permian Basin to meet the needs of our large-scale customers in the Permian Basin.

The Company had adjustments to consideration during the finalization of the purchase price allocation during the three months ended June 30, 2024. Refer to the table below for the acquisition-date fair value of the consideration as of March 5, 2024 and the adjustments as of June 30, 2024 (in thousands):


	March 5, 2024		Adjustments			June 30, 2024
Cash to sellers at close	$	140,146	$	—		$	140,146
Company Transaction Expenses (sellers' transaction expenses) (1)		9,019		—			9,019
Stock consideration (2)		189,082		—			189,082
Deferred Cash Consideration Note (1)		109,253		(2,064	)		107,189
Stockholders’ Representative Expense Fund (1)		50		—			50
Estimated Adjustment Holdback Amount (1) (3)		5,338		4,945			10,283
Total	$	452,888	$	2,881		$	455,769

(1) Refer to the Merger Agreement, a copy of which is included as Exhibit 2.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 8, 2024.

(2) Stock consideration is measured at fair value as of the Closing Date by taking the product of (a) the closing shares of 9,711,432 as defined in the Merger Agreement and (b) the low price per share of $19.47 on March 5, 2024, which is in line with ASC 820, “Fair Value Measurement” and company policy as an accounting policy election under ASC 235, “Notes to Financial Statements.”

(3) Represents a cash holdback subject to changes from estimated to actual net working capital amounts and other customary purchase price adjustments. The amount in the table above is based on management's best estimate as of the date of this filing and may be subject to further adjustments.

The Company has applied the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” and recognized assets acquired and liabilities assumed at their fair values as of the date of acquisition, with the excess purchase consideration recorded to goodwill. The fair value of acquired property and equipment were based on both available market data and a cost approach. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months from the acquisition date).

The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of March 5, 2024, including measurement period adjustments through June 30, 2024 (in thousands):


	Fair Value
	March 5, 2024			Adjustments			June 30, 2024
Cash and cash equivalents	$	6,982		$	—		$	6,982
Accounts receivable		96,393			—			96,393
Inventories		4,235			—			4,235
Spare parts inventories		3,101			—			3,101
Prepaid expenses and other current assets		2,180			—			2,180
Property, plant and equipment		277,584			20,321			297,905
Intangible assets		111,723			3,353			115,076
Operating lease right-of-use assets		10,868			—			10,868
Finance lease right-of-use assets		7,311			—			7,311
Other long-term assets		92			—			92
Accounts payable		(37,736	)		—			(37,736	)
Accrued liabilities		(13,162	)		—			(13,162	)
Current portion of long-term debt		(1,914	)		—			(1,914	)
Current portion of operating lease liabilities		(6,388	)		—			(6,388	)
Current portion of finance lease liabilities		(3,299	)		—			(3,299	)
Current portion of deferred revenue		(3,302	)		—			(3,302	)
Other current liabilities (1)		(1,221	)		—			(1,221	)
Long-term debt, net of discount and deferred financing costs		(252	)		—			(252	)
Deferred tax liabilities		(70,378	)		(4,841	)		(75,219	)
Operating lease liabilities		(4,479	)		—			(4,479	)
Finance lease liabilities		(4,012	)		—			(4,012	)
Deferred revenue		(9,946	)		—			(9,946	)
Asset retirement obligation		(2,663	)		—			(2,663	)
Goodwill		91,171			(15,952	)		75,219
Net Assets Acquired (2)	$	452,888		$	2,881		$	455,769

(1) The March 5, 2024 presentation includes the current portion of operating lease liabilities, current portion of finance lease liabilities, and current portion of deferred revenue. These balances were previously included within other current liabilities on our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 8, 2024.

(2) The March 5, 2024 presentation includes operating lease liabilities, finance lease liabilities, deferred revenue, and asset retirement obligation. These balances were previously included within other long-term liabilities on our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 8, 2024.

The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The Company retained an independent appraiser to determine the fair value of assets acquired and liabilities assumed. In accordance with the acquisition method of accounting, the purchase price of Hi-Crush has been allocated to the acquired assets and assumed liabilities based on their preliminary estimated acquisition date fair values. The fair value estimates were based on income, market, and cost valuation methods. The excess of the total consideration over the estimated fair value of the amounts initially assigned to the identifiable assets acquired and liabilities assumed has been recorded as goodwill. In many cases, the determination of the fair values required estimates about discount rates, future expected cash flows and other future events that are based on the Company's best judgment from the information available. The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information becomes available but no later than one year from the acquisition date. As of June 30, 2024, we had purchase price adjustments of $2.9 million in net assets acquired. This resulted in an increase of $2.5 million in depreciation, depletion and accretion expense, an increase of $0.1 million in amortization expense, and an increase of $0.3 million in interest expense on the condensed consolidated statements of operations for both the three and six months ended June 30, 2024.

The Company’s condensed consolidated statement of operations includes revenue of $162.8 million and $210.5 million for the three and six months ended June 30, 2024, respectively, attributable to the acquired Hi-Crush operations. The Company’s condensed consolidated statement of operations includes direct operating expenses of $113.3 million and $145.6 million for the three and six months ended June 30, 2024, respectively, attributable to the acquired Hi-Crush operations. Of the $75.2 million of goodwill recognized, $40.0 million is considered non-deductible goodwill.

The following transactions were recognized separately from the acquisition of assets and assumptions of liabilities in the Hi-Crush Transaction.

The preliminary estimate of the fair value of the identifiable intangible assets was determined primarily using the income approach, which requires a forecast of all of the expected future cash flows either through the with or without method or the relief-from-royalty (“RFR”) method. Intangible assets consisting of the customer relationships and trade name were valued using the with or without method and the RFR method, respectively, both of which are forms of the income approach.

The preliminary estimate of the fair value of the reserves were valued at $105.8 million using the income approach. Reserves are recorded in property, plant and equipment, net on the Company's condensed consolidated balance sheets. Reserves were valued using the multi-period excess earnings method (“MPEEM”). The MPEEM is an approach where the net earnings attributable to the asset being measured are isolated from other “contributory assets” over the intangible asset’s remaining economic life.

The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Company for the three and six months ended June 30, 2024 and 2023, assuming the Hi-Crush Transaction had occurred on January 1, 2023 (in thousands).

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the Hi-Crush Transaction occurred on January 1, 2023, nor are they necessarily indicative of future results.

The unaudited pro forma information for all periods presented includes the following adjustments, where applicable, for business combination accounting effects resulting from the Hi-Crush Transaction: (i) additional amortization expense related to finite-lived intangible assets acquired, (ii) additional interest expense related to financing for the acquisition, (iii) depreciation or depletion expense on property, plant and equipment, (iv) depreciation and interest on finance leases, and (v) the related tax effects assuming that the acquisition occurred on January 1, 2023. No assumptions have been applied to the pro forma results of operations regarding potential operating cost savings or other business synergies expected to be achieved.

The significant nonrecurring adjustments reflected in the unaudited pro-forma consolidated information above include the reclassification of the transaction costs to the earliest period presented.