Liberty Energy (LBRT) - 2023 Q3 - Quarterly Report

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section cautions that the report contains forward-looking statements, subject to inherent risks and not routinely updated - The report includes forward-looking statements regarding expected performance, future operating results, oil and natural gas demand and prices, industry outlook, global economic conditions, and business strategies[10] - Actual results could differ materially from forward-looking statements due to important factors, many beyond the company's control, including risks and uncertainties detailed in the Annual Report and this Quarterly Report[10] - The Company does not intend or is obligated to update or revise any forward-looking statements, except as required by law[10] PART I: FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial results Item 1. Financial Statements (Unaudited) This section provides Liberty Energy Inc.'s unaudited condensed consolidated financial statements and related notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $3,089,123 | $2,575,932 | | Total Liabilities | $1,300,561 | $1,078,626 | | Total Equity | $1,788,562 | $1,497,306 | - Current assets increased from $956,673 thousand at December 31, 2022, to $1,067,624 thousand at September 30, 2023, primarily driven by an increase in accounts receivable—trade and unbilled revenue[15] - Property and equipment, net, significantly increased from $1,362,364 thousand at December 31, 2022, to $1,613,437 thousand at September 30, 2023[15] Condensed Consolidated Statements of Income This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net income Condensed Consolidated Statements of Income (3 Months Ended Sep 30) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Total Revenue | $1,215,905 | $1,188,247 | $27,658 | 2.33% | | Operating Income | $205,227 | $182,983 | $22,244 | 12.16% | | Net Income attributable to Liberty Energy Inc. stockholders | $148,608 | $146,953 | $1,655 | 1.13% | | Basic EPS | $0.88 | $0.79 | $0.09 | 11.39% | | Diluted EPS | $0.85 | $0.78 | $0.07 | 8.97% | Condensed Consolidated Statements of Income (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Total Revenue | $3,672,970 | $2,923,636 | $749,334 | 25.63% | | Operating Income | $636,825 | $297,426 | $339,399 | 114.04% | | Net Income attributable to Liberty Energy Inc. stockholders | $463,934 | $246,733 | $217,201 | 88.03% | | Basic EPS | $2.68 | $1.33 | $1.35 | 101.50% | | Diluted EPS | $2.62 | $1.30 | $1.32 | 101.54% | Condensed Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (3 Months Ended Sep 30) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Net Income | $148,608 | $147,263 | $1,345 | 0.91% | | Foreign Currency Translation | $(3,148) | $(6,343) | $3,195 | -50.37% | | Comprehensive Income attributable to Liberty Energy Inc. | $145,460 | $140,621 | $4,839 | 3.44% | Condensed Consolidated Statements of Comprehensive Income (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Net Income | $464,025 | $247,122 | $216,903 | 87.77% | | Foreign Currency Translation | $(1,618) | $(8,299) | $6,681 | -80.50% | | Comprehensive Income attributable to Liberty Energy Inc. | $462,315 | $238,444 | $223,871 | 93.89% | Condensed Consolidated Statements of Changes in Equity This section details changes in the company's equity accounts, including retained earnings and additional paid-in capital Condensed Consolidated Statements of Changes in Equity | Metric | Dec 31, 2022 (in thousands) | Sep 30, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $1,495,017 | $1,788,562 | $293,545 | | Retained Earnings | $234,525 | $671,924 | $437,399 | | Additional Paid in Capital | $1,266,097 | $1,123,967 | $(142,130) | - Key activities impacting equity during the nine months ended September 30, 2023, included $463.9 million in net income, $23.7 million in stock-based compensation expense, and $164.0 million in share repurchases[24] - The company paid $26.5 million in Class A Common Stock dividends during the nine months ended September 30, 2023[24] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :---------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net Cash Provided by Operating Activities | $719,841 | $292,610 | $427,231 | | Net Cash Used in Investing Activities | $(528,435) | $(333,875) | $(194,560) | | Net Cash (Used in) Provided by Financing Activities | $(208,340) | $45,642 | $(253,982) | | Cash and Cash Equivalents—End of Period | $26,603 | $24,045 | $2,558 | - Purchases of property and equipment and construction in-progress increased to $465.2 million in 2023 from $327.0 million in 2022[27] - The Siren Energy acquisition used $75.7 million in cash, net of cash received, during the nine months ended September 30, 2023[27] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1—Organization and Basis of Presentation This note describes the company's business, corporate structure, and the basis for financial statement presentation - Liberty Energy Inc. is a leading integrated energy services and technology company focused on hydraulic fracturing and related services for onshore oil and natural gas E&P companies in North America[32] - Effective January 31, 2023, Liberty LLC merged into the Company, resulting in the redemption of all Class B Common Stock for Class A Common Stock[31] - The company's name changed from "Liberty Oilfield Services Inc." to "Liberty Energy Inc." effective April 25, 2022[31] Note 2—Significant Accounting Policies This note outlines the key accounting policies and recent accounting pronouncements adopted by the company - The Company completed the acquisition of Siren Energy on April 6, 2023, for $76.0 million in cash, recognizing $42.0 million in goodwill[40] - Transaction and integration costs associated with acquisitions are expensed as incurred[38] - The Company adopted ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, effective December 15, 2022, with no material impact[39] Note 3—Inventories This note provides a breakdown of inventory categories and related accounting adjustments Inventories | Inventory Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :----------------- | :-------------------------- | :-------------------------- | | Proppants | $17,691 | $31,350 | | Chemicals | $17,554 | $32,392 | | Maintenance parts and other | $176,502 | $150,712 | | Total Inventories | $211,747 | $214,454 | - The company recorded an inventory write-down of $2.2 million for the nine months ended September 30, 2023[43] Note 4—Property and Equipment This note details the composition of property and equipment, including depreciation and assets held for sale Property and Equipment, Net | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Field services equipment | $2,398,065 | $1,925,848 | | Construction in-progress | $179,345 | $158,518 | | Property and equipment, net | $1,613,437 | $1,362,364 | - Depreciation expense for the nine months ended September 30, 2023, was $280.9 million, up from $219.9 million in the prior year period[45] - As of September 30, 2023, the company classified $0.7 million of land and $0.8 million of buildings as assets held for sale[47] Note 5—Leases This note provides information on the company's lease arrangements, including lease costs and right-of-use assets Lease Cost Components (9 Months Ended Sep 30) | Lease Cost Component | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :------------------------- | :----------------------------------------- | :----------------------------------------- | | Amortization of ROU assets (Finance) | $11,008 | $3,796 | | Interest on lease liabilities (Finance) | $3,271 | $1,066 | | Operating lease cost | $30,562 | $32,809 | | Variable lease cost | $3,932 | $3,473 | | Short-term lease cost | $6,359 | $5,113 | | Total Lease Cost | $55,132 | $46,257 | - Right-of-use assets obtained in exchange for new finance lease liabilities increased substantially to $105.3 million for the nine months ended September 30, 2023, from $14.7 million in the prior year[53] - The company leases dry and wet sand containers and conveyor belts to customers through operating leases, generating $27.8 million in revenue for the nine months ended September 30, 2023[57][58] Note 6—Accrued Liabilities This note presents a breakdown of the company's accrued liabilities by category Accrued Liabilities | Accrued Liability Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------- | :-------------------------- | :-------------------------- | | Accrued vendor invoices | $104,033 | $119,801 | | Operations accruals | $73,270 | $72,348 | | Accrued benefits and other | $90,715 | $84,670 | | Total Accrued Liabilities | $268,018 | $276,819 | Note 7—Debt This note details the company's debt instruments, including the ABL Facility and Term Loan Facility Debt, Net of Deferred Financing Costs and Original Issue Discount | Debt Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | | Term Loan outstanding | $0 | $104,716 | | Revolving Line of Credit | $223,000 | $115,000 | | Total debt, net of deferred financing costs and original issue discount | $223,000 | $218,446 | - The ABL Facility's maximum revolver amount was increased from $425.0 million to $525.0 million, and its maturity date was extended to January 23, 2028[62] - The Term Loan Facility was paid off and terminated on January 23, 2023, using proceeds from the ABL Facility[63][65] Note 8—Fair Value Measurements and Financial Instruments This note describes the fair value measurements of financial instruments and assets held for sale - The carrying values of cash and cash equivalents, accounts receivable, accounts payable, long-term debt, and lease obligations approximated their fair values as of September 30, 2023, and December 31, 2022[73] - The Siren Acquisition involved nonrecurring fair value measurements for acquired assets and liabilities[75] - As of September 30, 2023, assets held for sale (land and buildings) were recorded at a total fair value of $0.8 million, based on Level 3 inputs[76] Note 9—Equity This note provides details on the company's equity, including share repurchases, dividends, and stock-based compensation Non-vested Equity Awards Outstanding | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Non-vested RSUs Outstanding | 3,064,132 | 2,985,727 | | Non-vested PSUs Outstanding | 1,339,568 | 1,390,588 | - The company repurchased 11,673,886 shares of Class A Common Stock for $164.0 million during the nine months ended September 30, 2023, under its expanded $500.0 million share repurchase program[91][92] - Cash dividends of $0.05 per share of Class A Common Stock were paid quarterly, totaling $25.8 million for the nine months ended September 30, 2023[89] Note 10—Net Income per Share This note presents the basic and diluted net income per share calculations for various periods Net Income per Share (3 Months Ended Sep 30) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | | :------------------------------------------------- | :-------------------------- | :-------------------------- | | Basic Net Income per Share | $0.88 | $0.79 | | Diluted Net Income per Share | $0.85 | $0.78 | Net Income per Share (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------------- | :-------------------------- | :-------------------------- | | Basic Net Income per Share | $2.68 | $1.33 | | Diluted Net Income per Share | $2.62 | $1.30 | Note 11—Income Taxes This note details the company's income tax expense, effective tax rate, and Tax Receivable Agreements liability Income Tax Metrics (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | | Effective Global Income Tax Rate | 24.6% | 1.5% | | Income Tax Expense (in thousands) | $151,658 | $3,637 | - The increase in the effective tax rate is primarily due to recording taxes on U.S. activity in 2023, compared to having a valuation allowance on U.S. net deferred tax assets in 2022[104][159] - The company's liability under the Tax Receivable Agreements (TRAs) was $119.5 million as of September 30, 2023, with related deferred tax assets totaling $100.6 million[109] Note 12—Defined Contribution Plan This note provides information on company matching contributions to the defined contribution plan Company Matching Contributions (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | | Company Matching Contributions | $24,400 | $18,800 | Note 13—Related Party Transactions This note discloses transactions and balances with related parties, including revenue from services and share repurchases - The company repurchased 3,000,000 shares of Class A Common Stock for $45.0 million from Schlumberger, which ceased to be a related party after January 31, 2023[111] Related Party Transactions (9 Months Ended Sep 30) | Related Party | Service/Transaction | 9 Months Ended Sep 30, 2023 (in millions) | 9 Months Ended Sep 30, 2022 (in millions) | | :------------------------ | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Franklin Mountain Energy, LLC | Hydraulic fracturing services revenue | $128.0 | $79.0 | | Liberty Resources LLC | Hydraulic fracturing services revenue | $33.5 | $10.3 | - Amounts outstanding from Liberty Resources LLC under an amended payment agreement were $14.7 million as of September 30, 2023, generating $1.3 million in interest income for the nine months ended September 30, 2023[115][116] Note 14—Commitments & Contingencies This note outlines the company's contractual commitments, purchase obligations, and potential legal contingencies Purchase Obligations | Commitment Period | Amount (in thousands) | | :---------------- | :-------------------- | | Remainder of 2023 | $91,442 | | 2024 | $87,643 | | Total | $179,085 | - The company has committed to purchase 2,041,893 tons of proppant through December 31, 2024[118] - Potential shortfall fees for failing to purchase minimum volumes could be $31.0 million for the remainder of 2023 and $17.7 million for 2024, though the company does not expect to incur significant fees[119] Note 15—Selected Quarterly Financial Data This note provides a summary of key financial data for recent quarterly periods - For the three months ended September 30, 2023, net income was $148.6 million, while share repurchases amounted to $29.3 million and dividends paid were $8.7 million[123] - For the three months ended September 30, 2022, net income was $147.0 million, and share repurchases were $70.0 million[123] Note 16—Subsequent Events This note discloses significant events occurring after the reporting period but before financial statement issuance - A quarterly dividend of $0.07 per share of Class A Common Stock was declared on October 17, 2023, payable on December 20, 2023[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, operational highlights, market trends, liquidity, and non-GAAP measures Overview This section provides a general description of Liberty Energy Inc.'s business, services, and recent strategic acquisitions - Liberty Energy Inc. provides hydraulic fracturing services, wireline services, proppant delivery, field gas processing, CNG delivery, data analytics, and lower emission technologies to North American E&P companies[127] - The company has grown from one active hydraulic fracturing fleet in December 2011 to over 40 active fleets as of September 30, 2023[127] - Liberty Power Innovations (LPI) acquired Siren Energy on April 6, 2023, for $76.0 million, expanding its natural gas compression and CNG delivery capabilities in the Permian Basin[129] Recent Trends and Outlook This section discusses current industry trends, market conditions, and the company's expectations for future activity - The frac industry has stabilized with a better supply and demand balance due to consolidation, technological progress, disciplined investment, and underutilized fleets exiting the market[131] - Seasonal softness, winter weather, and holiday disruptions are expected in Q4 2023, but a modest increase in activity is anticipated in 2024 due to strengthening commodity prices[132][133] Key Market Metrics | Metric | Q3 2023 | Q3 2022 | Q2 2023 | | :-------------------------------- | :------ | :------ | :------ | | Average WTI Price (per Bbl) | $82.25 | $93.06 | $73.54 | | Average Domestic Onshore Rig Count (US & Canada) | 817 | 942 | 815 | Results of Operations This section analyzes the company's financial results, detailing changes in revenues, costs, and profitability for specific periods Three Months Ended September 30, 2023, Compared to Three Months Ended September 30, 2022 This section compares the company's financial performance for the three months ended September 30, 2023, against the prior year period Consolidated Results (3 Months Ended Sep 30) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Total Revenue | $1,215,905 | $1,188,247 | $27,658 | 2.3% | | Cost of Services (excl. DDA) | $850,247 | $874,453 | $(24,206) | -2.8% | | General and Administrative | $55,040 | $50,473 | $4,567 | 9.0% | | Depreciation, Depletion, and Amortization | $108,997 | $82,848 | $26,149 | 31.6% | | Operating Income | $205,227 | $182,983 | $22,244 | 12.2% | | Net Income attributable to Liberty Energy Inc. stockholders | $148,608 | $146,953 | $1,655 | 1.1% | - The decrease in cost of services was primarily related to lower costs of materials and lower operating overhead costs[138] - The increase in depreciation, depletion, and amortization was due to additional equipment placed in service, including digiTechnologies[142] Nine Months Ended September 30, 2023, Compared to Nine Months Ended September 30, 2022 This section compares the company's financial performance for the nine months ended September 30, 2023, against the prior year period Consolidated Results (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Total Revenue | $3,672,970 | $2,923,636 | $749,334 | 25.6% | | Cost of Services (excl. DDA) | $2,572,119 | $2,258,190 | $313,929 | 13.9% | | General and Administrative | $166,110 | $130,953 | $35,157 | 26.8% | | Depreciation, Depletion, and Amortization | $303,093 | $234,815 | $68,278 | 29.1% | | Operating Income | $636,825 | $297,426 | $339,399 | 114.0% | | Net Income attributable to Liberty Energy Inc. stockholders | $463,934 | $246,733 | $217,201 | 88.0% | - The increase in cost of services was primarily due to higher materials and parts consumption, increased labor costs related to additional fleets and efficiency, and inflationary impacts[151] - General and administrative expenses increased due to labor cost inflation, corporate costs related to increased activity, and higher share-based compensation[152] Comparison of Non-GAAP Financial Measures This section reconciles and analyzes non-GAAP financial measures such as EBITDA and Adjusted EBITDA - EBITDA is defined as net income before interest, income taxes, and depreciation, depletion, and amortization. Adjusted EBITDA further adjusts for non-cash stock-based compensation, fleet costs, transaction costs, asset disposal gains/losses, and other non-recurring items[160] Non-GAAP Financial Measures (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :---------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------------- | | Net Income | $464,025 | $247,122 | $216,903 | 87.8% | | EBITDA | $939,918 | $501,533 | $438,385 | 87.4% | | Adjusted EBITDA | $960,561 | $564,793 | $395,768 | 70.1% | - The increases in EBITDA and Adjusted EBITDA were primarily driven by improved market conditions and increased activity levels[165] Liquidity and Capital Resources This section discusses the company's sources and uses of cash, capital structure, and financial flexibility Overview This section outlines the company's primary sources of liquidity and current cash position - Primary liquidity sources are cash flows from operations and borrowings under the ABL Facility, supplemented by an additional equipment leasing facility[167] Cash and Cash Equivalents | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and Cash Equivalents | $26,603 | $43,676 | $(17,073) | - The ABL Facility was increased to $525.0 million, with $295.6 million of remaining availability as of September 30, 2023[169][170] Share Repurchase Program This section details the company's share repurchase activities and remaining authorization under the program - The share repurchase program's cumulative authorization was increased to $500.0 million[175] - During the nine months ended September 30, 2023, the company repurchased $164.0 million of Class A Common Stock[175] - As of September 30, 2023, $211.0 million remained authorized for future repurchases[93] Cash Flows This section analyzes the company's cash flows from operating, investing, and financing activities Cash Flows (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :---------------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net Cash Provided by Operating Activities | $719,841 | $292,610 | $427,231 | | Net Cash Used in Investing Activities | $(528,435) | $(333,875) | $(194,560) | | Net Cash (Used in) Provided by Financing Activities | $(208,340) | $45,642 | $(253,982) | - The increase in operating cash flow was primarily due to a $749.3 million increase in revenues, partially offset by increased costs and a decrease in cash from changes in working capital[177] - Investing activities were higher due to investments in new equipment (digiTechnologies) and the $75.7 million Siren Energy acquisition[178] Cash Requirements This section identifies the company's material cash commitments, including debt, leases, and purchase obligations - Material cash commitments include long-term debt, TRAs, finance and operating leases, share repurchases, dividends, and purchase obligations[180] - Purchase obligations for the remainder of 2023 and 2024 total $179.1 million[180] - Finance lease obligations increased by $105.3 million during the three months ended September 30, 2023, due to expanded equipment lease facilities[181] Income Taxes This section discusses the company's income tax expense and effective tax rate, including factors influencing changes Income Tax Metrics (9 Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | | Effective Global Income Tax Rate | 24.6% | 1.5% | | Income Tax Expense (in thousands) | $151,700 | $3,600 | - The increase in the effective tax rate is primarily due to recording taxes on U.S. activity in 2023, following the release of a valuation allowance on U.S. net deferred tax assets in 2022[184] Tax Receivable Agreements This section explains the company's obligations and benefits under the Tax Receivable Agreements - The company's liability under the TRAs was $119.5 million as of September 30, 2023, with related deferred tax assets totaling $100.6 million[109] - TRAs provide for payments by the Company of 85% of net cash savings in U.S. federal, state, and local income tax resulting from certain tax basis increases and net operating losses[106] Critical Accounting Estimates This section highlights key accounting estimates and assumptions that are fundamental to the company's financial results - Financial statements are prepared using GAAP, requiring estimates and assumptions, particularly for critical accounting estimates that are fundamental to results of operations[187] - No material changes in critical accounting policies and estimates have occurred since the Annual Report[188] Item 3. Quantitative and Qualitative Disclosure about Market Risk The company faces market risk primarily from foreign currency translation in its Canadian operations, with no other material changes since December 31, 2022 - The company's operations in Canada expose it to foreign currency translation risk, as the Canadian dollar is the functional currency of its foreign subsidiary[190] Foreign Currency Translation Losses | Metric | 9 Months Ended Sep 30, 2023 (in millions) | 9 Months Ended Sep 30, 2022 (in millions) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | | Foreign Currency Translation Losses | $1.6 | $8.3 | - No other material changes to market risk exposures have occurred since December 31, 2022[191] Item 4. Controls and Procedures As of September 30, 2023, disclosure controls were effective, with updates to internal controls following the Siren Acquisition - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of September 30, 2023[192] - Accounting functions of the Siren Acquisition were integrated during the quarter, resulting in updates to internal controls over financial reporting[193] - No other material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[194] PART II: OTHER INFORMATION This part provides additional information, including legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings This section incorporates legal proceedings information from Note 14, indicating no material adverse effects are expected from current matters - The company is subject to legal and administrative proceedings from time to time, but management does not believe any current matters will have a material adverse effect on financial position or results of operations[121][197] Item 1A. Risk Factors This section refers to risk factors in the Annual Report, noting no new or material changes in this Quarterly Report - Readers should consider the risk factors described in the Annual Report and other SEC filings[198] - No new risk factors or material changes to existing risk factors were identified in this Quarterly Report[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase program, including shares bought and remaining authorization for the quarter Share Repurchase Program Activity (July 1 - Sep 30, 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining | | :-------------------------- | :--------------------- | :--------------------------- | :--------------------------------- | | July 1 - Sep 30, 2023 | 1,784,899 | $16.38 | $210,968,900 | - The share repurchase program's cumulative authorization was increased to $500.0 million on January 24, 2023[200] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[202] Item 4. Mine Safety Disclosures This section refers to Exhibit 95 for mine safety disclosures, as required by the Federal Mine Safety and Health Act of 1977 - Mine safety disclosures, as required by the Federal Mine Safety and Health Act of 1977, are provided in Exhibit 95[203] Item 5. Other Information No director or Section 16 officer adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No director or Section 16 officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2023[204] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report, including agreements, corporate documents, certifications, and XBRL files - The exhibits include the Master Transaction Agreement, Amended and Restated Certificate of Incorporation, Bylaws, CEO/CFO certifications, Mine Safety Disclosure, and XBRL taxonomy files[206] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers - The report was signed by the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer on October 19, 2023[211]