ProFrac Holding Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Leases

Leases

12 Months Ended

Dec. 31, 2023

7. LEASES

Our leasing arrangements consist of both operating and finance leases. We are a lessee on several leases of real estate, administrative offices, manufacturing and maintenance facilities, heavy duty equipment, light duty vehicles, tractors, and power generation equipment. We do not have any material lessor arrangements.

In connection with the completion of the FTSI Acquisition, FTSI conveyed to Wilks Development, LLC, an affiliate of ProFrac LLC, substantially all of FTSI’s owned real property, consisting primarily of FTSI’s hydraulic fracturing equipment manufacturing facilities, in exchange for cash consideration of approximately $44.4 million (the “FTSI Sale Leaseback”). We now lease such real property from Wilks Development, LLC in exchange for aggregate monthly lease payments of $51.6 million through March 2032. The cash consideration received was $3.7 million less than the carrying value of these assets. Because this sale was to an affiliate under common control, we accounted for the $3.7 million as an equity transaction recorded as a deemed distribution within our consolidated statements of changes in equity.

Our finance lease balances are as follows:


		December 31,
	Consolidated Balance Sheet Location	2023		2022
Assets:
Finance lease right-of-use assets	Property, plant, and equipment, net	$	11.4	$	10.3
Liabilities:
Current portion of finance lease liabilities	Current portion of long-term debt	$	4.2	$	2.3
Finance lease liabilities	Long-term debt	$	6.5	$	7.0

The components of our lease costs are as follows:


	Year Ended December 31,
	2023		2022
Operating lease costs	$	45.8	$	18.6
Short-term lease costs		32.3		10.5
Finance lease costs:
Amortization of right-of-use assets		5.1		0.4
Interest on lease liabilities		1.0		0.1
Total lease costs	$	84.2	$	29.6

The weighted-average remaining lease term and discount rates used in the measurement of our right-of-use assets and lease liabilities are as follows:


	Year Ended December 31,
	2023			2022
Weighted-average remaining lease term:
Operating leases	6.4 years			5.9 years
Finance leases	3.7 years			4.0 years
Weighted average discount rate:
Operating leases		5.9	%		6.9	%
Finance leases		7.8	%		7.1	%

The following table includes other supplemental information for our leases:


	Year Ended December 31,
	2023		2022
Cash paid for amounts included in the measurement of lease obligations:
Operating leases	$	46.4	$	18.2
Finance leases	$	6.2	$	0.9
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	11.9	$	50.8
Finance leases	$	8.6	$	3.6
Operating lease right-of-use assets recognized upon adoption of the leasing standard	$	—	$	35.8

As of December 31, 2023, the future maturities of our leases liabilities are as follows:


Fiscal Year	Operating Leases			Finance Leases
2024	$	29.0		$	5.0
2025		13.1			2.7
2026		12.4			2.3
2027		12.6			1.9
2028		11.6			0.3
Thereafter		31.6			—
Total lease payments		110.3			12.2
Less imputed interest		(18.0	)		(1.5	)
Total lease liabilities	$	92.3		$	10.7