HOUSTON, Aug. 15, 2016 /PRNewswire/ -- Key Energy
Services, Inc. (OTC: KEGX) reported second quarter 2016
consolidated revenues of $95.0
million and a pre-tax GAAP loss of $92.9 million, or $0.58 per share. The results for the second
quarter include:
- pre-tax costs of $9.5 million, or
$0.06 per share, in restructuring
fees;
- pre-tax costs of $1.1 million, or
$0.01 per share, in severance;
- a pre-tax charge of $0.9 million,
or $0.01 per share, related to the
loss on sale of certain U.S. assets; and
- pre-tax costs of $0.6 million, or
$0.00 per share, related to the
previously disclosed Foreign Corrupt Practices Act ("FCPA")
investigations.
Excluding these items, the Company reported a pre-tax loss of
$80.8 million, or $0.50 per share. Due to the Company's net
operating loss balance, management does not expect to realize a tax
benefit from U.S. operations during 2016. As such, an effective tax
rate of 0.1% was realized for the second quarter.
Contrary to prior reporting periods, Key will not be hosting a
conference call with management to review second quarter 2016
results.
First quarter 2016 consolidated revenues were $111.1 million with a pre-tax GAAP loss of
$81.9 million, or $0.51 per share. The results for the first
quarter included pre-tax costs of $6.8
million, or $0.04 per share,
due to severance, a pre-tax charge of $5.0
million, or $0.03 per share,
due to an accrual associated with the offer of settlement of the
FCPA investigations, pre-tax costs of $2.4
million, or $0.02 per share,
related to the FCPA investigations and a pre-tax charge of
$2.1 million, or $0.01 per share, related to the loss on sale of
certain U.S. assets. Excluding these items, the Company reported a
pre-tax loss of $65.5 million, or
$0.41 per share. The Company did not
realize a tax benefit from U.S. operations for first quarter 2016,
yielding an effective tax rate of 0.3% for the first quarter.
The following table sets forth summary data for the second
quarter 2016 and prior comparable quarterly
periods:
|
|
Three Months
Ended (unaudited)
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
|
|
(in
millions, except per share amounts)
|
Revenues
|
|
$
|
95.0
|
|
|
$
|
111.1
|
|
|
$
|
197.5
|
|
Net loss
|
|
(92.8)
|
|
|
(81.6)
|
|
|
(65.4)
|
|
Diluted loss per
share
|
|
(0.58)
|
|
|
(0.51)
|
|
|
(0.42)
|
|
Adjusted
EBITDA*
|
|
(24.4)
|
|
|
(10.7)
|
|
|
(8.6)
|
|
|
* Adjusted
EBITDA does not exclude costs incurred in connection with the
Company's on-going FCPA investigations.
|
Overview and Outlook
Key's President and Chief Executive Officer, Robert Drummond, stated, "We continued to
reshape our support structure and reduce costs during the second
quarter with significant reductions in G&A. Although oil prices
recovered from February lows during the second quarter, customer
activity continued to decline with May marking the lowest total
monthly U.S. revenue since the downturn began. However, we saw an
uptick in U.S. revenue in June due to renewed customer interest.
This improvement in customer interest is choppy and somewhat
limited as while some of our customers are interested in pursuing
work that requires Key's services, others are looking to address
levered balance sheets with the improved cash flow generated from
higher oil prices.
"Discussions with Key's creditors continue with a goal of
allowing Key to significantly reduce its debt burden and to achieve
an improved liquidity position. During this period, we continue to
deliver a high-level of service to our customers and remain a safe
and dynamic work environment for our employees. In fact, thanks to
our dedicated employees, we finished the second quarter with our
best safety record ever recorded.
"We are also pleased to have resolved the FCPA investigation
with the SEC. We agreed to pay disgorgement of $5 million and entered into a cease and desist
agreement. Key had already accrued a liability for the
payment in the first quarter of 2016."
U.S. Results
Second quarter 2016 U.S. Rig Services revenues of $51.5 million were down 12.7% as compared to the
first quarter. Second quarter operating loss was $13.7 million, or -26.6% of revenue, which
included a loss on sale of asset of $0.3
million and severance of $0.4
million; excluding these items, normalized operating loss
was $12.9 million, or -25.1% of
revenue. These results compare to first quarter operating loss of
$6.4 million, or -10.8% of revenue,
which included severance of $0.6
million; excluding this loss, normalized operating loss was
$5.8 million, or -9.9% of revenue.
Rig hours declined approximately 6% sequentially driven primarily
by an approximately 16% decline in California.
Second quarter 2016 Fluid Management Services revenues of
$19.6 million were down 13.6% as
compared to the first quarter. Second quarter operating loss was
$7.6 million, or -38.6% of revenue,
which included a gain on sale of assets of $0.3 million; excluding this gain, normalized
operating loss was $7.8 million, or
39.9% of revenue. These results compare to first quarter operating
loss of $6.3 million, or -27.7% of
revenue, which included a loss on sale of assets of $2.7 million and severance of $0.2 million; excluding these losses, normalized
operating loss was $3.4 million, or
-15.1% of revenue. Truck hours declined approximately 8%
sequentially driven primarily by an approximately 19% decline in
the Permian Basin.
Second quarter 2016 Coiled Tubing Services revenues of
$7.6 million were down 20.1% as
compared to the first quarter. Second quarter operating loss was
$6.1 million, or -79.5% of revenue;
which included severance of $0.1
million; excluding this item, normalized operating loss was
$5.9 million, or 77.8% of revenue.
These results compare to first quarter operating loss of
$6.1 million, or -64.5% of revenue,
which included a loss on sale of assets of $1.1 million and severance of $0.1 million; excluding these losses, normalized
operating loss was $5.0 million, or
-52.2% of revenue.
Second quarter 2016 Fishing & Rental Services revenues of
$13.4 million were down 17.6% as
compared to the first quarter. Second quarter operating loss was
$8.8 million, or -65.4% of revenue,
which included a loss on sale of assets of $0.9 million and severance of $0.1 million; excluding these items, normalized
operating loss was $7.7 million, or
57.7% of revenue. These results compare to first quarter operating
loss of $4.0 million, or -24.6% of
revenue, which included a gain on the sale of assets of
$1.7 million and severance of
$0.1 million; excluding these items,
normalized operating loss was $5.6
million, or -34.6% of revenue.
International Segment
Second quarter 2016 International revenues were $2.9 million, down 20.1% as compared to first
quarter 2016 revenues of $3.6
million. Second quarter operating loss was $4.9 million, or -169.6% of revenues, which
included severance of $0.3 million;
excluding this item, normalized operating loss was $4.7 million. These results compare to first
quarter operating loss of $5.1
million, or -139.9% of revenues, which included a loss on
sale of assets of $0.1 million and
severance of $0.4 million; excluding
these items, normalized operating loss was $4.6 million, or 127.7% of revenue.
General and Administrative Expenses
General and Administrative (G&A) expenses were $40.9 million for the second quarter compared to
$46.2 million in the prior quarter.
Second quarter G&A expenses included $9.5 million in restructuring fees, $0.6 million in severance and $0.6 in costs associated with the FCPA
investigations compared to first quarter G&A expenses that
included a $5.0 million accrual in
connection with the offer of settlement related to the FCPA
investigations, $2.4 million in costs
associated with the FCPA investigations and $5.9 million in severance. Excluding these items,
G&A expense in the second quarter was $30.2 million as compared to $32.9 million in the first quarter. International
G&A expenses were $2.5 million in
the second quarter compared to $2.3
million in the first quarter.
Balance Sheet and Capital Expenditures
Key's consolidated cash balance at June
30, 2016 was $103.5 million
compared to $155.7 million at
March 31, 2016; additionally, Key had
$18.6 million of restricted cash as
of June 30, 2016 and March 31, 2016. Total debt at June 30, 2016 was $953.6
million compared to total debt of $965.4 million at March
31, 2016. The Company had $130.8 of total liquidity available at
June 30, 2016. Capital expenditures
for the quarter were $2.4
million.
Contact:
West Gotcher, Investor Relations
713-757-5539
Consolidated
Statements of Operations (in thousands, except per share amounts,
unaudited):
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
REVENUES
|
|
$
|
95,012
|
|
|
$
|
111,088
|
|
|
$
|
197,496
|
|
|
$
|
206,100
|
|
|
$
|
465,295
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
Direct operating
expenses
|
|
89,419
|
|
|
90,598
|
|
|
158,841
|
|
|
180,017
|
|
|
363,371
|
|
Depreciation and
amortization expense
|
|
35,856
|
|
|
35,752
|
|
|
45,896
|
|
|
71,608
|
|
|
93,107
|
|
General and
administrative expenses
|
|
40,903
|
|
|
46,245
|
|
|
50,710
|
|
|
87,148
|
|
|
118,354
|
|
Impairment
expense
|
|
—
|
|
|
—
|
|
|
21,352
|
|
|
—
|
|
|
43,052
|
|
Operating
loss
|
|
(71,166)
|
|
|
(61,507)
|
|
|
(79,303)
|
|
|
(132,673)
|
|
|
(152,589)
|
|
Interest expense, net
of amounts capitalized
|
|
21,357
|
|
|
21,584
|
|
|
17,058
|
|
|
42,941
|
|
|
30,400
|
|
Other (income) loss,
net
|
|
412
|
|
|
(1,231)
|
|
|
(248)
|
|
|
(819)
|
|
|
4,184
|
|
Loss before tax
income taxes
|
|
(92,935)
|
|
|
(81,860)
|
|
|
(96,113)
|
|
|
(174,795)
|
|
|
(187,173)
|
|
Income tax
benefit
|
|
133
|
|
|
246
|
|
|
30,734
|
|
|
379
|
|
|
62,118
|
|
NET
LOSS
|
|
$
|
(92,802)
|
|
|
$
|
(81,614)
|
|
|
$
|
(65,379)
|
|
|
$
|
(174,416)
|
|
|
$
|
(125,055)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.58)
|
|
|
$
|
(0.51)
|
|
|
$
|
(0.42)
|
|
|
$
|
(1.09)
|
|
|
$
|
(0.80)
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
160,982
|
|
|
160,047
|
|
|
156,347
|
|
|
160,514
|
|
|
155,586
|
|
Segment Revenue
and Operating Income (in thousands, except for percentages,
unaudited):
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
U.S. Rig
Services
|
|
$
|
51,502
|
|
|
$
|
58,988
|
|
|
$
|
93,253
|
|
|
$
|
110,490
|
|
|
$
|
214,075
|
|
Fluid Management
Services
|
|
19,591
|
|
|
22,670
|
|
|
39,178
|
|
|
42,261
|
|
|
89,933
|
|
Coiled Tubing
Services
|
|
7,617
|
|
|
9,531
|
|
|
21,609
|
|
|
17,148
|
|
|
52,626
|
|
Fishing & Rental
Services
|
|
13,412
|
|
|
16,283
|
|
|
28,142
|
|
|
29,695
|
|
|
70,832
|
|
International
|
|
2,890
|
|
|
3,616
|
|
|
15,314
|
|
|
6,506
|
|
|
37,829
|
|
Consolidated
Total
|
|
$
|
95,012
|
|
|
$
|
111,088
|
|
|
$
|
197,496
|
|
|
$
|
206,100
|
|
|
$
|
465,295
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss)
|
|
|
|
|
|
|
|
|
|
|
U.S. Rig
Services
|
|
$
|
(13,674)
|
|
|
$
|
(6,366)
|
|
|
$
|
(4,132)
|
|
|
$
|
(20,040)
|
|
|
$
|
3,868
|
|
Fluid Management
Services
|
|
(7,555)
|
|
|
(6,272)
|
|
|
(59)
|
|
|
(13,827)
|
|
|
1,417
|
|
Coiled Tubing
Services
|
|
(6,057)
|
|
|
(6,149)
|
|
|
(4,083)
|
|
|
(12,206)
|
|
|
(27,905)
|
|
Fishing & Rental
Services
|
|
(8,776)
|
|
|
(4,012)
|
|
|
(6,574)
|
|
|
(12,788)
|
|
|
(6,630)
|
|
International
|
|
(4,901)
|
|
|
(5,060)
|
|
|
(28,871)
|
|
|
(9,961)
|
|
|
(38,482)
|
|
Functional
Support
|
|
(30,203)
|
|
|
(33,648)
|
|
|
(35,584)
|
|
|
(63,851)
|
|
|
(84,857)
|
|
Consolidated
Total
|
|
$
|
(71,166)
|
|
|
$
|
(61,507)
|
|
|
$
|
(79,303)
|
|
|
$
|
(132,673)
|
|
|
$
|
(152,589)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss) % of Revenues
|
|
|
|
|
|
|
|
|
|
|
U.S. Rig
Services
|
|
(26.6)%
|
|
|
(10.8)%
|
|
|
(4.4)%
|
|
|
(18.1)%
|
|
|
1.8%
|
|
Fluid Management
Services
|
|
(38.6)%
|
|
|
(27.7)%
|
|
|
(0.2)%
|
|
|
(32.7)%
|
|
|
1.6%
|
|
Coiled Tubing
Services
|
|
(79.5)%
|
|
|
(64.5)%
|
|
|
(18.9)%
|
|
|
(71.2)%
|
|
|
(53.0)%
|
|
Fishing & Rental
Services
|
|
(65.4)%
|
|
|
(24.6)%
|
|
|
(23.4)%
|
|
|
(43.1)%
|
|
|
(9.4)%
|
|
International
|
|
(169.6)%
|
|
|
(139.9)%
|
|
|
(188.5)%
|
|
|
(153.1)%
|
|
|
(101.7)%
|
|
Consolidated
Total
|
|
(74.9)%
|
|
|
(55.4)%
|
|
|
(40.2)%
|
|
|
(64.4)%
|
|
|
(32.8)%
|
|
Reconciliations of
normalized operating loss to operating loss(in thousands,
unaudited):
|
|
|
|
Six Months
Ended
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Operating
loss
|
|
(71,166)
|
|
|
(61,507)
|
|
|
(79,303)
|
|
Severance
costs
|
|
1,091
|
|
|
6,843
|
|
|
1,104
|
|
Impairment
expense
|
|
—
|
|
|
—
|
|
|
21,352
|
|
Loss on sales of
assets
|
|
885
|
|
|
2,117
|
|
|
2,127
|
|
FCPA
settlement
|
|
—
|
|
|
5,000
|
|
|
—
|
|
FCPA investigation
expense
|
|
629
|
|
|
2,439
|
|
|
8,400
|
|
Restructuring fees
|
|
9,522
|
|
|
—
|
|
|
—
|
|
Normalized operating
loss
|
|
(59,039)
|
|
|
(45,108)
|
|
|
(46,320)
|
|
|
Three Months Ended
June 30, 2016
|
|
U.S. Rig
Services
|
|
Fluid Management
Services
|
|
Coiled Tubing
Services
|
|
Fishing and Rental
Services
|
|
International
|
|
Functional
Support
|
|
Total
|
Operating
loss
|
$
|
(13,674)
|
|
|
$
|
(7,555)
|
|
|
$
|
(6,057)
|
|
|
$
|
(8,776)
|
|
|
$
|
(4,901)
|
|
|
$
|
(30,203)
|
|
|
$
|
(71,166)
|
|
Severance
costs
|
416
|
|
|
30
|
|
|
131
|
|
|
145
|
|
|
284
|
|
|
85
|
|
|
1,091
|
|
(Gain) loss on sale
of certain assets
|
331
|
|
|
(296)
|
|
|
—
|
|
|
889
|
|
|
(39)
|
|
|
—
|
|
|
885
|
|
FCPA investigation
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
629
|
|
|
629
|
|
Restructuring fees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,522
|
|
|
9,522
|
|
Normalized operating
loss
|
$
|
(12,927)
|
|
|
$
|
(7,821)
|
|
|
$
|
(5,926)
|
|
|
$
|
(7,742)
|
|
|
$
|
(4,656)
|
|
|
$
|
(19,967)
|
|
|
(59,039)
|
|
|
Three Months Ended
March 31, 2016
|
|
U.S. Rig
Services
|
|
Fluid Management
Services
|
|
Coiled Tubing
Services
|
|
Fishing and Rental
Services
|
|
International
|
|
Functional
Support
|
|
Total
|
Operating
loss
|
$
|
(6,366)
|
|
|
$
|
(6,272)
|
|
|
$
|
(6,149)
|
|
|
$
|
(4,012)
|
|
|
$
|
(5,060)
|
|
|
$
|
(33,648)
|
|
|
$
|
(61,507)
|
|
Severance
costs
|
590
|
|
|
166
|
|
|
92
|
|
|
56
|
|
|
355
|
|
|
5,584
|
|
|
6,843
|
|
(Gain) loss on sale
of certain assets
|
(59)
|
|
|
2,684
|
|
|
1,079
|
|
|
(1,674)
|
|
|
87
|
|
|
—
|
|
|
2,117
|
|
FCPA
settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
5,000
|
|
FCPA investigation
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,439
|
|
|
2,439
|
|
Normalized operating
loss
|
$
|
(5,835)
|
|
|
$
|
(3,422)
|
|
|
$
|
(4,978)
|
|
|
$
|
(5,630)
|
|
|
$
|
(4,618)
|
|
|
$
|
(20,625)
|
|
|
(45,108)
|
|
Following is a reconciliation of net loss as presented in
accordance with United States
generally accepted accounting principles (GAAP) to EBITDA and
Adjusted EBITDA as required under Regulation G of the Securities
Exchange Act of 1934.
Reconciliations of
EBITDA and Adjusted EBITDA to net loss (in thousands, except for
percentages, unaudited):
|
|
|
Three Months
Ended
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Net loss
|
|
$
|
(92,802)
|
|
|
$
|
(81,614)
|
|
|
$
|
(65,379)
|
|
Income tax
benefit
|
|
(133)
|
|
|
(246)
|
|
|
(30,734)
|
|
Interest expense, net
of amounts capitalized
|
|
21,357
|
|
|
21,584
|
|
|
17,058
|
|
Interest
income
|
|
(134)
|
|
|
(132)
|
|
|
(25)
|
|
Depreciation and
amortization
|
|
35,856
|
|
|
35,752
|
|
|
45,896
|
|
EBITDA
|
|
$
|
(35,856)
|
|
|
$
|
(24,656)
|
|
|
$
|
(33,184)
|
|
%
of revenues
|
|
(37.7)%
|
|
|
(22.2)%
|
|
|
(16.8)%
|
|
|
|
|
|
|
|
|
Severance
costs
|
|
1,091
|
|
|
6,843
|
|
|
1,104
|
|
Impairment
expense
|
|
—
|
|
|
—
|
|
|
21,352
|
|
Loss on sales of
assets
|
|
885
|
|
|
2,117
|
|
|
2,127
|
|
FCPA
settlement
|
|
—
|
|
|
5,000
|
|
|
—
|
|
Restructuring fees
|
|
9,522
|
|
|
—
|
|
|
—
|
|
Adjusted
EBITDA*
|
|
$
|
(24,358)
|
|
|
$
|
(10,696)
|
|
|
$
|
(8,601)
|
|
%
of revenues
|
|
(25.6)%
|
|
|
(9.6)%
|
|
|
(4.4)%
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
95,012
|
|
|
$
|
111,088
|
|
|
$
|
197,496
|
|
|
* Adjusted
EBITDA does not exclude costs incurred in connection with the
Company's on-going FCPA investigations.
|
|
Three Months Ended
June 30, 2016
|
|
U.S. Rig
Services
|
|
Fluid Management
Services
|
|
Coiled Tubing
Services
|
|
Fishing and Rental
Services
|
|
International
|
|
Functional
Support
|
|
Total
|
Net income
(loss)
|
$
|
(13,663)
|
|
|
$
|
(7,518)
|
|
|
$
|
(6,007)
|
|
|
$
|
(8,767)
|
|
|
$
|
(5,639)
|
|
|
$
|
(51,208)
|
|
|
$
|
(92,802)
|
|
Income tax
benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(139)
|
|
|
6
|
|
|
(133)
|
|
Interest expense, net
of amounts capitalized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,357
|
|
|
21,357
|
|
Interest
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
(124)
|
|
|
(134)
|
|
Depreciation and
amortization
|
14,771
|
|
|
5,978
|
|
|
2,905
|
|
|
7,580
|
|
|
2,111
|
|
|
2,511
|
|
|
35,856
|
|
EBITDA
|
$
|
1,108
|
|
|
$
|
(1,540)
|
|
|
$
|
(3,102)
|
|
|
$
|
(1,187)
|
|
|
$
|
(3,677)
|
|
|
$
|
(27,458)
|
|
|
$
|
(35,856)
|
|
%
of revenues
|
2.2
|
%
|
|
(7.9)%
|
|
|
(40.7)%
|
|
|
(8.9)%
|
|
|
(127.2)%
|
|
|
—
|
%
|
|
(37.7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
costs
|
416
|
|
|
30
|
|
|
131
|
|
|
145
|
|
|
284
|
|
|
85
|
|
|
1,091
|
|
Loss on sales of
assets
|
331
|
|
|
(296)
|
|
|
—
|
|
|
889
|
|
|
(39)
|
|
|
—
|
|
|
885
|
|
Restructuring fees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,522
|
|
|
9,522
|
|
Adjusted
EBITDA*
|
$
|
1,855
|
|
|
$
|
(1,806)
|
|
|
$
|
(2,971)
|
|
|
$
|
(153)
|
|
|
$
|
(3,432)
|
|
|
$
|
(17,851)
|
|
|
$
|
(24,358)
|
|
%
of revenues
|
3.6
|
%
|
|
(9.2)%
|
|
|
(39.0)%
|
|
|
(1.1)%
|
|
|
(118.8)%
|
|
|
—
|
%
|
|
(25.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
51,502
|
|
|
$
|
19,591
|
|
|
$
|
7,617
|
|
|
$
|
13,412
|
|
|
$
|
2,890
|
|
|
$
|
—
|
|
|
$
|
95,012
|
|
|
* Adjusted
EBITDA does not exclude costs incurred in connection with the
Company's on-going FCPA investigations.
|
"EBITDA" is defined as income or loss attributable to Key
before interest, taxes, depreciation, and amortization.
"Adjusted EBITDA" is EBITDA as further adjusted for certain
non-recurring or extraordinary items such as impairment expense,
severance expense, loss on debt extinguishment, gains or losses on
asset sales, asset retirements and impairments, and certain
non-recurring transaction or other costs.
EBITDA and Adjusted EBITDA are non-GAAP measures that are
used as supplemental financial measures by the Company's management
and directors and by external users of the Company's financial
statements, such as investors, to assess:
- The financial performance of the Company's assets without
regard to financing methods, capital structure or historical cost
basis;
- The ability of the Company's assets to generate cash
sufficient to pay interest on its indebtedness;
- The Company's operating performance and return on invested
capital as compared to those of other companies in the well
services industry, without regard to financing methods and capital
structure; and
- The Company's operating trends underlying the items that
tend to be of a non-recurring nature.
Normalized operating loss is a non-GAAP financial measure and
is defined as operating loss plus or minus certain items such as
impairment expense, severance expense, FCPA settlement costs and
FCPA investigation costs. Normalized operating loss is used
as a supplemental financial measure by the Company's management and
directors and by external users of the Company's financial
statements, such as investors, primarily to compare the Company's
core operating and financial performance from period to period
without regard to the many non-cash accounting charges or unusual
expenses that have impacted the Company's GAAP operating income and
net income due to the severe downturn in the company's
business.
EBITDA, Adjusted EBITDA and normalized operating income have
limitations as analytical tools and should not be considered an
alternative to net income, operating income, cash flow from
operating activities, or any other measure of financial performance
or liquidity presented in accordance with GAAP. EBITDA, Adjusted
EBITDA and normalized operating income exclude some, but not all,
items that affect net income and operating income and these
measures may vary among other companies. Limitations in using
normalized operating loss as an analytical tool include that
normalized operating loss excludes certain cash costs and losses
actually incurred by the Company. Limitations to using EBITDA and
Adjusted EBITDA as an analytical tool include:
- EBITDA and Adjusted EBITDA do not reflect Key's current or
future requirements for capital expenditures or capital
commitments;
- EBITDA and Adjusted EBITDA do not reflect changes in, or
cash requirements necessary to service, interest or principal
payments on Key's debt;
- EBITDA and Adjusted EBITDA do not reflect income
taxes;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA and Adjusted EBITDA do not
reflect any cash requirements for such replacements;
- Other companies in Key's industry may calculate EBITDA and
Adjusted EBITDA differently than Key does, limiting their
usefulness as a comparative measure; and
- EBITDA and Adjusted EBITDA are a different calculation from
earnings before interest, taxes, depreciation and amortization as
defined for purposes of the financial covenants in the Company's
senior secured credit facility, and therefore should not be relied
upon for assessing compliance with covenants.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Statements that are not historical in nature or that relate
to future events and conditions are, or may be deemed to be,
forward-looking statements. These forward-looking statements are
based on Key's current expectations, estimates and projections and
its management's beliefs and assumptions concerning future events
and financial trends affecting its financial condition and results
of operations. In some cases, you can identify these statements by
terminology such as "may," "will," "should," "predicts," "expects,"
"believes," "anticipates," "projects," "potential" or "continue" or
the negative of such terms and other comparable terminology. These
statements are only predictions and are subject to substantial
risks and uncertainties and are not guarantees of performance.
Future actions, events and conditions and future results of
operations may differ materially from those expressed in these
statements. In evaluating those statements, you should carefully
consider the risks outlined in "Item 1A. Risk Factors," in Key's
Annual Report on Form 10-K for the year ended December 31, 2015.
Key undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date of this
press release except as required by law. All of Key's written and
oral forward-looking statements are expressly qualified by these
cautionary statements and any other cautionary statements that may
accompany such forward-looking statements.
Important factors that may affect Key's expectations,
estimates or projections include, but are not limited to, the
following: conditions in the oil and natural gas industry,
especially oil and natural gas prices and capital expenditures by
oil and natural gas companies; volatility in oil and natural gas
prices; Key's ability to preserve its liquidity, manage its level
of indebtedness; the terms of strategic alternative or transaction
with Key's lenders and noteholders; Key's ability to implement
price increases or maintain pricing on its core services; industry
capacity; increased labor costs or unavailability of skilled
workers; asset impairments or other charges; the periodic low
demand for Key's services and resulting operating losses and
negative cash flows; Key's highly competitive industry as well as
operating risks, which are primarily self-insured, and the
possibility that its insurance may not be adequate to cover all of
its losses or liabilities; the economic, political and social
instability risks of doing business in certain foreign countries;
significant costs and potential liabilities resulting from
compliance with applicable laws; Key's historically high employee
turnover rate and its ability to replace or add workers; Key's
ability to incur debt or long-term lease obligations; Key's ability
to implement technological developments and enhancements;
significant costs and liabilities resulting from environmental,
health and safety laws and regulations, including those relating to
hydraulic fracturing; severe weather impacts on Key's business;
Key's ability to successfully identify, make and integrate
acquisitions and its ability to finance future growth of its
operations or future acquisitions; the loss of one or more of Key's
larger customers; the impact of compliance with climate change
legislation or initiatives; Key's ability to generate sufficient
cash flow to meet debt service obligations; the amount of Key's
debt and the limitations imposed by the covenants in the agreements
governing its debt, including its ability to comply with covenants
under its current debt agreements; an increase in Key's debt
service obligations due to variable rate indebtedness; Key's
inability to achieve its financial, capital expenditure and
operational projections, including quarterly and annual projections
of revenue and/or operating income and its inaccurate assessment of
future activity levels, customer demand, and pricing stability
which may not materialize (whether for Key as a whole or for
geographic regions and/or business segments individually); Key's
ability to execute its plans to withdraw from international markets
outside North America; Key's
ability to achieve the benefits expected from acquisition and
disposition transactions; Key's ability to respond to changing or
declining market conditions, including Key's ability to reduce the
costs of labor, fuel, equipment and supplies employed and used in
its businesses; Key's ability to maintain sufficient liquidity; and
other factors affecting Key's business described in "Item 1A. Risk
Factors" in its Annual Report on Form 10-K for the year ended
December 31, 2015.
About Key Energy Services
Key Energy Services is the largest onshore, rig-based well
servicing contractor based on the number of rigs owned. Key
provides a complete range of well intervention services and has
operations in all major onshore oil and gas producing regions of
the continental United States and
internationally in Mexico and
Russia.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/key-energy-services-reports-second-quarter-2016-earnings-300313753.html
SOURCE Key Energy Services, Inc.