Keane Group, Inc. ("Keane" or the "Company") today reported
third quarter 2018 financial and operational results.
Results and Recent Highlights
- Reported third quarter 2018 revenue of
$558.9 million, compared to second quarter 2018 of $578.5
million
- Realized third quarter 2018 net income
of $30.8 million, compared to second quarter 2018 net income of
$30.7 million
- Achieved third quarter 2018 Adjusted
EBITDA of $100.9 million compared to second quarter 2018 of $111.3
million
- Reported annualized Adjusted Gross
Profit per fleet of $20.5 million, compared to second quarter 2018
of $20.0 million
- Averaged 27.0 hydraulic fracturing
fleets deployed in third quarter 2018; equivalent of 24.0
fully-utilized fleets
- Executed $88 million of stock
repurchases to date, representing approximately 6% of outstanding
shares
- Board of Directors authorized second
stock repurchase program capacity reset to $100 million
Third Quarter 2018 Financial Results
Revenue for the third quarter of 2018 totaled $558.9 million, a
decrease of 3% compared to revenue for the second quarter of 2018
of $578.5 million. Net income for the third quarter of 2018 was
$0.28 per share, unchanged from the $0.28 per share reported for
the second quarter of 2018. Excluding one-time items and other
adjustments further discussed below, net income for the third
quarter of 2018 was $24.0 million, compared to net income of $38.5
million for the second quarter of 2018.
Adjusted EBITDA for the third quarter of 2018 totaled $100.9
million, compared to $111.3 million for the second quarter of 2018.
Adjusted Gross Profit for the third quarter of 2018 was $122.3
million, compared to $130.8 million for the second quarter of
2018.
Selling, general and administrative expenses for the third
quarter of 2018 totaled $27.8 million, compared to $24.1 million
for the second quarter of 2018. Excluding one-time items, selling,
general and administrative expenses for the third quarter of 2018
totaled $19.9 million compared to $18.9 million for the second
quarter of 2018.
“My first few months since joining Keane have been exciting, and
I am pleased to be working alongside James, Greg and the rest of
the leadership team,” said Robert Drummond, Chief Executive Officer
of Keane. “I have long been impressed by Keane’s platform, and my
experience in the first 90 days has underscored to me the quality
of personnel, the strength of relationships and the consistency of
execution. I look forward to partnering with our customers and
building upon Keane’s track-record of success.”
“We executed well during the third quarter, delivering financial
results slightly above the guidance ranges provided in September,”
said Greg Powell, President and Chief Financial Officer of Keane.
“While we were successful in maintaining annualized Adjusted Gross
Profit per fleet, the record-high efficiencies we continue to
achieve led to white space on our frac schedule, resulting in
approximately 90% utilization on the 27 average fleets deployed
during the quarter.”
Completions Services
Revenue for Completion Services totaled $548.4 million for the
third quarter of 2018, a decrease of 4% compared to the second
quarter of 2018 of $569.9 million, driven by reduced utilization
from unanticipated white space in the frac calendar. For the third
quarter of 2018, Keane had an average of 27.0 fleets deployed, of
which, utilization averaged 89%, resulting in the equivalent of
24.0 average fully-utilized fleets during the quarter. Adjusted
Gross Profit in Completion Services totaled $122.7 million for the
third quarter of 2018, compared to $131.2 million for the second
quarter of 2018.
Annualized revenue per average deployed hydraulic fracturing
fleet for the third quarter of 2018 was $91.4 million, compared to
$86.7 million for the second quarter of 2018. Annualized Adjusted
Gross Profit per fleet totaled $20.5 million, compared to $20.0
million for the second quarter of 2018.
Other Services
Revenue in Other Services for the third quarter of 2018 totaled
$10.5 million, compared to $8.6 million for the second quarter of
2018, driven by the continued ramp of the Company’s cementing
business.
Third Quarter 2018 One-Time Items and Other
Adjustments
Adjusted EBITDA for the third quarter of 2018 excludes $6.8
million of one-time items, driven by insurance proceeds received
for the previously disclosed incident in July 2018, partially
offset by non-cash stock compensation expense, legal contingencies
and costs associated with the recently completed asset acquisition
from Refinery Specialties, Incorporated ("RSI").
Balance Sheet and Capital
Total debt outstanding as of September 30, 2018 was $341.0
million, net of unamortized debt discounts and unamortized deferred
charges and excluding capital lease obligations, compared to $341.3
million as of June 30, 2018. As of September 30, 2018, cash and
equivalents totaled $82.8 million, compared to $109.5 million as of
June 30, 2018.
Total available liquidity as of September 30, 2018 was
approximately $290.7 million, which included cash and availability
under our asset-based credit facility. Total operating cash flow
for the third quarter of 2018 was approximately $108 million. These
operating cash flows, combined with balance sheet cash, were
primarily used to fund capital expenditures of approximately $90
million, stock repurchases of $29 million, acquisition costs net of
insurance proceeds of approximately $17 million, and debt service
of approximately $7 million.
Stock Repurchase Program Update
During the third quarter of 2018, Keane repurchased
approximately 2.4 million of its common shares for $29 million, and
thus far in the fourth quarter of 2018, repurchased an additional
1.6 million common shares for $18 million. Since the program’s
initiation earlier this year and through October 31, 2018, Keane
has repurchased a total of approximately 6.6 million common shares
for approximately $88 million.
Effective October 26, 2018, Keane’s Board of Directors
authorized a reset of capacity on its existing stock repurchase
program back to $100 million and extended the program’s expiration
date to September 2019, from a previous expiration of February
2019.
“We are pleased to repurchase a significant amount of shares at
attractive value for shareholders,” said Mr. Powell. “The
repurchases completed to date represent approximately 6.6 million
shares, or roughly 6% of outstanding shares prior to the program’s
implementation. We remain committed to stock repurchases as part of
our capital allocation strategy, as evidenced by the Board’s second
increased capacity authorization.”
The stock repurchase program does not obligate Keane to purchase
any shares of common stock during any period and the program may be
modified or suspended at any time at the Company's discretion.
Outlook
For the fourth quarter of 2018, total revenue is expected to
range between $470 million and $500 million. Keane’s hydraulic
fracturing fleet for the fourth quarter of 2018 will include 29.0
fleets, of which, 25.0 are expected to be deployed. Of this amount,
Keane expects to achieve average utilization of approximately 90%,
resulting in the equivalent of approximately 22.0 average
fully-utilized hydraulic fracturing fleets during the quarter.
Annualized Adjusted Gross Profit per fleet, based on approximately
22.0 average fully-utilized fleets, is expected to range between
$16.0 million and $18.0 million, including approximately $15
million of labor and maintenance costs associated with keeping our
fleets market-ready.
Keane’s cementing business continues to ramp activity. By the
end of 2018, Keane expects run-rate revenue of its cementing
business of between $50 million and $60 million on margins of
approximately 15%. This compares to Keane’s previous forecast of
run-rate revenue by the end of 2018 of between $70 million and $90
million and margins of 20% to 25%, which it now expects to achieve
in the first half of 2019.
“While I am pleased with the efficiency we are seeing across our
portfolio, driven by our partnership with high quality operators,
we expect the fourth quarter to be impacted by the same
efficiency-driven challenges faced in the third quarter, as well as
customer budget exhaustion, some early-achievement of production
targets, commodity price differentials and typical seasonality,”
said Mr. Drummond. “While our business is not immune to these
challenges, we believe they are temporary, and we’re utilizing the
near-term market dynamics to invest in our people and equipment,
ensuring that we are well-positioned to take advantage of the
opportunities anticipated on the horizon. I am very optimistic
about the long term fundamentals for our business over the next few
years.”
Conference Call
On November 1, 2018, Keane will hold a conference call for
investors at 7:30 a.m. Central Time (8:30 a.m. Eastern Time) to
discuss Keane’s third quarter 2018 results. Hosting the call will
be Robert Drummond, Chief Executive Officer, James Stewart,
Executive Chairman, and Greg Powell, President and Chief Financial
Officer. The call can be accessed live over the telephone by
dialing (877) 407-9208, or for international callers, (201)
493-6784. A replay will be available shortly after the call and can
be accessed by dialing (844) 512-2921, or for international callers
(412) 317-6671. The passcode for the replay is 13683543. The replay
will be available until November 15, 2018.
About Keane Group, Inc.
Headquartered in Houston, Texas, Keane is one of the largest
pure-play providers of integrated well completion services in the
U.S., with a focus on complex, technically demanding completion
solutions. Keane's primary service offerings include horizontal and
vertical fracturing, wireline perforation and logging, engineered
solutions and cementing, as well as other value-added service
offerings.
Definitions of Non-GAAP Financial Measures and Other
Items
Keane has included both financial measures compiled in
accordance with GAAP and certain non-GAAP financial measures in
this press release, including Adjusted EBITDA and Adjusted Gross
Profit and ratios based on these financial measures. These
measurements provide supplemental information which Keane believes
is useful to analysts and investors to evaluate its ongoing results
of operations, when considered alongside GAAP measures such as net
income and operating income. These non-GAAP financial measures
exclude the financial impact of items management does not consider
in assessing Keane’s ongoing operating performance, and thereby
facilitate review of Keane’s operating performance on a
period-to-period basis. Other companies may have different capital
structures, and comparability to Keane’s results of operations may
be impacted by the effects of acquisition accounting on its
depreciation and amortization. As a result of the effects of these
factors and factors specific to other companies, Keane believes
Adjusted EBITDA and Adjusted Gross Profit provide helpful
information to analysts and investors to facilitate a comparison of
its operating performance to that of other companies.
Adjusted EBITDA is defined as net income (loss) adjusted to
eliminate the impact of interest, income taxes, depreciation and
amortization, along with certain items management does not consider
in assessing ongoing performance. Adjusted Gross Profit is defined
as Adjusted EBITDA, further adjusted to eliminate the impact of all
activities in the Corporate segment, such as selling, general and
administrative expenses, along with cost of services that
management does not consider in assessing ongoing performance.
Forward-Looking Statements
The statements contained in this release that are not historical
facts are forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Words such as “may,”
“will,” “could,” “should,” “expect,” “plan,” “project,” “intend,”
“anticipate,” “believe,” “estimate,” “predict,” “potential,”
“pursuant,” “target,” “continue,” and similar expressions are
intended to identify such forward-looking statements. The
statements in this press release that are not historical
statements, including statements regarding the Company’s plans,
objectives, future opportunities for the Company’s services, future
financial performance and operating results and any other
statements regarding Keane's future expectations, beliefs, plans,
objectives, financial conditions, assumptions or future events or
performance that are not historical facts, are forward-looking
statements within the meaning of the federal securities laws. These
statements are subject to numerous risks and uncertainties, many of
which are beyond Keane's control, which could cause actual results
to differ materially from the results expressed or implied by the
statements. These risks and uncertainties include, but are not
limited to the operations of Keane; the Company’s future financial
condition, results of operations, strategy and plans; results of
litigation, settlements and investigations; actions by third
parties, including governmental agencies; volatility in customer
spending and in oil and natural gas prices, which could adversely
affect demand for Keane's services and their associated effect on
rates, utilization, margins and planned capital expenditures;
global economic conditions; excess availability of pressure pumping
equipment, including as a result of low commodity prices,
reactivation or construction; liabilities from operations; weather;
decline in, and ability to realize, backlog; equipment
specialization and new technologies; shortages, delays in delivery
and interruptions of supply of equipment and materials; ability to
hire and retain personnel; loss of, or reduction in business with,
key customers; difficulty with growth and in integrating
acquisitions; product liability; political, economic and social
instability risk; ability to effectively identify and enter new
markets; cybersecurity risk; dependence on our subsidiaries to meet
our long-term debt obligations; variable rate indebtedness risk;
and anti-takeover measures in our charter documents.
Additional information concerning factors that could cause
actual results to differ materially from those in the
forward-looking statements is contained from time to time in
Keane's Securities and Exchange Commission (“SEC”) filings,
including the most recently filed Forms 10-Q and 10-K. Keane's
filings may be obtained by contacting Keane or the SEC or through
Keane's website at http://www.keanegrp.com or through the SEC's
Electronic Data Gathering and Analysis Retrieval System (EDGAR) at
http://www.sec.gov. Keane undertakes no obligation to publicly
update or revise any forward-looking statement.
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS & COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
Three Months Ended
September 30,
Three Months Ended
June 30,
2018 2017 2018 (Unaudited) (Unaudited)
(Unaudited) Revenue $ 558,908 $ 477,302 $ 578,533 Operating costs
and expenses: Cost of services 436,799 391,089 447,685 Depreciation
and amortization 68,287 46,204 59,404 Selling, general and
administrative expenses 27,783 28,592 24,125
Loss on disposal of assets
1,113 302 3,287 Total operating costs and
expenses 533,982 466,187 534,501 Operating
income 24,926 11,115 44,032 Other income (expenses): Other income
14,454 942 16 Interest expense (5,978 ) (7,195 ) (14,317 ) Total
other income (expense) 8,476 (6,253 ) (14,301 ) Income
before income taxes 33,402 4,862 29,731 Income tax benefit
(expense) (2,623 ) (797 ) 936
Net income
30,779 4,065 30,667 Other comprehensive income
(loss): Foreign currency translation adjustments 28 64 (31 )
Hedging activities 1,119 (178 ) 99
Total
comprehensive income $ 31,926 $
3,951 $ 30,735 Net income
per share, basic
$ 0.28 $ 0.04 $
0.28 Weighted average shares, basic
108,825
111,509 111,319
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS & COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
Nine Months Ended
September 30,
2018 2017 (Unaudited) (Unaudited)
Revenue $ 1,650,457 $ 1,040,591 Operating costs and expenses: Cost
of services 1,287,892 893,465 Depreciation and amortization 187,742
109,316 Selling, general and administrative expenses 85,792 68,915
(Gain) loss on disposal of assets 5,169 (137 ) Total
operating costs and expenses 1,566,595 1,071,559
Operating income (loss) 83,862 (30,968 ) Other income (expenses):
Other income 1,481 4,647 Interest expense (27,285 ) (51,905 ) Total
other expenses (25,804 ) (47,258 ) Income (loss) before income
taxes 58,058 (78,226 ) Income tax expense (4,855 ) (1,862 )
Net
income (loss) 53,203 (80,088 ) Other
comprehensive income (loss): Foreign currency translation
adjustments (37 ) 108 Hedging activities 3,429 (167 )
Total comprehensive income (loss) $ 56,595
$ (80,147 ) Net income (loss)
per share, basic
$ 0.48 $ (0.77
) Weighted average shares, basic
110,706
104,496
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
September 30, December
31, 2018 2017 ASSETS (Unaudited) (Audited)
Current Assets: Cash and cash equivalents $ 82,848 $ 96,120
Accounts receivable 246,345 238,018 Inventories, net 28,772 33,437
Prepaid and other current assets 9,982 8,519 Total current
assets 367,947 376,094 Property and equipment, net 550,273 468,000
Goodwill 132,524 134,967 Intangible assets 53,253 57,280 Other
noncurrent assets 10,332 6,775
Total Assets $
1,114,329 $ 1,043,116
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 125,524 $ 92,348 Accrued expenses 113,877
135,175 Customer contract liabilities 1,280 5,000 Current
maturities of capital lease obligations 4,173 3,097 Current
maturities of long-term debt 2,116 1,339 Stock based compensation -
current 4,281 4,281 Other current liabilities 217 914 Total
current liabilities 251,468 242,154 Capital lease
obligations, less current maturities 6,522 4,796 Long-term debt,
net(1) less current maturities 338,915 273,715 Stock based
compensation – non-current — 4,281 Other non-current liabilities
4,849 5,078 Total non-current liabilities 350,286 287,870
Total liabilities 601,754 530,024
Shareholders’ equity: Stockholders’ equity 486,826 542,192
Retained earnings (deficit) 24,558 (27,372 ) Accumulated other
comprehensive income (loss) 1,191 (1,728 )
Total shareholders’
equity 512,575 513,092 Total
liabilities and shareholders’ equity $ 1,114,329
$ 1,043,116
(1) Net of unamortized deferred financing costs and unamortized
debt discounts.
KEANE GROUP, INC. AND
SUBSIDIARIES
ADDITIONAL SELECTED FINANCIAL AND
OPERATING DATA
(unaudited, amounts in thousands, except
for non-financial statistics)
Three Months EndedSeptember
30,
Three Months EndedJune
30,
2018 2017 2018 Completion
Services: Revenues $ 548,418 $ 468,479 $ 569,929 Cost of
services 425,928 384,007 438,684 Gross profit 122,490 84,472
131,245 Depreciation, amortization and administrative expenses, and
impairment 64,579 41,542 54,618 Operating income $ 56,771 $ 42,362
$ 75,694 Average hydraulic fracturing fleets deployed 27.0
24.7 26.3 Average hydraulic fracturing fleet utilization 89 % 99 %
100 % Wireline - fracturing fleet bundling percentages 77 % 81 % 73
% Average annualized revenue per fleet deployed (1) $ 91,403 $
75,867 $ 86,681 Average annualized adjusted gross profit per fleet
deployed (1) $ 20,453 $ 14,239 $ 19,961 Adjusted gross profit
(loss) $ 122,717 $ 87,926 $ 131,245
Other Services
(2): Revenues $ 10,490 $ 8,823 $ 8,604 Cost of
services 10,871 7,082 9,001 Gross profit (loss) (381 ) 1,741 (397 )
Depreciation, amortization and administrative expenses, and
impairment 840 1,586 1,319 Operating income (loss) (1,221 ) 1,055
(1,716 ) Adjusted gross profit (loss) $ (381 ) $ 1,798 $ (397 )
(1) For the third quarter of 2018,
average annualized revenue per fleet deployed and average
annualized adjusted gross profit per fleet deployed was calculated
using the equivalent of 24.0 average fully-utilized fleets, which
represents 89% utilization of the Company's 27.0 average fleets
deployed. (2) Other Services segment includes exclusively the
cementing division from January 1, 2018. The Company’s workover
rigs were sold during the third and fourth quarters of 2017. The
Company’s coiled tubing assets were sold during the fourth quarter
of 2017.
KEANE GROUP, INC. AND
SUBSIDIARIES
ADDITIONAL SELECTED FINANCIAL AND
OPERATING DATA
(unaudited, amounts in thousands, except
for non-financial statistics)
Nine Months EndedSeptember 30,
2018 2017 Completion Services: Revenues
$ 1,625,798 $ 1,031,768 Cost of services 1,261,676 886,383 Gross
profit 364,122 145,385 Depreciation, amortization and
administrative expenses, and impairment 174,376 96,674 Operating
income $ 186,730 $ 49,807 Average hydraulic fracturing
fleets deployed 26.4 19.5 Average hydraulic fracturing fleet
utilization 96 % 78 % Wireline - fracturing fleet bundling
percentages 75 % 69 % Average annualized revenue per fleet deployed
(1) $ 85,344 $ 70,548 Average annualized adjusted gross profit per
fleet deployed (1) $ 19,126 $ 10,944 Adjusted gross profit $
364,349 $ 160,060
Other Services (2):
Revenues $ 24,659 $ 8,823 Cost of services 26,216 7,082 Gross
profit (loss) (1,557 ) 1,741 Depreciation, amortization and
administrative expenses, and impairment 3,557 4,323 Operating loss
(5,114 ) (1,894 ) Adjusted gross profit (loss) $ (1,557 ) $ 1,798
(1) For the nine months ended September
30, 2018, average annualized revenue per fleet deployed and average
annualized adjusted gross profit per fleet deployed was calculated
using the equivalent of 24.0 average fully-utilized fleets for the
third quarter of 2018, which represents 89% utilization of the
Company's 27.0 average fleets deployed in the third quarter of
2018. (2) Other Services segment includes exclusively the cementing
division from January 1, 2018. The Company’s workover rigs were
sold during the third and fourth quarters of 2017. The Company’s
coiled tubing assets were sold during the fourth quarter of 2017.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Three Months Ended September
30, 2018
Completion
Services
Other
Services
Corporate and
Other
Total Net Income (loss) $ 56,771
$ (1,221 ) $ (24,771 )
$ 30,779 Interest expense, net — — 5,978 5,978 Income
tax expense — — 2,623 2,623 Depreciation and amortization 64,579
840 2,868 68,287
EBITDA $
121,350 $ (381 ) $
(13,302 ) $ 107,667 Plus Management
Adjustments: Acquisition, integration and expansion (1) 227 — 301
528 Non-cash stock compensation (2) — — 4,809 4,809 Other (3) —
— (12,127 ) (12,127 )
Adjusted EBITDA $
121,577 $ (381 ) $
(20,319 ) $ 100,877 Selling, general
and administrative — — 27,783 27,783 (Gain) loss on disposal of
assets 1,140 — (27 ) 1,113 Other income — — (14,454 ) (14,454 )
Less Management Adjustments not associated with cost of services —
— 7,017 7,017
Adjusted gross profit
(loss) $ 122,717 $ (381 )
$ — $ 122,336 (1)
Represents integration costs related to the asset
acquisition from RSI, of which $0.2 million was recorded in cost of
services and $0.3 million was recorded in selling, general and
administrative expenses. (2) Represents non-cash amortization of
equity awards issued under Keane Group, Inc.’s Equity and Incentive
Award Plan (the “Equity Plan”). According to the Equity Plan, the
Compensation Committee of the Board of Directors can approve awards
in the form of restricted stock, restricted stock units, and/or
other deferred compensation. Consistent with prior policy,
amortization of awards is made ratably over the vesting periods,
beginning with the grant date, based on the total fair value
determined on grant date and recorded in selling, general and
administrative expenses. (3) Represents gain of $14.9 million
recognized for insurance proceeds received in connection with a
fire that damaged a portion of one hydraulic fracturing fleet on
July 1, 2018, which was recorded in (gain) loss on disposal of
assets, offset by $2.8 million of legal contingencies, which were
recorded in selling, general and administrative expenses.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Three Months Ended June 30,
2018
Completion
Services
Other
Services
Corporate
and Other
Total Net Income (loss) $ 75,694
$ (1,716 ) $ (43,311 )
$ 30,667 Interest expense, net — — 14,317 14,317
Income tax benefit — — (936 ) (936 ) Depreciation and amortization
54,618 1,319 3,467 59,404
EBITDA
$ 130,312 $ (397 ) $
(26,463 ) $ 103,452 Plus Management
Adjustments: Acquisition, integration and expansion (1) — — 2,827
2,827 Non-cash stock compensation (2) — — 4,040 4,040 Other (3) —
— 989 989
Adjusted EBITDA
$ 130,312 $ (397 ) $
(18,607 ) $ 111,308 Selling, general
and administrative — — 24,125 24,125 Loss on disposal of assets 933
— 2,354 3,287 Other income — — (16 ) (16 ) Less Management
Adjustments not associated with cost of services — —
(7,856 ) (7,856 )
Adjusted gross profit (loss) $
131,245 $ (397 ) $ —
$ 130,848 (1) Represents
primarily a markdown to fair value of idle real estate pending for
sale in Mathis, Texas acquired during the acquisition of a majority
of the U.S. assets and assumed certain liabilities of Trican Well
Service, L.P. (the "Acquired Trican Operations"). This loss was
recorded in loss on disposal of assets. (2) Represents non-cash
amortization of equity awards issued under the Equity Plan, which
is recorded in selling, general and administrative expenses. (3)
Represents primarily rating agency fees for establishing initial
ratings in connection with entering into a new $350 million senior
secured term facility. These expenses were recorded in selling,
general and administrative expenses.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Three Months Ended September
30, 2017
Completion
Services
Other
Services
Corporate and
Other
Total Net Income (loss) $ 42,362
$ 1,055 $ (39,352 ) $
4,065 Interest expense, net — — 7,195 7,195 Income tax
expense — — 797 797 Depreciation and amortization 41,542
1,586 3,076 46,204
EBITDA $
83,904 $ 2,641 $ (28,284
) $ 58,261 Plus Management Adjustments:
Acquisition, integration and expansion (1) 1,835 57 5,998 7,890
Offering-related expenses (2) — — 98 98 Commissioning costs 1,619 —
— 1,619 Non-cash stock compensation (3) — — 3,263 3,263 Other (4) —
— 470 470
Adjusted EBITDA
$ 87,358 $ 2,698 $
(18,455 ) $ 71,601 Selling, general and
administrative — — 28,592 28,592 (Gain) loss on disposal of assets
568 (900 ) 634 302 Other income — — (942 ) (942 ) Less Management
Adjustments not associated with cost of services — —
(9,829 ) (9,829 )
Adjusted gross profit $
87,926 $ 1,798 $ — $
89,724 (1) Represents primarily professional fees,
integration costs, lease termination costs, severance and other
costs associated with our acquisition and integration of RockPile
Energy Services and its subsidiaries (“RockPile”). (2) Represents
fees related to the organizational (legal entities) restructuring
to ready the Company for its initial public offering ("IPO"). These
expenses were recorded in selling, general and administrative
expenses. (3) Represents non-cash amortization of equity awards
issued under the Equity Plan, which is recorded in selling, general
and administrative expenses. (4) Represents an adjustment to a
contingent accrual and readiness costs associated with the
Company's initial internal controls design documentation for
Sarbanes-Oxley compliance, using COSO 2013 framework, beginning in
2018. These costs were recorded in selling, general and
administrative expenses. Also represents net (gain) loss on
disposals of assets, which is recorded in (gain) loss on disposal
of assets.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Nine Months Ended September
30, 2018
Completion
Services
Other
Services
Corporate and
Other
Total Net Income (loss) $ 186,731
$ (5,114 ) $ (128,414 )
$ 53,203 Interest expense, net — — 27,285 27,285
Income tax expense — — 4,855 4,855 Depreciation and amortization
174,376 3,557 9,809 187,742
EBITDA $ 361,107 $ (1,557
) $ (86,465 ) $ 273,085
Plus Management Adjustments: Acquisition, integration and expansion
(1) 227 — 16,382 16,609 Offering-related expenses (2) — — 12,969
12,969 Non-cash stock compensation (3) — — 11,924 11,924 Other (4)
— — (11,138 ) (11,138 )
Adjusted EBITDA
$ 361,334 $ (1,557 ) $
(56,328 ) $ 303,449 Selling, general
and administrative — — 85,792 85,792 Loss on disposal of assets
3,015 — 2,154 5,169 Other income — — (1,481 ) (1,481 ) Less
Management Adjustments not associated with cost of services —
— (30,137 ) (30,137 )
Adjusted gross profit
(loss) $ 364,349 $ (1,557 )
$ — $ 362,792 (1)
Represents adjustment to the contingent value right
liability based on the final agreed-upon settlement, which was
recorded in other income (expense), net and a markdown to fair
value of idle real estate pending for sale in Mathis, Texas
acquired as part of the Acquired Trican Operations, which was
recorded in (gain) loss on disposal of assets. Also represents
integration costs related to the asset acquisition from RSI, of
which $0.2 million was recorded in cost of services and $0.3
million was recorded in selling, general and administrative
expenses. (2) Represents primarily professional fees and other
miscellaneous expenses to consummate the secondary common stock
offering completed in January 2018. These expenses were recorded in
selling, general and administrative expenses, as Keane did not
receive any proceeds in the offering to offset the expenses. (3)
Represents non-cash amortization of equity awards issued under the
Equity Plan, which is recorded in selling, general and
administrative expenses. (4) Represents gain recognized for
insurance proceeds received in connection with a fire that damaged
a portion of one hydraulic fracturing fleet on July 1, 2018, which
was recorded in (gain) loss on disposal of assets. Also represents
legal contingencies and rating agency fees for establishing initial
ratings in connection with entering into a new $350 million senior
secured term facility, which were recorded in selling, general and
administrative expenses.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Nine Months Ended September
30, 2017
Completion
Services
Other
Services
Corporate and
Other
Total Net Income (loss) $ 49,807
$ (1,894 ) $ (128,001 )
$ (80,088 ) Interest expense, net — — 51,905
51,905 Income tax expense — — 1,862 1,862 Depreciation and
amortization 96,674 4,323 8,319 109,316
EBITDA $ 146,481 $ 2,429
$ (65,915 ) $ 82,995 Plus
Management Adjustments: Acquisition, integration and expansion (1)
1,835 57 5,786 7,678 Offering-related expenses (2) 1,266 — 4,619
5,885 Commissioning costs 11,574 — 197 11,771 Non-cash stock
compensation (3) — — 7,334 7,334 Other (4) — — 5,031
5,031
Adjusted EBITDA $ 161,156
$ 2,486 $ (42,948 ) $
120,694 Selling, general and administrative — — 68,915
68,915 (Gain) loss on disposal of assets (1,096 ) (688 ) 1,647 (137
) Other income — — (4,647 ) (4,647 ) Less Management Adjustments
not associated with cost of services — — (22,967 )
(22,967 )
Adjusted gross profit (loss) $
160,060 $ 1,798 $ — $
161,858 (1) Represents primarily
professional fees, due diligence expenses and other costs
associated with the acquisition and integration of RockPile, the
acquisition of the Acquired Trican Operations and costs associated
with the wind-down of certain other acquisitions. (2) Represents
fees and other miscellaneous expenses required to carry out the
reporting, prior years' audits and organizational (legal entities)
restructuring to ready the Company for its IPO and the eventual
consummation of the offering. These expenses were recorded in
selling, general and administrative expenses. Also represents
one-time IPO bonuses paid out to key operational and corporate
employees. These expenses were recorded in selling, general and
administrative expenses, of which $1.3 million was recorded in cost
of services for operations employees and the remaining in selling
general and administrative expenses. The bonuses were paid out
during the first quarter of 2017. (3) Represents non-cash
amortization of equity awards issued under the Equity Plan, which
is recorded in selling, general and administrative expenses. (4)
Represents contingency accruals related to certain litigation
claims and readiness costs associated with Keane's initial internal
control design documentation for Sarbanes-Oxley compliance, using
COSO 2013 framework, beginning in 2018. These costs were recorded
in selling, general and administrative expenses. Also represents
net (gain) loss on disposal of assets, which was recorded in (gain)
loss on disposal of assets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181031005868/en/
Investor Relations(713) 893-3602Marc Silverberg,
ICRmarc.silverberg@icrinc.com
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