FTS International, Inc. (NYSE: FTSI) (the “Company” or “FTSI”)
today reported its financial and operational results for the fourth
quarter and full year 2018.
Michael Doss, FTSI’s Chief Executive Officer, commented “Despite
a more challenging market, we delivered solid results in the fourth
quarter. Our adjusted EBITDA per fleet was higher than we initially
expected even though we experienced lower pricing and more than
normal white space in our operations calendar near year-end. We
generated healthy free cash flow, allowing us to continue reducing
our net debt.”
Fourth Quarter 2018 Compared to the Third Quarter
2018
- Revenue was $248.1 million, down from
$334.4 million
- Net income was $26.5 million, down from
$49.6 million
- Earnings per share of $0.24, down from
$0.45
- Adjusted EBITDA was $63.9 million, down
from $85.0 million
- Adjusted EBITDA per average active
fleet was $13.2 million on an annualized basis, down from $15.6
million
- Repaid $57.1 million of debt in the
fourth quarter and an additional $11.9 million subsequent to the
end of the quarter
Full Year 2018 Compared to Full Year 2017
- Revenue was $1,543.3 million, up from
$1,466.1 million
- Net income was $258.4 million, up from
$200.7 million
- Earnings per share was $6.54. Adjusting
for the timing and impact of the IPO on accretion expense and total
shares outstanding, earnings per share was $2.36
- Adjusted EBITDA per average active
fleet was $17.3 million, up from $16.0 million
- Repaid $622.1 million of debt, $319.1
million above IPO proceeds
Operational Update
Average active fleets during the fourth quarter 2018 was 19.3,
down from 21.8 in the third quarter 2018. The Company exited the
fourth quarter 2018 with 19 active fleets. The Company has 20
fleets active today.
FTSI completed 6,038 stages during the fourth quarter 2018, or
313 stages per active fleet. This compares to 6,991 stages in the
third quarter 2018, or 321 stages per active fleet.
Liquidity and Capital Resources
Capital expenditures were $15.6 million in the fourth quarter
and $100.5 million in 2018, below the Company’s previous estimate
of $105-$110 million in 2018.
During the fourth quarter, the Company repaid $57.1 million of
debt to bring the total principal amount of debt outstanding to
$507.9 million at year end. Subsequent to year end, FTSI
repaid an additional $11.9 million of debt. FTSI intends to
continue to repay debt with free cash flow generated in 2019.
At December 31, 2018, FTSI had $177.8 million of cash, resulting
in net debt of $330.1 million. As of February 27, 2019, the
availability under the Company’s revolving credit facility was
$106.1 million. During the fourth quarter 2018, the Company had no
borrowings outstanding under its revolving credit facility.
Conference Call & Webcast
FTSI will hold a conference call that will also be webcast on
its website on Thursday, February 28, 2019 at 9:00 a.m. Central
Time (10:00 a.m. Eastern Time) to discuss the results. Presenting
the Company’s results will be Michael Doss, Chief Executive
Officer, Buddy Petersen, Chief Operating Officer and Lance Turner,
Chief Financial Officer.
Please see below for instructions on how to access the
conference call and webcast. If you intend to ask a question in the
Q&A portion of the call, please join by phone.
By Phone:
Dial (312) 429-1274 at least 10 minutes before the call. A replay
will be available through March 21 by dialing (402) 977-9140 and
using the conference ID 21915388#. By Webcast:
Connect to the webcast via the Events page
of FTSI’s website at www.FTSI.com/investor-relations/events. Please
join the webcast at least 10 minutes in advance to register and
download any necessary software. A replay will be available shortly
after the call.
About FTS International, Inc.
Headquartered in Fort Worth, Texas, FTS International is one of
the largest providers of hydraulic fracturing services in North
America with an operating footprint consisting of five of the most
active major unconventional basins in the United States. The
Company’s services enhance hydrocarbon flow from oil and natural
gas wells drilled by exploration and production, or E&P,
companies in shale and other unconventional resource formations. To
learn more, visit www.FTSI.com.
Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP financial measure that FTSI
defines as earnings before interest; income taxes; and depreciation
and amortization, as well as, the following items, if applicable:
gain or loss on disposal of assets; debt extinguishment gains or
losses; inventory write-downs, asset and goodwill impairments; gain
on insurance recoveries; acquisition earn-out adjustments;
stock-based compensation; and acquisition or disposition
transaction costs. The most comparable financial measure to
Adjusted EBITDA under GAAP is net income or loss. The Company also
uses Adjusted EBITDA per average active fleet on an annualized
basis, which is a non-GAAP measure and is defined as Adjusted
EBITDA divided by the average active fleets per quarter then
multiplying the result by four. Adjusted EBITDA and Adjusted EBITDA
per average active fleet on an annualized basis are used by
management to evaluate the operating performance of the business
for comparable periods and Adjusted EBITDA is a metric used for
management incentive compensation. Adjusted EBITDA and Adjusted
EBITDA per average active fleet on an annualized basis should not
be used by investors or others as the sole basis for formulating
investment decisions, as they exclude a number of important items.
The Company believes Adjusted EBITDA and Adjusted EBITDA per
average active fleet on an annualized basis are important
indicators of operating performance because they exclude the
effects of the Company’s capital structure and certain non-cash
items from the Company’s operating results. Adjusted EBITDA is also
commonly used by investors in the oilfield services industry to
measure a company's operating performance, although FTSI’s
definition of Adjusted EBITDA may differ from other industry peer
companies.
Adjusted earnings per share represents FTSI’s net income less
the reversal of accretion expense for the conversion of FTSI’s
convertible preferred stock into shares of common stock in February
2018 divided by the number of shares outstanding during the year
ended December 31, 2018 assuming the shares issued and sold in
FTSI’s IPO occurred on January 1, 2018 and that those shares
remained outstanding throughout the year ended December 31, 2018.
The Company believes the use of adjusted earnings per share
provides additional information to enable management and FTSI’s
investors to facilitate year-over-year performance comparisons and
a comparison to the performance of the Company’s peers.
Net debt is a non-GAAP financial measure that FTSI defines as
total long-term debt less cash and cash equivalents. The most
comparable financial measure to net debt under GAAP is long-term
debt. Net debt is used by management as a measure of our financial
leverage. Net debt should not be used by investors or others as the
sole basis in formulating investment decisions as it does not
represent the Company’s actual indebtedness.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include statements regarding the
repayment of debt with free cash flow generated in 2019 and other
statements identified by words such as “could,” “may,” “might,”
“will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,”
“believes,” “estimates,” “expects,” “continues,” “projects” and
similar references to future periods. Forward-looking statements
are based on FTSI’s current expectations and assumptions regarding
capital market conditions, FTSI’s business, the economy and other
future conditions. Because forward-looking statements relate to the
future, by their nature, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict. As a result, FTSI’s actual results may differ
materially from those contemplated by the forward-looking
statements. Important factors that could cause actual results to
differ materially from those in the forward-looking statements
include, but are not limited to, the operations of FTSI; results of
litigation, settlements and investigations; the final terms of new
and renegotiated supply and customer contracts; actions by third
parties, including governmental agencies; volatility in customer
spending and in oil and natural gas prices, which could adversely
affect demand for FTSI'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. Any
forward-looking statement made in this press release speaks only as
of the date on which it is made. FTSI undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future developments or otherwise,
except as required by law.
When considering these forward-looking statements, you should
keep in mind the risk factors and other cautionary statements in
FTSI’s filings with the SEC. The risk factors and other factors
noted in FTSI’s filings with the SEC could cause the Company’s
actual results to differ materially from those contained in any
forward-looking statement.
Consolidated Statements of Operations
(unaudited)
Three Months Ended Year Ended
(In millions, except per share
amounts)
Dec. 31,2018
Sep. 30,2018
Dec. 31,2017
Dec. 31,2018
Dec. 31,2017
Revenue Revenue $
248.1 $ 324.4 $ 446.6 $ 1,450.4 $ 1,352.7 Revenue from related
parties – 10.0 12.1
92.9 113.4
Total revenue
248.1 334.4 458.7 1,543.3
1,446.1
Operating expenses Costs
of revenue 169.4 222.2 299.9 1,033.2 1,009.8 Selling, general and
administrative 21.6 19.7 19.0 87.9 81.0 Depreciation and
amortization 22.3 21.1 21.4 84.7 86.6 Impairments and other charges
3.2 10.0 0.4 19.2 1.8 (Gain) loss on disposal of assets, net (0.3 )
(0.1 ) 0.2 (0.1 ) (1.4 ) Gain on insurance recoveries –
– – – (2.9
)
Total operating expenses 216.2 272.9
340.9 1,224.9 1,174.9
Operating income 31.9 61.5 117.8 318.4 291.2
Interest expense, net (9.4 ) (10.4 ) (21.9 ) (49.3 ) (86.7 )
Gain (Loss) on extinguishment of debt, net 0.9 (0.6 ) (1.4 ) (9.8 )
(1.4 ) Equity in net income (loss) of joint venture affiliate
3.0 (0.7 ) (0.9 ) 1.1
(0.8 )
Income before income taxes 26.4 49.8
93.6 260.4 202.3 Income tax expense (benefit) (0.1 )
0.2 0.7 2.0 1.6
Net income $ 26.5 $ 49.6 $ 92.9
$ 258.4 $ 200.7 Net income (loss) attributable
to common stockholders (a) $ 26.5 $ 49.6 $ 30.9
$ 681.6 $ (25.9 ) Basic and diluted earnings
(loss) per share attributable to common stockholders $ 0.24
$ 0.45 $ 0.60 $ 6.54 $ (0.50 ) Shares
used in computing basic and diluted earnings (loss) per share
109.4 109.3 51.8
104.2 51.8 (a) Net loss
attributable to common stockholders for 2017, was calculated by
subtracting an accreted value attributable to FTSI’s convertible
preferred stock from net income. The accretion amount was $62.0
million and $226.6 million for the three- and twelve-month periods
ended December 31, 2017, respectively. Net income attributable to
common stockholders for 2018 included a $423.2 million reversal of
accretion expense previously recognized upon the conversion of
FTSI’s convertible preferred stock into shares of common stock in
February 2018.
Consolidated Balance Sheets
(unaudited)
Dec. 31, Dec. 31, (In millions)
2018 2017
ASSETS Current assets Cash and cash equivalents $
177.8 $ 208.1 Accounts receivable, net 158.3 231.1 Accounts
receivable from related parties – 3.0 Inventories 66.6 44.5 Prepaid
expenses and other current assets 7.0 19.9
Total current assets 409.7 506.6 Property,
plant, and equipment, net 275.3 270.9 Intangible assets, net 29.5
29.5 Investment in joint venture affiliate 23.2 21.0 Other assets
6.0 3.0
Total assets $ 743.7
$ 831.0
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT) Current liabilities Accounts payable $
101.1 $ 138.3 Accrued expenses and other current liabilities
31.3 44.4
Total current liabilities
132.4 182.7 Long-term debt 503.2 1,116.4 Other liabilities
1.2 0.4
Total liabilities
636.8 1,299.5 Series A convertible
preferred stock (a) – 349.8
Stockholders’ equity (deficit) Common stock 36.4 35.9
Additional paid-in capital 4,378.4 3,712.1 Accumulated deficit
(4,307.9 ) (4,566.3 )
Total stockholders’ equity
(deficit) 106.9 (818.3 )
Total
liabilities and stockholders’ equity (deficit) $ 743.7 $
831.0 (a)
Recapitalized into common stock directly
prior to FTSI’s initial public offering. See FTSI’s SEC filings
located on the Company’s website (www.FTSI.com) or the SEC’s
website (www.SEC.gov) for details on this recapitalization.
Reconciliation of Net Income to Adjusted
EBITDA
Three Months Ended
Year Ended
(In millions except average active fleets)
Dec. 31,2018
Sep. 30,2018
Dec. 31,2017
Dec. 31,2018
Dec. 31,2017
Net income $ 26.5 $ 49.6 $ 92.9 $ 258.4
$ 200.7 Interest expense, net 9.4 10.4 21.9 49.3 86.7
Income tax expense (0.1 ) 0.2 0.7 2.0 1.6 Depreciation and
amortization 22.3 21.1 21.4 84.7 86.6 (Gain) loss on disposal of
assets, net (0.3 ) (0.1 ) 0.2 (0.1 ) (1.4 ) Loss on extinguishment
of debt, net (0.9 ) 0.6 1.4 9.8 1.4 Stock-based compensation 7.0
3.2 – 15.2 – Gain on insurance recoveries – –
– – (2.9 )
Adjusted
EBITDA 63.9 85.0 138.5 419.3 372.7 Average Active Fleets
19.3 21.8 26.2 24.2
23.3
Annualized Adjusted EBITDA Per Average Active
Fleet $ 13.2 $ 15.6 $ 21.1 $ 17.3 $ 16.0
Reconciliation of Long-term Debt to Net
Debt
Dec. 31, Sep. 30, Dec.
31, (In millions)
2018
2018 2017 Long-term debt
$
503.2
$ 559.5 $ 1,116.4 Add: unamortized discount and debt issuance costs
4.7 5.5 13.6 Total principal amount of debt
507.9 565.0 1,130.0 Less: cash and cash equivalents
177.8 167.2 208.1
Net debt $ 330.1 $ 397.8 $
921.9
Calculation of Adjusted 2018 Earnings Per
Share
Year Ended (In millions, except per share amounts)
Dec. 31, 2018
Net income (loss) attributable to common stockholders (a) $
681.6 Less: reversal of accretion expense for the conversion of
FTSI’s convertible preferred stock into shares of common stock in
February 2018 423.2 Adjusted net income (loss) attributable
to common stockholders 258.4 Adjusted earnings per share:
Basic $ 2.36 Diluted $ 2.36 Adjusted shares used in
computing basic and diluted earnings per share (b): Basic
109.3 Diluted 109.3 (a) Net
income attributable to common stockholders for 2018 included a
$423.2 million reversal of accretion expense previously recognized
upon the conversion of FTSI’s convertible preferred stock into
shares of common stock in February 2018. (b) Assumes the shares
issued and sold in our IPO occurred on January 1, 2018 and that
109.3 million shares were outstanding throughout the year ended
December 31, 2018.
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version on businesswire.com: https://www.businesswire.com/news/home/20190227005982/en/
Lance TurnerChief Financial OfficerFTS International,
Inc.817-862-2000
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