HOUSTON, March 1, 2019 /PRNewswire/ -- Independence
Contract Drilling, Inc. (the "Company") (NYSE: ICD) today reported
financial results for the three and twelve months ended
December 31, 2018.
Fourth Quarter 2018 Highlights
- Net loss of $8.6 million, or
$0.11 per share.
- Adjusted net income, as defined below, of $1.0 million, or $0.01 per share.
- Adjusted EBITDA, as defined below, of $16.0 million.
- Net debt, excluding capitalized leases, of $117.1 million.
- Fleet utilization of 95.7%.
- Fully-burdened margin of $7,501
per day.
- Completion of the Sidewinder merger on October 1, 2018.
In the fourth quarter of 2018, the Company reported revenues of
$62.8 million, a net loss of
$8.6 million, or $0.11 per share, adjusted net income (defined
below) of $1.0 million, or
$0.01 per share, and adjusted EBITDA
(defined below) of $16.0
million. This compares to revenues of $28.4 million, a net loss of $3.9 million, or $0.10 per share, an adjusted net loss of
$1.8 million, or $0.05 per share, and adjusted EBITDA of
$6.8 million in the third quarter of
2018 and revenues of $25.0 million, a
net loss of $5.7 million, or
$0.15 per share, an adjusted net loss
of $4.6 million, or $0.12 per share, and adjusted EBITDA of
$3.7 million in the fourth quarter of
2017.
For the year ended December 31,
2018, the Company reported revenues of $142.6 million, a net loss of $20.0 million, or $0.42 per share, an adjusted net loss of
$8.3 million, or $0.17 per share, and adjusted EBITDA of
$31.9 million. This compares to
revenues of $90.0 million, a net loss
of $24.3 million, or $0.64 per share, an adjusted net loss of
$20.1 million, or $0.53 per share, and adjusted EBITDA of
$12.6 million for the year ended
December 31, 2017.
Chief Executive Officer Anthony
Gallegos commented, "The fourth quarter of 2018 was
transformational for Independence Contract Drilling. We
successfully completed the combination with Sidewinder, more than
doubling our operating fleet. The combination fundamentally
improved our profitability and free cash flow and the operating and
financial scale of the Company.
The post-combination integration is progressing exceptionally
well thanks to the efforts of our dedicated field and corporate
employees who have worked diligently while maintaining our focus on
safe and reliable operations and cost control. We are
confident that we can exceed our $10
million synergy goal by the third quarter of 2019.
During the fourth quarter, we mobilized an incremental rig that
commenced drilling operations in December under a one-year
contract. We also successfully recontracted or extended
contracts on five rigs with expiring contracts. As a result,
we exited 2018 with 32 drilling rigs operating.
Looking forward into 2019, the decline in oil price during the
fourth quarter of 2018 negatively impacted our customers' budgeting
processes and 2019 capital budgets. Although we remain
encouraged by the oil price recovery and recent stabilization, we
have seen some softness in drilling activity. However, we
expect super-spec rig utilization to remain robust, with only
minimal periods of transitory idle time as operators reshape and
high-grade their contracted rig fleets in light of their capital
budgets."
Sidewinder Merger
On October 1, 2018, the Company
completed its merger with Sidewinder Drilling, increasing its
drilling fleet from 15 rigs to 34 rigs. Pursuant to the terms
of the merger, the Company issued 36,752,657 shares of common stock
and assumed $58.5 million of
Sidewinder indebtedness. Contemporaneously with the closing
of the merger, the Company entered into a new $130 million term loan and $40 million revolving line of credit facility,
which were utilized to refinance the indebtedness assumed in the
merger as well as the Company's then-existing outstanding bank
debt.
The Company's results for the fourth quarter of 2018 fully
reflect the combined operations. As a result, prior period
results of operations may not be comparable. During the
fourth quarter of 2018, the following items relating to the merger
and associated financing impacted the Company's results of
operations:
- Non-cash revenues of $2.0 million
associated with the amortization of intangible revenues
attributable to the merger, which is excluded from the Company's
reported adjusted net income, adjusted EBITDA and revenue per day
statistics during the quarter;
- merger related expenses of $11.3
million, which is excluded from the Company's reported
adjusted net income and adjusted EBITDA during the quarter;
and
- non-cash interest expense of $0.9
million associated with the write-off of deferred financing
costs associated with the termination of pre-merger financing
arrangements, which is excluded from the Company's reported
adjusted net income.
Quarterly Operational Results
In the fourth quarter of 2018, the Company's fleet operated at
95.7% utilization and recorded 2,818 revenue days, compared to 99%
utilization and 1,345 revenue days in the third quarter of 2018,
and 100% utilization and 1,289 revenue days in the fourth quarter
of 2017. The decrease in utilization compared to prior
periods reflects idle time associated with the transition of one
drilling rig assumed in the Sidewinder merger to a new contract
during the quarter.
Operating revenues in the fourth quarter of 2018 totaled
$62.8 million, compared to
$28.4 million in the third quarter of
2018 and $25.0 million in the fourth
quarter of 2017. Fourth quarter 2018 revenues include
$2.0 million of non-cash intangible
revenue associated with the Sidewinder merger.
Excluding this non-cash revenue, revenue per day in the fourth
quarter of 2018 was $20,433, compared
to $20,538 in the third quarter of
2018 and $18,338 in the fourth
quarter of 2017. The slight sequential revenue per day
decline is associated primarily with below-market dayrate contracts
assumed in the Sidewinder merger.
Operating costs in the fourth quarter of 2018 totaled
$39.9 million, compared to
$18.4 million in the third quarter of
2018 and $18.8 million in the fourth
quarter of 2017. Fully-burdened operating costs were
$12,932 per day in the fourth quarter
of 2018, compared to $12,986 in the
third quarter of 2018 and $13,094 in
the fourth quarter of 2017.
Fully-burdened rig operating margins, excluding reactivation and
rig construction costs, in the fourth quarter of 2018 were
$7,501 per day, compared to
$7,552 per day in the third quarter
of 2018 and $5,244 per day in the
fourth quarter of 2017.
Selling, general and administrative expenses in the fourth
quarter of 2018 were $5.0 million
(including $0.2 million of non-cash
stock-based compensation), compared to $3.9
million (including $0.7
million of non-cash stock-based compensation) in the third
quarter of 2018 and $3.1 million
(including $0.5 million of non-cash
stock-based compensation) in the fourth quarter of 2017.
Sequential increases in SG&A were primarily associated with
additional operations acquired in the Sidewinder merger, but do not
reflect the full realization of combined synergies, which the
Company does not expect to realize on a run-rate basis until the
end of the second quarter of 2019.
Drilling Operations Update
The Company is marketing 32 drilling rigs, including one rig
acquired in the Sidewinder merger that was reactivated and began
drilling operations in December
2018.
The Company's December 31, 2018
backlog of revenues from contracts with original terms of six
months or more was $120.9
million. Approximately $114.2
million of this backlog is expected to be realized during
2019.
Capital Expenditures and Liquidity Update
The Company's capital expenditure budget for 2019, net of asset
sales and recoveries is $29 million,
including $9.0 million associated
with the delivery of long lead-time items required to complete
four SCR conversions to AC
pad-optimal status based upon market conditions and the timing of
the rigs' existing drilling commitments, and $5.0 million reserved for future equipment
enhancements based upon market conditions and customer demand.
As of December 31, 2018, the
Company had cash on hand of $12.2
million, $2.5 million drawn on
its $40 million revolving credit
facility and a $130 million term loan
outstanding. The term loan includes a fully-committed
$15 million accordion that remains
undrawn and fully available to the Company.
Conference Call Details
A conference call for investors will be held today, March 1, 2019, at 9:00
a.m. Central Time (10:00 a.m. Eastern
Time) to discuss the Company's fourth quarter and year end
2018 results.
The call can be accessed live over the telephone by dialing
(855) 239-3115 or for international callers, (412) 542-4125.
A replay will be available shortly after the call and can be
accessed by dialing (877) 344-7529 or for international callers,
(412) 317-0088. The passcode for the replay is
10128988. The replay will be available until March 8, 2019.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging onto the Company's website at
www.icdrilling.com in the Investor Relations section. A
replay of the webcast will also be available for approximately 30
days following the call.
About Independence Contract Drilling, Inc.
Independence Contract Drilling provides land-based contract
drilling services for oil and natural gas producers in the United States. The Company constructs,
owns and operates a fleet of pad-optimal ShaleDriller rigs that are
specifically engineered and designed to accelerate its clients'
production profiles and cash flows from their most technically
demanding and economically impactful oil and gas properties. For
more information, visit www.icdrilling.com.
Forward-Looking Statements
This news release contains certain forward-looking statements
within the meaning of the federal securities laws. Words such as
"anticipated," "estimated," "expected," "planned," "scheduled,"
"targeted," "believes," "intends," "objectives," "projects,"
"strategies" and similar expressions are used to identify such
forward-looking statements. However, the absence of these words
does not mean that a statement is not forward-looking.
Forward-looking statements relating to Independence Contract
Drilling's operations are based on a number of expectations or
assumptions which have been used to develop such information and
statements but which may prove to be incorrect. These statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict, and
there can be no assurance that actual outcomes and results will not
differ materially from those expected by management of Independence
Contract Drilling. For more information concerning factors that
could cause actual results to differ materially from those conveyed
in the forward-looking statements, please refer to the "Risk
Factors" section of the Company's Annual Report on Form 10-K, filed
with the SEC and the information included in subsequent amendments
and other filings. These forward-looking statements are based on
and include our expectations as of the date hereof. Independence
Contract Drilling does not undertake any obligation to update or
revise such forward-looking statements to reflect events or
circumstances that occur, or which Independence Contract Drilling
becomes aware of, after the date hereof.
INDEPENDENCE
CONTRACT DRILLING, INC.
|
Unaudited
|
(in thousands,
except par value and share data)
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
December 31,
2018
|
|
December 31,
2017
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
12,247
|
|
$
2,533
|
Accounts receivable,
net
|
41,987
|
|
18,056
|
Inventories
|
2,693
|
|
2,710
|
Assets held for
sale
|
19,711
|
|
4,637
|
Prepaid expenses and
other current assets
|
8,930
|
|
2,957
|
|
Total current assets
|
85,568
|
|
30,893
|
Property, plant and
equipment, net
|
496,197
|
|
272,388
|
Goodwill
|
1,627
|
|
-
|
Other long-term
assets, net
|
1,470
|
|
1,364
|
|
Total assets
|
$
584,862
|
|
$
304,645
|
Liabilities and
Stockholders' Equity
|
|
|
|
Liabilities
|
|
|
|
|
Current portion of
long-term debt (1)
|
$
587
|
|
$
533
|
|
Accounts
payable
|
16,312
|
|
11,627
|
|
Accrued
liabilities
|
29,219
|
|
6,969
|
|
Total current liabilities
|
46,118
|
|
19,129
|
|
Long-term debt
(2)
|
130,012
|
|
49,278
|
|
Deferred income
taxes, net
|
774
|
|
683
|
|
Other long-term
liabilities
|
16,425
|
|
73
|
|
Total liabilities
|
|
|
|
|
193,329
|
|
69,163
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock, $0.01
par value, 200,000,000 shares authorized; 77,598,806 and 38,246,919 shares issued,
respectively; and 77,078,252 and 37,985,225 shares outstanding,
respectively
|
|
|
|
|
771
|
|
380
|
|
Additional paid-in
capital
|
503,446
|
|
326,616
|
|
Accumulated
deficit
|
(109,638)
|
|
(89,645)
|
|
Treasury stock, at
cost, 520,554 and 261,694 shares, respectively
|
(3,046)
|
|
(1,869)
|
|
Total stockholders' equity
|
391,533
|
|
235,482
|
|
Total liabilities and stockholders' equity
|
$
584,862
|
|
$
304,645
|
|
|
|
|
(1)
|
Current portion of
long-term debt relates to the current portion of vehicle capital
lease obligations.
|
|
|
|
|
(2)
|
As of December 31,
2018, long-term debt includes $0.6 million of long-term vehicle
capital lease obligations. As of December 31, 2017, long-term
debt included $0.7 million of long-term vehicle capital lease
obligations.
|
INDEPENDENCE
CONTRACT DRILLING, INC.
|
Unaudited
|
(in thousands,
except per share amounts)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ 62,789
|
|
$ 25,041
|
|
$ 28,439
|
|
$ 142,609
|
|
$
90,007
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
39,908
|
|
18,780
|
|
18,420
|
|
95,220
|
|
67,733
|
|
Selling, general and
administrative
|
5,030
|
|
3,112
|
|
3,903
|
|
15,907
|
|
13,213
|
|
Merger related
expenses
|
11,270
|
|
-
|
|
1,933
|
|
13,646
|
|
-
|
|
Depreciation and
amortization
|
10,890
|
|
6,724
|
|
6,831
|
|
30,891
|
|
25,844
|
|
Asset impairment,
net
|
(371)
|
|
994
|
|
431
|
|
25
|
|
2,568
|
|
(Gain) loss on
disposition of assets, net
|
(65)
|
|
104
|
|
(260)
|
|
(740)
|
|
1,677
|
|
|
Total cost and
expenses
|
66,662
|
|
29,714
|
|
31,258
|
|
154,949
|
|
111,035
|
|
|
Operating
loss
|
(3,873)
|
|
(4,673)
|
|
(2,819)
|
|
(12,340)
|
|
(21,028)
|
Interest
expense
|
(4,513)
|
|
(895)
|
|
(1,168)
|
|
(7,562)
|
|
(2,983)
|
|
|
Loss before income
taxes
|
(8,386)
|
|
(5,568)
|
|
(3,987)
|
|
(19,902)
|
|
(24,011)
|
Income tax expense
(benefit)
|
211
|
|
177
|
|
(50)
|
|
91
|
|
287
|
|
|
Net loss
|
$ (8,597)
|
|
$ (5,745)
|
|
$ (3,937)
|
|
$ (19,993)
|
|
$(24,298)
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
$ (0.11)
|
|
$ (0.15)
|
|
$ (0.10)
|
|
$
(0.42)
|
|
$
(0.64)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
75,692
|
|
37,983
|
|
38,253
|
|
47,580
|
|
37,762
|
INDEPENDENCE
CONTRACT DRILLING, INC.
|
Unaudited
|
(in
thousands)
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
Twelve Months
Ended December 31,
|
|
2018
|
|
2017
|
|
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
(19,993)
|
|
$
(24,298)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Depreciation and amortization
|
30,891
|
|
25,844
|
Asset impairment, net
|
25
|
|
2,568
|
Stock-based compensation
|
4,829
|
|
3,565
|
(Gain) loss on disposition of assets, net
|
(740)
|
|
1,677
|
Amortization of deferred rent
|
105
|
|
-
|
Deferred income taxes
|
91
|
|
287
|
Amortization of deferred financing costs
|
492
|
|
434
|
Write-off of deferred financing costs
|
856
|
|
-
|
Bad debt expense
|
22
|
|
-
|
Changes in operating assets and liabilities, net of effects of
Sidewinder merger
|
|
|
|
Accounts
receivable
|
(1,022)
|
|
(6,588)
|
Inventories
|
250
|
|
(301)
|
Prepaid
expenses and other assets
|
(4,681)
|
|
133
|
Accounts
payable and accrued liabilities
|
5,010
|
|
1,612
|
Net cash provided by operating activities
|
16,135
|
|
4,933
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Cash acquired in
Sidewinder merger
|
10,743
|
|
-
|
Purchases of
property, plant and equipment
|
(37,550)
|
|
(31,347)
|
Proceeds from
insurance claims
|
257
|
|
-
|
Proceeds from the
sale of assets
|
1,303
|
|
1,253
|
Net cash used in investing activities
|
(25,247)
|
|
(30,094)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings under Term
Loan Facility
|
130,000
|
|
-
|
Borrowings under ABL
Credit Facility
|
5,066
|
|
-
|
Borrowings under CIT
Credit Facility
|
50,666
|
|
44,451
|
Repayments under ABL
Credit Facility
|
(2,500)
|
|
-
|
Repayments under CIT
Credit Facility
|
(99,207)
|
|
(21,662)
|
Repayment of
Sidewinder debt
|
(58,512)
|
|
-
|
Purchase of treasury
stock
|
(1,180)
|
|
(174)
|
RSUs withheld for
taxes
|
(710)
|
|
(863)
|
Financing costs paid
under Term Loan Facility
|
(3,371)
|
|
-
|
Financing costs paid
under ABL Credit Facility
|
(676)
|
|
-
|
Financing costs paid
under CIT Credit Facility
|
(114)
|
|
(530)
|
Payments for capital
lease obligations
|
(636)
|
|
(599)
|
Net cash provided by financing activities
|
18,826
|
|
20,623
|
Net increase (decrease) in cash and cash equivalents
|
9,714
|
|
(4,538)
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
Beginning of
year
|
2,533
|
|
7,071
|
End of
year
|
$
12,247
|
|
$
2,533
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid during the
period for interest
|
$
3,202
|
|
$
2,680
|
Supplemental
disclosure of non-cash investing and financing
activity
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
$
1,175
|
|
$
(882)
|
Additions to
property, plant and equipment through capital leases
|
$
601
|
|
$
1,102
|
Additions to
property, plant and equipment through tenant allowance
on
leasehold
improvement
|
|
|
|
$
694
|
|
$
-
|
Sidewinder merger
consideration
|
$
231,617
|
|
$
-
|
The following table provides various financial and operational
data for the Company's operations the three months ending
December 31, 2018 and 2017 and
September 30, 2018 and the twelve
months ending December 31, 2018 and
2017. This information contains non-GAAP financial measures
of the Company's operating performance. The Company believes
this non-GAAP information is useful because it provides a means to
evaluate the operating performance of the Company on an ongoing
basis using criteria that are used by our management.
Additionally, it highlights operating trends and aids analytical
comparisons. However, this information has limitations and
should not be used as an alternative to operating income (loss) or
cash flow performance measures determined in accordance with GAAP,
as this information excludes certain costs that may affect the
Company's operating performance in future periods.
OTHER FINANCIAL
& OPERATING DATA
|
Unaudited
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed
rigs end of period (1)
|
|
32
|
|
14
|
|
15
|
|
32
|
|
14
|
Rig operating days
(2)
|
|
2,817.5
|
|
1,288.6
|
|
1,345.1
|
|
6,686.7
|
|
4,707.4
|
Average number of
operating rigs (3)
|
|
30.6
|
|
14.0
|
|
14.6
|
|
18.3
|
|
12.9
|
Rig utilization
(4)
|
|
95.7%
|
|
100.0%
|
|
99.0%
|
|
97.8%
|
|
96.0%
|
Average revenue per
operating day (5)
|
|
$
20,433
|
|
$
18,338
|
|
$
20,538
|
|
$
20,001
|
|
$
18,137
|
Average cost per
operating day (6)
|
|
$
12,932
|
|
$
13,094
|
|
$
12,986
|
|
$
13,053
|
|
$
12,899
|
Average rig margin
per operating day
|
|
$
7,501
|
|
$
5,244
|
|
$
7,552
|
|
$
6,948
|
|
$
5,238
|
|
|
|
|
(1)
|
Number of marketed
rigs as of December 31, 2018 increased by 18 rigs as compared
to the number of marketed rigs as of December 31, 2017.
Our 15th ShaleDriller rig was completed and commenced operations
during the third quarter of 2018, and as a result of the Sidewinder
merger we acquired 17 marketed rigs. Marketed rigs exclude
two idle rigs acquired in the Sidewinder merger that require
additional upgrade before they enter our marketed fleet.
|
|
|
|
|
(2)
|
Rig operating days
represent the number of days our rigs are earning revenue under a
contract during the period, including days that standby revenues
are earned. During the three months ended December 31, 2018
and 2017, and September 30, 2018 there were 4.3, zero and zero
operating days in which we earned revenue on a standby basis,
respectively. During the twelve months ended December 31,
2018 and 2017, there were 4.3 and 77.9 operating days,
respectively, in which we earned revenue on a standby basis,
including zero and 69.0 standby-without-crew days,
respectively.
|
|
|
|
|
(3)
|
Average number of
operating rigs is calculated by dividing the total number of rig
operating days in the period by the total number of calendar days
in the period.
|
|
|
|
|
(4)
|
Rig utilization is
calculated as rig operating days divided by the total number of
days our marketed drilling rigs are available during the applicable
period.
|
|
|
|
|
(5)
|
Average revenue per
operating day represents total contract drilling revenues earned
during the period divided by rig operating days in the
period. Excluded in calculating average revenue per operating
day are revenues associated with the reimbursement of out-of-pocket
costs paid by customers of $3.2 million, $1.4 million and $0.8
million for the three months ended December 31, 2018 and 2017 and
September 30, 2018, respectively, and $6.8 million and $4.6 million
for the twelve months ended December 31, 2018 and 2017,
respectively, and revenues associated with the amortization of
intangible revenue acquired in the Sidewinder merger of $2.0
million for the three months and the year ended December 31,
2018.
|
|
|
|
|
(6)
|
Average cost per
operating day represents operating costs incurred during the period
divided by rig operating days in the period. The following
costs are excluded in calculating average cost per operating day:
(i) out-of-pocket costs reimbursed by customers of $3.2 million,
$1.4 million and $0.8 million during the three months ended
December 31, 2018 and 2017 and September 30, 2018, respectively,
and $6.8 million and $4.6 million for the twelve months ended
December 31, 2018 and 2017, respectively, (ii) new crew training
costs of zero during the three months ended December 31, 2018 and
2017 and September 30, 2018, respectively, and $0.1 million and
$0.1 million during the twelve months ended December 31, 2018 and
2017, respectively, (iii) construction overhead costs expensed due
to reduced rig construction activity of $0.3 million, $0.5 million
and $0.1 million during the three months ended December 31, 2018
and 2017 and September 30, 2018, respectively, and $1.0 million and
$1.1 million during the twelve months ended December 31, 2018 and
2017, respectively, (iv) rig reactivation costs associated with the
redeployment of previously stacked rigs, excluding new crew
training costs (included in (ii) above), of zero and $1.0 million
during the three and twelve months ended December 31, 2017,
respectively, and (v) out-of-pocket expenses of $0.1 million, net
of insurance recoveries, incurred as a result of damage to one of
our rig's mast during the twelve months ended December 31,
2017.
|
Non-GAAP Financial Measures
Adjusted net loss, EBITDA and adjusted EBITDA are supplemental
non-GAAP financial measures that are used by management and
external users of our financial statements, such as industry
analysts, investors, lenders and rating agencies. In
addition, adjusted EBITDA is consistent with how EBITDA is
calculated under our credit facility for purposes of determining
our compliance with various financial covenants. We define
"EBITDA" as earnings (or loss) before interest, taxes,
depreciation, and amortization, and we define "adjusted EBITDA" as
EBITDA before stock-based compensation, non-cash asset impairments,
gains or losses on disposition of assets, and other non-recurring
items added back to, or subtracted from, net income for purposes of
calculating EBITDA under our credit facility. Neither
adjusted net loss, EBITDA or adjusted EBITDA is a measure of net
income as determined by U.S. generally accepted accounting
principles ("GAAP").
Management believes adjusted net loss, EBITDA and adjusted
EBITDA are useful because they allow our stockholders to more
effectively evaluate our operating performance and compliance with
various financial covenants under our credit facility and compare
the results of our operations from period to period and against our
peers without regard to our financing methods or capital structure
or non-recurring, non-cash transactions. We exclude the items
listed above from net income (loss) in calculating adjusted net
loss, EBITDA and adjusted EBITDA because these amounts can vary
substantially from company to company within our industry depending
upon accounting methods and book values of assets, capital
structures and the method by which the assets were acquired. None
of adjusted net loss, EBITDA or adjusted EBITDA should be
considered an alternative to, or more meaningful than, net income
(loss), the most closely comparable financial measure calculated in
accordance with GAAP, or as an indicator of our operating
performance or liquidity. Certain items excluded from adjusted net
loss, EBITDA and adjusted EBITDA are significant components in
understanding and assessing a company's financial performance, such
as a company's return on assets, cost of capital and tax structure.
Our presentation of adjusted net loss, EBITDA and adjusted EBITDA
should not be construed as an inference that our results will be
unaffected by unusual or non-recurring items. Our
computations of adjusted net loss, EBITDA and adjusted EBITDA may
not be comparable to other similarly titled measures of other
companies.
Reconciliation of
Net Loss to Adjusted Net Income (Loss):
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$(8,597)
|
|
$ (0.11)
|
|
$(5,745)
|
|
$
(0.15)
|
|
$(3,937)
|
|
$
(0.10)
|
|
$(19,993)
|
|
$
(0.42)
|
|
$(24,298)
|
|
$
(0.64)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
(371)
|
|
(0.01)
|
|
994
|
|
0.03
|
|
431
|
|
0.01
|
|
25
|
|
-
|
|
2,568
|
|
0.07
|
(Gain) loss on
disposition of assets, net (2)
|
(65)
|
|
-
|
|
104
|
|
-
|
|
(260)
|
|
(0.01)
|
|
(740)
|
|
(0.02)
|
|
1,677
|
|
0.04
|
Intangible revenue
(3)
|
(2,044)
|
|
(0.03)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,044)
|
|
(0.04)
|
|
-
|
|
-
|
Merger related
expenses (4)
|
11,270
|
|
0.15
|
|
-
|
|
-
|
|
1,933
|
|
0.05
|
|
13,646
|
|
0.29
|
|
-
|
|
-
|
Write-off of deferred
financing costs (5)
|
856
|
|
0.01
|
|
-
|
|
-
|
|
-
|
|
-
|
|
856
|
|
0.02
|
|
-
|
|
-
|
Adjusted net
income (loss)
|
$ 1,049
|
|
$
0.01
|
|
$(4,647)
|
|
$
(0.12)
|
|
$(1,833)
|
|
$
(0.05)
|
|
$
(8,250)
|
|
$
(0.17)
|
|
$(20,053)
|
|
$
(0.53)
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(8,597)
|
|
$
(5,745)
|
|
$
(3,937)
|
|
$
(19,993)
|
|
$
(24,298)
|
Add back:
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
211
|
|
177
|
|
(50)
|
|
91
|
|
287
|
Interest
expense
|
4,513
|
|
895
|
|
1,168
|
|
7,562
|
|
2,983
|
Depreciation and
amortization
|
10,890
|
|
6,724
|
|
6,831
|
|
30,891
|
|
25,844
|
Asset impairment, net
(1)
|
(371)
|
|
994
|
|
431
|
|
25
|
|
2,568
|
EBITDA
|
6,646
|
|
3,045
|
|
4,443
|
|
18,576
|
|
7,384
|
(Gain) loss on
disposition of assets, net (2)
|
(65)
|
|
104
|
|
(260)
|
|
(740)
|
|
1,677
|
Stock-based
compensation
|
240
|
|
528
|
|
718
|
|
2,438
|
|
3,565
|
Intangible revenue
(3)
|
(2,044)
|
|
-
|
|
-
|
|
(2,044)
|
|
-
|
Merger related
expenses( 4)
|
11,270
|
|
-
|
|
1,933
|
|
13,646
|
|
-
|
Adjusted
EBITDA
|
$
16,047
|
|
$
3,677
|
|
$
6,834
|
|
$
31,876
|
|
$
12,626
|
|
|
|
|
(1)
|
In the fourth quarter
of 2018, we recorded insurance recoveries, net of impairments of
$0.6 million on the Galayda facility water damage incurred during
Hurricane Harvey after receiving a proof of loss letter from our
insurance carrier, offset by an increased impairment of $0.2
million related to increased estimated costs to sell the Galayda
facility. In the third quarter of 2018, we recorded a $0.4
million, or $0.01 per share, charge to asset impairments, net,
reflecting a $650 thousand estimated loss from the expected sale of
our Galayda facility, offset by a $219 thousand insurance recovery
related to some damaged equipment. In the fourth quarter of
2017 we recorded a $0.9 million, or $0.03 per share, non-cash
charge consisting of a $0.6 million impairment to our Galayda
facility as a result of damage associated with Hurricane Harvey in
August 2017, as well as a non-cash impairment representing the
estimated damage to a piece of drilling equipment, net of estimated
insurance recoveries totaling $0.3 million.
|
|
|
|
|
(2)
|
In the fourth quarter
of 2018 and the third quarter of 2018, we recorded a gain on
disposition of assets of $0.1 million and $0.3 million,
respectively. In the fourth quarter of 2017, we recorded a
loss on disposition of assets of $0.1 million. All three
quarters were primarily due to the gain or loss on the sale or
disposition of miscellaneous drilling equipment.
|
|
|
|
|
(3)
|
For the three months
and the year ended December 31, 2018, we amortized intangible
revenue related to an unfavorable contract liability acquired in
the Sidewinder merger.
|
|
|
|
|
(4)
|
For the three months
ended December 31, 2018 and September 30, 2018, and the twelve
months ended December 31, 2018, we incurred $11.3 million, $1.9
million and $13.6 million, respectively, of costs directly
associated with the Sidewinder merger.
|
|
|
|
|
(5)
|
For the three months
and the year ended December 31, 2018, we wrote-off $0.9 million of
unamortized deferred financing costs associated with the CIT Credit
Facility, which was terminated upon the closing of the Sidewinder
merger.
|
INVESTOR CONTACTS:
Independence Contract Drilling, Inc.
E-mail inquiries to: Investor.relations@icdrilling.com
Phone inquiries: (281) 598-1211
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SOURCE Independence Contract Drilling, Inc.