Keane Group, Inc. ("Keane" or the "Company") today reported
fourth quarter and full-year 2017 financial results.
Results and Recent Highlights
- Reported fourth quarter 2017 revenue of
$501.5 million, compared to third quarter 2017 of $477.3
million
- Reported fourth quarter 2017 net income
of $43.9 million, compared to third quarter 2017 net income of $4.1
million
- Achieved fourth quarter 2017 Adjusted
EBITDA of $93.8 million, compared to third quarter 2017 of $71.6
million
- Increased annualized Adjusted Gross
Profit per fleet to $17.3 million, compared to third quarter 2017
of $14.2 million
- Board of Directors authorized stock
repurchase program of up to $100 million
- Executed dedicated agreement for one
previously ordered newbuild fleet; deployment expected by end of
second quarter 2018
Fourth Quarter 2017 Financial Results
Revenue for the fourth quarter of 2017 totaled $501.5 million,
an increase of 5% compared to revenue for the third quarter of 2017
of $477.3 million. Reported net income for the fourth quarter of
2017 totaled $43.9 million, compared to net income of $4.1 million
for the third quarter of 2017. Net income per share for the fourth
quarter of 2017 totaled $0.39, compared to net income per share for
the third quarter of 2017 of $0.04. Excluding one-time items and
other adjustments further discussed below, net income for the
fourth quarter of 2017 was $38.2 million, compared to net income of
$17.4 million for the third quarter of 2017.
Adjusted EBITDA for the fourth quarter of 2017 totaled $93.8
million, compared to $71.6 million for the third quarter of 2017.
Adjusted Gross Profit for the fourth quarter of 2017 was $113.1
million, compared to $89.7 million for the third quarter of
2017.
Selling, general and administrative expenses for the fourth
quarter of 2017 totaled $24.6 million, compared to $28.6 million
for the third quarter of 2017. Excluding one-time items, selling,
general and administrative expenses for the fourth quarter of 2017
totaled $18.4 million compared to $17.5 million for the third
quarter of 2017.
“Constructive market dynamics for completions services continued
during the fourth quarter,” said James Stewart, Chairman and Chief
Executive Officer of Keane. “We are proud of our performance and
execution during the quarter and throughout the year, grounded by
our strategy of partnering with high-quality blue chip customers
under dedicated agreements. We are deepening our customer
relationships, and in many cases, running multiple fleets per
customer, validating our successful partnership model. The outlook
for U.S. completions services remains robust, and we are encouraged
by current market signals and feedback from our customers,
supporting our decision to order 150,000 newbuild horsepower for
delivery and deployment later this year.”
“We achieved another quarter of strong financial performance,
maintaining full-utilization, advancing profitability, further
optimizing our asset portfolio and strengthening our balance sheet”
said Greg Powell, President and Chief Financial Officer of Keane.
“During the fourth quarter, we grew adjusted EBITDA by
approximately 30% sequentially and improved average annualized
Adjusted Gross Profit per fleet by more than 20%. The industry
experienced colder than normal weather late in the fourth quarter,
resulting in periods of inefficiency in many regions, including the
Permian. However, our dedicated customer agreements, combined with
quality execution, allowed us to continue our growth and deliver
results at the high-end of our profitability guidance.”
Full Year 2017 Financial Results
Revenue for the full year 2017 totaled $1.542 billion, an
increase of 266% compared to revenue for the full year 2016 of
$420.6 million. Net loss for the full year 2017 was $(36.1)
million, compared to a net loss for the full year 2016 of $(187.1)
million. Net loss per share for the full year 2017 totaled
$(0.34).
Adjusted EBITDA for the full year 2017 totaled $214.5 million,
compared to $1.9 million for the full year 2016. Adjusted gross
profit for the full year 2017 was $275.0 million, compared to $27.8
million for the full year 2016.
Completion Services
Revenue for Completion Services totaled $495.5 million for the
fourth quarter of 2017, an increase of 6% compared to the third
quarter of 2017 of $468.5 million, driven by an additional fleet
deployment in October 2017, and price increases from contract
re-openers on a portion of our portfolio. Keane averaged 26
deployed hydraulic fracturing fleets for the fourth quarter of
2017, of which 78% were bundled with wireline. Keane exited the
fourth quarter of 2017 with 26 hydraulic fracturing fleets
deployed.
Adjusted Gross Profit in Completion Services totaled $112.6
million for the fourth quarter of 2017, compared to $87.9 million
for the third quarter of 2017.
Annualized revenue per average deployed hydraulic fracturing
fleet for the fourth quarter of 2017 was $76.2 million, compared to
$75.9 million for the third quarter of 2017. Annualized Adjusted
Gross Profit per fleet totaled $17.3 million, an increase of 22% as
compared to $14.2 million for the third quarter of 2017.
Other Services
Revenue in Other Services for the fourth quarter of 2017 totaled
$6.0 million, compared to $8.8 million for the third quarter of
2017. Revenue during the fourth quarter of 2017 included
contribution from the company’s cementing assets, and
partial-quarter contribution from its workover rig assets, prior to
their sale in November 2017.
As part of Keane’s ongoing portfolio optimization, the company
executed the sale of the remaining six of its workover rigs during
the fourth quarter of 2017, generating approximately $10 million of
cash proceeds. Keane also completed the sale of its idled coiled
tubing assets for approximately $10 million of cash proceeds.
Together, and combined with the previous sale of six workover rigs
completed in the third quarter of 2017, Keane has generated
approximately $27 million of cash proceeds, while focusing on
optimizing utilization of its cementing assets.
Fourth Quarter 2017 One-Time Items and Other
Adjustments
Adjusted EBITDA for the fourth quarter of 2017 excludes $5.7
million of one-time net gains, comprised of one-time gains of $12.7
million, partially offset by one-time expenses of $7.0 million.
One-time gains primarily include a reduction in our contingent
value right ("CVR") liability from the acquisition of RockPile in
July 2017, insurance recoveries related to the acquisition of the
Acquired Trican Operations (as defined within) in 2016 and gains
related to the sale of coiled tubing assets. One-time expenses
primarily include non-cash stock compensation expense, secondary
issuance costs and commissioning costs.
Balance Sheet and Capital
Total debt outstanding as of December 31, 2017 was $275.1
million, net of unamortized debt discounts and unamortized deferred
charges and excluding capital lease obligations, compared to $275.6
million as of September 30, 2017.
As of December 31, 2017, cash and equivalents totaled $96.1
million, compared to $71.7 million as of September 30, 2017. Total
available liquidity as of December 31, 2017 was approximately
$295.8 million, which included availability under our asset-based
credit facility, as amended and further described below. Total
operating cash flow for the fourth quarter of 2017 was
approximately $79.7 million.
In December 2017, Keane amended and restated its Asset-Based
Revolving Credit Facility (“New ABL Facility”). The New ABL
Facility expands the Company’s total availability by $150 million
to a total of $300 million, subject to a borrowing base. In
addition, subject to approval by the applicable lenders and other
customary conditions, the New ABL Facility also allows for an
increase in commitments of up to an additional $150 million, up
from a previous amount of up to $75 million. The New ABL Facility
also amended certain terms to reflect Keane’s growth and provide
additional flexibility under its covenants.
“We remain committed to running a conservative balance sheet
position that provides us the financial flexibility to capitalize
on today’s supportive market conditions,” said Mr. Powell. “This
was further evidenced by the successful amendment of our ABL
facility completed during the fourth quarter, which enhances our
financial flexibility through increased capacity and lower interest
costs.”
Stock Repurchase Program
Keane’s Board of Directors has authorized a stock repurchase
program of up to $100 million of the Company’s outstanding common
stock, subject to Securities and Exchange Commission regulations,
stock market conditions and corporate working capital needs. The
duration of the stock buy-back program will be 12 months. The
program does not obligate Keane to purchase any particular number
of shares of common stock during any period and the program may be
modified or suspended at any time at the Company's discretion.
“2017 was about establishing our track record of execution, and
because of our success and continued market momentum, we are now in
a position to return additional value to shareholders,” said Greg
Powell. “Returning value through the implementation of a repurchase
program reflects the confidence we have in our business, including
our expectation for further growth and profitability.”
Outlook
For the first quarter of 2018, normalized revenue is expected to
increase to approximately $530 million, driven by price increases
from contract re-openers on a portion of our portfolio. Normalized
annualized Adjusted Gross Profit per fleet is expected to be
approximately $18 million for the first quarter of 2018. Normalized
expectations exclude transitional factors, including inclement
weather experienced early in the first quarter, combined with
ongoing frac sand supply challenges. These factors are expected to
impact first quarter results by up to approximately $30 million of
revenue and between $0.5 million and $2.0 million of annualized
Adjusted Gross Profit per fleet. Keane expects to remain at full
utilization of 26 hydraulic fracturing fleets.
“The industry continues to face strain in frac sand supply,
driven by weather-induced rail congestion, combined with mine
issues due to rail-related output constraints, flooding impacts,
delays on local mine start-ups and continued growth in demand,”
said Greg Powell. “We are proactively managing these transitory
issues facing the entire industry to limit the impact to our
customers and business.”
Keane recently entered into a dedicated agreement with an
existing customer for one of the newbuild fleets on order, and
expects to deploy the fleet upon delivery by the end of the second
quarter of 2018. Keane remains on schedule for the remaining two of
its previously ordered newbuild fleets, with one to be delivered
and deployed by the end of the second quarter of 2018, and a second
by the end of the third quarter of 2018. We remain in advanced
discussions with multiple existing and new customers for the
remaining two fleets, and expect to execute dedicated agreements by
the end of the first quarter of 2018. Keane continues to expect all
three newbuilds to initially generate annualized Adjusted Gross
Profit per fleet of greater than $20 million.
Within the Other Services segment, Keane expects to ramp
activity in its cementing business throughout the year, and by the
end of 2018, expect to generate run-rate revenue of between $70 and
$90 million on margins of between 20% and 25%.
Conference Call
On Tuesday, February 27, 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 fourth quarter and full-year 2017 results. Hosting
the call will be James Stewart, Chairman and Chief Executive
Officer 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 13675336. The replay will
be available until March 13, 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 effects of the business
combination of Keane and RockPile, including the combined Company’s
future financial condition, results of operations, strategy and
plans; potential adverse reactions or changes to business
relationships resulting from the completion of the RockPile
transaction; expected synergies and other benefits from the
transaction and the ability of Keane to realize such synergies and
other benefits; 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 AND COMBINED
STATEMENTS OF OPERATIONS & COMPREHENSIVE
INCOME (LOSS)
(in thousands, except per share data)
Three Months Ended Three Months Ended
December 31, September 30, 2017
2016(1) 2017 (Unaudited) (Unaudited)
(Unaudited) Revenue $ 501,490 $ 151,033 $ 477,302 Operating costs
and expenses: Cost of services 389,096 142,978 391,089 Depreciation
and amortization 49,964 29,032 46,204 Selling, general and
administrative expenses 24,611 7,948 28,592 (Gain) loss on disposal
of assets (2,418 ) (90 ) 302 Impairment — 185 —
Total operating costs and expenses 461,253 180,053
466,187 Operating income (loss) 40,237 (29,020 )
11,115 Other income (expenses): Other income (expense), net 9,316
379 942 Interest expense (7,318 ) (9,891 ) (7,195 )
Total other income (expenses)
1,998 (9,512 ) (6,253 ) Income (loss) before income taxes
42,235 (38,532 ) 4,862
Income tax benefit (expenses)
1,712 — (797 )
Net income (loss) 43,947
(38,532 ) 4,065 Other comprehensive income
(loss): Foreign currency translation adjustments (12 ) (35 ) 64
Hedging activities 785 519 (178 )
Total
comprehensive income (loss) $ 44,720
$ (38,048 ) $ 3,951
Net income per share, basic
$ 0.39 NM
$ 0.04 Weighted average shares, basic
111,707
NM 111,509
_______________________________
(1) Condensed Consolidated and Combined
Financial Statements of Keane Group Holdings, LLC and
Subsidiaries.
NM – Not measured as Keane Group, Inc. did
not consummate its initial public offering ("IPO") until
1/25/2017.
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED
STATEMENTS OF OPERATIONS & COMPREHENSIVE (LOSS)
(in thousands, except per share data)
Year EndedDecember 31, 2017
2016(1) (Unaudited) (Unaudited) Revenue
$ 1,542,081 $ 420,570 Operating costs and expenses: Cost of
services 1,282,561 416,342 Depreciation and amortization 159,280
100,979 Selling, general and administrative expenses 93,526 53,155
(Gain) loss on disposal of assets (2,555 ) (387 ) Impairment —
185 Total operating costs and expenses 1,532,812
570,274 Operating income (loss) 9,269 (149,704
) Other income (expenses): Other income (expense), net 13,963 916
Interest expense (59,223 ) (38,299 ) Total other expenses (45,260 )
(37,383 ) (Loss) before income taxes (35,991 ) (187,087 ) Income
tax (expenses) (150 ) —
Net (loss) (36,141
) (187,087 ) Other comprehensive income
(loss): Foreign currency translation adjustments 96 22 Hedging
activities 791 1,857
Total comprehensive
(loss) $ (35,254 ) $
(185,208 ) Net loss per share, basic
$
(0.34 ) NM Weighted average shares, basic
106,321 NM
________________________________
(1) Condensed Consolidated and Combined
Financial Statements of Keane Group Holdings, LLC and
Subsidiaries.
NM – Not measured as Keane Group, Inc. did
not consummate its IPO until 1/25/2017.
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED
BALANCE SHEETS
(in thousands)
ASSETS December 31, December 31,
2017
2016(1)
(Unaudited) (Audited) Current Assets: Cash and cash equivalents $
96,120 $ 48,920 Accounts receivable 238,018 66,277 Inventories, net
33,437 15,891 Prepaid and other current assets 8,519 14,618
Total current assets 376,094 145,706 Property and equipment,
net 468,000 294,209 Goodwill 134,967 50,478 Intangible assets
57,280 44,015 Other noncurrent assets 6,776 2,532
Total Assets $ 1,043,117 $
536,940 LIABILITIES AND OWNERS’ EQUITY Current
liabilities: Accounts payable $ 92,348 $ 48,484 Accrued expenses
135,175 42,892 Current maturities of capital lease obligations
3,097 2,633 Current maturities of long-term debt 1,339 2,512 Stock
based compensation - current 4,281 — Deferred revenue 5,000 — Other
current liabilities 914 3,171 Total current
liabilities 242,154 99,692 Capital lease obligations,
less current maturities 4,796 5,442 Long-term debt, net(2) less
current maturities 273,715 267,238 Stock based compensation –
non-current 4,281 — Other non-current liabilities 5,078
2,316 Total non-current liabilities 287,870 274,996
Total liabilities 530,024 374,688
Owners’ equity: Members’ equity — 453,810 Stockholders’
equity 542,192 — Retained (deficit) (27,371 ) (288,771 )
Accumulated other comprehensive (loss) (1,728 ) (2,787 )
Total
owners’ equity 513,093 162,252
Total liabilities and owners’ equity $
1,043,117 $ 536,940
___________________________
(1) Condensed Consolidated and Combined
Financial Statements of Keane Group Holdings, LLC and
Subsidiaries.
(2) 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 EndedDecember 31, Three Months
EndedSeptember 30, 2017 2016
2017 Completion Services: Revenues $ 495,519 $
147,973 $ 468,479 Cost of services 382,880 139,626 384,007 Gross
profit 112,639 8,347 84,472 Depreciation, amortization and
administrative expenses, and impairment 44,711 23,956 41,542
Operating income (loss) $ 65,885 $ (15,650 ) $ 42,362
Average hydraulic fracturing fleets deployed 26.0 12.0 24.7 Average
hydraulic fracturing fleet utilization 100 % 52 % 99 % Wireline -
fracturing fleet bundling percentages 78 % 62 % 81 % Average
annualized revenue per fleet deployed $ 76,234 $ 49,324 $ 75,867
Average annualized adjusted gross profit per fleet deployed $
17,316 $ 4,436 $ 14,239 Adjusted gross profit $ 112,554 $ 13,309 $
87,926
Other Services (1): Revenues $
5,971 $ 3,060 $ 8,823 Cost of services 6,216 3,352 7,082 Gross
profit (loss) (245 ) (292 ) 1,741 Depreciation, amortization and
administrative expenses, and impairment 1,434 3,098 1,586 Operating
income (loss) $ 2,850 $ (3,433 ) $ 1,055 Adjusted gross profit
(loss) $ 548 $ (141 ) $ 1,798
______________________
(1)
Other Services segment includes workover
rigs, cementing and coiled tubing divisions. A portion of the
company's workover rigs were sold during the third quarter of 2017
and the remainder during the fourth quarter of 2017. Coiled tubing
assets acquired as part of the RockPile transaction, which were
previously idle, were sold during the fourth quarter of 2017.
Following these asset sales, Other Services segment exclusively
reflects the cementing division.
KEANE GROUP, INC. AND
SUBSIDIARIES
ADDITIONAL SELECTED FINANCIAL AND
OPERATING DATA
(unaudited, amounts in thousands, except
for non-financial statistics)
Year EndedDecember 31, 2017
2016 Completion Services: Revenues $ 1,527,287
$ 410,854 Cost of services 1,269,263 401,891 Gross profit 258,024
8,963 Depreciation, amortization and administrative expenses, and
impairment 141,385 89,432 Operating income (loss) $ 115,691 $
(80,563 ) Average hydraulic fracturing fleets deployed 21.1
10.3 Average hydraulic fracturing fleet utilization 81 % 50 %
Wireline - fracturing fleet bundling percentages 70 % 57 % Average
annualized revenue per fleet deployed $ 72,383 $ 39,889 Average
annualized adjusted gross profit per fleet deployed $ 12,920 $
3,053 Adjusted gross profit $ 272,614 $ 31,447
Other
Services (1): Revenues $ 14,794 $ 9,716 Cost of
services 13,298 14,451 Gross profit (loss) 1,496 (4,735 )
Depreciation, amortization and administrative expenses, and
impairment 5,757 5,087 Operating income (loss) $ 957 $ (10,156 )
Adjusted gross profit (loss) $ 2,346 $ (3,622 )
__________________________________
(1)
Other Services segment includes workover
rigs, cementing and coiled tubing divisions. A portion of the
company's workover rigs were sold during the third quarter of 2017
and the remainder during the fourth quarter of 2017. Coiled tubing
assets acquired as part of the RockPile transaction, which were
previously idle, were sold during the fourth quarter of 2017.
Following these asset sales, Other Services segment exclusively
reflects the cementing division.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Three Months Ended December 31, 2017
Completion Other Corporate Services
Services and Other Total Net Income
(loss) $ 65,885 $ 2,850 $
(24,788 ) $ 43,947 Interest expense,
net — — 7,318 7,318 Income tax (benefits) expense — — (1,712 )
(1,712 ) Depreciation and amortization 44,711 1,434
3,819 49,964
EBITDA $ 110,596
$ 4,284 $ (15,363 ) $
99,517 Plus Management Adjustments: Acquisition, integration
and expansion (1) (86 ) — (12,266 ) (12,352 ) Offering-related
expenses (2) — — 1,184 1,184 Commissioning costs — 794 — 794
Non-cash stock compensation (3) — — 3,244 3,244 Other (4) —
— 1,444 1,444
Adjusted EBITDA $
110,510 $ 5,078 $ (21,757
) $ 93,831 Other income (expense) — — (9,316 )
(9,316 ) (Gain) loss on disposal of assets 2,044 (4,530 ) 68 (2,418
) Selling, general and administrative — — 24,611 24,611 Management
Adjustments not associated with Cost of Services — —
6,394 6,394
Adjusted gross profit $
112,554 $ 548 $ — $
113,102
___________________________
(1)
Represents adjustment to the CVR
liability, insurance recoveries associated with the acquisition of
a majority of the U.S. assets and assumed certain liabilities of
Trican Well Service, L.P. (the "Acquired Trican Operations"), gain
on the sale of coiled tubing assets, lease termination costs and
other expenses associated with organic growth initiatives. The CVR
associated with the Company’s RockPile acquisition represents a
contingent payment amount equal to the difference between (i)
$19.00 and (ii) the trading price of Keane's common stock during a
trading period ending on the nine-month maturity date of the right,
subject to certain limitations and conditions.
(2)
Represents a portion of 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.
(3)
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.
(4)
Represents contingency accruals related to
certain litigation claims. These costs 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 Other Corporate and Services
Services Other Total Net Income (loss)
$ 42,362 $ 1,055 $
(39,352 ) $ 4,065 Interest expense, net
— — 7,195 7,195 Income tax (benefits) 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 Other income (expense) — — (942 ) (942 ) (Gain) loss
on disposal of assets 568 (900 ) 634 302 Selling, general and
administrative — — 28,592 28,592 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
and other expenses associated with organic growth initiatives.
(2)
Represents fees related to the
organizational (legal entities) restructuring to ready the Company
for its IPO. These expenses were recorded in selling, general and
administrative expenses.
(3)
Represents non-cash amortization of equity
awards issued under 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.
(4)
Represents an adjustment to a contingent
accrual and readiness costs associated with Keane’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)
Three Months Ended December 31, 2016
Completion Other Corporate and Services
Services Other Total Net Income (loss)
$ (15,610 ) $ (3,574 )
$ (19,348 ) $ (38,532 )
Interest expense, net — — 9,891 9,891 Income tax (benefits) expense
— — (114 ) (114 ) Depreciation and amortization 23,956 3,098
1,978 29,032
EBITDA $
8,346 $ (476 ) $ (7,593
) $ 277 Plus Management Adjustments:
Acquisition, integration and expansion (1) 77 141 (609 ) (391 )
Offering-related expenses (2) — — 945 945 Commissioning costs 4,951
9 — 4,960 Impairment of assets
— 185 — 185 Non-cash stock
compensation (3) — — 159 159
Adjusted EBITDA $ 13,374 $ (141
) $ (7,098 ) $ 6,135
Other income (expense) — — (379 ) (379 ) (Gain) loss on disposal of
assets — — (90 ) (90 ) Selling, general and administrative (65 ) —
8,127 8,062 Management Adjustments not associated with Cost of
Services — — (495 ) (495 )
Adjusted gross
profit $ 13,309 $ (141 )
$ 65 $ 13,233
_________________________
(1)
Represents professional fees, integration
costs, lease termination costs, and other costs associated with the
acquisition and integration of a majority of the U.S. assets and
assumed certain liabilities of Trican Well Service, L.P.
(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.
(3)
Represents adjustments to the non-cash
profit interests related to Keane Group Holdings, LLC in 2016.
These costs were recorded in selling, general and administrative
expenses.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Year Ended December 31, 2017 Completion
Other Corporate and Services Services
Other Total Net Income (loss) $
115,692 $ 956 $ (152,789
) $ (36,141 ) Interest expense, net — —
59,223 59,223 Income tax (benefits) expense — — 150 150
Depreciation and amortization 141,385 5,757 12,138
159,280
EBITDA $ 257,077
$ 6,713 $ (81,278 ) $
182,512 Plus Management Adjustments: Acquisition,
integration and expansion (1) 1,750 57 (6,481 ) (4,674 )
Offering-related expenses (2) 1,266 — 5,803 7,069 Commissioning
costs 11,573 794 198 12,565 Non-cash stock compensation (3) — —
10,578 10,578 Other (4) — — 6,475 6,475
Adjusted EBITDA $ 271,666 $
7,564 $ (64,705 ) $
214,525 Other income (expense) — — (13,963 ) (13,963 )
(Gain) loss on disposal of assets 948 (5,218 ) 1,715 (2,555 )
Selling, general and administrative — — 93,526 93,526 Management
Adjustments not associated with Cost of Services — —
(16,573 ) (16,573 )
Adjusted gross profit $
272,614 $ 2,346 $ — $
274,960
____________________
(1)
Represents professional fees, integration
and divestiture costs, lease-termination costs, adjustment to the
CVR liability, severance, start-up and other costs associated with
the acquisition of RockPile and the Acquired Trican Operations and
other expenses associated with organic growth initiatives. The CVR
associated with the Company’s RockPile acquisition represents a
contingent payment amount equal to the difference between (i)
$19.00 and (ii) the trading price of Keane's common stock during a
trading period ending on the nine-month maturity date of the right,
subject to certain limitations and conditions. At the acquisition,
the CVR was valued at $12.0 million, which was recorded against
Goodwill. At December 31, 2017, the CVR was valued at $6.7 million,
with the mark-to-market valuation adjustment increasing pre-tax
income by $5.3 million
(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 its offering,
as well as the consummation of the secondary common stock offering
completed in January 2018. These expenses were recorded in selling,
general and administrative expenses. Also represents one-time IPO
bonuses paid to key operational and corporate employees; recorded
$1.3 million as cost of services for operations employees, while
the remaining was recorded in selling, general and administration
expenses. One-time IPO bonuses were paid out during the first
quarter of 2017.
(3)
Represents non-cash amortization of equity
awards issued under 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.
(4)
Represents contingency accruals related to
certain litigation claims and readiness costs associated with
Keane’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)
Year Ended December 31, 2016 Completion
Other Corporate and Services Services
Other Total Net Income (loss) $
(80,563 ) $ (10,156 ) $
(96,368 ) $ (187,087 ) Interest
expense, net — — 38,299 38,299 Income tax (benefits) expense — —
(114 ) (114 ) Depreciation and amortization 89,432 5,087
6,460 100,979
EBITDA $
8,869 $ (5,069 ) $
(51,723 ) $ (47,923 ) Plus
Management Adjustments: Acquisition, integration and expansion (1)
13,233 366 23,971 37,570 Offering-related expenses (2) — — 1,205
1,205 Commissioning costs 9,251 747 — 9,998 Impairment of assets
— 185 — 185 Non-cash stock compensation (3) — — 1,985 1,985
Other (4) — — (1,099 ) (1,099 )
Adjusted
EBITDA $ 31,353 $ (3,771 )
$ (25,661 ) $ 1,921 Other income
(expense) — — (916 ) (916 ) (Gain) loss on disposal of assets 239 —
(626 ) (387 ) Selling, general and administrative (145 ) 149 53,268
53,272 Management Adjustments not associated with Cost of Services
— — (26,065 ) (26,065 )
Adjusted gross profit
$ 31,447 $ (3,622 ) $
— $ 27,825
_____________________
(1)
Represents primarily professional fees,
integration costs, lease termination costs, severance, start-up and
other costs associated with the acquisition of a majority of the
U.S. assets and assumed certain liabilities of Trican Well Service,
L.P. We also incurred costs associated with the wind-down of our
Canadian operations in the earlier months of 2016.
(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.
(3)
Represents recognition of the grants of
non-cash profit interests related to Keane Group Holdings, LLC in
2016.
(4)
Represents net (gain) loss from the
disposals of assets, which is recorded in (gain) loss on disposal
of assets.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180226006714/en/
Keane Group, Inc.Investor Relations713-893-3602orICRMarc
Silverbergmarc.silverberg@icrinc.com
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