Keane Group, Inc. (NYSE: FRAC) (“Keane” or the “Company”) today
reported fourth quarter and full-year 2018 financial and
operational results.
Results and Recent Highlights
- Reported fourth quarter 2018 revenue of
$486.5 million, compared to third quarter 2018 of $558.9
million
- Realized fourth quarter 2018 net income
of $6.1 million, compared to third quarter 2018 net income of $30.8
million
- Achieved fourth quarter 2018 Adjusted
EBITDA of $88.4 million, compared to third quarter 2018 of $100.9
million
- Reported annualized Adjusted Gross
Profit per fleet of $20.9 million, compared to third quarter 2018
of $20.5 million
- Delivered full-year 2018 revenue of
$2.1 billion, compared to full-year 2017 revenue of $1.5
billion
- Generated full-year 2018 net cash
provided by operating activities of $350.3 million, compared to
$79.7 million in 2017
- Executed $105.0 million of stock
repurchases in 2018; Board authorized third program capacity reset
to $100.0 million
Fourth Quarter 2018 Financial Results
Revenue for the fourth quarter of 2018 totaled $486.5 million, a
decrease of 13% compared to $558.9 million for the third quarter of
2018. Net income for the fourth quarter of 2018 was $0.06 per
share, compared to $0.28 per share reported for the third quarter
of 2018. Excluding one-time items and other adjustments further
discussed below, net income for the fourth quarter of 2018 was
$11.4 million, compared to net income of $24.0 million for the
third quarter of 2018.
Adjusted EBITDA for the fourth quarter of 2018 totaled $88.4
million, compared to $100.9 million for the third quarter of 2018.
Adjusted Gross Profit for the fourth quarter of 2018 was $113.9
million, compared to $122.3 million for the third quarter of
2018.
Selling, general and administrative expenses for the fourth
quarter of 2018 totaled $28.5 million, compared to $27.8 million
for the third quarter of 2018. Excluding one-time items, selling,
general and administrative expenses for the fourth quarter of 2018
totaled $23.2 million, compared to $19.9 million for the third
quarter of 2018, driven by investments in technology.
“I am very pleased with our overall fourth quarter financial
results which exceeded our outlook,” said Robert Drummond, Chief
Executive Officer of Keane. “As expected, conditions were
challenging, but our team remained focused on delivering efficiency
for customers and controlling costs across our business, resulting
in annualized adjusted gross profit per fleet of approximately $21
million. We maintain significant operational flexibility, and have
invested in keeping a portion of our idle fleets ready to respond
quickly to market demand going forward.”
Full-Year 2018 Financial Results
Revenue for the full-year 2018 totaled $2.1 billion, an increase
of 39% compared to $1.5 billion for the full-year 2017. Net income
for the full-year 2018 was $59.3 million, compared to a net loss of
$36.1 million for the full-year 2017. Net income per share for the
full-year 2018 totaled $0.54. Adjusted gross profit for the
full-year 2018 was $476.7 million, an increase of 73%, compared to
$275.0 million for the full-year 2017.
“Our strong fourth quarter results capped off a successful year
for Keane,” said Greg Powell, President and Chief Financial Officer
of Keane. “Our winning strategy focuses on partnering with
like-minded customers under dedicated agreements who share our
commitment to safety, efficiency and innovation. We generated more
than $350 million in operating cash flow in 2018, enabling us to
fund our robust capital return program, organic and inorganic
expansion, capital to keep our fleet fresh and market-ready, and
investments in technology and innovation initiatives.”
Completions Services
Revenue for Completion Services totaled $475.2 million for the
fourth quarter of 2018, a decrease of 13% compared to $548.4
million for the third quarter of 2018, driven by reduced
utilization from customer’s budget exhaustion, early achievement of
production targets, and commodity price differentials, in addition
to normal weather and seasonality. For the fourth quarter of 2018,
Keane had an average of 25.0 fleets deployed, of which, utilization
averaged 88%, resulting in the equivalent of 22.0 fully-utilized
fleets. Adjusted Gross Profit for Completion Services totaled
$114.7 million for the fourth quarter of 2018, compared to $122.7
million for the third quarter of 2018.
Annualized revenue per average deployed hydraulic fracturing
fleet for the fourth quarter of 2018 was $86.4 million, compared to
$91.4 million for the third quarter of 2018. Annualized Adjusted
Gross Profit per fleet totaled $20.9 million, compared to $20.5
million for the third quarter of 2018. Included in our results for
the fourth quarter was approximately $15.0 million of investment in
labor and maintenance costs associated with keeping several fleets
market-ready.
Other Services
Revenue in Other Services for the fourth quarter of 2018 totaled
$11.4 million, compared to $10.5 million for the third quarter of
2018.
Fourth Quarter 2018 One-Time Items and Other
Adjustments
Adjusted EBITDA for the fourth quarter of 2018 excludes $5.2
million of one-time items related to non-cash stock compensation
expense.
Balance Sheet and Capital
Total debt outstanding as of December 31, 2018 was $340.7
million, net of unamortized debt discounts and unamortized deferred
charges and excluding capital lease obligations, compared to $341.0
million as of September 30, 2018. As of December 31, 2018, cash and
equivalents totaled $80.2 million, compared to $82.8 million as of
September 30, 2018.
Total available liquidity as of December 31, 2018 was
approximately $264.2 million, which included cash and availability
under our asset-based credit facility. Total operating cash flow
for the fourth quarter of 2018 was approximately $99.2 million.
These operating cash flows, combined with balance sheet cash, were
primarily used to fund capital expenditures of approximately $52.2
million, stock repurchases of $35.5 million and debt service of
approximately $7.0 million, excluding capital lease
obligations.
Stock Repurchase Program Update
During the fourth quarter of 2018, Keane repurchased
approximately 3.1 million of its common shares for $35.5 million.
For the full-year 2018, Keane repurchased a total of 8.1 million of
its common shares for $105.0 million, representing approximately 8%
of outstanding shares. Effective February 25, 2019, Keane’s Board
of Directors authorized a reset of capacity on its existing stock
repurchase program back to $100.0 million and extended the
program’s expiration to December 2019.
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 first quarter of 2019, total revenue is expected to
range between $400 million and $420 million. Keane’s hydraulic
fracturing fleet for the first quarter of 2019 will include 29.0
deployable fleets, of which, 22.0 are expected to be deployed. Of
this amount, Keane expects to achieve utilization of approximately
90%, resulting in the equivalent of approximately 20.0
fully-utilized hydraulic fracturing fleets during the quarter.
Annualized Adjusted Gross Profit per fleet, based on 20.0
fully-utilized fleets, is expected to range between $15.0 million
and $17.0 million, including approximately $10 million of labor and
maintenance costs associated with keeping a portion of our fleets
market-ready.
“We expect sequential revenue declines in the first quarter,
driven by increased direct sourcing of sand by certain customers,
disruptions in activity from abnormal weather, delays in pad
readiness and some price concessions,” continued Mr. Drummond. “The
significant and rapid oil price decline emerging late in the fourth
quarter disrupted budget cycles for many E&Ps, while awaiting
better visibility into the commodity outlook. We remain
disciplined, as evidenced by our decision to idle three fleets
early in the first quarter after evaluating several market
opportunities which did not meet our economic hurdles. Current
supply and demand dynamics has led to some pressure on net pricing
on deployed fleets, however, most of our customers collaborated
with us exhibiting their commitment to our long-term
partnership.”
“By the end of the first quarter of 2019, we expect
approximately $20 million of adjusted EBITDA tailwind, driven by
the abatement of disruptions in activity from abnormal weather,
delays in pad readiness and the resolution of strategic labor and
maintenance investments we’ve made,” continued Mr. Powell. “Our
baseload of activity is strong, with most of our 22 currently
deployed fleets committed at least through the end of the year, and
7 currently idle fleets available to support future growth.
Regardless of the shape of recovery in activity, we are positioned
to generate more than $100 million of free cash flow in 2019 after
debt service and capital expenditures. We remain focused on
delivering shareholder value by employing a thoughtful and
disciplined approach to capital allocation, including maintaining a
strong balance sheet and asset base, and returning capital to
shareholders.”
Conference Call
On February 26, 2019, 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 2018 results. Hosting
the call will be Robert Drummond, 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 13686481. The replay will be available until
March 12, 2019.
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,” “positioned” 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 AND COMBINED
STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
(in thousands, except per share data)
Three Months Ended
December 31,
Three Months Ended September
30,
2018 2017 2018 (Unaudited) (Unaudited)
(Unaudited) Revenue $ 486,549 $ 501,490 $ 558,908 Operating costs
and expenses: Cost of services 372,654 389,096 436,799 Depreciation
and amortization 71,403 49,964 68,287 Selling, general and
administrative expenses 28,466 24,611 27,783 (Gain) loss on
disposal of assets (122 ) (2,418 ) 1,113 Total operating
costs and expenses 472,401 461,253 533,982
Operating income 14,148 40,237 24,926 Other income (expenses):
Other income (2,386 ) 9,316 14,454 Interest expense (6,219 ) (7,318
) (5,978 ) Total other income (expense) (8,605 ) 1,998 8,476
Income before income taxes 5,543 42,235 33,402 Income tax
benefit (expense) 585 1,712 (2,623 )
Net
income 6,128 43,947 30,779 Other
comprehensive income (loss): Foreign currency translation
adjustments (77 ) (12 ) 28 Hedging activities (4,309 ) 785
1,119
Total comprehensive income $
1,742 $ 44,720 $
31,926 Net income per share, basic
$
0.06 $ 0.39 $ 0.28 Weighted
average shares, basic
105,265 111,707 108,825
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED
STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
Year ended
December 31,
2018 2017 (Unaudited) (Unaudited) Revenue $
2,137,006 $ 1,542,081 Operating costs and expenses: Cost of
services 1,660,546 1,282,561 Depreciation and amortization 259,145
159,280 Selling, general and administrative expenses 114,258 93,526
(Gain) loss on disposal of assets 5,047 (2,555 ) Total
operating costs and expenses 2,038,996 1,532,812
Operating income 98,010 9,269 Other income (expenses): Other income
(expense) (905 ) 13,963 Interest expense (33,504 ) (59,223 ) Total
other expenses (34,409 ) (45,260 ) Income (loss) before income
taxes 63,601 (35,991 ) Income tax expense (4,270 ) (150 )
Net
income (loss) 59,331 (36,141 ) Other
comprehensive income (loss): Foreign currency translation
adjustments (114 ) 96 Hedging activities (880 ) 791
Total
comprehensive income (loss) $ 58,337
$ (35,254 ) Net income (loss) per
share, basic
$ 0.54 $ (0.34 )
Weighted average shares, basic
109,335 106,321
KEANE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED
BALANCE SHEETS
(in thousands)
December 31, December 31,
2018 2017 ASSETS (Unaudited) (Audited) Current
Assets: Cash and cash equivalents $ 80,206 $ 96,120 Trade and other
accounts receivable, net 210,428 238,018 Inventories, net 35,669
33,437 Assets held for sale 176 — Prepaid and other current assets
5,784 8,519 Total current assets 332,263 376,094 Property and
equipment, net 531,319 468,000 Goodwill 132,524 134,967 Intangible
assets 51,904 57,280 Other noncurrent assets 6,569 6,775
Total
Assets $ 1,054,579 $ 1,043,116
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 106,702 $ 92,348 Accrued expenses 101,539
135,175 Customer contract liabilities 60 5,000 Current maturities
of capital lease obligations 4,928 3,097 Current maturities of
long-term debt 2,776 1,339 Stock based compensation - current 4,281
4,281 Other current liabilities 294 914 Total current liabilities
220,580 242,154 Capital lease obligations, less current maturities
5,581 4,796 Long-term debt, net(1) less current maturities 337,954
273,715 Stock based compensation – non-current — 4,281 Other
non-current liabilities 3,283 5,078 Total non-current liabilities
346,818 287,870
Total liabilities 567,398
530,024 Shareholders’ equity: Stockholders’ equity
456,485 542,192 Retained earnings (deficit) 31,494 (27,372)
Accumulated other comprehensive income (loss) (798) (1,728)
Total shareholders’ equity 487,181 513,092
Total liabilities and shareholders’ equity $
1,054,579 $ 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 EndedDecember
31, Three Months EndedSeptember 30, 2018
2017 2018 Completion Services: Revenues
$ 475,158 $ 495,519 $ 548,418 Cost of services 360,430 382,880
425,928 Gross profit 114,728 112,639 122,490 Depreciation,
amortization and administrative expenses, and impairment 66,793
44,711 64,579 Operating income $ 48,025 $ 65,885 $ 56,771
Average hydraulic fracturing fleets deployed 25.0 26.0 27.0 Average
hydraulic fracturing fleet utilization 88 % 100 % 89 % Wireline -
fracturing fleet bundling percentages 79 % 78 % 77 % Average
annualized revenue per fleet deployed (1) $ 86,392 $ 76,234 $
91,403 Average annualized adjusted gross profit per fleet deployed
(1) $ 20,860 $ 17,316 $ 20,453 Adjusted gross profit $ 114,728 $
112,554 $ 122,717
Other Services (2):
Revenues $ 11,391 $ 5,971 $ 10,490 Cost of services 12,224 6,216
10,871 Gross loss (833 ) (245 ) (381 ) Depreciation, amortization
and administrative expenses, and impairment 871 1,434 840 Operating
income (loss) (1,704 ) 1,697 (1,221 ) Adjusted gross profit (loss)
$ (833 ) $ 548 $ (381 )
______________________________________
(1) For the fourth quarter of 2018, average annualized
revenue per fleet deployed and average annualized adjusted gross
profit per fleet deployed was calculated using the equivalent of
22.0 fully-utilized hydraulic fracturing fleets, which represents
88% utilization of the Company's 25.0 average hydraulic fracturing
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)
Year EndedDecember 31,
2018 2017 Completion Services: Revenues
$ 2,100,956 $ 1,527,287 Cost of services 1,622,106 1,269,263 Gross
profit 478,850 258,024 Depreciation, amortization and
administrative expenses, and impairment 241,169 141,385 Operating
income $ 234,756 $ 115,691 Average hydraulic fracturing
fleets deployed 26.1 21.1 Average hydraulic fracturing fleet
utilization 94 % 81 % Wireline - fracturing fleet bundling
percentages 78 % 70 % Average annualized revenue per fleet deployed
(1) $ 85,405 $ 72,383 Average annualized adjusted gross profit per
fleet deployed (1) $ 19,475 $ 12,920 Adjusted gross profit $
479,077 $ 272,614
Other Services (2):
Revenues $ 36,050 $ 14,794 Cost of services 38,440 13,298 Gross
profit (loss) (2,390 ) 1,496 Depreciation, amortization and
administrative expenses, and impairment 4,428 5,757 Operating loss
(6,818 ) (197 ) Adjusted gross profit (loss) $ (2,390 ) $ 2,346
______________________________________
(1) For 2018, average annualized revenue per fleet deployed
and average annualized adjusted gross profit per fleet deployed
were calculated using the equivalent of 24.0 and 22.0
fully-utilized fleets for the third quarter of 2018 and fourth
quarter of 2018, respectively, which represents 89% utilization of
the Company's 27.0 average hydraulic fracturing fleets deployed in
the third quarter of 2018 and 88% utilization of the Company's 25.0
average hydraulic fracturing fleets deployed in the fourth 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
December 31, 2018
Completion Services
Other Services
Corporate and Other
Total Net Income (loss) $ 48,025
$ (1,704 ) $ (40,193 )
$ 6,128 Interest expense, net — — 6,219 6,219 Income
tax expense — — (585 ) (585 ) Depreciation and amortization 66,793
871 3,739 71,403
EBITDA $
114,818 $ (833 ) $
(30,820 ) $ 83,165 Plus Management
Adjustments: Non-cash stock compensation (1) — —
5,242 5,242
Adjusted EBITDA $
114,818 $ (833 ) $
(25,578 ) $ 88,407 Selling, general and
administrative — — 28,466 28,466 Gain on disposal of assets (90 ) —
(32 ) (122 ) Other expense — — 2,386 2,386 Less Management
Adjustments not associated with cost of services — —
(5,242 ) (5,242 )
Adjusted gross profit (loss) $
114,728 $ (833 ) $ —
$ 113,895
_______________________________________
(1) 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.
KEANE GROUP, INC. AND
SUBSIDIARIES
NON-U.S. GAAP FINANCIAL
MEASURES
(unaudited, in thousands)
Three Months Ended
September 31, 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 benefit — — 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 the Equity Plan, which is 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
December 31, 2017
Completion Services
Other Services
Corporate and Other
Total Net Income (loss) $ 65,885
$ 1,697 $ (23,635 ) $
43,947 Interest expense, net — — 7,318 7,318 Income tax
expense — — (1,712 ) (1,712 ) Depreciation and amortization 44,711
1,434 3,819 49,964
EBITDA
$ 110,596 $ 3,131 $
(14,210 ) $ 99,517 Plus Management
Adjustments: Acquisition, integration and expansion (1) (86 )
(3,377 ) (8,889 ) (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 $
548 $ (17,227 ) $ 93,831
Selling, general and administrative — — 24,611 24,611 (Gain) loss
on disposal of assets 2,044 (3,377 ) (1,085 ) (2,418 ) Other income
— — (9,316 ) (9,316 ) Less Management Adjustments not associated
with cost of services — 3,377 3,017 6,394
Adjusted gross profit $ 112,554
$ 548 $ — $ 113,102
____________________________________
1) Corporate and Other segment 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"), lease
termination costs and other expenses associated with organic growth
initiatives. Completion Services and Other Services segment
represents gain on the sale of coiled tubing assets . (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 the Equity Plan, which
is 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)
Year Ended December
31, 2018
Completion Services
Other Services
Corporate and Other
Total Net Income (loss) $ 234,756
$ (6,818 ) $ (168,607 )
$ 59,331 Interest expense, net — — 33,504 33,504
Income tax expense — — 4,270 4,270 Depreciation and amortization
241,169 4,428 13,548 259,145
EBITDA $ 475,925 $ (2,390
) $ (117,285 ) $ 356,250
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) — — 17,166 17,166 Other (4)
— — (11,138 ) (11,138 )
Adjusted EBITDA
$ 476,152 $ (2,390 ) $
(81,906 ) $ 391,856 Selling, general
and administrative — — 114,258 114,258 Loss on disposal of assets
2,925 — 2,122 5,047 Other expense — — 905 905 Less Management
Adjustments not associated with cost of services — —
(35,379 ) (35,379 )
Adjusted gross profit (loss) $
479,077 $ (2,390 ) $ —
$ 476,687
______________________________________
(1) Represents adjustment to the contingent value right
liability based on the final agreed-upon settlement of $13.2
million, 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 of
$2.7 million, 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 $0.5 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, rating agency fees for establishing initial
ratings in connection with entering into a new $350 million senior
secured term facility and bond offering costs, which 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 Services
Other Services
Corporate and Other
Total Net Income (loss) $ 115,692
$ (197 ) $ (151,636 )
$ (36,141 ) Interest expense, net — — 59,223
59,223 Income tax expense — — 150 150 Depreciation and amortization
141,385 5,757 12,138 159,280
EBITDA $ 257,077 $ 5,560
$ (80,125 ) $ 182,512 Plus
Management Adjustments: Acquisition, integration and expansion (1)
1,750 (3,320 ) (3,104 ) (4,674 ) Offering-related expenses (2)
1,266 — 5,803 7,069 Commissioning costs 11,574 794 197 12,565
Non-cash stock compensation (3) — — 10,578 10,578 Other (4) —
(900 ) 7,375 6,475
Adjusted EBITDA
$ 271,667 $ 2,134 $
(59,276 ) $ 214,525 Selling, general
and administrative — — 93,526 93,526 (Gain) loss on disposal of
assets 947 (4,064 ) 562 (2,555 ) Other income — — (13,963 ) (13,963
) Less Management Adjustments not associated with cost of services
— 4,276 (20,849 ) (16,573 )
Adjusted gross profit
(loss) $ 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. Of these
costs, $1.8 million was recorded in cost of services, $10.7 million
was recorded in selling, general and administrative expenses, $3.4
million in gain on disposal of assets and $13.4 million in other
income. (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, 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/20190225005986/en/
Investor Relations(713) 893-3602
Marc Silverberg, ICRmarc.silverberg@icrinc.com
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