Keane Announces Fourth Quarter and Full-Year 2018 Financial and Operational Results
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.
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KEANE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (in thousands, except per share data) |
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Three Months Ended December 31, |
Three Months Ended |
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| 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 | |||||||||||
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KEANE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS) (in thousands, except per share data) |
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Year ended
December 31, |
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| 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 | ||||||||
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KEANE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS (in thousands) |
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| 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 | ||||
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| (1) | Net of unamortized deferred financing costs and unamortized debt discounts. | |
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KEANE GROUP, INC. AND SUBSIDIARIES ADDITIONAL SELECTED FINANCIAL AND OPERATING DATA (unaudited, amounts in thousands, except for non-financial statistics) |
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Three Months Ended December 31, |
Three Months Ended September 30, |
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| 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 | ) | ||||||
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| (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. | |
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KEANE GROUP, INC. AND SUBSIDIARIES ADDITIONAL SELECTED FINANCIAL AND OPERATING DATA (unaudited, amounts in thousands, except for non-financial statistics) |
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Year Ended December 31, |
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| 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 | |||||
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| (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. | |
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KEANE GROUP, INC. AND SUBSIDIARIES NON-U.S. GAAP FINANCIAL MEASURES (unaudited, in thousands) |
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| Three Months Ended December 31, 2018 | ||||||||||||||||||
|
Completion |
Other |
Corporate and |
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 | |||||||||
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| (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. | |
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KEANE GROUP, INC. AND SUBSIDIARIES NON-U.S. GAAP FINANCIAL MEASURES (unaudited, in thousands) |
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| Three Months Ended September 31, 2018 | ||||||||||||||||||
|
Completion |
Other |
Corporate |
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 | |||||||||
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| (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) |
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| Three Months Ended December 31, 2017 | ||||||||||||||||||
|
Completion |
Other |
Corporate and |
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 | ||||||||||
|
____________________________________ |
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| 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) |
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| Year Ended December 31, 2018 | ||||||||||||||||||
|
Completion |
Other |
Corporate and |
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 |
Other |
Corporate and |
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. | |
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