FTS International, Inc. (NYSE: FTSI) today reported its
financial and operational results for the first quarter 2020.
Michael Doss, Chief Executive Officer, commented “We were
pleased with our first quarter results despite a significant
drop-off in activity that began in late March. Most of our
customers have reduced or suspended completions as a result of the
sharp fall in oil prices due to the economic effects of COVID-19.
Accordingly, we have taken a series of aggressive measures to
reduce costs and preserve liquidity.”
The COVID-19 pandemic has drastically affected the global
economy and oil demand, along with the OPEC related price war
related to oil supply. The consequential plummet in global oil
prices has resulted in U.S. exploration and production companies
announcing significant cuts in their 2020 capital expenditures,
decreasing our frac activity to historic lows.
In response, we have addressed all aspects of our cost structure
to ensure that we are well positioned to supply the industry with
hydraulic fracturing services, which are an integral part of U.S.
oil production. These actions include:
- Bolstering safety procedures and emergency plans at both our
district offices and customer worksites;
- Reducing crews that no longer have scheduled work and related
support staff;
- Reducing executive salaries by over 25%, on top of a 15%
reduction at the beginning of the year;
- Reducing wages and salaries across the entire company;
- Rolling furloughs for certain SG&A and manufacturing
staff;
- Suspending bonuses to eligible SG&A staff under the
company’s short-term incentive plan, except for the safety
component;
- Reducing capital expenditures and repairs to the minimum level
needed to operate the limited active fleets; and
- Aggressively reducing all non-labor costs and re-negotiating
contractual commitments where possible.
First Quarter 2020 Compared to the Fourth Quarter
2019
- Revenue was $151.5 million, up from $142.3 million
- Net loss was $(11.7) million, compared to a loss of $(13.0)
million
- Earnings per share of $(0.11), compared to $(0.12)
- Adjusted EBITDA was $21.7 million, down from $22.7 million
- Adjusted EBITDA per average active fleet was $5.4 million on an
annualized basis
- Repaid $22.6 million in aggregate principal amount of term loan
at a discount of approximately $2 million
Operational Update
Average active fleets during the first quarter of 2020 was 16.0,
down from 16.5 in the fourth quarter of 2019. During the month of
March, we stacked 9 fleets that were released by customers, exiting
the quarter with 7 active fleets.
We completed 6,888 stages during the first quarter of 2020, or
431 stages per active fleet. This compares to 6,346 stages in the
fourth quarter of 2019, or 385 stages per active fleet.
Since March, low oil prices due to the COVID-19 pandemic and the
Saudi-Russia price war have caused our customers to substantially
reduce their hydraulic fracturing activities and the prices they
are willing to pay for our services.
While our first quarter results reflect some reduction of this
activity at the end of the quarter, we have limited visibility for
future work and currently expect to only average three to four
active fleets in the second quarter.
Liquidity and Capital Resources
Capital expenditures were $16.4 million in the first quarter, up
from $14.9 million in the fourth quarter due largely to a front
loaded purchasing schedule. In March, we began rationalizing all
capital expenditures, which we now expect to be in the range of $30
- $35 million for 2020. We will continue to reassess our capital
expenditures to ensure they are aligned with the market
outlook.
At March 31, 2020, we had $199.2 million of cash and $434.7
million of long-term debt. Net debt, excluding unamortized discount
and debt issuance costs, was $238.1 million at March 31, 2020.
Additionally, at quarter end, total liquidity was $255.5 million,
including $56.3 million of availability under our revolving credit
facility. During the first quarter of 2020, we had no borrowings
outstanding under our revolving credit facility.
COVID-19
The health and safety of our employees has always been paramount
and that does not change during this pandemic. Within our employee
base, we are not aware of any confirmed cases of COVID-19 to date.
We will continue taking appropriate measures to prevent the
outbreak from affecting our employees, customers, vendors and their
families.
Conference Call & Webcast
We will hold a conference call that will also be webcast on our
website on Thursday, April 30, 2020 at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time) to discuss these results. Presenting for
the company will be Michael Doss, Chief Executive Officer, who will
then be joined by Buddy Petersen, Chief Operating Officer and Lance
Turner, Chief Financial Officer, for Q&A.
Please see below for instructions on how to access the
conference call and webcast. If you intend to ask a question in the
Q&A portion of the call, please join by phone.
By Phone:
Dial (212) 231-2904 at least 10 minutes
before the call. A replay will be available through May 21 by
dialing (402) 977-9140 and using the conference ID 21960025#.
By Webcast:
Connect to the webcast via the Events page
of FTSI’s website at www.FTSI.com/investor-relations/events. Please
join the webcast at least 10 minutes in advance to register and
download any necessary software. A replay will be available shortly
after the call.
About FTS International, Inc.
Headquartered in Fort Worth, Texas, FTS International is an
independent hydraulic fracturing service company and one of the
only vertically integrated service providers of its kind in North
America.
To learn more, visit www.FTSI.com.
Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP financial measure that FTSI
defines as earnings before interest; income taxes; and depreciation
and amortization, as well as, the following items, if applicable:
gain or loss on disposal of assets; debt extinguishment gains or
losses; inventory write-downs, asset and goodwill impairments; gain
on insurance recoveries; acquisition earn-out adjustments;
stock-based compensation; supply commitment charges; gain on sale
of equity interest in joint venture affiliate; acquisition or
disposition transaction costs; and employee severance costs related
to corporate-wide cost reduction initiatives. The most comparable
financial measure to Adjusted EBITDA under GAAP is net income or
loss. The company also uses Adjusted EBITDA per average active
fleet on an annualized basis, which is a non-GAAP measure and is
defined as Adjusted EBITDA divided by the average active fleets per
quarter then multiplying the result by four. Adjusted EBITDA and
Adjusted EBITDA per average active fleet on an annualized basis are
used by management to evaluate the operating performance of the
business for comparable periods and Adjusted EBITDA is a metric
used for management incentive compensation. Adjusted EBITDA and
Adjusted EBITDA per average active fleet on an annualized basis
should not be used by investors or others as the sole basis for
formulating investment decisions, as they exclude a number of
important items. The company believes Adjusted EBITDA and Adjusted
EBITDA per average active fleet on an annualized basis are
important indicators of operating performance because they exclude
the effects of the company’s capital structure and certain non-cash
items from the company’s operating results. Adjusted EBITDA is also
commonly used by investors in the oilfield services industry to
measure a company's operating performance, although FTSI’s
definition of Adjusted EBITDA may differ from other industry peer
companies.
Net debt is a non-GAAP financial measure that FTSI defines as
total long-term debt plus unamortized discount and debt issuance
costs less cash and cash equivalents. The most comparable financial
measure to net debt under GAAP is long-term debt. Net debt is used
by management as a measure of our financial leverage and helps our
investors better understand our financial leverage. Net debt should
not be used by investors or others as the sole basis in formulating
investment decisions as it does not represent the company’s actual
indebtedness.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include statements regarding our
average active fleets in the second quarter, our expected
efficiencies and that those efficiencies are not expected to offset
pricing concessions or underutilized fleets, capital expenditures
for 2020, our continued response to prevent the spread of
Coronavirus, and other statements identified by words such as
“could,” “may,” “might,” “will,” “likely,” “anticipates,”
“intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,”
“continues,” “projects” and similar references to future periods.
Forward-looking statements are based on FTSI’s current expectations
and assumptions regarding capital market conditions, FTSI’s
business, the economy and other future conditions. Because
forward-looking statements relate to the future, by their nature,
they are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. As a result, FTSI’s
actual results may differ materially from those contemplated by the
forward-looking statements. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the
ultimate geographic spread, duration and severity of coronavirus
(COVID-19) outbreak, and the effectiveness of actions taken, or
actions that may be taken, by governmental authorities to contain
the outbreak or treat its impact; the operations of FTSI; results
of litigation, settlements and investigations; the final terms of
new and renegotiated supply and customer contracts; actions by
third parties, including governmental agencies; volatility in
customer spending and in oil and natural gas prices, which could
adversely affect demand for FTSI's services and their associated
effect on rates, utilization, margins and planned capital
expenditures; global economic conditions; excess availability of
pressure pumping equipment, including as a result of low commodity
prices, reactivation or construction; liabilities from operations;
weather; decline in, and ability to realize, backlog; equipment
specialization and new technologies; shortages, delays in delivery
and interruptions of supply of equipment and materials; ability to
hire and retain personnel; loss of, or reduction in business with,
key customers; difficulty with growth and in integrating
acquisitions; product liability; political, economic and social
instability risk; ability to effectively identify and enter new
markets; cybersecurity risk; dependence on our subsidiaries to meet
our long-term debt obligations; variable rate indebtedness risk;
and anti-takeover measures in our charter documents. Any
forward-looking statement made in this press release speaks only as
of the date on which it is made. FTSI undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future developments or otherwise,
except as required by law.
When considering these forward-looking statements, you should
keep in mind the risk factors and other cautionary statements in
FTSI’s filings with the SEC. The risk factors and other factors
noted in FTSI’s filings with the SEC could cause the company’s
actual results to differ materially from those contained in any
forward-looking statement.
Consolidated Statements of Operations (unaudited)
Three Months Ended Mar. 31, Dec. 31, Mar.
31, (In millions, except per share amounts)
2020
2019
2019
Revenue Revenue
$
150.8
$
142.3
$
221.6
Revenue from related parties
0.7
-
0.9
Total revenue
151.5
142.3
222.5
Operating expenses Costs of revenue, excluding
depreciation and amortization
115.2
102.7
163.1
Selling, general and administrative
17.7
22.7
23.6
Depreciation and amortization
21.4
22.1
22.4
Impairments and other charges
3.7
0.9
60.8
(Gain) loss on disposal of assets, net
(0.1)
(0.4)
0.3
Total operating expenses
157.9
148.0
270.2
Operating loss
(6.4)
(5.7)
(47.7)
Interest expense, net
(7.3)
(7.2)
(8.2)
Gain on extinguishment of debt, net
2.0
-
0.5
Equity in net income of joint venture affiliate
-
-
0.6
Loss before income taxes
(11.7)
(12.9)
(54.8)
Income tax expense
-
0.1
0.2
Net loss
$
(11.7)
$
(13.0)
$
(55.0)
Basic and diluted earnings per share
$
(0.11)
$
(0.12)
$
(0.50)
Shares used in computing basic and diluted earnings per
share
107.3
107.3
109.7
Consolidated Balance Sheets (unaudited)
Mar. 31, Dec. 31, Mar. 31, (In
millions)
2020
2019
2019
ASSETS Current assets Cash and cash
equivalents
$ 199.2
$ 223.0
$ 172.1
Accounts receivable, net
78.6
77.0
150.6
Accounts receivable from related parties, net
0.6
-
-
Inventories
43.6
45.5
67.6
Prepaid expenses and other current assets
15.0
7.0
5.9
Total current assets
337.0
352.5
396.2
Property, plant, and equipment, net
223.1
227.0
261.2
Operating lease right-of-use assets
22.5
26.3
32.7
Intangible assets, net
29.5
29.5
29.5
Investment in joint venture affiliate
-
-
24.2
Other assets
3.9
4.0
6.2
Total assets
$ 616.0
$ 639.3
$ 750.0
LIABILITIES AND EQUITY Current liabilities
Accounts payable
$ 53.6
$ 36.4
$ 75.5
Accrued expenses
25.2
22.9
38.2
Current portion of operating lease liabilities
13.8
14.3
22.4
Other current liabilities
14.6
11.6
28.0
Total current liabilities
107.2
85.2
164.1
Long-term debt
434.7
456.9
476.8
Operating lease liabilities
10.5
13.9
11.8
Other liabilities
34.6
45.6
44.0
Total liabilities
587.0
601.6
696.7
Equity Common stock
36.4
36.4
36.4
Additional paid-in capital
4,385.0
4,382.0
4,379.7
Accumulated deficit
(4,392.4)
(4,380.7)
(4,362.8)
Total equity
29.0
37.7
53.3
Total liabilities and equity
$ 616.0
$ 639.3
$ 750.0
Consolidated Statement of Cash Flows (unaudited)
Three Months Ended Mar. 31, Dec. 31,
Mar. 31, (In millions)
2020
2019
2019
Cash flows from operating activities Net loss
$ (11.7)
$ (13.0)
$ (55.0)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization
21.4
22.1
22.4
Stock-based compensation
3.1
5.8
3.0
Amortization of debt discounts and issuance costs
0.4
0.4
0.5
Impairment of assets
-
-
2.8
(Gain) loss on disposal of assets, net
(0.1)
(0.4)
0.3
(Gain) loss on extinguishment of debt, net
(2.0)
-
(0.5)
Inventory write-down
-
-
1.4
Non-cash provision for supply commitment charges
3.2
0.9
56.6
Cash paid to settle supply commitment charges
(11.2)
(1.5)
-
Other non-cash items
1.0
3.1
(0.8)
Changes in operating assets and liabilities: Accounts receivable
(2.4)
40.3
7.7
Accounts receivable from related parties
(0.7)
-
-
Inventories
1.8
2.2
(1.7)
Prepaid expenses and other assets
(8.1)
5.4
0.3
Accounts payable
16.2
(18.8)
(11.3)
Accrued expenses and other liabilities
2.3
(12.5)
8.2
Net cash provided by operating activities
13.2
34.0
33.9
Cash flows from investing activities Capital
expenditures
(16.4)
(14.9)
(11.7)
Proceeds from disposal of assets
0.1
1.4
0.1
Net cash used in investing activities
(16.3)
(13.5)
(11.6)
Cash flows from financing activities Repayments of
long-term debt
(20.6)
-
(26.3)
Repurchases of common stock
-
(1.6)
-
Taxes paid related to net share settlement of equity awards
(0.1)
(0.1)
(1.7)
Net cash used in financing activities
(20.7)
(1.7)
(28.0)
Net increase (decrease) in cash and cash equivalents
(23.8)
18.8
(5.7)
Cash and cash equivalents at beginning of period
223.0
204.2
177.8
Cash and cash equivalents at end of period
$ 199.2
$ 223.0
$ 172.1
Reconciliation of Net Loss to Adjusted EBITDA
Three Months Ended Mar. 31, Dec. 31, Mar.
31, (In millions, except average active fleets)
2020
2019
2019
Net loss
$ (11.7)
$ (13.0)
$ (55.0)
Interest expense, net
7.3
7.2
8.2
Income tax expense
-
0.1
0.2
Depreciation and amortization
21.4
22.1
22.4
(Gain) loss on disposal of assets, net
(0.1)
(0.4)
0.3
(Gain) loss on extinguishment of debt, net
(2.0)
-
(0.5)
Stock-based compensation
3.1
5.8
3.0
Supply commitment charges
3.2
0.9
56.6
Inventory write-down
-
-
1.4
Impairment of assets
-
-
2.8
Employee severance costs
0.5
-
-
Adjusted EBITDA
21.7
22.7
39.4
Average active fleets
16.0
16.5
20.0
Annualized adjusted EBITDA per average active fleet
$ 5.4
$ 5.5
$ 7.9
Reconciliation of Long-term Debt to Net Debt
Mar. 31, Dec. 31, Mar. 31, (In millions)
2020
2019
2019
Term loan due April 2021
$ 67.4
$ 90.0
$ 106.0
Senior notes due May 2022
369.9
369.9
374.9
Less unamortized discount and debt issuance costs
(2.6)
(3.0)
(4.1)
Total long-term debt
434.7
456.9
476.8
Add unamortized discount and debt issuance costs
2.6
3.0
4.1
Total principal amount of debt
437.3
459.9
480.9
Less cash and cash equivalents
(199.2)
(223.0)
(172.1)
Net debt
$ 238.1
$ 236.9
$ 308.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200429005934/en/
Lance Turner Chief Financial Officer 817-862-2000
Investors@FTSI.com
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