FTS International, Inc. (NYSE: FTSI) (the “Company” or “FTSI”)
today reported its financial and operational results for the third
quarter of 2019.
Michael Doss, Chief Executive Officer, commented, “The pressure
pumping market remains oversupplied and ultra-competitive due to
higher completions efficiencies and E&P capital discipline. As
a result, we are directing our attention toward what we can control
including providing outstanding service quality to our customers,
intelligently managing our costs, and maintaining strong liquidity.
We have conducted a comprehensive cost review and right-sizing of
the business for the current environment and expect to generate
meaningful cash flow savings in the coming quarters. In the third
quarter, we reduced our long-term debt to $456.6 million, a
decrease of $15.6 million and we reduced our net debt to $255.7
million, a decrease of $58.1 million.”
Third Quarter 2019 Compared to Second Quarter 2019
- Revenue was $186.0 million, down from $225.8 million
- Net loss was $(10.8) million, down from net income of $5.9
million
- Earnings per share was $(0.10), down from $0.05
- Adjusted EBITDA was $20.6 million, down from $41.9 million
- Adjusted EBITDA per average active fleet was $4.2 million on an
annualized basis, down from $8.0 million
- Successfully closed the sale of interest in Chinese joint
venture, SinoFTS, for total cash proceeds of $32.7 million
- Net cash provided by operating activities of $42.6 million less
capital expenditures of $13.0 million yielded free cash flow of
$29.6 million, up from net cash provided by operating activities of
$13.4 million less capital expenditures of $14.8 million which
yielded free cash flow of $(1.4) million
Operational Update
Average active fleets during the third quarter was 19.8 and FTSI
ended the quarter with 18 fleets active. The Company currently
expects to stack two or three additional fleets in the fourth
quarter due to customers reducing completions, persistent pricing
pressure and underutilization. FTSI expects to average 15 to 16
active fleets in the fourth quarter.
The Company completed 7,050 stages during the third quarter, or
356 stages per active fleet. This compares to 7,230 stages in the
second quarter, or 344 stages per active fleet, and 6,991 stages in
the third quarter of last year, or 321 stages per active fleet.
FTSI continues to increase its efficiency through market headwinds,
working closely with customers to lower costs and extend their
drilling & completion dollars.
In the fourth quarter of 2019, FTSI decided to reduce its
capacity of equipment from 34 total fleets to 28 total fleets,
equivalent to 300,000 HHP. The Company recorded an asset impairment
charge of $4.2 million in connection with this reduction.
Michael Doss commented, “We remain extraordinarily disciplined
with respect to the number of active fleets we maintain in this
market environment. In addition, we have decided to retire six of
our idle fleets, a reduction equivalent to 300,000 hydraulic
horsepower, to right-size the fleet and utilize usable components
to slightly reduce our capex spend. Strategically, we expect that
over the coming years, we will be investing in expanded dual fuel
capabilities as well as evaluate next generation electric pumps to
respond to our customers’ needs to realize diesel fuel savings and
meet ESG objectives.”
Liquidity and Capital Resources
Capital expenditures were $13.0 million in the third quarter
compared to $14.8 million in the second quarter. The Company
expects full-year capital expenditures to be approximately $50
million to $55 million. Maintenance capital expenditures in 2019
remains steady at approximately $2.5 million per average active
fleet.
During the third quarter, FTSI repaid $16.0 million of debt to
bring total long-term debt outstanding to $456.6 million at
September 30, 2019. At the close of the quarter, the Company had
$204.2 million of cash and $255.7 million of net debt, down from
$313.8 million as of June 30, a $58.1 million reduction. Total
availability under FTSI’s revolving credit facility was $90.5
million as of September 30, 2019, and the Company had no borrowings
outstanding under its revolving credit facility.
During the third quarter, FTSI repurchased approximately 1.2
million shares under its stock repurchase program for $3.7
million.
Conference Call & Webcast
FTSI will hold a conference call that will also be webcast on
its website on Tuesday, November 5, 2019 at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time) to discuss the results. Presenting the
Company’s results 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) 231-2933 at least 10 minutes
before the call. A replay will be available through November 26 by
dialing (402) 977-9140 and using the conference ID 21931893#.
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 one of
the largest providers of hydraulic fracturing services in North
America with an operating footprint consisting of five of the most
active major unconventional basins in the United States. The
Company’s services stimulate hydrocarbon flow from oil and natural
gas wells drilled by exploration and production companies primarily
in shale resource formations. 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; acquisition or disposition transaction
costs; supply commitment charges; and gains or losses on sale of
equity interest in joint venture affiliate. The most comparable
financial measure to Adjusted EBITDA under GAAP is net income or
loss. Adjusted EBITDA per average active fleet on an annualized
basis is also a non-GAAP measure and is defined as Adjusted EBITDA
divided by the average active fleets per quarter then multiplying
the result by four.These non-GAAP measures 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. Our non-GAAP measures 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 the non-GAAP measures it uses 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 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. 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.
Free cash flow is a non‐GAAP financial measure that FTSI defines
as cash flow from operations less capital expenditures. The most
comparable financial measure to free cash flow is net cash provided
by (used in) operating activities. Free cash flow is used by
management to evaluate our ongoing business operations. Free cash
flow should not be used by investors or others as the sole basis
for formulating investment decisions, as it excludes important
items. This calculation is commonly used as a basis for investors
to evaluate and compare the operating performance and value of
companies within our industry, although FTSI’s definition of free
cash flow may differ from other industry peer companies.
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 the
expected savings as a result of our comprehensive cost review and
right sizing of our business, the expected reduction of fleets,
expected average active fleets in the fourth quarter, anticipated
capacity reduction and resulting benefits, including investing in
dual fuel and electric pumps, full-year 2019 capital expenditure
guidance, anticipated 2019 maintenance capital expenditures, and
other statements identified by words such as “could,” “may,”
“might,” “will,” “likely,” “anticipates,” “intends,” “potential,”
“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
projected operations of FTSI; results of litigation, arbitration,
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
FTSI’s services and capital expenditures; global economic
conditions; excess availability of pressure pumping equipment;
liabilities from operations; weather; decline in, and ability to
realize, backlog; potential delay in future equipment
specialization and new technologies, including electric fleets;
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 and other risks and
uncertainties. 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.
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, including the most recently filed
Forms 10-Q and 10-K. FTSI’s filings may be reviewed on FTSI’s
website at ftsi.com or through the SEC’s Electronic Data Gathering
and Analysis Retrieval System (EDGAR) at http://www.sec.gov.
Consolidated Statements of Operations
(unaudited)
Three Months Ended
Nine Months Ended
Sep. 30,
Jun. 30,
Sep. 30,
Sep. 30,
Sep. 30,
(In millions, except per share amounts)
2019
2019
2018
2019
2018
Revenue Revenue
$
186.0
$
225.8
$
324.4
$
633.4
$
1,202.3
Revenue from related parties
-
-
10.0
0.9
92.9
Total revenue
186.0
225.8
334.4
634.3
1,295.2
Operating expenses Costs of revenue
147.2
165.9
222.2
476.2
863.8
Selling, general and administrative
21.1
21.7
19.7
66.4
66.3
Depreciation and amortization
22.7
22.8
21.1
67.9
62.4
Impairments and other charges
5.1
2.8
10.0
68.7
16.0
(Gian) loss on disposal of assets, net
(0.1
)
(1.2
)
(0.1
)
(1.0
)
0.2
Total operating expenses
196.0
212.0
272.9
678.2
1,008.7
Operating (loss) income
(10.0
)
13.8
61.5
(43.9
)
286.5
Interest expense, net
(7.6
)
(7.7
)
(10.4
)
(23.5
)
(39.9
)
Gain (loss) on extinguishment of debt, net
0.8
(0.1
)
(0.6
)
1.2
(10.7
)
Gain on sale of equity interest in joint venture affiliate
7.0
-
-
7.0
-
Equity in net income (loss) of joint venture affiliate
-
-
(0.7
)
0.6
(1.9
)
(Loss) income before income taxes
(9.8
)
6.0
49.8
(58.6
)
234.0
Income tax expense
1.0
0.1
0.2
1.3
2.1
Net (loss) income
$
(10.8
)
$
5.9
$
49.6
$
(59.9
)
$
231.9
Net (loss) income attributable to common stockholders
$
(10.8
)
$
5.9
$
49.6
$
(59.9
)
$
655.1
Basic and diluted earnings per share attributable to common
stockholders
$
(0.10
)
$
0.05
$
0.45
$
(0.55
)
$
6.40
Shares used in computing basic and diluted earnings per
share
108.6
109.7
109.3
109.3
102.4
Consolidated Balance Sheets
(unaudited)
Sep. 30,
Dec. 31,
(In millions)
2019
2018
ASSETS Current assets Cash and cash
equivalents
$ 204.2
$ 177.8
Accounts receivable, net
119.5
158.3
Inventories
48.3
66.6
Prepaid expenses and other current assets
11.9
7.0
Total current assets
383.9
409.7
Property, plant, and equipment, net
237.7
275.3
Operating lease right-of-use assets
30.2
-
Intangible assets, net
29.5
29.5
Investment in joint venture affiliate
-
23.2
Other assets
4.2
6.0
Total assets
$ 685.5
$ 743.7
LIABILITIES AND EQUITY Current liabilities
Accounts payable
$ 57.6
$ 86.8
Accrued expenses
34.8
29.3
Current maturities of operating lease liabilities
15.0
-
Other current liabilities
12.0
16.3
Total current liabilities
119.4
132.4
Long-term debt
456.6
503.2
Operating lease liabilities
17.2
-
Other liabilities
45.8
1.2
Total liabilities
639.0
636.8
Equity Common stock
36.4
36.4
Additional paid-in capital
4,377.8
4,378.4
Accumulated deficit
(4,367.7
)
(4,307.9
)
Total equity
46.5
106.9
Total liabilities and equity
$ 685.5
$ 743.7
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
Nine Months Ended
Sep. 30,
Jun. 30,
Sep. 30,
Sep. 30,
Sep. 30,
(In millions)
2019
2019
2018
2019
2018
Cash flows from operating activities Net (loss)
income
$
(10.8
)
$
5.9
$
49.6
$
(59.9
)
$
231.9
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation and amortization
22.7
22.8
21.1
67.9
62.4
Stock-based compensation
2.9
3.7
3.2
9.6
8.2
Amortization of debt discounts and issuance costs
0.5
0.4
0.5
1.4
2.0
Impairment of assets
4.2
2.7
-
9.7
-
(Gain) loss on disposal of assets, net
(0.1
)
(1.2
)
(0.1
)
(1.0
)
0.2
(Gain) loss on extinguishment of debt, net
(0.8
)
0.1
0.6
(1.2
)
10.7
(Gain) on sale of equity interest in joint venture affiliate
(7.0
)
-
-
(7.0
)
-
Inventory write-down
-
-
-
1.4
-
Non-cash provision for supply commitment charges
0.9
0.1
10.0
57.6
16.0
Cash paid to settle supply commitment charges
(0.2
)
(15.9
)
(0.1
)
(16.1
)
(2.1
)
Other non-cash items
1.6
0.8
0.7
1.6
1.8
Changes in operating assets and liabilities: Accounts receivable
21.9
9.1
70.8
38.7
16.0
Accounts receivable from related parties
-
-
15.0
-
(4.4
)
Inventories
11.2
7.3
(6.0
)
16.8
(23.3
)
Prepaid expenses and other assets
1.7
(8.9
)
1.9
(6.9
)
1.1
Accounts payable
(16.2
)
(1.0
)
(46.2
)
(28.5
)
(25.2
)
Accrued expenses and other liabilities
10.1
(12.5
)
8.1
5.8
7.3
Net cash provided by operating activities
42.6
13.4
129.1
89.9
302.6
Cash flows from investing activities Capital
expenditures
(13.0
)
(14.8
)
(18.6
)
(39.5
)
(84.9
)
Proceeds from disposal of assets
0.6
1.2
0.4
1.9
1.0
Proceeds from sale of equity interest in joint venture affiliate
30.7
-
-
30.7
-
Net cash provided by (used in) investing activities
18.3
(13.6
)
(18.2
)
(6.9
)
(83.9
)
Cash flows from financing activities Repayments of
long-term debt
(15.1
)
(5.0
)
(70.0
)
(46.4
)
(569.3
)
Repurchase of common stock
(3.7
)
(4.6
)
-
(8.3
)
-
Taxes paid related to net share settlement of equity awards
-
(0.2
)
-
(1.9
)
-
Net proceeds from issuance of common stock
-
-
-
-
303.0
Payments of revolving credit facility issuance costs
-
-
-
-
(2.4
)
Net cash used in financing activities
(18.8
)
(9.8
)
(70.0
)
(56.6
)
(268.7
)
Net increase (decrease) in cash, cash equivalents, and
restricted cash
42.1
(10.0
)
40.9
26.4
(50.0
)
Cash, cash equivalents, and restricted cash at beginning of period
162.1
172.1
126.3
177.8
217.2
Cash and cash equivalents at end of period
$
204.2
$
162.1
$
167.2
$
204.2
$
167.2
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
Three Months Ended
Sep. 30,
Jun. 30,
Sep. 30,
(In millions, except average active fleets)
2019
2019
2018
Net (loss) income
$
(10.8
)
$
5.9
$
49.6
Interest expense, net
7.6
7.7
10.4
Income tax expense
1.0
0.1
0.2
Depreciation and amortization
22.7
22.8
21.1
(Gain) loss on disposal of assets, net
(0.1
)
(1.2
)
(0.1
)
(Gain) loss on extinguishment of debt, net
(0.8
)
0.1
0.6
Stock-based compensation
2.9
3.7
3.2
Supply commitment charges
0.9
0.1
10.0
Impairment of assets
4.2
2.7
-
Gain on sale of equity interest in joint venture affiliate
(7.0
)
-
-
Adjusted EBITDA
20.6
41.9
95.0
Average active fleets
19.8
21.0
21.8
Annualized adjusted EBITDA per average active fleet
$
4.2
$
8.0
$
17.4
Free Cash Flow Calculation
Three Months Ended
Nine Months Ended
Sep. 30,
Jun. 30,
Sep. 30,
Sep. 30,
Sep. 30,
(In millions)
2019
2019
2018
2019
2018
Free Cash Flow: Net cash provided by operating
activities
$
42.6
$
13.4
$
129.1
$
89.9
$
302.6
Capital expenditures
(13.0
)
(14.8
)
(18.6
)
(39.5
)
(84.9
)
Free cash flow
$
29.6
$
(1.4
)
$
110.5
$
50.4
$
217.7
Reconciliation of Long-term Debt to Net Debt
Sep. 30,
Jun. 30,
Dec. 31,
(In millions)
2019
2019
2018
Term loan due April 2021
$
90.0
$
101.0
$
121.0
Senior notes due May 2022
369.9
374.9
386.9
Less unamortized discount and debt issuance costs
(3.3
)
(3.7
)
(4.7
)
Total long-term debt
456.6
472.2
503.2
Add unamortized discount and debt issuance costs
3.3
3.7
4.7
Total principal amount of debt
459.9
475.9
507.9
Less cash and cash equivalents
(204.2
)
(162.1
)
(177.8
)
Net debt
$
255.7
$
313.8
$
330.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191104005946/en/
Lance Turner Chief Financial Officer FTS International, Inc.
817-862-2000
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