FTS International, Inc. (NYSE American: FTSI) today reported its
financial and operational results for the second quarter of
2020.
Michael Doss, Chief Executive Officer, commented “Due to the
impacts of COVID-19 and the Saudi-Russian oil price war earlier
this year, the second quarter was challenging for us and our
industry. We reacted quickly in late March to adjust our business
to lower demand by aggressively cutting costs to preserve
liquidity. Sequentially, we were able to cut our annualized costs
of revenue per active fleet by approximately $6 million and reduce
our annualized SG&A by approximately $18 million.
We continue to expect a challenging market for the remainder of
the year. While I am encouraged by the recent improvement in
activity levels from the trough, margins are expected to remain
compressed. With a firm grip on operating costs, low fleet
reactivation costs and our ability to react quickly to market
changes, I am confident that we will hold our position as a leader
in through-cycle cash returns.”
Second Quarter 2020 Compared to the First Quarter
2020
- Revenue was $29.5 million, down from $151.5 million
- Net loss was $(50.7) million, compared to a loss of $(11.7)
million
- Earnings per share of $(9.43), compared to $(2.18)
- Adjusted EBITDA was $(9.1) million, down from $22.3
million
- Capital expenditures were $0.4 million, down from $16.4
million
Operational Update
Average active fleets during the second quarter was 5.0, down
from 16.0 in the first quarter. Utilization of our active fleets
averaged 46% during the second quarter, resulting in fully-utilized
fleets of 2.3 during the second quarter. This compares to 88%
utilization and fully-utilized fleets of 14.0 during the first
quarter.
We completed 1,468 stages during the second quarter, or 638
stages per fully-utilized fleet. This compares to 6,888 stages
during the first quarter, or 492 stages per fully-utilized fleet.
The increase from the prior quarter was largely driven by customer
and geographical mix, but also by an increase in average pumping
hours per day.
While utilization of our active fleets was low due to
significant white space in our operations calendar, we continued to
further increase our average pumping hours per active day to an
all-time high of 14.4 hours. Our highest utilized fleets routinely
pump more than 18 pumping hours per active day. This exemplifies
our unwavering attention to efficiency and safety even during
challenging times.
We have 6 fleets active today and currently expect to average 6
to 7 active fleets in the third quarter. However, with limited
visibility we also expect white space to persist in our operations
calendar for the foreseeable future.
These increased activity levels are accretive to the company as
we are only pursuing work that provides a positive contribution
margin; however, we expect gross profit to be minimal due to the
low pricing for our services and certain fixed costs. The largest
fixed costs are contractual in nature and are for items that are
not being fully utilized at today’s activity levels.
Liquidity and Capital Resources
Capital expenditures were $0.4 million in the second quarter,
down from $16.4 million in the first quarter as we took quick
action to preserve liquidity. Due to the low number of fleets
operating, we were able to utilize the pumps that were most
recently rebuilt for our active fleets. In the third quarter, we
will continue to minimize capital expenditures. We currently expect
to incur total capital expenditures between $20 million and $25
million for 2020.
As of June 30, 2020, our borrowing base and therefore our
maximum availability under our revolving credit facility was $9.0
million. As of June 30, 2020, there were no borrowings outstanding
under the credit facility, and letters of credit totaling $4.0
million were issued, resulting in $5.0 million of availability
under the credit facility. This availability requires us to
maintain a minimum fixed charge coverage ratio (“FCCR”) of 1.0 to
1.0. At our next compliance date in August 2020, we expect our FCCR
to be below the minimum. We are evaluating our options, which
include modifying or terminating the credit facility.
As of June 30, 2020, we had $192.5 million of cash and $437.3
million of gross debt. Net debt, excluding unamortized discount and
debt issuance costs, was $244.8 million. Additionally, at quarter
end, total liquidity was $197.5 million, including $5.0 million of
availability under our revolving credit facility.
Conference Call & Webcast
We do not expect to host a conference call and webcast to
discuss financial results for the second quarter.
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 we define
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, and Adjusted EBITDA
per fully-utilized fleet on an annualized basis, which is a
non-GAAP measure and is defined as Adjusted EBITDA divided by the
number of fully-utilized fleets during a quarter then multiplying
the result by four. We calculate the number of fully-utilized
active fleets during a quarter by multiplying utilization
percentage by the average active fleets during a quarter. We
calculate utilization percentage by multiplying average active
fleets by 78 then dividing the result by the total number of active
days during a quarter. 78 is the total number of days an active
fleet could be active during a quarter not including transition or
move days during a quarter. Adjusted EBITDA, Adjusted EBITDA per
average active fleet on an annualized basis and Adjusted EBITDA per
fully-utilized 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, Adjusted EBITDA
per average active fleet on an annualized basis and Adjusted EBITDA
per fully-utilized 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. We believe
Adjusted EBITDA, Adjusted EBITDA per average active fleet on an
annualized basis and Adjusted EBITDA per fully-utilized 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 our definition of Adjusted EBITDA may differ from other
industry peer companies.
Net debt, excluding unamortized discount and debt issuance costs
is a non-GAAP financial measure that we define as total long-term
debt plus current maturities of 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
market expectations, expected margins, our average active fleets
and fleet utilization in the third quarter, expected gross profit
and pricing for our services, capital expenditures for 2020, our
future deployment of additional fleets, our fixed charge coverage
ratio at our next compliance date, increases in our net working
capital in the third quarter, and other statements identified by
words such as “could,” “should,” “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 our current expectations and assumptions regarding capital
market conditions, our 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, our 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, further declines in domestic
spending by the onshore oil and natural gas industry; continued
volatility in oil and natural gas prices; the effect of a loss of,
financial distress of, or decline in activity levels of, one or
more significant customers; actions of the Organization of the
Petroleum Exporting Countries, or OPEC, its members and other
state-controlled oil companies relating to oil price and production
controls; our inability to employ a sufficient number of key
employees, technical personnel and other skilled or qualified
workers; the price and availability of alternative fuels and energy
sources; the discovery rates of new oil and natural gas reserves;
the availability of water resources, suitable proppant and
chemicals in sufficient quantities and pricing for use in hydraulic
fracturing fluids; uncertainty in capital and commodities markets
and the ability of oil and natural gas producers to raise equity
capital and debt financing; our ability to manage the maturities of
our term loan and senior notes; ongoing and potential securities
litigation and other litigation and legal proceedings, including
arbitration proceedings and our dispute with Covia Holdings
Corporation regarding a terminated supply agreement; our ability to
participate in consolidation opportunities within our industry; the
ability to successfully manage the economic and operational
challenges associated with a disease outbreak, including epidemics,
pandemics, or similar widespread public health concerns, including
the COVID-19 pandemic; the ultimate geographic spread, duration and
severity of the COVID-19 outbreak, and the effectiveness of actions
taken, or actions that may be taken, by governmental authorities to
contain such outbreak or treat its impact; the ultimate duration
and impact of geopolitical events that adversely affect the price
of oil, including the Saudi-Russia price war earlier this year; and
a deterioration in general economic conditions or a weakening of
the broader energy industry. Any forward-looking statement made in
this press release speaks only as of the date on which it is made.
We undertake 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
our filings with the SEC. The risk factors and other factors noted
in our 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
Six Months Ended
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
(Dollars in millions, except per share amounts; shares in
thousands)
2020
2020
2019
2020
2019
Revenue Revenue $
29.5
$
150.8
$
225.8
$
180.3
$
447.4
Revenue from related parties
-
0.7
-
0.7
0.9
Total revenue
29.5
151.5
225.8
181.0
448.3
Operating expenses Costs of revenue, excluding
depreciation and amortization
28.9
114.6
164.8
143.5
326.9
Selling, general and administrative
13.2
17.7
21.7
30.9
45.3
Depreciation and amortization
20.2
21.4
22.8
41.6
45.2
Impairments and other charges
10.3
4.3
3.9
14.6
65.7
Loss (gain) on disposal of assets, net
0.2
(0.1)
(1.2)
0.1
(0.9)
Total operating expenses
72.8
157.9
212.0
230.7
482.2
Operating (loss) income
(43.3)
(6.4)
13.8
(49.7)
(33.9)
Interest expense, net
(7.4)
(7.3)
(7.7)
(14.7)
(15.9)
Gain on extinguishment of debt, net
-
2.0
(0.1)
2.0
0.4
Equity in net income of joint venture affiliate
-
-
-
-
0.6
(Loss) income before income taxes
(50.7)
(11.7)
6.0
(62.4)
(48.8)
Income tax expense
-
-
0.1
-
0.3
Net (loss) income $
(50.7)
$
(11.7)
$
5.9
$
(62.4)
$
(49.1)
Basic and diluted earnings per share $
(9.43)
$
(2.18)
$
1.08
$
(11.61)
$
(8.95)
Shares used in computing basic and diluted earnings per
share
5,379
5,367
5,484
5,373
5,483
Consolidated Balance Sheets
(unaudited)
Jun. 30,
Mar. 31,
Dec. 31
(Dollars in millions)
2020
2020
2019
ASSETS Current assets Cash and cash
equivalents
$
192.5
$
199.2
$
223.0
Accounts receivable, net
20.8
78.6
77.0
Accounts receivable from related parties, net
-
0.6
-
Inventories
40.0
43.6
45.5
Prepaid expenses and other current assets
5.8
15.0
7.0
Total current assets
259.1
337.0
352.5
Property, plant, and equipment, net
203.7
223.1
227.0
Operating lease right-of-use assets
21.1
22.5
26.3
Intangible assets, net
29.5
29.5
29.5
Investment in joint venture affiliate
-
-
-
Other assets
3.8
3.9
4.0
Total assets
$
517.2
$
616.0
$
639.3
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities Accounts payable
$
16.8
$
53.6
$
36.4
Accrued expenses
13.0
25.2
22.9
Current maturities of long-term debt
67.2
-
-
Current portion of operating lease liabilities
13.0
13.8
14.3
Other current liabilities
12.8
14.6
11.6
Total current liabilities
122.8
107.2
85.2
Long-term debt
367.8
434.7
456.9
Operating lease liabilities
9.7
10.5
13.9
Other liabilities
35.0
34.6
45.6
Total liabilities
535.3
587.0
601.6
Stockholders' (deficit) equity Total
stockholders' (deficit) equity
(18.1
)
29.0
37.7
Total liabilities and stockholders' (deficit) equity
$
517.2
$
616.0
$
639.3
Consolidated Statements of
Cash Flows (unaudited)
Three Months Ended
Six Months Ended
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
(Dollars in millions)
2020
2020
2019
2020
2019
Cash flows from operating activities Net (loss)
income
$
(50.7
)
$
(11.7
)
$
5.9
$
(62.4
)
$
(49.1
)
Adjustments to reconcile net loss (income) to net cash provided by
operating activities: Depreciation and amortization
20.2
21.4
22.8
41.6
45.2
Stock-based compensation
3.5
3.1
3.7
6.6
6.7
Amortization of debt discounts and issuance costs
0.5
0.4
0.4
0.9
0.9
Impairment of assets
-
-
2.7
-
5.5
(Gain) loss on disposal of assets, net
0.2
(0.1
)
(1.2
)
0.1
(0.9
)
(Gain) loss on extinguishment of debt, net
-
(2.0
)
0.1
(2.0
)
(0.4
)
Inventory write-down
3.9
0.6
1.1
4.5
3.5
Non-cash provision for supply commitment charges
5.9
3.2
0.1
9.1
56.7
Cash paid to settle supply commitment charges
(7.6
)
(11.2
)
(15.9
)
(18.8
)
(15.9
)
Other non-cash items
(0.1
)
0.9
(0.1
)
0.8
(1.1
)
Changes in operating assets and liabilities: Accounts receivable
57.8
(2.4
)
9.1
55.4
16.8
Accounts receivable from related parties
0.7
(0.7
)
-
-
-
Inventories
(0.3
)
1.3
7.1
1.0
4.6
Prepaid expenses and other assets
9.0
(8.1
)
(8.9
)
0.9
(8.6
)
Accounts payable
(37.5
)
16.2
(1.0
)
(21.3
)
(12.3
)
Accrued expenses and other liabilities
(11.8
)
2.3
(12.5
)
(9.5
)
(4.3
)
Net cash (used in) provided by operating activities
(6.3
)
13.2
13.4
6.9
47.3
Cash flows from investing activities Capital
expenditures
(0.4
)
(16.4
)
(14.8
)
(16.8
)
(26.5
)
Proceeds from disposal of assets
-
0.1
1.2
0.1
1.3
Net cash used in investing activities
(0.4
)
(16.3
)
(13.6
)
(16.7
)
(25.2
)
Cash flows from financing activities Repayments of
long-term debt
-
(20.6
)
(5.0
)
(20.6
)
(31.3
)
Repurchases of common stock
-
-
(4.6
)
-
(4.6
)
Taxes paid related to net share settlement of equity awards
-
(0.1
)
(0.2
)
(0.1
)
(1.9
)
Net cash used in financing activities
-
(20.7
)
(9.8
)
(20.7
)
(37.8
)
Net decrease in cash and cash equivalents
(6.7
)
(23.8
)
(10.0
)
(30.5
)
(15.7
)
Cash and cash equivalents at beginning of period
199.2
223.0
172.1
223.0
177.8
Cash and cash equivalents at end of period
$
192.5
$
199.2
$
162.1
$
192.5
$
162.1
Reconciliation of Net (Loss)
Income to Adjusted EBITDA
Three Months Ended
Six Months Ended
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
(Dollars in millions, except fleets)
2020
2020
2019
2020
2019
Net (loss) income
$
(50.7
)
$
(11.7
)
$
5.9
$
(62.4
)
$
(49.1
)
Interest expense, net
7.4
7.3
7.7
14.7
15.9
Income tax expense
-
-
0.1
-
0.3
Depreciation and amortization
20.2
21.4
22.8
41.6
45.2
(Gain) loss on disposal of assets, net
0.2
(0.1
)
(1.2
)
0.1
(0.9
)
(Gain) loss on extinguishment of debt, net
-
(2.0
)
0.1
(2.0
)
(0.4
)
Stock-based compensation
3.5
3.1
3.7
6.6
6.7
Supply commitment charges
5.9
3.2
0.1
9.1
56.7
Inventory write-down
3.9
0.6
1.1
4.5
3.5
Impairment of assets
-
-
2.7
-
5.5
Employee severance costs
0.5
0.5
-
1.0
-
Adjusted EBITDA
(9.1
)
22.3
43.0
13.2
83.4
Adjusted EBITDA
(9.1
)
22.3
43.0
13.2
83.4
Average active fleets
5.0
16.0
21.0
10.5
20.5
Annualized adjusted EBITDA per average active fleet
(7.3
)
5.6
8.2
2.5
8.1
Adjusted EBITDA
(9.1
)
22.3
43.0
13.2
83.4
Fully-utilized fleets
2.3
14.0
18.2
8.2
17.6
Annualized adjusted EBITDA per fully-utilized fleet
$
(15.8
)
$
6.4
$
9.5
$
3.2
$
9.5
Average active fleets
5.0
16.0
21.0
10.5
20.5
Utilization %
46
%
88
%
87
%
78
%
86
%
Fully-utilized fleets
2.3
14.0
18.2
8.2
17.6
Reconciliation of Long-term
Debt to Net Debt
Jun. 30,
Mar. 31,
Dec. 30,
(Dollars in millions)
2020
2020
2019
Term loan due April 2021
$
67.4
$
67.4
$
90.0
Senior notes due May 2022
369.9
369.9
369.9
Total principal amount of debt
437.3
437.3
459.9
Less current portion of long-term debt
(67.2
)
-
-
Less unamortized discount and debt issuance costs
(2.3
)
(2.6
)
(3.0
)
Total long-term debt
367.8
434.7
456.9
Add current maturities of long-term debt
67.2
-
-
Add unamortized discount and debt issuance costs
2.3
2.6
3.0
Total principal amount of debt
437.3
437.3
459.9
Less cash and cash equivalents
(192.5
)
(199.2
)
(223.0
)
Net debt
$
244.8
$
238.1
$
236.9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200810005668/en/
Lance Turner Chief Financial Officer 817-862-2000
FTS (NYSE:FTSI)
Historical Stock Chart
From Jan 2025 to Feb 2025
FTS (NYSE:FTSI)
Historical Stock Chart
From Feb 2024 to Feb 2025
