HOUSTON, Feb. 24, 2020 /PRNewswire/ -- Select Energy
Services, Inc. (NYSE: WTTR) ("Select" or "the Company"), a leading
provider of water management and chemical solutions to the U.S.
unconventional oil and gas industry, today announced results for
the fourth quarter and fiscal year ended December 31, 2019.
Holli Ladhani, President and CEO,
stated, "We advanced our strategy throughout the year by divesting
our non-core businesses, paying down our debt balance in full,
completing our New Mexico pipeline
system, adding incremental chemicals manufacturing capacity in the
Permian basin, acquiring a strategic water treatment business and
returning cash to shareholders via open market share repurchases,
all while continuing to generate and build cash on the balance
sheet.
"We finished 2019 with another strong free cash flow quarter and
significantly exceeded the top end of our full year free cash flow
target. We were disciplined in our approach to capital allocation
throughout 2019, generating consistent free cash flow and further
enhancing our financial flexibility. With our debt-free balance
sheet, we are well positioned to capitalize on opportunities as
they arise and navigate the potentially volatile market ahead of
us.
"Looking forward, while we expect full year activity to decline
year-over-year, we have already seen activity pick up in the early
part of 2020 and expect improvements across all three segments in
the first quarter. Absent signals of further increases in activity
levels, we will invest our capital judiciously, with a capital
expenditure range of $55 million to
$70 million expected in 2020. We will
continue to target a balanced capital allocation strategy including
the evaluation of opportunistic and strategic growth focused on
expanding our ability to bring full life-cycle solutions to our
customers, as well as in technologies that support our operational
efficiency initiatives and service differentiation," concluded
Ladhani.
Summary Financial Information
Revenue for fiscal year 2019 was $1.29
billion as compared to $1.53
billion in fiscal year 2018. Revenue for the fourth
quarter of 2019 was $276.1 million as
compared to $329.0 million in the
third quarter of 2019 and $362.3
million in the fourth quarter of 2018. Revenue in the fiscal
year 2019 and fourth quarter of 2019 were impacted by the
divestment of certain non-core operations that contributed an
incremental $29.4 million of revenue
in the fourth quarter of 2018 and an incremental $142.2 million in fiscal year 2018. Net income
for fiscal year 2019 was $4.1 million
as compared to net income of $54.3
million in fiscal year 2018. Net loss for the fourth quarter
of 2019 was $12.5 million compared to
net income of $7.2 million in the
third quarter of 2019 and net loss of $18.1
million in the fourth quarter of 2018.
Gross profit was $21.8 million in
the fourth quarter of 2019 compared to $41.0
million in the third quarter of 2019 and $34.4 million in the fourth quarter of 2018.
Total gross margin for Select was 7.9% in the fourth quarter of
2019 as compared to 12.5% in the third quarter of 2019 and 9.5% in
the fourth quarter of 2018. Gross margin before depreciation and
amortization ("D&A") for the fourth quarter of 2019 was 18.1%
compared to 21.1% for the third quarter of 2019 and 19.8% for the
fourth quarter of 2018.
Gross profit for fiscal year 2019 was $148.7 million as compared to $198.5 million in fiscal year 2018, and gross
margin was 11.5% in fiscal year 2019 as compared to 13.0% in fiscal
year 2018. Gross margin before D&A for fiscal year 2019
was 20.6% as compared to 21.5% for fiscal year 2018.
Adjusted EBITDA was $28.8 million,
or 10.4% of revenue in the fourth quarter of 2019, as compared to
$48.9 million or 14.9% of revenue in
the third quarter of 2019 and $56.1
million or 15.5% of revenue in the fourth quarter of
2018. Adjusted EBITDA for fiscal year 2019 was $182.7 million as compared to $257.6 million in fiscal year 2018. Please
refer to the end of this release for reconciliations of gross
profit before D&A and gross margin before D&A (non-GAAP
measures) to gross profit and of Adjusted EBITDA (non-GAAP measure)
to net income.
Business Segment Information
The Water Services segment generated revenues of $152.9 million in the fourth quarter of 2019, as
compared to $196.8 million in the
third quarter of 2019 and $211.1
million in the fourth quarter of 2018. Gross margin
before D&A for Water Services was 17.3% in the fourth quarter
of 2019 as compared to 21.9% in the third quarter of 2019 and 22.9%
in the fourth quarter of 2018. The sequential decline in revenue
and gross margin before D&A was largely attributable to
meaningful seasonal activity declines in the quarter driven by
weather, holidays and our customers having exhausted their capital
budgets throughout the quarter. The year over year decline was
largely driven by lower completions activity and pricing from our
customers in 2019 relative to 2018.
The Water Infrastructure segment generated revenues of
$52.3 million in the fourth quarter
of 2019 as compared to $64.0 million
in the third quarter of 2019 and $54.5
million in the fourth quarter of 2018. Gross margin before
D&A for Water Infrastructure was 22.9% in the fourth quarter of
2019 as compared to 26.9% in the third quarter of 2019 and 27.0% in
the fourth quarter of 2018. The decline in revenues and gross
margin before D&A in the fourth quarter of 2019 was driven
primarily by decreased non-pipeline water sourcing volumes
associated with seasonal activity declines as well as increased
costs associated with the Company's legacy New Mexico sourcing and logistics operations
prior to the Northern Delaware
pipeline coming online late in the fourth quarter of 2019.
The Oilfield Chemicals segment generated revenues of
$70.9 million in the fourth quarter
of 2019, as compared to $67.9 million
in the third quarter of 2019 and $67.4
million during the fourth quarter of 2018. Gross
margin before D&A for Oilfield Chemicals was 16.0% in the
fourth quarter of 2019 as compared to 15.6% in the third quarter of
2019 and 8.9% in the fourth quarter of 2018. The revenue
growth in the fourth quarter of 2019 was driven primarily by
incremental contributions from the Well Chemical Services business
("WCS"), which we acquired from Baker Hughes Company on
September 30, 2019. The meaningful
year-over-year improvement in margins was driven by continued
demand for our higher margin friction reducer product lines
combined with the transportation cost savings from our Midland
plant expansion.
The "Other" category, which contains the residual wind-down
impacts of the non-core businesses that were largely divested and
wound down during the first half of 2019, generated no revenues
during the fourth quarter of 2019 relative to $0.3 million in the third quarter of 2019 and
$29.4 million in the fourth quarter
of 2018. The "Other" category contributed gross profit before
D&A of $0.1 million in the fourth
quarter of 2019 as compared to gross loss before D&A of
$1.6 million in the third quarter of
2019 and gross profit before D&A of $2.7
million in the fourth quarter of 2018. The Company does not
expect any material contributions from these operations going
forward.
Select's consolidated Adjusted EBITDA during the quarter
includes $13.1 million of
non-recurring or non-cash adjustments, including $4.8 million of loss on sales of subsidiaries and
other assets, primarily related to non-cash losses incurred from
the sale of certain underutilized assets within the Water Services
segment, $2.8 million of asset
impairment charges for underutilized assets, $1.6 million of transaction costs, primarily
related to a legacy Rockwater liability accrual and deal costs from
the acquisition of WCS, and $0.6
million of lease abandonment and impairment costs. Non-cash
compensation expense accounted for an additional $3.6 million adjustment and other items produced
a net impact of ($0.3) million.
Cash Flow and Balance Sheet
Cash flow from operations for the fourth quarter of 2019 was
$61.7 million as compared to
$67.5 million in the third quarter of
2019 and $107.8 million in the fourth
quarter of 2018. Cash flow from operations during the fourth
quarter of 2019 included a $34.3
million contribution from working capital. Cash flow
from operations for the fiscal year 2019 was $203.9 million compared to $232.4 million during fiscal year 2018. Capital
expenditures for the fourth quarter of 2019 were $20.5 million, net of ordinary course asset sales
of $3.3 million. Capital
expenditures for the fiscal year 2019 were $98.1 million, net of ordinary course asset sales
of $12.0 million, a reduction of 35%
as compared to $151.4 million for the
fiscal year 2018, net of ordinary course asset sales of
$14.0 million. Cash flow from
operations less capex, net of asset sales, was $41.2 million during the fourth quarter and
$105.8 million during the fiscal year
2019.
Other net cash uses during the fourth quarter included
$4.9 million to fund the open market
repurchase of approximately 0.66 million shares of Class A common
stock. For fiscal year 2019, we repurchased approximately 2.18
million of Class A common stock for $17.5
million in the open market.
Total liquidity was $274.0 million
as of December 31, 2019, as compared
to $221.9 million as of December 31, 2018. The Company had no
outstanding borrowings under the Company's revolving credit
facility as of December 31, 2019,
compared to $45.0 million as of
December 31, 2018. As of
December 31, 2019, the Company had
approximately $194.7 million of
available borrowing capacity under its revolving credit facility,
after giving effect to $19.9 million
of outstanding letters of credit. Total cash and cash
equivalents were $79.3 million at
December 31, 2019 as compared to
$17.2 million at December 31, 2018.
Conference Call
Select has scheduled a conference call on Tuesday, February 25, 2020 at 10:00 a.m. Eastern time / 9:00 a.m. Central time. Please dial
201-389-0872 and ask for the Select Energy Services call at least
10 minutes prior to the start time of the call, or listen to the
call live over the Internet by logging on to the website at the
address
http://investors.selectenergyservices.com/events-and-presentations.
A telephonic replay of the conference call will be available
through March 10, 2020 and may be
accessed by calling 201-612-7415 using passcode 13697812#. A
webcast archive will also be available at the link above shortly
after the call and will be accessible for approximately 90
days.
About Select Energy Services, Inc.
Select Energy Services, Inc. ("Select") is a leading provider of
comprehensive water management and chemical solutions to the oil
and gas industry in the United States. Select provides for
the sourcing and transfer of water, both by permanent pipeline and
temporary hose, prior to its use in the drilling and completion
activities associated with hydraulic fracturing, as well as
complementary water-related services that support oil and gas well
completion and production activities, including containment,
monitoring, treatment and recycling, flowback, hauling, gathering
and disposal. Select, under its Rockwater Energy Solutions
brand, develops and manufactures a full suite of specialty
chemicals used in the well completion process and production
chemicals used to enhance performance over the producing life of a
well. Select currently provides services to exploration and
production companies and oilfield service companies operating in
all the major shale and producing basins in the United
States. For more information, please visit Select's website,
http://www.selectenergyservices.com.
Cautionary Statement Regarding Forward-Looking
Statements
All statements in this communication other than statements of
historical facts are forward-looking statements which contain our
current expectations about our future results. We have
attempted to identify any forward-looking statements by using words
such as "expect," "will," "estimate" and other similar
expressions. Although we believe that the expectations
reflected, and the assumptions or bases underlying our
forward-looking statements are reasonable, we can give no assurance
that such expectations will prove to be correct. Such
statements are not guarantees of future performance or events and
are subject to known and unknown risks and uncertainties that could
cause our actual results, events or financial positions to differ
materially from those included within or implied by such
forward-looking statements. Factors that could materially impact
such forward-looking statements include, but are not limited to,
the factors discussed or referenced in the "Risk Factors" section
of our most recent Annual Report on Form 10-K and in any
subsequently filed quarterly reports on Form 10-Q or current
reports on Form 8-K. Investors should not place undue
reliance on our forward-looking statements. Any
forward-looking statement speaks only as of the date on which such
statement is made, and we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result
of new information, future events, changed circumstances or
otherwise, unless required by law.
WTTR-ER
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands,
except share and per share data)
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
December 31,
|
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
2019
|
|
2018
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
$
|
152,922
|
$
|
196,782
|
$
|
211,096
|
|
$
|
772,311
|
|
$
|
896,783
|
Water
infrastructure
|
|
52,314
|
|
63,953
|
|
54,454
|
|
|
221,593
|
|
|
230,115
|
Oilfield
chemicals
|
|
70,852
|
|
67,932
|
|
67,368
|
|
|
268,614
|
|
|
259,791
|
Other
|
|
—
|
|
301
|
|
29,400
|
|
|
29,071
|
|
|
142,241
|
Total
revenue
|
|
276,088
|
|
328,968
|
|
362,318
|
|
|
1,291,589
|
|
|
1,528,930
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
126,392
|
|
153,741
|
|
162,702
|
|
|
598,405
|
|
|
681,546
|
Water
infrastructure
|
|
40,328
|
|
46,748
|
|
39,768
|
|
|
166,962
|
|
|
160,072
|
Oilfield
chemicals
|
|
59,499
|
|
57,357
|
|
61,397
|
|
|
230,434
|
|
|
233,454
|
Other
|
|
(126)
|
|
1,865
|
|
26,686
|
|
|
30,239
|
|
|
124,839
|
Depreciation and
amortization
|
|
28,185
|
|
28,263
|
|
37,357
|
|
|
116,809
|
|
|
130,537
|
Total costs of
revenue
|
|
254,278
|
|
287,974
|
|
327,910
|
|
|
1,142,849
|
|
|
1,330,448
|
Gross
profit
|
|
21,810
|
|
40,994
|
|
34,408
|
|
|
148,740
|
|
|
198,482
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
24,669
|
|
27,280
|
|
25,494
|
|
|
111,622
|
|
|
103,156
|
Depreciation and
amortization
|
|
1,002
|
|
952
|
|
844
|
|
|
3,860
|
|
|
3,176
|
Impairment of
goodwill
|
|
—
|
|
—
|
|
17,894
|
|
|
4,396
|
|
|
17,894
|
Impairment of property
and equipment
|
|
2,773
|
|
49
|
|
4,375
|
|
|
3,715
|
|
|
6,657
|
Impairment of
cost-method investment
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
2,000
|
Lease abandonment
costs
|
|
579
|
|
238
|
|
(217)
|
|
|
2,073
|
|
|
3,925
|
Total operating
expenses
|
|
29,023
|
|
28,519
|
|
48,390
|
|
|
125,666
|
|
|
136,808
|
(Loss)/income from
operations
|
|
(7,213)
|
|
12,475
|
|
(13,982)
|
|
|
23,074
|
|
|
61,674
|
Other
(expense)/income
|
|
|
|
|
|
|
|
|
|
|
|
|
(Losses) gains on
sales of property, equipment and divestitures, net
|
|
(3,393)
|
|
(2,033)
|
|
844
|
|
|
(11,626)
|
|
|
3,804
|
Interest expense,
net
|
|
(318)
|
|
(438)
|
|
(1,496)
|
|
|
(2,688)
|
|
|
(5,311)
|
Foreign currency gain
(loss), net
|
|
5
|
|
(59)
|
|
(800)
|
|
|
273
|
|
|
(1,292)
|
Other expense,
net
|
|
(2,886)
|
|
(272)
|
|
(3,011)
|
|
|
(2,948)
|
|
|
(2,872)
|
(Loss) income before
income tax expense
|
|
(13,805)
|
|
9,673
|
|
(18,445)
|
|
|
6,085
|
|
|
56,003
|
Income tax benefit
(expense)
|
|
1,301
|
|
(2,501)
|
|
323
|
|
|
(1,949)
|
|
|
(1,704)
|
Net (loss)
income
|
|
(12,504)
|
|
7,172
|
|
(18,122)
|
|
|
4,136
|
|
|
54,299
|
Less: net loss
(income) attributable to noncontrolling interests
|
|
2,574
|
|
(1,793)
|
|
4,622
|
|
|
(1,352)
|
|
|
(17,787)
|
Net (loss) income
attributable to Select Energy Services, Inc.
|
$
|
(9,930)
|
$
|
5,379
|
$
|
(13,500)
|
|
$
|
2,784
|
|
$
|
36,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
$
|
(0.12)
|
$
|
0.07
|
$
|
(0.17)
|
|
$
|
0.03
|
|
$
|
0.49
|
Class
A-1—Basic
|
$
|
—
|
$
|
—
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Class
A-2—Basic
|
$
|
—
|
$
|
—
|
$
|
—
|
|
$
|
—
|
|
$
|
0.49
|
Class
B—Basic
|
$
|
—
|
$
|
—
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
$
|
(0.12)
|
|
0.07
|
|
(0.17)
|
|
$
|
0.03
|
|
$
|
0.49
|
Class
A-1—Diluted
|
$
|
—
|
$
|
—
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Class
A-2—Diluted
|
$
|
—
|
$
|
—
|
$
|
—
|
|
$
|
—
|
|
$
|
0.49
|
Class
B—Diluted
|
$
|
—
|
$
|
—
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED
BALANCE SHEETS
(unaudited)
(in thousands,
except share data)
|
|
|
|
As of
December 31,
|
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
79,268
|
|
$
|
17,237
|
Accounts receivable
trade, net of allowance for doubtful accounts of $5,773 and
$5,329, respectively
|
|
|
267,628
|
|
|
341,711
|
Accounts receivable,
related parties
|
|
|
4,677
|
|
|
1,119
|
Inventories
|
|
|
37,542
|
|
|
44,992
|
Prepaid expenses and
other current assets
|
|
|
26,486
|
|
|
27,093
|
Total current
assets
|
|
|
415,601
|
|
|
432,152
|
Property and
equipment
|
|
|
1,015,379
|
|
|
1,114,378
|
Accumulated
depreciation
|
|
|
(562,986)
|
|
|
(611,530)
|
Property and
equipment held-for-sale, net
|
|
|
885
|
|
|
—
|
Total property and
equipment, net
|
|
|
453,278
|
|
|
502,848
|
Right-of-use assets,
net
|
|
|
70,635
|
|
|
—
|
Goodwill
|
|
|
266,934
|
|
|
273,801
|
Other intangible
assets, net
|
|
|
136,952
|
|
|
148,377
|
Other assets,
net
|
|
|
4,220
|
|
|
3,427
|
Total
assets
|
|
$
|
1,347,620
|
|
$
|
1,360,605
|
Liabilities and
Equity
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
35,686
|
|
$
|
53,847
|
Accrued accounts
payable
|
|
|
47,547
|
|
|
62,536
|
Accounts payable and
accrued expenses, related parties
|
|
|
2,789
|
|
|
5,056
|
Accrued salaries and
benefits
|
|
|
20,079
|
|
|
22,113
|
Accrued
insurance
|
|
|
8,843
|
|
|
14,849
|
Sales tax
payable
|
|
|
2,119
|
|
|
5,820
|
Accrued expenses and
other current liabilities
|
|
|
15,375
|
|
|
14,560
|
Current operating
lease liabilities
|
|
|
19,315
|
|
|
—
|
Current portion of
finance lease obligations
|
|
|
128
|
|
|
938
|
Total current
liabilities
|
|
|
151,881
|
|
|
179,719
|
Long-term operating
lease liabilities
|
|
|
72,143
|
|
|
16,752
|
Other long-term
liabilities
|
|
|
10,784
|
|
|
8,361
|
Long-term
debt
|
|
|
—
|
|
|
45,000
|
Total
liabilities
|
|
|
234,808
|
|
|
249,832
|
Commitments and
contingencies
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value; 350,000,000 shares authorized and
87,893,525 shares issued and outstanding as of
December 31, 2019; 350,000,000 shares authorized and
78,956,555 shares issued and outstanding as of
December 31, 2018
|
|
|
879
|
|
|
790
|
Class A-2 common
stock, $0.01 par value; 40,000,000 shares authorized; no shares
issued or outstanding as of December 31, 2019 and
December 31, 2018
|
|
|
—
|
|
|
—
|
Class B common
stock, $0.01 par value; 150,000,000 shares authorized and
16,221,101 shares issued and outstanding as of
December 31, 2019; 150,000,000 shares authorized and
26,026,843 shares issued and outstanding as of
December 31, 2018
|
|
|
162
|
|
|
260
|
Preferred stock,
$0.01 par value; 50,000,000 shares authorized; no shares issued and
outstanding as of December 31, 2019 and December 31,
2018
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
914,699
|
|
|
813,599
|
Retained
earnings
|
|
|
21,437
|
|
|
18,653
|
Accumulated other
comprehensive deficit
|
|
|
—
|
|
|
(368)
|
Total stockholders'
equity
|
|
|
937,177
|
|
|
832,934
|
Noncontrolling
interests
|
|
|
175,635
|
|
|
277,839
|
Total
equity
|
|
|
1,112,812
|
|
|
1,110,773
|
Total liabilities
and equity
|
|
$
|
1,347,620
|
|
$
|
1,360,605
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(in
thousands)
|
|
|
|
Year Ended
December 31,
|
|
|
|
2019
|
|
2018
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,136
|
|
$
|
54,299
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
120,669
|
|
|
133,713
|
|
Net loss (gain) on
disposal of property and equipment
|
|
|
7,950
|
|
|
(3,803)
|
|
Gain realized on
previously held interest in Rockwater
|
|
|
—
|
|
|
—
|
|
Bad debt
expense
|
|
|
2,553
|
|
|
2,210
|
|
Amortization of debt
issuance costs
|
|
|
688
|
|
|
688
|
|
Inventory
write-downs
|
|
|
250
|
|
|
442
|
|
Equity-based
compensation
|
|
|
15,485
|
|
|
10,371
|
|
Impairment of
goodwill
|
|
|
4,396
|
|
|
17,894
|
|
Impairment of property
and equipment
|
|
|
3,715
|
|
|
6,657
|
|
Impairment of
cost-method investment
|
|
|
—
|
|
|
2,000
|
|
Loss on
divestitures
|
|
|
3,676
|
|
|
—
|
|
Other operating items,
net
|
|
|
240
|
|
|
1,287
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
57,908
|
|
|
36,537
|
|
Prepaid expenses and
other assets
|
|
|
11,321
|
|
|
(9,115)
|
|
Accounts payable and
accrued liabilities
|
|
|
(29,039)
|
|
|
(20,771)
|
|
Net cash provided by
operating activities
|
|
|
203,948
|
|
|
232,409
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
Working capital
settlement
|
|
|
691
|
|
|
—
|
|
Proceeds received from
divestitures
|
|
|
24,872
|
|
|
—
|
|
Purchase of property
and equipment
|
|
|
(110,143)
|
|
|
(165,360)
|
|
Acquisitions, net of
cash received
|
|
|
(10,000)
|
|
|
(16,999)
|
|
Proceeds received from
sales of property and equipment
|
|
|
17,223
|
|
|
13,998
|
|
Net cash used in
investing activities
|
|
|
(77,357)
|
|
|
(168,361)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
Borrowings from
revolving line of credit
|
|
|
5,000
|
|
|
60,000
|
|
Payments on long-term
debt
|
|
|
(50,000)
|
|
|
(90,000)
|
|
Payments of finance
lease obligations
|
|
|
(883)
|
|
|
(1,881)
|
|
Payment of debt
issuance costs
|
|
|
—
|
|
|
—
|
|
Proceeds from initial
public offering
|
|
|
—
|
|
|
—
|
|
Proceeds from share
issuance
|
|
|
142
|
|
|
762
|
|
Payments incurred for
initial public offering
|
|
|
—
|
|
|
—
|
|
Distributions to
noncontrolling interests, net
|
|
|
(349)
|
|
|
(506)
|
|
Repurchase of common
stock
|
|
|
(18,600)
|
|
|
(16,562)
|
|
Contingent
consideration
|
|
|
—
|
|
|
(1,106)
|
|
Net cash used in
financing activities
|
|
|
(64,690)
|
|
|
(49,293)
|
|
Effect of exchange
rate changes on cash
|
|
|
130
|
|
|
(292)
|
|
Net increase in cash
and cash equivalents
|
|
|
62,031
|
|
|
14,463
|
|
Cash and cash
equivalents, beginning of period
|
|
|
17,237
|
|
|
2,774
|
|
Cash and cash
equivalents, end of period
|
|
$
|
79,268
|
|
$
|
17,237
|
|
Comparison of Non-GAAP Financial
Measures
EBITDA, Adjusted EBITDA, gross profit before depreciation and
amortization (D&A) and gross margin before D&A are not
financial measures presented in accordance with GAAP. We define
EBITDA as net income, plus interest expense, taxes and depreciation
& amortization. We define Adjusted EBITDA as EBITDA
plus/(minus) loss/(income) from discontinued operations, plus any
impairment charges or asset write-offs pursuant to GAAP, plus
non-cash losses on the sale of assets or subsidiaries,
non-recurring compensation expense, non-cash compensation expense,
and non-recurring or unusual expenses or charges, including
severance expenses, transaction costs, or facilities-related exit
and disposal-related expenditures, plus/(minus) foreign currency
losses/(gains) and plus any inventory write-downs. The adjustments
to EBITDA are generally consistent with such adjustments described
in our Credit Facility regarding compliance with covenants
thereunder. We define gross profit before D&A as revenue less
cost of revenue, excluding cost of sales D&A expense. We define
gross margin before D&A as gross profit before D&A divided
by revenue. EBITDA, Adjusted EBITDA, gross profit before D&A
and gross margin before D&A are supplemental non-GAAP financial
measures that we believe provide useful information to external
users of our financial statements, such as industry analysts,
investors, lenders and rating agencies because it allows them to
compare our operating performance on a consistent basis across
periods by removing the effects of our capital structure (such as
varying levels of interest expense), asset base (such as
depreciation and amortization) and non-recurring items outside the
control of our management team. We present EBITDA, Adjusted EBITDA,
gross profit before D&A and gross margin before D&A because
we believe they provide useful information regarding the factors
and trends affecting our business in addition to measures
calculated under GAAP.
Net income is the GAAP measure most directly comparable to
EBITDA and Adjusted EBITDA. Gross profit is the GAAP measure most
directly comparable to gross profit before D&A. Our non-GAAP
financial measures should not be considered as alternatives to the
most directly comparable GAAP financial measure. Each of these
non-GAAP financial measures has important limitations as an
analytical tool due to exclusion of some but not all items that
affect the most directly comparable GAAP financial measures. You
should not consider EBITDA, Adjusted EBITDA or gross profit before
D&A in isolation or as substitutes for an analysis of our
results as reported under GAAP. Because EBITDA, Adjusted EBITDA and
gross profit before D&A may be defined differently by other
companies in our industry, our definitions of these non-GAAP
financial measures may not be comparable to similarly titled
measures of other companies, thereby diminishing their utility. For
further discussion, please see "Item 6. Selected Financial Data" in
our Annual Report on Form 10-K for the year ended December 31, 2019, which we expect to file with
the SEC on or before the applicable filing deadline.
The following tables present a reconciliation of EBITDA and
Adjusted EBITDA to our net income (loss), which is the most
directly comparable GAAP measure for the periods presented:
|
Three Months
Ended
|
Year Ended
December 31,
|
(unaudited) (in
thousands)
|
December 31,
2019
|
September 30,
2019
|
December 31,
2018
|
2019
|
2018
|
Net income
(loss)
|
$
|
(12,504)
|
$
|
7,172
|
$
|
(18,122)
|
$
|
4,136
|
$
|
54,299
|
|
Interest expense,
net
|
|
318
|
|
438
|
|
1,496
|
|
2,688
|
|
5,311
|
|
Income tax
expense
|
|
(1,301)
|
|
2,501
|
|
(323)
|
|
1,949
|
|
1,704
|
|
Depreciation and
amortization
|
|
29,187
|
|
29,215
|
|
38,201
|
|
120,669
|
|
133,713
|
|
EBITDA
|
|
15,700
|
|
39,326
|
|
21,252
|
|
129,442
|
|
195,027
|
|
Impairment of
goodwill
|
|
—
|
|
—
|
|
17,894
|
|
4,396
|
|
17,894
|
|
Impairment of property
and equipment
|
|
2,773
|
|
49
|
|
4,375
|
|
3,715
|
|
6,657
|
|
Impairment of
cost-method investment
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,000
|
|
Lease abandonment
costs
|
|
579
|
|
238
|
|
(217)
|
|
2,073
|
|
3,925
|
|
Non-recurring
severance expenses
|
|
11
|
|
—
|
|
725
|
|
1,691
|
|
1,220
|
|
Non-recurring
transaction costs
|
|
1,598
|
|
2,025
|
|
(11)
|
|
4,697
|
|
7,809
|
|
Non-cash compensation
expenses
|
|
3,611
|
|
3,566
|
|
2,341
|
|
15,485
|
|
10,371
|
|
Non-cash loss on sale
of assets or subsidiaries
|
|
4,811
|
|
3,648
|
|
1,696
|
|
21,679
|
|
3,775
|
|
Foreign currency
(gain) loss, net
|
|
(5)
|
|
59
|
|
800
|
|
(273)
|
|
1,292
|
|
Inventory
write-down
|
|
—
|
|
—
|
|
12
|
|
75
|
|
442
|
|
Non-recurring change
in vacation policy
|
|
—
|
|
—
|
|
2,894
|
|
—
|
|
2,894
|
|
Other non-recurring
charges
|
|
(248)
|
|
—
|
|
4,313
|
|
(248)
|
|
4,313
|
|
Adjusted
EBITDA
|
$
|
28,830
|
$
|
48,911
|
$
|
56,074
|
$
|
182,732
|
$
|
257,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present a reconciliation of gross profit
before D&A to total gross profit, which is the most directly
comparable GAAP measure, and a calculation of gross margin before
D&A for the periods presented:
|
|
Three Months
Ended
|
Year Ended
December 31,
|
(unaudited) (in
thousands)
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
2019
|
|
2018
|
Gross profit by
segment
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
$7,571
|
|
$23,622
|
|
$23,345
|
|
$93,242
|
|
$132,362
|
Water
infrastructure
|
|
4,892
|
|
10,796
|
|
7,860
|
|
28,966
|
|
47,001
|
Oilfield
chemicals
|
|
9,222
|
|
8,140
|
|
3,328
|
|
29,414
|
|
15,841
|
Other
|
|
125
|
|
(1,564)
|
|
(125)
|
|
(2,882)
|
|
3,278
|
As reported gross
profit
|
|
21,810
|
|
40,994
|
|
34,408
|
|
148,740
|
|
198,482
|
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
18,960
|
|
19,419
|
|
25,049
|
|
80,664
|
|
82,875
|
Water
infrastructure
|
|
7,094
|
|
6,409
|
|
6,826
|
|
25,665
|
|
23,042
|
Oilfield
chemicals
|
|
2,131
|
|
2,435
|
|
2,643
|
|
8,766
|
|
10,496
|
Other
|
|
—
|
|
—
|
|
2,839
|
|
1,714
|
|
14,124
|
Total depreciation and
amortization
|
|
28,185
|
|
28,263
|
|
37,357
|
|
116,809
|
|
130,537
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
49,995
|
|
69,257
|
|
71,765
|
|
265,549
|
|
329,019
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
26,531
|
|
43,041
|
|
48,394
|
|
173,906
|
|
215,237
|
Water
infrastructure
|
|
11,986
|
|
17,205
|
|
14,686
|
|
54,631
|
|
70,043
|
Oilfield
chemicals
|
|
11,353
|
|
10,575
|
|
5,971
|
|
38,180
|
|
26,337
|
Other
|
|
125
|
|
(1,564)
|
|
2,714
|
|
(1,168)
|
|
17,402
|
Total gross profit
before D&A
|
|
$49,995
|
|
$69,257
|
|
71,765
|
|
$265,549
|
|
329,019
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
17.3%
|
|
21.9%
|
|
22.9%
|
|
22.5%
|
|
24.0%
|
Water
infrastructure
|
|
22.9%
|
|
26.9%
|
|
27.0%
|
|
24.7%
|
|
30.4%
|
Oilfield
chemicals
|
|
16.0%
|
|
15.6%
|
|
8.9%
|
|
14.2%
|
|
10.1%
|
Other
|
|
-12500%
|
|
-520%
|
|
9.2%
|
|
-4.0%
|
|
12.0%
|
Total gross margin
before D&A
|
|
18.1%
|
|
21.1%
|
|
19.8%
|
|
20.6%
|
|
21.5%
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:
|
Select Energy
Services
|
|
Chris George - VP,
Investor Relations & Treasurer
|
|
(713)
296-1073
|
|
IR@selectenergyservices.com
|
|
|
|
Dennard Lascar
Investor Relations
|
|
Ken Dennard / Lisa
Elliott
|
|
713-529-6600
|
|
WTTR@dennardlascar.com
|
View original
content:http://www.prnewswire.com/news-releases/select-energy-services-reports-fourth-quarter-and-fiscal-year-2019-financial-results-and-operational-updates-301010096.html
SOURCE Select Energy Services, Inc.