QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Large accelerated filer | ☐ | ☒ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company |
September 30, 2020 | December 31, 2019 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Income taxes receivable | |||||||||||
Inventories, net | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Intangible assets, net | |||||||||||
Goodwill | |||||||||||
Other long-term assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Current portion of long-term debt | |||||||||||
Current portion of capital lease obligations | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities | |||||||||||
Long-term debt | |||||||||||
Deferred income taxes | |||||||||||
Long-term capital lease obligations | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 10) | |||||||||||
Stockholders’ equity | |||||||||||
Common stock ( | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Service | $ | $ | $ | $ | |||||||||||||||||||
Product | |||||||||||||||||||||||
Cost and expenses | |||||||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | |||||||||||||||||||||||
Service | |||||||||||||||||||||||
Product | |||||||||||||||||||||||
General and administrative expenses | |||||||||||||||||||||||
Depreciation | |||||||||||||||||||||||
Amortization of intangibles | |||||||||||||||||||||||
Impairment of goodwill | |||||||||||||||||||||||
(Gain) loss on revaluation of contingent liabilities | ( | ( | |||||||||||||||||||||
Loss on sale of subsidiaries | |||||||||||||||||||||||
Gain on sale of property and equipment | ( | ( | ( | ( | |||||||||||||||||||
Income (loss) from operations | ( | ( | ( | ||||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Interest income | ( | ( | ( | ( | |||||||||||||||||||
Gain on extinguishment of debt | ( | ( | |||||||||||||||||||||
Other income | ( | ( | |||||||||||||||||||||
Income (loss) before income taxes | ( | ( | ( | ||||||||||||||||||||
Provision (benefit) for income taxes | ( | ( | ( | ||||||||||||||||||||
Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
Earnings (loss) per share | |||||||||||||||||||||||
Basic | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
Diluted | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
Foreign currency translation adjustments, net of $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
Total comprehensive income (loss) | $ | ( | $ | ( | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amounts | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Issuance of common stock under stock compensation plan, net of forfeitures | ( | ( | — | — | |||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||
Vesting of restricted stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balance, September 30, 2020 | $ | $ | $ | ( | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amounts | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Issuance of common stock under stock compensation plan, net of forfeitures | ( | ( | — | — | |||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||
Vesting of restricted stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balance, September 30, 2019 | $ | $ | $ | ( | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amounts | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Issuance of common stock under stock compensation plan, net of forfeitures | ( | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||
Vesting of restricted stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balance, September 30, 2020 | $ | $ | $ | ( | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amounts | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Issuance of common stock under stock compensation plan, net of forfeitures | ( | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
Vesting of restricted stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Balance, September 30, 2019 | $ | $ | $ | ( | $ | ( | $ |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income (loss) | $ | ( | $ | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||||||||
Depreciation | |||||||||||
Amortization of intangibles | |||||||||||
Amortization of deferred financing costs | |||||||||||
Provision for doubtful accounts | |||||||||||
Benefit for deferred income taxes | ( | ( | |||||||||
Provision for inventory obsolescence | |||||||||||
Stock-based compensation expense | |||||||||||
Impairment of goodwill | |||||||||||
Gain on extinguishment of debt | ( | ||||||||||
Gain on sale of property and equipment | ( | ( | |||||||||
(Gain) loss on revaluation of contingent liabilities | ( | ||||||||||
Loss on sale of subsidiaries | |||||||||||
Changes in operating assets and liabilities, net of effects from acquisitions | |||||||||||
Accounts receivable, net | |||||||||||
Inventories, net | |||||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable and accrued expenses | ( | ( | |||||||||
Income taxes receivable/payable | ( | ||||||||||
Other assets and liabilities | |||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities | |||||||||||
Acquisitions, net of cash acquired | |||||||||||
Proceeds from the sale of subsidiaries | |||||||||||
Proceeds from sales of property and equipment | |||||||||||
Proceeds from property and equipment casualty losses | |||||||||||
Proceeds from notes receivable payments | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Purchases of Senior Notes | ( | ||||||||||
Proceeds from 2018 ABL Credit Facility | |||||||||||
Payments on 2018 ABL Credit Facility | ( | ||||||||||
Payments on capital leases | ( | ( | |||||||||
Payments of contingent liability | ( | ( | |||||||||
Proceeds from exercise of stock options | |||||||||||
Vesting of restricted stock | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
Impact of foreign currency exchange on cash | ( |
Net decrease in cash and cash equivalents | ( | ||||||||||
Cash and cash equivalents | |||||||||||
Cash and cash equivalents beginning of year | |||||||||||
Cash and cash equivalents end of period | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid (refunded) for income taxes | $ | ( | $ | ||||||||
Capital expenditures in accounts payable and accrued expenses | $ | $ | |||||||||
Property and equipment obtained by capital lease | $ | $ | |||||||||
Receivable from property and equipment sale (including insurance) | $ | $ | |||||||||
Termination of contingent liability related to business acquisition | $ | $ |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
Completion Solutions | Total | Completion Solutions | Production Solutions(2) | Total | |||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Coiled tubing | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Cement | |||||||||||||||||||||||||||||
Tools | |||||||||||||||||||||||||||||
Wireline | |||||||||||||||||||||||||||||
Well service | |||||||||||||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ |
Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
Completion Solutions | Total | Completion Solutions | Production Solutions(2) | Total | |||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Coiled tubing | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Cement | |||||||||||||||||||||||||||||
Tools | |||||||||||||||||||||||||||||
Wireline | |||||||||||||||||||||||||||||
Well service | |||||||||||||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
Completion Solutions | Total | Completion Solutions | Production Solutions(2) | Total | |||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Service(1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Product(1) | |||||||||||||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ |
Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
Completion Solutions | Total | Completion Solutions | Production Solutions(2) | Total | |||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Service(1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Product(1) | |||||||||||||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
(in thousands) | |||||||||||
Raw materials | $ | $ | |||||||||
Work in progress | |||||||||||
Finished goods | |||||||||||
Inventories | |||||||||||
Reserve for obsolescence | ( | ( | |||||||||
Inventories, net | $ | $ |
Goodwill | |||||||||||||||||
Gross Value | Accumulated Impairment Loss | Net | |||||||||||||||
(in thousands) | |||||||||||||||||
Balance as of December 31, 2019 | $ | $ | ( | $ | |||||||||||||
Impairment | — | ( | ( | ||||||||||||||
Balance as of September 30, 2020 | $ | $ | ( | $ |
Customer Relationships | Non- Compete Agreements | Technology | In-process R&D | Total | |||||||||||||||||||||||||
(in thousands, except weighted average amortization period information) | |||||||||||||||||||||||||||||
Balance as of December 31, 2019 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Amortization expense | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Balance as of September 30, 2020 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Weighted average amortization period | Indefinite |
Year Ending December 31, | (in thousands) | ||||
2020 | $ | ||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 | |||||
Thereafter | |||||
Total | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
(in thousands) | |||||||||||
Accrued compensation and benefits | $ | $ | |||||||||
Accrued interest | |||||||||||
Accrued bonus | |||||||||||
Accrued sales tax | |||||||||||
Contingent liabilities | |||||||||||
Other accrued expenses | |||||||||||
Accrued expenses | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
(in thousands) | |||||||||||
Senior Notes | $ | $ | |||||||||
2018 ABL Credit Facility | |||||||||||
Magnum Promissory Notes | |||||||||||
Total debt before deferred financing costs | $ | $ | |||||||||
Deferred financing costs | ( | ( | |||||||||
Total debt | $ | $ | |||||||||
Less: Current portion of long-term debt | ( | ||||||||||
Long-term debt | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
(in thousands) | |||||||||||
Senior Notes | $ | $ | |||||||||
2018 ABL Credit Facility | $ | $ | |||||||||
Magnum Promissory Notes | $ | $ |
Magnum | Frac Tech | Total | |||||||||||||||
(in thousands) | |||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | ||||||||||||||
Revaluation adjustments | |||||||||||||||||
Payments | ( | ( | |||||||||||||||
Termination | ( | ( | |||||||||||||||
Balance at September 30, 2020 | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands, except percentages) | (in thousands, except percentages) | ||||||||||||||||||||||
Income tax provision (benefit) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Effective tax rate | % | ( | % | % | ( | % |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||
Net Loss | Average Shares Outstanding | Loss Per Share | Net Loss | Average Shares Outstanding | Loss Per Share | ||||||||||||||||||||||||||||||
(in thousands, except share and per share amounts) | |||||||||||||||||||||||||||||||||||
Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
Assumed exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||
Unvested restricted stock and stock units | — | — | — | — | |||||||||||||||||||||||||||||||
Diluted | $ | ( | $ | ( | $ | ( | $ | ( |
Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||
Net Loss | Average Shares Outstanding | Loss Per Share | Net Income | Average Shares Outstanding | Earnings Per Share | ||||||||||||||||||||||||||||||
(in thousands, except share and per share amounts) | |||||||||||||||||||||||||||||||||||
Basic | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
Assumed exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||
Unvested restricted stock and stock units | — | — | — | — | |||||||||||||||||||||||||||||||
Diluted | $ | ( | $ | ( | $ | $ |
2020 | 2019 | ||||||||||
Three months ended September 30, | |||||||||||
Nine months ended September 30, |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Completion Solutions | $ | $ | $ | $ | |||||||||||||||||||
Production Solutions | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | |||||||||||||||||||||||
Completion Solutions | $ | $ | $ | $ | |||||||||||||||||||
Production Solutions | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Adjusted gross profit (loss) | |||||||||||||||||||||||
Completion Solutions | $ | ( | $ | $ | $ | ||||||||||||||||||
Production Solutions | |||||||||||||||||||||||
$ | ( | $ | $ | $ | |||||||||||||||||||
General and administrative expenses | |||||||||||||||||||||||
Depreciation | |||||||||||||||||||||||
Amortization of intangibles | |||||||||||||||||||||||
Impairment of goodwill | |||||||||||||||||||||||
(Gain) loss on revaluation of contingent liabilities | ( | ( | |||||||||||||||||||||
Loss on sale of subsidiaries | |||||||||||||||||||||||
Gain on sale of property and equipment | ( | ( | ( | ( | |||||||||||||||||||
Income (loss) from operations | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
Non-operating (income) expenses | ( | ( | |||||||||||||||||||||
Income (loss) before income taxes | ( | ( | ( | ||||||||||||||||||||
Provision (benefit) for income taxes | ( | ( | ( | ||||||||||||||||||||
Net income (loss) | $ | ( | $ | ( | $ | ( | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Completion Solutions | $ | $ | $ | $ | |||||||||||||||||||
Production Solutions | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
$ | $ | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
(in thousands) | |||||||||||
Completion Solutions | $ | $ | |||||||||
Corporate | |||||||||||
$ | $ |
Three Months Ended September 30, | |||||||||||||||||
2020 | 2019 | Change | |||||||||||||||
(in thousands) | |||||||||||||||||
Revenues | |||||||||||||||||
Completion Solutions | $ | 49,521 | $ | 186,252 | $ | (136,731) | |||||||||||
Production Solutions (1) | — | 16,053 | (16,053) | ||||||||||||||
$ | 49,521 | $ | 202,305 | $ | (152,784) | ||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | |||||||||||||||||
Completion Solutions | $ | 52,483 | $ | 152,679 | $ | (100,196) | |||||||||||
Production Solutions (1) | — | 14,170 | (14,170) | ||||||||||||||
$ | 52,483 | $ | 166,849 | $ | (114,366) | ||||||||||||
Adjusted gross profit (loss) | |||||||||||||||||
Completion Solutions | $ | (2,962) | $ | 33,573 | $ | (36,535) | |||||||||||
Production Solutions (1) | — | 1,883 | (1,883) | ||||||||||||||
$ | (2,962) | $ | 35,456 | $ | (38,418) | ||||||||||||
General and administrative expenses | $ | 10,701 | $ | 19,222 | $ | (8,521) | |||||||||||
Depreciation | 7,763 | 12,196 | (4,433) | ||||||||||||||
Amortization of intangibles | 4,091 | 4,609 | (518) | ||||||||||||||
Impairment of goodwill | — | — | — | ||||||||||||||
(Gain) loss on revaluation of contingent liabilities | 297 | (5,771) | 6,068 | ||||||||||||||
Loss on sale of subsidiaries | — | 15,834 | (15,834) | ||||||||||||||
Gain on sale of property and equipment | (535) | (466) | (69) | ||||||||||||||
Loss from operations | (25,279) | (10,168) | (15,111) | ||||||||||||||
Non-operating (income) expenses | (6,740) | 9,732 | (16,472) | ||||||||||||||
Loss before income taxes | (18,539) | (19,900) | 1,361 | ||||||||||||||
Provision (benefit) for income taxes | (37) | 727 | (764) | ||||||||||||||
Net loss | $ | (18,502) | $ | (20,627) | $ | 2,125 |
Nine Months Ended September 30, | |||||||||||||||||
2020 | 2019 | Change | |||||||||||||||
(in thousands) | |||||||||||||||||
Revenues | |||||||||||||||||
Completion Solutions | $ | 248,880 | $ | 611,255 | $ | (362,375) | |||||||||||
Production Solutions (1) | — | 58,272 | (58,272) | ||||||||||||||
$ | 248,880 | $ | 669,527 | $ | (420,647) | ||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | |||||||||||||||||
Completion Solutions | $ | 235,194 | $ | 480,140 | $ | (244,946) | |||||||||||
Production Solutions (1) | — | 49,854 | (49,854) | ||||||||||||||
$ | 235,194 | $ | 529,994 | $ | (294,800) | ||||||||||||
Adjusted gross profit | |||||||||||||||||
Completion Solutions | $ | 13,686 | $ | 131,115 | $ | (117,429) | |||||||||||
Production Solutions (1) | — | 8,418 | (8,418) | ||||||||||||||
$ | 13,686 | $ | 139,533 | $ | (125,847) | ||||||||||||
General and administrative expenses | $ | 38,380 | $ | 60,979 | $ | (22,599) | |||||||||||
Depreciation | 24,753 | 39,572 | (14,819) | ||||||||||||||
Amortization of intangibles | 12,376 | 13,925 | (1,549) | ||||||||||||||
Impairment of goodwill | 296,196 | — | 296,196 | ||||||||||||||
(Gain) loss on revaluation of contingent liabilities | 781 | (20,701) | 21,482 | ||||||||||||||
Loss on sale of subsidiaries | — | 15,834 | (15,834) | ||||||||||||||
Gain on sale of property and equipment | (2,900) | (799) | (2,101) | ||||||||||||||
Income (loss) from operations | (355,900) | 30,723 | (386,623) | ||||||||||||||
Non-operating (income) expenses | (9,979) | 29,501 | (39,480) | ||||||||||||||
Income (loss) before income taxes | (345,921) | 1,222 | (347,143) | ||||||||||||||
Benefit for income taxes | (2,348) | (1,548) | (800) | ||||||||||||||
Net income (loss) | $ | (343,573) | $ | 2,770 | $ | (346,343) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
EBITDA reconciliation: | |||||||||||||||||||||||
Net income (loss) | $ | (18,502) | $ | (20,627) | $ | (343,573) | $ | 2,770 | |||||||||||||||
Interest expense | 9,130 | 9,843 | 28,144 | 29,940 | |||||||||||||||||||
Interest income | (43) | (111) | (593) | (439) | |||||||||||||||||||
Provision (benefit) for income taxes | (37) | 727 | (2,348) | (1,548) | |||||||||||||||||||
Depreciation | 7,763 | 12,196 | 24,753 | 39,572 | |||||||||||||||||||
Amortization of intangibles | 4,091 | 4,609 | 12,376 | 13,925 | |||||||||||||||||||
EBITDA | $ | 2,402 | $ | 6,637 | $ | (281,241) | $ | 84,220 | |||||||||||||||
Adjusted EBITDA reconciliation: | |||||||||||||||||||||||
EBITDA | $ | 2,402 | $ | 6,637 | $ | (281,241) | $ | 84,220 | |||||||||||||||
Impairment of goodwill | — | — | 296,196 | — | |||||||||||||||||||
Transaction and integration costs | — | 1,418 | 146 | 8,864 | |||||||||||||||||||
(Gain) loss on revaluation of contingent liabilities (1) | 297 | (5,771) | 781 | (20,701) | |||||||||||||||||||
Gain on extinguishment of debt | (15,798) | — | (37,501) | — | |||||||||||||||||||
Loss on sale of subsidiaries | — | 15,834 | — | 15,834 | |||||||||||||||||||
Restructuring charges | 459 | 3,263 | 4,882 | 3,263 | |||||||||||||||||||
Stock-based compensation expense | 2,020 | 3,286 | 7,717 | 10,553 | |||||||||||||||||||
Gain on sale of property and equipment | (535) | (466) | (2,900) | (799) | |||||||||||||||||||
Legal fees and settlements (2) | 15 | 22 | 39 | 165 | |||||||||||||||||||
Adjusted EBITDA | $ | (11,140) | $ | 24,223 | $ | (11,881) | $ | 101,399 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Net income (loss) | $ | (18,502) | $ | (20,627) | $ | (343,573) | $ | 2,770 | |||||||||||||||
Add back: | |||||||||||||||||||||||
Impairment of goodwill | — | — | 296,196 | — | |||||||||||||||||||
Transaction and integration costs | — | 1,418 | 146 | 8,864 | |||||||||||||||||||
Interest expense | 9,130 | 9,843 | 28,144 | 29,940 | |||||||||||||||||||
Interest income | (43) | (111) | (593) | (439) | |||||||||||||||||||
Restructuring charges | 459 | 3,263 | 4,882 | 3,263 | |||||||||||||||||||
Loss on sale of subsidiaries | — | 15,834 | — | 15,834 | |||||||||||||||||||
Gain on extinguishment of debt | (15,798) | — | (37,501) | — | |||||||||||||||||||
Provision (benefit) for deferred income taxes | — | 143 | (1,588) | (2,876) | |||||||||||||||||||
After-tax net operating profit (loss) | $ | (24,754) | $ | 9,763 | $ | (53,887) | $ | 57,356 | |||||||||||||||
Total capital as of prior period-end: | |||||||||||||||||||||||
Total stockholders’ equity | $ | 69,950 | $ | 624,309 | $ | 389,877 | $ | 594,823 | |||||||||||||||
Total debt | 372,584 | 400,000 | 400,000 | 435,000 | |||||||||||||||||||
Less cash and cash equivalents | (88,678) | (16,886) | (92,989) | (63,615) | |||||||||||||||||||
Total capital as of prior period-end | $ | 353,856 | $ | 1,007,423 | $ | 696,888 | $ | 966,208 | |||||||||||||||
Total capital as of period-end: | |||||||||||||||||||||||
Total stockholders’ equity | $ | 53,599 | $ | 606,779 | $ | 53,599 | $ | 606,779 | |||||||||||||||
Total debt | 349,418 | 400,000 | 349,418 | 400,000 | |||||||||||||||||||
Less cash and cash equivalents | (80,338) | (93,321) | (80,338) | (93,321) | |||||||||||||||||||
Total capital as of period-end | $ | 322,679 | $ | 913,458 | $ | 322,679 | $ | 913,458 | |||||||||||||||
Average total capital | $ | 338,268 | $ | 960,441 | $ | 509,784 | $ | 939,833 | |||||||||||||||
ROIC | (29.3)% | 4.1% | (14.1)% | 8.1% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Calculation of gross profit (loss) | |||||||||||||||||||||||
Revenues | $ | 49,521 | $ | 202,305 | $ | 248,880 | $ | 669,527 | |||||||||||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 52,483 | 166,849 | 235,194 | 529,994 | |||||||||||||||||||
Depreciation (related to cost of revenues) | 7,219 | 11,994 | 23,020 | 38,916 | |||||||||||||||||||
Amortization of intangibles | 4,091 | 4,609 | 12,376 | 13,925 | |||||||||||||||||||
Gross profit (loss) | $ | (14,272) | $ | 18,853 | $ | (21,710) | $ | 86,692 | |||||||||||||||
Adjusted gross profit (loss) reconciliation: | |||||||||||||||||||||||
Gross profit (loss) | $ | (14,272) | $ | 18,853 | $ | (21,710) | $ | 86,692 | |||||||||||||||
Depreciation (related to cost of revenues) | 7,219 | 11,994 | 23,020 | 38,916 | |||||||||||||||||||
Amortization of intangibles | 4,091 | 4,609 | 12,376 | 13,925 | |||||||||||||||||||
Adjusted gross profit (loss) | $ | (2,962) | $ | 35,456 | $ | 13,686 | $ | 139,533 |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
(in thousands) | |||||||||||
Operating activities | $ | 4,640 | $ | 86,808 | |||||||
Investing activities | (550) | (19,593) | |||||||||
Financing activities | (16,637) | (37,546) | |||||||||
Impact of foreign exchange rate on cash | (104) | 37 | |||||||||
Net change in cash and cash equivalents | $ | (12,651) | $ | 29,706 |
Exhibit Number | Description | |||||||
3.1 | ||||||||
3.2 | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
32.2** | ||||||||
101* | Interactive Data Files |
Nine Energy Service, Inc. | |||||||||||||||||
Date: | November 5, 2020 | By: | /s/ Ann G. Fox | ||||||||||||||
Ann G. Fox | |||||||||||||||||
President, Chief Executive Officer and Director | |||||||||||||||||
(Principal Executive Officer) | |||||||||||||||||
Date: | November 5, 2020 | By: | /s/ Guy Sirkes | ||||||||||||||
Guy Sirkes | |||||||||||||||||
Senior Vice President and Chief Financial Officer | |||||||||||||||||
(Principal Financial Officer) |
Date: | November 5, 2020 | /s/ Ann G. Fox | ||||||
Ann G. Fox | ||||||||
President, Chief Executive Officer and Director | ||||||||
(Principal Executive Officer) |
Date: | November 5, 2020 | /s/ Guy Sirkes | ||||||
Guy Sirkes | ||||||||
Senior Vice President and Chief Financial Officer | ||||||||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | ||||||||||
/s/ Ann G. Fox | |||||||||||
Ann G. Fox | |||||||||||
President, Chief Executive Officer and Director | |||||||||||
(Principal Executive Officer) | |||||||||||
Date: | November 5, 2020 |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | ||||||||||
/s/ Guy Sirkes | |||||||||||
Guy Sirkes | |||||||||||
Senior Vice President and Chief Financial Officer | |||||||||||
(Principal Financial Officer) | |||||||||||
Date: | November 5, 2020 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, shares authorized (in shares) | 120,000,000 | 120,000,000 |
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 31,570,926 | 30,555,677 |
Common stock, shares outstanding (in shares) | 31,570,926 | 30,555,677 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenues | $ 49,521 | $ 202,305 | $ 248,880 | $ 669,527 |
Cost and expenses | ||||
General and administrative expenses | 10,701 | 19,222 | 38,380 | 60,979 |
Depreciation | 7,763 | 12,196 | 24,753 | 39,572 |
Amortization of intangibles | 4,091 | 4,609 | 12,376 | 13,925 |
Impairment of goodwill | 0 | 0 | 296,196 | 0 |
(Gain) loss on revaluation of contingent liabilities | 297 | (5,771) | 781 | (20,701) |
Loss on sale of subsidiaries | 0 | 15,834 | 0 | 15,834 |
Gain on sale of property and equipment | (535) | (466) | (2,900) | (799) |
Income (loss) from operations | (25,279) | (10,168) | (355,900) | 30,723 |
Interest expense | 9,130 | 9,843 | 28,144 | 29,940 |
Interest income | (43) | (111) | (593) | (439) |
Gain on extinguishment of debt | (15,798) | 0 | (37,501) | 0 |
Other income | (29) | 0 | (29) | 0 |
Income (loss) before income taxes | (18,539) | (19,900) | (345,921) | 1,222 |
Provision (benefit) for income taxes | (37) | 727 | (2,348) | (1,548) |
Net income (loss) | $ (18,502) | $ (20,627) | $ (343,573) | $ 2,770 |
Earnings (loss) per share | ||||
Basic (in usd per share) | $ (0.62) | $ (0.70) | $ (11.56) | $ 0.09 |
Diluted (in usd per share) | $ (0.62) | $ (0.70) | $ (11.56) | $ 0.09 |
Weighted average shares outstanding | ||||
Basic (in shares) | 29,849,753 | 29,361,633 | 29,708,673 | 29,288,113 |
Diluted (in shares) | 29,849,753 | 29,361,633 | 29,708,673 | 29,397,636 |
Other comprehensive income (loss), net of tax | ||||
Foreign currency translation adjustments, net of $0 tax in each period | $ 132 | $ (179) | $ (264) | $ 261 |
Total other comprehensive income (loss), net of tax | 132 | (179) | (264) | 261 |
Total comprehensive income (loss) | (18,370) | (20,806) | (343,837) | 3,031 |
Service | ||||
Revenues | 35,639 | 161,632 | 187,713 | 519,072 |
Cost and expenses | ||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 38,445 | 134,984 | 179,508 | 420,445 |
Product | ||||
Revenues | 13,882 | 40,673 | 61,167 | 150,455 |
Cost and expenses | ||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | $ 14,038 | $ 31,865 | $ 55,686 | $ 109,549 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Statement [Abstract] | ||||
Foreign currency translation adjustments, tax | $ 0 | $ 0 | $ 0 | $ 0 |
Company and Organization |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Company and Organization | Company and Organization Background Nine Energy Service, Inc. (the “Company” or “Nine”), a Delaware corporation, is an oilfield services business that provides services integral to the completion of unconventional wells through a full range of tools and methodologies. The Company is headquartered in Houston, Texas. Risks and Uncertainties The Company’s business depends, to a significant extent, on the level of unconventional resource development activity and corresponding capital spending of oil and natural gas companies. These activity and spending levels are strongly influenced by the current and expected oil and natural gas prices. The worldwide coronavirus outbreak in early 2020, which was declared a pandemic by the World Health Organization in March 2020, the uncertainty regarding its impact, and various governmental actions taken to mitigate its impact have resulted in an unprecedented decline in demand for oil. In the midst of the ongoing pandemic, the Organization of the Petroleum Exporting Countries and other oil producing nations, including Russia, were initially unable to reach an agreement on production levels for crude oil, at which point Saudi Arabia and Russia initiated efforts to aggressively increase production. The convergence of these events created the unprecedented dual impact of a massive decline in the demand for oil, coupled with the risk of a substantial increase in supply, which has directly affected the Company. While the Company cannot predict the length of time that market disruptions resulting from the coronavirus pandemic and efforts to mitigate its effects will continue, the ultimate impact on its business, or the pace or extent of any subsequent recovery, the Company expects the coronavirus pandemic and related effects to continue to have a material adverse impact on commodity prices and its business generally. Historically, the Company has met its liquidity needs principally from cash on hand, cash flow from operations and, if needed, external borrowings. In response to the above events, the Company has implemented certain cost-cutting measures across the organization to continue to maintain its current liquidity position. Based on its current forecasts, the Company believes that cash on hand, together with cash flow from operations, and borrowings under the 2018 ABL Credit Facility (as defined in Note 8 – Debt Obligations), should be sufficient to fund its capital requirements for at least the next twelve months from the issuance date of its condensed consolidated financial statements.
|
Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation Condensed Consolidated Financial Information The Condensed Consolidated Balance Sheet at December 31, 2019 and the Condensed Consolidated Statement of Stockholders’ Equity as of December 31, 2019 and 2018 are derived from audited consolidated financial statements. In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for the fair statement of the Company’s financial position have been included. These condensed consolidated financial statements include all accounts of the Company. These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Principles of Consolidation The condensed consolidated financial statements include the accounts of Nine and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. Such estimates include fair value assumptions used in purchase accounting and in analyzing goodwill, definite and indefinite-lived intangible assets, and property and equipment for possible impairment, useful lives used in depreciation and amortization expense, stock-based compensation fair value, estimated realizable value on excess and obsolete inventories, deferred taxes and income tax contingencies, and losses on accounts receivable. It is at least reasonably possible that the estimates used will change within the next year. Reclassifications Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. These reclassifications relate to presenting “Revenues” and “Cost of revenues” by product and service as separate line items in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss).
|
New Accounting Standards |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
New Accounting Standards | New Accounting Standards Accounting Pronouncements Recently Adopted In August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The standard is required to be applied retrospectively, except the new Level 3 disclosure requirements are applied prospectively. The Company adopted ASU 2018-13 in the first quarter of 2020, and it had an immaterial impact on the Company’s condensed consolidated financial statements. Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard, which requires the use of a modified retrospective transition approach, includes a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued a new, optional transition method that gives companies the option to use the effective date as the date of initial application on transition. For emerging growth entities, the standard is effective for the fiscal years beginning after December 15, 2021 and interim periods within the fiscal years beginning after December 15, 2022. Early adoption is allowed, and the Company, as an emerging growth company, plans to early adopt the standard for the fiscal years beginning after December 15, 2019 and interim periods within the fiscal years beginning after December 15, 2020. To support the accounting and disclosure requirements under the new standard, the Company is currently in the process of accumulating and evaluating all the necessary information required to properly account for its lease portfolio and developing and implementing appropriate changes to its internal processes and controls. Based on initial evaluation, the Company expects to recognize a lease liability and offsetting right-of-use asset for all of its operating leases with durations greater than twelve months on its Condensed Consolidated Balance Sheets. The Company will provide additional information about the expected financial impact as it progresses through the evaluation and implementation of the standard. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages are expensed as the activities are performed. ASU 2018-15 is effective for public businesses for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. As an emerging growth company, the Company is permitted, and plans, to adopt the new standard for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in ASU 2016-13 replace the current incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information. ASU 2016-13 is effective for SEC filers, excluding smaller reporting companies, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As an emerging growth company, the Company is permitted, and plans, to adopt the new standard for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements.
|
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Disaggregation of Revenue The Company adopted Accounting Standards Codification 606 (“ASC 606”) on December 31, 2019, effective January 1, 2019, using the modified retrospective method. Accordingly, results for the year ended December 31, 2019 and periods thereafter are presented in accordance with ASC 606 while prior period results, including those presented below for the three and nine months ended September 30, 2019, have not been adjusted and are reported under the previous revenue recognition guidance. Disaggregated revenue for the three and nine months ended September 30, 2020 and September 30, 2019 was as follows:
(1) The Company recognizes revenues from the sales of products at a point in time and revenues from the sales of services over time. (2) The Production Solutions segment was sold to Brigade Energy Service LLC (“Brigade”) on August 30, 2019. For additional information on the Production Solutions divestiture, see Note 13 – Segment Information. Performance Obligations At September 30, 2020 and December 31, 2019, the amount of remaining performance obligations were immaterial. Contract Balances At September 30, 2020 and December 31, 2019, contract assets and contract liabilities were immaterial.
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories, consisting primarily of finished goods and raw materials, are stated at the lower of cost or net realizable value. Cost is determined on an average cost basis. The Company reviews its inventory balances and writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. The reserve for obsolescence was $6.1 million and $5.4 million at September 30, 2020 and December 31, 2019, respectively. Inventories, net as of September 30, 2020 and December 31, 2019 were comprised of the following:
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill The changes in the net carrying amount of the components of goodwill for the nine months ended September 30, 2020 were as follows:
Q1 2020 Goodwill Impairment With a significant reduction in exploration and production capital budgets and activity, primarily driven by sharp declines in global crude oil demand and an economic recession associated with the coronavirus pandemic, as well as, sharp declines in oil and natural gas prices associated with international pricing and production disputes, the outlook for expected future cash flows associated with the Company’s reporting units decreased dramatically in the first quarter of 2020. Based on the above events, an indication of impairment associated with the Company’s reporting units occurred, triggering an interim goodwill impairment test of the Level 3 fair value of each reporting unit under Accounting Standards Codification 350, Intangibles - Goodwill and Other (“ASC 350”) at March 31, 2020. The Level 3 fair value of each reporting unit was determined by using the income approach (discounted cash flows of forecasted income) based on the Company’s best internal projections and the likelihood of various outcomes. Determining fair value requires the use of estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating profit margins, weighted average cost of capital, terminal growth rates, future market share, the impact of new product development, and future market conditions, among others. The Company believes that the estimates and assumptions used in the interim goodwill impairment test are reasonable and appropriate. Based on its Level 3 fair value determination in connection with the interim goodwill impairment test under ASC 350, the Company recorded goodwill impairment charges of $296.2 million in the first quarter of 2020 associated with its tools, cementing, and wireline reporting units. These charges represented a full write-off of goodwill and were primarily attributed to the events described above, coupled with an increased weighted average cost of capital driven by a reduction in the Company’s stock price and the Level 2 fair value of its Senior Notes (as defined in Note 8 – Debt Obligations). These charges are included in the line item “Impairment of goodwill” in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the nine months ended September 30, 2020. Intangible Assets The changes in the net carrying value of the components of intangible assets for the nine months ended September 30, 2020 were as follows:
Amortization of intangibles expense was $4.1 million and $12.4 million for the three and nine months ended September 30, 2020, respectively. Amortization of intangibles expense was $4.6 million and $13.9 million for the three and nine months ended September 30, 2019, respectively. Future estimated amortization of intangibles is as follows:
With a significant reduction in exploration and production capital budgets and activity, primarily driven by sharp declines in global crude oil demand and an economic recession associated with the coronavirus pandemic, as well as, sharp declines in oil and natural gas prices associated with international pricing and production disputes, the carrying amount of long-lived assets (inclusive of definite-lived intangible assets and property and equipment) associated with the Company’s asset groups may not be recoverable. As such, the Company performed an impairment assessment of long-lived assets in its asset groups under Accounting Standards Codification 360, Property, Plant and Equipment (“ASC 360”) at March 31, 2020, based on its best internal projections and the likelihood of various outcomes. Based on its assessment, the Company determined that the estimated future undiscounted cash flows derived from long-lived assets associated with its asset groups exceeded the carrying amount of long-lived assets associated with its asset groups, and no impairment to long-lived assets was required. No events triggered additional impairment tests under ASC 360 through September 30, 2020. However, the occurrence of future events or deteriorating market conditions could result in additional impairment assessments under ASC 360 subsequent to September 30, 2020.
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Accrued Expenses |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | Accrued Expenses Accrued expenses as of September 30, 2020 and December 31, 2019 consisted of the following:
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Debt Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Obligations | Debt Obligations The Company’s debt obligations as of September 30, 2020 and December 31, 2019 were as follows:
Senior Notes Background On October 25, 2018, the Company issued $400.0 million principal amount of 8.750% Senior Notes due 2023 (the “Senior Notes”). The Senior Notes were issued under an indenture, dated as of October 25, 2018 (the “Indenture”), by and among the Company, certain subsidiaries of the Company and Wells Fargo, National Association, as Trustee. The Senior Notes bear interest at an annual rate of 8.750% payable on May 1 and November 1 of each year, and the first interest payment was due on May 1, 2019. The Senior Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s current domestic subsidiaries and by certain future subsidiaries. The Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to engage in certain activities. The Company was in compliance with the provisions of the Indenture at September 30, 2020. Upon an event of default, the trustee or the holders of at least 25% in aggregate principal amount of then outstanding Senior Notes may declare the Senior Notes immediately due and payable, except that a default resulting from certain events of bankruptcy or insolvency with respect to the Company, any restricted subsidiary of the Company that is a significant subsidiary or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary, will automatically cause all outstanding Senior Notes to become due and payable. Unamortized deferred financing costs associated with the Senior Notes were $5.5 million and $7.9 million at September 30, 2020 and December 31, 2019, respectively. These costs are direct deductions from the carrying amount of the Senior Notes and are being amortized through interest expense through the maturity date of the Senior Notes using the effective interest method. Extinguishment of Debt The Company repurchased approximately $23.1 million and $52.8 million of Senior Notes at a repurchase price of approximately $7.0 million and $14.4 million in cash for the three and nine months ended September 30, 2020, respectively. Deferred financing costs associated with these transactions were $0.4 million and $0.9 million for the three and nine months ended September 30, 2020, respectively. As a result, for the three and nine months ended September 30, 2020, the Company recorded a $15.8 million gain and a $37.5 million gain, respectively, on the extinguishment of debt, which was calculated as the difference between the repurchase price and the carrying amount of the Senior Notes partially offset by the deferred financing costs. The gain on extinguishment of debt is included as a separate line item in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2020. Subsequent to September 30, 2020, the Company repurchased an additional $0.5 million of the Senior Notes for a repurchase price of approximately $0.2 million in cash. 2018 ABL Credit Facility On October 25, 2018, the Company entered into a credit agreement dated as of October 25, 2018 (the “2018 ABL Credit Agreement”), by and among the Company, Nine Energy Canada, Inc., JP Morgan Chase Bank, N.A., as administrative agent and as an issuing lender, and certain other financial institutions party thereto as lenders and issuing lenders. The 2018 ABL Credit Agreement permits aggregate borrowings of up to $200.0 million, subject to a borrowing base, including a Canadian tranche with a sub-limit of up to $25.0 million and a sub-limit of $50.0 million for letters of credit (the “2018 ABL Credit Facility”). The 2018 ABL Credit Facility will mature on October 25, 2023 or, if earlier, on the date that is 180 days before the scheduled maturity date of the Senior Notes if they have not been redeemed or repurchased by such date. Loans to the Company and its domestic related subsidiaries (the “U.S. Credit Parties”) under the 2018 ABL Credit Facility may be base rate loans or LIBOR loans; and loans to Nine Energy Canada Inc., a corporation organized under the laws of Alberta, Canada, and its restricted subsidiaries (the “Canadian Credit Parties”) under the Canadian tranche may be Canadian Dollar Offered Rate (“CDOR”) loans or Canadian prime rate loans. The applicable margin for base rate loans and Canadian prime rate loans vary from 0.75% to 1.25%, and the applicable margin for LIBOR loans or CDOR loans vary from 1.75% to 2.25%, in each case depending on the Company’s leverage ratio. In addition, a commitment fee of 0.50% per annum will be charged on the average daily unused portion of the revolving commitments. The 2018 ABL Credit Agreement contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other restricted payments, investments (including acquisitions), and transactions with affiliates. In addition, the 2018 ABL Credit Agreement contains a minimum fixed charge ratio covenant of 1.00 to 1.00 that is tested quarterly when the availability under the 2018 ABL Credit Facility drops below $18.75 million or a default has occurred until the availability exceeds such threshold for 30 consecutive days and such default is no longer outstanding. The Company was in compliance with all covenants under the 2018 ABL Credit Agreement at September 30, 2020. All of the obligations under the 2018 ABL Credit Facility are secured by first priority perfected security interests (subject to permitted liens) in substantially all of the personal property of U.S. Credit Parties, excluding certain assets. The obligations under the Canadian tranche are further secured by first priority perfected security interests (subject to permitted liens) in substantially all of the personal property of Canadian Credit Parties, excluding certain assets. The 2018 ABL Credit Facility is guaranteed by the U.S. Credit Parties, and the Canadian tranche is further guaranteed by the Canadian Credit Parties and the U.S. Credit Parties. At September 30, 2020, the Company’s availability under the 2018 ABL Credit Facility was approximately $39.5 million, net of outstanding letters of credit of $0.4 million. Magnum Promissory Notes On October 25, 2018, pursuant to the terms of a Securities Purchase Agreement, dated October 15, 2018 (as amended on June 7, 2019, the “Magnum Purchase Agreement”), the Company acquired all of the equity interests of Magnum Oil Tools International, LTD, Magnum Oil Tools GP, LLC, and Magnum Oil Tools Canada Ltd. (such entities collectively, “Magnum”). The Magnum Purchase Agreement included the potential for additional future payments in cash of (i) up to 60% of net income (before interest, taxes, and certain gains or losses) for the “E-Set” tools business in 2019 through 2026 and (ii) up to $25.0 million based on sales of certain dissolvable plug products in 2019 (the “Magnum Earnout”). On June 30, 2020, pursuant to an amendment to the Magnum Purchase Agreement to terminate the remaining Magnum Earnout and all obligations related thereto (the “Magnum Purchase Agreement Amendment”), the Company issued promissory notes with an aggregated principal amount of $2.3 million (the “Magnum Promissory Notes”) to the sellers of Magnum. The Magnum Promissory Notes bear interest at a rate of 6.0% per annum. The principal amount of the Magnum Promissory Notes will be paid in equal quarterly installments beginning January 1, 2021. The entire unpaid principal amount will be due and payable on the maturity date, which is the earlier of October 1, 2022 and the business day after the date on which the Company sells, transfers or otherwise disposes of the “E-Set” tools business to an unaffiliated third party, unless such sale, transfer or disposition is made, directly or indirectly, as part of the sale, transfer or disposition of the Dissolvable Plugs Business or due to the occurrence of a Change of Control Event (each as defined in the Magnum Purchase Agreement). For additional information regarding the termination of the Magnum Earnout, see Note 10 – Commitments and Contingencies. Fair Value of Debt Instruments The estimated fair value of the Company’s debt obligations as of September 30, 2020 and December 31, 2019 was as follows:
The fair value of the Senior Notes, 2018 ABL Credit Facility, and the Magnum Promissory Notes is classified as Level 2 in the fair value hierarchy. The fair value of the Senior Notes is established based on observable inputs in less active markets. The fair value of the 2018 ABL Credit Facility and the Magnum Promissory Notes approximates their carrying value.
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Related Party Transactions |
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Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company leases office space, yard facilities, and equipment and purchases building maintenance services from entities owned by David Crombie, an executive officer of the Company. Total lease expense and building maintenance expense associated with these entities was $0.2 million and $0.6 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2019, respectively. The Company also purchased $0.8 million and $1.3 million of equipment during the three and nine months ended September 30, 2020, respectively, and $0.7 million and $1.3 million of equipment during the three and nine months ended September 30, 2019, respectively, from an entity in which Mr. Crombie is a limited partner. There were outstanding payables due to this entity relating to equipment purchases of $0.1 million at both September 30, 2020 and December 31, 2019. In addition, the Company leases office space in Corpus Christi and Midland, Texas from an entity affiliated with Warren Lynn Frazier, a beneficial owner of more than 5% of the Company’s stock. In the third quarter of 2020, another entity affiliated with Mr. Frazier began to sub-lease a portion of such space in Corpus Christi, Texas from the Company. Total rental expense associated with this office space, net of sub-leasing income, was $0.3 million and $1.0 million for the three and nine months ended September 30, 2020, respectively, and $0.4 million and $1.1 million for the three and nine months ended September 30, 2019, respectively. There were net outstanding payables due to the entity of $0.1 million at September 30, 2020. Additionally, on June 30, 2020, the Company issued the Magnum Promissory Notes to the sellers of Magnum, including Mr. Frazier. At September 30, 2020, the outstanding principal balance payable to Mr. Frazier was $2.1 million. For additional information regarding the Magnum Promissory Notes, see Note 8 – Debt Obligations. The Company purchases cable for its wireline trucks from an entity owned by Forum Energy Technologies (“Forum”). Two of the Company’s directors serve as directors of Forum. The Company was billed $0.0 million and $0.4 million for the three and nine months ended September 30, 2020, respectively, and $0.6 million and $1.5 million for the three and nine months ended September 30, 2019, respectively. There were outstanding payables due to the entity of $0.3 million at December 31, 2019. The Company purchases coiled tubing string from another entity owned by Forum. The Company was billed $0.9 million and $3.0 million for coiled tubing string for the three and nine months ended September 30, 2020, respectively, and $2.0 million and $6.2 million for the three and nine months ended September 30, 2019, respectively. There were outstanding payables due to the entity of $0.2 million and $0.9 million at September 30, 2020 and December 31, 2019, respectively. The Company purchases chemical additives used in cementing from Select Energy Services, Inc. (“Select”). One of the Company’s directors also serves as a director of Select. The Company was billed $0.2 million and $1.0 million for the three and nine months ended September 30, 2020, respectively, and $0.5 million and $1.6 million for the three and nine months ended September 30, 2019, respectively. There were outstanding payables due to Select of $0.1 million at both September 30, 2020 and December 31, 2019. The Company provides products and rentals to National Energy Reunited Corp. (“NESR”), where one of the Company’s directors serves as a director. The Company billed NESR $0.2 million and $1.4 million for the three and nine months ended September 30, 2020, respectively, and issued credit memos of $0.5 million for both the three and nine months ended September 30, 2020. The Company billed NESR $0.6 million for both the three and nine months ended September 30, 2019. During the fourth quarter of 2019, the Company sold coiled tubing equipment for $5.9 million to NESR with payments due in 24 monthly equal installments beginning on January 31, 2020. Total outstanding receivables due to the Company from NESR (inclusive of the equipment sale above) were $4.4 million and $6.8 million at September 30, 2020 and December 31, 2019, respectively. On June 5, 2019, Ann G. Fox, President and Chief Executive Officer and a director of the Company, was elected as a director of Devon Energy Corporation (“Devon”). The Company generated revenue from Devon of $1.2 million and $4.6 million for the three and nine months ended September 30, 2020, respectively, and $5.4 million and $15.8 million for the three and nine months ended September 30, 2019, respectively. There were outstanding receivables due from Devon of $0.4 million and $1.0 million at September 30, 2020 and December 31, 2019, respectively.
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Commitment and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment and Contingencies | Commitments and Contingencies Litigation From time to time, the Company has various claims, lawsuits, and administrative proceedings that are pending or threatened with respect to personal injury, workers’ compensation, contractual matters, and other matters. Although no assurance can be given with respect to the outcome of these claims, lawsuits, or proceedings or the effect such outcomes may have, the Company believes any ultimate liability resulting from the outcome of such claims, lawsuits, or administrative proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on its business, operating results, or financial condition. Self-insurance The Company uses a combination of third-party insurance and self-insurance for health insurance claims. The self-insured liability represents an estimate of the undiscounted ultimate cost of uninsured claims incurred as of the balance sheet date. The estimate is based on an analysis of trailing months of incurred medical claims to project the amount of incurred but not reported claims liability. The estimated liability for self-insured medical claims was $1.5 million and $1.8 million at September 30, 2020 and December 31, 2019, respectively, and is included under the caption “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets. Although the Company does not expect the amounts ultimately paid to differ significantly from the estimates, the self-insurance liability could be affected if future claims experience differs significantly from historical trends and actuarial assumptions. Contingent Liabilities The Company has recorded the following contingent liabilities at September 30, 2020: Magnum Earnout The Magnum Purchase Agreement included the potential for additional future payments in cash of (i) up to 60% of net income (before interest, taxes, and certain gains or losses) for the “E-Set” tools business in 2019 through 2026 and (ii) up to $25.0 million based on sales of certain dissolvable plug products in 2019. In 2019, the Company did not meet the sales requirement of certain dissolvable plug products during the year. Pursuant to the Magnum Purchase Agreement Amendment, which terminated the remaining Magnum Earnout and all obligations related thereto, the Company made a cash payment of $1.1 million and issued the Magnum Promissory Notes with an aggregated principal amount of $2.3 million to the sellers of Magnum. For additional information regarding the Magnum Promissory Notes, see Note 8 – Debt Obligations. Frac Tech Earnout On October 1, 2018, pursuant to the terms and conditions of a Securities Purchase Agreement (the “Frac Tech Purchase Agreement”), the Company acquired Frac Technology AS, a Norwegian private limited company (“Frac Tech”) focused on the development of downhole technology, including a casing flotation tool and a number of patented downhole completion tools. The Frac Tech Purchase Agreement includes, among other things, the potential for additional future payments, based on certain Frac Tech sales volume metrics through December 31, 2023. The changes in the components of contingent liabilities for the nine months ended September 30, 2020 were as follows:
The contingent consideration related to the contingent liabilities is reported at fair value, based on a Monte Carlo simulation model. Significant inputs used in the fair value measurement include estimated gross margin related to forecasted sales of the plugs, term of the agreement, and a risk adjusted discount factor. Contingent liabilities include $0.4 million reported in “Accrued expenses” at both September 30, 2020 and December 31, 2019, and $0.8 million and $3.6 million reported in “Other long-term liabilities” at September 30, 2020 and December 31, 2019, respectively, in the Company’s Condensed Consolidated Balance Sheets. The impact of the revaluation adjustments is included in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss).
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Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes | Taxes Income tax expense (benefit) included in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss) was as follows:
The Company’s tax benefit for the three and nine months ended September 30, 2020 was less than $0.1 million and $2.3 million, respectively. The Company’s year-to-date tax benefit was primarily a result of the discrete tax benefit recorded in the first quarter of 2020 related to the Coronavirus Aid, Relief, and Economic Security Act as well as the release of valuation allowance due to the goodwill impairment which was also recorded in the first quarter of 2020.
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Earnings (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is based on the weighted average number of shares outstanding during each period and the exercise of potentially dilutive stock options assumed to be purchased from the proceeds using the average market price of the Company’s stock for each of the periods presented as well as the potentially dilutive restricted stock, restricted stock units, and performance stock units. Basic and diluted earnings (loss) per common share was computed as follows:
For the three and nine months ended September 30, 2020 as well as the three months ended September 30, 2019, the computation of diluted earnings (loss) per share excluded all stock options, unvested restricted stock, unvested restricted stock units, and unvested performance stock units because their inclusion would be anti-dilutive given the Company was in a net loss position. The average number of securities that were excluded from diluted earnings (loss) per share that would potentially dilute earnings (loss) per share for the periods in which the Company experienced a net loss were as follows:
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Segment Information |
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Segment Information | Segment Information On August 30, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Production Solutions Purchase Agreement”) with Brigade. Pursuant to the Production Solutions Purchase Agreement, on such date, through the sale of all of the limited liability interests of its wholly owned subsidiary, Beckman Holding Production Services, LLC, the Company sold its Production Solutions segment to Brigade. The Production Solutions Purchase Agreement contained customary representations and warranties, covenants, and indemnification provisions. This divestiture did not qualify as discontinued operations in accordance with ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity as it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Prior to August 30, 2019, the Company reported its results in two segments, the Completions Solutions segment and the Production Solutions segment. As a result of the Company’s sale of its Production Solutions segment, the Company considers the Completion Solutions segment to be its operating and reporting segment. This segmentation is representative of the manner in which the Chief Operating Decision Maker (“CODM”) and its Board of Directors view the business in allocating resources and measuring financial performance. The Company considers the CODM to be its Chief Executive Officer. The amounts labeled “Corporate” relate to assets not allocated to either the Completion Solutions segment or the Production Solutions segment.
Capital expenditures by segment for the three and nine months ended September 30, 2020 and 2019, were as follows:
Total assets by segment as of September 30, 2020 and December 31, 2019 were as follows:
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Basis of Presentation (Policies) |
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Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Condensed Consolidated Financial Information | Condensed Consolidated Financial Information The Condensed Consolidated Balance Sheet at December 31, 2019 and the Condensed Consolidated Statement of Stockholders’ Equity as of December 31, 2019 and 2018 are derived from audited consolidated financial statements. In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for the fair statement of the Company’s financial position have been included. These condensed consolidated financial statements include all accounts of the Company. These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.
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Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of Nine and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. Such estimates include fair value assumptions used in purchase accounting and in analyzing goodwill, definite and indefinite-lived intangible assets, and property and equipment for possible impairment, useful lives used in depreciation and amortization expense, stock-based compensation fair value, estimated realizable value on excess and obsolete inventories, deferred taxes and income tax contingencies, and losses on accounts receivable. It is at least reasonably possible that the estimates used will change within the next year.
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Reclassifications | Reclassifications Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. These reclassifications relate to presenting “Revenues” and “Cost of revenues” by product and service as separate line items in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss).
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New Accounting Standards | New Accounting Standards Accounting Pronouncements Recently Adopted In August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The standard is required to be applied retrospectively, except the new Level 3 disclosure requirements are applied prospectively. The Company adopted ASU 2018-13 in the first quarter of 2020, and it had an immaterial impact on the Company’s condensed consolidated financial statements. Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard, which requires the use of a modified retrospective transition approach, includes a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued a new, optional transition method that gives companies the option to use the effective date as the date of initial application on transition. For emerging growth entities, the standard is effective for the fiscal years beginning after December 15, 2021 and interim periods within the fiscal years beginning after December 15, 2022. Early adoption is allowed, and the Company, as an emerging growth company, plans to early adopt the standard for the fiscal years beginning after December 15, 2019 and interim periods within the fiscal years beginning after December 15, 2020. To support the accounting and disclosure requirements under the new standard, the Company is currently in the process of accumulating and evaluating all the necessary information required to properly account for its lease portfolio and developing and implementing appropriate changes to its internal processes and controls. Based on initial evaluation, the Company expects to recognize a lease liability and offsetting right-of-use asset for all of its operating leases with durations greater than twelve months on its Condensed Consolidated Balance Sheets. The Company will provide additional information about the expected financial impact as it progresses through the evaluation and implementation of the standard. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages are expensed as the activities are performed. ASU 2018-15 is effective for public businesses for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. As an emerging growth company, the Company is permitted, and plans, to adopt the new standard for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in ASU 2016-13 replace the current incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information. ASU 2016-13 is effective for SEC filers, excluding smaller reporting companies, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As an emerging growth company, the Company is permitted, and plans, to adopt the new standard for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements.
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disaggregation of revenue | Disaggregated revenue for the three and nine months ended September 30, 2020 and September 30, 2019 was as follows:
(1) The Company recognizes revenues from the sales of products at a point in time and revenues from the sales of services over time. (2) The Production Solutions segment was sold to Brigade Energy Service LLC (“Brigade”) on August 30, 2019. For additional information on the Production Solutions divestiture, see Note 13 – Segment Information.
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Inventories (Tables) |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories, net | Inventories, net as of September 30, 2020 and December 31, 2019 were comprised of the following:
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in net carrying amount of components of goodwill | The changes in the net carrying amount of the components of goodwill for the nine months ended September 30, 2020 were as follows:
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Schedule of changes in net carrying amount of components of intangible assets | The changes in the net carrying value of the components of intangible assets for the nine months ended September 30, 2020 were as follows:
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Schedule of finite-lived intangible assets, future amortization expense | Future estimated amortization of intangibles is as follows:
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Accrued Expenses (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses | Accrued expenses as of September 30, 2020 and December 31, 2019 consisted of the following:
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Debt Obligations (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of debt obligations | The Company’s debt obligations as of September 30, 2020 and December 31, 2019 were as follows:
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Summary of fair value of debt obligations | The estimated fair value of the Company’s debt obligations as of September 30, 2020 and December 31, 2019 was as follows:
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Commitment and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of contingent liabilities | The changes in the components of contingent liabilities for the nine months ended September 30, 2020 were as follows:
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Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income tax expense (benefit) | Income tax expense (benefit) included in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income (Loss) was as follows:
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Earnings (Loss) Per Share (Table) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of basic and diluted income (loss) per common share | Basic and diluted earnings (loss) per common share was computed as follows:
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Schedule of antidilutive securities excluded from computation of earnings per share | The average number of securities that were excluded from diluted earnings (loss) per share that would potentially dilute earnings (loss) per share for the periods in which the Company experienced a net loss were as follows:
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of financial data by segment | The amounts labeled “Corporate” relate to assets not allocated to either the Completion Solutions segment or the Production Solutions segment.
Capital expenditures by segment for the three and nine months ended September 30, 2020 and 2019, were as follows:
Total assets by segment as of September 30, 2020 and December 31, 2019 were as follows:
|
Inventories - Narrative (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Reserve for obsolescence | $ 6,063 | $ 5,433 |
Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 35,968 | $ 38,823 |
Work in progress | 93 | 0 |
Finished goods | 22,685 | 27,555 |
Inventories | 58,746 | 66,378 |
Reserve for obsolescence | (6,063) | (5,433) |
Inventories, net | $ 52,683 | $ 60,945 |
Goodwill and Intangible Assets - Components of Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Goodwill [Roll Forward] | |||||
Gross Value, beginning balance | $ 408,732 | $ 408,732 | |||
Accumulated impairment loss, beginning balance | (112,536) | (112,536) | |||
Net, beginning balance | 296,196 | 296,196 | |||
Impairment | $ 0 | $ (296,200) | $ 0 | (296,196) | $ 0 |
Gross Value, ending balance | 408,732 | 408,732 | |||
Accumulated impairment loss, ending balance | (408,732) | (408,732) | |||
Net, ending balance | $ 0 | $ 0 |
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Impairment of goodwill | $ 0 | $ 296,200,000 | $ 0 | $ 296,196,000 | $ 0 |
Amortization of intangibles | $ 4,091,000 | $ 4,609,000 | 12,376,000 | $ 13,925,000 | |
Impairment of long-lived assets | $ 0 |
Goodwill and Intangible Assets - Future Estimated Amortization of Intangibles (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 | $ 4,091 |
2021 | 16,116 |
2022 | 13,463 |
2023 | 11,516 |
2024 | 11,183 |
Thereafter | 79,246 |
Total | $ 135,615 |
Accrued Expenses (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued compensation and benefits | $ 5,519 | $ 7,009 |
Accrued interest | 12,948 | 6,091 |
Accrued bonus | 0 | 5,043 |
Accrued sales tax | 303 | 820 |
Contingent liabilities | 396 | 391 |
Other accrued expenses | 4,070 | 5,376 |
Accrued expenses | $ 23,236 | $ 24,730 |
Debt Obligations - Summary of Debt Obligations (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Total debt before deferred financing costs | $ 349,418 | $ 400,000 |
Deferred financing costs | (5,538) | (7,941) |
Total debt | 343,880 | 392,059 |
Less: Current portion of long-term debt | (844) | 0 |
Long-term debt | 343,036 | 392,059 |
Senior Notes | ||
Line of Credit Facility [Line Items] | ||
Total debt before deferred financing costs | 347,168 | 400,000 |
Magnum Promissory Notes | ||
Line of Credit Facility [Line Items] | ||
Total debt before deferred financing costs | 2,250 | 0 |
2018 ABL Credit Facility | Line of Credit | ||
Line of Credit Facility [Line Items] | ||
Total debt before deferred financing costs | $ 0 | $ 0 |
Debt Obligations - Fair Value of Debt Instruments (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt instrument, fair value disclosure | $ 102,415 | $ 324,000 |
Line of Credit | 2018 ABL Credit Facility | ||
Debt Instrument [Line Items] | ||
Debt instrument, fair value disclosure | 0 | 0 |
Magnum Promissory Notes | ||
Debt Instrument [Line Items] | ||
Debt instrument, fair value disclosure | $ 2,250 | $ 0 |
Commitment and Contingencies - Contingent Consideration (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
| |
Loss Contingency Accrual [Roll Forward] | |
Beginning balance | $ 3,968 |
Revaluation adjustments | 781 |
Payments | (206) |
Termination | (3,375) |
Ending balance | 1,168 |
Magnum | |
Loss Contingency Accrual [Roll Forward] | |
Beginning balance | 2,609 |
Revaluation adjustments | 766 |
Payments | 0 |
Termination | (3,375) |
Ending balance | 0 |
Frac Tech | |
Loss Contingency Accrual [Roll Forward] | |
Beginning balance | 1,359 |
Revaluation adjustments | 15 |
Payments | (206) |
Termination | 0 |
Ending balance | $ 1,168 |
Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax provision (benefit) | $ 37 | $ (727) | $ 2,348 | $ 1,548 |
Effective tax rate | 0.20% | (3.70%) | 0.70% | (126.70%) |
Earnings (Loss) Per Share - Computation of Earnings per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Net income (loss) | $ (18,502) | $ (20,627) | $ (343,573) | $ 2,770 |
Average shares outstanding, basic (in shares) | 29,849,753 | 29,361,633 | 29,708,673 | 29,288,113 |
Loss per share, basic (in usd per share) | $ (0.62) | $ (0.70) | $ (11.56) | $ 0.09 |
Assumed exercise of stock options (in shares) | 0 | 0 | 0 | 0 |
Unvested restricted stock (in shares) | 0 | 0 | 0 | 109,523 |
Average shares outstanding, diluted (in shares) | 29,849,753 | 29,361,633 | 29,708,673 | 29,397,636 |
Loss per share, diluted (in usd per share) | $ (0.62) | $ (0.70) | $ (11.56) | $ 0.09 |
Earnings (Loss) Per Share - Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 723,608 | 71,574 | 700,417 | 0 |
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