ý | 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 |
Maryland | 04-2648081 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1301 McKinney Street, Suite 1800, Houston, Texas | 77010 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. |
ITEM 1. | FINANCIAL STATEMENTS |
June 30, 2013 | December 31, 2012 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 24,735 | $ | 45,949 | |||
Accounts receivable, net of allowance for doubtful accounts of $3,903 and $2,860, respectively | 433,136 | 404,390 | |||||
Inventories | 39,860 | 38,622 | |||||
Other current assets | 122,136 | 100,833 | |||||
Total current assets | 619,867 | 589,794 | |||||
Property and equipment | 2,575,041 | 2,528,578 | |||||
Accumulated depreciation | (1,180,448 | ) | (1,091,904 | ) | |||
Property and equipment, net | 1,394,593 | 1,436,674 | |||||
Goodwill | 624,858 | 626,481 | |||||
Other intangible assets, net | 50,516 | 60,905 | |||||
Deferred financing costs, net | 15,301 | 16,628 | |||||
Deposits | 8,131 | 7,339 | |||||
Equity method investments | 947 | 966 | |||||
Other assets | 18,224 | 22,801 | |||||
TOTAL ASSETS | $ | 2,732,437 | $ | 2,761,588 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 90,272 | $ | 104,073 | |||
Other current liabilities | 174,732 | 200,630 | |||||
Current portion of capital leases | 13 | 393 | |||||
Total current liabilities | 265,017 | 305,096 | |||||
Long-term debt | 867,832 | 848,110 | |||||
Workers' compensation, vehicular and health insurance liabilities | 32,889 | 33,676 | |||||
Deferred tax liabilities | 269,025 | 259,453 | |||||
Other non-current liabilities | 28,022 | 27,921 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Common stock, $0.10 par value; 200,000,000 shares authorized, 152,443,492 and 151,069,609 shares issued and outstanding | 15,244 | 15,108 | |||||
Additional paid-in capital | 952,186 | 925,132 | |||||
Accumulated other comprehensive loss | (15,197 | ) | (6,148 | ) | |||
Retained earnings | 315,334 | 319,736 | |||||
Total equity attributable to Key | 1,267,567 | 1,253,828 | |||||
Noncontrolling interest | 2,085 | 33,504 | |||||
Total equity | 1,269,652 | 1,287,332 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 2,732,437 | $ | 2,761,588 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
REVENUES | $ | 411,390 | $ | 515,997 | $ | 839,839 | $ | 1,002,748 | |||||||
COSTS AND EXPENSES: | |||||||||||||||
Direct operating expenses | 287,102 | 343,996 | 586,284 | 655,493 | |||||||||||
Depreciation and amortization expense | 58,208 | 52,452 | 112,401 | 103,641 | |||||||||||
General and administrative expenses | 57,736 | 58,081 | 120,981 | 118,999 | |||||||||||
Operating income | 8,344 | 61,468 | 20,173 | 124,615 | |||||||||||
Interest expense, net of amounts capitalized | 13,984 | 13,730 | 27,788 | 25,612 | |||||||||||
Other (income) loss, net | 430 | (1,380 | ) | (793 | ) | (2,409 | ) | ||||||||
Income (loss) from continuing operations before tax | (6,070 | ) | 49,118 | (6,822 | ) | 101,412 | |||||||||
Income tax benefit (expense) | 2,298 | (17,419 | ) | 2,864 | (36,232 | ) | |||||||||
Income (loss) from continuing operations | (3,772 | ) | 31,699 | (3,958 | ) | 65,180 | |||||||||
Loss from discontinued operations, net of tax benefit of $-, $1,501, $- and $17,855, respectively | — | (2,454 | ) | — | (33,359 | ) | |||||||||
Net income (loss) | (3,772 | ) | 29,245 | (3,958 | ) | 31,821 | |||||||||
Income (loss) attributable to noncontrolling interest | 356 | 204 | 444 | (410 | ) | ||||||||||
INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (4,128 | ) | $ | 29,041 | $ | (4,402 | ) | $ | 32,231 | |||||
Income (loss) from continuing operations attributable to Key: | |||||||||||||||
Income (loss) from continuing operations | $ | (3,772 | ) | $ | 31,699 | $ | (3,958 | ) | $ | 65,180 | |||||
Income (loss) attributable to noncontrolling interest | 356 | 204 | 444 | (410 | ) | ||||||||||
Income (loss) from continuing operations attributable to Key | $ | (4,128 | ) | $ | 31,495 | $ | (4,402 | ) | $ | 65,590 | |||||
Earnings (loss) per share from continuing operations attributable to Key: | |||||||||||||||
Basic and diluted | $ | (0.03 | ) | $ | 0.21 | $ | (0.03 | ) | $ | 0.43 | |||||
Loss per share from discontinued operations: | |||||||||||||||
Basic and diluted | $ | — | $ | (0.02 | ) | $ | — | $ | (0.22 | ) | |||||
Earnings (loss) per share attributable to Key: | |||||||||||||||
Basic and diluted | $ | (0.03 | ) | $ | 0.19 | $ | (0.03 | ) | $ | 0.21 | |||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 152,384 | 151,087 | 152,175 | 151,110 | |||||||||||
Diluted | 152,384 | 151,100 | 152,175 | 151,168 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | $ | (3,772 | ) | $ | 31,699 | $ | (3,958 | ) | $ | 65,180 | |||||
Other comprehensive loss, net of tax: | |||||||||||||||
Foreign currency translation loss | (3,848 | ) | (9,573 | ) | (5,366 | ) | (2,521 | ) | |||||||
Total other comprehensive loss, net of tax | (3,848 | ) | (9,573 | ) | (5,366 | ) | (2,521 | ) | |||||||
COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF TAX | (7,620 | ) | 22,126 | (9,324 | ) | 62,659 | |||||||||
Comprehensive loss from discontinued operations | — | (2,454 | ) | — | (33,359 | ) | |||||||||
COMPREHENSIVE INCOME (LOSS) | (7,620 | ) | 19,672 | (9,324 | ) | 29,300 | |||||||||
Comprehensive (income) loss attributable to noncontrolling interest | (367 | ) | 3,952 | 223 | 1,538 | ||||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (7,987 | ) | $ | 23,624 | $ | (9,101 | ) | $ | 30,838 |
Six Months Ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | (3,958 | ) | $ | 31,821 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 112,401 | 103,784 | |||||
Asset retirements and impairments | — | 41,457 | |||||
Bad debt expense | 901 | 549 | |||||
Accretion of asset retirement obligations | 305 | 297 | |||||
Loss from equity method investments | 242 | 412 | |||||
Amortization of deferred financing costs and premium | 1,358 | 1,309 | |||||
Deferred income tax expense (benefit) | (3,085 | ) | 3,187 | ||||
Capitalized interest | (292 | ) | (674 | ) | |||
Loss on disposal of assets, net | 848 | 506 | |||||
Share-based compensation | 9,393 | 8,444 | |||||
Excess tax expense (benefit) from share-based compensation | 1,501 | (4,047 | ) | ||||
Changes in working capital: | |||||||
Accounts receivable | (30,449 | ) | (20,283 | ) | |||
Other current assets | 4,611 | (33,721 | ) | ||||
Accounts payable, accrued interest and accrued expenses | (40,457 | ) | 28,316 | ||||
Share-based compensation liability awards | 493 | 1,443 | |||||
Other assets and liabilities | (7,131 | ) | 29,052 | ||||
Net cash provided by operating activities | 46,681 | 191,852 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (72,577 | ) | (309,328 | ) | |||
Proceeds from sale of fixed assets | 3,881 | 9,225 | |||||
Acquisition of the 50% noncontrolling interest in Geostream | (14,600 | ) | — | ||||
Investment in Wilayat Key Energy, LLC | — | (676 | ) | ||||
Net cash used in investing activities | (83,296 | ) | (300,779 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from long-term debt | — | 205,000 | |||||
Repayments of capital lease obligations | (379 | ) | (1,007 | ) | |||
Proceeds from borrowings on revolving credit facility | 155,000 | 195,000 | |||||
Repayments on revolving credit facility | (135,000 | ) | (300,000 | ) | |||
Payment of deferred financing costs | (69 | ) | (4,534 | ) | |||
Repurchases of common stock | (3,134 | ) | (7,417 | ) | |||
Proceeds from exercise of stock options | — | 812 | |||||
Excess tax (expense) benefit from share-based compensation | (1,501 | ) | 4,047 | ||||
Other financing activities | — | 12,601 | |||||
Net cash provided by financing activities | 14,917 | 104,502 | |||||
Effect of changes in exchange rates on cash | 484 | (2,738 | ) | ||||
Net decrease in cash and cash equivalents | (21,214 | ) | (7,163 | ) | |||
Cash and cash equivalents, beginning of period | 45,949 | 35,443 | |||||
Cash and cash equivalents, end of period | $ | 24,735 | $ | 28,280 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in thousands) | |||||||||||||||
Net Income (loss) attributable to Key | $ | (4,128 | ) | $ | 29,041 | $ | (4,402 | ) | $ | 32,231 | |||||
Transfers from the noncontrolling interest | |||||||||||||||
Increase in Key's paid-in capital for purchase of the 50% noncontrolling interest in Geostream | 22,432 | — | 22,432 | — | |||||||||||
Net transfers from noncontrolling interest | 22,432 | — | 22,432 | — | |||||||||||
Change from net income (loss) attributable to Key and transfers from noncontrolling interest | $ | 18,304 | $ | 29,041 | $ | 18,030 | $ | 32,231 |
Three Months Ended | Six Months Ended | |||||||
June 30, 2012 | June 30, 2012 | |||||||
(in thousands) | ||||||||
REVENUES | $ | 30,150 | $ | 55,789 | ||||
COSTS AND EXPENSES: | ||||||||
Direct operating expenses | 28,237 | 54,542 | ||||||
Depreciation and amortization expense | — | 143 | ||||||
General and administrative expenses | 4,366 | 8,476 | ||||||
Impairment and other charges | — | 41,457 | ||||||
Operating loss | (2,453 | ) | (48,829 | ) | ||||
Interest expense, net of amounts capitalized | 86 | 137 | ||||||
Other expense, net | 1,416 | 2,248 | ||||||
Loss before tax | (3,955 | ) | (51,214 | ) | ||||
Income tax benefit | 1,501 | 17,855 | ||||||
Loss from discontinued operations | $ | (2,454 | ) | $ | (33,359 | ) |
COMMON STOCKHOLDERS | ||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Noncontrolling Interest | Total | |||||||||||||||||||||
Number of Shares | Amount at Par | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2012 | 151,070 | $ | 15,108 | $ | 925,132 | $ | (6,148 | ) | $ | 319,736 | $ | 33,504 | $ | 1,287,332 | ||||||||||||
Foreign currency translation | — | — | — | (4,699 | ) | — | (667 | ) | (5,366 | ) | ||||||||||||||||
Common stock purchases | (410 | ) | (42 | ) | (3,092 | ) | — | — | (3,134 | ) | ||||||||||||||||
Share-based compensation | 1,783 | 178 | 9,215 | — | — | — | 9,393 | |||||||||||||||||||
Tax benefits from share-based compensation | — | — | (1,501 | ) | — | — | — | (1,501 | ) | |||||||||||||||||
Acquisition of the 50% noncontrolling interest in Geostream (Note 3) | — | — | 22,432 | (4,350 | ) | — | (31,196 | ) | (13,114 | ) | ||||||||||||||||
Net income (loss) | — | — | — | — | (4,402 | ) | 444 | (3,958 | ) | |||||||||||||||||
BALANCE AT JUNE 30, 2013 | 152,443 | $ | 15,244 | $ | 952,186 | $ | (15,197 | ) | $ | 315,334 | $ | 2,085 | $ | 1,269,652 |
COMMON STOCKHOLDERS | ||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Noncontrolling Interest | Total | |||||||||||||||||||||
Number of Shares | Amount at Par | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2011 | 150,733 | $ | 15,073 | $ | 915,400 | $ | (58,231 | ) | $ | 312,114 | $ | 30,275 | $ | 1,214,631 | ||||||||||||
Foreign currency translation | — | — | — | (1,393 | ) | — | (1,128 | ) | (2,521 | ) | ||||||||||||||||
Common stock purchases | (468 | ) | (47 | ) | (7,370 | ) | — | — | — | (7,417 | ) | |||||||||||||||
Exercise of stock options and warrants | 89 | 9 | 803 | — | — | — | 812 | |||||||||||||||||||
Share-based compensation | 855 | 86 | 8,358 | — | — | — | 8,444 | |||||||||||||||||||
Tax benefits from share-based compensation | — | — | 4,047 | — | — | — | 4,047 | |||||||||||||||||||
Shares surrendered | (68 | ) | (7 | ) | (999 | ) | — | — | — | (1,006 | ) | |||||||||||||||
Net income (loss) | — | — | — | — | 32,231 | (410 | ) | 31,821 | ||||||||||||||||||
BALANCE AT JUNE 30, 2012 | 151,141 | $ | 15,114 | $ | 920,239 | $ | (59,624 | ) | $ | 344,345 | $ | 28,737 | $ | 1,248,811 |
Severance | Lease Cancellation Fees | Mobilization Costs | Total | ||||||||||||
(in thousands) | |||||||||||||||
U.S. | |||||||||||||||
Balance as of December 31, 2012 | $ | — | $ | — | $ | — | $ | — | |||||||
Expense | 746 | 1,630 | 218 | 2,594 | |||||||||||
Payment | (724 | ) | — | — | (724 | ) | |||||||||
Balance as of June 30, 2013 | $ | 22 | $ | 1,630 | $ | 218 | $ | 1,870 | |||||||
International | |||||||||||||||
Balance as of December 31, 2012 | $ | — | $ | — | $ | — | $ | — | |||||||
Expense | 4,843 | 307 | 2,077 | 7,227 | |||||||||||
Payment | (4,533 | ) | (307 | ) | $ | (1,054 | ) | (5,894 | ) | ||||||
Balance as of June 30, 2013 | $ | 310 | $ | — | $ | 1,023 | $ | 1,333 | |||||||
Functional Support | |||||||||||||||
Balance as of December 31, 2012 | $ | — | $ | — | $ | — | $ | — | |||||||
Expense | 732 | — | — | 732 | |||||||||||
Payment | (732 | ) | — | — | (732 | ) | |||||||||
Balance as of June 30, 2013 | $ | — | $ | — | $ | — | $ | — | |||||||
Consolidated | |||||||||||||||
Balance as of December 31, 2012 | $ | — | $ | — | $ | — | $ | — | |||||||
Expense | 6,321 | 1,937 | 2,295 | 10,553 | |||||||||||
Payment | (5,989 | ) | (307 | ) | (1,054 | ) | (7,350 | ) | |||||||
Balance as of June 30, 2013 | $ | 332 | $ | 1,630 | $ | 1,241 | $ | 3,203 |
June 30, 2013 | December 31, 2012 | ||||||
(in thousands) | |||||||
Other current assets: | |||||||
Deferred tax assets | $ | 27,444 | $ | 20,026 | |||
Prepaid current assets | 25,673 | 27,736 | |||||
Reinsurance receivable | 9,660 | 10,217 | |||||
VAT asset | 36,506 | 32,762 | |||||
Other | 22,853 | 10,092 | |||||
Total | $ | 122,136 | $ | 100,833 |
June 30, 2013 | December 31, 2012 | ||||||
(in thousands) | |||||||
Other current liabilities: | |||||||
Accrued payroll, taxes and employee benefits | $ | 36,054 | $ | 31,708 | |||
Accrued operating expenditures | 42,890 | 42,137 | |||||
Income, sales, use and other taxes | 40,152 | 62,709 | |||||
Self-insurance reserve | 34,539 | 35,742 | |||||
Accrued interest | 16,010 | 15,301 | |||||
Insurance premium financing | 2,999 | 8,021 | |||||
Share-based compensation and other liabilities | 2,088 | 5,012 | |||||
Total | $ | 174,732 | $ | 200,630 |
June 30, 2013 | December 31, 2012 | ||||||
(in thousands) | |||||||
Other non-current liabilities: | |||||||
Asset retirement obligations | $ | 11,866 | $ | 11,659 | |||
Environmental liabilities | 6,530 | 4,539 | |||||
Accrued rent | 1,140 | 1,424 | |||||
Accrued sales, use and other taxes | 7,155 | 6,952 | |||||
Other | 1,331 | 3,347 | |||||
Total | $ | 28,022 | $ | 27,921 |
U.S. | International | Total | |||||||||
(in thousands) | |||||||||||
December 31, 2012 | $ | 597,456 | $ | 29,025 | $ | 626,481 | |||||
Impact of foreign currency translation | — | (1,623 | ) | (1,623 | ) | ||||||
June 30, 2013 | $ | 597,456 | $ | 27,402 | $ | 624,858 |
June 30, 2013 | December 31, 2012 | ||||||
(in thousands) | |||||||
Noncompete agreements: | |||||||
Gross carrying value | $ | 7,134 | $ | 9,332 | |||
Accumulated amortization | (4,927 | ) | (5,022 | ) | |||
Net carrying value | $ | 2,207 | $ | 4,310 | |||
Patents, trademarks and tradename: | |||||||
Gross carrying value | $ | 14,044 | $ | 14,689 | |||
Accumulated amortization | (473 | ) | (410 | ) | |||
Net carrying value | $ | 13,571 | $ | 14,279 | |||
Customer relationships and contracts: | |||||||
Gross carrying value | $ | 100,256 | $ | 100,481 | |||
Accumulated amortization | (70,446 | ) | (62,143 | ) | |||
Net carrying value | $ | 29,810 | $ | 38,338 | |||
Developed technology: | |||||||
Gross carrying value | $ | 9,780 | $ | 7,583 | |||
Accumulated amortization | (4,852 | ) | (3,605 | ) | |||
Net carrying value | $ | 4,928 | $ | 3,978 | |||
Customer Backlog: | |||||||
Gross carrying value | $ | 776 | $ | 779 | |||
Accumulated amortization | (776 | ) | (779 | ) | |||
Net carrying value | $ | — | $ | — |
Weighted average remaining amortization period (years) | Expected Amortization Expense | ||||||||||||||||||||||||
Remainder of 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||
Noncompete agreements | 1.3 | $ | 869 | $ | 1,338 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Patents and trademarks | 4.9 | 63 | 119 | 55 | 40 | 40 | 17 | ||||||||||||||||||
Customer relationships and contracts | 6.6 | 8,477 | 7,952 | 5,090 | 3,439 | 2,368 | 1,120 | ||||||||||||||||||
Developed technology | 17.5 | 282 | 553 | 505 | 428 | 288 | 221 | ||||||||||||||||||
Total expected intangible asset amortization expense | $ | 9,691 | $ | 9,962 | $ | 5,650 | $ | 3,907 | $ | 2,696 | $ | 1,358 |
June 30, 2013 | December 31, 2012 | ||||||
(in thousands) | |||||||
6.75% Senior Notes due 2021 | $ | 675,000 | $ | 675,000 | |||
8.375% Senior Notes due 2014 | 3,573 | 3,573 | |||||
Senior Secured Credit Facility revolving loans due 2016 | 185,000 | 165,000 | |||||
Net unamortized premium on debt | 4,259 | 4,537 | |||||
Capital lease obligations | 13 | 393 | |||||
Total debt | 867,845 | 848,503 | |||||
Less current portion | (13 | ) | (393 | ) | |||
Long-term debt and capital leases | $ | 867,832 | $ | 848,110 |
Year | Percentage | |
2016 | 103.375 | % |
2017 | 102.250 | % |
2018 | 101.125 | % |
2019 and thereafter | 100.000 | % |
• | incur additional indebtedness and issue preferred equity interests; |
• | pay dividends or make other distributions or repurchase or redeem equity interests; |
• | make loans and investments; |
• | enter into sale and leaseback transactions; |
• | sell, transfer or otherwise convey assets; |
• | create liens; |
• | enter into transactions with affiliates; |
• | enter into agreements restricting subsidiaries’ ability to pay dividends; |
• | designate future subsidiaries as unrestricted subsidiaries; and |
• | consolidate, merge or sell all or substantially all of the applicable entities’ assets. |
• | our ratio of consolidated funded indebtedness to total capitalization be no greater than 45%; |
• | our senior secured leverage ratio of senior secured funded debt to trailing four quarters of earnings before interest, taxes, depreciation and amortization (as calculated pursuant to the terms of the 2011 Credit Facility, “EBITDA”) be no greater than 2.00 to 1.00; |
• | we maintain a collateral coverage ratio, the ratio of the aggregate book value of the collateral to the amount of the total commitments, as of the last day of any fiscal quarter of at least 2:00 to 1:00; |
• | we maintain a consolidated interest coverage ratio of trailing four quarters EBITDA to interest expense of at least 3.00 to 1.00; and |
• | we limit our capital expenditures and investments in foreign subsidiaries to $250.0 million per fiscal year, if the consolidated total leverage ratio exceeds 3.00 to 1.00. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in thousands) | |||||||||||||||
Interest income | $ | (84 | ) | $ | (7 | ) | $ | (95 | ) | $ | (14 | ) | |||
Foreign exchange (gain) loss | 1,398 | (766 | ) | 473 | (1,705 | ) | |||||||||
Other income, net | (884 | ) | (607 | ) | (1,171 | ) | (690 | ) | |||||||
Total | $ | 430 | $ | (1,380 | ) | $ | (793 | ) | $ | (2,409 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Basic EPS Calculation: | |||||||||||||||
Numerator | |||||||||||||||
Income (loss) from continuing operations attributable to Key | $ | (4,128 | ) | $ | 31,495 | $ | (4,402 | ) | $ | 65,590 | |||||
Loss from discontinued operations, net of tax | — | (2,454 | ) | — | (33,359 | ) | |||||||||
Income (loss) attributable to Key | $ | (4,128 | ) | $ | 29,041 | $ | (4,402 | ) | $ | 32,231 | |||||
Denominator | |||||||||||||||
Weighted average shares outstanding | 152,384 | 151,087 | 152,175 | 151,110 | |||||||||||
Basic earnings (loss) per share from continuing operations attributable to Key | $ | (0.03 | ) | $ | 0.21 | $ | (0.03 | ) | $ | 0.43 | |||||
Basic loss per share from discontinued operations | — | (0.02 | ) | — | (0.22 | ) | |||||||||
Basic earnings (loss) per share attributable to Key | $ | (0.03 | ) | $ | 0.19 | $ | (0.03 | ) | $ | 0.21 | |||||
Diluted EPS Calculation: | |||||||||||||||
Numerator | |||||||||||||||
Income (loss) from continuing operations attributable to Key | $ | (4,128 | ) | $ | 31,495 | $ | (4,402 | ) | $ | 65,590 | |||||
Loss from discontinued operations, net of tax | — | (2,454 | ) | — | (33,359 | ) | |||||||||
Income (loss) attributable to Key | $ | (4,128 | ) | $ | 29,041 | $ | (4,402 | ) | $ | 32,231 | |||||
Denominator | |||||||||||||||
Weighted average shares outstanding | 152,384 | 151,087 | 152,175 | 151,110 | |||||||||||
Stock options | — | 13 | — | 58 | |||||||||||
Total | 152,384 | 151,100 | 152,175 | 151,168 | |||||||||||
Diluted earnings (loss) per share from continuing operations attributable to Key | $ | (0.03 | ) | $ | 0.21 | $ | (0.03 | ) | $ | 0.43 | |||||
Diluted loss per share from discontinued operations | — | (0.02 | ) | — | (0.22 | ) | |||||||||
Diluted earnings (loss) per share attributable to Key | $ | (0.03 | ) | $ | 0.19 | $ | (0.03 | ) | $ | 0.21 |
Company Placement for the Performance Period | Percentile Ranking in Peer Group | Performance Units Earned as a Percentage of Target | ||||
First | 100 | % | 200 | % | ||
Second | 91 | % | 180 | % | ||
Third | 82 | % | 160 | % | ||
Fourth | 73 | % | 140 | % | ||
Fifth | 64 | % | 120 | % | ||
Sixth | 55 | % | 100 | % | ||
Seventh | 45 | % | 75 | % | ||
Eighth | 36 | % | 50 | % | ||
Ninth | 27 | % | 25 | % | ||
Tenth | 18 | % | 0 | % | ||
Eleventh | 9 | % | 0 | % | ||
Twelfth | 0 | % | 0 | % |
June 30, 2013 | December 31, 2012 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Notes receivable - Argentina operations sale | 12,955 | 12,955 | 12,955 | 12,955 | ||||||||||||
Financial liabilities: | ||||||||||||||||
6.75% Senior Notes | $ | 675,000 | $ | 663,188 | $ | 675,000 | $ | 680,510 | ||||||||
8.375% Senior Notes | 3,573 | 3,637 | 3,573 | 3,656 | ||||||||||||
Credit Facility revolving loans | 185,000 | 185,000 | 165,000 | 165,000 |
As of and for the three months ended June 30, 2013 | ||||||||||||||||||||
U.S. | International | Functional Support(2) | Reconciling Eliminations | Total | ||||||||||||||||
Revenues from external customers | $ | 361,698 | $ | 49,692 | $ | — | $ | — | $ | 411,390 | ||||||||||
Intersegment revenues | (139 | ) | 2,676 | 23 | (2,560 | ) | — | |||||||||||||
Depreciation and amortization | 47,484 | 7,463 | 3,261 | — | 58,208 | |||||||||||||||
Other operating expenses | 259,121 | 53,235 | 32,482 | — | 344,838 | |||||||||||||||
Operating income (loss) | 55,093 | (11,006 | ) | (35,743 | ) | — | 8,344 | |||||||||||||
Interest expense, net of amounts capitalized | — | 15 | 13,969 | — | 13,984 | |||||||||||||||
Income (loss) from continuing operations before tax | 55,210 | (11,762 | ) | (49,518 | ) | — | (6,070 | ) | ||||||||||||
Long-lived assets(1) | 1,671,666 | 333,096 | 292,818 | (185,010 | ) | 2,112,570 | ||||||||||||||
Total assets | 2,654,754 | 556,325 | 23,035 | (501,677 | ) | 2,732,437 | ||||||||||||||
Capital expenditures, excluding acquisitions | 26,659 | 2,196 | 6,578 | — | 35,433 |
As of and for the three months ended June 30, 2012 | ||||||||||||||||||||
U.S. | International | Functional Support(2) | Reconciling Eliminations | Total | ||||||||||||||||
Revenues from external customers | $ | 431,646 | $ | 84,351 | $ | — | $ | — | $ | 515,997 | ||||||||||
Intersegment revenues | — | 1,195 | — | (1,195 | ) | — | ||||||||||||||
Depreciation and amortization | 44,838 | 4,526 | 3,088 | — | 52,452 | |||||||||||||||
Other operating expenses | 304,311 | 63,709 | 34,057 | — | 402,077 | |||||||||||||||
Operating income (loss) | 82,497 | 16,116 | (37,145 | ) | — | 61,468 | ||||||||||||||
Interest expense, net of amounts capitalized | 4 | 1 | 13,725 | — | 13,730 | |||||||||||||||
Income (loss) from continuing operations before tax | 82,530 | 17,073 | (50,485 | ) | — | 49,118 | ||||||||||||||
Long-lived assets(1) | 1,907,653 | 308,497 | 301,454 | (344,309 | ) | 2,173,295 | ||||||||||||||
Total assets | 2,591,329 | 502,735 | 408,233 | (711,977 | ) | 2,790,320 | ||||||||||||||
Capital expenditures, excluding acquisitions | 85,406 | 39,321 | 15,163 | — | 139,890 |
As of and for the six months ended June 30, 2013 | ||||||||||||||||||||
U.S. | International | Functional Support(2) | Reconciling Eliminations | Total | ||||||||||||||||
Revenues from external customers | $ | 707,770 | $ | 132,069 | $ | — | $ | — | $ | 839,839 | ||||||||||
Intersegment revenues | 8,462 | 4,195 | 147 | (12,804 | ) | — | ||||||||||||||
Depreciation and amortization | 92,274 | 13,963 | 6,164 | — | 112,401 | |||||||||||||||
Other operating expenses | 522,128 | 117,238 | 67,899 | — | 707,265 | |||||||||||||||
Operating income (loss) | 93,368 | 868 | (74,063 | ) | — | 20,173 | ||||||||||||||
Interest expense, net of amounts capitalized | 1 | 64 | 27,723 | — | 27,788 | |||||||||||||||
Income (loss) from continuing operations before tax | 93,419 | 1,294 | (101,535 | ) | — | (6,822 | ) | |||||||||||||
Long-lived assets(1) | 1,671,666 | 333,096 | 292,818 | (185,010 | ) | 2,112,570 | ||||||||||||||
Total assets | 2,654,754 | 556,325 | 23,035 | (501,677 | ) | 2,732,437 | ||||||||||||||
Capital expenditures, excluding acquisitions | 49,969 | 13,163 | 9,445 | — | 72,577 |
As of and for the six months ended June 30, 2012 | ||||||||||||||||||||
U.S. | International | Functional Support(2) | Reconciling Eliminations | Total | ||||||||||||||||
Revenues from external customers | $ | 856,619 | $ | 146,129 | $ | — | $ | — | $ | 1,002,748 | ||||||||||
Intersegment revenues | — | 2,152 | 15 | (2,167 | ) | — | ||||||||||||||
Depreciation and amortization | 89,189 | 8,473 | 5,979 | — | 103,641 | |||||||||||||||
Other operating expenses | 593,475 | 111,172 | 69,845 | — | 774,492 | |||||||||||||||
Operating income (loss) | 173,955 | 26,484 | (75,824 | ) | — | 124,615 | ||||||||||||||
Interest expense, net of amounts capitalized | 12 | 14 | 25,586 | — | 25,612 | |||||||||||||||
Income (loss) from continuing operations before tax | 174,082 | 28,300 | (100,970 | ) | — | 101,412 | ||||||||||||||
Long-lived assets(1) | 1,907,653 | 308,497 | 301,454 | (344,309 | ) | 2,173,295 | ||||||||||||||
Total assets | 2,591,329 | 502,735 | 408,233 | (711,977 | ) | 2,790,320 | ||||||||||||||
Capital expenditures, excluding acquisitions | 164,816 | 124,777 | 19,735 | — | 309,328 |
(1) | Long lived assets include: fixed assets, goodwill, intangibles and other assets. |
(2) | Functional Support is geographically located in the United States. |
CONDENSED CONSOLIDATING BALANCE SHEETS | ||||||||||||||||||||
June 30, 2013 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) (unaudited) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Current assets | $ | 51,099 | $ | 510,280 | $ | 58,488 | $ | — | $ | 619,867 | ||||||||||
Property and equipment, net | — | 1,288,438 | 106,155 | — | 1,394,593 | |||||||||||||||
Goodwill | — | 597,458 | 27,400 | — | 624,858 | |||||||||||||||
Deferred financing costs, net | 15,301 | — | — | — | 15,301 | |||||||||||||||
Intercompany notes and accounts receivable and investment in subsidiaries | 3,463,047 | 1,203,469 | (4,502 | ) | (4,662,014 | ) | — | |||||||||||||
Other assets | 4,082 | 31,664 | 42,072 | — | 77,818 | |||||||||||||||
TOTAL ASSETS | $ | 3,533,529 | $ | 3,631,309 | $ | 229,613 | $ | (4,662,014 | ) | $ | 2,732,437 | |||||||||
Liabilities and equity: | ||||||||||||||||||||
Current liabilities | $ | 23,013 | $ | 215,451 | $ | 26,553 | $ | — | $ | 265,017 | ||||||||||
Long-term debt and capital leases, less current portion | 867,832 | — | — | — | 867,832 | |||||||||||||||
Intercompany notes and accounts payable | 1,108,780 | 2,640,108 | 52,601 | (3,801,489 | ) | — | ||||||||||||||
Deferred tax liabilities | 262,722 | 6,781 | (478 | ) | — | 269,025 | ||||||||||||||
Other long-term liabilities | 1,548 | 59,216 | 147 | — | 60,911 | |||||||||||||||
Equity | 1,269,634 | 709,753 | 150,790 | (860,525 | ) | 1,269,652 | ||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 3,533,529 | $ | 3,631,309 | $ | 229,613 | $ | (4,662,014 | ) | $ | 2,732,437 |
CONDENSED CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||
December 31, 2012 | |||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
(in thousands) | |||||||||||||||||||||
Assets: | |||||||||||||||||||||
Current assets | $ | 66,435 | $ | 469,049 | $ | 54,310 | $ | — | $ | 589,794 | |||||||||||
Property and equipment, net | — | 1,329,379 | 107,295 | — | 1,436,674 | ||||||||||||||||
Goodwill | — | 597,458 | 29,023 | — | 626,481 | ||||||||||||||||
Deferred financing costs, net | 16,628 | — | — | — | 16,628 | ||||||||||||||||
Intercompany notes and accounts receivable and investment in subsidiaries | 3,298,679 | 1,108,231 | (20,371 | ) | (4,386,539 | ) | — | ||||||||||||||
Other assets | 8,068 | 39,696 | 44,247 | — | 92,011 | ||||||||||||||||
TOTAL ASSETS | $ | 3,389,810 | — | $ | 3,543,813 | $ | 214,504 | $ | (4,386,539 | ) | $ | 2,761,588 | |||||||||
Liabilities and equity: | |||||||||||||||||||||
Current liabilities | $ | 46,632 | $ | 226,773 | $ | 31,691 | $ | — | $ | 305,096 | |||||||||||
Long-term debt and capital leases, less current portion | 848,110 | — | — | — | 848,110 | ||||||||||||||||
Intercompany notes and accounts payable | 947,700 | 2,590,398 | 14,138 | (3,552,236 | ) | — | |||||||||||||||
Deferred tax liabilities | 258,528 | 6,781 | (746 | ) | (5,110 | ) | 259,453 | ||||||||||||||
Other long-term liabilities | 1,528 | 60,068 | 1 | — | 61,597 | ||||||||||||||||
Equity | 1,287,312 | 659,793 | 169,420 | (829,193 | ) | 1,287,332 | |||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 3,389,810 | $ | 3,543,813 | $ | 214,504 | $ | (4,386,539 | ) | $ | 2,761,588 |
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
Three Months Ended June 30, 2013 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | 23 | $ | 389,847 | $ | 44,807 | $ | (23,287 | ) | $ | 411,390 | |||||||||
Direct operating expense | — | 273,188 | 32,637 | (18,723 | ) | 287,102 | ||||||||||||||
Depreciation and amortization expense | — | 55,533 | 2,675 | — | 58,208 | |||||||||||||||
General and administrative expense | 262 | 52,543 | 9,449 | (4,518 | ) | 57,736 | ||||||||||||||
Operating (loss) income | (239 | ) | 8,583 | 46 | (46 | ) | 8,344 | |||||||||||||
Interest expense, net of amounts capitalized | 14,124 | (155 | ) | 15 | — | 13,984 | ||||||||||||||
Other expense (income), net | (911 | ) | (77 | ) | 701 | 717 | 430 | |||||||||||||
Income (loss) from continuing operations before taxes | (13,452 | ) | 8,815 | (670 | ) | (763 | ) | (6,070 | ) | |||||||||||
Income tax benefit (expense) | (3,631 | ) | 6,154 | (225 | ) | — | 2,298 | |||||||||||||
Income (loss) from continuing operations | (17,083 | ) | 14,969 | (895 | ) | (763 | ) | (3,772 | ) | |||||||||||
Discontinued operations | — | — | — | — | — | |||||||||||||||
Net income (loss) | (17,083 | ) | 14,969 | (895 | ) | (763 | ) | (3,772 | ) | |||||||||||
Income attributable to noncontrolling interest | — | — | 356 | — | 356 | |||||||||||||||
INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (17,083 | ) | $ | 14,969 | $ | (1,251 | ) | $ | (763 | ) | $ | (4,128 | ) |
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
Three Months Ended June 30, 2012 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | — | $ | 493,046 | $ | 41,609 | $ | (18,658 | ) | $ | 515,997 | |||||||||
Direct operating expense | — | 331,139 | 28,908 | (16,051 | ) | 343,996 | ||||||||||||||
Depreciation and amortization expense | — | 50,354 | 2,098 | — | 52,452 | |||||||||||||||
General and administrative expense | 303 | 53,286 | 7,080 | (2,588 | ) | 58,081 | ||||||||||||||
Operating (loss) income | (303 | ) | 58,267 | 3,523 | (19 | ) | 61,468 | |||||||||||||
Interest expense, net of amounts capitalized | 14,112 | (385 | ) | 3 | — | 13,730 | ||||||||||||||
Other expense (income), net | (895 | ) | 75 | (651 | ) | 91 | (1,380 | ) | ||||||||||||
Income (loss) from continuing operations before taxes | (13,520 | ) | 58,577 | 4,171 | (110 | ) | 49,118 | |||||||||||||
Income tax expense | (14,984 | ) | (1,376 | ) | (1,059 | ) | — | (17,419 | ) | |||||||||||
Income (loss) from continuing operations | (28,504 | ) | 57,201 | 3,112 | (110 | ) | 31,699 | |||||||||||||
Discontinued operations | — | — | (2,454 | ) | — | (2,454 | ) | |||||||||||||
Net income (loss) | (28,504 | ) | 57,201 | 658 | (110 | ) | 29,245 | |||||||||||||
Income attributable to noncontrolling interest | — | — | 204 | — | 204 | |||||||||||||||
INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (28,504 | ) | $ | 57,201 | $ | 454 | $ | (110 | ) | $ | 29,041 |
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | 147 | $ | 795,231 | $ | 88,297 | $ | (43,836 | ) | $ | 839,839 | |||||||||
Direct operating expense | — | 559,230 | 63,120 | (36,066 | ) | 586,284 | ||||||||||||||
Depreciation and amortization expense | — | 107,590 | 4,811 | — | 112,401 | |||||||||||||||
General and administrative expense | 516 | 110,364 | 18,301 | (8,200 | ) | 120,981 | ||||||||||||||
Operating (loss) income | (369 | ) | 18,047 | 2,065 | 430 | 20,173 | ||||||||||||||
Interest expense, net of amounts capitalized | 28,015 | (291 | ) | 64 | — | 27,788 | ||||||||||||||
Other expense (income), net | (1,809 | ) | (1,246 | ) | 738 | 1,524 | (793 | ) | ||||||||||||
Income (loss) from continuing operations before taxes | (26,575 | ) | 19,584 | 1,263 | (1,094 | ) | (6,822 | ) | ||||||||||||
Income tax benefit (expense) | (2,383 | ) | 5,271 | (24 | ) | — | 2,864 | |||||||||||||
Income (loss) from continuing operations | (28,958 | ) | 24,855 | 1,239 | (1,094 | ) | (3,958 | ) | ||||||||||||
Discontinued operations | — | — | — | — | — | |||||||||||||||
Net income (loss) | (28,958 | ) | 24,855 | 1,239 | (1,094 | ) | (3,958 | ) | ||||||||||||
Income attributable to noncontrolling interest | — | — | 444 | — | 444 | |||||||||||||||
INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (28,958 | ) | $ | 24,855 | $ | 795 | $ | (1,094 | ) | $ | (4,402 | ) |
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
Six Months Ended June 30, 2012 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | 15 | $ | 958,316 | $ | 74,595 | $ | (30,178 | ) | $ | 1,002,748 | |||||||||
Direct operating expense | — | 626,776 | 53,691 | (24,974 | ) | 655,493 | ||||||||||||||
Depreciation and amortization expense | — | 100,021 | 3,620 | — | 103,641 | |||||||||||||||
General and administrative expense | 573 | 111,006 | 12,603 | (5,183 | ) | 118,999 | ||||||||||||||
Operating (loss) income | (558 | ) | 120,513 | 4,681 | (21 | ) | 124,615 | |||||||||||||
Interest expense, net of amounts capitalized | 26,259 | (658 | ) | 11 | — | 25,612 | ||||||||||||||
Other expense (income), net | (1,506 | ) | 657 | (1,728 | ) | 168 | (2,409 | ) | ||||||||||||
Income (loss) from continuing operations before taxes | (25,311 | ) | 120,514 | 6,398 | (189 | ) | 101,412 | |||||||||||||
Income tax expense | (32,946 | ) | (1,581 | ) | (1,705 | ) | — | (36,232 | ) | |||||||||||
Income (loss) from continuing operations | (58,257 | ) | 118,933 | 4,693 | (189 | ) | 65,180 | |||||||||||||
Discontinued operations | — | — | (33,359 | ) | — | (33,359 | ) | |||||||||||||
Net income (loss) | (58,257 | ) | 118,933 | (28,666 | ) | (189 | ) | 31,821 | ||||||||||||
Loss attributable to noncontrolling interest | — | — | (410 | ) | — | (410 | ) | |||||||||||||
INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (58,257 | ) | $ | 118,933 | $ | (28,256 | ) | $ | (189 | ) | $ | 32,231 |
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by operating activities | $ | — | $ | 45,284 | $ | 1,397 | $ | — | $ | 46,681 | ||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Capital expenditures | — | (69,413 | ) | (3,164 | ) | — | (72,577 | ) | ||||||||||||
Acquisition of the 50% noncontrolling interest in Geostream | — | (14,600 | ) | — | — | (14,600 | ) | |||||||||||||
Intercompany notes and accounts | — | 36,539 | — | (36,539 | ) | — | ||||||||||||||
Other investing activities, net | 3,881 | — | — | 3,881 | ||||||||||||||||
Net cash used in investing activities | — | (43,593 | ) | (3,164 | ) | (36,539 | ) | (83,296 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Repayment of capital lease obligations | — | (379 | ) | — | — | (379 | ) | |||||||||||||
Proceeds from borrowings on revolving credit facility | 155,000 | — | — | — | 155,000 | |||||||||||||||
Repayments on revolving credit facility | (135,000 | ) | — | — | — | (135,000 | ) | |||||||||||||
Payment of deferred financing costs | (69 | ) | — | — | — | (69 | ) | |||||||||||||
Repurchases of common stock | (3,134 | ) | — | — | — | (3,134 | ) | |||||||||||||
Intercompany notes and accounts | (36,539 | ) | — | — | 36,539 | — | ||||||||||||||
Other financing activities, net | (1,501 | ) | — | — | — | (1,501 | ) | |||||||||||||
Net cash provided by (used in) financing activities | (21,243 | ) | (379 | ) | — | 36,539 | 14,917 | |||||||||||||
Effect of changes in exchange rates on cash | — | — | 484 | — | 484 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | (21,243 | ) | 1,312 | (1,283 | ) | — | (21,214 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 39,617 | 1,601 | 4,731 | — | 45,949 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 18,374 | $ | 2,913 | $ | 3,448 | $ | — | $ | 24,735 |
Six Months Ended June 30, 2012 | ||||||||||||||||||||
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (24,658 | ) | $ | 210,219 | $ | 6,291 | $ | — | $ | 191,852 | |||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Capital expenditures | — | (302,754 | ) | (6,574 | ) | — | (309,328 | ) | ||||||||||||
Intercompany notes and accounts | 676 | 67,769 | — | (68,445 | ) | — | ||||||||||||||
Other investing activities, net | (676 | ) | 9,225 | — | — | 8,549 | ||||||||||||||
Net cash used in investing activities | — | (225,760 | ) | (6,574 | ) | (68,445 | ) | (300,779 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from long-term debt | 205,000 | — | — | 205,000 | ||||||||||||||||
Repayment of capital lease obligations | — | (1,007 | ) | — | — | (1,007 | ) | |||||||||||||
Proceeds from borrowings on revolving credit facility | 195,000 | — | — | — | 195,000 | |||||||||||||||
Repayments on revolving credit facility | (300,000 | ) | — | — | — | (300,000 | ) | |||||||||||||
Payment of deferred financing costs | (4,534 | ) | — | — | — | (4,534 | ) | |||||||||||||
Repurchases of common stock | (7,417 | ) | — | — | — | (7,417 | ) | |||||||||||||
Intercompany notes and accounts | (67,769 | ) | (676 | ) | — | 68,445 | — | |||||||||||||
Other financing activities, net | 4,859 | 10,914 | 1,687 | — | 17,460 | |||||||||||||||
Net cash provided by financing activities | 25,139 | 9,231 | 1,687 | 68,445 | 104,502 | |||||||||||||||
Effect of changes in exchange rates on cash | — | — | (2,738 | ) | — | (2,738 | ) | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 481 | (6,310 | ) | (1,334 | ) | — | (7,163 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 21,673 | 7,985 | 5,785 | — | 35,443 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 22,154 | $ | 1,675 | $ | 4,451 | $ | — | $ | 28,280 |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
WTI Cushing Oil (1) | NYMEX Henry Hub Natural Gas (1) | Average Baker Hughes U.S. Land Drilling Rigs (2) | |||||||||
2013: | |||||||||||
First Quarter | $ | 94.33 | $ | 3.49 | 1,706 | ||||||
Second Quarter | $ | 94.05 | $ | 4.02 | 1,710 | ||||||
2012: | |||||||||||
First Quarter | $ | 102.98 | $ | 2.50 | 1,947 | ||||||
Second Quarter | $ | 93.06 | $ | 2.35 | 1,924 | ||||||
Third Quarter | $ | 92.17 | $ | 2.89 | 1,855 | ||||||
Fourth Quarter | $ | 88.01 | $ | 3.40 | 1,759 |
(1) | Represents the average of the monthly average prices for each of the periods presented. Source: EIA and Bloomberg |
(2) | Source: www.bakerhughes.com |
Rig Hours | Trucking Hours | Key’s U.S. Working Days (3) | |||||||||||||
2013: | U.S. | International Continuing Operations (1) | Total Continuing Operations (2) | ||||||||||||
First Quarter | 337,714 | 114,103 | 451,817 | 580,862 | 62 | ||||||||||
Second Quarter | 365,956 | 65,280 | 431,236 | 559,584 | 64 | ||||||||||
Total 2013: | 703,670 | 179,383 | 883,053 | 1,140,446 | 126 | ||||||||||
2012: | |||||||||||||||
First Quarter | 435,280 | 84,469 | 519,749 | 722,718 | 64 | ||||||||||
Second Quarter | 428,864 | 104,656 | 533,520 | 685,587 | 63 | ||||||||||
Third Quarter | 412,998 | 103,448 | 516,446 | 607,480 | 63 | ||||||||||
Fourth Quarter | 357,628 | 113,246 | 470,874 | 594,770 | 62 | ||||||||||
Total 2012: | 1,634,770 | 405,819 | 2,040,589 | 2,610,555 | 252 |
(1) | International continuing operations rig hours exclude rig hours generated in Argentina, as our Argentina operations were sold in the third quarter of 2012 and are reported as discontinued operations. Argentina rig hours were 54,625 and 55,972 for the first and second quarters of 2012, respectively. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
REVENUES | $ | 411,390 | $ | 515,997 | $ | 839,839 | $ | 1,002,748 | |||||||
COSTS AND EXPENSES: | |||||||||||||||
Direct operating expenses | 287,102 | 343,996 | 586,284 | 655,493 | |||||||||||
Depreciation and amortization expense | 58,208 | 52,452 | 112,401 | 103,641 | |||||||||||
General and administrative expenses | 57,736 | 58,081 | 120,981 | 118,999 | |||||||||||
Operating income | 8,344 | 61,468 | 20,173 | 124,615 | |||||||||||
Interest expense, net of amounts capitalized | 13,984 | 13,730 | 27,788 | 25,612 | |||||||||||
Other income (loss), net | 430 | (1,380 | ) | (793 | ) | (2,409 | ) | ||||||||
Income (loss) from continuing operations before tax | (6,070 | ) | 49,118 | (6,822 | ) | 101,412 | |||||||||
Income tax benefit (expense) | 2,298 | (17,419 | ) | 2,864 | (36,232 | ) | |||||||||
Income (loss) from continuing operations | (3,772 | ) | 31,699 | (3,958 | ) | 65,180 | |||||||||
Loss from discontinued operations, net of tax benefit of $-, $1,501, $- and $17,855, respectively | — | (2,454 | ) | — | (33,359 | ) | |||||||||
Net income (loss) | (3,772 | ) | 29,245 | (3,958 | ) | 31,821 | |||||||||
Income (loss) attributable to noncontrolling interest | 356 | 204 | 444 | (410 | ) | ||||||||||
INCOME (LOSS) ATTRIBUTABLE TO KEY | $ | (4,128 | ) | $ | 29,041 | $ | (4,402 | ) | $ | 32,231 |
Three Months Ended June 30, | |||||||
2013 | 2012 | ||||||
(in thousands) | |||||||
Interest income | $ | (84 | ) | $ | (7 | ) | |
Foreign exchange (gain) loss | 1,398 | (766 | ) | ||||
Other income, net | (884 | ) | (607 | ) | |||
Total | $ | 430 | $ | (1,380 | ) |
For the three months ended June 30, 2013 | ||||||||||||||||
U.S. | International | Functional Support | Total | |||||||||||||
Revenues from external customers | $ | 361,698 | $ | 49,692 | $ | — | $ | 411,390 | ||||||||
Operating expenses | 306,605 | 60,698 | 35,743 | 403,046 | ||||||||||||
Operating income (loss) | $ | 55,093 | $ | (11,006 | ) | $ | (35,743 | ) | $ | 8,344 |
For the three months ended June 30, 2012 | ||||||||||||||||
U.S. | International | Functional Support | Total | |||||||||||||
Revenues from external customers | $ | 431,646 | $ | 84,351 | $ | — | $ | 515,997 | ||||||||
Operating expenses | 349,149 | 68,235 | 37,145 | 454,529 | ||||||||||||
Operating income (loss) | $ | 82,497 | $ | 16,116 | $ | (37,145 | ) | $ | 61,468 |
Six Months Ended June 30, | |||||||
2013 | 2012 | ||||||
(in thousands) | |||||||
Interest income | $ | (95 | ) | $ | (14 | ) | |
Foreign exchange (gain) loss | 473 | (1,705 | ) | ||||
Other income, net | (1,171 | ) | (690 | ) | |||
Total | $ | (793 | ) | $ | (2,409 | ) |
For the six months ended June 30, 2013 | ||||||||||||||||
U.S. | International | Functional Support | Total | |||||||||||||
Revenues from external customers | $ | 707,770 | $ | 132,069 | $ | — | $ | 839,839 | ||||||||
Operating expenses | 614,402 | 131,201 | 74,063 | 819,666 | ||||||||||||
Operating income (loss) | 93,368 | 868 | (74,063 | ) | 20,173 |
For the six months ended June 30, 2012 | ||||||||||||||||
U.S. | International | Functional Support | Total | |||||||||||||
Revenues from external customers | $ | 856,619 | $ | 146,129 | $ | — | $ | 1,002,748 | ||||||||
Operating expenses | 682,664 | 119,645 | 75,824 | 878,133 | ||||||||||||
Operating income (loss) | 173,955 | 26,484 | (75,824 | ) | 124,615 |
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
(in thousands) | ||||||||
Net cash provided by operating activities | $ | 46,681 | $ | 191,852 | ||||
Cash paid for capital expenditures | (72,577 | ) | (309,328 | ) | ||||
Proceeds received from sale of fixed assets | 3,881 | 9,225 | ||||||
Acquisition of the 50% noncontrolling interest in Geostream | (14,600 | ) | — | |||||
Investment in Wilayat Key Energy, LLC | — | (676 | ) | |||||
Repayments of capital lease obligations | (379 | ) | (1,007 | ) | ||||
Proceeds from long-term debt | — | 205,000 | ||||||
Proceeds from borrowings on revolving credit facility | 155,000 | 195,000 | ||||||
Repayments on revolving credit facility | (135,000 | ) | (300,000 | ) | ||||
Repurchases of common stock | (3,134 | ) | (7,417 | ) | ||||
Other financing activities, net | (1,570 | ) | 12,926 | |||||
Effect of exchange rates on cash | 484 | (2,738 | ) | |||||
Net decrease in cash and cash equivalents | $ | (21,214 | ) | $ | (7,163 | ) |
Year | Principal Payments | ||
(in thousands) | |||
2013 | $ | — | |
2014 | 3,573 | ||
2015 | — | ||
2016 | 185,000 | ||
2017 and thereafter | $ | 675,000 | |
Total principal payments | $ | 863,573 |
Year | Percentage | |
2016 | 103.375 | % |
2017 | 102.250 | % |
2018 | 101.125 | % |
2019 and thereafter | 100.000 | % |
• | incur additional indebtedness and issue preferred equity interests; |
• | pay dividends or make other distributions or repurchase or redeem equity interests; |
• | make loans and investments; |
• | enter into sale and leaseback transactions; |
• | sell, transfer or otherwise convey assets; |
• | create liens; |
• | enter into transactions with affiliates; |
• | enter into agreements restricting subsidiaries’ ability to pay dividends; |
• | designate future subsidiaries as unrestricted subsidiaries; and |
• | consolidate, merge or sell all or substantially all of the applicable entities’ assets. |
• | our ratio of consolidated funded indebtedness to total capitalization be no greater than 45%; |
• | our senior secured leverage ratio of senior secured funded debt to trailing four quarters of earnings before interest, taxes, depreciation and amortization (as calculated pursuant to the terms of the 2011 Credit Facility, “EBITDA”) be no greater than 2.00 to 1.00; |
• | we maintain a collateral coverage ratio, the ratio of the aggregate book value of the collateral to the amount of the total commitments, as of the last day of any fiscal quarter of at least 2:00 to 1:00; |
• | we maintain a consolidated interest coverage ratio of trailing four quarters EBITDA to interest expense of at least 3.00 to 1.00; and |
• | we limit our capital expenditures and investments in foreign subsidiaries to $250.0 million per fiscal year, if the consolidated total leverage ratio exceeds 3.00 to 1.00. |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
Period | Number of Shares Purchased (1) | Weighted Average Price Paid per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Amount of Shares that may yet be Purchased Under the Plans or Programs | ||||||||||
April 1, 2013 to April 30, 2013 | 12,375 | $ | 6.12 | — | $ | — | ||||||||
May 1, 2013 to May 31, 2013 | 7,189 | 6.29 | — | — | ||||||||||
June 1, 2013 to June 30, 2013 | 90,994 | 5.96 | — | — | ||||||||||
Total | 110,558 | $ | 6.00 | — | $ | — |
(1) | Represents shares repurchased to satisfy tax withholding obligations upon the vesting of restricted stock awards. |
(2) | The price paid per share with respect to the tax withholding repurchases was determined using the closing prices on the applicable vesting date, as quoted on the NYSE. |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
KEY ENERGY SERVICES, INC. (Registrant) | ||||||
Date: | August 2, 2013 | By: | /s/ J. MARSHALL DODSON | |||
J. Marshall Dodson | ||||||
Senior Vice President and Chief Financial Officer (As duly authorized officer and Principal Financial Officer) |
3.1 | Articles of Restatement of Key Energy Services, Inc. (Incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 001-08038.) | |
3.2 | Unanimous consent of the Board of Directors of Key Energy Services, Inc. dated January 11, 2000, limiting the designation of the additional authorized shares to common stock. (Incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, File No. 001-08038.) | |
3.3 | Fifth Amended and Restated By-laws of Key Energy Services, Inc. as amended through July 19, 2012. (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on July 20, 2012, File No. 001-08038.) | |
31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101* | Interactive Data File. |
* | Filed herewith |
Dated: | August 2, 2013 | /s/ RICHARD J. ALARIO | |
Richard J. Alario | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) |
Dated: | August 2, 2013 | /s/ J. MARSHALL DODSON | |
J. Marshall Dodson | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Financial Officer) |
Dated: | August 2, 2013 | /s/ RICHARD J. ALARIO | |
Richard J. Alario | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) |
Dated: | August 2, 2013 | /s/ J. MARSHALL DODSON | |
J. Marshall Dodson | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Financial Officer) |
LONG-TERM DEBT
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Jun. 30, 2013
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | LONG-TERM DEBT As of June 30, 2013 and December 31, 2012, the components of our long-term debt were as follows:
8.375% Senior Notes due 2014 We have outstanding $3.6 million aggregate principal amount of 8.375% Senior Notes due 2014 (the “2014 Notes”). The 2014 Notes are general unsecured senior obligations and are subordinate to all of our existing and future secured indebtedness. The 2014 Notes are jointly and severally guaranteed on a senior unsecured basis by certain of our existing and future domestic subsidiaries. Interest on the 2014 Notes is payable on June 1 and December 1 of each year. The indenture governing the 2014 Notes contains various covenants. These covenants are subject to certain exceptions and qualifications, and contain cross-default provisions tied to the covenants of our 2011 Credit Facility (defined below). We were in compliance with these covenants at June 30, 2013. 6.75% Senior Notes due 2021 We issued $475.0 million aggregate principal amount of 6.75% Senior Notes due 2021 (the “Initial 2021 Notes”) on March 4, 2011 and issued an additional $200.0 million aggregate principal amount of the 2021 Notes (the “Additional 2021 Notes” and together with the Initial 2021 Notes, the “2021 Notes”) in a private placement on March 8, 2012 under an indenture dated March 4, 2011 (the “Base Indenture”), as supplemented by a first supplemental indenture dated March 4, 2011 and amended by a further supplemental indenture dated March 8, 2012 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). We used the net proceeds to repay senior secured indebtedness under our revolving bank credit facility. We capitalized $4.6 million of financing costs associated with the issuance of the 2021 Notes that will be amortized over the term of the notes. On March 5, 2013, we completed an offer to exchange the $200.0 million in aggregate principal amount of unregistered Additional 2021 Notes for an equal principal amount of such notes registered under the Securities Act of 1933. All of the 2021 Notes are treated as a single class under the Indenture and as of the closing of the exchange offers bear the same CUSIP and ISIN numbers. The 2021 Notes are general unsecured senior obligations and are effectively subordinated to all of our existing and future secured indebtedness. The 2021 Notes are or will be jointly and severally guaranteed on a senior unsecured basis by certain of our existing and future domestic subsidiaries. Interest on the 2021 Notes is payable on March 1 and September 1 of each year. The 2021 Notes mature on March 1, 2021. On or after March 1, 2016, the 2021 Notes will be subject to redemption at any time and from time to time at our option, in whole or in part, at the redemption prices below (expressed as percentages of the principal amount redeemed), plus accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on March 1 of the years indicated below:
At any time and from time to time before March 1, 2014, we may on any one or more occasions redeem up to 35% of the aggregate principal amount of the outstanding 2021 Notes at a redemption price of 106.75% of the principal amount, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from any one or more equity offerings provided that (i) at least 65% of the aggregate principal amount of the 2021 Notes remains outstanding immediately after each such redemption and (ii) each such redemption occurs within 180 days of the date of the closing of such equity offering. In addition, at any time and from time to time prior to March 1, 2016, we may, at our option, redeem all or a portion of the 2021 Notes at a redemption price equal to 100% of the principal amount plus a premium with respect to the 2021 Notes plus accrued and unpaid interest to the redemption date. If we experience a change of control, subject to certain exceptions, we must give holders of the 2021 Notes the opportunity to sell to us their 2021 Notes, in whole or in part, at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest to the date of purchase. We are subject to certain negative covenants under the Indenture. The Indenture limits our ability to, among other things:
These covenants are subject to certain exceptions and qualifications, and contain cross-default provisions relating to the covenants of our 2011 Credit Facility discussed below. Substantially all of the covenants will terminate before the 2021 Notes mature if one of two specified ratings agencies assigns the 2021 Notes an investment grade rating in the future and no events of default exist under the Indenture. As of June 30, 2013, the 2021 Notes were below investment grade. Any covenants that cease to apply to us as a result of achieving an investment grade rating will not be restored, even if the credit rating assigned to the 2021 Notes later falls below investment grade. We were in compliance with these covenants as of June 30, 2013. Senior Secured Credit Facility We are party to a $550.0 million senior secured revolving bank credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent, and Capital One, N.A., Wells Fargo Bank, N.A., Credit Agricole Corporate and Investment Bank and DnB NOR Bank ASA, as Co-Documentation Agent (as amended, the “2011 Credit Facility”), which is an important source of liquidity for us. The 2011 Credit Facility consists of a revolving credit facility, letter of credit sub-facility and swing line facility, all of which will mature no later than March 31, 2016. The maximum amount that we may borrow under the facility may be subject to limitation due to the operation of the covenants contained in the facility. The 2011 Credit Facility allows us to request increases in the total commitments under the facility by up to $100.0 million in the aggregate in part or in full anytime during the term of the 2011 Credit Facility, with any such increases being subject to compliance with the restrictive covenants in the 2011 Credit Facility and in the Indenture governing our 2021 Senior Notes, as well as lender approval. We capitalized $4.9 million of financing costs in connection with the execution of the 2011 Credit Facility and an additional $1.4 million related to a subsequent amendment that will be amortized over the term of the debt. The interest rate per annum applicable to the 2011 Credit Facility is, at our option, (i) adjusted LIBOR plus the applicable margin or (ii) the higher of (x) JPMorgan’s prime rate, (y) the Federal Funds rate plus 0.5% and (z) one-month adjusted LIBOR plus 1.0%, plus in each case the applicable margin for all other loans. The applicable margin for LIBOR loans ranges from 225 to 300 basis points, and the applicable margin for all other loans ranges from 125 to 200 basis points, depending upon our consolidated total leverage ratio as defined in the 2011 Credit Facility. Unused commitment fees on the facility equal 0.50%. The 2011 Credit Facility contains certain financial covenants, which, among other things, limit our annual capital expenditures, restrict our ability to repurchase shares and require us to maintain certain financial ratios. The financial ratios require that:
In addition, the 2011 Credit Facility contains certain affirmative and negative covenants, including, without limitation, restrictions on (i) liens; (ii) debt, guarantees and other contingent obligations; (iii) mergers and consolidations; (iv) sales, transfers and other dispositions of property or assets; (v) loans, acquisitions, joint ventures and other investments (with acquisitions permitted so long as, after giving pro forma effect thereto, no default or event of default exists under the 2011 Credit Facility, the pro forma consolidated total leverage ratio does not exceed 4.00 to 1.00, we are in compliance with other financial covenants and we have at least $25.0 million of availability under the 2011 Credit Facility); (vi) dividends and other distributions to, and redemptions and repurchases from, equity holders; (vii) making investments, loans or advances; (viii) selling properties; (ix) prepaying, redeeming or repurchasing subordinated (contractually or structurally) debt; (x) engaging in transactions with affiliates; (xi) entering into hedging arrangements; (xii) entering into sale and leaseback transactions; (xiii) granting negative pledges other than to the lenders; (xiv) changes in the nature of business; (xv) amending organizational documents; and (xvi) changes in accounting policies or reporting practices; in each of the foregoing cases, with certain exceptions. We were in compliance with these covenants as of June 30, 2013. We may prepay the 2011 Credit Facility in whole or in part at any time without premium or penalty, subject to certain reimbursements to the lenders for breakage and redeployment costs. As of June 30, 2013, we had borrowings of $185.0 million outstanding under the revolving credit facility and $54.1 million of letters of credit outstanding, leaving $310.9 million of available borrowing capacity subject to compliance with the debt to capitalization limitation under the terms of the 2011 Credit Facility. The weighted average interest rate on the outstanding borrowings under the 2011 Credit Facility was 2.67% and 2.70% for the three-month periods ended June 30, 2013 and June 30, 2012, respectively, and the weighted average interest rate on the outstanding borrowing under the 2011 Credit Facility was 2.68% and 2.70% for six months ended June 30, 2013 and June 30, 2012, respectively. |
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
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6 Months Ended |
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Jun. 30, 2013
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Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES | SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES The preparation of these unaudited condensed consolidated financial statements requires us to develop estimates and to make assumptions that affect our financial position, results of operations and cash flows. These estimates may also impact the nature and extent of our disclosure, if any, of our contingent liabilities. Among other things, we use estimates to (i) analyze assets for possible impairment, (ii) determine depreciable lives for our assets, (iii) assess future tax exposure and realization of deferred tax assets, (iv) determine amounts to accrue for contingencies, (v) value tangible and intangible assets, (vi) assess workers’ compensation, vehicular liability, self-insured risk accruals and other insurance reserves, (vii) provide allowances for our uncollectible accounts receivable, (viii) value our asset retirement obligations, and (ix) value our equity-based compensation. We review all significant estimates on a recurring basis and record the effect of any necessary adjustments prior to publication of our financial statements. Adjustments made with respect to the use of estimates relate to improved information not previously available. Because of the limitations inherent in this process, our actual results may differ materially from these estimates. We believe that the estimates used in the preparation of these interim financial statements are reasonable. There have been no material changes or developments in our evaluation of accounting estimates and underlying assumptions or methodologies that we believe to be a “Critical Accounting Policy or Estimate” as disclosed in our 2012 Form 10-K. Accounting Standards Adopted or Not Yet Adopted in this Report There are no new accounting standards that have been adopted or not yet adopted in this report. |
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS | ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of June 30, 2013 and December 31, 2012. Cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities. These carrying amounts approximate fair value because of the short maturity of the instruments or because the carrying value is equal to the fair value of those instruments on the balance sheet date.
Notes receivable — Argentina operations sale. The fair value of these notes receivable is based upon the quoted market Treasury rates as of the twelve, eighteen and twenty-four month maturity dates indicated. The carrying values of these items approximate their fair values due to the maturity dates rapidly approaching, thus giving way to discount rates that are similar. 6.75% Senior Notes due 2021. The fair value of these notes are based upon the quoted market prices for those securities as of the dates indicated. The carrying value of these notes as of June 30, 2013 was $675.0 million, and the fair value was $663.2 million (98.3% of carrying value). 8.375% Senior Notes due 2014. The fair value of our 2014 Notes is based upon the quoted market prices for those securities as of the dates indicated. The carrying value of these notes as of June 30, 2013 was $3.6 million, and the fair value was $3.6 million (101.8% of carrying value). Credit Facility Revolving Loans. Because of their variable interest rates, the fair values of the revolving loans borrowed under our 2012 Credit Facility approximate their carrying values. The carrying and fair values of these loans as of June 30, 2013 were $185.0 million. |
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS - Carrying Amounts and Estimated Fair Values of Financial Instruments (Detail) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Financial liabilities: | ||
Credit Facility revolving loans, carrying value | $ 185,000,000 | $ 165,000,000 |
Financial liabilities: | ||
Credit Facility revolving loans, fair value | 185,000,000 | 165,000,000 |
Senior Notes 6.75% Issued March 24 2011
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||
Financial liabilities: | ||
Senior notes, carrying value | 675,000,000 | 675,000,000 |
Financial liabilities: | ||
Senior Notes, fair value | 663,188,000 | 680,510,000 |
Senior Notes 8.375 Percent Due 2014
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Financial liabilities: | ||
Senior notes, carrying value | 3,573,000 | 3,573,000 |
Financial liabilities: | ||
Senior Notes, fair value | 3,637,000 | 3,656,000 |
Argentina Operations
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Financial assets: | ||
Notes and accounts receivable - related parties, carrying amount | 12,955,000 | 12,955,000 |
Financial assets: | ||
Notes and accounts receivable - related parties, fair value | $ 12,955,000 | $ 12,955,000 |
LONG-TERM DEBT - 8.75% Senior Notes due 2014 (Details) (Senior Notes 8.375 Percent Due 2014, USD $)
In Millions, unless otherwise specified |
6 Months Ended |
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Jun. 30, 2013
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Debt Instrument [Line Items] | |
Debt stated percentage | 8.375% |
Senior Notes
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|
Debt Instrument [Line Items] | |
Long-term debt | $ 3.6 |
Debt stated percentage | 8.375% |
Debt instrument interest rate payment date | Interest on the 2014 Notes is payable on June 1 and December 1 of each year. |
OTHER INCOME, NET
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Jun. 30, 2013
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER INOME, NET | OTHER (INCOME) LOSS The table below presents comparative detailed information about our other income and expense, shown on the condensed consolidated statements of operations as “Other (income) loss, net” for the periods indicated:
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OTHER BALANCE SHEET INFORMATION - Other Current Assets (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Other current assets: | ||
Deferred tax assets | $ 27,444 | $ 20,026 |
Prepaid current assets | 25,673 | 27,736 |
Reinsurance receivable | 9,660 | 10,217 |
VAT asset | 36,506 | 32,762 |
Other | 22,853 | 10,092 |
Total | $ 122,136 | $ 100,833 |
LONG-TERM DEBT - 6.75% Senior Notes due 2021 (Details) (USD $)
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6 Months Ended | ||
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Jun. 30, 2013
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Mar. 08, 2012
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Mar. 04, 2011
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Fiscal Year 2016
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Debt Instrument [Line Items] | |||
Debt redemption price percent of principal amount | 103.375% | ||
Fiscal Year 2017
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Debt Instrument [Line Items] | |||
Debt redemption price percent of principal amount | 102.25% | ||
Fiscal Year 2018
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Debt Instrument [Line Items] | |||
Debt redemption price percent of principal amount | 101.125% | ||
Fiscal Year 2019 And Thereafter
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Debt Instrument [Line Items] | |||
Debt redemption price percent of principal amount | 100.00% | ||
Senior Notes 6.75 Percent Due 2021 | Prior To March 1, 2014
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Debt Instrument [Line Items] | |||
Senior notes, call feature | At any time and from time to time before March 1, 2014, we may on any one or more occasions redeem up to 35% of the aggregate principal amount of the outstanding 2021 Notes at a redemption price of 106.750% of the principal amount, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from any one or more equity offerings provided that (i) at least 65% of the aggregate principal amount of the 2021 Notes remains outstanding immediately after each such redemption and (ii) each such redemption shall occur within 180 days of the date of the closing of such equity offering. | ||
Senior notes, latest call date | Mar. 01, 2014 | ||
Maximum amount as percentage of aggregate principal amount of outstanding debt that can be redeemed | 35.00% | ||
Debt redemption price percent of principal amount | 106.75% | ||
Required percentage of aggregate principal amount of debt that remains outstanding immediately after redemption minimum | 65.00% | ||
Time period after the date of closing of equity offering within which the redemption of the notes shall occur | 180 days | ||
Senior Notes 6.75 Percent Due 2021 | Prior To March 1, 2016
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Debt Instrument [Line Items] | |||
Senior notes, call feature | In addition, at any time and from time to time prior to March 1, 2016, we may, at our option, redeem all or a portion of the 2021 Notes at a redemption price equal to 100% of the principal amount plus a premium with respect to the 2021 Notes plus accrued and unpaid interest to the redemption date. If we experience a change of control, subject to certain exceptions, we must give holders of the 2021 Notes the opportunity to sell to us their 2021 Notes, in whole or in part, at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest to the date of purchase. | ||
Senior notes, latest call date | Mar. 01, 2016 | ||
Debt redemption price percent of principal amount | 100.00% | ||
Debt purchase price percent of principal amount | 101.00% | ||
Senior Notes | Senior Notes 6.75 Percent Due 2021
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Debt Instrument [Line Items] | |||
Senior notes, carrying value | $ 200,000,000.0 | $ 475,000,000.0 | |
Debt stated percentage | 6.75% | ||
Capitalized finance costs | $ 4,600,000 | ||
Debt instrument interest rate payment date | Interest on the 2021 Notes is payable on March 1 and September 1 of each year. | ||
Senior notes, maturity date | Mar. 01, 2021 |
SHARE-BASED COMPENSATION (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number Of Performance Units Earned Based on Relative Placement of Total Stockholder Return for Period Within Peer Group | The number of performance units that may be earned by a participant is determined at the end of each performance period based on the relative placement of Key’s total stockholder return for that period within the peer group, as follows:
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VARIABLE INTEREST ENTITIES
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6 Months Ended |
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Jun. 30, 2013
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Variable Interest Entities [Abstract] | |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES On March 7, 2010, we entered into an agreement with AlMansoori Petroleum Services LLC (“AlMansoori”) to form the joint venture AlMansoori Key Energy Services LLC, a joint venture under the laws of Abu Dhabi, UAE. The purpose of the joint venture is to engage in conventional workover and drilling services, coiled tubing services, fishing and rental services, rig monitoring services, pipe handling services and fluids, waste treatment and handling services. AlMansoori holds a 51% interest in the joint venture while we hold a 49% interest. However, we hold three of the five board of directors seats and a controlling financial interest. Future capital contributions to the joint venture will be made on equal terms and in equal amounts, and any future share capital increases will be issued in proportion to the initial share capital percentages but paid for by AlMansoori and Key in equal amounts. Also, we share the profits and losses of the joint venture on equal terms and in equal amounts with AlMansoori. The joint venture does not have sufficient resources to carry on its activities without our financial support; accordingly, we have determined it to be a variable interest entity of which we are the primary beneficiary. We consolidate the entity in our financial statements. We have guaranteed the performance of the joint venture under its sole services contract valued at $2.0 million. Creditors of the joint venture have no recourse to us other than pursuant to this guarantee. For the three and six months ended June 30, 2013, we recognized $4.6 million and $8.6 million of revenue, respectively, and $0.8 million and $1.7 million of net income, respectively, associated with this joint venture. For the three and six months ended June 30, 2012, we recognized $4.0 million and $7.3 million of revenue, respectively, and $0.8 million and $1.0 million of net income, respectively, associated with this joint venture. At June 30, 2013, there were approximately $16.6 million of assets and $13.4 million of liabilities in the joint venture. At December 31, 2012, there were approximately $16.2 million of assets and $14.7 million of liabilities in the joint venture. There are no restrictions on the use of assets and liabilities associated with the joint venture. |
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
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Jun. 30, 2013
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Condensed Consolidating Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS | CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Our 2021 Notes are guaranteed by our domestic subsidiaries, all of which are wholly owned. The guarantees are joint and several, full, complete and unconditional. There are no restrictions on the ability of subsidiary guarantors to transfer funds to the parent company. As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information pursuant to SEC Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”
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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)
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Jun. 30, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the six months ended June 30, 2013 are as follows:
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Other Intangible Assets | The components of our other intangible assets as of June 30, 2013 and December 31, 2012 are as follows:
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Weighted Average Remaining Amortization Periods and Expected Amortization Expense for the Next Five Years for Intangible | The weighted average remaining amortization periods and expected amortization expense for the next five years for our definite lived intangible assets are as follows:
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SEGMENT INFORMATION (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | The following tables set forth our unaudited segment information as of and for the three and six months ended June 30, 2013 and 2012. (in thousands):
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OTHER BALANCE SHEET INFORMATION - Other Current Liabilities (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Other current liabilities: | ||
Accrued payroll, taxes and employee benefits | $ 36,054 | $ 31,708 |
Accrued operating expenditures | 42,890 | 42,137 |
Income, sales, use and other taxes | 40,152 | 62,709 |
Self-insurance reserve | 34,539 | 35,742 |
Accrued interest | 16,010 | 15,301 |
Insurance premium financing | 2,999 | 8,021 |
Share-based compensation and other liabilities | 2,088 | 5,012 |
Total | $ 174,732 | $ 200,630 |
EQUITY AND NONCONTROLLING INTEREST (Tables)
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Jun. 30, 2013
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders Equity | A reconciliation of the total carrying amount of our equity accounts for the six months ended June 30, 2013 is as follows :
A reconciliation of the total carrying amount of our equity accounts for the six months ended June 30, 2012 is as follows :
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SHARE-BASED COMPENSATION - Additional Information (Details) (USD $)
In Millions, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | ||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
Restricted Stock
|
Jun. 30, 2013
Performance Based Units
|
Jan. 31, 2013
Performance Based Units
Performance Unit Awards 2012
|
Feb. 28, 2012
Performance Based Units
Performance Unit Awards 2013
|
May 31, 2013
2012 Equity and Cash Incentive Plan
Outside directors
|
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Share-based compensation expense recognized | $ 2.2 | $ 2.2 | $ 8.1 | $ 8.3 | $ 1.8 | ||||
Income tax benefit recognized | 0.9 | 0.8 | 3.1 | 3.0 | |||||
Compensation expense expected to be recognized | 14.3 | 1.6 | |||||||
Compensation expense expected to be recognized, weighted average remaining vesting period | 1 year 4 months 24 days | 1 year 7 months 6 days | |||||||
Shares of common stock issued | 288,780 | ||||||||
Performance units issued | 400,000 | 200,000 | |||||||
Fair value of outstanding performance units issued | $ 2.4 | $ 2.4 | |||||||
Award requisite service period | 2 years |
EARNINGS PER SHARE - Additional Information (Details)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|---|---|
Jun. 30, 2013
Stock Option
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Jun. 30, 2012
Stock Option
|
Jun. 30, 2012
Stock Option
|
Jun. 30, 2012
Stock Appreciation Rights (SARs)
|
Jun. 30, 2013
Stock Appreciation Rights (SARs)
|
Jun. 30, 2012
Stock Appreciation Rights (SARs)
|
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Antidilutive Securiites Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Antidilutive securities excluded from computation of earnings per share | 1.7 | 1.9 | 1.5 | 0.4 | 0.3 | 0.4 |
DISCONTINUED OPERATIONS - Additional Information (Detail) (USD $)
|
6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | |
---|---|---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Sep. 30, 2012
Argentine Operations
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Sep. 30, 2012
Argentine Operations
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Jun. 30, 2012
Argentine Operations
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Proceeds from sale of operations | $ 12,500,000 | ||||
Loss on sale of operations | 85,800,000 | ||||
Disposal group, aggregate pre-tax non cash charge | 41,457,000 | 0 | 41,500,000 | ||
Loss on write off | $ 51,900,000 |
SEGMENT INFORMATION - Additional Information (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | 3 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2013
ft
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Jun. 30, 2013
Geostream
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Apr. 09, 2013
Geostream
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Oct. 31, 2008
Geostream
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Jun. 30, 2013
Geostream
International
|
Apr. 09, 2013
Geostream
International
|
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Segment Reporting Information [Line Items] | ||||||
Percentage of noncontrolling interest acquired | 50.00% | 50.00% | 26.00% | 50.00% | ||
Aggregate cost of acquired interest | $ 14.6 | $ 17.4 | $ 14.6 | |||
Cumulative percentage ownership after all transactions | 100.00% | |||||
Description of rigs used | Our rigs encompass various sizes and capabilities, allowing us to service all types of wells with depths up to 20,000 feet. | |||||
Maximum depth of wells that can be serviced (in feet) | 20,000 |
SEGMENT INFORMATION
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION Our operating segments are U.S. and International. We also have a “Functional Support” segment associated with managing each of our reportable operating segments. Our domestic rig services, fluid management services, fishing and rental services, and coiled tubing services are aggregated within our U.S. reportable segment. Our international rig services business and our Canadian technology development group are aggregated within our International reportable segment. We evaluate the performance of our operating segments based on revenue and income measures. All inter-segment sales pricing is based on current market conditions. The following is a description of the segments: U.S. Segment Rig-Based Services Our rig-based services include the completion of newly drilled wells, workover and recompletion of existing oil and natural gas wells, well maintenance, and the plugging and abandonment of wells at the end of their useful lives. We also provide specialty drilling services to oil and natural gas producers with certain of our larger rigs that are capable of providing conventional and horizontal drilling services. Our rigs encompass various sizes and capabilities, allowing us to service all types of wells with depths up to 20,000 feet. Many of our rigs are outfitted with our proprietary KeyView® technology, which captures and reports well site operating data and provides safety control systems. We believe that this technology allows our customers and our crews to better monitor well site operations, improves efficiency and safety, and adds value to the services that we offer. The completion and recompletion services provided by our rigs prepare wells for production, whether newly drilled, or recently extended through a workover operation. The completion process may involve selectively perforating the well casing to access production zones, stimulating and testing these zones, and installing tubular and downhole equipment. We typically provide a well service rig and may also provide other equipment to assist in the completion process. Completion services vary by well and our work may take a few days to several weeks to perform, depending on the nature of the completion. The workover services that we provide are designed to enhance the production of existing wells and generally are more complex and time consuming than normal maintenance services. Workover services can include deepening or extending wellbores into new formations by drilling horizontal or lateral wellbores, sealing off depleted production zones and accessing previously bypassed production zones, converting former production wells into injection wells for enhanced recovery operations and conducting major subsurface repairs due to equipment failures. Workover services may last from a few days to several weeks, depending on the complexity of the workover. Maintenance services provided with our rig fleet are generally required throughout the life cycle of an oil or natural gas well. Examples of these maintenance services include routine mechanical repairs to the pumps, tubing and other equipment, removing debris and formation material from wellbores, and pulling rods and other downhole equipment from wellbores to identify and resolve production problems. Maintenance services are generally less complicated than completion and workover related services and require less time to perform. Our rig fleet is also used in the process of permanently shutting-in oil or natural gas wells that are at the end of their productive lives. These plugging and abandonment services generally require auxiliary equipment in addition to a well servicing rig. The demand for plugging and abandonment services is not significantly impacted by the demand for oil and natural gas because well operators are required by state regulations to plug wells that are no longer productive. Fluid Management Services We provide transportation and well-site storage services for various fluids utilized in connection with drilling, completions, workover and maintenance activities. We also provide disposal services for fluids produced subsequent to well completion. These fluids are removed from the well site and transported for disposal in saltwater disposal wells owned by us or a third party. In addition, we operate a fleet of hot oilers capable of pumping heated fluids used to clear soluble restrictions in a wellbore. Demand and pricing for these services generally correspond to demand for our well service rigs. Coiled Tubing Services Coiled tubing services involve the use of a continuous metal pipe spooled onto a large reel which is then deployed into oil and natural gas wells to perform various applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, and formation stimulations utilizing acid and chemical treatments. Coiled tubing is also used for a number of horizontal well applications such as milling temporary isolation plugs that separate frac zones, and various other pre- and post- hydraulic fracturing well preparation services. Fishing and Rental Services We offer a full line of services and rental equipment designed for use in providing both onshore and offshore drilling and workover services. Fishing services involve recovering lost or stuck equipment in the wellbore utilizing a broad array of “fishing tools.” Our rental tool inventory consists of drill pipe, tubulars, handling tools (including our patented Hydra-Walk® pipe-handling units and services), pressure-control equipment, pumps, power swivels, reversing units, foam air units, frac stack equipment used to support hydraulic fracturing operations and the associated flowback of frac fluids, proppants, oil and natural gas. We also provide well testing services. Demand for our fishing and rental services is also closely related to capital spending by oil and natural gas producers, which is generally a function of oil and natural gas prices. International Segment Our International segment includes operations in Mexico, Colombia, Ecuador, the Middle East and Russia. In addition, we have a technology development and control systems business based in Canada. Also, we operated in Argentina prior to the sale of that business in the third quarter of 2012. We are reporting the results of our former Argentina business as discontinued operations for all periods presented. We provide rig-based services such as the maintenance, workover, recompletion of existing oil wells, completion of newly-drilled wells, and plugging and abandonment of wells at the end of their useful lives in each of our international markets. In addition, in Mexico we provide drilling, coiled tubing, wireline, project management and consulting services. Our work in Mexico also requires us to provide third party services that vary in scope by project. In the Middle East, we operate in the Kingdom of Bahrain and Oman. Our business in Bahrain is currently conducted through a joint venture in which we have a controlling interest. Our Russian operations provide drilling, workover, and reservoir engineering services. On April 9, 2013, we completed the acquisition of the 50% noncontrolling interest in Geostream, a limited liability company incorporated in the Russian Federation, for $14.6 million. Key now owns 100% of Geostream . See “Note 3. Acquisition of Noncontrolling Interest in Geostream” for further discussion. Our technology development and control systems business based in Canada is focused on the development of hardware and software related to oilfield service equipment controls, data acquisition and digital information flow. Functional Support Segment Our Functional Support segment includes unallocated overhead costs associated with administrative support for our U.S. and International reporting segments. The following tables set forth our unaudited segment information as of and for the three and six months ended June 30, 2013 and 2012. (in thousands):
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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Statement of Other Comprehensive Income [Abstract] | ||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | $ (3,772) | $ 31,699 | $ (3,958) | $ 65,180 |
Other comprehensive loss, net of tax: | ||||
Foreign currency translation loss | (3,848) | (9,573) | (5,366) | (2,521) |
Total other comprehensive loss, net of tax | (3,848) | (9,573) | (5,366) | (2,521) |
COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF TAX | (7,620) | 22,126 | (9,324) | 62,659 |
Comprehensive loss from discontinued operations | 0 | (2,454) | 0 | (33,359) |
COMPREHENSIVE INCOME (LOSS) | (7,620) | 19,672 | (9,324) | 29,300 |
Comprehensive (income) loss attributable to noncontrolling interest | (367) | 3,952 | 223 | 1,538 |
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO KEY | $ (7,987) | $ 23,624 | $ (9,101) | $ 30,838 |
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) (Geostream)
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Jun. 30, 2013
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Apr. 09, 2013
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Oct. 31, 2008
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Geostream
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Percentage of noncontrolling interest acquired | 50.00% | 50.00% | 26.00% |
ACQUISITION OF NONCONTROLLING INTEREST IN GEOSTREAM
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Jun. 30, 2013
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION OF NONCONTROLLING INTEREST IN GEOSTREAM | ACQUISITION OF NONCONTROLLING INTEREST IN GEOSTREAM On October 31, 2008, we acquired a 26% interest in OOO Geostream Services Group (“Geostream”), a limited liability company incorporated in the Russian Federation that provides a wide range of drilling, workover and reservoir engineering services for $17.4 million. On September 1, 2009, we acquired an additional 24% interest for $16.4 million, which brought our total investment in Geostream to 50% and provided us a controlling interest with representation on Geostream's board of directors. We accounted for the second investment as a business combination achieved in stages. The results of Geostream have been included in our consolidated financial statements since the initial acquisition date, with the portion outside of our control forming a noncontrolling interest. On April 9, 2013, we completed the acquisition of the 50% noncontrolling interest in Geostream for $14.6 million. Geostream is now our wholly owned subsidiary. This acquisition of the 50% noncontrolling interest in Geostream was accounted for as an equity transaction. Therefore, changes in our ownership interest of Geostream as a result of the acquisition in the second quarter of 2013 did not result in a gain or loss transaction. The effects of changes in our ownership interest in Geostream were as follows:
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GENERAL
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6 Months Ended |
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Jun. 30, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GENERAL | GENERAL Key Energy Services, Inc., its wholly owned subsidiaries and its controlled subsidiaries (collectively, “Key,” the “Company,” “we,” “us,” “its,” and “our”) provide a full range of well services to major oil companies, foreign national oil companies and independent oil and natural gas production companies. Our services include rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, fishing and rental services, and other ancillary oilfield services. Additionally, certain rigs are capable of specialty drilling applications. We operate in most major oil and natural gas producing regions of the continental United States and have operations in Mexico, Colombia, Ecuador, the Middle East and Russia. In addition, we have a technology development and control systems business based in Canada. The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The condensed December 31, 2012 balance sheet was prepared from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”). Certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in this Quarterly Report on Form 10-Q. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2012 Form 10-K. The unaudited condensed consolidated financial statements contained in this report include all normal and recurring material adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented herein. The results of operations for the three months and six months ended June 30, 2013 are not necessarily indicative of the results expected for the full year or any other interim period, due to fluctuations in demand for our services, timing of maintenance and other expenditures, and other factors. We have evaluated events occurring after the balance sheet date included in this Quarterly Report on Form 10-Q and through the date on which the unaudited condensed consolidated financial statements were issued, for possible disclosure of a subsequent event. |
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Tables)
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Jun. 30, 2013
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Condensed Consolidating Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Balance Sheets |
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Condensed Consolidating Unaudited Statements of Operations |
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Condensed Consolidating Unaudited Statements of Cash Flows |
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SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Policies)
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6 Months Ended |
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Jun. 30, 2013
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Accounting Policies [Abstract] | |
Accounting Standards Not Yet Adopted in this Report | Accounting Standards Adopted or Not Yet Adopted in this Report There are no new accounting standards that have been adopted or not yet adopted in this report. |
SEVERANCE, CONTRACT TERMINATION AND MOBILIZATION COSTS (Tables)
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Jun. 30, 2013
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Reserve by Type of Cost by Segment | Presented below are the schedules of the activities for the liabilities recorded in connection with our restructuring by segments and in consolidation:
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EARNINGS PER SHARE (Tables)
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Jun. 30, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The components of our earnings (loss) per share are as follows:
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SEGMENT INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Dec. 31, 2012
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Segment Reporting Information [Line Items] | |||||||||||||
Revenues from external customers | $ 411,390 | $ 515,997 | $ 839,839 | $ 1,002,748 | |||||||||
Intersegment revenues | 0 | 0 | 0 | 0 | |||||||||
Depreciation and amortization | 58,208 | 52,452 | 112,401 | 103,641 | |||||||||
Other operating expenses | 344,838 | 402,077 | 707,265 | 774,492 | |||||||||
Operating income (loss) | 8,344 | 61,468 | 20,173 | 124,615 | |||||||||
Interest expense, net of amounts capitalized | 13,984 | 13,730 | 27,788 | 25,612 | |||||||||
Income (loss) from continuing operations before tax | (6,070) | 49,118 | (6,822) | 101,412 | |||||||||
Long-lived assets | 2,112,570 | [1] | 2,173,295 | [1] | 2,112,570 | [1] | 2,173,295 | [1] | |||||
Total assets | 2,732,437 | 2,790,320 | 2,732,437 | 2,790,320 | 2,761,588 | ||||||||
Capital expenditures, excluding acquisitions | 35,433 | 139,890 | 72,577 | 309,328 | |||||||||
U.S.
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Segment Reporting Information [Line Items] | |||||||||||||
Revenues from external customers | 361,698 | 431,646 | 707,770 | 856,619 | |||||||||
Intersegment revenues | (139) | 0 | 8,462 | 0 | |||||||||
Depreciation and amortization | 47,484 | 44,838 | 92,274 | 89,189 | |||||||||
Other operating expenses | 259,121 | 304,311 | 522,128 | 593,475 | |||||||||
Operating income (loss) | 55,093 | 82,497 | 93,368 | 173,955 | |||||||||
Interest expense, net of amounts capitalized | 0 | 4 | 1 | 12 | |||||||||
Income (loss) from continuing operations before tax | 55,210 | 82,530 | 93,419 | 174,082 | |||||||||
Long-lived assets | 1,671,666 | [1] | 1,907,653 | [1] | 1,671,666 | [1] | 1,907,653 | [1] | |||||
Total assets | 2,654,754 | 2,591,329 | 2,654,754 | 2,591,329 | |||||||||
Capital expenditures, excluding acquisitions | 26,659 | 85,406 | 49,969 | 164,816 | |||||||||
International
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Segment Reporting Information [Line Items] | |||||||||||||
Revenues from external customers | 49,692 | 84,351 | 132,069 | 146,129 | |||||||||
Intersegment revenues | 2,676 | 1,195 | 4,195 | 2,152 | |||||||||
Depreciation and amortization | 7,463 | 4,526 | 13,963 | 8,473 | |||||||||
Other operating expenses | 53,235 | 63,709 | 117,238 | 111,172 | |||||||||
Operating income (loss) | (11,006) | 16,116 | 868 | 26,484 | |||||||||
Interest expense, net of amounts capitalized | 15 | 1 | 64 | 14 | |||||||||
Income (loss) from continuing operations before tax | (11,762) | 17,073 | 1,294 | 28,300 | |||||||||
Long-lived assets | 333,096 | [1] | 308,497 | [1] | 333,096 | [1] | 308,497 | [1] | |||||
Total assets | 556,325 | 502,735 | 556,325 | 502,735 | |||||||||
Capital expenditures, excluding acquisitions | 2,196 | 39,321 | 13,163 | 124,777 | |||||||||
Functional Support
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Segment Reporting Information [Line Items] | |||||||||||||
Revenues from external customers | 0 | [2] | 0 | [2] | 0 | [2] | 0 | [2] | |||||
Intersegment revenues | 23 | [2] | 0 | [2] | 147 | [2] | 15 | [2] | |||||
Depreciation and amortization | 3,261 | [2] | 3,088 | [2] | 6,164 | [2] | 5,979 | [2] | |||||
Other operating expenses | 32,482 | [2] | 34,057 | [2] | 67,899 | [2] | 69,845 | [2] | |||||
Operating income (loss) | (35,743) | [2] | (37,145) | [2] | (74,063) | [2] | (75,824) | [2] | |||||
Interest expense, net of amounts capitalized | 13,969 | [2] | 13,725 | [2] | 27,723 | [2] | 25,586 | [2] | |||||
Income (loss) from continuing operations before tax | (49,518) | [2] | (50,485) | [2] | (101,535) | [2] | (100,970) | [2] | |||||
Long-lived assets | 292,818 | [1],[2] | 301,454 | [1],[2] | 292,818 | [1],[2] | 301,454 | [1],[2] | |||||
Total assets | 23,035 | [2] | 408,233 | [2] | 23,035 | [2] | 408,233 | [2] | |||||
Capital expenditures, excluding acquisitions | 6,578 | [2] | 15,163 | [2] | 9,445 | [2] | 19,735 | [2] | |||||
Reconciling Eliminations
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Segment Reporting Information [Line Items] | |||||||||||||
Revenues from external customers | 0 | 0 | 0 | 0 | |||||||||
Intersegment revenues | (2,560) | (1,195) | (12,804) | (2,167) | |||||||||
Depreciation and amortization | 0 | 0 | 0 | 0 | |||||||||
Other operating expenses | 0 | 0 | 0 | 0 | |||||||||
Operating income (loss) | 0 | 0 | 0 | 0 | |||||||||
Interest expense, net of amounts capitalized | 0 | 0 | 0 | 0 | |||||||||
Income (loss) from continuing operations before tax | 0 | 0 | 0 | 0 | |||||||||
Long-lived assets | (185,010) | [1] | (344,309) | [1] | (185,010) | [1] | (344,309) | [1] | |||||
Total assets | (501,677) | (711,977) | (501,677) | (711,977) | |||||||||
Capital expenditures, excluding acquisitions | $ 0 | $ 0 | $ 0 | $ 0 | |||||||||
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LONG-TERM DEBT - Schedule of Debt (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Debt Instrument [Line Items] | ||
Senior Secured Credit Facility revolving loans due 2016 | $ 185,000 | $ 165,000 |
Net unamortized premium on debt | 4,259 | 4,537 |
Capital lease obligations | 13 | 393 |
Total debt | 867,845 | 848,503 |
Less current portion | (13) | (393) |
Long-term debt and capital leases | 867,832 | 848,110 |
Senior Notes 6.75 Percent Due 2021
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Debt Instrument [Line Items] | ||
Senior Notes | 675,000 | 675,000 |
Senior Notes 8.375 Percent Due 2014
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Debt Instrument [Line Items] | ||
Senior Notes | $ 3,573 | $ 3,573 |