Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Jul. 26, 2019 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Entity Registrant Name | FTS INTERNATIONAL, INC. | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 109,032,732 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001529463 | |
Amendment Flag | false |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenue | ||||
Revenue | $ 225.8 | $ 454.6 | $ 447.4 | $ 877.9 |
Revenue from related parties | 38.7 | 0.9 | 82.9 | |
Total revenue | 225.8 | 493.3 | 448.3 | 960.8 |
Operating expenses | ||||
Costs of revenue (excluding depreciation of $20.7, $18.5, $41.1 and $36.9 respectively, included in depreciation and amortization below) | 165.9 | 329.4 | 329 | 641.6 |
Selling, general and administrative | 21.7 | 20.8 | 45.3 | 46.6 |
Depreciation and amortization | 22.8 | 20.7 | 45.2 | 41.3 |
Impairments and other charges | 2.8 | 4 | 63.6 | 6 |
(Gain) loss on disposal of assets, net | (1.2) | (0.2) | (0.9) | 0.3 |
Total operating expenses | 212 | 374.7 | 482.2 | 735.8 |
Operating income (loss) | 13.8 | 118.6 | (33.9) | 225 |
Interest expense, net | (7.7) | (12.1) | (15.9) | (29.5) |
(Loss) gain on extinguishment of debt, net | (0.1) | (0.8) | 0.4 | (10.1) |
Equity in net income (loss) of joint venture affiliate | (1.2) | 0.6 | (1.2) | |
Income (loss) before income taxes | 6 | 104.5 | (48.8) | 184.2 |
Income tax expense | 0.1 | 0.9 | 0.3 | 1.9 |
Net income (loss) | 5.9 | 103.6 | (49.1) | 182.3 |
Net income (loss) attributable to common stockholders | $ 5.9 | $ 103.6 | $ (49.1) | $ 605.5 |
Basic and diluted earnings per share attributable to common stockholders | $ 0.05 | $ 0.95 | $ (0.45) | $ 6.12 |
Shares used in computing basic and diluted earnings per share | 109.7 | 109.3 | 109.7 | 98.9 |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Depreciation | ||||
Depreciation | $ 20.7 | $ 18.5 | $ 41.1 | $ 36.9 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 162.1 | $ 177.8 |
Accounts receivable, net | 141.6 | 158.3 |
Inventories | 59.5 | 66.6 |
Prepaid expenses and other current assets | 14.3 | 7 |
Total current assets | 377.5 | 409.7 |
Property, plant, and equipment, net | 251.4 | 275.3 |
Operating lease right-of-use assets | 34.8 | |
Intangible assets, net | 29.5 | 29.5 |
Investment in joint venture affiliate | 24.2 | 23.2 |
Other assets | 5.1 | 6 |
Total assets | 722.5 | 743.7 |
Current liabilities | ||
Accounts payable | 73.3 | 86.8 |
Accrued expenses | 25.8 | 29.3 |
Current portion of operating lease liabilities | 16.6 | |
Other current liabilities | 12.1 | 16.3 |
Total current liabilities | 127.8 | 132.4 |
Long-term debt | 472.2 | 503.2 |
Operating lease liabilities | 20.5 | |
Other liabilities | 44 | 1.2 |
Total liabilities | 664.5 | 636.8 |
Commitments and contingencies (Note 10) | ||
Stockholders’ equity | ||
Preferred stock, $0.01 par value, 25,000,000 shares authorized | ||
Common stock, $0.01 par value, 320,000,000 shares authorized, 109,092,732 shares issued and outstanding at June 30, 2019 and 109,434,841 shares issued and outstanding at December 31, 2018 | 36.4 | 36.4 |
Additional paid-in capital | 4,378.5 | 4,378.4 |
Accumulated deficit | (4,356.9) | (4,307.9) |
Total stockholders’ equity | 58 | 106.9 |
Total liabilities and stockholders’ equity | $ 722.5 | $ 743.7 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 25,000,000 | 25,000,000 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 320,000,000 | 320,000,000 |
Common stock, issued (in shares) | 109,092,732 | 109,434,841 |
Common stock, outstanding (in shares) | 109,092,732 | 109,434,841 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities | |||
Net income (loss) | $ 5.9 | $ (49.1) | $ 182.3 |
Adjustments to reconcile net income (LOSS) to net cash provided by operating activities: | |||
Depreciation and amortization | 22.8 | 45.2 | 41.3 |
Stock-based compensation | 6.7 | 5 | |
Amortization of debt discounts and issuance costs | 0.9 | 1.5 | |
Impairment of assets | 2.7 | 5.5 | |
(Gain) loss on disposal of assets, net | (1.2) | (0.9) | 0.3 |
(Gain) loss on extinguishment of debt, net | 0.1 | (0.4) | 10.1 |
Inventory write down | 1.4 | ||
Non-cash provision for supply commitment charges | 0.1 | 56.7 | 6 |
Cash paid to settle supply commitment charges | (15.9) | (2) | |
Other non-cash items | 1.1 | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | 16.8 | (54.8) | |
Accounts receivable from related parties | (19.4) | ||
Inventories | 5.6 | (17.3) | |
Prepaid expenses and other assets | (8.6) | (0.8) | |
Accounts payable | (12.3) | 21 | |
Accrued expenses and other liabilities | (4.3) | (0.8) | |
Net cash provided by operating activities | 47.3 | 173.5 | |
Cash flows from investing activities | |||
Capital expenditures | (26.5) | (66.3) | |
Proceeds from disposal of assets | 1.3 | 0.6 | |
Net cash used in investing activities | (25.2) | (65.7) | |
Cash flows from financing activities | |||
Repayments of long-term debt | (31.3) | (499.3) | |
Repurchase of common stock | (4.6) | ||
Taxes paid related to net share settlement of equity awards | (1.9) | ||
Net proceeds from issuance of common stock | 303 | ||
Payments of revolving credit facility issuance costs | (2.4) | ||
Net cash used in financing activities | (37.8) | (198.7) | |
Net decrease in cash, cash equivalents, and restricted cash | (15.7) | (90.9) | |
Cash, cash equivalents, and restricted cash at beginning of period | 177.8 | 217.2 | |
Cash and cash equivalents at end of period | $ 162.1 | 162.1 | 126.3 |
Supplemental cash flow information: | |||
Interest paid | 16 | 24.3 | |
Income tax payments | 1.4 | 0.8 | |
Noncash investing and financing activities: | |||
Capital expenditures included in accounts payable | 2.9 | $ 3.6 | |
Operating lease liabilities incurred from obtaining right-of-use assets | $ 10.5 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Millions | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance at beginning of period at Dec. 31, 2017 | $ 35.9 | $ 3,712.1 | $ (4,566.3) | $ (818.3) |
Balance at beginning of period (in shares) at Dec. 31, 2017 | 51,783,000 | |||
Net income (loss) | 78.7 | 78.7 | ||
Activity related to stock plans | 1.6 | 1.6 | ||
Recapitalization of convertible preferred stock to common stock | $ 0.4 | 349.4 | 349.8 | |
Recapitalization of convertible preferred stock to common stock (in shares) | 39,415,000 | |||
Issuance of common stock | $ 0.1 | 302.9 | 303 | |
Issuance of common stock (in shares) | 18,077,000 | |||
Balance at end of period at Mar. 31, 2018 | $ 36.4 | 4,366 | (4,487.6) | (85.2) |
Balance at end of period (in shares) at Mar. 31, 2018 | 109,275,000 | |||
Balance at beginning of period at Dec. 31, 2017 | $ 35.9 | 3,712.1 | (4,566.3) | (818.3) |
Balance at beginning of period (in shares) at Dec. 31, 2017 | 51,783,000 | |||
Net income (loss) | 182.3 | |||
Balance at end of period at Jun. 30, 2018 | $ 36.4 | 4,369.4 | (4,384) | 21.8 |
Balance at end of period (in shares) at Jun. 30, 2018 | 109,275,000 | |||
Balance at beginning of period at Dec. 31, 2017 | $ 35.9 | 3,712.1 | (4,566.3) | (818.3) |
Balance at beginning of period (in shares) at Dec. 31, 2017 | 51,783,000 | |||
Balance at end of period at Dec. 31, 2018 | $ 36.4 | 4,378.4 | (4,307.9) | $ 106.9 |
Balance at end of period (in shares) at Dec. 31, 2018 | 109,435,000 | 109,434,841 | ||
Balance at beginning of period at Mar. 31, 2018 | $ 36.4 | 4,366 | (4,487.6) | $ (85.2) |
Balance at beginning of period (in shares) at Mar. 31, 2018 | 109,275,000 | |||
Net income (loss) | 103.6 | 103.6 | ||
Activity related to stock plans | 3.4 | 3.4 | ||
Balance at end of period at Jun. 30, 2018 | $ 36.4 | 4,369.4 | (4,384) | 21.8 |
Balance at end of period (in shares) at Jun. 30, 2018 | 109,275,000 | |||
Balance at beginning of period at Dec. 31, 2018 | $ 36.4 | 4,378.4 | (4,307.9) | $ 106.9 |
Balance at beginning of period (in shares) at Dec. 31, 2018 | 109,435,000 | 109,434,841 | ||
Net income (loss) | (55) | $ (55) | ||
Cumulative effect of accounting change | 0.1 | 0.1 | ||
Activity related to stock plans | 1.3 | 1.3 | ||
Activity related to stock plans (in shares) | 364,000 | |||
Balance at end of period at Mar. 31, 2019 | $ 36.4 | 4,379.7 | (4,362.8) | 53.3 |
Balance at end of period (in shares) at Mar. 31, 2019 | 109,799,000 | |||
Balance at beginning of period at Dec. 31, 2018 | $ 36.4 | 4,378.4 | (4,307.9) | $ 106.9 |
Balance at beginning of period (in shares) at Dec. 31, 2018 | 109,435,000 | 109,434,841 | ||
Net income (loss) | $ (49.1) | |||
Balance at end of period at Jun. 30, 2019 | $ 36.4 | 4,378.5 | (4,356.9) | $ 58 |
Balance at end of period (in shares) at Jun. 30, 2019 | 109,093,000 | 109,092,732 | ||
Balance at beginning of period at Mar. 31, 2019 | $ 36.4 | 4,379.7 | (4,362.8) | $ 53.3 |
Balance at beginning of period (in shares) at Mar. 31, 2019 | 109,799,000 | |||
Net income (loss) | 5.9 | 5.9 | ||
Repurchase of common stock | (4.6) | $ (4.6) | ||
Repurchase of common stock (in shares) | (761,000) | (761,000) | ||
Activity related to stock plans | 3.4 | $ 3.4 | ||
Activity related to stock plans (in shares) | 55,000 | |||
Balance at end of period at Jun. 30, 2019 | $ 36.4 | $ 4,378.5 | $ (4,356.9) | $ 58 |
Balance at end of period (in shares) at Jun. 30, 2019 | 109,093,000 | 109,092,732 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Text Block | |
BASIS OF PRESENTATION | NOTE 1 — BASIS OF PRESENTATION Unless the context requires otherwise, the use of the terms “FTSI,” “Company”, “we,” “us,” “our” or “ours” in these Notes to Consolidated Financial Statements refer to FTS International, Inc., together with its consolidated subsidiaries. The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. Accordingly, certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2018. In our opinion, the consolidated financial statements included herein contain all adjustments of a normal, recurring nature considered necessary for a fair presentation of the interim periods. The results of operations of the interim periods are not necessarily indicative of the results of operations to be expected for the full year. There were no items of other comprehensive income in the periods presented. The Company had $9.1 million of restricted cash at January 1, 2018 and zero restricted cash at June 30, 2019 and 2018. Reclassifications Current liabilities related to accrued supply commitment charges have been reclassified from accounts payable to other current liabilities on the balance sheet as of December 31, 2018, and the statement of cash flows for the six months ended June 30, 2018. These reclassifications had no effect on total assets, total liabilities, total equity, or net cash provided by operating activities as previously reported. New Accounting Standards Updates In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases. The FASB subsequently issued a number of additional ASUs to update this guidance. This standard was issued to increase transparency and comparability among organizations by requiring that a right-of-use asset and corresponding lease liability be recorded on the balance sheet for leases with terms longer than 12 months. We elected to use three practical expedients allowed under the guidance. According to these practical expedients we did not reassess whether existing contracts are or contain a lease; we did not reassess whether existing leases are operating or finance leases; and we did not reassess the accounting for initial direct costs for existing leases. Our approach to adopting this new standard included a review of existing leases and other executory contracts that could contain embedded leases and we identified the key terms that were necessary for us to calculate the right-of-use asset and lease liability. These consolidated financial statements have been prepared in accordance with the new ASU utilizing the modified retrospective transition method, which resulted in the recording of operating lease liabilities of $38.7 million as of January 1, 2019 on our consolidated balance sheet with an immaterial effect on our consolidated statement of stockholders’ equity (deficit) and no related effect on our consolidated statement of operations. |
JOINT VENTURE
JOINT VENTURE | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Text Block | |
JOINT VENTURE | NOTE 2 — JOINT VENTURE In April 2019, FTSI announced that it expects to sell all of its 45% equity ownership interest in SinoFTS Petroleum Services Ltd., FTSI’s joint venture in China, to Sinopec Oilfield Services Corporation, FTSI’s joint venture partner. In exchange, FTSI, via its affiliate FTS International Netherlands B.V., will receive consideration of approximately $26.9 million for the sale of its equity interest, and via FTS International Services, LLC, will receive a royalty fee of approximately $5.8 million for a license for its intellectual property use and for future limited support of the joint venture’s operations. This transaction is subject to customary closing conditions and is expected to be completed in the third quarter of 2019. FTSI currently estimates that it will recognize a small gain on the sale of our equity interest and intends to use the proceeds from this transaction to repay debt. |
INDEBTEDNESS AND BORROWING FACI
INDEBTEDNESS AND BORROWING FACILITY | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Text Block | |
INDEBTEDNESS AND BORROWING FACILITY | NOTE 3 — INDEBTEDNESS AND BORROWING FACILITY The following table summarizes our long-term debt: June 30, December 31, (In millions) 2019 2018 Term loan due April 2021 ("Term Loan") $ 101.0 $ 121.0 Senior notes due May 2022 ("2022 Senior Notes") 374.9 386.9 Total principal amount 475.9 507.9 Less unamortized discount and debt issuance costs (3.7) (4.7) Total long-term debt $ 472.2 $ 503.2 Estimated fair value of long-term debt $ 450.4 $ 461.2 Estimated fair values for our Term Loan and 2022 Senior Notes were determined using recent trading activity and/or bid-ask spreads and are classified as Level 2 in the FASB’s fair value hierarchy. We believe we were in compliance with all of the covenants in our debt agreements at June 30, 2019. Debt Repayments In the first six months of 2019, we repaid $20.0 million of aggregate principal amount of Term Loan using cash on hand. We recognized a loss on this debt extinguishment of $0.1 million. In the first six months of 2019, we repurchased $12.0 million of aggregate principal amount of 2022 Senior Notes in the qualified institutional buyer market using cash on hand. We recognized a gain on this debt extinguishment of $0.5 million. Revolving Credit Facility The maximum availability of credit under our revolving credit facility is limited at any time to the lesser of $250 million or a borrowing base. The borrowing base is based on percentages of eligible accounts receivable and eligible inventory and is subject to certain reserves. In an event of default or if the amount available under the credit facility is less than either 10% of our maximum availability or $12.5 million, we will be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0. If at any time borrowings and letters of credit issued under the credit facility exceed the borrowing base, we will be required to repay an amount equal to such excess. As of June 30, 2019, the borrowing base was $115.4 million and therefore our maximum availability under the credit facility was $115.4 million. As of June 30, 2019, there were no borrowings outstanding under the credit facility, and letters of credit totaling $3.0 million were issued, resulting in $112.4 million of availability under the credit facility. We believe we were in compliance with all of the covenants in the credit facility at June 30, 2019. |
LEASES
LEASES | 6 Months Ended |
Jun. 30, 2019 | |
LEASES | |
LEASES | NOTE 4 — LEASES We lease certain administrative offices, sales offices, and operational facilities. We also lease some service equipment and light duty vehicles. These leases have remaining lease terms of 6 years or less. Some leases contain options to extend the leases, and some include options to terminate the leases. We do not include renewal or termination options in our assessment of the lease terms unless extension or termination for certain assets is deemed to be reasonably certain. The accounting for some of our leases requires significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates, if necessary, to utilize in the calculation of our lease liabilities, and assessing the likelihood of renewal or termination options. We also have some lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. We provide residual value guarantees for our leases of light-duty vehicles and certain service equipment. No amounts related to these residual value guarantees have been deemed probable and included in the lease liability; however, if the value for all of the vehicles was zero at the end of the lease term, we would be required to pay $16.3 million for leases outstanding at June 30, 2019. We had no material amount of finance leases or subleases at June 30, 2019. We had no material variable lease costs for the three or six months ended June 30, 2019. The following table summarizes the components of our lease costs: Three Months Ended Six Months Ended June 30, June 30, (In millions) 2019 2019 Operating lease cost $ 5.8 $ 12.0 Short-term lease cost 1.4 2.7 Total lease cost $ 7.2 $ 14.7 Short-term lease costs represent costs related to leases with terms of one year or less. We elected the practical expedient to not recognize lease assets and liabilities for these leases. The following table includes other supplemental information for our operating leases: Six Months Ended June 30, (Dollars in millions) 2019 Cash paid for amounts included in the measurement of our lease obligations $ 12.2 Right-of-use assets obtained in exchange for lease obligations $ 10.5 Right-of-use assets recognized upon adoption of the leasing standard $ 37.8 Weighted-average remaining lease term 2.6 years Weighted-average discount rate The following table summarizes the maturity of our operating leases as of June 30, 2019: (In millions) Remainder of 2019 $ 9.5 2020 15.6 2021 10.9 2022 1.2 2023 1.2 2024 and thereafter 1.0 Total lease payments 39.4 Less imputed interest (2.3) Total lease liabilities $ 37.1 |
SHARE REPURCHASE
SHARE REPURCHASE | 6 Months Ended |
Jun. 30, 2019 | |
SHARE REPURCHASE | |
SHARE REPURCHASE | NOTE 5 — SHARE REPURCHASE In May 2019, our board of directors (our “Board”) approved an authorization for a total share repurchase of up to $100 million of the Company’s common stock to be executed through open market or private transactions. The authorization expires on May 14, 2020 and may be discontinued at any time. In the second quarter of 2019 we repurchased approximately 761,000 shares of common stock at an average price of $6.11 per share for a total of $4.6 million. At June 30, 2019, $95.4 million of the authorized amount was available for share repurchases under this program. The amount and timing of share repurchases are at the sole discretion of the Company, and plans for future share repurchases may be revised by the Board at any time. The share repurchase program could be affected by, among other things, changes in results of operations, capital expenditures, cash flows, and applicable tax laws. |
REVENUE
REVENUE | 6 Months Ended |
Jun. 30, 2019 | |
REVENUE | |
REVENUE | NOTE 6 — REVENUE The Company contracts with its customers to perform hydraulic fracturing services on one or more oil or natural gas wells. Under these arrangements, we satisfy our performance obligations as services are rendered, which is generally upon the completion of a fracturing stage or the passage of time. Pricing for our services is frequently negotiated with our customers and is based on prevailing market rates during each reporting period. The amounts we invoice our customers for services performed during a period are directly related to the value received by the customers for the period. There is no inherent uncertainty to the amount of consideration we will receive for services performed during a period and no judgment is required to allocate a portion of the transaction price to a future period. Accordingly, we are not required to identify any unsatisfied performance obligations nor attribute any revenue to them. We have no material contract assets or liabilities with our customers. We do not present disaggregated revenue because we do not believe this information is necessary to understand the nature, amount, timing and uncertainty of our revenues and cash flows. |
IMPAIRMENTS AND OTHER CHARGES
IMPAIRMENTS AND OTHER CHARGES | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Text Block | |
IMPAIRMENTS AND OTHER CHARGES | NOTE 7 — IMPAIRMENTS AND OTHER CHARGES The following table summarizes our impairments and other charges: Three Months Ended Six Months Ended June 30, June 30, (In millions) 2019 2018 2019 2018 Supply commitment charges $ 0.1 $ 4.0 $ 56.7 $ 6.0 Impairment of assets 2.7 — 5.5 — Inventory write-down — — 1.4 — Total impairments and other charges $ 2.8 $ 4.0 $ 63.6 $ 6.0 Supply Commitment Charges We incur supply commitment charges when our purchases of sand from certain suppliers are less than the minimum purchase commitments in our supply contracts. According to the accounting guidance for firm purchase commitments, future losses that are considered likely are also required to be recorded in the current period. During the first six months of 2019 and 2018, we recorded aggregate charges under these supply contracts of $56.7 million and $6.0 million, respectively. These charges relate to actual purchase shortfalls incurred, as well as forecasted losses expected to be incurred and settled in future periods. These purchase shortfalls are largely due to our customers choosing to procure their own sand, often from sand mines closer to their operating areas. In May 2019, we restructured and amended our largest sand supply contract to reduce the total remaining commitment through 2024 by approximately $162 million. This reduced our annual commitment from $47.9 million to $21.0 million from 2019 through 2024. The reduced annual commitments of $21.0 million represent the annual payments we would make under the contract if we do not purchase any sand from this vendor. Due to the terms of the amended agreement and our estimated future purchases under this contract, we determined that we would not be able to satisfy $11.0 million of the $21.0 million annual commitment with sand purchases for the last five years of the contract. Therefore, in connection with this amendment, we recorded a supply commitment charge of $55.0 million in the first quarter of 2019 to accelerate these purchase shortfalls. After recording the $55.0 million supply commitment charge in the first quarter of 2019, the amount of accrued supply commitment charges for future periods that was recognized on our consolidated balance sheet at March 31, 2019 was $66.0 million. We paid $11.0 million of this amount in the second quarter of 2019 and we expect to pay the remaining $55.0 million in annual installments of $11.0 million from January 2020 through January 2024. These payments may be accelerated under limited circumstances. The remaining amount of the 2019 charges represent revised estimates of our purchase shortfalls under this contract for 2019. After recording the $55.0 million supply commitment charge, the remaining annual purchase commitment that we must satisfy to avoid additional charges is $10.0 million. We will satisfy this annual purchase commitment if we purchase at least 1.0 million tons of sand per year, which we believe better matches our current and forecasted sand needs. If we purchase more than 1.0 million tons of sand in a year, then we could recover a portion of the supply commitment charge. We entered into this contract in 2013 in connection with selling our sand mines, which was at a time when our then current and expected needs for sand were significantly higher than they are today. As our sand needs have declined over the years due to industry cycles or due to our customers choosing to procure their own sand, we and our supplier have continuously worked together to accommodate changing market conditions by amending the contract. Estimated losses related to these supply contracts contain uncertainties, such as future customer demand and sand preferences. These uncertainties require us to use judgment to quantify these estimates. Actual results could materially differ from our estimates. Discontinued Wireline Operations In May 2019, we decided to discontinue our wireline operations due to underperformance. We are in the process of identifying the best options for disposing of these assets. As a result of this decision we recorded an asset impairment of $2.8 million and an inventory write-down of $1.4 million in the first quarter of 2019 to adjust these assets to their estimated fair market values and net realizable values, respectively. Other Impairments In the second quarter of 2019, we recorded $2.7 million of impairments for certain land and buildings that we no longer use. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Text Block | |
INCOME TAXES | NOTE 8 — INCOME TAXES In 2012, we established a full valuation allowance with respect to our U.S. federal deferred tax assets and state deferred tax assets in excess of our deferred tax liabilities. We have continued to record a valuation allowance for these net deferred tax assets since 2012. As a result, we only recorded income tax expense for the three and six months ended June 30, 2019 and 2018 for states that limit the deduction of net operating loss carryforwards. Deferred tax assets related to our U.S. federal and state operating losses are still available to us to offset future taxable income, subject to limitations in the event of a change of control under Section 382 of the Internal Revenue Code. At June 30, 2019, we had not incurred such an ownership change. At each reporting date, we consider all available positive and negative evidence to evaluate whether our deferred tax assets are more likely than not to be realized. A significant piece of negative evidence that we consider is that the Company generated a loss before income taxes for each year from 2012 to 2016. Such negative evidence weighs heavily against other more subjective positive evidence such as projections for future taxable income. The Company generated income before income taxes in 2017 and 2018 and has generated cumulative income for its most recent three year period. This represents positive evidence that we may be able to realize some or all of our deferred tax assets; however, due to the negative evidence of our annual losses generated from 2012 through 2016, the significant cyclicality of our business in recent years, and our loss before income taxes for the first six months of 2019, we concluded that a full valuation allowance was still required at June 30, 2019. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2019 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE 9 — EARNINGS PER SHARE The numerators and denominators of the basic and diluted earnings per share (“EPS”) computations for our common stock are calculated as follows: Three Months Ended Six Months Ended June 30, June 30, (In millions, except per share amounts) 2019 2018 2019 2018 Numerator: Net income (loss) $ 5.9 $ 103.6 $ (49.1) $ 182.3 Net reversal of convertible preferred stock — — — 423.2 Net income (loss) attributable to common $ 5.9 $ 103.6 $ (49.1) $ 605.5 Denominator: Weighted average shares used for 109.7 109.3 109.7 98.9 Dilutive potential common shares (2) — — — — Number of shares used for diluted EPS computation 109.7 109.3 109.7 98.9 Basic and diluted EPS $ 0.05 $ 0.95 $ (0.45) $ 6.12 _________________________ (1) The accreted value of our convertible preferred stock was $1,132.7 million at December 31, 2017. In connection with the Company’s initial public offering (“IPO”) in 2018, the convertible preferred stock was recapitalized into 39.4 million shares of common stock. These shares of common stock had a value of $709.5 million at the IPO share price of $18.00, which resulted in a net reversal of $423.2 million of convertible preferred stock accretion previously recognized. (2) The dilutive effect of employee restricted stock units was immaterial for the first quarter of 2018. The following table includes common stock equivalents that were not included in the calculation of diluted EPS for the periods presented because the effect would be antidilutive. These securities could be dilutive in future periods. Three Months Ended Six Months Ended June 30, June 30, (In millions) 2019 2018 2019 2018 Employee restricted stock units 2.1 — 2.1 — |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Text Block | |
COMMITMENTS AND CONTINGENCIES | NOTE 10 — COMMITMENTS AND CONTINGENCIES Purchase Obligations We have purchase commitments with certain vendors to supply a significant portion of the proppant used in our operations. These agreements have remaining terms ranging from one to six years. Some of these agreements have minimum unconditional purchase obligations. See Note 7 – “Impairments and Other Charges” for more discussion of these purchase commitments. Litigation In the ordinary course of business, we are subject to various legal proceedings and claims, some of which may not be covered by insurance. Many of these legal proceedings and claims are in early stages, and many of them seek an indeterminate amount of damages. We estimate and provide for potential losses that may arise out of legal proceedings and claims to the extent that such losses are probable and can be reasonably estimated. Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different from these estimates. When preparing our estimates, we consider, among other factors, the progress of each legal proceeding and claim, our experience and the experience of others in similar legal proceedings and claims, and the opinions and views of legal counsel. Legal costs related to litigation contingencies are expensed as incurred. With respect to the litigation matters below, if there is an adverse outcome individually or collectively, there could be a material adverse effect on the Company’s consolidated financial position or results of operations. These litigation matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Therefore, there can be no assurance as to the ultimate outcome of these matters. Regardless of the outcome, any such litigation and claims can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Patterson v. FTS International Manufacturing, LLC and FTS International Services, LLC : On June 24, 2015, Joshua Patterson filed a lawsuit against the Company in the 115 th Judicial District Court of Upshur County, Texas, alleging, among other things, that the Company was negligent with respect to an automobile accident in 2013. Mr. Patterson sought monetary relief of more than $1 million. On July 19, 2018, a jury returned a verdict of approximately $100 million, including punitive damages, against the Company. The trial court reduced the judgment on November 12, 2018 to approximately $33 million. The Company’s insurance carriers have been defending the suit and are appealing the final judgment. The Company’s appellate brief was filed with the Tyler Court of Appeals on June 28, 2019. While the outcome of this case is uncertain, the Company has met its insurance deductible for this matter and we do not expect the ultimate resolution of this case to have a material adverse effect on our consolidated financial statements. Securities Act Litigation : On February 22, 2019, Carol Glock filed a purported securities class action in the 160th Civil District Court of Dallas County, Texas (Cause No. DC-19-02668) against the Company, certain of our officers, directors and stockholders, and certain of the underwriters of our IPO. The petition is brought on behalf of an alleged class of persons or entities who purchased our common stock in or traceable to our IPO, and purports to allege claims arising under Sections 11 and 15 of the Securities Act of 1933, as amended. The petition generally alleges that the defendants violated federal securities laws relating to the disclosure in the registration statement and prospectus filed with the Securities and Exchange Commission in connection with our IPO. The petition seeks, among other relief, class certification, damages in an amount in excess of $1.0 million, and reasonable costs and expenses, including attorneys’ fees. The Company has insurance coverage on this matter and has hired counsel to vigorously defend the case. Defendants have filed Special Exceptions to the petition and have requested dismissal if the defects cannot be cured. While the outcome of this case is uncertain, we do not expect the ultimate resolution of this case to have a material adverse effect on our consolidated financial statements. We believe that costs associated with other legal matters will not have a material adverse effect on our consolidated financial statements. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
BASIS OF PRESENTATION | |
Reclassifications | Reclassifications Current liabilities related to accrued supply commitment charges have been reclassified from accounts payable to other current liabilities on the balance sheet as of December 31, 2018, and the statement of cash flows for the six months ended June 30, 2018. These reclassifications had no effect on total assets, total liabilities, total equity, or net cash provided by operating activities as previously reported. |
New Accounting Standards Updates | New Accounting Standards Updates In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases. The FASB subsequently issued a number of additional ASUs to update this guidance. This standard was issued to increase transparency and comparability among organizations by requiring that a right-of-use asset and corresponding lease liability be recorded on the balance sheet for leases with terms longer than 12 months. We elected to use three practical expedients allowed under the guidance. According to these practical expedients we did not reassess whether existing contracts are or contain a lease; we did not reassess whether existing leases are operating or finance leases; and we did not reassess the accounting for initial direct costs for existing leases. Our approach to adopting this new standard included a review of existing leases and other executory contracts that could contain embedded leases and we identified the key terms that were necessary for us to calculate the right-of-use asset and lease liability. These consolidated financial statements have been prepared in accordance with the new ASU utilizing the modified retrospective transition method, which resulted in the recording of operating lease liabilities of $38.7 million as of January 1, 2019 on our consolidated balance sheet with an immaterial effect on our consolidated statement of stockholders’ equity (deficit) and no related effect on our consolidated statement of operations. |
INDEBTEDNESS AND BORROWING FA_2
INDEBTEDNESS AND BORROWING FACILITY (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Table Text Blocks | |
Summary of long-term debt | June 30, December 31, (In millions) 2019 2018 Term loan due April 2021 ("Term Loan") $ 101.0 $ 121.0 Senior notes due May 2022 ("2022 Senior Notes") 374.9 386.9 Total principal amount 475.9 507.9 Less unamortized discount and debt issuance costs (3.7) (4.7) Total long-term debt $ 472.2 $ 503.2 Estimated fair value of long-term debt $ 450.4 $ 461.2 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
LEASES | |
Summary of components of our lease costs and other supplemental information for our operating leases | Three Months Ended Six Months Ended June 30, June 30, (In millions) 2019 2019 Operating lease cost $ 5.8 $ 12.0 Short-term lease cost 1.4 2.7 Total lease cost $ 7.2 $ 14.7 Short-term lease costs represent costs related to leases with terms of one year or less. We elected the practical expedient to not recognize lease assets and liabilities for these leases. The following table includes other supplemental information for our operating leases: Six Months Ended June 30, (Dollars in millions) 2019 Cash paid for amounts included in the measurement of our lease obligations $ 12.2 Right-of-use assets obtained in exchange for lease obligations $ 10.5 Right-of-use assets recognized upon adoption of the leasing standard $ 37.8 Weighted-average remaining lease term 2.6 years Weighted-average discount rate |
Summary of maturity of our operating leases | (In millions) Remainder of 2019 $ 9.5 2020 15.6 2021 10.9 2022 1.2 2023 1.2 2024 and thereafter 1.0 Total lease payments 39.4 Less imputed interest (2.3) Total lease liabilities $ 37.1 |
IMPAIRMENTS AND OTHER CHARGES (
IMPAIRMENTS AND OTHER CHARGES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Table Text Blocks | |
Schedule of impairments and other charges | Three Months Ended Six Months Ended June 30, June 30, (In millions) 2019 2018 2019 2018 Supply commitment charges $ 0.1 $ 4.0 $ 56.7 $ 6.0 Impairment of assets 2.7 — 5.5 — Inventory write-down — — 1.4 — Total impairments and other charges $ 2.8 $ 4.0 $ 63.6 $ 6.0 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
EARNINGS PER SHARE | |
Schedule of computations for basic and diluted earnings (loss) per share | Three Months Ended Six Months Ended June 30, June 30, (In millions, except per share amounts) 2019 2018 2019 2018 Numerator: Net income (loss) $ 5.9 $ 103.6 $ (49.1) $ 182.3 Net reversal of convertible preferred stock — — — 423.2 Net income (loss) attributable to common $ 5.9 $ 103.6 $ (49.1) $ 605.5 Denominator: Weighted average shares used for 109.7 109.3 109.7 98.9 Dilutive potential common shares (2) — — — — Number of shares used for diluted EPS computation 109.7 109.3 109.7 98.9 Basic and diluted EPS $ 0.05 $ 0.95 $ (0.45) $ 6.12 _________________________ (1) The accreted value of our convertible preferred stock was $1,132.7 million at December 31, 2017. In connection with the Company’s initial public offering (“IPO”) in 2018, the convertible preferred stock was recapitalized into 39.4 million shares of common stock. These shares of common stock had a value of $709.5 million at the IPO share price of $18.00, which resulted in a net reversal of $423.2 million of convertible preferred stock accretion previously recognized. (2) The dilutive effect of employee restricted stock units was immaterial for the first quarter of 2018. |
Summary of common stock equivalents that were not included in the calculation of diluted net earnings per share | The following table includes common stock equivalents that were not included in the calculation of diluted EPS for the periods presented because the effect would be antidilutive. These securities could be dilutive in future periods. Three Months Ended Six Months Ended June 30, June 30, (In millions) 2019 2018 2019 2018 Employee restricted stock units 2.1 — 2.1 — |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jan. 01, 2019 | Jan. 01, 2018 | |
Other comprehensive income | ||||||
Other comprehensive income | $ 0 | $ 0 | $ 0 | $ 0 | ||
Restricted cash | 0 | $ 0 | 0 | $ 0 | $ 9.1 | |
Operating lease liabilities | $ 20.5 | $ 20.5 | $ 38.7 |
JOINT VENTURE (Details)
JOINT VENTURE (Details) $ in Millions | 1 Months Ended |
Apr. 30, 2019USD ($) | |
JOINT VENTURE | |
Equity ownership interest | 45.00% |
Consideration to be received | $ 26.9 |
Future royalty fees | $ 5.8 |
INDEBTEDNESS AND BORROWING FA_3
INDEBTEDNESS AND BORROWING FACILITY - Summary of Long-term Debt (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
INDEBTEDNESS | |||||
Total principal amount | $ 475.9 | $ 475.9 | $ 507.9 | ||
Less unamortized discount and debt issuance costs | (3.7) | (3.7) | (4.7) | ||
Total long-term debt | 472.2 | 472.2 | 503.2 | ||
Estimated fair value of long-term debt | 450.4 | 450.4 | 461.2 | ||
(Loss) gain on extinguishment of debt, net | (0.1) | $ (0.8) | 0.4 | $ (10.1) | |
Term Loan | |||||
INDEBTEDNESS | |||||
Total principal amount | 101 | 101 | 121 | ||
Principal amount repaid | 20 | ||||
(Loss) gain on extinguishment of debt, net | (0.1) | ||||
2022 Senior notes | |||||
INDEBTEDNESS | |||||
Total principal amount | $ 374.9 | 374.9 | $ 386.9 | ||
Principal amount repaid | 12 | ||||
(Loss) gain on extinguishment of debt, net | $ 0.5 |
INDEBTEDNESS AND BORROWING FA_4
INDEBTEDNESS AND BORROWING FACILITY - Revolving Credit Facility (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Revolving credit facility | |
Revolving Credit Facility | |
Borrowing base on line of credit | $ 115.4 |
Maximum borrowing capacity | $ 115.4 |
Minimum credit facility percentage | 10.00% |
Minimum maintained credit facility | $ 12.5 |
Fixed coverage ratio | 100.00% |
Revolving credit | $ 0 |
Maximum borrowing credit facility | 112.4 |
Revolving credit facility | Maximum | |
Revolving Credit Facility | |
Maximum borrowing capacity | 250 |
Letter of Credit | |
Revolving Credit Facility | |
Revolving credit | $ 3 |
LEASES (Details)
LEASES (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Remaining lease terms | 6 years | 6 years |
Options to extend | true | |
Options to terminate | true | |
Value at end of lease term | $ 0 | $ 0 |
Residual owed if value of leased assets is zero | 16.3 | 16.3 |
Components of our lease costs | ||
Operating lease cost | 5.8 | 12 |
Short-term lease cost | 1.4 | 2.7 |
Total lease cost | 7.2 | 14.7 |
Cash paid for amounts included in the measurement of our lease obligations | 12.2 | |
Right-of-use assets obtained in exchange for lease obligations | 10.5 | |
Operating lease right-of-use assets | $ 34.8 | $ 34.8 |
Weighted average remaining lease term (years) | 2 years 7 months 6 days | 2 years 7 months 6 days |
Weighted average discount rate | 4.90% | 4.90% |
Accounting Standards Update 2016-02 | ||
Components of our lease costs | ||
Operating lease right-of-use assets | $ 37.8 | $ 37.8 |
LEASES - Maturity of operating
LEASES - Maturity of operating lease liabilities (Details) $ in Millions | Jun. 30, 2019USD ($) |
Maturity of our operating leases | |
Remainder of 2019 | $ 9.5 |
2020 | 15.6 |
2021 | 10.9 |
2022 | 1.2 |
2023 | 1.2 |
2024 and thereafter | 1 |
Total lease payments | 39.4 |
Less imputed interest | (2.3) |
Total lease liabilities | $ 37.1 |
SHARE REPURCHASE (Details)
SHARE REPURCHASE (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Jun. 30, 2019 | May 31, 2019 | |
SHARE REPURCHASE | ||
Stock Repurchase Program, Authorized Amount | $ 100 | |
Stock Repurchase Program, Shares Repurchased | 761,000 | |
Stock Repurchase Program, Share Price | $ 6.11 | |
Stock Repurchase Program, Repurchase Amount | $ 4.6 | |
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 95.4 |
IMPAIRMENTS AND OTHER CHARGES -
IMPAIRMENTS AND OTHER CHARGES - Summary of Impairments and Other Charges (Details) - USD ($) $ in Millions | May 01, 2019 | Apr. 30, 2019 | May 31, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2019 |
Impairments and other charges | ||||||||
Supply commitment charges | $ 0.1 | $ 4 | $ 56.7 | $ 6 | ||||
Impairment of assets | 2.7 | 5.5 | ||||||
Inventory write down | 1.4 | |||||||
Total impairments and other charges | 2.8 | 4 | 63.6 | 6 | ||||
Reduction of commitments | $ 162 | |||||||
Estimated loss from commitments under contract | $ 55 | |||||||
Commitment amount | $ 21 | $ 47.9 | ||||||
Annual commitment amount accrued | 11 | 11 | ||||||
Total commitment amount accrued | 55 | 55 | $ 66 | |||||
Remaining annual commitment amount | $ 10 | |||||||
Other Impairments | 2.7 | |||||||
Amount of sand to be purchased annually to meet contract obligations | 1 | |||||||
Amount of sand to be purchased where charges may be reduced | 1 | |||||||
Supply commitment charges | $ 0.1 | $ 4 | $ 56.7 | $ 6 |
EARNINGS PER SHARE - (Details)
EARNINGS PER SHARE - (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | ||||||||
Net income (loss) | $ 5.9 | $ (55) | $ 103.6 | $ 78.7 | $ (49.1) | $ 182.3 | ||
Net reversal of convertible preferred stock accretion due to recapitalization of convertible preferred stock to common stock | 423.2 | |||||||
Net income (loss) attributable to common stockholders used for basic and diluted EPS computation | $ 5.9 | $ 103.6 | $ (49.1) | $ 605.5 | ||||
Denominator: | ||||||||
Weighted average shares used for basic EPS computation | 109.7 | 109.3 | 109.7 | 98.9 | ||||
Number of shares used for diluted EPS computation | 109.7 | 109.3 | 109.7 | 98.9 | ||||
Basic and diluted EPS | $ 0.05 | $ 0.95 | $ (0.45) | $ 6.12 | ||||
Estimated accreted amount | $ 1,132.7 | |||||||
Recapitalization of convertible preferred stock to common stock | $ 349.8 | |||||||
Share price | $ 6.11 | $ 6.11 | ||||||
Net reversal | $ 423.2 | |||||||
IPO | ||||||||
Numerator: | ||||||||
Net reversal of convertible preferred stock accretion due to recapitalization of convertible preferred stock to common stock | $ 423.2 | |||||||
Denominator: | ||||||||
Recapitalization of convertible preferred stock to common stock (in shares) | 39.4 | |||||||
Recapitalization of convertible preferred stock to common stock | $ 709.5 | |||||||
Share price | $ 18 | |||||||
Net reversal | $ 423.2 |
EARNINGS PER SHARE - Antidiluti
EARNINGS PER SHARE - Antidilutive Securities (Details) - shares shares in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Employee restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Number of common stock equivalents that were not included in calculation of diluted net earnings per share | 2.1 | 2.1 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | Feb. 22, 2019 | Nov. 12, 2018 | Jul. 19, 2018 | Jun. 24, 2015 | Jun. 30, 2019 |
Minimum | |||||
Purchase obligations due | |||||
Duration of purchase agreement (in years) | 1 year | ||||
Maximum | |||||
Purchase obligations due | |||||
Duration of purchase agreement (in years) | 6 years | ||||
Patterson Case | |||||
Litigation | |||||
Damages sought | $ 1 | ||||
Damages awarded value | $ 33 | $ 100 | |||
Glock Case | |||||
Litigation | |||||
Damages sought | $ 1 |