Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 07, 2019 | |
Entity Registrant Name | Cactus, Inc. | |
Entity Central Index Key | 0001699136 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Trading Symbol | WHD | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Class A Common Stock | ||
Entity Common Stock, Shares Outstanding | 46,780,909 | |
Class B Common Stock | ||
Entity Common Stock, Shares Outstanding | 28,329,012 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 88,116 | $ 70,841 |
Accounts receivable, net of allowance of $578 and $576, respectively | 107,873 | 92,269 |
Inventories | 108,182 | 99,837 |
Prepaid expenses and other current assets | 11,028 | 11,558 |
Total current assets | 315,199 | 274,505 |
Property and equipment, net | 148,856 | 142,054 |
Operating lease right-of-use assets, net | 25,110 | |
Goodwill | 7,824 | 7,824 |
Deferred tax asset, net | 244,359 | 159,053 |
Other noncurrent assets | 1,285 | 1,308 |
Total assets | 742,633 | 584,744 |
Current liabilities | ||
Accounts payable | 44,847 | 42,047 |
Accrued expenses and other current liabilities | 15,932 | 15,650 |
Current portion of liability related to tax receivable agreement | 9,574 | 9,574 |
Finance lease obligations, current portion | 6,956 | 7,353 |
Operating lease liabilities, current portion | 6,772 | |
Total current liabilities | 84,081 | 74,624 |
Deferred tax liability, net | 1,244 | 1,036 |
Liability related to tax receivable agreement, net of current portion | 214,968 | 138,015 |
Finance lease obligations, net of current portion | 7,225 | 8,741 |
Operating lease liabilities, net of current portion | 18,754 | |
Total liabilities | 326,272 | 222,416 |
Stockholders' / Members' equity (deficit) | ||
Additional paid-in capital | 189,902 | 126,418 |
Retained earnings | 78,490 | 51,683 |
Accumulated other comprehensive income (loss) | (259) | (820) |
Total stockholders' equity attributable to Cactus Inc. and members' equity (deficit) | 268,597 | 177,658 |
Non-controlling interest | 147,764 | 184,670 |
Total stockholders' equity | 416,361 | 362,328 |
Total liabilities and equity | 742,633 | 584,744 |
Class A Common Stock | ||
Stockholders' / Members' equity (deficit) | ||
Common stock, $0.01 par value | $ 464 | $ 377 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
Allowance for doubtful accounts receivable | $ 578 | $ 576 | |
Preferred stock, par value | $ 0.01 | $ 0.01 | |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |
Preferred stock, shares issued | 0 | 0 | |
Preferred stock, shares outstanding | 0 | 0 | |
Class A Common Stock | |||
Common stock, par value | $ 0.01 | $ 0.01 | |
Common stock, shares authorized | 300,000,000 | 300,000,000 | |
Common stock, shares issued | 46,391,000 | 37,654,000 | |
Common stock, shares outstanding | 46,390,804 | 37,654,000 | |
Class B Common Stock | |||
Common stock, par value | $ 0.01 | $ 0.01 | |
Common stock, shares authorized | 215,000,000 | ||
Common stock, shares issued | 28,718,000 | 37,236,000 | |
Common stock, shares outstanding | 28,718,409 | 37,236,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenues | ||
Total revenues | $ 158,875 | $ 115,110 |
Costs and expenses | ||
Selling, general and administrative expenses | 12,668 | 9,114 |
Total costs and expenses | 110,383 | 79,893 |
Income from operations | 48,492 | 35,217 |
Interest income (expense), net | 23 | (2,852) |
Other income (expense), net | (1,042) | (4,305) |
Income before income taxes | 47,473 | 28,060 |
Income tax expense (benefit) | (973) | 1,652 |
Net income | 48,446 | 26,408 |
Less: pre-IPO net income attributable to Cactus LLC | 13,648 | |
Less: net income attributable to non-controlling interest | 21,639 | 9,007 |
Net income attributable to Cactus Inc. | $ 26,807 | $ 3,753 |
Earnings per Class A Share - basic | $ 0.69 | $ 0.14 |
Earnings per Class A Share - diluted | $ 0.59 | $ 0.14 |
Weighted average Class A Shares outstanding - diluted | 75,246 | 26,648 |
Product revenue | ||
Revenues | ||
Total revenues | $ 86,640 | $ 58,926 |
Costs and expenses | ||
Cost of revenue | 53,018 | 37,066 |
Rental revenue | ||
Revenues | ||
Total revenues | 38,497 | 29,145 |
Costs and expenses | ||
Cost of revenue | 17,791 | 12,176 |
Field service and other revenue | ||
Revenues | ||
Total revenues | 33,738 | 27,039 |
Costs and expenses | ||
Cost of revenue | $ 26,906 | $ 21,537 |
Class A Common Stock | ||
Costs and expenses | ||
Earnings per Class A Share - basic | $ 0.69 | $ 0.14 |
Earnings per Class A Share - diluted | $ 0.59 | $ 0.14 |
Weighted average Class A Shares outstanding - basic | 38,719 | 26,450 |
Weighted average Class A Shares outstanding - diluted | 75,246 | 26,648 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income (loss) | $ 48,446 | $ 26,408 |
Foreign currency translation | 270 | 239 |
Comprehensive income (loss) | 48,716 | 26,647 |
Less: pre-IPO comprehensive income attributable to Cactus LLC | 13,928 | |
Less: comprehensive income attributable to non-controlling interest | 21,786 | 8,981 |
Comprehensive income attributable to Cactus Inc. | $ 26,930 | $ 3,738 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands | Class A Common StockCommon stock | Class B Common StockCommon stock | Members' Equity (Deficit) | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interest | Total |
Balance at the beginning of the period at Dec. 31, 2017 | $ (36,299) | $ 82 | $ (36,217) | |||||
Statement of Stockholders'/Members' Equity | ||||||||
Member distributions prior to IPO | (26,000) | (26,000) | ||||||
Net income prior to IPO and Reorganization | (13,648) | (13,648) | ||||||
Effect of IPO and Reorganization | $ 265 | $ 48,651 | $ 71,195 | $ 130,861 | 250,972 | |||
Effect of IPO and Reorganization (shares) | 26,450 | 48,440 | ||||||
Member distribution after IPO | (41) | (41) | ||||||
Additional paid-in capital related to tax receivable agreement | 11,116 | 11,116 | ||||||
Other comprehensive income | 239 | 239 | ||||||
Stock-based compensation | 834 | 834 | ||||||
Net income after IPO and Reorganization | $ 3,753 | 9,007 | 12,760 | |||||
Balance at the end of the period at Mar. 31, 2018 | $ 265 | 83,145 | 3,753 | 321 | 139,827 | 227,311 | ||
Balance at the end of the period (shares) at Mar. 31, 2018 | 26,450 | 48,440 | ||||||
Balance at the beginning of the period at Dec. 31, 2018 | $ 377 | 126,418 | 51,683 | (820) | 184,670 | 362,328 | ||
Balance at the beginning of the period (shares) at Dec. 31, 2018 | 37,654 | 37,236 | ||||||
Statement of Stockholders'/Members' Equity | ||||||||
Correction to equity reclassification related to prior equity offering | 14,035 | 488 | (14,523) | |||||
Member distribution after IPO | (235) | (235) | ||||||
Effect of Follow-on Offering and CW redemptions | $ 85 | 43,899 | (50) | (43,934) | ||||
Effect of Follow-on Offering and CW redemptions (in shares) | 8,518 | (8,518) | ||||||
Adjustment to deferred tax asset from CW Unit redemptions | (8,232) | (8,232) | ||||||
Additional paid-in capital related to tax receivable agreement | 13,580 | 13,580 | ||||||
Other comprehensive income | 123 | 147 | 270 | |||||
Equity award vestings | $ 2 | (1,474) | (1,472) | |||||
Equity award vestings (in shares) | 219 | |||||||
Stock-based compensation | 1,676 | 1,676 | ||||||
Net income after IPO and Reorganization | 26,807 | 21,639 | 48,446 | |||||
Balance at the end of the period at Mar. 31, 2019 | $ 464 | $ 189,902 | $ 78,490 | $ (259) | $ 147,764 | $ 416,361 | ||
Balance at the end of the period (shares) at Mar. 31, 2019 | 46,391 | 28,718 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities | ||
Net income (loss) | $ 48,446 | $ 26,408 |
Reconciliation of net income (loss) to net cash provided by operating activities | ||
Depreciation and amortization | 8,881 | 6,621 |
Debt discount and deferred loan cost amortization | 42 | 219 |
Stock-based compensation | 1,676 | 834 |
Inventory obsolescence | 224 | 451 |
Loss on disposal of assets | 863 | 29 |
Deferred income taxes | (2,796) | 963 |
Loss on debt extinguishment | 4,305 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (15,597) | (419) |
Inventories | (8,875) | (5,594) |
Prepaid expenses and other assets | 2,156 | (56) |
Accounts payable | 192 | 792 |
Accrued expenses and other liabilities | 737 | 4,012 |
Operating lease liabilities | (1,710) | |
Net cash provided by operating activities | 34,239 | 38,565 |
Cash flows from investing activities | ||
Capital expenditures and other | (14,655) | (16,127) |
Proceeds from sale of assets | 808 | 440 |
Net cash used in investing activities | (13,847) | (15,687) |
Cash flows from financing activities | ||
Principal payments on long-term debt | (248,529) | |
Payments on capital leases | 1,846 | |
Payments on capital leases | (1,266) | |
Net proceeds from equity offerings | 469,621 | |
Distributions to members | (235) | (26,041) |
Redemption of CW Units | (216,425) | |
Repurchase of shares | (1,474) | |
Net cash used in financing activities | (3,555) | (22,640) |
Effect of exchange rate changes on cash and cash equivalents | 438 | 48 |
Net increase (decrease) in cash and cash equivalents | 17,275 | 286 |
Cash and cash equivalents | ||
Beginning of period | 70,841 | 7,574 |
End of period | $ 88,116 | $ 7,860 |
Organization and Nature of Oper
Organization and Nature of Operations | 3 Months Ended |
Mar. 31, 2019 | |
Organization and Nature of Operations | |
Organization and Nature of Operations | 1. Organization and Nature of Operations Description of Business Cactus, Inc. (“Cactus Inc.”) and its consolidated subsidiaries, including Cactus Wellhead, LLC (“Cactus LLC”) are primarily engaged in the design, manufacture and sale of wellhead and pressure control equipment. In addition, we maintain a fleet of frac valves and ancillary equipment for short-term rental, as well as offer repair and refurbishment services and the provision of service crews to assist in the installation and operations of pressure control systems. We operate through U.S. service centers located in Texas, Pennsylvania, Oklahoma, North Dakota, New Mexico, Louisiana, Colorado and Wyoming, and in Eastern Australia, with our corporate headquarters located in Houston, Texas. Cactus Inc. was incorporated on February 17, 2017 as a Delaware corporation for the purpose of completing an initial public offering of equity and related transactions, which was completed on February 12, 2018 (our “IPO”). Cactus Inc. is a holding company whose only material asset is an equity interest consisting of units representing limited liability company interests in Cactus LLC (“CW Units”). Cactus Inc. became the sole managing member of Cactus LLC upon completion of our IPO. Cactus LLC is a Delaware limited liability company and was formed on July 11, 2011. Except as otherwise indicated or required by the context, all references to “Cactus,” “we,” “us” and “our” refer to Cactus Inc. and its consolidated subsidiaries (including Cactus LLC) following the completion of our IPO and Cactus LLC and its consolidated subsidiaries prior to the completion of our IPO. As the sole managing member of Cactus LLC, Cactus Inc. operates and controls all of the business and affairs of Cactus LLC and conducts its business through Cactus LLC and its subsidiaries. As a result, Cactus Inc. consolidates the financial results of Cactus LLC and its subsidiaries and reports non-controlling interest related to the portion of CW Units not owned by Cactus Inc., which reduces net income attributable to holders of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”). Redemptions of CW Units Pursuant to the First Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus LLC Agreement”), each holder of CW Units (“CW Unit Holder”) has, subject to certain limitations, the right (the “Redemption Right”) to cause Cactus LLC to acquire all or at least a minimum portion of its CW Units for, at Cactus LLC’s election, (x) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each CW Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an equivalent amount of cash. Alternatively, upon the exercise of the Redemption Right, Cactus Inc. (instead of Cactus LLC) will have the right (the “Call Right”) to acquire each tendered CW Unit directly from the exchanging CW Unit Holder for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, or (y) an equivalent amount of cash. In connection with any redemption of CW Units pursuant to the Redemption Right or our Call Right, the corresponding number of shares of Class B common stock, par value $0.01 per share (“Class B common stock”), will be canceled. The following is a rollforward of ownership of CW Units, reflecting redemptions of CW Units occurring since our IPO: No. of CW Units CW Units held by legacy CW Unit Holders as of February 7, 2018 60,557,613 IPO (12,117,841) July 2018 follow-on offering (11,196,562) Other CW Unit redemptions (7,068) CW Units held by legacy CW Unit Holders as of December 31, 2018 37,236,142 March 2019 Secondary Offering (8,473,913) Other CW Unit redemptions (43,820) CW Units held by legacy CW Unit Holders as of March 31, 2019 28,718,409 On March 19, 2019, Cactus Inc. entered into an underwriting agreement by and among the Company, Cactus LLC, certain selling stockholders of the Company (the “Selling Stockholders”) and the underwriters named therein, providing for the offer and sale of Class A common stock by the Selling Stockholders (the “March 2019 Secondary Offering”). As described in the prospectus supplement dated March 19, 2019 and filed with the Securities and Exchange Commission on March 20, 2019, in connection with the March 2019 Secondary Offering, certain Selling Stockholders owning CW Units exercised their Redemption Right with respect to 8,473,913 CW Units, together with a corresponding number of shares of Class B common stock, as provided in the Cactus LLC Agreement. The March 2019 Secondary Offering closed on March 21, 2019, at which time, in exercise of its Call Right, Cactus Inc. acquired the redeemed CW Units and a corresponding number of shares of Class B common stock (which shares of Class B common stock were then canceled) and issued 8,473,913 shares of Class A common stock to the underwriters at the direction of the redeeming Selling Stockholders, as provided in the Cactus LLC Agreement. In addition, certain other Selling Stockholders sold 26,087 shares of Class A common stock in the March 2019 Secondary Offering, which shares were owned by them directly prior to the closing of this offering. The Company did not receive any of the proceeds from the sale of common stock in the March 2019 Secondary Offering. The Company incurred $1.0 million in offering expenses which were recorded in other income (expense), net, in the consolidated statement of income for the three months ended March 31, 2019. As a result of the March 2019 Secondary Offering and other CW Unit redemptions during the first quarter of 2019, Cactus Inc. increased its ownership in Cactus LLC and accordingly increased its equity by $43.9 million from the non-controlling interest. We also recorded additional liability under the TRA (defined below). During the quarter ended March 31, 2019, we corrected for misstatements of equity between Cactus Inc. and non-controlling interest related to our July 2018 follow-on offering to reduce non-controlling interest by $14.5 million and increase additional paid-in capital by $14.0 million and accumulated other comprehensive income by $0.5 million. This relates to immaterial errors associated with the ownership percentage change used in the underlying calculation giving effect to the offering. This correction had no impact to total assets, total liabilities, total equity or on our consolidated results of operations or cash flows. These corrections were not material to any prior period consolidated financial statements. Ownership As of March 31, 2019, Cactus Inc. owned 61.8% of Cactus LLC, and as of December 31, 2018, Cactus Inc. owned 50.3% of Cactus LLC. As of March 31, 2019, Cactus Inc. had outstanding 46,390,804 shares of Class A common stock (representing 61.8% of the total voting power) and 28,718,409 shares of Class B common stock (representing 38.2% of the total voting power). Tax Receivable Agreement In connection with our IPO, we entered into a tax receivable agreement (the “TRA”) with certain direct and indirect owners of Cactus LLC (the “TRA Holders”). The TRA generally provides for the payment by Cactus Inc. to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances. Cactus Inc. will retain the benefit of the remaining 15% of these net cash savings. See Note 2 for further details of the TRA. |
Preparation of Interim Financia
Preparation of Interim Financial Statements and Other Items | 3 Months Ended |
Mar. 31, 2019 | |
Summary of Significant Accounting Policies and Other Items | |
Preparation of Interim Financial Statements and Other Items | 2. Preparation of Interim Financial Statements and Other Items Basis of Presentation The unaudited condensed consolidated financial statements (“consolidated financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These consolidated financial statements include the accounts of Cactus Inc. and its wholly owned subsidiaries. Accordingly, these consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our Annual Report on Form 10‑K for the year ended December 31, 2018. All significant inter-company transactions and balances have been eliminated upon consolidation. The consolidated financial statements include all adjustments, which are of a normal recurring nature, unless otherwise disclosed, necessary for a fair statement of the consolidated financial statements for the interim periods. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. As discussed in Note 1, as a result of our IPO and related equity transactions (the “Reorganization”), Cactus Inc. is the sole managing member of Cactus LLC and consolidates the financial results of Cactus LLC and its subsidiaries and reports a non-controlling interest related to the portion of CW Units not owned by Cactus Inc., which reduces net income attributable to holders of Class A common stock. The Reorganization was considered a transaction between entities under common control. As a result, the financial statements for periods prior to our IPO and the Reorganization have been adjusted to combine the previously separate entities for presentation purposes. Limitation of Members’ Liability Under the terms of the Cactus LLC Agreement, the members of Cactus LLC are not obligated for debt, liabilities, contracts or other obligations of Cactus LLC. Profits and losses are allocated to members as defined in the Cactus LLC Agreement. Interim Period Tax Allocation For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. Net income attributable to Cactus Inc. includes Cactus Inc.’s share of income tax expense, which includes U.S. federal and state income tax expense, and net income attributable to non-controlling interest includes non-controlling interests’ share of income tax expense, which is not subject to U.S. federal and state income tax expense. Stock-based Compensation We measure the cost of equity-based awards based on the grant date fair value, and we allocate the compensation expense over the corresponding service period, which is usually the vesting period, using the straight-line method. All grant date fair values are expensed immediately for awards that are fully vested as of the grant date. Significant Customers For the three months ended March 31, 2019, one customer represented 12% of consolidated revenues, and no other customers represented 10% or more of our consolidated revenues during the period. For the three months ended March 31, 2018, one customer represented 11% of our consolidated revenues, and no other customers represented 10% or more of our consolidated revenues during this period. Significant Vendors We purchase a significant portion of supplies, equipment and machined components from a single vendor. For the three months ended March 31, 2019 and 2018, purchases from this vendor totaled $12.7 million and $ 10.4 million, respectively. These figures represent approximately 20% and 21% for the respective periods of our total third-party vendor purchases of raw materials, finished products, equipment, machining and other services. Amounts due to the vendor included in accounts payable in the consolidated balance sheets as of March 31, 2019 and December 31, 2018 totaled $6.7 million and $5.0 million, respectively. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include but are not limited to estimated losses on accounts receivable, estimated realizable value on excess and obsolete inventory, estimates related to fair value of reporting units for purposes of assessing goodwill and other indefinite-lived intangible assets for impairment, assessments of all long-lived assets for possible impairment and estimates of deferred tax assets related to the step-up in basis under the TRA and the associated liability under the TRA. Actual results could differ from those estimates. Tax Receivable Agreement As discussed above, pursuant to the Cactus LLC Agreement, each TRA Holder has, subject to certain limitations, the right to cause Cactus LLC to acquire all or at least a minimum portion of its CW Units for, at Cactus LLC’s election, (x) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each CW Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an equivalent amount of cash. Alternatively, upon the exercise of the Redemption Right, Cactus Inc. (instead of Cactus LLC) will have the Call Right to acquire each tendered CW Unit directly from the exchanging TRA Holder for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, or (y) an equivalent amount of cash. In connection with any redemption of CW Units pursuant to the Redemption Right or our Call Right, the corresponding number of shares of Class B common stock will be canceled. Cactus LLC has made for itself (and for each of its direct or indirect subsidiaries that is treated as a partnership for U.S. federal income tax purposes and that it controls) an election under Section 754 of the Internal Revenue Code (the “Code”) that became effective in 2018 and for each taxable year in which a redemption of CW Units pursuant to the Redemption Right or the Call Right occurs. Pursuant to the Section 754 election, redemptions of CW Units pursuant to the Redemption Right or the Call Right are expected to result in adjustments to the tax basis of the tangible and intangible assets of Cactus LLC. These adjustments will be allocated to Cactus Inc. In addition, the repayment of borrowings outstanding under the Cactus LLC term loan facility in connection with our IPO resulted in adjustments to the tax basis of the tangible and intangible assets of Cactus LLC, a portion of which will be allocated to Cactus Inc following its acquisition or deemed acquisition of CW Units from the CW Unit Holders. Such adjustments to the tax basis of the tangible and intangible assets of Cactus LLC would not have been available to Cactus Inc. absent its acquisition or deemed acquisition of CW Units pursuant to the exercise of the Redemption Right or the Call Right. These basis adjustments are expected to increase (for tax purposes) Cactus Inc.’s depreciation and amortization deductions and may also decrease Cactus Inc.’s gains (or increase its losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Such increased deductions and losses and reduced gains may reduce the amount of tax that Cactus Inc. would otherwise be required to pay in the future. The TRA generally provides for the payment by Cactus Inc. to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances as a result of (i) certain increases in tax basis that occur as a result of Cactus Inc.’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s CW Units in connection with our IPO or any subsequent offering, or pursuant to any other exercise of the Redemption Right or the Call Right, (ii) certain increases in tax basis resulting from the repayment of borrowings outstanding under Cactus LLC’s term loan facility in connection with our IPO and (iii) imputed interest deemed to be paid by Cactus Inc. as a result of, and additional tax basis arising from, any payments Cactus Inc. makes under the TRA. We will retain the benefit of the remaining 15% of the cash savings. The payment obligations under the TRA are Cactus Inc.’s obligations and not obligations of Cactus LLC, and we expect that the payments we will be required to make under the TRA will be substantial. We have determined that it is more likely than not that actual cash tax savings will be realized by Cactus Inc. from the tax benefits resulting from the CW Unit redemptions pursuant to the Redemption Right or the Call Right. Accordingly, the TRA is expected to result in future payments, and we have recorded a total liability from the TRA of $224.5 million included in the current portion and long-term portion of the liability related to tax receivable agreement in the consolidated balance sheet as of March 31, 2019. Future redemptions of CW Units will create additional liability and follow the same accounting procedures. Estimating the amount and timing of payments that may become due under the TRA is by its nature imprecise and the assumptions used in the estimate can change. For purposes of the TRA, net cash savings in tax generally will be calculated by comparing Cactus Inc.’s actual tax liability (determined by using the actual applicable U.S. federal income tax rate and an assumed combined state and local income tax rate) to the amount it would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRA. The amounts payable, as well as the timing of any payments under the TRA, are dependent upon significant future events and assumptions, including the timing of the redemption of CW Units, the price of our Class A common stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming unit holder’s tax basis in its CW Units at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future and the U.S. federal, state and local income tax rate then applicable, and the portion of Cactus Inc.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis. A delay in the timing of redemptions of CW Units, holding other assumptions constant, would be expected to decrease the discounted present value of the amounts payable under the TRA as the benefit of the depreciation and amortization deductions would be delayed and the estimated increase in tax basis could be reduced as a result of allocations of Cactus LLC taxable income to the redeeming unit holder prior to the redemption. Stock price increases or decreases at the time of each redemption of CW Units would be expected to result in a corresponding increase or decrease in the undiscounted amounts payable under the TRA in an amount equal to 85% of the tax-effected change in price. The amounts payable under the TRA are dependent upon Cactus Inc. having sufficient future taxable income to utilize the tax benefits on which it is required to make payments under the TRA. If Cactus Inc.’s projected taxable income is significantly reduced, the expected payments would be reduced to the extent such tax benefits do not result in a reduction of Cactus Inc.’s future income tax liabilities. It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding liability from the TRA. Moreover, there may be a negative impact on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the TRA exceed the actual benefits we realize in respect of the tax attributes subject to the TRA or (ii) distributions to Cactus Inc. by Cactus LLC are not sufficient to permit Cactus Inc. to make payments under the TRA after it has paid its taxes and other obligations. The payments under the TRA will not be conditional on a holder of rights under the TRA having a continued ownership interest in either Cactus LLC or Cactus Inc. In addition, although we are not aware of any issue that would cause the Internal Revenue Service (“IRS”) or other relevant tax authorities to challenge potential tax basis increases or other tax benefits covered under the TRA, the TRA Holders will not reimburse us for any payments previously made under the TRA if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any such holder will be netted against payments otherwise to be made, if any, to such holder after our determination of such excess. As a result, in such circumstances, Cactus Inc. could make payments that are greater than its actual cash tax savings, if any, and may not be able to recoup those payments. We account for any amounts payable under the TRA in accordance with Accounting Standard Codification (“ASC”) Topic 450, Contingencies. We will recognize subsequent changes to the measurement of the liability from the TRA in the income statement as a component of income before taxes. In the case of any changes to any valuation allowance associated with the underlying tax asset, given the link between the tax savings generated and the recognition of the liability from the TRA (i.e., one is recorded based on 85% of the other), and the explicit guidance in ASC 740-20-45-11(g) which requires that subsequent changes in a valuation allowance established against deferred tax assets that arose due to change in tax basis as a result of a transaction among or with shareholders to be recorded in the income statement as opposed to equity, we believe recording of the corollary adjustment to the liability from the TRA in the income statement is appropriate. The term of the TRA commenced upon completion of our IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we exercise our right to terminate the TRA. In the event that the TRA is not terminated, the payments under the TRA are anticipated to commence in 2019 and to continue for 16 years after the date of the last redemption of CW Units. Accordingly, it is expected that payments will continue to be made under the TRA for more than 25 years. If we elect to terminate the TRA early (or it is terminated early due to certain mergers, asset sales, other forms of business combinations or other changes of control), our obligations under the TRA would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA (determined by applying a discount rate of one-year LIBOR plus 150 basis points) and such payment is expected to be substantial. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the TRA, including the assumptions that (i) we have sufficient taxable income to fully utilize the tax benefits covered by the TRA and (ii) any CW Units (other than those held by Cactus Inc.) outstanding on the termination date are deemed to be redeemed on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates. The TRA provides that in the event that we breach any of our material obligations under the TRA, whether as a result of (i) our failure to make any payment when due (including in cases where we elect to terminate the TRA early, the TRA is terminated early due to certain mergers, asset sales, or other forms of business combinations or changes of control or we have available cash but fail to make payments when due under circumstances where we do not have the right to elect to defer the payment, as described below), (ii) our failure to honor any other material obligation under it or (iii) by operation of law as a result of the rejection of the TRA in a case commenced under the U.S. Bankruptcy Code or otherwise, then the TRA Holders may elect to treat such breach as an early termination, which would cause all our payment and other obligations under the TRA to be accelerated and become due and payable applying the same assumptions described above. As a result of either an early termination or a change of control, we could be required to make payments under the TRA that exceed the actual cash tax savings under the TRA. In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control. Decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by the TRA Holders under the TRA. For example, the earlier disposal of assets following a redemption of CW Units may accelerate payments under the TRA and increase the present value of such payments, and the disposal of assets before a redemption of CW Units may increase the TRA Holders’ tax liability without giving rise to any rights of the TRA Holders to receive payments under the TRA. Such effects may result in differences or conflicts of interest between the interests of the TRA Holders and other shareholders. Payments generally are due under the TRA within five business days following the finalization of the schedule with respect to which the payment obligation is calculated. However, interest on such payments will begin to accrue from the due date (without extensions) of our U.S. federal income tax return for the period to which such payments relate until such payment due date at a rate equal to one-year LIBOR plus 150 basis points. Except in cases where we elect to terminate the TRA early or it is otherwise terminated as described above, generally we may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA. Any such deferred payments under the TRA generally will accrue interest from the due date for such payment until the payment date at a rate of one-year LIBOR plus 550 basis points. However, interest will accrue from the due date for such payment until the payment date at a rate of one-year LIBOR plus 150 basis points if we are unable to make such payment as a result of limitations imposed by our credit facility. We have no present intention to defer payments under the TRA. Because we are a holding company with no operations of our own, our ability to make payments under the TRA is dependent on the ability of Cactus LLC to make distributions to us in an amount sufficient to cover our obligations under the TRA. This ability, in turn, may depend on the ability of Cactus LLC’s subsidiaries to make distributions to it. The ability of Cactus LLC, its subsidiaries and other entities in which it directly or indirectly holds an equity interest to make such distributions will be subject to, among other things, the applicable provisions of Delaware law (or other applicable jurisdiction) that may limit the amount of funds available for distribution and restrictions in relevant debt instruments issued by Cactus LLC or its subsidiaries and other entities in which it directly or indirectly holds an equity interest. Additionally, distributions made by Cactus LLC are generally required to be made pro-rata among all of its members, including legacy CW Unit Holders, which could be significant. To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid. Emerging Growth Company status Cactus is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which our total annual gross revenue is at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter (following twelve months from our IPO), and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies. We have irrevocably opted out of the extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. Recent Accounting Pronouncements Standards Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification (“ASC”) and creates Topic 842, Leases. On January 1, 2019, we adopted ASC Topic 842, which is effective for interim and annual reporting periods beginning on or after December 15, 2018. This Topic requires balance sheet recognition of lease assets and lease liabilities for leases classified as operating leases under previous GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. To adopt Topic 842, we elected the modified retrospective approach and as of January 1, 2019, there was no cumulative-effect adjustment required to the opening balance of retained earnings. We completed a review of contracts representative of our business and assessed the terms under the new standard. Adoption of the standard resulted in the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases on our consolidated balance sheets, but did not have a material impact on our consolidated statements of income and consolidated statements of comprehensive income or consolidated statements of cash flows. Our accounting for finance leases remained substantially unchanged. Adoption of this standard resulted in the recognition of operating lease right-of-use assets of $25.3 million, reversal of previously recorded deferred rent of $0.5 million, and corresponding operating short-term and long-term lease liabilities of $6.2 million and $19.6 million, respectively, on the consolidated balance sheet as of January 1, 2019. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 7. In addition, we utilized the package of practical expedients permitted under the transition guidance within the standard. The expedient package allowed us to not reassess whether existing contracts contained a lease, to not reassess the lease classification of existing leases, and to not consider the initial direct cost for existing leases. In addition to the package of practical expedients, we also utilized expedients allowing for the exclusion of leases with terms of less than twelve months across all asset classes, the portfolio approach to determine discount rates, the election to not separate non-lease components from lease components and to not apply the use of hindsight to the existing lease population. As a lessor, recognition of lease revenue associated with short-term equipment rentals remained consistent with previous guidance and the adoption of this standard did not have a significant impact on our consolidated statements of income. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. We adopted this ASU on January 1, 2019. The adoption of this pronouncement did not have an impact on our consolidated financial statements. Standards Not Yet Adopted In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other, which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the new standard, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this pronouncement will have a material impact on our consolidated financial statements. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2019 | |
Inventories | |
Inventories | 3. Inventories Inventories consist of the following: March 31, December 31, 2019 2018 Raw materials $ 1,890 $ 1,925 Work-in-progress 4,254 3,582 Finished goods 102,038 94,330 $ 108,182 $ 99,837 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2019 | |
Property and Equipment [Abstract] | |
Property, Plant and Equipment Disclosure [Text Block] | 4. Property and Equipment Property and equipment consists of the following: March 31, December 31, 2019 2018 Land $ 3,646 $ 3,614 Buildings and improvements 20,368 20,803 Machinery and equipment 49,132 47,606 Finance lease right-of-use asset 24,674 25,165 Rental equipment 135,980 124,002 Furniture and fixtures 1,672 1,623 Computers and software 3,214 3,094 Gross property and equipment 238,686 225,907 Less: Accumulated depreciation (102,441) (96,412) Net property and equipment 136,245 129,495 Construction in progress 12,611 12,559 Total property and equipment, net $ 148,856 $ 142,054 |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2019 | |
Long-term Debt. | |
Long-term Debt | 5. Long-term Debt We had no long-term debt outstanding as of March 31, 2019 and December 31, 2018. Credit Agreement On August 21, 2018, Cactus LLC entered into a five-year senior secured asset-based revolving credit facility with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent for such lenders and as an issuing bank and swingline lender (the “ABL Credit Facility”). The ABL Credit Facility provides for $75.0 million in revolving commitments, up to $15.0 million of which is available for the issuance of letters of credit. Subject to certain terms and conditions set forth in the ABL Credit Facility, Cactus LLC may request additional revolving commitments in an amount not to exceed $50.0 million, for a total of up to $125.0 million in revolving commitments. The ABL Credit Facility matures on August 21, 2023. The maximum amount that Cactus LLC may borrow under the ABL Credit Facility is subject to a borrowing base, which is based on a percentage of eligible accounts receivable and eligible inventory, subject to reserves and other adjustments. At March 31, 2019, in accordance with the terms of our borrowing base, we had access to the full $75.0 million revolving credit facility capacity. The ABL Credit Facility replaced Cactus LLC’s prior credit agreement, dated as of July 31, 2014, with Credit Suisse AG, as administrative agent, collateral agent and issuing bank, and the other lenders party thereto (the “Prior Credit Agreement”). The Prior Credit Agreement provided for a term loan tranche in an aggregate principal amount of $275.0 million, the outstanding balance of which was repaid in full in February 2018 with the net proceeds of our IPO, and a revolving credit facility (the “Prior Revolving Credit Facility”) of up to $50.0 million with a $10.0 million sublimit for letters of credit. The Prior Credit Agreement was terminated concurrently with the effectiveness of, and as a condition of entering into, the ABL Credit Facility. No loans or letters of credit under the Prior Credit Agreement were outstanding at the time of, or were repaid in connection with, such termination. The Prior Credit Agreement was scheduled to mature on July 31, 2019. Cactus LLC’s obligations under the ABL Credit Facility are secured by liens on Cactus LLC’s assets, other than equipment, intellectual property and real estate. Any subsidiary of Cactus LLC that is considered material pursuant to the ABL Credit Facility will be required to (i) guarantee on an unconditional basis all of Cactus LLC’s obligations under the ABL Credit Facility and (ii) grant a lien to secure such guarantee on its assets, other than equipment, intellectual property and real estate. Borrowings under the ABL Credit Facility bear interest at Cactus LLC’s option at either (i) the Alternate Base Rate (as defined therein) (“ABR”), or (ii) the Adjusted LIBO Rate (as defined therein) (“Eurodollar”), plus, in each case, an applicable margin. Letters of credit issued under the ABL Credit Facility accrue fees at a rate equal to the applicable margin for Eurodollar borrowings. The applicable margin ranges from 0.50% to 1.00% per annum for ABR borrowings and 1.50% to 2.00% per annum for Eurodollar borrowings and, in each case, is based on the average quarterly availability under the ABL Credit Facility for the immediately preceding fiscal quarter. The unused portion of the ABL Credit Facility is subject to a commitment fee that varies from 0.250% to 0.375% per annum, according to the average quarterly availability under the ABL Credit Facility for the immediately preceding fiscal quarter. The ABL Credit Facility contains various covenants and restrictive provisions that limit Cactus LLC’s and each of its subsidiaries’ ability to, among other things: · incur additional indebtedness and create liens; · make investments or loans; · enter into asset sales; · make certain restricted payments and distributions; and · engage in transactions with affiliates. The ABL Credit Facility also requires Cactus LLC to maintain a fixed charge coverage ratio of 1.0 to 1.0 based on the ratio of EBITDA (as defined therein) minus Unfinanced Capital Expenditures (as defined therein) to Fixed Charges (as defined therein) during certain periods, including when availability under the ABL Credit Facility is under certain levels. If Cactus LLC fails to perform its obligations under the ABL Credit Facility, (i) the commitments under the ABL Credit Facility could be terminated, (ii) any outstanding borrowings under the ABL Credit Facility may be declared immediately due and payable and (iii) the lenders may commence foreclosure or other actions against the collateral. At March 31, 2019 and December 31, 2018, although there were no borrowings outstanding under the ABL Credit Facility, the applicable margin on our Eurodollar borrowings was 1.5% plus an adjusted base rate of one or three month LIBOR. As of March 31, 2019 and December 31, 2018, we were in compliance with all covenants under the ABL Credit Facility. Loss on Debt Extinguishment During the first quarter of 2018, we recorded a $4.3 million loss on early extinguishment of debt in conjunction with the repayment of the term loan portion of the Prior Credit Agreement with a portion of the net proceeds from our IPO. The loss consists of the write-off of the unamortized balance of debt discount and deferred loan costs of $2.1 million and $2.2 million, respectively. The loss on debt extinguishment is included under other income (expense), net, in the consolidated statements of income. |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2019 | |
Revenue Recognition | |
Revenue from Contract with Customer [Text Block] | 6. Revenue Revenue Recognition The majority of our revenues are derived from short-term contracts. Product sales generally do not include right of return or other significant post-delivery obligations. Revenues are recognized when we satisfy a performance obligation by transferring control of the promised goods or services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration we expect to be entitled to in exchange for those goods or services. We also assess our customers’ ability and intention to pay, which is based on a variety of factors including our customers’ historical payment experience and financial condition. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 days. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We elected to treat shipping and handling associated with outbound freight as a fulfillment cost instead of as a separate performance obligation. We recognize the cost for shipping and handling when incurred as an expense in cost of sales. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services. For contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. In accordance with Topic 606, we do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. All of our contracts are less than one year in duration. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. Disaggregation of Revenue We disaggregate revenue from contracts with customers into three revenue categories: (i) product revenues, (ii) rental revenues and (iii) field service and other revenues. Approximately 99% of our revenues are from the United States. For the three months ended March 31, 2019, we derived 55% of our total revenues from the sale of our products, 24% of our total revenues from rental and 21% of our total revenues from field service and other. This compares to 51% of our total revenues from the sale of our products, 25% of our total revenues from rental and 24% of our total revenues from field service and other for the three months ended March 31, 2018. Contract Balances We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance can differ from the timing of invoicing and our customers’ payments, which can result in the recording of unbilled revenue and deferred revenue. Amounts in the consolidated balance sheet as of March 31, 2019 representing unbilled revenue within accounts receivable, net, were $20.3 million, and amounts representing deferred revenue within accrued expenses and other current liabilities were $1.6 million. This compares to an unbilled revenue balance of $26.8 million and a deferred revenue balance of $1.1 million as of December 31, 2018. Contract Costs We do not incur any material costs of obtaining contracts. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Lease disclosures | 7. Leases We have operating and finance leases for real estate, apartments, forklifts, vehicles and trucks, and other equipment under non-cancellable agreements whose initial terms typically range from two to 10 years, including reasonably certain renewal options. We determine if these contracts are or contain a lease at inception and review the facts and circumstances of the arrangement to classify the leased asset as operating or finance under Topic 842. To assess whether a contract is or contains a lease, we consider whether (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) whether we obtain substantially all the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract. The portion of active leases within our portfolio classified as operating leases under the new standard are included in operating lease right-of-use assets and short-term and long-term operating lease liabilities in our consolidated balance sheet. The finance leases portion of the active lease agreements are included in property and equipment and short-term and long-term finance lease obligations in our consolidated balance sheet. The ROU assets represent our right to use the underlying asset for the lease term and lease liabilities represent our obligation to make minimum lease payments arising from the lease for the duration of the lease term. Certain of our leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or greater. The exercise of lease renewal options is typically at our discretion. Additionally, many leases contain early termination clauses, however, in our active lease agreements, early termination typically requires the concurrence of both parties to the lease. The measurement of the lease term includes options to extend or renew the lease when it is reasonably certain that we will exercise that option. We do not have leases that include options to purchase leased property or that provide for the automatic transfer of ownership of leased property to the Company, residual value guarantees, or the incurrence by the Company of other restrictions or covenants. To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable; however, many of our leases do not provide an implicit rate, therefore to determine the present value of minimum lease payments we use our incremental borrowing rate based on the information available at commencement date of the lease. Our finance lease agreements typically include an interest rate that is used to determine the present value of future lease payments. Under Topic 842, minimum lease payments are expensed on a straight-line basis over the term of the lease, including reasonably certain renewal options. In addition, some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments for which we are typically responsible include payment of real estate taxes and maintenance expenses. These payments are expensed as incurred and recorded as variable lease costs. The following are the components of operating and finance lease costs: Three Months Ended March 31, 2019 Finance lease cost: Amortization of right-of-use asset $ 1,881 Interest expense 203 Operating lease cost 1,865 Short-term lease cost 175 Variable lease cost 127 Sublease income (99) Total lease cost $ 4,152 The following is supplemental cash flow information for our operating and finance leases: Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 203 Operating cash flows from operating leases 1,710 Financing cash flows from finance leases 1,846 Total $ 3,759 Right-of-use assets obtained in exchange for new lease obligations: Operating leases 1,407 Finance leases 216 Total $ 1,623 The following is the aggregate future lease payments for operating and finance leases as of March 31, 2019: Operating Finance 2019 (remaining) $ 5,880 $ 6,320 2020 6,801 6,684 2021 4,352 2,553 2022 3,221 76 2023 2,257 - Thereafter 6,566 - Total undiscounted lease payments 29,077 15,633 Less: Imputed interest 3,551 1,452 Present value of lease payments $ 25,526 $ 14,181 The following represents the aggregate future lease payments for operating leases under ASC 840 as of December 31, 2018: Operating 2019 $ 6,638 2020 4,618 2021 3,487 2022 2,195 2023 1,426 Thereafter 3,339 $ 21,703 The following represents the average lease terms and discount rates for our operating and finance lease portfolio as of March 31, 2019: Three Months Ended March 31, 2019 Weighted average remaining lease term: Finance leases 1.91 years Operating leases 5.59 years Weighted average discount rate Finance leases 11.95 % Operating leases 4.52 % As a lessor, we rent a fleet of frac valves and ancillary equipment for short-term rental periods, typically one to two months. Our lessor portfolio consists mainly of operating leases with onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of our customers’ wells. At this time, most lessor agreements contain less than three-month terms with no renewal options that are reasonably certain to exercise, or early termination options based on established terms specific to the individual agreement. See Note 6 for disaggregation of revenue. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2019 | |
Income Taxes | |
Income Taxes | 8. Income Taxes Cactus Inc. is a corporation and is subject to U.S. federal as well as state income tax related to its ownership percentage in Cactus LLC. Cactus LLC is a limited liability company treated as a partnership for U.S. federal income tax purposes and files a U.S. Return of Partnership Income, which includes both our U.S. and foreign operations. Consequently, the members of Cactus LLC are taxed individually on their share of earnings for U.S. federal and state income tax purposes. Additionally, our operations in both Australia and China are subject to local country income taxes. For the three months ended March 31, 2019, the Company recognized a tax benefit of $1.0 million (-2.0% effective tax rate), which includes an $8.2 million release of our valuation allowance as discussed below. This is compared to an income tax expense of $1.7 million (5.9% effective tax rate) for the three months ended March 31, 2018. In addition to the partial release of our valuation allowance, the Company’s effective tax rate is lower than the statutory federal rate of 21% primarily due to the fact that Cactus Inc. is only subject to federal and state income tax on its share of income of Cactus LLC. Income relating to non-controlling interest is not subject to U.S. federal or state tax. We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more-likely-than-not the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions meeting the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company does not have any uncertain tax positions as of March 31, 2019. We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. Based upon our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize the majority of our U.S. deferred tax assets in the future. We do not expect to realize the portion of our deferred tax asset for our investment in Cactus LLC that may only be realizable through the sale or liquidation of the investment and our ability to generate sufficient capital gains. However, as a result of the March 2019 Secondary Offering, we released $8.2 million of our valuation allowance and recorded a tax benefit of $8.2 million related to the realizable portion of the deferred tax asset. As of March 31, 2019, we have a valuation allowance of $19.4 million against this portion of the deferred tax asset. We have also recorded a valuation allowance of $1.8 million against our U.S. foreign tax credits. The foreign net operating losses have an indefinite carryforward period. We have recorded a full valuation allowance of $0.6 million against the deferred tax assets associated with the foreign net operating loss carryforwards and other items due to the uncertainty of realization. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions | |
Related Party Transactions | 9 . Related Party Transactions From time to time, we rent a plane under dry-lease from a company owned by a member of Cactus LLC. These transactions are under short-term rental arrangements. During the three months ended March 31, 2019 and 2018, expense recognized in connection with these rentals totaled $0.1 million for the respective periods. As of March 31, 2019 and December 31, 2018, Cactus LLC owed less than $0.1 million, respectively, to the related party which is included in accounts payable in the consolidated balance sheets. We are also party to a TRA with certain direct and indirect holders of CW Units, including certain of our officers, directors and employees. These TRA Holders have the right in the future to receive 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances. The total TRA liability as of March 31, 2019 was $224.5 million. The estimated annual amounts and timing of this liability is presented in Note 10. Distributions made by Cactus LLC are generally required to be made pro-rata among all of its members. For the three months ended March 31, 2019, Cactus LLC paid a cash distribution of $0.2 million. Prior to our IPO, Cactus LLC paid a cash distribution of $26.0 million to pre-IPO owners on January 25, 2018. This distribution was funded by borrowing under the Prior Revolving Credit Facility. The purpose of the distribution was primarily to provide funds to these owners to pay their federal and state tax liabilities associated with taxable income recognized by them for periods prior to the completion of our IPO as a result of their ownership interests in Cactus LLC. The borrowings under the Prior Revolving Credit Facility were repaid during the first quarter of 2018. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 10. Commitments and Contingencies Liability Related to Tax Receivable Agreement The following table presents our contractual obligations for payments of the liability related to the TRA for periods subsequent to March 31, 2019: Liability related to TRA Remainder of 2019 $ 9,574 2020 14,019 2021 11,776 2022 12,036 2023 12,280 Thereafter 164,857 $ 224,542 Because we are a holding company with no operations of our own, our ability to make payments under the TRA is dependent on the ability of Cactus LLC to make distributions to Cactus Inc. in an amount sufficient to cover its obligations under the TRA. Distributions made by Cactus LLC are generally required to be made pro-rata among all of its members. Legal Contingencies We are involved in various disputes arising in the ordinary course of business. Management does not believe the outcome of these disputes will have a material adverse effect on our consolidated financial position or consolidated results of operations. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 31, 2019 | |
Employee Benefit Plans | |
Employee Benefit Plans | 11. Employee Benefit Plans 401K Plan Our employees within the United States are eligible to participate in a 401(k) plan (the “Plan”) sponsored by us. These employees are eligible to participate upon employment hire date and reaching the age of eighteen. All eligible employees may contribute a percentage of their compensation subject to a maximum imposed by the Code. We match 100% of the first 3% of gross pay contributed by each employee and 50% of the next 4% of gross pay contributed by each employee. We may also make additional non-elective employer contributions at our discretion under the Plan. Similar benefit plans exist for employees of our foreign subsidiaries. During the three months ended March 31, 2019 and 2018, employer matching contributions totaled $1.1 million and $0.8 million, respectively. We have not made non-elective employer contributions under the Plan. |
Stock-based Compensation
Stock-based Compensation | 3 Months Ended |
Mar. 31, 2019 | |
Common Stock Incentive Plan | |
Stock-based Compensation | 12. Stock-based Compensation Long-term Incentive Plan Prior to the completion of our IPO, the Company adopted the long-term incentive plan (“LTIP”) to incentivize individuals providing services to us or our affiliates. The LTIP provides for the grant, from time to time, at the discretion of our compensation committee of our board of directors, of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards, substitute awards and performance awards. Any individual who is our officer or employee or an officer or employee of any of our affiliates, and any other person who provides services to us or our affiliates, including members of our board of directors, will be eligible to receive awards under the LTIP at the discretion of our board of directors. Restricted Stock Units Restricted stock units (“RSU’s”) granted pursuant to the LTIP are expected to be settled in shares of the Company's Class A common stock if they vest. The following table is a summary of restricted stock unit activity for the three months ended March 31, 2019: Three Months Ended March 31, 2019 No. of Stock Weighted Average Grant Date Fair Value (in thousands) Nonvested as of December 31, 2018 782 $ 19.84 Granted 204 $ 37.37 Vested (264) $ 19.00 Nonvested as of March 31, 2019 722 $ 25.11 Stock-based Compensation We measure the cost of equity-based awards based on the grant date fair value, and we allocate the compensation expense over the corresponding service period, which is usually the vesting period, using the straight-line method. All grant date fair values are expensed immediately for awards that are fully vested as of the grant date. During the three months ended March 31, 2019 and 2018, we recorded $1.7 million and $0.8 million, respectively, of stock-based compensation expense primarily in selling, general and administrative expenses. There was approximately $16.8 million of unrecognized compensation expense relating to the unvested RSU’s as of March 31, 2019. The unrecognized compensation expense will be recognized over the weighted average remaining vesting period of 2.5 years. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share | |
Earnings Per Share | 13. Earnings per Share Basic earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. during the period by the weighted average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. during that period by the weighted average number of common shares outstanding assuming all potentially dilutive shares were issued. The Company uses the “if-converted” method to determine the potential dilutive effect of outstanding CW Units (and corresponding shares of its outstanding Class B common stock), and the treasury stock method to determine the potential dilutive effect of unvested restricted stock units assuming that the proceeds will be used to purchase shares of Class A common stock. There were no shares of Class A common stock or Class B common stock outstanding prior to February 12, 2018, therefore no earnings per share information has been presented for any period prior to that date. The following table summarizes the basic and diluted earnings per share calculations (shares in thousands): Three Months Ended March 31, 2019 2018 Numerator: Net income attributable to Cactus Inc. (1) $ 26,807 $ 3,753 Denominator: Weighted average Class A shares outstanding—basic 38,719 26,450 Effect of dilutive shares (2) 36,527 198 Weighted average Class A shares outstanding—diluted (2) 75,246 26,648 Earnings per Class A share—basic $ 0.69 $ 0.14 Earnings per Class A share—diluted (1) (2) $ 0.59 $ 0.14 (1) Under the if-converted method, the numerator is adjusted in the calculation of diluted earnings per share to include $17.5 million of additional income attributable to non-controlling interest adjusted for a corporate effective tax rate of 24%. (2) Diluted earnings per share for the three months ended March 31, 2019 includes 36,292 shares of Class B common stock assuming conversion, plus the dilutive effect of 235 shares of restricted stock unit awards. Diluted earnings per share for the three months ended March 31, 2018 excludes 48,440 shares of Class B common stock as the effect would be anti-dilutive. |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 3 Months Ended |
Mar. 31, 2019 | |
Supplemental Cash Flow Information | |
Supplemental Cash Flow Information | 14. Supplemental Cash Flow Information Non-cash investing and financing activities were as follows: Three Months Ended March 31, 2019 2018 Property and equipment acquired under capital lease $ 216 $ 3,092 Property and equipment in payables 3,643 4,512 In conjunction with our IPO, we issued and contributed shares of Class B common stock to owners of CW Units equal to the number of outstanding CW Units held by such owners. The Class B common stock has no economic interest and does not share in cash dividends or liquidation rights. During the first quarter of 2019, we issued 8,517,733 shares of Class A common stock pursuant to redemptions of CW Units by holders thereof. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events | |
Subsequent Events [Text Block] | 15. Subsequent Events In April 2019, certain CW Unit Holders redeemed 0.4 million CW Units pursuant to the Redemption Right, together with a corresponding number of shares of the Class B common stock of the Company, par value $0.01 per share. The Company acquired the redeemed CW Units and a corresponding number of shares of Class B Common Stock (which shares of Class B common stock were then canceled) and issued 0.4 million shares of Class A common stock to the CW Unit Holders. Pursuant to the TRA, these CW Units redeemed will create additional liability and follow the same accounting procedures described in Note 2. In April 2019, Cactus LLC distributed $5.8 million to Cactus Inc. to fund a portion of its expected 2019 TRA liability payments and made pro-rata distributions to its other members totaling $3.6 million. |
Preparation of Interim Financ_2
Preparation of Interim Financial Statements and Other Items (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Preparation Of Interim Financial Statements And Other Items | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements (“consolidated financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These consolidated financial statements include the accounts of Cactus Inc. and its wholly owned subsidiaries. Accordingly, these consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our Annual Report on Form 10‑K for the year ended December 31, 2018. All significant inter-company transactions and balances have been eliminated upon consolidation. The consolidated financial statements include all adjustments, which are of a normal recurring nature, unless otherwise disclosed, necessary for a fair statement of the consolidated financial statements for the interim periods. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. As discussed in Note 1, as a result of our IPO and related equity transactions (the “Reorganization”), Cactus Inc. is the sole managing member of Cactus LLC and consolidates the financial results of Cactus LLC and its subsidiaries and reports a non-controlling interest related to the portion of CW Units not owned by Cactus Inc., which reduces net income attributable to holders of Class A common stock. The Reorganization was considered a transaction between entities under common control. As a result, the financial statements for periods prior to our IPO and the Reorganization have been adjusted to combine the previously separate entities for presentation purposes. |
Limitation of Members’ Liability | Limitation of Members’ Liability Under the terms of the Cactus LLC Agreement, the members of Cactus LLC are not obligated for debt, liabilities, contracts or other obligations of Cactus LLC. Profits and losses are allocated to members as defined in the Cactus LLC Agreement. |
Interim Period Tax Allocation | Interim Period Tax Allocation For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. Net income attributable to Cactus Inc. includes Cactus Inc.’s share of income tax expense, which includes U.S. federal and state income tax expense, and net income attributable to non-controlling interest includes non-controlling interests’ share of income tax expense, which is not subject to U.S. federal and state income tax expense. |
Stock-based Compensation | Stock-based Compensation We measure the cost of equity-based awards based on the grant date fair value, and we allocate the compensation expense over the corresponding service period, which is usually the vesting period, using the straight-line method. All grant date fair values are expensed immediately for awards that are fully vested as of the grant date. |
Significant Customers | Significant Customers For the three months ended March 31, 2019, one customer represented 12% of consolidated revenues, and no other customers represented 10% or more of our consolidated revenues during the period. For the three months ended March 31, 2018, one customer represented 11% of our consolidated revenues, and no other customers represented 10% or more of our consolidated revenues during this period. |
Significant Vendors | Significant Vendors We purchase a significant portion of supplies, equipment and machined components from a single vendor. For the three months ended March 31, 2019 and 2018, purchases from this vendor totaled $12.7 million and $ 10.4 million, respectively. These figures represent approximately 20% and 21% for the respective periods of our total third-party vendor purchases of raw materials, finished products, equipment, machining and other services. Amounts due to the vendor included in accounts payable in the consolidated balance sheets as of March 31, 2019 and December 31, 2018 totaled $6.7 million and $5.0 million, respectively. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include but are not limited to estimated losses on accounts receivable, estimated realizable value on excess and obsolete inventory, estimates related to fair value of reporting units for purposes of assessing goodwill and other indefinite-lived intangible assets for impairment, assessments of all long-lived assets for possible impairment and estimates of deferred tax assets related to the step-up in basis under the TRA and the associated liability under the TRA. Actual results could differ from those estimates. |
Tax Receivable Agreement | Tax Receivable Agreement As discussed above, pursuant to the Cactus LLC Agreement, each TRA Holder has, subject to certain limitations, the right to cause Cactus LLC to acquire all or at least a minimum portion of its CW Units for, at Cactus LLC’s election, (x) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each CW Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an equivalent amount of cash. Alternatively, upon the exercise of the Redemption Right, Cactus Inc. (instead of Cactus LLC) will have the Call Right to acquire each tendered CW Unit directly from the exchanging TRA Holder for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, or (y) an equivalent amount of cash. In connection with any redemption of CW Units pursuant to the Redemption Right or our Call Right, the corresponding number of shares of Class B common stock will be canceled. Cactus LLC has made for itself (and for each of its direct or indirect subsidiaries that is treated as a partnership for U.S. federal income tax purposes and that it controls) an election under Section 754 of the Internal Revenue Code (the “Code”) that became effective in 2018 and for each taxable year in which a redemption of CW Units pursuant to the Redemption Right or the Call Right occurs. Pursuant to the Section 754 election, redemptions of CW Units pursuant to the Redemption Right or the Call Right are expected to result in adjustments to the tax basis of the tangible and intangible assets of Cactus LLC. These adjustments will be allocated to Cactus Inc. In addition, the repayment of borrowings outstanding under the Cactus LLC term loan facility in connection with our IPO resulted in adjustments to the tax basis of the tangible and intangible assets of Cactus LLC, a portion of which will be allocated to Cactus Inc following its acquisition or deemed acquisition of CW Units from the CW Unit Holders. Such adjustments to the tax basis of the tangible and intangible assets of Cactus LLC would not have been available to Cactus Inc. absent its acquisition or deemed acquisition of CW Units pursuant to the exercise of the Redemption Right or the Call Right. These basis adjustments are expected to increase (for tax purposes) Cactus Inc.’s depreciation and amortization deductions and may also decrease Cactus Inc.’s gains (or increase its losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Such increased deductions and losses and reduced gains may reduce the amount of tax that Cactus Inc. would otherwise be required to pay in the future. The TRA generally provides for the payment by Cactus Inc. to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances as a result of (i) certain increases in tax basis that occur as a result of Cactus Inc.’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s CW Units in connection with our IPO or any subsequent offering, or pursuant to any other exercise of the Redemption Right or the Call Right, (ii) certain increases in tax basis resulting from the repayment of borrowings outstanding under Cactus LLC’s term loan facility in connection with our IPO and (iii) imputed interest deemed to be paid by Cactus Inc. as a result of, and additional tax basis arising from, any payments Cactus Inc. makes under the TRA. We will retain the benefit of the remaining 15% of the cash savings. The payment obligations under the TRA are Cactus Inc.’s obligations and not obligations of Cactus LLC, and we expect that the payments we will be required to make under the TRA will be substantial. We have determined that it is more likely than not that actual cash tax savings will be realized by Cactus Inc. from the tax benefits resulting from the CW Unit redemptions pursuant to the Redemption Right or the Call Right. Accordingly, the TRA is expected to result in future payments, and we have recorded a total liability from the TRA of $224.5 million included in the current portion and long-term portion of the liability related to tax receivable agreement in the consolidated balance sheet as of March 31, 2019. Future redemptions of CW Units will create additional liability and follow the same accounting procedures. Estimating the amount and timing of payments that may become due under the TRA is by its nature imprecise and the assumptions used in the estimate can change. For purposes of the TRA, net cash savings in tax generally will be calculated by comparing Cactus Inc.’s actual tax liability (determined by using the actual applicable U.S. federal income tax rate and an assumed combined state and local income tax rate) to the amount it would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRA. The amounts payable, as well as the timing of any payments under the TRA, are dependent upon significant future events and assumptions, including the timing of the redemption of CW Units, the price of our Class A common stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming unit holder’s tax basis in its CW Units at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future and the U.S. federal, state and local income tax rate then applicable, and the portion of Cactus Inc.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis. A delay in the timing of redemptions of CW Units, holding other assumptions constant, would be expected to decrease the discounted present value of the amounts payable under the TRA as the benefit of the depreciation and amortization deductions would be delayed and the estimated increase in tax basis could be reduced as a result of allocations of Cactus LLC taxable income to the redeeming unit holder prior to the redemption. Stock price increases or decreases at the time of each redemption of CW Units would be expected to result in a corresponding increase or decrease in the undiscounted amounts payable under the TRA in an amount equal to 85% of the tax-effected change in price. The amounts payable under the TRA are dependent upon Cactus Inc. having sufficient future taxable income to utilize the tax benefits on which it is required to make payments under the TRA. If Cactus Inc.’s projected taxable income is significantly reduced, the expected payments would be reduced to the extent such tax benefits do not result in a reduction of Cactus Inc.’s future income tax liabilities. It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding liability from the TRA. Moreover, there may be a negative impact on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the TRA exceed the actual benefits we realize in respect of the tax attributes subject to the TRA or (ii) distributions to Cactus Inc. by Cactus LLC are not sufficient to permit Cactus Inc. to make payments under the TRA after it has paid its taxes and other obligations. The payments under the TRA will not be conditional on a holder of rights under the TRA having a continued ownership interest in either Cactus LLC or Cactus Inc. In addition, although we are not aware of any issue that would cause the Internal Revenue Service (“IRS”) or other relevant tax authorities to challenge potential tax basis increases or other tax benefits covered under the TRA, the TRA Holders will not reimburse us for any payments previously made under the TRA if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any such holder will be netted against payments otherwise to be made, if any, to such holder after our determination of such excess. As a result, in such circumstances, Cactus Inc. could make payments that are greater than its actual cash tax savings, if any, and may not be able to recoup those payments. We account for any amounts payable under the TRA in accordance with Accounting Standard Codification (“ASC”) Topic 450, Contingencies. We will recognize subsequent changes to the measurement of the liability from the TRA in the income statement as a component of income before taxes. In the case of any changes to any valuation allowance associated with the underlying tax asset, given the link between the tax savings generated and the recognition of the liability from the TRA (i.e., one is recorded based on 85% of the other), and the explicit guidance in ASC 740-20-45-11(g) which requires that subsequent changes in a valuation allowance established against deferred tax assets that arose due to change in tax basis as a result of a transaction among or with shareholders to be recorded in the income statement as opposed to equity, we believe recording of the corollary adjustment to the liability from the TRA in the income statement is appropriate. The term of the TRA commenced upon completion of our IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we exercise our right to terminate the TRA. In the event that the TRA is not terminated, the payments under the TRA are anticipated to commence in 2019 and to continue for 16 years after the date of the last redemption of CW Units. Accordingly, it is expected that payments will continue to be made under the TRA for more than 25 years. If we elect to terminate the TRA early (or it is terminated early due to certain mergers, asset sales, other forms of business combinations or other changes of control), our obligations under the TRA would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA (determined by applying a discount rate of one-year LIBOR plus 150 basis points) and such payment is expected to be substantial. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the TRA, including the assumptions that (i) we have sufficient taxable income to fully utilize the tax benefits covered by the TRA and (ii) any CW Units (other than those held by Cactus Inc.) outstanding on the termination date are deemed to be redeemed on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates. The TRA provides that in the event that we breach any of our material obligations under the TRA, whether as a result of (i) our failure to make any payment when due (including in cases where we elect to terminate the TRA early, the TRA is terminated early due to certain mergers, asset sales, or other forms of business combinations or changes of control or we have available cash but fail to make payments when due under circumstances where we do not have the right to elect to defer the payment, as described below), (ii) our failure to honor any other material obligation under it or (iii) by operation of law as a result of the rejection of the TRA in a case commenced under the U.S. Bankruptcy Code or otherwise, then the TRA Holders may elect to treat such breach as an early termination, which would cause all our payment and other obligations under the TRA to be accelerated and become due and payable applying the same assumptions described above. As a result of either an early termination or a change of control, we could be required to make payments under the TRA that exceed the actual cash tax savings under the TRA. In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control. Decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by the TRA Holders under the TRA. For example, the earlier disposal of assets following a redemption of CW Units may accelerate payments under the TRA and increase the present value of such payments, and the disposal of assets before a redemption of CW Units may increase the TRA Holders’ tax liability without giving rise to any rights of the TRA Holders to receive payments under the TRA. Such effects may result in differences or conflicts of interest between the interests of the TRA Holders and other shareholders. Payments generally are due under the TRA within five business days following the finalization of the schedule with respect to which the payment obligation is calculated. However, interest on such payments will begin to accrue from the due date (without extensions) of our U.S. federal income tax return for the period to which such payments relate until such payment due date at a rate equal to one-year LIBOR plus 150 basis points. Except in cases where we elect to terminate the TRA early or it is otherwise terminated as described above, generally we may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA. Any such deferred payments under the TRA generally will accrue interest from the due date for such payment until the payment date at a rate of one-year LIBOR plus 550 basis points. However, interest will accrue from the due date for such payment until the payment date at a rate of one-year LIBOR plus 150 basis points if we are unable to make such payment as a result of limitations imposed by our credit facility. We have no present intention to defer payments under the TRA. Because we are a holding company with no operations of our own, our ability to make payments under the TRA is dependent on the ability of Cactus LLC to make distributions to us in an amount sufficient to cover our obligations under the TRA. This ability, in turn, may depend on the ability of Cactus LLC’s subsidiaries to make distributions to it. The ability of Cactus LLC, its subsidiaries and other entities in which it directly or indirectly holds an equity interest to make such distributions will be subject to, among other things, the applicable provisions of Delaware law (or other applicable jurisdiction) that may limit the amount of funds available for distribution and restrictions in relevant debt instruments issued by Cactus LLC or its subsidiaries and other entities in which it directly or indirectly holds an equity interest. Additionally, distributions made by Cactus LLC are generally required to be made pro-rata among all of its members, including legacy CW Unit Holders, which could be significant. To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid. |
Emerging Growth Company status | Emerging Growth Company status Cactus is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which our total annual gross revenue is at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter (following twelve months from our IPO), and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies. We have irrevocably opted out of the extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Standards Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification (“ASC”) and creates Topic 842, Leases. On January 1, 2019, we adopted ASC Topic 842, which is effective for interim and annual reporting periods beginning on or after December 15, 2018. This Topic requires balance sheet recognition of lease assets and lease liabilities for leases classified as operating leases under previous GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. To adopt Topic 842, we elected the modified retrospective approach and as of January 1, 2019, there was no cumulative-effect adjustment required to the opening balance of retained earnings. We completed a review of contracts representative of our business and assessed the terms under the new standard. Adoption of the standard resulted in the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases on our consolidated balance sheets, but did not have a material impact on our consolidated statements of income and consolidated statements of comprehensive income or consolidated statements of cash flows. Our accounting for finance leases remained substantially unchanged. Adoption of this standard resulted in the recognition of operating lease right-of-use assets of $25.3 million, reversal of previously recorded deferred rent of $0.5 million, and corresponding operating short-term and long-term lease liabilities of $6.2 million and $19.6 million, respectively, on the consolidated balance sheet as of January 1, 2019. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 7. In addition, we utilized the package of practical expedients permitted under the transition guidance within the standard. The expedient package allowed us to not reassess whether existing contracts contained a lease, to not reassess the lease classification of existing leases, and to not consider the initial direct cost for existing leases. In addition to the package of practical expedients, we also utilized expedients allowing for the exclusion of leases with terms of less than twelve months across all asset classes, the portfolio approach to determine discount rates, the election to not separate non-lease components from lease components and to not apply the use of hindsight to the existing lease population. As a lessor, recognition of lease revenue associated with short-term equipment rentals remained consistent with previous guidance and the adoption of this standard did not have a significant impact on our consolidated statements of income. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. We adopted this ASU on January 1, 2019. The adoption of this pronouncement did not have an impact on our consolidated financial statements. Standards Not Yet Adopted In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other, which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the new standard, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this pronouncement will have a material impact on our consolidated financial statements. |
Organization and Nature of Op_2
Organization and Nature of Operations (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Organization and Nature of Operations | |
Schedule of CW units held by legacy CW unit holders | No. of CW Units CW Units held by legacy CW Unit Holders as of February 7, 2018 60,557,613 IPO (12,117,841) July 2018 follow-on offering (11,196,562) Other CW Unit redemptions (7,068) CW Units held by legacy CW Unit Holders as of December 31, 2018 37,236,142 March 2019 Secondary Offering (8,473,913) Other CW Unit redemptions (43,820) CW Units held by legacy CW Unit Holders as of March 31, 2019 28,718,409 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Inventories | |
Summary of inventories | March 31, December 31, 2019 2018 Raw materials $ 1,890 $ 1,925 Work-in-progress 4,254 3,582 Finished goods 102,038 94,330 $ 108,182 $ 99,837 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property and Equipment [Abstract] | |
Schedule of Property and equipment Net | March 31, December 31, 2019 2018 Land $ 3,646 $ 3,614 Buildings and improvements 20,368 20,803 Machinery and equipment 49,132 47,606 Finance lease right-of-use asset 24,674 25,165 Rental equipment 135,980 124,002 Furniture and fixtures 1,672 1,623 Computers and software 3,214 3,094 Gross property and equipment 238,686 225,907 Less: Accumulated depreciation (102,441) (96,412) Net property and equipment 136,245 129,495 Construction in progress 12,611 12,559 Total property and equipment, net $ 148,856 $ 142,054 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Components of operating and finance lease costs | Three Months Ended March 31, 2019 Finance lease cost: Amortization of right-of-use asset $ 1,881 Interest expense 203 Operating lease cost 1,865 Short-term lease cost 175 Variable lease cost 127 Sublease income (99) Total lease cost $ 4,152 |
Schedule of supplemental cash flow information related to operating and finance leases | Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 203 Operating cash flows from operating leases 1,710 Financing cash flows from finance leases 1,846 Total $ 3,759 Right-of-use assets obtained in exchange for new lease obligations: Operating leases 1,407 Finance leases 216 Total $ 1,623 |
Schedule of operating lease future lease payments | Operating Finance 2019 (remaining) $ 5,880 $ 6,320 2020 6,801 6,684 2021 4,352 2,553 2022 3,221 76 2023 2,257 - Thereafter 6,566 - Total undiscounted lease payments 29,077 15,633 Less: Imputed interest 3,551 1,452 Present value of lease payments $ 25,526 $ 14,181 |
Schedule of finance lease future lease payments | Operating Finance 2019 (remaining) $ 5,880 $ 6,320 2020 6,801 6,684 2021 4,352 2,553 2022 3,221 76 2023 2,257 - Thereafter 6,566 - Total undiscounted lease payments 29,077 15,633 Less: Imputed interest 3,551 1,452 Present value of lease payments $ 25,526 $ 14,181 |
Schedule of operating lease future payments before Topic 842 | Operating 2019 $ 6,638 2020 4,618 2021 3,487 2022 2,195 2023 1,426 Thereafter 3,339 $ 21,703 |
Schedule of weighted-average lease terms and weighted-average discount rates | Three Months Ended March 31, 2019 Weighted average remaining lease term: Finance leases 1.91 years Operating leases 5.59 years Weighted average discount rate Finance leases 11.95 % Operating leases 4.52 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies | |
Schedule of liability related to TRA | The following table presents our contractual obligations for payments of the liability related to the TRA for periods subsequent to March 31, 2019: Liability related to TRA Remainder of 2019 $ 9,574 2020 14,019 2021 11,776 2022 12,036 2023 12,280 Thereafter 164,857 $ 224,542 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Common Stock Incentive Plan | |
Summary of restricted stock unit awards | Three Months Ended March 31, 2019 No. of Stock Weighted Average Grant Date Fair Value (in thousands) Nonvested as of December 31, 2018 782 $ 19.84 Granted 204 $ 37.37 Vested (264) $ 19.00 Nonvested as of March 31, 2019 722 $ 25.11 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share | |
Summary of basic and diluted earnings per share | Three Months Ended March 31, 2019 2018 Numerator: Net income attributable to Cactus Inc. (1) $ 26,807 $ 3,753 Denominator: Weighted average Class A shares outstanding—basic 38,719 26,450 Effect of dilutive shares (2) 36,527 198 Weighted average Class A shares outstanding—diluted (2) 75,246 26,648 Earnings per Class A share—basic $ 0.69 $ 0.14 Earnings per Class A share—diluted (1) (2) $ 0.59 $ 0.14 (1) Under the if-converted method, the numerator is adjusted in the calculation of diluted earnings per share to include $17.5 million of additional income attributable to non-controlling interest adjusted for a corporate effective tax rate of 24%. (2) Diluted earnings per share for the three months ended March 31, 2019 includes 36,292 shares of Class B common stock assuming conversion, plus the dilutive effect of 235 shares of restricted stock unit awards. Diluted earnings per share for the three months ended March 31, 2018 excludes 48,440 shares of Class B common stock as the effect would be anti-dilutive. |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Supplemental Cash Flow Information | |
Schedule of non cash investing and financing activities | Three Months Ended March 31, 2019 2018 Property and equipment acquired under capital lease $ 216 $ 3,092 Property and equipment in payables 3,643 4,512 |
Organization and Nature of Op_3
Organization and Nature of Operations - Redemption of CW Units (Details) - $ / shares | Mar. 20, 2019 | Feb. 12, 2018 | Apr. 30, 2019 | Mar. 31, 2019 | Jul. 31, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | Feb. 07, 2018 |
Redemptions of CW Units | ||||||||||
CW Units held by legacy CW Unit Holders as of February 7, 2018 | 28,718,409 | 28,718,409 | 37,236,142 | 37,236,142 | 28,718,409 | 37,236,142 | 60,557,613 | |||
CW Units held by legacy CW Unit Holders at beginning of the period | 28,718,409 | 37,236,142 | ||||||||
CW Unit redemptions | (43,820) | (7,068) | ||||||||
CW Units held by legacy CW Unit Holders at end of the period | 28,718,409 | 28,718,409 | 37,236,142 | |||||||
IPO | ||||||||||
Redemptions of CW Units | ||||||||||
CW Unit redemptions | (12,117,841) | |||||||||
July 2018 follow-on offering | ||||||||||
Redemptions of CW Units | ||||||||||
CW Unit redemptions | (11,196,562) | |||||||||
March 2019 Secondary Offering | ||||||||||
Redemptions of CW Units | ||||||||||
CW Unit redemptions | 8,473,913 | (8,473,913) | ||||||||
Class A Common Stock | ||||||||||
Organization and Nature of Operations | ||||||||||
Common stock, par value | $ 0.01 | $ 0.01 | ||||||||
Redemptions of CW Units | ||||||||||
Redemption ratio, shares of common stock per unit redeemed | 1 | |||||||||
Class B Common Stock | ||||||||||
Organization and Nature of Operations | ||||||||||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 |
Organization and Nature of Op_4
Organization and Nature of Operations - Secondary offering and ownership (Details) - USD ($) $ in Thousands | Mar. 21, 2019 | Mar. 20, 2019 | Feb. 12, 2018 | Mar. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Feb. 11, 2018 |
Redemptions of CW Units | |||||||
CW Unit redemptions | (43,820) | (7,068) | |||||
Reduction of non-controlling interest for correction of follow-on offering reclassification | $ 14,500 | ||||||
Increase to equity from reclassification adjustment to follow-on offering | 14,000 | ||||||
Increase to AOCL from reclassification adjustment to follow-on offering | $ 500 | ||||||
Tax Receivable Agreement | |||||||
Tax savings payable to TRA Holders (as a percent) | 85.00% | ||||||
Portion of net cash savings per tax agreement retained by entity | 15.00% | ||||||
Cactus LLC | |||||||
Ownership | |||||||
Ownership percentage | 61.80% | 50.30% | |||||
Cactus LLC | |||||||
Redemptions of CW Units | |||||||
Increase to equity in non-controlling interest | $ 43,900 | ||||||
March 2019 Secondary Offering | |||||||
Redemptions of CW Units | |||||||
CW Unit redemptions | 8,473,913 | (8,473,913) | |||||
Offering expenses | $ 1,000 | $ 1,000 | |||||
Class A Common Stock | |||||||
Ownership | |||||||
Common stock, shares outstanding | 46,390,804 | 46,390,804 | 37,654,000 | 0 | |||
Voting power of shares outstanding as a percent of the total shares outstanding | 61.80% | ||||||
Class A Common Stock | March 2019 Secondary Offering | |||||||
Redemptions of CW Units | |||||||
Number of shares issued | 8,473,913 | ||||||
Number of shares sold by certain other selling stockholders | 26,087 | ||||||
Class B Common Stock | |||||||
Redemptions of CW Units | |||||||
Common stock redeemed (in shares) | 8,473,913 | ||||||
Economic interest of shares | $ 0 | $ 0 | |||||
Ownership | |||||||
Common stock, shares outstanding | 28,718,409 | 28,718,409 | 37,236,000 | 0 | |||
Voting power of shares outstanding as a percent of the total shares outstanding | 38.20% | ||||||
Class B Common Stock | March 2019 Secondary Offering | |||||||
Redemptions of CW Units | |||||||
Number of shares canceled | 8,473,913 |
Preparation of Interim Financ_3
Preparation of Interim Financial Statements and Other Items - Significant Customers and Concentration of Credit Risk (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2019USD ($)item | Mar. 31, 2018USD ($)item | Dec. 31, 2018USD ($) | |
Total revenues | Customer | |||
Significant Customers and Concentration of Credit Risk | |||
Number of Customers | item | 1 | 1 | |
Concentration of risk (as a percent) | 12.00% | 11.00% | |
Purchases | Supplier concentration | |||
Significant Customers and Concentration of Credit Risk | |||
Concentration of risk (as a percent) | 20.00% | 21.00% | |
Purchases from the vendor | $ 12.7 | $ 10.4 | |
Amounts due to the vendor | $ 6.7 | $ 5 |
Preparation of Interim Financ_4
Preparation of Interim Financial Statements and Other Items - Tax Receivable Agreement (Details) - USD ($) $ in Thousands | Feb. 12, 2018 | Mar. 31, 2019 | Dec. 31, 2018 |
Tax savings payable to TRA Holders (as a percent) | 85.00% | ||
Tax savings benefit recorded as APIC (as a percent) | 15.00% | ||
Total liability from Tax Receivable Agreement | $ 224,500 | ||
Payment period, after redemption | 16 years | ||
Aggregate payment period | 25 years | ||
Variable reference rate | One-year LIBOR | ||
TRA payment period | 5 days | ||
Operating Leases, Future Minimum Payments Due | $ 21,703 | ||
One-year LIBOR | |||
Applicable margin rate (as a percent) | 1.50% | ||
Variable interest rate, deferral period | 5.50% | ||
Class A Common Stock | |||
Redemption ratio, shares of common stock per unit redeemed | 1 |
Preparation of Interim Financ_5
Preparation of Interim Financial Statements and Other Items - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2019 | Mar. 31, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets, net | $ 25,110 | |
Short-term operating lease liabilities | 6,772 | |
Long-term operating lease liabilities | $ 18,754 | |
Use of lease practical expedient package | true | |
Use of hindsight in the active lease population | false | |
ASC 842 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets, net | $ 25,300 | |
Deferred Rent Credit | (500) | |
Short-term operating lease liabilities | 6,200 | |
Long-term operating lease liabilities | $ 19,600 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Summary of inventories | ||
Raw materials | $ 1,890 | $ 1,925 |
Work-in-progress | 4,254 | 3,582 |
Finished goods | 102,038 | 94,330 |
Total inventory | $ 108,182 | $ 99,837 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | $ 238,686 | $ 225,907 |
Less: Accumulated depreciation | (102,441) | (96,412) |
Net property and equipment | 136,245 | 129,495 |
Property and equipment, net | 148,856 | 142,054 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 3,646 | 3,614 |
Buildings and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 20,368 | 20,803 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 49,132 | 47,606 |
Finance lease right-of-use asset | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 24,674 | 25,165 |
Rental equipment | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 135,980 | 124,002 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 1,672 | 1,623 |
Computers and software | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 3,214 | 3,094 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 12,611 | $ 12,559 |
Long-term Debt - Credit agreeme
Long-term Debt - Credit agreement (Details) - USD ($) $ in Millions | Aug. 21, 2018 | Feb. 12, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2019 | Jul. 31, 2014 |
Long-term Debt | ||||||
Long-term debt outstanding | $ 0 | $ 0 | $ 0 | |||
Variable reference rate | One-year LIBOR | |||||
One-month LIBOR | ||||||
Long-term Debt | ||||||
Applicable margin rate (as a percent) | 1.50% | 1.50% | ||||
Variable reference rate | one-month LIBOR | one-month LIBOR | ||||
Three-month LIBOR | ||||||
Long-term Debt | ||||||
Applicable margin rate (as a percent) | 1.50% | 1.50% | ||||
Variable reference rate | three-month LIBOR | |||||
Prior Credit Agreement | ||||||
Long-term Debt | ||||||
Amount outstanding | $ 0 | |||||
ABL Credit Facility | ||||||
Long-term Debt | ||||||
Revolving credit facility available per borrowing base terms | $ 75 | $ 75 | ||||
Prior Revolving Credit Facility | ||||||
Long-term Debt | ||||||
Maximum borrowing capacity | $ 50 | |||||
Prior letters of credit | ||||||
Long-term Debt | ||||||
Maximum borrowing capacity | $ 10 | |||||
Cactus LLC | Prior Credit Agreement | ||||||
Long-term Debt | ||||||
Aggregate principal amount | $ 275 | |||||
Cactus LLC | ABL Credit Facility | ||||||
Long-term Debt | ||||||
Debt term | 5 years | |||||
Maximum borrowing capacity | $ 75 | |||||
Additional revolving commitment that may be requested subject to certain terms and conditions | 50 | |||||
Total of revolving commitments | 125 | |||||
Fixed charge coverage ratio | 1 | |||||
Cactus LLC | ABL Credit Facility | Minimum | ||||||
Long-term Debt | ||||||
Commitment fee (as a percent) | 0.25% | |||||
Cactus LLC | ABL Credit Facility | Minimum | Alternate Base Rate | ||||||
Long-term Debt | ||||||
Applicable margin rate (as a percent) | 0.50% | |||||
Cactus LLC | ABL Credit Facility | Minimum | Eurodollar | ||||||
Long-term Debt | ||||||
Applicable margin rate (as a percent) | 1.50% | |||||
Cactus LLC | ABL Credit Facility | Maximum | ||||||
Long-term Debt | ||||||
Commitment fee (as a percent) | 0.375% | |||||
Cactus LLC | ABL Credit Facility | Maximum | Alternate Base Rate | ||||||
Long-term Debt | ||||||
Applicable margin rate (as a percent) | 1.00% | |||||
Cactus LLC | ABL Credit Facility | Maximum | Eurodollar | ||||||
Long-term Debt | ||||||
Applicable margin rate (as a percent) | 2.00% | |||||
Cactus LLC | Letters of credit | ||||||
Long-term Debt | ||||||
Maximum borrowing capacity | $ 15 |
Long-term Debt - Loss on debt e
Long-term Debt - Loss on debt extinguishment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Gain (Loss) on Extinguishment of Debt [Abstract] | ||
Loss on debt extinguishment | $ 4,305 | |
Loss on early extinguishment related to the write-off of unamortized debt discount | $ 2,100 | |
Loss on early debt extinguishment related to write off of deferred loan costs | $ 2,200 |
Revenue (Details)
Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Contract Balances | |||
Unbilled revenue | $ 20.3 | $ 26.8 | |
Deferred revenue | $ 1.6 | $ 1.1 | |
Product revenue | |||
Disaggregation of revenues | |||
Percentage of revenues | 55.00% | 51.00% | |
Rental revenue | |||
Disaggregation of revenues | |||
Percentage of revenues | 24.00% | 25.00% | |
Field service and other revenue | |||
Disaggregation of revenues | |||
Percentage of revenues | 21.00% | 24.00% | |
United States | |||
Disaggregation of revenues | |||
Percentage of revenues | 99.00% |
Leases (Details)
Leases (Details) | 3 Months Ended |
Mar. 31, 2019 | |
Lessee, Lease, Description [Line Items] | |
Operating lease option to extend | true |
Operating lease option to terminate | true |
Finance lease option to extend | true |
Finance lease option to terminate | true |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease term | 2 years |
Length of potential lease renewal for operating leases | 1 year |
Finance lease term | 2 years |
Length of potential lease renewal for finance leases | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease term | 10 years |
Length of potential lease renewal for operating leases | 10 years |
Finance lease term | 10 years |
Length of potential lease renewal for finance leases | 10 years |
Leases - Components of lease co
Leases - Components of lease costs (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Finance Lease, Cost [Abstract] | |
Amortization of right-of-use asset | $ 1,881 |
Interest expense | 203 |
Lease, Cost [Abstract] | |
Operating lease cost | 1,865 |
Short-term lease cost | 175 |
Variable lease cost | 127 |
Sublease income | (99) |
Total lease cost | $ 4,152 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from finance leases | $ 203 |
Operating cash flows from operating leases | 1,710 |
Financing cash flows from finance leases | 1,846 |
Total | 3,759 |
Right-of-use assets obtained for new lease obligations: | |
Operating leases | 1,407 |
Finance leases | 216 |
Total | $ 1,623 |
Leases - Future lease payments
Leases - Future lease payments (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Operating leases | ||
2019 (remaining) | $ 5,880 | |
2020 | 6,801 | |
2021 | 4,352 | |
2022 | 3,221 | |
2023 | 2,257 | |
Thereafter | 6,566 | |
Total undiscounted lease payments | 29,077 | |
Less: Imputed interest | 3,551 | |
Present value of lease payments | 25,526 | |
Finance leases | ||
2019 (remaining) | 6,320 | |
2020 | 6,684 | |
2021 | 2,553 | |
2022 | 76 | |
2023 | ||
Thereafter | ||
Total undiscounted lease payments | 15,633 | |
Less: Imputed interest | 1,452 | |
Present value of lease payments | $ 14,181 | |
Operating leases before Topic 842 | ||
2019 | $ 6,638 | |
2020 | 4,618 | |
2021 | 3,487 | |
2022 | 2,195 | |
2023 | 1,426 | |
Thereafter | 3,339 | |
Total | $ 21,703 |
Leases - Quantitative informati
Leases - Quantitative information (Details) | Mar. 31, 2019 |
Weighted average remaining lease term: | |
Finance Lease, Weighted Average Remaining Lease Term | 1 year 10 months 28 days |
Operating Lease, Weighted Average Remaining Lease Term | 5 years 7 months 2 days |
Weighted average discount rate | |
Finance Lease, Weighted Average Discount Rate, Percent | 11.95% |
Operating Lease, Weighted Average Discount Rate, Percent | 4.52% |
Leases - Lessor (Details)
Leases - Lessor (Details) | 3 Months Ended |
Mar. 31, 2019 | |
Lessor, Lease, Description [Line Items] | |
Lessor, Operating Lease, Existence of Option to Extend [true false] | false |
Lessor, Operating Lease, Existence of Option to Terminate [true false] | false |
Minimum | |
Lessor, Lease, Description [Line Items] | |
Short-term rental periods for equipment | 1 month |
Maximum | |
Lessor, Lease, Description [Line Items] | |
Short-term rental periods for equipment | 2 months |
Lessor, Operating Lease, Term of Contract | 3 months |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Tax Disclosure [Line Items] | ||
Effective combined Federal and state tax rate | (2.00%) | 5.90% |
Statutory federal tax rate (as a percent) | 21.00% | |
Income Tax Expense (Benefit) | $ (973) | $ 1,652 |
Release of valuation allowance | 8,200 | |
Deferred Tax Asset Investment In Subsidiary [Member] | ||
Income Tax Disclosure [Line Items] | ||
Income Tax Expense (Benefit) | (8,200) | |
Release of valuation allowance | (8,200) | |
Valuation allowance | 19,400 | |
Deferred Tax Asset Foreign Tax Credits [Member] | ||
Income Tax Disclosure [Line Items] | ||
Valuation allowance | 1,800 | |
Deferred Tax Asset Foreign Net Operating Loss [Member] | ||
Income Tax Disclosure [Line Items] | ||
Valuation allowance | $ 600 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | Feb. 12, 2018 | Jan. 25, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 |
Related Party Transaction [Line Items] | |||||
Tax savings payable to TRA Holders (as a percent) | 85.00% | ||||
Total TRA liability | $ 224,542 | ||||
Tax Receivable Agreement Liability | 224,500 | ||||
Certain direct and indirect holders of CW Units | |||||
Related Party Transaction [Line Items] | |||||
Tax savings payable to TRA Holders (as a percent) | 85.00% | ||||
Short-term rental agreement | Cactus LLC | |||||
Related Party Transaction [Line Items] | |||||
Expenses under related party agreements | 100 | $ 100 | |||
Short-term rental agreement | Maximum | Cactus LLC | |||||
Related Party Transaction [Line Items] | |||||
Accounts payable to related party | 100 | $ 100 | |||
Cactus LLC | |||||
Related Party Transaction [Line Items] | |||||
Distribution received from subsidiary | $ 200 | ||||
Cactus LLC | Cactus LLC | |||||
Related Party Transaction [Line Items] | |||||
Cash distribution to pre-IPO owners | $ 26,000 |
Commitments and Contingencies -
Commitments and Contingencies - Future minimum annual lease payments (Details) $ in Thousands | Mar. 31, 2019USD ($) |
Liability related to TRA | |
Remainder of 2019 | $ 9,574 |
2020 | 14,019 |
2021 | 11,776 |
2022 | 12,036 |
2023 | 12,280 |
Thereafter | 164,857 |
Total | $ 224,542 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | |
Employee Benefit Plans | ||
Employer match of first tier of employee contribution (as a percent) | 100 | |
First tier percentage of compensation eligible for match | 3 | |
Employer match of second tier of employee contribution (as a percent) | 50 | |
Second tier percentage of compensation eligible for match | 4 | |
Employer matching contributions | $ 1.1 | $ 0.8 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Restricted Stock Units | ||
No. of Stock Units | ||
Nonvested restricted stock units, beginning of period | 782 | |
Granted (in units) | 204 | |
Vested (in units) | (264) | |
Nonvested restricted stock units, end of period | 722 | 782 |
Weighted Average Grant Date Fair Value | ||
Nonvested restricted stock units, beginning of period | $ 19.84 | |
Granted (in dollars per share) | 37.37 | |
Vested (in dollars per share) | 19 | |
Nonvested restricted stock units, end of period | $ 25.11 | $ 19.84 |
Stock-based Compensation | ||
Unrecognized compensation cost | $ 16.8 | |
Weighted average period over which unrecognized compensation cost is expected to be recognized | 2 years 6 months | |
Selling, General and Administrative Expenses | ||
Stock-based Compensation | ||
Share-based compensation costs recognized | $ 1.7 | $ 0.8 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | Feb. 11, 2018 | |
Numerator: | ||||
Net income attributable to Cactus, Inc. | $ 26,807 | $ 3,753 | ||
Denominator: | ||||
Weighted average Class A Shares Outstanding - basic | 38,719,000 | 26,450,000 | ||
Effect of dilutive shares | 36,527,000 | 198,000 | ||
Weighted average Class A Shares Outstanding - diluted | 75,246,000 | 26,648,000 | ||
Earnings per Class A Share - basic | $ 0.69 | $ 0.14 | ||
Earnings per Class A Share - diluted | $ 0.59 | $ 0.14 | ||
Income attributable to noncontrolling interest, net of tax | $ 17,500 | |||
Corporate effective interest rate, if-converted method | 24.00% | |||
Effective tax rate | (2.00%) | 5.90% | ||
Class A Common Stock | ||||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
Common Stock, Shares, Outstanding | 46,390,804 | 37,654,000 | 0 | |
Denominator: | ||||
Weighted average Class A Shares Outstanding - diluted | 75,246,000 | 26,648,000 | ||
Earnings per Class A Share - basic | $ 0.69 | $ 0.14 | ||
Earnings per Class A Share - diluted | $ 0.59 | $ 0.14 | ||
Class B Common Stock | ||||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
Common Stock, Shares, Outstanding | 28,718,409 | 37,236,000 | 0 | |
Denominator: | ||||
Effect of dilutive shares | 36,292,000 | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 48,440,000 | |||
Restricted Stock Units | ||||
Denominator: | ||||
Effect of dilutive shares | 235,000 |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property and equipment acquired under capital lease | $ 216 | $ 3,092 |
Property and equipment in payables | $ 3,643 | $ 4,512 |
Class A Common Stock | ||
Number of common stock shares issued upon redemption of CW units | 8,517,733 | |
Class B Common Stock | ||
Economic interest of shares | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 01, 2019 | Mar. 20, 2019 | Apr. 30, 2019 | Jul. 31, 2018 | Mar. 31, 2019 | Dec. 31, 2018 |
Subsidiary, Sale of Stock [Line Items] | ||||||
CW Unit redemptions | (43,820) | (7,068) | ||||
Subsequent event | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
CW Unit redemptions | 400,000 | |||||
Distribution received from subsidiary | $ 5.8 | |||||
July 2018 follow-on offering | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
CW Unit redemptions | (11,196,562) | |||||
Class A Common Stock | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Common stock, par value | $ 0.01 | $ 0.01 | ||||
Class A Common Stock | Subsequent event | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Number of shares issued | 400,000 | |||||
Class B Common Stock | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Common stock redeemed (in shares) | 8,473,913 | |||||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | |||
Class B Common Stock | Subsequent event | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Common stock redeemed (in shares) | 400,000 | |||||
Number of shares canceled | 400,000 | |||||
Cactus LLC | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Distribution received from subsidiary | $ 0.2 | |||||
Cactus LLC | Subsequent event | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Distributions to LLC members made by subsidiary | $ 3.6 |