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Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2018 Operational and Financial Results

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Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2018 Operational and Financial Results
  • Fourth Quarter net income of $68 million, or $1.51 per diluted share, and full year 2018 net income of $236 million, or $5.24 per diluted share
  • 2018 adjusted EBITDA of $547 million, a three-fold increase from 2017
  • After tax return on invested capital (ROIC) of 35% in 2018
  • Returned $11 million of cash to stockholders through dividends

OKLAHOMA CITY, March 14, 2019 (GLOBE NEWSWIRE) — Mammoth Energy Services, Inc. (“Mammoth” or the “Company”) (NASDAQ: TUSK) today reported financial and operational results for the fourth quarter and full year ended December 31, 2018.

Financial Highlights for the Fourth Quarter and Full Year 2018:

Total revenue was $278.2 million for the three months ended December 31, 2018, down 28% sequentially from $384.0 million for the three months ended September 30, 2018 and down 25% from $369.0 million for the three months ended December 31, 2017. Total revenue was $1.7 billion for the year ended December 31, 2018, a 144% increase from $691.5 million for the year ended December 31, 2017.

Net income for the three months ended December 31, 2018 was $68.2 million, or $1.51 per fully diluted share, a $1.2 million decrease from $69.5 million, or $1.54 per fully diluted share, for the three months ended September 30, 2018 and an increase of $2.3 million from $65.9 million, or $1.48 per fully diluted share, for the three months ended December 31, 2017. Net income was $236.0 million, or $5.24 per fully diluted share, for the year ended December 31, 2018, a 300% increase from $59.0 million, or $1.42 per fully diluted share, for the year ended December 31, 2017.

Adjusted EBITDA (as defined and reconciled below) was $84.3 million for the three months ended December 31, 2018, a $99.3 million decrease from $183.6 million for the three months ended September 30, 2018 and a $26.2 million decline from $110.5 million for the three months ended December 31, 2017. Adjusted EBITDA was $547.3 million for the year ended December 31, 2018, a 231% increase from $165.3 million for the year ended December 31, 2017.

Arty Straehla, Mammoth’s Chief Executive Officer, stated, “2018 was another strong year for Mammoth as we posted record levels of total revenue, net income and adjusted EBITDA. In addition, we strategically invested in high margin businesses, returned $11 million to stockholders through dividends and positioned ourselves to take advantage of M&A opportunities. Since going public in late 2016, adjusted EBITDA has grown more than 12 times to $547 million in 2018 from $41 million in 2016. Despite continuing volatility in commodity prices and reductions in capital expenditure budgets at many of our customers, oilfield activity levels have been improving so far in 2019 from the levels experienced in the fourth quarter of 2018.  Our six frac fleets have experienced full utilization since late January and demand and pricing for our sand is getting stronger.”

Infrastructure Services

Mammoth’s infrastructure services segment contributed revenues of $159.6 million for the three months ended December 31, 2018, a 33% decrease from $237.1 million for the three months ended September 30, 2018 and a 24% decrease from $209.2 million the three months ended December 31, 2017. During the fourth quarter of 2018, our staffing levels in Puerto Rico generally ranged from 475 to 550, dropping to approximately 130 at year end for a period of three days due to the holidays.

The infrastructure segment contributed revenues of $1.1 billion for the year ended December 31, 2018, a 382% increase from $224.4 million for the year ended December 31, 2017.

Pressure Pumping Services

Mammoth’s pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $72.8 million on 1,164 stages for the three months ended December 31, 2018, a 23% decrease from $94.2 million on 1,594 stages for the three months ended September 30, 2018 and a 35% decrease from $111.9 million on 1,375 stages for the three months ended December 31, 2017.

The pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $369.5 million for the year ended December 31, 2018, a 32% increase from $279.4 million for the year ended December 31, 2017. During 2018, Mammoth’s pressure pumping division completed a total of 6,245 stages, an increase of 22% from 2017.

An average of 3.7 fleets remained active throughout the fourth quarter of 2018.

Natural Sand Proppant Services

Mammoth’s natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $27.4 million for the three months ended December 31, 2018, a 26% decrease from $37.0 million for the three months ended September 30, 2018 and a 38% decrease from $43.9 million for the three months ended December 31, 2017. The Company sold 569,195 tons of sand during the three months ended December 31, 2018, a 5% decrease from 598,438 during the three months ended September 30, 2018 and a 5% decrease from 600,182 during the three months ended December 31, 2017.

The natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $168.3 million for the year ended December 31, 2018, a 44% increase from $117.0 million for the year ended December 31, 2017. The Company sold 2.7 million tons of sand during the year ended December 31, 2018, a 59% increase from 1.7 million during the year ended December 31, 2017.

During 2018, Mammoth’s total sand processing capacity increased to approximately 4.4 million tons per year. Due to market conditions, our Muskie facility was temporarily idled during the third quarter of 2018 and continues to be idled. The Company’s average production costs were approximately $12 per ton during the fourth quarter of 2018.

Other Services

Mammoth’s other services, including contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $38.8 million for the three months ended December 31, 2018, a 9% increase from $35.7 million for the three months ended September 30, 2018 and a 34% increase from $28.9 million for the three months ended December 31, 2017.

The Company’s other services contributed revenues (inclusive of inter-segment revenues) of $149.9 million for the year ended December 31, 2018, a 47% increase from $102.2 million for the year ended December 31, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $14.8 million for the three months ended December 31, 2018, compared to a credit of $45.3 million for the three months ended September 30, 2018 and $27.4 million for the three months ended December 31, 2017.

Following is a breakout of SG&A expense (in thousands):

    
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
 2018 2017 2018 2018 2017
Cash expenses:         
Compensation and benefits$9,409  $6,364  $14,864  $42,950  $15,322 
Professional services3,018  2,690  3,267  11,854  7,765 
Other(a)1,475  1,802  3,701  10,718  7,503 
Total cash SG&A expense13,902  10,856  21,832  65,522  30,590 
Non-cash expenses:         
Bad debt provision(b)(34) 16,020  (68,333) (14,578) 16,098 
Equity based compensation(c)      17,487   
Stock based compensation915  550  1,177  4,666  3,198 
Total non-cash SG&A expense881  16,570  (67,156) 7,575  19,296 
Total SG&A expense$14,783  $27,426  $(45,324) $73,097  $49,886 
a. Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b. During the three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result, during the three months ended September 30, 2018, the Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half of 2018. The Company expects to receive payment for the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.
c. Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).
  

SG&A expenses, as a percentage of total revenue, were 5% for the three months ended December 31, 2018 compared to (12%) for the three months ended September 30, 2018 and 7% for the three months ended December 31, 2017. Excluding bad debt expenses, SG&A expenses as a percentage of total revenue were 5% for the three months ended December 31, 2018, compared to 6% for the three months ended September 30, 2018 and 3% for the three months ended December 31, 2017.

Income Tax Expense

During the fourth quarter of 2018, the Company recognized a tax benefit of $21.0 million related to a change in the mix of earnings between our United States and Puerto Rico operations as compared to the three months ended September 30, 2018. For the full year of 2018, the Company’s effective tax rate was 39%.

Liquidity

On October 19, 2018, Mammoth entered into an amended and restated five-year asset backed revolving credit facility led by PNC Capital Markets with a maximum revolving advance amount at closing of $185 million and the potential to increase the facility by up to an additional $165 million.

As of December 31, 2018, Mammoth had cash on hand totaling $67.6 million and no borrowings outstanding under its revolving credit facility. As of December 31, 2018, the Company had approximately $175.8 of available borrowing capacity under its revolving credit facility, after giving effect to $8.4 million of outstanding letters of credit, resulting in total liquidity of approximately $243.4 million. On March 13, 2019, the Company borrowed $82.0 million under its revolving credit facility for 2018 Puerto Rico income taxes to be paid on March 15, 2019. Pursuant to the terms of its original contract with the Puerto Rico Electric Power Authority, or PREPA, once the Company’s 2018 Puerto Rico income taxes are paid and the applicable returns are filed the Company is entitled to receive payment from PREPA of $44.8 million related to a contractual income tax provision.

Capital Expenditures

The following table summarizes Mammoth’s capital expenditures by operating division for the periods indicated (in thousands):

 
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
 2018 2017 2018 2018 2017
Infrastructure services(a)$22,409  $8,131  $21,737  $100,701  $20,144 
Pressure pumping services(b)9,632  12,870  8,042  33,774  85,853 
Natural sand proppant services(c)2,132  8,478  3,145  17,935  16,376 
Other(d)8,240  2,100  7,821  39,533  11,480 
Total capital expenditures$42,413  $31,579  $40,745  $191,943  $133,853 
a. Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for periods presented.
b.Capital expenditures primarily for pressure pumping equipment, including three new fleets, for 2017 and various pressure pumping and water transfer equipment for 2018.
c.Capital expenditures primarily for the upgrade and expansion of our plants for 2018 and plant upgrades for 2017.
d. Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for 2018 and upgrades to our rig fleet and purchase of other equipment for 2017.
  

Explanatory Note Regarding Financial Information

The financial information contained in this release should be read in conjunction with the financial information contained in Mammoth’s Annual Report to be filed on Form 10-K with the Securities and Exchange Commission (“SEC”), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings.

The Company’s Chief Executive Officer and Chief Financial Officer comprise the Company’s Chief Operating Decision Maker function (“CODM”). Segment information is prepared on the same basis that the CODM manages the segments, evaluates the segment financial statements and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of operating income (loss) as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

Based on its assessment of Financial Accounting Standards Board guidance at December 31, 2018, the Company identified three reportable segments: infrastructure services, pressure pumping services and natural sand proppant services. For the year ended December 31, 2017, the Company identified four reportable segments consisting of infrastructure services, pressure pumping services, natural sand proppant services and contract land and directional drilling services. The Company changed its reportable segment presentation in 2018, as it determined based upon both a quantitative and qualitative basis that the contract land and directional drilling services segment, which previously included Bison Drilling and Field Services LLC, Bison Trucking LLC, Panther Drilling Systems LLC, Mako Acquisitions LLC and White Wing Tubular LLC, is not of continuing significance. The Company now includes the results of the entities previously included in the contract land and directional drilling services segment in its reconciling column titled “All Other” in the tables below. The financial results by segment below for the three months ended September 30, 2018 and the three months and year ended December 31, 2017 have been retroactively adjusted to reflect this change in reportable segments.

On June 5, 2017, the Company completed the acquisition of (1) Sturgeon Acquisitions, LLC and its wholly owned subsidiaries Taylor Frac LLC, Taylor RE, LLC and South River, LLC (collectively, “Sturgeon”), (2) Stingray Energy Services and (3) Stingray Cementing (together with Stingray Energy Services, the “Stingray Acquisition”) in exchange for the issuance by Mammoth of an aggregate of 7,000,000 shares of its common stock.

Prior to the acquisition, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the Unites States of America (“GAAP”) to account for this common control acquisition in a manner similar to the pooling of interest method of accounting. Therefore, the Company’s historical financial information has been recast to combine Sturgeon with the Company as if the acquisition had been completed at commencement of Sturgeon’s operations on September 13, 2014.

Conference Call Information

Mammoth will host a conference call on Friday, March 15, 2019 at 10:00 a.m. CDT (11:00 am EDT) to discuss its fourth quarter and full year 2018 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 1357129. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.

About Mammoth Energy Services, Inc.

Mammoth is an integrated, growth-oriented company serving both the oil and gas and the electric utility industries in North America and US territories.  Mammoth’s subsidiaries provide a diversified set of drilling and completion services to the exploration and production industry including pressure pumping, coil tubing, natural sand and proppant services as well as trucking, drilling, cementing, water transfer among others. In addition, its infrastructure division provides transmission, distribution and logistics services to various public and private owned utilities throughout the US and Puerto Rico.

For additional information about Mammoth, please visit its website at www.mammothenergy.com, where Mammoth routinely posts announcements, updates, events, investor information and presentations and recent news releases.

Investor Contact:
Don Crist
Director of Investor Relations
dcrist@mammothenergy.com
405-608-6048

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding our business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, our forward-looking statements are subject to significant risks and uncertainties, including those described in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we make with the SEC, including those relating to our acquisitions and our contracts, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the failure to receive or delays in receiving governmental authorizations, approvals and/or payments; risks relating to economic conditions; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; the effects of government regulation, permitting and other legal requirements; operating risks; the adequacy of capital resources and liquidity; weather; natural disasters; litigation; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

Investors are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law.

 
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
 
ASSETS December 31, December 31,
  2018 2017
   
CURRENT ASSETS (in thousands)
Cash and cash equivalents $67,625  $5,637 
Accounts receivable, net 337,460  243,746 
Receivables from related parties 11,164  33,788 
Inventories 21,302  17,814 
Prepaid expenses 11,317  12,552 
Other current assets 688  886 
Total current assets 449,556  314,423 
     
Property, plant and equipment, net 436,699  351,017 
Sand reserves 71,708  74,769 
Intangible assets, net – customer relationships 1,711  9,623 
Intangible assets, net – trade names 6,045  6,516 
Goodwill 101,245  99,811 
Deferred income tax asset   6,739 
Other non-current assets 6,127  4,345 
Total assets $1,073,091  $867,243 
LIABILITIES AND EQUITY    
CURRENT LIABILITIES    
Accounts payable $68,843  $141,306 
Payables to related parties 370  1,378 
Accrued expenses and other current liabilities 59,652  40,895 
Income taxes payable 104,958  36,409 
Total current liabilities 233,823  219,988 
     
Long-term debt   99,900 
Deferred income tax liabilities 79,309  34,147 
Asset retirement obligation 3,164  2,123 
Other liabilities 2,743  3,289 
Total liabilities 319,039  359,447 
     
COMMITMENTS AND CONTINGENCIES    
     
EQUITY    
Equity:    
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,876,649 and 44,589,306 issued and outstanding at December 31, 2018 and 2017 449  446 
Additional paid in capital 530,919  508,010 
Retained earnings 226,765  2,001 
Accumulated other comprehensive loss (4,081) (2,661)
Total equity 754,052  507,796 
Total liabilities and equity $1,073,091  $867,243 
 
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
 2018 2017 2018 2018 2017
  
 (in thousands, except per share amounts)
REVENUE 
Services revenue$260,513  $315,545  $346,368  $1,471,085  $435,409 
Services revenue – related parties9,551  31,639  18,933  118,183  166,064 
Product revenue8,063  18,024  14,955  75,766  47,067 
Product revenue – related parties71  3,755  3,787  25,050  42,956 
Total revenue278,198  368,963  384,043  1,690,084  691,496 
          
COST AND EXPENSES         
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $26,999, $25,044 and $27,810, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $106,282 and $82,686, respectively, for the years ended December 31, 2018 and 2017)151,273  198,201  216,670  961,205  390,112 
Services cost of revenue – related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0 and $0, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $0 and $0, respectively, for the years ended December 31, 2018 and 2017)240  707  1,425  5,885  1,408 
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $3,136, $2,790 and $4,183, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $13,512 and $9,389, respectively, for the years ended December 31, 2018 and 2017)28,797  33,290  29,470  126,714  91,049 
Selling, general and administrative14,283  26,931  (45,761) 71,199  48,405 
Selling, general and administrative – related parties500  495  437  1,898  1,481 
Depreciation, depletion, amortization and accretion30,159  27,770  32,015  119,877  92,124 
Impairment of long-lived assets4,086  4,146  4,582  8,855  4,146 
Total cost and expenses229,338  291,540  238,838  1,295,633  628,725 
Operating income48,860  77,423  145,205  394,451  62,771 
          
OTHER (EXPENSE) INCOME         
Interest expense, net(533) (1,381) (458) (3,187) (4,310)
Bargain purchase gain, net of tax        4,012 
Other, net(1,122) 28  (400) (2,036) (677)
Total other expense(1,655) (1,353) (858) (5,223) (975)
Income before income taxes47,205  76,070  144,347  389,228  61,796 
(Benefit) provision for income taxes(21,002) 10,155  74,835  153,263  2,832 
Net income$68,207  $65,915  $69,512  $235,965  $58,964 
          
OTHER COMPREHENSIVE INCOME         
Foreign currency translation adjustment, net of tax of $212, ($167) and ($87), respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $397 and $645, respectively, for the years ended December 31, 2018 and 2017(961) (482) 327  (1,420) 555 
Comprehensive income$67,246  $65,433  $69,839  $234,545  $59,519 
          
Net income per share (basic)$1.52  $1.48  $1.55  $5.27  $1.42 
Net income per share (diluted)$1.51  $1.48  $1.54  $5.24  $1.42 
Weighted average number of shares outstanding (basic)44,845  44,579  44,756  44,750  41,548 
Weighted average number of shares outstanding (diluted)45,048  44,683  45,082  45,021  41,639 
Dividends declared per share$0.125    $0.125  $0.25   
 
 MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Twelve Months Ended
 December 31,
 2018 2017
  
 (in thousands)
Cash flows from operating activities:   
Net income$235,965  $58,964 
Adjustments to reconcile net income to cash provided by operating activities:   
Equity based compensation17,487   
Stock based compensation5,425  3,741 
Depreciation, depletion, accretion and amortization119,877  92,124 
Amortization of coil tubing strings2,193  2,855 
Amortization of debt origination costs387  399 
Bad debt expense(14,578) 16,206 
Loss on disposal of property and equipment947  69 
Gain on bargain purchase  (4,012)
Impairment of long-lived assets8,855  4,146 
Deferred income taxes52,226  (34,425)
Loss from equity investee16   
Changes in assets and liabilities, net of acquisitions of businesses:   
Accounts receivable, net(78,840) (231,751)
Receivables from related parties22,624  (1,096)
Inventories(5,502) (14,238)
Prepaid expenses and other assets1,423  (7,628)
Accounts payable(64,966) 101,725 
Payables to related parties(1,008) 1,174 
Accrued expenses and other liabilities15,445  32,968 
Income taxes payable68,692  36,395 
Net cash provided by operating activities386,668  57,616 
    
Cash flows from investing activities:   
Purchases of property and equipment(187,285) (132,295)
Purchases of property and equipment from related parties(4,658) (1,558)
Business acquisitions(20,824) (42,008)
Contributions to equity investee(702)  
Proceeds from disposal of property and equipment1,514  907 
Business combination cash acquired  2,671 
Net cash used in investing activities(211,955) (172,283)
    
Cash flows from financing activities:   
Borrowings from lines of credit77,000  156,850 
Repayments of lines of credit(176,900) (56,950)
Dividends paid(11,201)  
Repayments of equipment financing note(292)  
Debt issuance costs(1,199)  
Repayment of acquisition long-term debt  (8,851)
Net cash (used in) provided by financing activities(112,592) 91,049 
Effect of foreign exchange rate on cash(133) 16 
Net change in cash and cash equivalents61,988  (23,602)
Cash and cash equivalents at beginning of period5,637  29,239 
Cash and cash equivalents at end of period$67,625  $5,637 
Supplemental disclosure of cash flow information: 
Cash paid for interest$3,212  $3,656 
Cash paid for income taxes$32,757  $840 
Supplemental disclosure of non-cash transactions:   
Acquisition of Stingray Cementing LLC and Stingray Energy Services LLC$  $23,091 
Purchases of property and equipment included in accounts payable$11,908  $15,038 
 
MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS
(in thousands)
 
Three months ended December 31, 2018InfrastructurePressure
Pumping
SandAll OtherEliminationsTotal
Revenue from external customers$159,610 $72,219 $8,133 $38,236 $ $278,198 
Intersegment revenues 560 19,273 542 (20,375) 
Total revenue159,610 72,779 27,406 38,778 (20,375)278,198 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion75,486 39,601 28,796 36,427  180,310 
Intersegment cost of revenues 19,787 253 308 (20,348) 
Total cost of revenue75,486 59,388 29,049 36,735 (20,348)180,310 
Selling, general and administrative9,689 1,768 1,170 2,156  14,783 
Depreciation, depletion, amortization and accretion7,425 10,952 3,138 8,644  30,159 
Impairment of long-lived assets308   3,778  4,086 
Operating income (loss)66,702 671 (5,951)(12,535)(27)48,860 
Interest expense, net82 177 40 234  533 
Other expense, net60 340 304 418  1,122 
Income (loss) before income taxes$66,560 $154 $(6,295)$(13,187)$(27)$47,205 
                   
Three months ended December 31, 2017InfrastructurePressure
Pumping
SandAll OtherEliminationsTotal
Revenue from external customers$209,229 $111,244 $21,779 $26,711 $ $368,963 
Intersegment revenues 617 22,167 2,154 (24,938) 
Total revenue209,229 111,861 43,946 28,865 (24,938)368,963 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion108,289 65,594 33,289 25,026  232,198 
Intersegment cost of revenues1,443 22,928 373 159 (24,903) 
Total cost of revenue109,732 88,522 33,662 25,185 (24,903)232,198 
Selling, general and administrative20,365 2,810 1,875 2,376  27,426 
Depreciation, depletion, amortization and accretion1,805 13,590 2,791 9,584  27,770 
Impairment of long-lived assets  324 3,822  4,146 
Operating income (loss)77,327 6,939 5,294 (12,102)(35)77,423 
Interest expense, net168 599 107 507  1,381 
Other (income) expense, net(4)2 (40)14  (28)
Income (loss) before income taxes$77,163 $6,338 $5,227 $(12,623)$(35)$76,070 
                   
Three months ended September 30, 2018InfrastructurePressure
Pumping
SandAll OtherEliminationsTotal
Revenue from external customers$237,052 $93,360 $18,742 $34,889 $ $384,043 
Intersegment revenues 809 18,268 781 (19,858) 
Total revenue237,052 94,169 37,010 35,670 (19,858)384,043 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion128,267 55,490 29,470 34,338  247,565 
Intersegment cost of revenues37 19,002 546 263 (19,848) 
Total cost of revenue128,304 74,492 30,016 34,601 (19,848)247,565 
Selling, general and administrative(54,200)4,508 1,618 2,750  (45,324)
Depreciation, depletion, amortization and accretion6,591 12,720 4,184 8,520  32,015 
Impairment of long-lived assets 143  4,439  4,582 
Operating income (loss)156,357 2,306 1,192 (14,640)(10)145,205 
Interest expense, net159 150 37 112  458 
Other expense, net181 2 199 18  400 
Income (loss) before income taxes$156,017 $2,154 $956 $(14,770)$(10)$144,347 
                   
Year ended December 31, 2018InfrastructurePressure
Pumping
SandAll OtherEliminationsTotal
Revenue from external customers$1,082,371 $362,491 $100,816 $144,406 $ $1,690,084 
Intersegment revenues 7,001 67,459 5,516 (79,976) 
Total revenue1,082,371 369,492 168,275 149,922 (79,976)1,690,084 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion608,017 223,296 126,714 135,777  1,093,804 
Intersegment cost of revenues2,583 70,365 6,103 898 (79,949) 
Total cost of revenue610,600 293,661 132,817 136,675 (79,949)1,093,804 
Selling, general and administrative27,126 29,761 6,218 9,992  73,097 
Depreciation, depletion, amortization and accretion20,516 51,487 13,519 34,355  119,877 
Impairment of long-lived assets308 143  8,404  8,855 
Operating income (loss)423,821 (5,560)15,721 (39,504)(27)394,451 
Interest expense, net423 1,171 234 1,359  3,187 
Other expense, net573 434 525 504  2,036 
Income (loss) before income taxes$422,825 $(7,165)$14,962 $(41,367)$(27)$389,228 
                   
Year ended December 31, 2017InfrastructurePressure
Pumping
SandAll OtherEliminationsTotal
Revenue from external customers$224,425 $277,326 $90,023 $99,722 $ $691,496 
Intersegment revenues 2,026 27,014 2,527 (31,567) 
Total revenue224,425 279,352 117,037 102,249 (31,567)691,496 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion120,117 183,089 91,049 88,314  482,569 
Intersegment cost of revenues1,443 28,147 1,731 211 (31,532) 
Total cost of revenue121,560 211,236 92,780 88,525 (31,532)482,569 
Selling, general and administrative21,606 9,501 8,190 10,589  49,886 
Depreciation, depletion, amortization and accretion3,185 45,413 9,394 34,132  92,124 
Impairment of long-lived assets  324 3,822  4,146 
Operating income (loss)78,074 13,202 6,349 (34,819)(35)62,771 
Interest expense, net241 1,622 679 1,768  4,310 
Bargain purchase gain  (4,012)  (4,012)
Other expense, net6 129 211 331  677 
Income (loss) before income taxes$77,827 $11,451 $9,471 $(36,918)$(35)$61,796 
                   

Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s financial statements, such as industry analysts, investors, lenders and rating agencies. Mammoth defines Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion expense, impairment of long-lived assets, acquisition related costs, public offering costs, equity based compensation, stock based compensation, bargain purchase gain, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets) and provision (benefit) for income taxes. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of Mammoth’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Mammoth’s computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure its ability to meet debt service requirements.

The following tables provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income (loss) on a consolidated basis and for each of the Company’s segments (in thousands):

Consolidated

 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
Reconciliation of Adjusted EBITDA to net income:2018 2017 2018 2018 2017
Net income$68,207  $65,915  $69,512  $235,965  $58,964 
Depreciation, depletion, accretion and amortization expense30,159  27,770  32,015  119,877  92,124 
Impairment of long-lived assets4,086  4,146  4,582  8,855  4,146 
Acquisition related costs61  51  99  191  2,506 
Public offering costs(10)   260  982   
Equity based compensation      17,487   
Stock based compensation1,094  1,093  1,415  5,425  3,741 
Bargain purchase gain        (4,012)
Interest expense, net533  1,381  458  3,187  4,310 
Other expense (income), net1,122  (28) 400  2,036  677 
(Benefit) provision for income taxes(21,002) 10,155  74,835  153,263  2,832 
Adjusted EBITDA$84,250  $110,483  $183,576  $547,268  $165,288 
                    

Infrastructure Services

 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
Reconciliation of Adjusted EBITDA to net income:2018 2017 2018 2018 2017
Net income$141,875  $47,873  $78,405  $319,940  $48,537 
Depreciation and amortization expense7,425  1,805  6,591  20,516  3,185 
Impairment of long-lived assets308      308   
Acquisition related costs61  8    58  98 
Public offering costs(10)   123  473   
Stock based compensation470  316  555  2,089  345 
Interest expense82  168  159  423  241 
Other expense (income), net60  (4) 181  573  6 
(Benefit) provision for income taxes(75,315) 29,290  77,612  102,885  29,290 
Adjusted EBITDA$74,956  $79,456  $163,626  $447,265  $81,702 
                    

Pressure Pumping Services

 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
Reconciliation of Adjusted EBITDA to net income (loss):2018 2017 2018 2018 2017
Net income (loss)$154  $6,338  $2,154  $(7,165) $11,451 
Depreciation and amortization expense10,952  13,590  12,720  51,487  45,413 
Impairment of long-lived assets    143  143   
Acquisition related costs    6  39  1 
Public offering costs    62  264   
Equity based compensation      17,487   
Stock based compensation318  438  423  1,612  1,641 
Interest expense177  599  150  1,171  1,622 
Other expense, net340  2  2  434  129 
Adjusted EBITDA$11,941  $20,967  $15,660  $65,472  $60,257 
                    

Natural Sand Proppant Services

 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
Reconciliation of Adjusted EBITDA to net income (loss):2018 2017 2018 2018 2017
Net (loss) income$(6,295) $5,263  $956  $14,962  $9,474 
Depreciation, depletion, accretion and amortization expense3,138  2,791  4,184  13,519  9,394 
Impairment of long-lived assets  324      324 
Acquisition related costs  42    (38) 2,163 
Public offering costs    49  144   
Stock based compensation181  184  211  783  708 
Bargain purchase gain        (4,012)
Interest expense40  107  37  234  679 
Other expense (income), net304  (40) 199  525  211 
Benefit for income taxes  (36)     (4)
Adjusted EBITDA$(2,632) $8,635  $5,636  $30,129  $18,937 
                    

Other Services(a)

 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
Reconciliation of Adjusted EBITDA to net income (loss):2018 2017 2018 2018 2017
Net (loss) income$(67,500) $6,476  $(11,993) $(91,745) $(10,464)
Depreciation and amortization expense8,644  9,584  8,520  34,355  34,132 
Impairment of long-lived assets3,778  3,822  4,439  8,404  3,822 
Acquisition related costs  1  93  132  244 
Public offering costs    26  101   
Stock based compensation125  155  226  941  1,047 
Interest expense, net234  507  112  1,359  1,768 
Other expense, net418  14  18  504  331 
Provision (benefit) for income taxes54,313  (19,099) (2,777) 50,378  (26,454)
Adjusted EBITDA$12  $1,460  $(1,336) $4,429  $4,426 
                    
a.Includes results for Mammoth’s contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations services and corporate related activities. The Company’s corporate related activities do not generate revenue.
  

Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income and adjusted earnings per share are supplemental non-GAAP financial measures that are used by management to evaluate the Company’s operating and financial performance. Management believes these measures provide meaningful information about the Company’s performance by excluding certain non-cash charges that may not be indicative of the Company’s ongoing operating results, such as equity based compensation, that may not be indicative of the Company’s ongoing operating results. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for net income and earnings per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income and adjusted earnings per share to the GAAP financial measures of net income and earnings per share for the periods specified.

 
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31,
 2018 2017 2018 2018 2017
  
 (in thousands, except per share amounts)
Net income, as reported$68,207  $65,915  $69,512  $235,965  $58,964 
Equity based compensation      17,487   
Adjusted net income$68,207  $65,915  $69,512  $253,452  $58,964 
          
Basic earnings per share, as reported$1.52  $1.48  $1.55  $5.27  $1.42 
Equity based compensation      0.39   
Adjusted basic earnings per share$1.52  $1.48  $1.55  $5.66  $1.42 
          
Diluted earnings per share, as reported$1.51  $1.48  $1.54  $5.24  $1.42 
Equity based compensation      0.39   
Adjusted diluted earnings per share$1.51  $1.48  $1.54  $5.63  $1.42 
                    

After Tax Return on Invested Capital

After tax return on invested capital is a supplemental non-GAAP measure that is used by management to evaluate the Company’s performance. Mammoth defines after tax return on invested capital as net income divided by total capital employed, which is the average of ending debt and equity for the last two years. Management believes after tax return on invested capital is a useful measure of how effectively the Company uses capital to generate profits and it provides additional insight for analysts and investors in evaluating the Company’s financial and operating performance. After tax return on invested capital should not be considered in isolation or as a substitute for financial measures reported in accordance with GAAP. The following table provides the calculation of after tax return on invested capital using the GAAP financial measures of net income, total debt and total equity.

 
 Twelve Months Ended
 December 31,
 2018 2017 2016
  
 (in thousands)
Net income$235,965  $58,964   
Capital Employed     
Total debt$  $99,900  $ 
Total equity754,052  507,796  422,781 
Total capital employed$754,052  $607,696  $422,781 
      
Average capital employed(a)$680,874  $515,239   
After tax return on invested capital(b)35% 11%  
a.Average capital employed is the average of total capital employed as of end of the period and end of the prior period.
b.After tax return on invested capital is the ratio of net income for the period to average capital employed.
  

HGH Adv

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