HOUSTON, July 25, 2013 /PRNewswire/ --?Key Energy Services, Inc. (KEG) generated second quarter 2013 consolidated revenues of $411.4 million and normalized pre-tax income from continuing operations of $2.2 million, or $0.01 per share. Normalized pre-tax income from continuing operations excludes $8.3 million, or $0.04 per share, of severance and restructuring costs. On a GAAP basis, the second quarter 2013 net loss from continuing operations was $4.1 million, or $0.03 per share. Both GAAP and normalized results include $2.3 million of pre-tax equipment mobilization costs associated with international operations.
First quarter 2013 consolidated revenues were $428.4 million with normalized pre-tax income from continuing operations of $1.4 million, or $0.01 per share, which excludes a $2.2 million pre-tax charge associated with an executive retirement. On a GAAP basis, first quarter 2013 net loss from continuing operations was $274,000, or $0.00 per share.
Overview of Results
Commenting on the results, Key's Chairman, President and Chief Executive Officer, Dick Alario, stated, "We are pleased that, on a normalized basis, Key's U.S. segment delivered 50% operating income growth on a sequential revenue increase of 4.5%. This strong U.S. performance was driven by operational and cost efficiencies and effective execution in the restructuring of Fluid Management Services, which offset the impact of a severe activity decline in the North Region of Mexico within our International Segment."
The following table sets forth summary data from continuing operations for the second quarter 2013 and prior comparable quarterly periods.
| ?Three Months Ended? (unaudited)? | ||||||||||
| ? June 30, 2013? | ?March 31, 2013? | ? June 30, 2012? | ||||||||
| ?(in millions, except per share amounts)? | ||||||||||
| Revenues | $ ? ?411.4 | $ ? ? 428.4 | $ ? ?516.0 | |||||||
| Income (loss) attributable to Key | (4.1) | (0.3) | 31.5 | |||||||
| Diluted earnings (loss) per share attributable to Key | (0.03) | (0.00) | 0.21 | |||||||
| Adjusted EBITDA | 73.8 | 68.8 | 114.7 | |||||||
U.S. Segment
Second quarter 2013 U.S. revenues were $361.7 million, up 4.5% compared to $346.1 million in the first quarter 2013. Second quarter U.S. normalized operating income was $57.5 million, or 15.9% of revenues, compared to $38.3 million, or 11.1% of revenues, in the first quarter. Second quarter U.S. normalized operating income excludes $2.4 million of severance and restructuring costs primarily associated with the Fluid Management Services restructuring.
U.S. results benefited from improved operational efficiencies in Rig Services and Coiled Tubing Services. Fluids Management Services generated a slight profit, inclusive of the restructuring expenses and despite flat market activity and strong competitive pressures.
International Segment
Second quarter 2013 international revenues were $49.7 million, down 39.7% compared to $82.4 million in the first quarter 2013. Second quarter international normalized operating loss was $5.8 million, or -11.8% of revenues, compared to first quarter operating income of $11.9 million, or 14.4% of revenues. Second quarter international normalized operating loss excludes $5.2 million of expenses primarily associated with severance in Mexico but includes $2.1 million of expenses associated with rig mobilizations.
Second quarter financial results were negatively impacted by the worse than anticipated activity decline in the North Region of Mexico. Key's active Mexico rig count averaged 16 rigs operating during the second quarter compared to an average of 40 rigs operating in the first quarter. The 60% quarter-over-quarter revenue decline in Mexico drove a normalized decremental operating income margin of 54%, due to operating inefficiencies associated with the sharp activity decline.
Functional Support Segment
Functional Support operating expense was $35.7 million during the second quarter 2013 compared to $38.3 million in the first quarter. Second quarter Functional Support expense included $0.7 million of corporate?severance.?First quarter Functional Support expense included a $2.2 million charge associated with?an executive retirement.
General and Administrative Expenses
General and administrative expenses, which include Functional Support, were $57.7 million, or 14.0% of revenues, for the second quarter 2013 compared to $63.2 million, or 14.8% of revenues, in the prior quarter.
Capital Expenditures and Liquidity
Capital expenditures were $35.4 million during the second quarter 2013 and $72.6 million through June 30, 2013. Key's consolidated cash balance at June 30, 2013 was $24.7 million compared to $39.9 million at March 31, 2013. Total debt at June 30, 2013 was $867.8 million compared to total debt of $878.1 million at March 31, 2013. At the end of the second quarter, there was $310.9 million of unused capacity under the Company's $550 million senior secured credit facility. Net debt to total capitalization at the end of the second quarter 2013 was 39.4%.
Outlook
Commenting on Key's outlook, Alario stated, "In the U.S., we expect third quarter market activity levels roughly flat with the second quarter, followed by a typical seasonal activity decline in the fourth quarter. As such, we anticipate Key's third quarter U.S. revenues and margin will be similar to the second quarter's results. Internationally, we expect approximately breakeven operating income in the third quarter, inclusive of ongoing equipment mobilization expense, as we continue to redeploy idle rigs from the North Region of Mexico to higher demand markets."
Conference Call Information
As previously announced, Key management will host a conference call to discuss its second quarter 2013 financial results on Friday, July 26, 2013 at 10:00 a.m. CDT. Callers from the U.S. and Canada should dial 888-794-4637 to access the call. International callers should dial 660-422-4879. All callers should ask for the "Key Energy Services Conference Call" or provide the access code 96056301. The conference call will also be available live via the internet. To access the webcast, go to www.keyenergy.com and select "Investor Relations."
A telephonic replay of the conference call will be available on Friday, July 26, 2013, beginning approximately two hours after the completion of the conference call and will remain available for one week. To access the replay, call 855-859-2056 or 800-585-8367. The access code for the replay is 96056301. The replay will also be accessible at www.keyenergy.com under "Investor Relations" for a period of at least 90 days.
Contact:
Gary Russell, Investor Relations
713-651-4434
?
| Consolidated Statements of Operations (in thousands, except per share amounts, unaudited): | |||||||||||
| ?Three Months Ended? | ?Six Months Ended? | ||||||||||
| ? June 30, 2013?? | ?March 31, 2013? | ? June 30, 2012? | ? June 30, 2013?? | ? June 30, 2012? | |||||||
| REVENUES | $ ? 411,390 | $ ? 428,449 | $ ?515,997 | $ ? ? ? ? ? ? 839,839 | $ ?1,002,748 | ||||||
| COSTS AND EXPENSES: | |||||||||||
| Direct operating expenses | 287,102 | 299,182 | 343,996 | 586,284 | 655,493 | ||||||
| Depreciation and amortization expense | 58,208 | 54,193 | 52,452 | 112,401 | 103,641 | ||||||
| General and administrative expenses | 57,736 | 63,245 | 58,081 | 120,981 | 118,999 | ||||||
| Operating income | 8,344 | 11,829 | 61,468 | 20,173 | 124,615 | ||||||
| Interest expense, net of amounts capitalized | 13,984 | 13,804 | 13,730 | 27,788 | 25,612 | ||||||
| Other (income) loss, net | 430 | (1,223) | (1,380) | (793) | (2,409) | ||||||
| Income (loss) from continuing operations before tax | (6,070) | (752) | 49,118 | (6,822) | 101,412 | ||||||
| Income tax benefit (expense) | 2,298 | 566 | (17,419) | 2,864 | (36,232) | ||||||
| Income (loss) from continuing operations | (3,772) | (186) | 31,699 | (3,958) | 65,180 | ||||||
| Loss from discontinued operations, net of tax | - | - | (2,454) | - | (33,359) | ||||||
| Net income (loss) | (3,772) | (186) | 29,245 | (3,958) | 31,821 | ||||||
| Income (loss) attributable to noncontrolling interest | 356 | 88 | 204 | 444 | (410) | ||||||
| INCOME (LOSS) ATTRIBUTABLE TO KEY | $ ? ? (4,128) | $ ? ? ? ?(274) | $ ? 29,041 | $ ? ? ? ? ? ? ? ?(4,402) | $ ? ? 32,231 | ||||||
| Earnings (loss) per share attributable to Key: | |||||||||||
| Basic and diluted | $ ? ? ? (0.03) | $ ? ? ? ? ? - | $ ? ? ? 0.19 | $ ? ? ? ? ? ? ? ? ?(0.03) | $ ? ? ? ?0.21 | ||||||
| Weighted average shares outstanding: | |||||||||||
| Basic? | 152,384 | 151,967 | 151,087 | 152,175 | 151,110 | ||||||
| Diluted | 152,384 | 151,967 | 151,100 | 152,175 | 151,168 | ||||||
| Income (loss) from continuing operations? | |||||||||||
| attributable to Key: | |||||||||||
| Income (loss) from continuing operations | (3,772) | (186) | 31,699 | (3,958) | 65,180 | ||||||
| Income (loss) attributable to noncontrolling interest | 356 | 88 | 204 | 444 | (410) | ||||||
| Income (loss) from continuing operations attributable to Key | $ ? ? (4,128) | $ ? ? ? ?(274) | $ ? 31,495 | $ ? ? ? ? ? ? ? ?(4,402) | $ ? ? 65,590 | ||||||
| Earnings (loss) per share from continuing? | |||||||||||
| operations attributable to Key: | |||||||||||
| Basic and diluted | $ ? ? ? (0.03) | $ ? ? ? ? ? - | $ ? ? ? 0.21 | $ ? ? ? ? ? ? ? ? ?(0.03) | $ ? ? ? ?0.43 | ||||||
| Loss from discontinued operations, net of tax: | $ ? ? ? ? ? - | $ ? ? ? ? ? - | $ ? ?(2,454) | $ ? ? ? ? ? ? ? ? ? ? ?- | $ ? ?(33,359) | ||||||
| Loss per share from discontinued operations: | |||||||||||
| Basic and diluted | $ ? ? ? ? ? - | $ ? ? ? ? ? - | $ ? ? ?(0.02) | $ ? ? ? ? ? ? ? ? ? ? ?- | $ ? ? ? (0.22) | ||||||
?
?
| Condensed Consolidated Balance Sheets (in thousands): ? | |||||
| ?June 30, 2013? | December 31, 2012 | ||||
| ?(unaudited)? | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ ? ? ? 24,735 | $ ? ? 45,949 | |||
| Other current assets | 595,132 | 543,845 | |||
| Total current assets | 619,867 | 589,794 | |||
| Property and equipment, net | 1,394,593 | 1,436,674 | |||
| Goodwill | 624,858 | 626,481 | |||
| Other assets, net | 93,119 | 108,639 | |||
| TOTAL ASSETS | $ ? 2,732,437 | $2,761,588 | |||
| LIABILITIES AND EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | $ ? ? ? 90,272 | $ ? 104,073 | |||
| Other current liabilities | 174,745 | 201,023 | |||
| Total current liabilities | 265,017 | 305,096 | |||
| Long-term debt, less current portion | 867,832 | 848,110 | |||
| Other non-current liabilities | 329,936 | 321,050 | |||
| Equity | 1,269,652 | 1,287,332 | |||
| TOTAL LIABILITIES AND EQUITY | $ ? 2,732,437 | $ 2,761,588 | |||
?
?
| Consolidated Cash Flow Data (in thousands, unaudited): | ||||
| ?Six Months Ended?? | ||||
| ? June 30, 2013? | ? June 30, 2012? | |||
| Net cash provided by operating activities | $ ?46,681 | $ 191,852 | ||
| Net cash used in investing activities | (83,296) | (300,779) | ||
| Net cash provided by financing activities | 14,917 | 104,502 | ||
| Effect of exchange rates on cash | 484 | (2,738) | ||
| Net decrease in cash and cash equivalents | (21,214) | (7,163) | ||
| Cash and cash equivalents, beginning of period | 45,949 | 35,443 | ||
| Cash and cash equivalents, end of period | $ ?24,735 | $ ?28,280 | ||
?
?
| Segment Revenue and Operating Income from continuing operations (in thousands, except for percentages, unaudited): | ||||||
| ?Three Months Ended?? | ||||||
| Revenues | ??? June 30, 2013? | ?March 31, 2013? | ???? June 30, 2012? | |||
| U.S. Operations: | ||||||
| Rig Services | $ ? ? ? 173,597 | $ ? ? ? ? ? 161,750 | $ ? ? ? ? ? 208,765 | |||
| Fluid Management Services | 70,073 | 70,384 | 96,716 | |||
| Coiled Tubing Services | 54,342 | 49,291 | 56,929 | |||
| Fishing & Rental Services | 63,686 | 64,647 | 69,236 | |||
| Total U.S. Operations | 361,698 | 346,072 | 431,646 | |||
| International Operations | 49,692 | 82,377 | 84,351 | |||
| Consolidated Total | $ ? ? ? 411,390 | $ ? ? ? ? ? 428,449 | $ ? ? ? ? ? 515,997 | |||
| Operating Income? | ||||||
| U.S. Operations | $ ? ? ? ? 55,093 | $ ? ? ? ? ? ? 38,275 | $ ? ? ? ? ? ? 82,497 | |||
| International Operations | (11,006) | 11,874 | 16,116 | |||
| Functional Support | (35,743) | (38,320) | (37,145) | |||
| Consolidated Total | $ ? ? ? ? ? 8,344 | $ ? ? ? ? ? ? 11,829 | $ ? ? ? ? ? ? 61,468 | |||
| Operating Income? % of Revenues | ||||||
| U.S. Operations | 15.2% | 11.1% | 19.1% | |||
| International Operations | (22.1)% | 14.4% | 19.1% | |||
| Consolidated Total | 2.0% | 2.8% | 11.9% | |||
| ?Six Months Ended? | ||||||
| Revenues | ???? June 30, 2013? | ???? June 30, 2012? | ||||
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