Key Energy Services Generated Fourth Quarter 2012 Income from Continuing Operations of $0.09 per Diluted Share PR Newswire HOUSTON, Feb. 14, 2013 HOUSTON, Feb. 14, 2013 /PRNewswire/ --Key Energy Services, Inc. (NYSE: KEG) reported fourth quarter 2012 consolidated revenues of $466.5 million, generating income from continuing operations of $13.5 million, or $0.09 per share. Third quarter 2012 consolidated revenues were $490.9 million with income from continuing operations of $22.1 million, or $0.15 per share. The following table sets forth summary data from continuing operations for the fourth quarter 2012 and prior comparable quarterly periods. Three Months Ended December 31, 2012 September 30, December 31, 2012 2011 (unaudited) (unaudited) (in millions, except per share amounts) Revenues $ 466.5 $ 490.9 $481.7 Income attributable to Key $ 13.5 $ 22.1 $ 41.8 Diluted earnings per share $ 0.09 $ 0.15 $ 0.28 attributable to Key Adjusted EBITDA (unaudited) $ 92.2 $ 101.3 $130.5 For the full year 2012, consolidated revenues were $1.96 billion, up 13.4% compared to $1.73 billion for the full year 2011. Full year 2012 income from continuing operations was $101.2 million, or $0.67 per share, compared to full year 2011 income from continuing operations of $112.1 million, or $0.76 per share. Full year 2012 GAAP net income attributable to Key was $7.6 million, or $0.05 per share, which includes a net loss of $93.6 million, or $0.62 per share, associated with the sale of the Argentina business and is reflected in discontinued operations. Full year 2011 GAAP net income attributable to Key was $101.5 million, or $0.69 per share, which includes a $46.5 million loss on early retirement of debt and a net loss of $10.7 million, or $0.07 per share, from discontinued operations. The following table sets forth summary data from continuing operations for the full year 2012 and 2011. Twelve Months Ended December 31, 2012 December 31, 2011 (unaudited) (in millions, except per share amounts) Revenues $ 1,960.1 $ 1,729.2 Income attributable to Key $ 101.2 $ 112.1 Diluted income per share attributable $ 0.67 $ 0.76 to Key Adjusted EBITDA (unaudited) $ 423.7 $ 431.9 U.S. Segment Fourth quarter 2012 U.S. revenues were $372.3 million, down 6.4% compared to $397.8 million in the third quarter 2012. Fourth quarter operating income was $51.3 million, or 13.8% of revenue, compared to $60.1 million, or 15.1% of revenue, in the third quarter. The quarter-over-quarter revenue decline and margin contraction was driven primarily by seasonal factors. Additionally, Key's Rig Services business was impacted late in the quarter due to a large customer's reduction of its U.S. oilfield service activity. International Segment Fourth quarter 2012 international revenues were $94.1 million, up 1.2% compared to third quarter 2012 revenues of $93.0 million. Fourth quarter operating income was $17.1 million, or 18.2% of revenues, compared to third quarteroperating income of $19.4 million, or 20.8% of revenues. Margins were impacted by costs associated with anticipated activity growth in Mexico that did not occur during the quarter. General and Administrative Expenses General and Administrative (G&A) expenses were $57.9 million, or 12.4% of revenues, for the fourth quarter compared to $53.6 million, or 10.9% of revenues, in the prior quarter. Full year G&A expenses were $230.5 million, or 11.8% of consolidated revenues. Capital Expenditures and Liquidity Capital expenditures were $47.4 million during the fourth quarter 2012 and $447.2 million for the full year 2012. Key's consolidated cash balance at December 31, 2012 was $45.9 million compared to $38.3 million at September 30, 2012. Total debt at December 31, 2012 was $848.5 million compared to total debt of $904.0 million at September 30, 2012. At the end of the quarter, there was $330.9 million available under the Company's $550 million senior secured credit facility. Net debt to total capitalization at the end of 2012 was 37.6%. Overview and Outlook Commenting on the results, Key's Chairman, President and Chief Executive Officer, Dick Alario, stated, "Our fourth quarter consolidated results were generally in line with expectations, reflective of activity declines in excess of typical seasonal factors. "We forecast first quarter 2013 consolidated revenue to decline approximately 5% compared to the fourth quarter and project first quarter earnings of $0.02 to $0.04 per share as a result of cost inefficiencies associated with underutilized assets and labor in our U.S. Rig Services business." Alario continued, "We believe U.S. activity will begin to recover in the second quarter, and expect activity for 2013 to approximate 2012 levels. We anticipate another good year in 2013 in our international segment following 67% revenue growth in 2012. The stalled activity growth in Mexico in the fourth quarter has already resumed, and assets delivered toMexico and Colombialate in 2012should fuel additional growth given a full year's contribution in 2013. "Our capital expenditure plan for 2013 is $210 million for equipment maintenance needs, including ongoing upgrades to our Rig Services fleet." Conference Call Information As previously announced, Key management will host a conference call to discuss its fourth quarter 2012 financial results on Friday, February 15, 2013 at 10:00 a.m. CST. 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 89977893. 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, February 15, 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 89977893. The replay will also be accessible at www.keyenergy.com under "Investor Relations" for a period of at least 90 days. Consolidated Statements of Operations (in thousands, except per share amounts): Three Months Ended Twelve Months Ended December September December December December 31, 2012 30, 2012 31, 2011 31, 2012 31, 2011 (unaudited) (unaudited) (unaudited) REVENUES $466,471 $490,851 $481,718 $1,960,070 $1,729,211 COSTS AND EXPENSES: Direct operating 317,553 335,799 290,137 1,308,845 1,085,190 expenses Depreciation and 57,195 52,947 46,899 213,783 166,946 amortization expense General and administrative 57,930 53,567 63,438 230,496 223,299 expenses Operating income 33,793 48,538 81,244 206,946 253,776 Loss on early extinguishment - - - - 46,451 of debt Interest expense, net of 13,992 13,962 10,846 53,566 40,849 amounts capitalized Other, net (2,711) (1,529) 955 (6,649) (8,977) Income from continuing 22,512 36,105 69,443 160,029 175,453 operations before tax Income tax (8,205) (12,915) (27,411) (57,352) (64,117) expense Income from continuing 14,307 23,190 42,032 102,677 111,336 operations Loss from discontinued - (60,209) (2,463) (93,568) (10,681) operations, net of tax Net income (loss) 14,307 (37,019) 39,569 9,109 100,655 Income (loss) attributable to 822 1,075 221 1,487 (806) noncontrolling interest INCOME (LOSS) $ $ ATTRIBUTABLE TO $ 13,485 $ (38,094) $ 39,348 7,622 101,461 KEY Earnings (loss) per share attributable to Key: Basic $ 0.09 $ (0.25) $ $ $ 0.26 0.05 0.70 Diluted $ 0.09 $ (0.25) $ $ $ 0.26 0.05 0.69 Weighted average shares outstanding: Basic 151,100 151,105 150,738 151,106 145,909 Diluted 151,104 151,110 150,804 151,125 146,217 Income from continuing operations attributable to Key: Income from continuing 14,307 23,190 42,032 102,677 111,336 operations Income (loss) attributable to 822 1,075 221 1,487 (806) noncontrolling interest Income from continuing $ operations $ 13,485 $ 22,115 $ 41,811 $ 101,190 112,142 attributable to Key Earnings per share from continuing operations attributable to Key: Basic $ 0.09 $ 0.15 $ $ $ 0.28 0.67 0.77 Diluted $ 0.09 $ 0.15 $ $ $ 0.28 0.67 0.76 Loss from discontinued $ - $ (60,209) $ $ $ operations, net (2,463) (93,568) (10,681) of tax: Loss per share from discontinued operations: Basic and $ - $ (0.40) $ $ $ diluted (0.02) (0.62) (0.07) Condensed Consolidated Balance Sheets (in thousands): December 31, 2012 December 31, 2011 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 45,949 $ 35,443 Other current assets 543,845 504,777 Current assets held for sale - 60,343 Total current assets 589,794 600,563 Property and equipment, net 1,436,674 1,197,300 Goodwill 626,481 622,773 Other assets, net 108,639 155,601 Non-current assets held for sale - 22,883 TOTAL ASSETS $2,761,588 $2,599,120 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 104,073 $ 71,736 Other current liabilities 201,023 175,877 Current liabilities associated with - 41,890 assets held for sale Total current liabilities 305,096 289,503 Long-term debt, less current portion 848,110 773,975 Other non-current liabilities 321,050 321,011 Equity 1,287,332 1,214,631 TOTAL LIABILITIES AND EQUITY $2,761,588 $2,599,120 Consolidated Cash Flow Data (in thousands): Twelve Months Ended December 31, 2012 December 31, 2011 (unaudited) Net cash provided by operating $369,660 $188,305 activities Net cash used in investing activities (428,709) (520,090) Net cash provided by financing 73,946 306,084 activities Effect of exchange rates on cash (4,391) 4,516 Net increase (decrease) in cash and 10,506 (21,185) cash equivalents Cash and cash equivalents, beginning 35,443 56,628 of period Cash and cash equivalents, end of $ 45,949 $ 35,443 period Segment Revenue and Operating Income from continuing operations (in thousands, except for percentages): Three Months Ended December 31, September 30, December 31, 2012 2012 2011 Revenues (unaudited) (unaudited) U.S. Operations Rig Services $ 174,912 $ 201,453 $ 194,197 Fluid Management 76,897 82,140 96,886 Services Coiled Tubing Services 53,525 52,442 60,896 Fishing & Rental 67,001 61,779 68,960 Services Total U.S. Operations 372,335 397,814 420,939 International 94,136 93,037 60,779 Operations Consolidated Total $ 466,471 $ 490,851 $ 481,718 Operating Income U.S. Operations $ 51,250 $ 60,136 $ 106,550 International 17,149 19,359 14,450 Operations Functional Support (34,606) (30,957) (39,756) Consolidated Total $ 33,793 $ 48,538 $ 81,244 Operating Income % of Revenues U.S. Operations 13.8% 15.1% 25.3% International 18.2% 20.8% 23.8% Operations Consolidated Total 7.2% 9.9% 16.9% Twelve Months Ended December 31, December 31, 2012 2011 Revenues (unaudited) U.S. Operations Rig Services $ 788,512 $ 725,509 Fluid Management 353,597 387,982 Services Coiled Tubing Services 215,876 232,374 Fishing & Rental 268,783 184,222 Services Total U.S. Operations 1,626,768 1,530,087 International 333,302 199,124 Operations Consolidated Total $1,960,070 $1,729,211 Operating Income U.S. Operations $ 285,341 $ 357,606 International 62,992 38,921 Operations Functional Support (141,387) (142,751) Consolidated Total $ 206,946 $ 253,776 Operating Income % of Revenues U.S. Operations 17.5% 23.4% International 18.9% 19.5% Operations Consolidated Total 10.6% 14.7% Following is a reconciliation of income from continuing operations attributable to Key as presented in accordance with United States generally accepted accounting principles (GAAP) to EBITDA from continuing operations and Adjusted EBITDA from continuing operations as required under Regulation G of the Securities Exchange Act of 1934. Reconciliations of EBITDA from continuing operations and Adjusted EBITDA from continuing operations to income from continuing operations (in thousands, except for percentages, unaudited): Three Months Ended December 31, September 30, December 31, 2012 2012 2011 Income from continuing $ 14,307 $ 23,190 $ 42,032 operations Income tax expense 8,205 12,915 27,411 Income attributable to noncontrolling interest, (1,456) (1,683) (769) excluding depreciation and amortization Interest expense, net of 13,992 13,962 10,846 amounts capitalized Interest income (20) (12) (3) Depreciation and 57,195 52,947 46,899 amortization EBITDA $ 92,223 $ 101,319 $ 126,416 % of revenues 19.8% 20.6% 26.2% G&A restructuring costs - - 4,120 Adjusted EBITDA $ 92,223 $ 101,319 $ 130,536 % of revenues 19.8% 20.6% 27.1% Revenues $ 466,471 $ 490,851 $ 481,718 Twelve Months Ended December 31, December 31, 2012 2011 Income from continuing $ 102,677 $ 111,336 operations Income tax expense 57,352 64,117 Income attributable to noncontrolling interest, (3,648) (437) excluding depreciation and amortization Interest expense, net of 53,566 40,849 amounts capitalized Interest income (46) (26) Depreciation and 213,783 166,946 amortization EBITDA $ 423,684 $ 382,785 % of revenues 21.6% 22.1% Loss on debt extinguishment - 46,451 Gain on IROC sale - (4,783) Edge transaction costs - 3,307 G&A restructuring costs - 4,120 Adjusted EBITDA $ 423,684 $ 431,880 % of revenues 21.6% 25.0% Revenues $1,960,070 $1,729,211 "EBITDA" is defined as income or loss from continuing operations attributable to Key before interest, taxes, depreciation, and amortization. "Adjusted EBITDA" is EBITDA as further adjusted for certain non-recurring or extraordinary items such as loss on debt extinguishment, certain other gains or losses, asset retirements and impairments, and certain non-recurring transaction or other costs. EBITDA and Adjusted EBITDA are non-GAAP measures that are used as supplemental financial measures by the Company's management and directors and by external users of the Company's financial statements, such as investors, to assess: oThe financial performance of the Company's assets without regard to financing methods, capital structure or historical cost basis; oThe ability of the Company's assets to generate cash sufficient to pay interest on its indebtedness; oThe Company's operating performance and return on invested capital as compared to those of other companies in the well services industry, without regard to financing methods and capital structure; and oThe Company's operating trends underlying the items that tend to be of a non-recurring nature. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered an alternative to net income, operating income, cash flow from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and operating income and these measures may vary among other companies. Limitations to using EBITDA and Adjusted EBITDA as an analytical tool include: oEBITDA and Adjusted EBITDA do not reflect Key's current or future requirements for capital expenditures or capital commitments; oEBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements necessary to service, interest or principal payments on Key's debt; oEBITDA and Adjusted EBITDA do not reflect income taxes; oAlthough depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; oOther companies in Key's industry may calculate EBITDA and Adjusted EBITDA differently than Key does, limiting their usefulness as a comparative measure; and oEBITDA and Adjusted EBITDA are a different calculation from earnings before interest, taxes, depreciation and amortization as defined for purposes of the financial covenants in the Company's senior secured credit facility, and therefore should not be relied upon for assessing compliance with covenants. Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements as to matters that are not of historic fact are forward-looking statements. These forward-looking statements are based on Key's current expectations, estimates and projections about Key, its industry, its management's beliefs and certain assumptions made by management, and include statements regarding estimated capital expenditures, future operational and activity expectations, international growth, and anticipated financial performance in the first quarter of 2013. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these "forward-looking statements" are identified by words such as "expects," "believes," "anticipates" and similar phrases. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult topredict, including, but not limited to: risks that Key will be unable to achieve its financial, capital expenditure and operational projections, including quarterly and annual projections ofrevenue and/or operating income and risks that Key's expectations regarding future activity levels, customer demand, and pricing stability may not materialize (whether for Key as a whole or for geographic regions and/or business segments individually); risks that fundamentals in the U.S. oil and gas markets may not yield anticipated future growth in Key's businesses, or could further deteriorate or worsen from the recent market declines, and/or that Key could experience further unexpected declines in activity and demand for itsrig service, fluid management service, coiled tubing service, and fishing and rental service businesses;risks relating to Key's ability to implement technological developments and enhancements; risks relating to compliance with environmental, health and safety laws and regulations, as well as actions by governmental and regulatory authorities; risks affecting Key's international operations, including risks that Key may not be able to achieveits international growth and mobilization strategy in the foreign countries in which Key operates;risks that Key may be unable to achieve the benefits expected from acquisition and disposition transactions, and risks associated with integration of the acquired operations into Key's operations; risks, in responding to changing or declining market conditions, that Key may not be able to reduce, and could even experience increases in, the costs of labor, fuel, equipment and supplies employed and used in Key's businesses;risks relating to changes in the demand for or the priceof oil and natural gas; risks that Key may not be able to execute its capital expenditure program and/or that any such capital expenditure investments, ifmade, will not generate adequate returns; and other risks affecting Key's ability to maintain or improve operations, including its ability to maintain prices for services under market pricingpressures, weather risks, and the impact of potential increases in general and administrative expenses. Because such statements involve risks and uncertainties, many of which are outside of Key's control, Key's actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Other important risk factors that may affect Key's business, results of operations and financial position are discussed in its most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and in other Securities and Exchange Commission filings. Unless otherwise required by law, Key also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. However, readers should review carefully reports and documents that Key files periodically with the Securities and Exchange Commission. About Key Energy Services Key Energy Services is the largest onshore, rig-based well servicing contractor based on the number of rigs owned. Key provides a complete range of well intervention services and has operations in all major onshore oil and gas producing regions of the continental United States and internationally in Mexico, Colombia, the Middle East and Russia. Contact: Gary Russell, Investor Relations 713-651-4434 SOURCE Key Energy Services, Inc. Website: http://www.keyenergy.com
Key Energy Services Generated Fourth Quarter 2012 Income from Continuing Operations of $0.09 per Diluted Share
Press spacebar to pause and continue. Press esc to stop.