Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 14, 2019
 
Mammoth Energy Services, Inc.

(Exact name of registrant as specified in its charter)

001-37917
(Commission File No.)
 
 
 
Delaware
 
32-0498321
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
14201 Caliber Drive, Suite 300
Oklahoma City, Oklahoma
 
73134
(Address of principal executive offices)
 
(Zip Code)
(405) 608-6007
(Registrant’s telephone number, including area code)
______________________________

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§232.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(s) of the Exchange Act.  ¨

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17 CFR 240.13e-4(c))



















Item 2.02 Results of Operations and Financial Condition

On March 14, 2019, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for quarter and year ended December 31, 2018. A copy of that press release is furnished as Exhibit 99.1 to this report.

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.

Item 7.01 Regulation FD Disclosure
On March 14, 2019, the Company posted an investor presentation to the “investors” section of its website (www.mammothenergy.com), where the Company routinely posts announcements, updates, events, investor information and presentations and recent news releases. Information on the Company's website does not constitute part of this Current Report on Form 8-K.

The information in this Item 7.01 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.

99.1     Press release dated March 14, 2019, entitled "Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2018 Operational and Financial Results."






Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
 
MAMMOTH ENERGY SERVICES, INC.
Date:
March 14, 2019
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 



Exhibit

EXHIBIT 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12778880&doc=3


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, OKLAHOMA, March 14, 2019 - 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.

2



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 services
3,018

 
2,690

 
3,267

 
11,854

 
7,765

Other(a)
1,475

 
1,802

 
3,701

 
10,718

 
7,503

Total cash SG&A expense
13,902

 
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 compensation
915

 
550

 
1,177

 
4,666

 
3,198

Total non-cash SG&A expense
881

 
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.



3



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

4



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.




5

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




6

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 parties
9,551

 
31,639

 
18,933

 
118,183

 
166,064

Product revenue
8,063

 
18,024

 
14,955

 
75,766

 
47,067

Product revenue - related parties
71

 
3,755

 
3,787

 
25,050

 
42,956

Total revenue
278,198

 
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 administrative
14,283

 
26,931

 
(45,761
)
 
71,199

 
48,405

Selling, general and administrative - related parties
500

 
495

 
437

 
1,898

 
1,481

Depreciation, depletion, amortization and accretion
30,159

 
27,770

 
32,015

 
119,877

 
92,124

Impairment of long-lived assets
4,086

 
4,146

 
4,582

 
8,855

 
4,146

Total cost and expenses
229,338

 
291,540

 
238,838

 
1,295,633

 
628,725

Operating income
48,860

 
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 taxes
47,205

 
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

 


7

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 compensation
17,487

 

Stock based compensation
5,425

 
3,741

Depreciation, depletion, accretion and amortization
119,877

 
92,124

Amortization of coil tubing strings
2,193

 
2,855

Amortization of debt origination costs
387

 
399

Bad debt expense
(14,578
)
 
16,206

Loss on disposal of property and equipment
947

 
69

Gain on bargain purchase

 
(4,012
)
Impairment of long-lived assets
8,855

 
4,146

Deferred income taxes
52,226

 
(34,425
)
Loss from equity investee
16

 

Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(78,840
)
 
(231,751
)
Receivables from related parties
22,624

 
(1,096
)
Inventories
(5,502
)
 
(14,238
)
Prepaid expenses and other assets
1,423

 
(7,628
)
Accounts payable
(64,966
)
 
101,725

Payables to related parties
(1,008
)
 
1,174

Accrued expenses and other liabilities
15,445

 
32,968

Income taxes payable
68,692

 
36,395

Net cash provided by operating activities
386,668

 
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 equipment
1,514

 
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 credit
77,000

 
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 equivalents
61,988

 
(23,602
)
Cash and cash equivalents at beginning of period
5,637

 
29,239

Cash and cash equivalents at end of period
$
67,625

 
$
5,637


8

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Twelve Months Ended
 
December 31,
 
2018
 
2017
Supplemental disclosure of cash flow information:
(in thousands)
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



9

MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS
(in thousands)

Three months ended December 31, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
159,610

$
72,219

$
8,133

$
38,236

$

$
278,198

Intersegment revenues

560

19,273

542

(20,375
)

Total revenue
159,610

72,779

27,406

38,778

(20,375
)
278,198

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
75,486

39,601

28,796

36,427


180,310

Intersegment cost of revenues

19,787

253

308

(20,348
)

Total cost of revenue
75,486

59,388

29,049

36,735

(20,348
)
180,310

Selling, general and administrative
9,689

1,768

1,170

2,156


14,783

Depreciation, depletion, amortization and accretion
7,425

10,952

3,138

8,644


30,159

Impairment of long-lived assets
308



3,778


4,086

Operating income (loss)
66,702

671

(5,951
)
(12,535
)
(27
)
48,860

Interest expense, net
82

177

40

234


533

Other expense, net
60

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, 2017
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
209,229

$
111,244

$
21,779

$
26,711

$

$
368,963

Intersegment revenues

617

22,167

2,154

(24,938
)

Total revenue
209,229

111,861

43,946

28,865

(24,938
)
368,963

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
108,289

65,594

33,289

25,026


232,198

Intersegment cost of revenues
1,443

22,928

373

159

(24,903
)

Total cost of revenue
109,732

88,522

33,662

25,185

(24,903
)
232,198

Selling, general and administrative
20,365

2,810

1,875

2,376


27,426

Depreciation, depletion, amortization and accretion
1,805

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, net
168

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, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
237,052

$
93,360

$
18,742

$
34,889

$

$
384,043

Intersegment revenues

809

18,268

781

(19,858
)

Total revenue
237,052

94,169

37,010

35,670

(19,858
)
384,043

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
128,267

55,490

29,470

34,338


247,565

Intersegment cost of revenues
37

19,002

546

263

(19,848
)

Total cost of revenue
128,304

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 accretion
6,591

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, net
159

150

37

112


458

Other expense, net
181

2

199

18


400

Income (loss) before income taxes
$
156,017

$
2,154

$
956

$
(14,770
)
$
(10
)
$
144,347


10

MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS
(in thousands)

Year ended December 31, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
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 revenue
1,082,371

369,492

168,275

149,922

(79,976
)
1,690,084

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
608,017

223,296

126,714

135,777


1,093,804

Intersegment cost of revenues
2,583

70,365

6,103

898

(79,949
)

Total cost of revenue
610,600

293,661

132,817

136,675

(79,949
)
1,093,804

Selling, general and administrative
27,126

29,761

6,218

9,992


73,097

Depreciation, depletion, amortization and accretion
20,516

51,487

13,519

34,355


119,877

Impairment of long-lived assets
308

143


8,404


8,855

Operating income (loss)
423,821

(5,560
)
15,721

(39,504
)
(27
)
394,451

Interest expense, net
423

1,171

234

1,359


3,187

Other expense, net
573

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, 2017
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
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 revenue
224,425

279,352

117,037

102,249

(31,567
)
691,496

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
120,117

183,089

91,049

88,314


482,569

Intersegment cost of revenues
1,443

28,147

1,731

211

(31,532
)

Total cost of revenue
121,560

211,236

92,780

88,525

(31,532
)
482,569

Selling, general and administrative
21,606

9,501

8,190

10,589


49,886

Depreciation, depletion, amortization and accretion
3,185

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, net
241

1,622

679

1,768


4,310

Bargain purchase gain


(4,012
)


(4,012
)
Other expense, net
6

129

211

331


677

Income (loss) before income taxes
$
77,827

$
11,451

$
9,471

$
(36,918
)
$
(35
)
$
61,796



11

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


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 expense
30,159

 
27,770

 
32,015

 
119,877

 
92,124

Impairment of long-lived assets
4,086

 
4,146

 
4,582

 
8,855

 
4,146

Acquisition related costs
61

 
51

 
99

 
191

 
2,506

Public offering costs
(10
)
 

 
260

 
982

 

Equity based compensation

 

 

 
17,487

 

Stock based compensation
1,094

 
1,093

 
1,415

 
5,425

 
3,741

Bargain purchase gain

 

 

 

 
(4,012
)
Interest expense, net
533

 
1,381

 
458

 
3,187

 
4,310

Other expense (income), net
1,122

 
(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



12

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


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 expense
7,425

 
1,805

 
6,591

 
20,516

 
3,185

Impairment of long-lived assets
308

 

 

 
308

 

Acquisition related costs
61

 
8

 

 
58

 
98

Public offering costs
(10
)
 

 
123

 
473

 

Stock based compensation
470

 
316

 
555

 
2,089

 
345

Interest expense
82

 
168

 
159

 
423

 
241

Other expense (income), net
60

 
(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 expense
10,952

 
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 compensation
318

 
438

 
423

 
1,612

 
1,641

Interest expense
177

 
599

 
150

 
1,171

 
1,622

Other expense, net
340

 
2

 
2

 
434

 
129

Adjusted EBITDA
$
11,941

 
$
20,967

 
$
15,660

 
$
65,472

 
$
60,257



13

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


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 expense
3,138

 
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 compensation
181

 
184

 
211

 
783

 
708

Bargain purchase gain

 

 

 

 
(4,012
)
Interest expense
40

 
107

 
37

 
234

 
679

Other expense (income), net
304

 
(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 expense
8,644

 
9,584

 
8,520

 
34,355

 
34,132

Impairment of long-lived assets
3,778

 
3,822

 
4,439

 
8,404

 
3,822

Acquisition related costs

 
1

 
93

 
132

 
244

Public offering costs

 

 
26

 
101

 

Stock based compensation
125

 
155

 
226

 
941

 
1,047

Interest expense, net
234

 
507

 
112

 
1,359

 
1,768

Other expense, net
418

 
14

 
18

 
504

 
331

Provision (benefit) for income taxes
54,313

 
(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.


14

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


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.


15

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


 
Twelve Months Ended
 
December 31,
 
2018
 
2017
 
2016
 
(in thousands)
Net income
$
235,965

 
$
58,964

 
 
Capital Employed
 
 
 
 
 
Total debt
$

 
$
99,900

 
$

Total equity
754,052

 
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.


16