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): August 1, 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 August 1, 2019, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for quarter ended June 30, 2019. 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 August 1, 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 August 1, 2019, entitled "Mammoth Energy Services, Inc. Announces Second Quarter 2019 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:
August 1, 2019
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 



Exhibit



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13037100&doc=3


Mammoth Energy Services, Inc. Announces
Second Quarter 2019 Operational and Financial Results


Second Quarter net loss of $11 million, or $0.24 per diluted share
Second Quarter Adjusted EBITDA of $9 million
Suspended dividend due to oilfield service market conditions
2019 capital budget decreased 49% from $80 million to $41 million

OKLAHOMA CITY, OKLAHOMA, August 1, 2019 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the quarter ended June 30, 2019.

Financial Highlights for the Second Quarter of 2019:

Total revenue was $181.8 million for the three months ended June 30, 2019, down from $262.1 million for the three months ended March 31, 2019 and down from $533.6 million for the three months ended June 30, 2018.

Net loss for the three months ended June 30, 2019 was $10.9 million, or $0.24 per fully diluted share, as compared to net income of $28.3 million, or $0.63 per fully diluted share, for the three months ended March 31, 2019 and net income of $42.7 million, or $0.95 per fully diluted share, for the three months ended June 30, 2018.

Adjusted EBITDA (as defined and reconciled below) was $8.6 million for the three months ended June 30, 2019, down from $82.8 million for the three months ended March 31, 2019 and down from $148.6 million for the three months ended June 30, 2018.

Arty Straehla, Mammoth's Chief Executive Officer, stated, “The second quarter of 2019 was a challenging environment as further capital restraint by our oilfield customers continued to apply downward pressure on pricing and resulted in several completions being delayed or canceled with short notice. In addition, we worked through the challenges of demobilizing our equipment from Puerto Rico. As a result of current market conditions, we have begun to right size our operations and we expect this process to be completed in the coming months. Demand for infrastructure services remains high with the competencies and experience of our crews allowing for unique bidding opportunities in both the US and overseas. While our work in Puerto Rico has ended, we have continued to receive payments from PREPA, with $42 million received in the second quarter of 2019. For the remainder of 2019, we are taking a disciplined approach to our spending and we have reduced our 2019 capital expenditure budget from $80 million to $41 million. As a result of oilfield market conditions, our board of directors has suspended the quarterly cash dividend.”

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $41.8 million for the three months ended June 30, 2019, a decrease from $108.7 million for the three months ended March 31, 2019 and a decline from $360.3 million for the three months ended June 30, 2018.

During the second quarter of 2019, Mammoth demobilized approximately 1,000 pieces of equipment from Puerto Rico back to the Lower 48.





Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $84.6 million for the three months ended June 30, 2019, a decrease from $92.1 million for the three months ended March 31, 2019 and a decrease from $101.4 million for the three months ended June 30, 2018.

Mammoth's pressure pumping division completed a total of 1,717 stages for the three months ended June 30, 2019, as compared to 1,889 stages for the three months ended March 31, 2019 and 1,815 stages for the three months ended June 30, 2018. An average of 2.7 of our 6 fleets were active for the three months ended June 30, 2019, compared to average utilization of 4.4 fleets during the three months ended March 31, 2019 and an average utilization of 4.3 fleets during the three months ended June 30, 2018.
  
Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $40.4 million for the three months ended June 30, 2019, an increase from $37.9 million for the three months ended March 31, 2019 and a decrease from $52.8 million for the three months ended June 30, 2018.

The Company sold 812,611 tons of sand during the three months ended June 30, 2019, a 22% increase from the 665,806 tons sold during the three months ended March 31, 2019 and a 4% increase from the 777,850 tons sold during the three months ended June 30, 2018. The Company's average sales price for the sand sold during the second quarter of 2019 was $30.09 per ton, a 7% decrease from the $32.20 per ton average sales price during the first quarter of 2019 and a 30% decrease from the $43.09 per ton average sales price during the second quarter of 2018.

Blended second quarter production costs came in at approximately $12 per ton during the second quarter of 2019, unchanged from the first quarter of 2019 production costs and a 24% decrease from production costs of approximately $15.70 per ton during the second 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 $28.4 million for the three months ended June 30, 2019, a decrease from $38.5 million for the three months ended March 31, 2019 and a decrease from $37.3 million for the three months ended June 30, 2018.

An average of 601 pieces of equipment were rented during the three months ended June 30, 2019, down 3% from the average 621 pieces of equipment rented during the three months ended March 31, 2019 and a 77% increase from an average of 339 pieces of equipment rented for the three months ended June 30, 2018. As a result of market conditions, the Company has temporarily shut down its cementing and acidizing operations as well as its flowback operations subsequent to June 30, 2019.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $9.5 million for the three months ended June 30, 2019, as compared to $17.3 million for the three months ended March 31, 2019 and $65.1 million for the three months ended June 30, 2018.

2



Following is a breakout of SG&A expense (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2019
 
2018
 
2019
 
2019
 
2018
Cash expenses:
 
 
 
 
 
 
 
 
 
Compensation and benefits
$
2,154

 
$
10,978

 
$
9,230

 
$
11,384

 
$
18,677

Professional services
2,934

 
2,981

 
3,789

 
6,723

 
5,568

Other(a)
3,381

 
3,935

 
3,244

 
6,626

 
5,542

Total cash SG&A expense
8,469

 
17,894

 
16,263

 
24,733

 
29,787

Non-cash expenses:
 
 
 
 
 
 
 
 
 
Bad debt provision(b)
262

 
28,263

 
4

 
266

 
53,790

Equity based compensation(c)

 
17,487

 

 

 
17,487

Stock based compensation
724

 
1,483

 
1,069

 
1,792

 
2,574

Total non-cash SG&A expense
986

 
47,233

 
1,073

 
2,058

 
73,851

Total SG&A expense
$
9,455

 
$
65,127

 
$
17,336

 
$
26,791

 
$
103,638

a.
Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.
$28.3 million and $53.6 million of the bad debt expense recognized during the three and six months ended June 30, 2018 was subsequently reversed during the third quarter of 2018.
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 June 30, 2019 as compared to 7% for the three months ended March 31, 2019 and 12% for the three months ended June 30, 2018.

Liquidity

As of June 30, 2019, Mammoth had cash on hand totaling $7.2 million and outstanding borrowings under its revolving credit facility of $82.0 million. As of June 30, 2019, the Company had $93.5 million of available borrowing capacity under its revolving credit facility, after giving effect to $8.7 million of outstanding letters of credit, resulting in total liquidity of approximately $100.7 million. As of July 31, 2019, the Company had cash on hand totaling $11.6 million and outstanding borrowings under its revolving credit facility of $85.5 million.

Capital Expenditures

The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2019
 
2018
 
2019
 
2019
 
2018
Infrastructure services(a)
$
2,177

 
$
40,778

 
$
3,254

 
$
5,431

 
$
56,556

Pressure pumping services(b)
4,013

 
8,233

 
7,329

 
11,342

 
16,099

Natural sand proppant services(c)
990

 
6,958

 
985

 
1,975

 
12,658

Other(d)
2,767

 
17,042

 
8,705

 
11,472

 
23,472

Total capital expenditures
$
9,947

 
$
73,011

 
$
20,273

 
$
30,220

 
$
108,785

a.
Capital expenditures primarily for truck, tooling and other equipment for the periods presented.
b.
Capital expenditures primarily for pressure pumping and water transfer equipment for the for the periods presented.
c.
Capital expenditures primarily for maintenance for the 2019 periods presented and plant upgrades for the 2018 periods presented.
d.
Capital expenditures primarily for equipment for the Company's rental business and upgrades to its rig fleet for the periods presented.

3




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.

Conference Call Information

Mammoth will host a conference call on Friday, August 2, 2019 at 10:00 a.m. CDT (11:00 am EDT) to discuss its second quarter 2019 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 6178026. 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 energy service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves and government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities through its energy infrastructure services. Mammoth’s suite of services and products include: pressure pumping services, infrastructure services, natural sand and proppant services and other energy services.

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

Media Contact:
Peter Mirijanian
peter@pmpadc.com
(202) 464-8803

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

4



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; the outcome of an ongoing government investigation relating to the contracts awarded to our subsidiary Cobra Acquisitions LLC by the Puerto Rico Electric Power Authority; our inability to replace the prior levels of work in our infrastructure segment; risks relating to economic conditions; 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
 
June 30,
 
December 31,
 
 
2019
 
2018
CURRENT ASSETS
 
(in thousands)
Cash and cash equivalents
 
$
7,245

 
$
67,625

Accounts receivable, net
 
385,626

 
337,460

Receivables from related parties
 
37,400

 
11,164

Inventories
 
22,114

 
21,302

Prepaid expenses
 
10,196

 
11,317

Other current assets
 
699

 
688

Total current assets
 
463,280

 
449,556

 
 
 
 
 
Property, plant and equipment, net
 
408,408

 
436,699

Sand reserves
 
69,762

 
71,708

Operating lease right-of-use assets
 
52,184

 

Intangible assets, net - customer relationships
 
1,563

 
1,711

Intangible assets, net - trade names
 
5,625

 
6,045

Goodwill
 
101,245

 
101,245

Other non-current assets
 
6,843

 
6,127

Total assets
 
$
1,108,910

 
$
1,073,091

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
72,671

 
$
68,843

Payables to related parties
 
1,020

 
370

Accrued expenses and other current liabilities
 
42,658

 
59,652

Current operating lease liability
 
17,338

 

Income taxes payable
 
30,780

 
104,958

Total current liabilities
 
164,467

 
233,823

 
 
 
 
 
Long-term debt
 
82,036

 

Deferred income tax liabilities
 
56,580

 
79,309

Long-term operating lease liability
 
34,807

 

Asset retirement obligation
 
3,534

 
3,164

Other liabilities
 
4,270

 
2,743

Total liabilities
 
345,694

 
319,039

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 45,004,795 and 44,876,649 issued and outstanding at June 30, 2019 and December 31, 2018
 
450

 
449

Additional paid in capital
 
533,151

 
530,919

Retained earnings
 
232,990

 
226,765

Accumulated other comprehensive loss
 
(3,375
)
 
(4,081
)
Total equity
 
763,216

 
754,052

Total liabilities and equity
 
$
1,108,910

 
$
1,073,091




6

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2019
 
2018
 
2019
 
2019
 
2018
 
(in thousands, except per share amounts)
REVENUE
 
Services revenue
$
115,760

 
$
455,545

 
$
193,101

 
$
308,861

 
$
864,204

Services revenue - related parties
36,837

 
40,611

 
44,073

 
80,910

 
89,699

Product revenue
18,362

 
27,708

 
12,309

 
30,671

 
52,748

Product revenue - related parties
10,861

 
9,730

 
12,655

 
23,516

 
21,192

Total revenue
181,820

 
533,594

 
262,138

 
443,958

 
1,027,843

 
 
 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
 
 
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $25,597, $26,898, $25,682, $51,280 and $51,473, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018)
132,688

 
302,283

 
158,106

 
290,794

 
593,262

Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0, $0 and $0, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018)
2,650

 
2,428

 
713

 
3,363

 
4,220

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,525, $3,879, $2,871, $7,395 and $6,193, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018)
32,677

 
35,117

 
30,251

 
62,928

 
68,447

Selling, general and administrative
8,796

 
64,595

 
16,902

 
25,698

 
102,677

Selling, general and administrative - related parties
659

 
532

 
434

 
1,093

 
961

Depreciation, depletion, amortization and accretion
30,145

 
30,795

 
28,576

 
58,721

 
57,703

Impairment of long-lived assets

 
187

 

 

 
187

Total cost and expenses
207,615

 
435,937

 
234,982

 
442,597

 
827,457

Operating (loss) income
(25,795
)
 
97,657

 
27,156

 
1,361

 
200,386

 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
Interest expense, net
(1,551
)
 
(959
)
 
(523
)
 
(2,074
)
 
(2,196
)
Other, net
4,019

 
(486
)
 
24,557

 
28,576

 
(514
)
Total other income (expense)
2,468

 
(1,445
)
 
24,034

 
26,502

 
(2,710
)
(Loss) income before income taxes
(23,327
)
 
96,212

 
51,190

 
27,863

 
197,676

(Benefit) provision for income taxes
(12,438
)
 
53,512

 
22,857

 
10,419

 
99,430

Net (loss) income
$
(10,889
)
 
$
42,700

 
$
28,333

 
$
17,444

 
$
98,246

 
 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax of $92, $86, ($90), $182 and $272, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018
350

 
(325
)
 
356

 
706

 
(786
)
Comprehensive (loss) income
$
(10,539
)
 
$
42,375

 
$
28,689

 
$
18,150

 
$
97,460

 
 
 
 
 
 
 
 
 
 
Net (loss) income per share (basic)
$
(0.24
)
 
$
0.95

 
$
0.63

 
$
0.39

 
$
2.20

Net (loss) income per share (diluted)
$
(0.24
)
 
$
0.95

 
$
0.63

 
$
0.39

 
$
2.18

Weighted average number of shares outstanding (basic)
45,003

 
44,737

 
44,929

 
44,966

 
44,700

Weighted average number of shares outstanding (diluted)
45,003

 
45,059

 
45,063

 
45,060

 
44,977

Dividends declared per share
$
0.125

 

 
$
0.125

 
$
0.25

 


7

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Six Months Ended
 
June 30,
 
2019
 
2018
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
17,444

 
$
98,246

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Equity based compensation

 
17,487

Stock based compensation
2,233

 
2,916

Depreciation, depletion, accretion and amortization
58,721

 
57,703

Amortization of coil tubing strings
1,003

 
1,120

Amortization of debt origination costs
163

 
199

Bad debt expense
266

 
53,790

Loss (gain) on disposal of property and equipment
176

 
(128
)
Impairment of long-lived assets

 
187

Deferred income taxes
(22,911
)
 
(27,906
)
Other
(199
)
 

Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(48,530
)
 
(122,908
)
Receivables from related parties
(26,236
)
 
3,114

Inventories
(1,815
)
 
4,156

Prepaid expenses and other assets
1,115

 
(1,195
)
Accounts payable
7,366

 
34,186

Payables to related parties
650

 
538

Accrued expenses and other liabilities
(17,129
)
 
10,193

Income taxes payable
(74,172
)
 
94,753

Net cash (used in) provided by operating activities
(101,855
)
 
226,451

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(30,085
)
 
(105,349
)
Purchases of property and equipment from related parties
(135
)
 
(3,436
)
Business acquisitions

 
(13,356
)
Contributions to equity investee
(680
)
 

Proceeds from disposal of property and equipment
2,465

 
898

Net cash used in investing activities
(28,435
)
 
(121,243
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
108,000

 
52,000

Repayments of lines of credit
(25,964
)
 
(151,900
)
Dividends paid
(11,219
)
 

Principal payments on financing leases and equipment financing notes
(992
)
 
(145
)
Net cash provided by (used in) financing activities
69,825

 
(100,045
)
Effect of foreign exchange rate on cash
85

 
(98
)
Net change in cash and cash equivalents
(60,380
)
 
5,065

Cash and cash equivalents at beginning of period
67,625

 
5,637

Cash and cash equivalents at end of period
$
7,245

 
$
10,702

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
1,830

 
$
2,543

Cash paid for income taxes
$
116,442

 
$
32,584

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in accounts payable
$
2,339

 
$
20,897



8

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

Three months ended June 30, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
41,821

$
82,973

$
29,223

$
27,803

$

$
181,820

Intersegment revenues

1,668

11,170

584

(13,422
)

Total revenue
41,821

84,641

40,393

28,387

(13,422
)
181,820

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
44,864

59,835

32,676

30,640


168,015

Intersegment cost of revenues

11,797

1,141

562

(13,500
)

Total cost of revenue
44,864

71,632

33,817

31,202

(13,500
)
168,015

Selling, general and administrative
3,035

2,664

1,380

2,376


9,455

Depreciation, depletion, amortization and accretion
7,818

10,174

4,528

7,625


30,145

Operating (loss) income
(13,896
)
171

668

(12,816
)
78

(25,795
)
Interest expense, net
386

452

72

641


1,551

Other (income) expense, net
(4,045
)
9

(32
)
49


(4,019
)
(Loss) income before income taxes
$
(10,237
)
$
(290
)
$
628

$
(13,506
)
$
78

$
(23,327
)
Three months ended June 30, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
360,250

$
100,333

$
37,439

$
35,572

$

$
533,594

Intersegment revenues

1,073

15,406

1,776

(18,255
)

Total revenue
360,250

101,406

52,845

37,348

(18,255
)
533,594

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
210,189

61,593

35,117

32,929


339,828

Intersegment cost of revenues
754

16,174

1,019

60

(18,007
)

Total cost of revenue
210,943

77,767

36,136

32,989

(18,007
)
339,828

Selling, general and administrative
39,786

20,822

1,787

2,732


65,127

Depreciation, depletion, amortization and accretion
4,094

13,829

3,881

8,991


30,795

Impairment of long-lived assets



187


187

Operating income (loss)
105,427

(11,012
)
11,041

(7,551
)
(248
)
97,657

Interest expense, net
106

341

76

436


959

Other expense, net
330

80

36

40


486

Income (loss) before income taxes
$
104,991

$
(11,433
)
$
10,929

$
(8,027
)
$
(248
)
$
96,212

Three months ended March 31, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
108,721

$
90,595

$
24,964

$
37,858

$

$
262,138

Intersegment revenues

1,544

12,897

658

(15,099
)

Total revenue
108,721

92,139

37,861

38,516

(15,099
)
262,138

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
58,965

64,211

30,252

35,642


189,070

Intersegment cost of revenues

13,537

1,047

497

(15,081
)

Total cost of revenue
58,965

77,748

31,299

36,139

(15,081
)
189,070

Selling, general and administrative
9,517

3,213

1,519

3,087


17,336

Depreciation, depletion, amortization and accretion
7,719

9,893

2,873

8,091


28,576

Operating income (loss)
32,520

1,285

2,170

(8,801
)
(18
)
27,156

Interest expense, net
39

198

30

256


523

Other expense, net
(24,824
)
(1
)

268


(24,557
)
Income (loss) before income taxes
$
57,305

$
1,088

$
2,140

$
(9,325
)
$
(18
)
$
51,190


9

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

Six months ended June 30, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
150,542

$
173,568

$
54,187

$
65,661

$

$
443,958

Intersegment revenues

3,212

24,067

1,243

(28,522
)

Total revenue
150,542

176,780

78,254

66,904

(28,522
)
443,958

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
103,828

124,047

62,928

66,282


357,085

Intersegment cost of revenues

25,334

2,188

1,060

(28,582
)

Total cost of revenue
103,828

149,381

65,116

67,342

(28,582
)
357,085

Selling, general and administrative
12,553

5,876

2,899

5,463


26,791

Depreciation, depletion, amortization and accretion
15,537

20,068

7,401

15,715


58,721

Operating income (loss)
18,624

1,455

2,838

(21,616
)
60

1,361

Interest expense, net
425

649

102

898


2,074

Other (income) expense, net
(28,869
)
8

(32
)
317


(28,576
)
Income (loss) before income taxes
$
47,068

$
798

$
2,768

$
(22,831
)
$
60

$
27,863

Six months ended June 30, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
685,709

$
196,912

$
73,942

$
71,280

$

$
1,027,843

Intersegment revenues

5,632

29,918

4,193

(39,743
)

Total revenue
685,709

202,544

103,860

75,473

(39,743
)
1,027,843

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
404,265

128,205

68,447

65,012


665,929

Intersegment cost of revenues
2,545

31,576

5,305

327

(39,753
)

Total cost of revenue
406,810

159,781

73,752

65,339

(39,753
)
665,929

Selling, general and administrative
71,637

23,485

3,431

5,085


103,638

Depreciation, depletion, amortization and accretion
6,501

27,815

6,197

17,190


57,703

Impairment of long-lived assets



187


187

Operating income (loss)
200,761

(8,537
)
20,480

(12,328
)
10

200,386

Interest expense, net
182

845

156

1,013


2,196

Other expense (income), net
332

92

23

67


514

Income (loss) before income taxes
$
200,247

$
(9,474
)
$
20,301

$
(13,408
)
$
10

$
197,676




10

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, 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, further adjusted to add back interest on trade accounts receivable. 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
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2019
 
2018
 
2019
 
2019
 
2018
Net (loss) income
$
(10,889
)
 
$
42,700

 
$
28,333

 
$
17,444

 
$
98,246

Depreciation, depletion, accretion and amortization expense
30,145

 
30,795

 
28,576

 
58,721

 
57,703

Impairment of long-lived assets

 
187

 

 

 
187

Acquisition related costs
45

 
77

 

 
45

 
31

Public offering costs

 
731

 

 

 
731

Equity based compensation

 
17,487

 

 

 
17,487

Stock based compensation
944

 
1,660

 
1,289

 
2,233

 
2,916

Interest expense, net
1,551

 
959

 
523

 
2,074

 
2,196

Other (income) expense, net
(4,019
)
 
486

 
(24,557
)
 
(28,576
)
 
514

Interest on trade accounts receivable
3,234

 

 
25,735

 
28,969

 

(Benefit) provision for income taxes
(12,438
)
 
53,512

 
22,857

 
10,419

 
99,430

Adjusted EBITDA
$
8,573

 
$
148,594

 
$
82,756

 
$
91,329

 
$
279,441



11

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


Infrastructure Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income:
2019
 
2018
 
2019
 
2019
 
2018
Net income
$
6,210

 
$
52,359

 
$
35,665

 
$
41,875

 
$
99,658

Depreciation and amortization expense
7,818

 
4,094

 
7,719

 
15,537

 
6,501

Acquisition related costs
12

 
4

 

 
12

 
(4
)
Public offering costs

 
360

 

 

 
360

Stock based compensation
9

 
606

 
462

 
471

 
1,063

Interest expense
386

 
106

 
39

 
425

 
182

Other (income) expense, net
(4,045
)
 
330

 
(24,824
)
 
(28,869
)
 
332

Interest on trade accounts receivable
3,234

 

 
25,735

 
28,969

 

(Benefit) provision for income taxes
(16,447
)
 
52,632

 
21,639

 
5,193

 
100,589

Adjusted EBITDA
$
(2,823
)
 
$
110,491

 
$
66,435

 
$
63,613

 
$
208,681


Pressure Pumping Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2019
 
2018
 
2019
 
2019
 
2018
Net income (loss)
$
(290
)
 
$
(11,433
)
 
$
1,088

 
$
798

 
$
(9,474
)
Depreciation and amortization expense
10,174

 
13,829

 
9,893

 
20,068

 
27,815

Acquisition related costs
18

 
33

 

 
18

 
33

Public offering costs

 
202

 

 

 
202

Equity based compensation

 
17,487

 

 

 
17,487

Stock based compensation
489

 
453

 
410

 
899

 
871

Interest expense
452

 
341

 
198

 
649

 
845

Other expense (income), net
9

 
80

 
(1
)
 
8

 
92

Adjusted EBITDA
$
10,852

 
$
20,992

 
$
11,588

 
$
22,440

 
$
37,871


Natural Sand Proppant Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2019
 
2018
 
2019
 
2019
 
2018
Net income
$
628

 
$
10,929

 
$
2,140

 
$
2,768

 
$
20,301

Depreciation, depletion, accretion and amortization expense
4,528

 
3,881

 
2,873

 
7,401

 
6,197

Acquisition related costs
8

 

 

 
8

 
(38
)
Public offering costs

 
95

 

 

 
95

Stock based compensation
236

 
205

 
203

 
439

 
391

Interest expense
72

 
76

 
30

 
102

 
156

Other (income) expense, net
(32
)
 
36

 

 
(32
)
 
23

Adjusted EBITDA
$
5,440

 
$
15,222

 
$
5,246

 
$
10,686

 
$
27,125



12

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


Other Services(a) 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2019
 
2018
 
2019
 
2019
 
2018
Net (loss) income
$
(17,515
)
 
$
(8,907
)
 
$
(10,542
)
 
$
(28,057
)
 
$
(12,250
)
Depreciation and amortization expense
7,625

 
8,991

 
8,091

 
15,715

 
17,190

Impairment of long-lived assets

 
187

 

 

 
187

Acquisition related costs
7

 
40

 

 
7

 
40

Public offering costs

 
74

 

 

 
74

Stock based compensation
210

 
396

 
214

 
424

 
592

Interest expense, net
641

 
436

 
256

 
898

 
1,013

Other expense, net
49

 
40

 
268

 
317

 
67

Provision (benefit) for income taxes
4,009

 
880

 
1,217

 
5,226

 
(1,158
)
Adjusted EBITDA
$
(4,974
)
 
$
2,137

 
$
(496
)
 
$
(5,470
)
 
$
5,755

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.

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
 
June 30,
 
2019
 
2018
 
2017
 
(in thousands)
Net income
$
155,163

 
$
163,360

 
 
Capital Employed
 
 
 
 
 
Total debt
$
82,036

 
$

 
$
65,000

Total equity
763,216

 
625,669

 
440,410

Total capital employed
$
845,252

 
$
625,669

 
$
505,410

 
 
 
 
 
 
Average capital employed(a)
$
735,461

 
$
565,540

 
 
Trailing twelve month after tax return on invested capital(b)
21
%
 
29
%
 
 
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.


13