Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 07, 2018 | |
Entity Registrant Name | Select Energy Services, Inc. | |
Entity Central Index Key | 1,693,256 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Class A Common Stock | ||
Entity Common Stock, Shares Outstanding | 66,254,863 | |
Class B Common Stock | ||
Entity Common Stock, Shares Outstanding | 40,331,989 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 6,117 | $ 2,774 |
Accounts receivable trade, net of allowance for doubtful accounts of $3,341 and $2,979, respectively | 407,046 | 373,633 |
Accounts receivable, related parties | 7,206 | 7,669 |
Inventories | 44,501 | 44,598 |
Prepaid expenses and other current assets | 20,295 | 17,842 |
Total current assets | 485,165 | 446,516 |
Property and equipment | 1,051,970 | 1,034,995 |
Accumulated depreciation | (578,220) | (560,886) |
Property and equipment, net | 473,750 | 474,109 |
Goodwill | 275,795 | 273,421 |
Other intangible assets, net | 152,215 | 156,066 |
Other assets | 4,084 | 6,256 |
Total assets | 1,391,009 | 1,356,368 |
Current liabilities | ||
Accounts payable | 62,415 | 52,579 |
Accounts payable and accrued expenses, related parties | 2,600 | 2,772 |
Accrued salaries and benefits | 20,222 | 21,324 |
Accrued insurance | 11,928 | 12,510 |
Sales tax payable | 12,570 | 12,931 |
Accrued expenses and other current liabilities | 91,400 | 81,112 |
Current portion of capital lease obligations | 1,706 | 1,965 |
Total current liabilities | 202,841 | 185,193 |
Accrued lease obligations | 18,321 | 18,979 |
Other long term liabilities | 13,577 | 13,827 |
Long-term debt | 75,000 | 75,000 |
Total liabilities | 309,739 | 292,999 |
Commitments and contingencies (Note 9) | ||
Additional paid-in capital | 675,895 | 673,141 |
Accumulated deficit | (7,760) | (17,859) |
Accumulated other comprehensive income | 43 | 302 |
Total stockholders’ equity | 669,244 | 656,647 |
Noncontrolling interests | 412,026 | 406,722 |
Total equity | 1,081,270 | 1,063,369 |
Total liabilities and equity | 1,391,009 | 1,356,368 |
Class A Common Stock | ||
Current liabilities | ||
Common stock | 662 | 592 |
Total equity | 662 | 592 |
Class A-2 Common Stock | ||
Current liabilities | ||
Common stock | 67 | |
Total equity | 67 | |
Class B Common Stock | ||
Current liabilities | ||
Common stock | 404 | 404 |
Total equity | $ 404 | $ 404 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts | $ 3,341 | $ 2,979 |
Common Stock, Shares, Issued | 40,331,989 | 40,331,989 |
Common Stock, Shares, Outstanding | 40,331,989 | 40,331,989 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Class A Common Stock | ||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 350,000,000 | 350,000,000 |
Common Stock, Shares, Issued | 66,258,163 | 59,182,176 |
Common Stock, Shares, Outstanding | 66,258,163 | 59,182,176 |
Class A-2 Common Stock | ||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 40,000,000 | 40,000,000 |
Common Stock, Shares, Issued | 0 | 6,731,845 |
Common Stock, Shares, Outstanding | 0 | 6,731,845 |
Class B Common Stock | ||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 150,000,000 | 150,000,000 |
Common Stock, Shares, Issued | 40,331,989 | |
Common Stock, Shares, Outstanding | 40,331,989 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenue | ||
Water solutions and related services | $ 281,555 | $ 78,377 |
Accommodations and rentals | 14,744 | 9,515 |
Wellsite completion and construction services | 16,466 | 12,033 |
Oilfield chemical product sales | 63,630 | |
Total revenue | 376,395 | 99,925 |
Costs of revenue | ||
Water solutions and related services | 215,425 | 60,621 |
Accommodations and rentals | 10,665 | 7,923 |
Wellsite completion and construction services | 14,390 | 10,419 |
Oilfield chemical product sales | 57,084 | |
Depreciation and amortization | 30,882 | 21,204 |
Total costs of revenue | 328,446 | 100,167 |
Gross profit (loss) | 47,949 | (242) |
Operating expenses | ||
Selling, general and administrative | 25,681 | 9,957 |
Depreciation and amortization | 541 | 446 |
Impairment of investment | 2,000 | |
Lease abandonment costs | 1,124 | 1,863 |
Total operating expenses | 29,346 | 12,266 |
Income (loss) from operations | 18,603 | (12,508) |
Other income (expense) | ||
Interest expense, net | (1,151) | (730) |
Foreign currency losses, net | (400) | |
Other (expense) income, net | (458) | 1,064 |
Income (loss) before tax expense | 16,594 | (12,174) |
Tax expense | (462) | (106) |
Net income (loss) | 16,132 | (12,280) |
Less: net (income) loss attributable to noncontrolling interests | (6,033) | 8,108 |
Net income (loss) attributable to Select Energy Services, Inc. | 10,099 | (4,172) |
EARNINGS PER SHARE | ||
Allocation of net income (loss) attributable to, Diluted | 10,134 | |
Class A Common Stock | ||
Other income (expense) | ||
Net income (loss) attributable to Select Energy Services, Inc. | 9,097 | $ (809) |
EARNINGS PER SHARE | ||
Allocation of net income (loss) attributable to, Diluted | $ 9,137 | |
Weighted average shares outstanding, basic | 59,064,958 | |
Net income (loss) per share attributable to common stockholders, basis | $ 0.15 | $ (0.21) |
Weighted average shares outstanding, diluted | 59,673,466 | |
Net income (loss) per share attributable to common stockholders, diluted | $ 0.15 | $ (0.21) |
Weighted-average shares of common stock outstanding — basic & diluted | 3,870,194 | |
Net loss per share attributable to common stockholders: | $ (0.21) | |
Class A-1 Common Stock | ||
EARNINGS PER SHARE | ||
Net income (loss) per share attributable to common stockholders, basis | (0.21) | |
Net income (loss) per share attributable to common stockholders, diluted | $ (0.21) | |
Class A-2 Common Stock | ||
Other income (expense) | ||
Net income (loss) attributable to Select Energy Services, Inc. | $ 1,002 | $ (3,363) |
EARNINGS PER SHARE | ||
Allocation of net income (loss) attributable to, Diluted | $ 997 | |
Weighted average shares outstanding, basic | 6,507,445 | |
Net income (loss) per share attributable to common stockholders, basis | $ 0.15 | |
Weighted average shares outstanding, diluted | 6,507,445 | |
Net income (loss) per share attributable to common stockholders, diluted | $ 0.15 | |
Weighted-average shares of common stock outstanding — basic & diluted | 16,100,000 | |
Net loss per share attributable to common stockholders: | $ (0.21) | |
Class B Common Stock | ||
EARNINGS PER SHARE | ||
Weighted average shares outstanding, basic | 40,331,989 | |
Weighted average shares outstanding, diluted | 40,331,989 | |
Weighted-average shares of common stock outstanding — basic & diluted | 38,462,541 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Net income (loss) | $ 16,132 | $ (12,280) |
Other comprehensive income (loss) | ||
Foreign currency translation adjustment, net of tax of $0 | (259) | |
Net change in unrealized loss | (259) | |
Comprehensive income (loss) | 15,873 | (12,280) |
Less: comprehensive (income) loss attributable to noncontrolling interests | (5,936) | 8,108 |
Comprehensive income (loss) attributable to Select Energy Services, Inc. | $ 9,937 | $ (4,172) |
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |
Foreign currency translation adjustment, tax amount | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands | Class A Common Stock | Class A-1 Common Stock | Class A-2 Common Stock | Class B Common Stock | Total Stockholders’ Equity | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total |
Beginning balance at Dec. 31, 2016 | $ 38 | $ 161 | $ 385 | $ 112,716 | $ 113,175 | $ (1,043) | $ 221,992 | $ 334,708 | ||
Beginning balance (in shares) at Dec. 31, 2016 | 3,802,972 | 16,100,000 | 38,462,541 | |||||||
Equity-based compensation | 221 | 221 | 422 | 643 | ||||||
Issuance of shares for acquisition | $ 3 | 2,498 | 2,495 | 3,002 | 5,500 | |||||
Issuance of shares for acquisition (in shares) | 274,998 | |||||||||
Net income (loss) | (4,172) | (4,172) | (8,108) | (12,280) | ||||||
Ending balance at Mar. 31, 2017 | $ 41 | $ 161 | $ 385 | 111,263 | 115,891 | (5,215) | 217,308 | 328,571 | ||
Ending balance (in shares) at Mar. 31, 2017 | 4,077,970 | 16,100,000 | 38,462,541 | |||||||
Beginning balance at Dec. 31, 2016 | $ 38 | $ 161 | $ 385 | 112,716 | 113,175 | (1,043) | 221,992 | 334,708 | ||
Beginning balance (in shares) at Dec. 31, 2016 | 3,802,972 | 16,100,000 | 38,462,541 | |||||||
Conversion of Class A-2 to Class A (in shares) | 6,731,845 | 40,331,989 | ||||||||
Ending balance at Dec. 31, 2017 | $ 592 | $ 67 | $ 404 | 656,647 | 673,141 | (17,859) | $ 302 | 406,722 | 1,063,369 | |
Ending balance (in shares) at Dec. 31, 2017 | 59,182,176 | |||||||||
Noncontrolling interest in subsidiary | (161) | (161) | ||||||||
Equity-based compensation | 1,542 | 1,542 | 939 | 2,481 | ||||||
Issuance of restricted shares | $ 3 | 1,424 | 1,421 | (1,424) | ||||||
Issuance of restricted shares (in shares) | 331,389 | |||||||||
Conversion of Class A-2 to Class A | $ 67 | $ (67) | ||||||||
Conversion of Class A-2 to Class A (in shares) | 6,731,839 | (6,731,839) | ||||||||
Stock options exercised | 81 | 81 | 49 | 130 | ||||||
Stock options exercised (in shares) | 19,398 | |||||||||
Issuance of shares for initial public offering | 2 | 2 | (2) | |||||||
Issuance of shares for initial public offering (in shares) | 27,235 | |||||||||
Repurchase of common stock | (222) | (222) | (42) | (264) | ||||||
Repurchase of common stock ( in shares) | (15,234) | (6) | ||||||||
Restricted shares forfeited | (70) | (70) | 70 | |||||||
Restricted shares forfeited (in shares) | (18,640) | |||||||||
Foreign currency translation adjustment | (259) | (259) | (158) | (417) | ||||||
Net income (loss) | 10,099 | 10,099 | 6,033 | 16,132 | ||||||
Ending balance at Mar. 31, 2018 | $ 662 | $ 404 | $ 669,244 | $ 675,895 | $ (7,760) | $ 43 | $ 412,026 | $ 1,081,270 | ||
Ending balance (in shares) at Mar. 31, 2018 | 66,258,163 | 40,331,989 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities | ||
Net income (loss) | $ 16,132 | $ (12,280) |
Adjustments to reconcile net loss to net cash provided by operating activities | ||
Depreciation and amortization | 31,423 | 21,650 |
Loss (gain) on disposal of property and equipment | 554 | (1,105) |
Bad debt expense | 485 | 334 |
Amortization of debt issuance costs | 172 | 309 |
Equity-based compensation | 2,481 | 643 |
Impairment of investment | 2,000 | |
Other operating items, net | 117 | |
Changes in operating assets and liabilities | ||
Accounts receivable | (33,691) | (21,157) |
Prepaid expenses and other assets | (1,017) | 1,337 |
Accounts payable and accrued liabilities | 16,549 | 2,333 |
Net cash provided by (used in) operating activities | 35,205 | (7,936) |
Cash flows from investing activities | ||
Acquisitions, net of cash received | (49,004) | |
Purchase of property and equipment | (32,612) | (10,806) |
Proceeds received from sale of property and equipment | 1,609 | 1,753 |
Net cash used in investing activities | (31,003) | (58,057) |
Cash flows from financing activities | ||
Proceeds from revolving line of credit and issuance of long-term debt | 34,000 | |
Payments of capital lease obligations | (511) | |
Proceeds from share issuance | 130 | |
Distributions to noncontrolling interests | (161) | |
Purchase of treasury stock | (264) | |
Net cash (used in) provided by financing activities | (806) | 34,000 |
Effect of exchange rate changes on cash | (53) | |
Net increase (decrease) in cash and cash equivalents | 3,343 | (31,993) |
Cash and cash equivalents, beginning of period | 2,774 | 40,041 |
Cash and cash equivalents, end of period | 6,117 | 8,048 |
Supplemental cash flow disclosure: | ||
Cash paid for interest | 991 | 427 |
Cash paid for taxes | 344 | 12 |
Supplemental disclosure of noncash investing activities: | ||
Capital expenditures included in accounts payable and accrued liabilities | $ 9,632 | $ 4,766 |
BUSINESS AND BASIS OF PRESENTAT
BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2018 | |
BUSINESS AND BASIS OF PRESENTATION | |
BUSINESS AND BASIS OF PRESENTATION | NOTE 1—BUSINESS AND BASIS OF PRESENTATION Description of the business : Select Energy Services, Inc. (‘we,” “Select Inc.” or “the Company”) was incorporated as a Delaware corporation on November 21, 2016. The Company is a holding company whose sole material asset consists of a membership interest in SES Holdings, LLC (“SES Holdings”). On November 1, 2017, the Company completed the transactions in which subsidiaries of Select Inc. and SES Holdings merged with Rockwater Energy Solutions, Inc. (“Rockwater”) and Rockwater Energy Solutions, LLC (“Rockwater LLC”), respectively, in a stock-for-stock or unit-for-unit transaction (the “Rockwater Merger”). See Note 3 —Acquisitions for further discussion. We are a leading provider of total water management and chemical solutions to the oil and gas industry in the United States and Western Canada. The oilfield water services market has grown rapidly over the past decade, driven by advances in drilling, completion and production technologies. Within the major onshore oil and gas plays in the United States, we believe we are a market leader in sourcing, transfer (both by permanent pipeline and temporary hose) and temporary containment of water prior to its use in drilling and completion activities associated with hydraulic fracturing or “fracking,” which we collectively refer to as “pre‑frac water services.” We also provide well testing and flowback services immediately following the well completion and in most of our areas of operations, we provide additional complementary water‑related services that support oil and gas well completion and production activities including monitoring, treatment, hauling, recycling and disposal. In addition to our water-related services, we also develop and manufacture specialty chemicals used in frac fluid systems and production chemicals used to enhance performance over the life of a well. Furthermore, we develop and manufacture chemicals required by oil and gas companies to maintain and enhance oil and gas production over the life of a typical well. We believe we are the only oilfield services company that provides total water solutions together with complementary chemical products and related expertise, which we believe gives us a unique competitive advantage in our industry. We also offer wellsite services that complement our total water management and chemical solutions offering. These services include equipment rental, accommodations, crane and logistics services, wellsite and pipeline construction, field and well services, sand hauling and fluids logistic services. In addition, we provide water transfer, fluids hauling, containment and rental services in Canada. Reorganization : On December 20, 2016, Select Inc. completed a private placement (the “Select 144A Offering”) of 16,100,000 shares of Select Inc. Class A‑1 common stock, par value $0.01 per share (“Class A-1 Common Stock”) at an offering price of $20.00 per share. In conjunction with the Select 144A Offering, SES Holdings’ then existing Class A and Class B units were converted into a single class of common units (the “SES Holdings LLC Units”) and SES Holdings effected a 10.3583 for 1 unit split. In exchange for the contribution of all net proceeds from the Select 144A Offering to SES Holdings, SES Holdings issued 16,100,000 SES Holdings LLC Units to Select Inc., and Select Inc. became the sole managing member of SES Holdings. Select Inc. issued 38,462,541 shares of its Class B common stock, par value $0.01 per share (“Class B Common Stock”), to the other member of SES Holdings, SES Legacy Holdings, LLC (“Legacy Owner Holdco”) or one share for each SES Holdings LLC Unit held by Legacy Owner Holdco. Select Inc. also acquired 3,802,972 SES Holdings LLC Units from certain legacy owners (the “Contributing Legacy Owners”) in exchange for the issuance of 3,802,972 shares of Select Inc. Class A common stock, par value $0.01 per share (“Class A Common Stock”). Upon the effectiveness on June 13, 2017 of a shelf registration statement registering such shares for resale, all shares of Class A-1 Common Stock converted into shares of Class A Common Stock on a one-for-one basis. Refer below for further discussion. Shareholders of Class A Common Stock, and Class B Common Stock vote together as a single class on all matters, subject to certain exceptions in the Company’s amended and restated certificate of incorporation. Holders of Class B Common Stock have voting rights only and are not entitled to an economic interest in Select Inc. based on their ownership of Class B Common Stock. The reorganization transactions were treated as a combination of entities under common control with assets and liabilities transferred at their carrying amounts in a manner similar to a pooling of interests. Initial Public Offering: On April 26, 2017, the Company completed its initial public offering (“IPO”) of 8,700,000 shares of Class A Common Stock at a price of $14.00 per share. On May 10, 2017, the underwriters of the IPO exercised their over-allotment option to purchase an additional 1,305,000 shares of Class A Common Stock at the IPO price of $14.00 per share. After deducting underwriting discounts and commissions and estimated offering expenses payable by it, the Company received $128.5 million of the aggregate net proceeds from the IPO (including the over-allotment option). The Company contributed all of the net proceeds received by it to SES Holdings in exchange for SES Holdings LLC Units. SES Holdings used the net proceeds in the following manner: (i) $34.0 million was used to repay borrowings incurred under the Company’s Previous Credit Facility (as defined and discussed in Note 8) to fund the cash portion of the purchase price of the GRR Acquisition, as defined below, (ii) $7.8 million was used for the cash settlement of outstanding phantom unit awards and (iii) the remaining net proceeds were intended to be used for general corporate purposes, including funding capital expenditures. Rockwater Merger: On November 1, 2017, we completed the Rockwater Merger, as contemplated by the Agreement and Plan of Merger, dated as of July 18, 2017 (the “Merger Agreement”), by and among us, SES Holdings, Raptor Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary, Raptor Merger Sub, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of SES Holdings, Rockwater and Rockwater LLC. Pursuant to the Merger Agreement, we combined with Rockwater in a stock‑for‑stock transaction in which we issued approximately 25.9 million shares of Class A Common Stock, 6.7 million shares of Select Inc. Class A-2 common stock, par value $0.01 (the “Class A‑2 Common Stock”) and 4.4 million shares of Class B Common Stock to the former holders of Rockwater common stock and a unit‑for‑unit transaction in which SES Holdings issued approximately 37.3 million common units of SES Holdings (each, an “SES Holdings LLC Unit”) to the former holders of units in Rockwater LLC (each, a “Rockwater LLC Unit”). See Note 3 – Acquisitions for further discussion. Credit Agreement : Concurrent with the Rockwater Merger, the Company entered into the Credit Agreement, a $300.0 million senior secured revolving credit facility. In addition, the obligations under the Previous Credit Facility were repaid in full and the Previous Credit Facility was terminated. See Note 8—Debt for further discussion. Exchange rights : Under the Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings (the “SES Holdings LLC Agreement”), Legacy Owner Holdco and its permitted transferees have the right (an “Exchange Right”) to cause SES Holdings to acquire all or a portion of its SES Holdings LLC Units for, at SES Holdings’ election, (i) shares of Class A Common Stock at an exchange ratio of one share of Class A Common Stock for each SES Holdings LLC Unit exchanged, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions or (ii) cash in an amount equal to the Cash Election Value (as defined within the SES Holdings LLC Agreement) of such Class A Common Stock. Alternatively, upon the exercise of any Exchange Right, Select Inc. has the right (the “Call Right”) to acquire the tendered SES Holdings LLC Units from the exchanging unitholder for, at its election, (i) the number of shares of Class A Common Stock the exchanging unitholder would have received under the Exchange Right or (ii) cash in an amount equal to the Cash Election Value of such Class A Common Stock. In connection with any exchange of SES Holdings LLC Units pursuant to an Exchange Right or Call Right, the corresponding number of shares of Class B Common Stock will be cancelled. Registration rights : In December 2016, in connection with the closing of the Select 144A Offering, Select Inc. entered into a registration rights agreement with FBR Capital Markets & Co. for the benefit of the investors in the Select 144A Offering. Under this registration rights agreement, the Company agreed, at its expense, to file with the U.S Securities and Exchange Commission (“SEC”), in no event later than April 30, 2017, a shelf registration statement registering for resale the 16,100,000 shares of Class A Common Stock issuable upon conversion of the Class A‑1 Common Stock sold in the Select 144A Offering plus any additional shares of Class A‑1 Common Stock issued in respect thereof whether by stock dividend, stock distribution, stock split or otherwise, and to use commercially reasonable efforts to cause such registration statement to be declared effective by the SEC as soon as practicable but in any event within 60 days after the closing of the IPO. The Company filed this registration statement with the SEC on April 28, 2017 and this registration statement was declared effective by the SEC on June 13, 2017. Accordingly, each share of Class A‑1 Common Stock outstanding automatically converted into a share of Class A Common Stock on a one‑for‑one basis at that time. In addition, Legacy Owner Holdco has the right, under certain circumstances, to cause the Company to register the shares of Class A Common Stock obtained pursuant to the Exchange Right. Rockwater Registration Rights Agreement: In connection with the closing of the Rockwater Merger, pursuant to that certain Assignment and Assumption Agreement (the “Assignment and Assumption Agreement”), dated as of November 1, 2017, by and between Rockwater and Select Inc., Rockwater assigned, and Select Inc. assumed, Rockwater’s rights and obligations under that certain Registration Rights Agreement made and entered into as of February 16, 2017, between Rockwater and FBR Capital Markets & Co. (as assumed by Select Inc. pursuant to the Assignment and Assumption Agreement, the “Rockwater Registration Rights Agreement”). Under the Rockwater Registration Rights Agreement, Select Inc. agreed, at its expense, to file with the SEC a shelf registration statement registering for resale shares of Class A Common Stock into which the outstanding shares of Class A-2 Common Stock were convertible, and to cause such registration statement to be declared effective by the SEC as soon as practicable but in any event within 180 days after the initial filing of such registration statement On January 12, 2018, the Company, pursuant to the Rockwater Registration Rights Agreement, filed with the SEC a shelf registration statement registering for resale of 6,653,777 shares of Class A Common Stock into which certain of the outstanding shares of Class A-2 Common Stock registered under such registration statement were convertible. Pursuant to the Company’s Third Amended and Restated Certificate of Incorporation, upon the effectiveness of this registration statement on March 29, 2018, each outstanding share of Class A-2 Common Stock converted automatically into a share of Class A Common Stock on a one-for-one basis. No shares of Class A-2 Common Stock are currently outstanding. Tax receivable agreements : In connection with the Company’s restructuring at the Select 144A Offering, Select Inc. entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco and certain other affiliates of the then-holders of SES Holdings LLC Units (each such person and any permitted transferee thereof, a “TRA Holder” and together, the “TRA Holders”). On July 18, 2017, the Company’s board of directors approved amendments to each of the Tax Receivable Agreements. See Note 12—Related Party Transactions for further discussion. Basis of presentation : The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. These unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with GAAP. Accordingly, the accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the Company’s annual consolidated financial statements and related notes included in the annual report on Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Form 10-K”), filed with the SEC on March 19, 2018. The unaudited interim consolidated financial statements include the accounts of the Company and all of its majority‑owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for a fair presentation of the Company’s interim financial statements have been included in these unaudited interim consolidated financial statements. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. For investments in subsidiaries that are not wholly owned, but where the Company exercises control, the equity held by the minority owners and their portion of net income or loss are reflected as noncontrolling interests. Investments in entities in which the Company exercises significant influence over operating and financial policies are accounted for using the equity method, and investments in entities for which the Company does not have significant control or influence are accounted for using the cost method. As of March 31, 2018, the Company has no equity method investees and one cost method investee. The Company’s investments are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. When circumstances indicate that the fair value of its investment is less than its carrying value and the reduction in value is other than temporary, the reduction in value is recognized in earnings. During the three months ended March 31, 2018, the Company determined that its cost method investee was no longer fully recoverable and was written down to its estimated fair value of $0.5 million. The impairment expense of $2.0 million is included in impairment of investment within the consolidated statement of operations. Reclassifications : Certain reclassifications have been made to the Company’s prior period consolidated financial information in order to conform to the current period presentation. These presentation changes did not impact the Company’s consolidated net income, total assets, total liabilities or total stockholders’ equity. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies : The Company’s significant accounting policies are disclosed in Note 2 of the consolidated financial statements for the years ended December 31, 2017, 2016 and 2015 included in the Company’s most recent Annual Report on Form 10-K. There have been no significant changes in such policies or the application of such policies during the quarter ended March 31, 2018. Use of estimates : The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Change in depreciable lives of property and equipment: In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review indicated that the economic lives of the assets were longer than the historic asset lives previously used by Select Inc. As a result, effective January 1, 2018, the Company changed its estimates of the useful lives of certain assets included in vehicles & equipment and machinery & equipment to better reflect the estimated periods during which these assets will remain in service. The average estimated useful lives of the assets impacted in vehicles and equipment category increased from 6.0 to 8.1 years while the average estimated useful lives of assets impacted in machinery & equipment increased from 5.5 years to 6.9 years. The change in the estimated useful lives of fixed assets is change implemented on a prospective basis and does not require restatement of previously reported depreciation and amortization. The effect of this change in accounting estimates was to reduce depreciation and amortization expense by $4.7 million, increase net income by $4.7 million and increase basic and diluted earnings per share by $0.04 each attributable to Class A and Class A-2 stockholders. Emerging Growth Company status: Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), the Company is an “emerging growth company,” or an “EGC,” which allows the Company to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company intends to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase‑in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. The Company’s election to use the phase‑in periods permitted by this election may make it difficult to compare the Company’s financial statements to those of non‑emerging growth companies and other emerging growth companies that have opted out of the longer phase‑in periods under Section 107 of the JOBS Act and who will comply with new or revised financial accounting standards. If the Company was to subsequently elect to immediately comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. The Company will remain an emerging growth company until, at the latest, December 31, 2022, the last day of the fiscal year following the fifth anniversary of our IPO, although we will lose that status sooner if we have $1.07 billion or more in revenues in a fiscal year, have more than $700 million in market value of our common stock held by non-affiliates as of any June 30 or issue more than $1.0 billion of non-convertible debt over a rolling three-year period. Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) on a comprehensive new revenue recognition standard that will supersede Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASU 2014-09, Revenue from Contracts with Customers, creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. In accordance with the JOBS Act, the Company is afforded the extended transition period and therefore is not required to adopt the ASU until January 1, 2019. The Company has assembled a team to scope the project, identify relevant revenue streams and understand the revenue recognition implications of the new guidance. The Company is currently evaluating whether the adoption of the ASU will have a material impact on its consolidated financial statements and related disclosures, and internal controls over financial reporting, and the Company has not yet determined the method by which it will adopt the standard. In February 2016, the FASB issued ASU 2016-02, Leases , which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, using a modified retrospective approach. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which is intended to simplify several aspects of the accounting for share‑based payment award transactions. ASU 2016-09 was effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement was effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. Certain amendments in this update should be applied prospectively, while other amendments in the update should be applied retrospectively, with early adoption permitted in any interim or annual period. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies and distributions received from equity method investees. ASU 2016-15 was effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied using a retrospective approach. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01 , Clarifying the Definition of a Business , with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This update was effective for fiscal years and interim periods within fiscal years beginning after December 15, 2017. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied prospectively. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment . This pronouncement removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This update is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021. The amendments in this ASU should be applied prospectively. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting . This pronouncement provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. This update was effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The pronouncement should be applied prospectively to an award modified on or after the adoption date. This ASU became effective for the Company in 2018, and the adoption of this guidance did not materially affect its consolidated financial statements and related disclosures. In January 2018, the FASB issued ASU 2018-01, Land Easements . The amendments in this update permit an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity’s adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 31, 2018 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 3— ACQUISITIONS Business combinations Rockwater Merger On November 1, 2017, the Company completed the Rockwater Merger in which the Company combined with Rockwater. Total consideration was $620.2 million based on the closing price of the Company’s shares of Class A Common Stock on November 1, 2017. Consideration transferred consisted of shares of Class A Common Stock, shares of Class A-2 Common Stock, shares of Class B Common Stock, and SES Holdings LLC Units. Consideration transferred also included the Company’s previously held interest in Rockwater, which was acquired as consideration in a sale of assets by Select’s predecessor to Rockwater’s predecessor in 2008 prior to the contribution of those assets to Rockwater and the related conversion of the ownership interests received by Select’s predecessor to ownership interests in Rockwater in 2011, and the fair value of Rockwater’s replaced share-based payments attributed to pre-acquisition service. In addition, the Company’s previously held interest in Rockwater was cancelled pursuant to the Merger Agreement. The previously held interest in Rockwater was previously included in other assets in the consolidated balance sheet. It was remeasured to a fair value of $2.3 million, which resulted in a gain of $1.2 million recognized in the fourth quarter of 2017 in other income in the consolidated statement of operations. For the three months ended March 31, 2018, the Company expensed $2.3 million of transaction-related costs which are included in selling, general and administrative within the consolidated statement of operations. The Rockwater Merger was accounted for as a business combination under the acquisition method of accounting. Assets acquired and liabilities assumed in the Rockwater Merger were recorded at their estimated fair values as of the merger date. The Company has not finalized these estimates; therefore, the fair value estimates set forth below are subject to adjustment during a one-year measurement period following the merger date. The final allocation of purchase consideration could include changes in the estimated fair value of working capital, property and equipment, intangible assets, other long-term assets, deferred tax liabilities and other long-term liabilities. Adjustments in the purchase price allocation may require a change in the amount allocated to goodwill during the period in which the adjustments are determined. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. The Company also engaged third-party valuation experts to assist in the purchase price allocation and the recorded valuation of property and equipment. The Company has received preliminary reports from these experts including estimates, judgments and assumptions for the valuation of the tangible and intangible assets acquired and liabilities assumed. These preliminary reports along with the analysis and expertise of management have formed the basis for the preliminary allocation. Detailed analysis and review of the assets acquired, including confirmation of the condition, existence and utility of the assets is currently ongoing. Management believes that the current information provides a reasonable basis for estimating fair values of assets acquired and liabilities assumed. These estimates, judgments and assumptions are subject to change and should be treated as preliminary values as there could be significant changes upon final valuation. Management currently believes that its valuation work and the work of its third-party experts will be completed and a final purchase price allocation will be recorded by June 30, 2018. Included in the working capital figure in the table below is accounts receivable acquired with a fair value of $196.9 million, and a gross contractual amount of $199.1 million. The Company expects $2.2 million of the gross contractual amount to be uncollectible. Management estimated that total consideration paid exceeded the fair value of the net assets acquired and liabilities assumed by $249.6 million, which excess was recognized as goodwill. The goodwill recognized was primarily attributable to synergies driven by expanding into new geographies and service offerings, strengthening existing service lines, acquiring an established, trained workforce and expected cost reductions. Goodwill of $233.4 million and $16.2 million was allocated to the Company’s Water Solutions and Oilfield Chemicals segments, respectively. The following table summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition: Preliminary purchase price allocation Amount Consideration transferred (in thousands) Class A Common Stock (25,914,260 shares) $ 423,957 Class A-2 Common Stock (6,731,845 shares) 110,133 Class B Common Stock (4,356,477 shares) and SES Holdings common units issued (4,356,477 units) 71,272 Fair value of previously held interest in Rockwater 2,310 Fair value of Rockwater share-based awards attributed to pre-acquisition service 12,529 Total consideration transferred 620,201 Less: identifiable assets acquired and liabilities assumed Working capital (1) 144,509 Property and equipment 185,601 Intangible assets Customer relationships 89,007 Trademarks and patents 31,215 Non-compete agreements 3,810 Other long-term assets 62 Deferred tax liabilities (408) Long-term debt (80,555) Other long-term liabilities (2,650) Total identifiable net assets acquired 370,591 Goodwill 249,610 Fair value allocated to net assets acquired $ 620,201 (1) During the three months ended March 31, 2018, the Company obtained additional information related to the working capital which led to a decrease of $2.4 million. The impact of this change resulted in a corresponding increase of $2.4 million in goodwill. Resource Water Acquisition On September 15, 2017, the Company completed its acquisition (the “Resource Water Acquisition”) of Resource Water Transfer Services, L.P. and certain other affiliated assets (collectively, “Resource Water”). Resource Water provides water transfer services to exploration and production (“E&P”) operators in West Texas and East Texas. Resource Water’s assets include 24 miles of layflat hose as well as numerous pumps and ancillary equipment required to support water transfer operations. Resource Water has longstanding customer relationships across its operating regions which are viewed as strategic to the Company’s water solutions business. The total consideration for the Resource Water Acquisition was $9.0 million, with $6.6 million paid in cash and $2.4 million paid in shares of Class A Common Stock valued at $15.17 per share, subject to customary post‑closing adjustments. The Company funded the cash portion of the consideration for the Resource Water Acquisition with $6.6 million of cash on hand. The Resource Water Acquisition was accounted for as a business combination under the acquisition method of accounting. The allocation of the consideration transferred was based on management’s estimates, judgments and assumptions. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. These estimates, judgments and assumptions are subject to change upon final valuation and should be treated as preliminary values. Working capital estimates are based on provisional amounts. Management estimated that total consideration paid exceeded the fair value of the net assets acquired by $1.9 million, which excess was recognized as goodwill. The goodwill recognized was attributable to Resource Water’s assembled workforce as well as synergies related to the Company’s comprehensive water solutions strategy. The goodwill was included in the assets of the Company’s Water Solutions segment. The following table summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition: Purchase price allocation Amount Consideration transferred (in thousands) Cash paid $ 6,586 Class A Common Stock (156,909 shares) 2,380 Total consideration transferred 8,966 Less: identifiable assets acquired and liabilities assumed Working capital 1,189 Fixed assets 3,485 Customer relationship intangible assets 1,933 Other intangible assets 465 Total identifiable net assets acquired 7,072 Goodwill 1,894 Fair value allocated to net assets acquired $ 8,966 GRR Acquisition On March 10, 2017, the Company completed its acquisition (the “GRR Acquisition”) of Gregory Rockhouse Ranch, Inc. and certain other affiliated entities and assets (collectively, the “GRR Entities”). The GRR Entities provide water and water‑related services to E&P companies in the Permian Basin and own and have rights to a vast array of fresh, brackish and effluent water sources with access to significant volumes of water annually and water transport infrastructure, including over 1,200 miles of temporary and permanent pipeline infrastructure and related storage facilities and pumps, all located in the northern Delaware Basin portion of the Permian Basin. The total consideration for the GRR Acquisition was $59.6 million, subject to customary post-closing adjustments, with $53.0 million paid in cash, $1.1 million in assumed tax liabilities and $5.5 million paid to the sellers in shares of Class A Common Stock valued at $20.00 per share. The Company funded the cash portion of the consideration for the GRR Acquisition with $19.0 million of cash on hand and $34.0 million of borrowings under the Company’s Previous Credit Facility. For the three months ended March 31, 2017, the Company expensed $0.7 million of transaction-related costs, which are included in selling, general and administrative expenses within the consolidated statement of operations. The GRR Acquisition was accounted for as a business combination under the acquisition method of accounting. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. Management estimated that consideration paid exceeded the fair value of the net assets acquired. Therefore, goodwill of $12.0 million was recorded. The goodwill recognized was primarily attributable to synergies related to the Company’s comprehensive water solutions strategy that are expected to arise from the GRR Acquisition and was attributable to the Company’s Water Solutions segment. The assets acquired and liabilities assumed and the results of operations of the acquired business are included in the Company’s Water Solutions segment. The following table summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition: Purchase price allocation Amount Consideration transferred (in thousands) Cash paid $ 53,032 Class A Common Stock (274,998 shares) 5,500 Assumed liabilities 1,106 Total consideration transferred 59,638 Less: identifiable assets acquired and liabilities assumed Working capital 7,728 Fixed assets 13,225 Customer relationship intangible assets 21,484 Other intangible assets 5,152 Total identifiable net assets acquired 47,589 Goodwill 12,049 Fair value allocated to net assets acquired $ 59,638 The GRR Acquisition contributed revenue and net income of $1.9 million and $0.3 million, respectively, to the consolidated results of the Company for the period from March 10, 2017, the date of completion of the GRR Acquisition, to March 31, 2017. The following unaudited consolidated pro forma information is presented as if the GRR Acquisition had occurred on January 1, 2016: Pro Forma Three Months Ended March 31, 2017 (unaudited) (in thousands) Revenue $ 229,235 Net loss (24,144) Less: net loss attributable to noncontrolling interests (1) 9,784 Net loss attributable to Select Energy Services, Inc. (1) $ (14,360) (1) The allocation of net loss attributable to noncontrolling interests and Select Inc. gives effect to the equity structure as of March 31, 2017 as though the Select 144A Offering, the IPO, the Rockwater Merger, the Resource Water Acquisition and the GRR Acquisition occurred as of January 1, 2016. However, the calculation of pro forma net loss does not give effect to any other pro forma adjustments for the Select 144A Offering or the subsequent IPO. The unaudited pro forma amounts above have been calculated after applying the Company’s accounting policies and adjusting the Rockwater Merger, GRR Acquisition and Resource Water Acquisition results to reflect the increase to depreciation and amortization that would have been charged assuming the fair value adjustments to property, The pro forma amounts do not include any potential synergies, cost savings or other expected benefits of the Rockwater Merger, the GRR Acquisition or the Resource Water Acquisition, and are presented for illustrative purposes only and are not necessarily indicative of results that would have been achieved if the Rockwater Merger, the GRR Acquisition and the Resource Water Acquisition had occurred as of January 1, 2016 or of future operating performance. |
EXIT AND DISPOSAL ACTIVITIES
EXIT AND DISPOSAL ACTIVITIES | 3 Months Ended |
Mar. 31, 2018 | |
EXIT AND DISPOSAL ACTIVITIES | |
EXIT AND DISPOSAL ACTIVITIES | NOTE 4—EXIT AND DISPOSAL ACTIVITIES Due to a reduction in industry activity from 2014, the Company made the decision during the year ended December 31, 2016 to close 15 facilities and consolidate operations for the purpose of improving operating efficiencies. In addition, the Company has decided to consolidate or close additional facilities in relation to its Rockwater Merger. During the three months ended March 31, 2018, the Company recorded $0.9 million of charges related to exit and disposal activities. During the three months ended March 31, 2017, the Company recorded $1.9 million of charges related to exit and disposal activities and reclassified $0.2 million of deferred rent related to accrued lease obligations related to exited facilities. The Company had a remaining balance of $21.6 million, inclusive of a short‑term balance of $3.3 million in accrued expenses and other current liabilities, as of March 31, 2018 related to accrued lease obligations and terminations at exited facilities within its Water Solutions segment. As of March 31, 2018, the Company has completed its exit from underperforming facilities but will continue to make non‑cancelable lease payments for related facilities through the year ended 2027. The Company’s abandonment of these facilities is not a part of a formalized exit plan. The changes in the abandoned lease obligations for the three months ended March 31, 2018 and 2017 are as follows: Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2017 March 31, 2018 March 31, 2018 March 31, 2018 (in thousands) Lease obligations and terminations $ 21,350 $ 871 $ 1,838 $ 20,383 Reclassification of deferred rent 1,254 1,254 Total $ 22,604 $ 21,637 Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2016 March 31, 2017 March 31, 2017 March 31, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 1,863 $ 712 $ 19,151 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 20,405 |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2018 | |
INVENTORIES | |
INVENTORIES | NOTE 5—INVENTORIES Inventories, which are comprised of chemicals and materials available for resale and parts and consumables used in operations, are valued at the lower of cost and net realizable value, with cost determined under the weighted-average method. The significant components of inventory are as follows: March 31, 2018 December 31, 2017 (in thousands) Raw materials $ 11,951 $ 11,462 Finished goods 29,955 29,674 Materials and supplies 2,861 3,462 44,767 44,598 Inventory reserve (266) — $ 44,501 $ 44,598 During the three months ended March 31, 2018 and 2017, the Company recorded charges to the reserve for excess and obsolete inventory in the amount of $0.3 million and $0.0 million, respectively, which were recognized within cost of revenue on the accompanying consolidated statements of operations. The reserve for excess and obsolete inventories is determined based on the Company’s historical usage of inventory on hand, as well as future expectations, and the amount necessary to reduce the cost of the inventory to its estimated net realizable value. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2018 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 6—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of March 31, 2018 and December 31, 2017: March 31, 2018 December 31, 2017 (in thousands) Land $ 15,315 $ 15,286 Buildings and leasehold improvements 98,589 99,222 Vehicles and equipment 67,900 70,537 Vehicles and equipment - capital lease 2,757 2,810 Machinery and equipment 720,970 716,420 Machinery and equipment - capital lease 545 544 Computer equipment and software 12,534 12,466 Computer equipment and software - capital lease 356 356 Office furniture and equipment 4,320 4,320 Disposal wells 67,168 67,805 Other 497 497 Construction in progress 61,019 44,732 1,051,970 1,034,995 Less accumulated depreciation and impairment (578,220) (560,886) Total property and equipment, net $ 473,750 $ 474,109 Long‑lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the three months ended March 31, 2018 and 2017, depreciation expense was $27.5 million and $19.6 million, respectively. As a result of the Rockwater Merger, the Company acquired various capital leases for certain vehicles, machinery and equipment that expire at various dates during the next five years. Depreciation of assets held under capital lease for the three months ended March 31, 2018 was $0.4 million and is included in depreciation and amortization expense in the accompanying consolidated statements of operations. The Company had no capital lease obligations as of March 31, 2017. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS. | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is evaluated for impairment on at least an annual basis, or more frequently if indicators of impairment exist. The annual impairment tests are based on Level 3 inputs. The changes in the carrying amounts of goodwill by reportable segment for the three months ended March 31, 2018 and year ended December 31, 2017 are as follows: Water Oilfield Wellsite Solutions Chemicals Services Total (in thousands) Balance as of December 31, 2016 $ — $ — $ 12,242 $ 12,242 Additions 245,542 15,637 — 261,179 Balance as of December 31, 2017 245,542 15,637 12,242 273,421 Measurement period adjustment 1,765 609 — 2,374 Balance as of March 31, 2018 $ 247,307 $ 16,246 $ 12,242 $ 275,795 The components of other intangible assets as of March 31, 2018 and December 31, 2017 are as follows: As of March 31, 2018 As of December 31, 2017 Gross Accumulated Net Gross Accumulated Net Value Amortization Value Value Amortization Value (in thousands) (in thousands) Customer relationships $ 169,250 $ 61,008 $ 108,242 $ 169,250 $ 57,836 $ 111,414 Patents and trademarks 33,544 644 32,900 33,544 414 33,130 Other 14,704 3,631 11,073 14,704 3,182 11,522 Total other intangible assets $ 217,498 $ 65,283 $ 152,215 $ 217,498 $ 61,432 $ 156,066 The Company had $5.3 million in indefinite-lived water rights as of March 31, 2018 and December 31, 2017. The Company had $23.4 million in indefinite-lived trademarks as of March 31, 2018 and December 31, 2017. Indefinite-lived water rights are included within the other component in the tables above. Indefinite-lived trademarks are included in the patents and trademarks component in the table above. Amortization expense was $3.9 million and $2.1 million for the three months ended March 31, 2018 and 2017, respectively. Annual amortization of intangible assets for the next five years and beyond is as follows: Amount (in thousands) Remainder of 2018 $ 9,185 2019 11,595 2020 11,301 2021 10,118 2022 9,904 Thereafter 71,396 |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2018 | |
DEBT | |
DEBT | NOTE 8—DEBT Credit facility and revolving line of credit Our subsidiary, Select Energy Services, LLC’s (“Select LLC”) previous credit facility (the “Previous Credit Facility”), originally executed in May 2011, has been amended over time. Effective December 20, 2016, the Company amended its Previous Credit Facility to extend the maturity date from February 28, 2018 to February 28, 2020 and reduce the revolving line of credit to $100.0 million. On November 1, 2017, in connection with the Closing (defined below), Select LLC entered into the Credit Agreement, the obligations of SES Holdings and the Borrower under the Previous Credit Facility were repaid in full and the Previous Credit Facility was terminated. On November 1, 2017, in connection with the closing of the Rockwater Merger (the “Closing”), SES Holdings and Select LLC, a wholly owned subsidiary of SES Holdings (the “Borrower”), entered into a $300.0 million senior secured revolving credit facility (the “Credit Agreement”), by and among SES Holdings, as parent, Select LLC, as Borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”). The Credit Agreement also has a sublimit of $40.0 million for letters of credit and a sublimit of $30.0 million for swingline loans. Subject to obtaining commitments from existing or new lenders, the Company has the option to increase the maximum amount under the Credit Agreement by $150.0 million during the first three years following the closing. The maturity date of the Credit Agreement is the earlier of (a) November 1, 2022, and (b) the earlier termination in whole of the Commitments pursuant to Section 2.1(b) or Article VII of the Credit Agreement. The Credit Agreement permits extensions of credit up to the lesser of $300.0 million and a borrowing base that is determined by calculating the amount equal to the sum of (i) 85% of the Eligible Billed Receivables (as defined in the Credit Agreement), plus (ii) 75% of Eligible Unbilled Receivables (as defined in the Credit Agreement), provided that this amount will not equal more than 35% of the borrowing base, plus (iii) the lesser of (A) the product of 70% multiplied by the value of Eligible Inventory (as defined in the Credit Agreement) at such time and (B) the product of 85% multiplied by the Net Recovery Percentage (as defined in the Credit Agreement) identified in the most recent Acceptable Appraisal of Inventory (as defined in the Credit Agreement), multiplied by the value of Eligible Inventory at such time, provided that this amount will not equal more than 30% of the borrowing base, minus (iv) the aggregate amount of Reserves (as defined in the Credit Agreement), if any, established by the Administrative Agent from time to time, including, if any, the amount of the Dilution Reserve (as defined in the Credit Agreement). The borrowing base is calculated on a monthly basis pursuant to a borrowing base certificate delivered by the Borrower to the Administrative Agent. Borrowings under the Credit Agreement bear interest, at Select LLC’s election, at either the (a) one-, two-, three- or six-month LIBOR (“Eurocurrency Rate”) or (b) the greatest of (i) the federal funds rate plus 0.5%, (ii) the one-month Eurocurrency Rate plus 1% and (iii) the Administrative Agent’s prime rate (the ”Base Rate”), in each case plus an applicable margin, and interest shall be payable monthly in arrears. The applicable margin for Eurocurrency Rate loans ranges from 1.50% to 2.00% and the applicable margin for Base Rate loans ranges from 0.50% to 1.00%, in each case, depending on Select LLC’s average excess availability under the Credit Agreement. The applicable margin for Eurocurrency Rate loans will be 1.75% and the applicable margin for Base Rate loans will be 0.75% until June 30, 2018. During the continuance of a bankruptcy event of default, automatically and during the continuance of any other default, upon the Administrative Agent’s or the required lenders’ election, all outstanding amounts under the Credit Agreement will bear interest at 2.00% plus the otherwise applicable interest rate. Level Average Excess Availability Base Rate Margin Eurocurrency Rate Margin I < 33% of the commitments II < 66.67% of the commitments and ≥ 33.33% of the commitments III ≥ 66.67% of the commitments Level Average Revolver Usage Unused Line Fee Percentage I ≥ 50% of the commitments II < 50% of the commitments The obligations under the Credit Agreement are guaranteed by SES Holdings and certain subsidiaries of SES Holdings and Select LLC and secured by a security interest in substantially all of the personal property assets of SES Holdings, Select LLC and their domestic subsidiaries. The Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default. If an event of default occurs and is continuing, the lenders may declare all amounts outstanding under the Credit Agreement to be immediately due and payable. In addition, the Credit Agreement restricts SES Holdings’ and Select LLC’s ability to make distributions on, or redeem or repurchase, its equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Credit Agreement and either (a) excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 25% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $37.5 million or (b) if SES Holdings’ fixed charge coverage ratio is at least 1.0 to 1.0 on a pro forma basis, and excess availability at all times during the preceding 30 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 20% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $30.0 million. Additionally, the Credit Agreement generally permits Select LLC to make distributions to allow Select Inc. to make payments required under the existing Tax Receivable Agreements. The Credit Agreement also requires SES Holdings to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 at any time availability under the Credit Agreement is less than the greater of (i) 10% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (ii) $15.0 million and continuing through and including the first day after such time that availability under the Credit Agreement has equaled or exceeded the greater of (i) 10% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (ii) $15.0 million for 60 consecutive calendar days. Certain lenders party to the Credit Agreement and their respective affiliates have from time to time performed, and may in the future perform, various financial advisory, commercial banking and investment banking services for the Company and its affiliates in the ordinary course of business for which they have received and would receive customary compensation. In addition, in the ordinary course of their various business activities, such parties and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investments and securities activities may involve the Company’s securities and/or instruments. In addition, certain lenders party to the Previous Credit Facility are lenders under the Credit Agreement. The Company had $75.0 million outstanding under the revolving line of credit as of March 31, 2018 and December 31, 2017. The weighted‑average interest rate of outstanding borrowings under the revolving line of credit was 3.627% and 3.319% as of March 31, 2018 and December 31, 2017, respectively. As of March 31, 2018 and December 31, 2017, the borrowing base under the Credit Agreement was $255.6 million and $262.1 million, respectively. The borrowing capacity under the revolving line of credit was reduced by outstanding letters of credit of $19.8 million as of March 31, 2018 and December 31, 2017. The Company’s letters of credit have a variable interest rate between 1.50% and 2.00% based on the Company’s average excess availability as outlined above. The unused portion of the available borrowings under the Credit Agreement was $160.8 million at March 31, 2018. Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of March 31, 2018 and December 31, 2017 were $3.2 million and $3.3 million, respectively. As these debt issuance costs relate to a revolving line of credit, they are presented as a deferred charge within other assets on the consolidated balance sheet. The Company was in compliance with all debt covenants as of March 31, 2018. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | NOTE 9—COMMITMENTS AND CONTINGENCIES Litigation The Company is subject to a number of lawsuits and claims arising out of the conduct of its business. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. Based on a consideration of all relevant facts and circumstances, including applicable insurance coverage, it is not expected that the ultimate outcome of any currently pending lawsuits or claims against the Company will have a material adverse effect on its consolidated financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these matters. Certain subsidiaries acquired in the Rockwater Merger are under investigation by the U.S. Attorney's Office for the Middle District of Pennsylvania and the Environmental Protection Agency. It is alleged that certain employees at some of the facilities altered emissions controls systems on 4% of the vehicles in the fleet in violation of the Clean Air Act. The Company is cooperating with the relevant authorities to resolve the matter. At this time no administrative, civil or criminal charges have been brought against the Company and the Company cannot estimate the possible fines and penalties that may be levied against the Company. |
EQUITY_BASED COMPENSATION
EQUITY‑BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2018 | |
EQUITY BASED COMPENSATION | |
EQUITY‑BASED COMPENSATION | NOTE 10—EQUITY‑BASED COMPENSATION The SES Holdings 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the board of managers of SES Holdings in April 2011. In conjunction with the Select 144A Offering, the Company adopted the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended from time to time, the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan immediately prior to the Select 144A Offering were cancelled in exchange for new options granted under the 2016 Plan. On July 18, 2017, the Select Inc. board of directors approved the First Amendment to the 2016 Plan (the “Equity Plan Amendment”), which clarifies the treatment of substitute awards under the 2016 Plan (including substitute awards that may be granted in connection with the Rockwater Merger) and allows for the assumption by the Company of shares eligible under any pre-existing stockholder-approved plan of an entity acquired by the Company or its affiliate (including the Rockwater Energy Solutions Inc. Amended and Restated 2017 Long Term Incentive Plan (the “Rockwater Equity Plan”)), in each case subject to the listing rules of the stock exchange on which Class A Common Stock is listed. The effectiveness of the Equity Plan Amendment was subject to approval by the Company's stockholders and the consummation of the transactions contemplated by the Merger Agreement for the Rockwater Merger. The Company’s consenting stockholders, who hold a majority of the outstanding common stock of the Company, approved the Equity Plan Amendment on July 18, 2017. The Equity Plan Amendment became effective on November 1, 2017 upon the consummation of the Rockwater Merger. The maximum number of shares initially reserved for issuance under the 2016 Plan was 5,400,400 shares of Class A Common Stock, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. Stock options are granted with terms not to exceed ten years. After giving effect to the Equity Plan Amendment, the maximum number of shares of Class A Common Stock reserved for issuance under the 2016 Plan is equal to (i) 5,400,400 shares plus (ii) 1,011,087 shares that became available on account of the assumption of the Rockwater Equity Plan, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. The maximum number of shares described in the preceding sentence does not take into account 2,879,112 shares of Class A Common Stock related to substitute awards that were granted under the 2016 Plan following the conversion of outstanding equity awards originally granted under the Rockwater Equity Plan in accordance with the Merger Agreement. Stock option awards Stock options were granted with an exercise price equal to or greater than the fair market value of a share of Class A Common Stock as of the date of grant. The Company historically valued Class A Common Stock on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. The fair value measurement relies on Level 3 inputs. The estimated fair value of its stock options is expensed over their vesting period, which is generally three years from the applicable date of grant. However, certain awards that were granted during the years ended December 31, 2017 and 2016 in exchange for cancelled awards were immediately vested and fully exercisable on the date of grant because they were either granted in exchange for the cancellation of outstanding options granted under the 2011 Plan or the Rockwater Equity Plan, as applicable, that were fully vested and exercisable prior to such cancellation. The Company utilized the Monte Carlo simulation model to determine fair value of the options granted during the three months ended March 31, 2018, which incorporates assumptions to value equity‑based awards. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. The expected life of the options was based on the vesting period and term of the options awarded, which is ten years. The table below presents the assumptions used in determining the fair value of stock options granted during the three months ended March 31, 2018. The weighted‑average grant date fair value of stock options granted was $8.98 for the three months ended March 31, 2018. Assumptions Underlying equity $ 20.50 Strike price $ 20.50 - 30.75 Dividend yield (%) % Risk free rate (%) 2.3 % Volatility (%) 50.0 % Expected term (years) A summary of the Company’s stock option activity and related information as of and for the three months ended March 31, 2018 is as follows: For the three months ended March 31, 2018 Weighted-average Stock Options Exercise Price Beginning balance, outstanding 3,495,935 $ 14.12 Granted 584,846 26.02 Exercised (19,398) 6.70 Forfeited (13,659) 16.84 Ending balance, outstanding 4,047,724 $ 15.86 Ending balance, exercisable 566,829 $ 8.46 Non-vested at end of period 1,097,790 $ 19.20 Aggregate intrinsic value for stock options is based on the difference between the exercise price of the stock options and the quoted closing Class A Common Stock price of $12.62 as of March 29, 2018. The aggregate intrinsic value of stock options outstanding at March 31, 2018 was $6.0 million, with a weighted-average remaining term of 8.7 years. As of March 31, 2018, the total number of in-the-money stock options exercisable was 566,829. The aggregate intrinsic value of stock options exercisable at March 31, 2018 was $2.4 million, with a weighted-average remaining term of 7.6 years. The Company recognized $1.3 million and $0.5 million of compensation expense related to stock options during the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, there was $8.9 million of unrecognized equity-based compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted-average period of 1.7 years. Restricted Stock Awards and Restricted Stock Units The value of the restricted stock awards and restricted stock units issued was established by the market price of the Class A Common Stock on the date of grant and is being recorded as compensation expense ratably over the vesting term which is generally one to three years from the applicable date of grant. The Company recognized compensation expense of $1.0 million and $0.1 million related to the restricted stock awards for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, there was $7.9 million of unrecognized compensation expense with a weighted-average remaining life of 2.3 years related to unvested restricted stock awards and restricted stock units. A summary of the Company’s restricted stock awards activity and related information for the three months ended March 31, 2018 is as follows: For the three months ended March 31, 2018 Weighted-average Restricted Stock Awards Grant Date Fair Value Non-vested at December 31, 2017 299,801 $ 16.36 Granted 331,389 20.87 Vested (33,429) 16.36 Forfeited (18,640) 16.36 Non-vested at March 31, 2018 579,121 $ 18.94 A summary of the Company’s restricted stock unit activity and related information for the three months ended March 31, 2018 is as follows: For the three months ended March 31, 2018 Weighted-average Restricted Stock Units Grant Date Fair Value Non-vested at December 31, 2017 30,360 $ 19.88 Granted — — Vested (27,235) 20.00 Non-vested at March 31, 2018 3,125 $ 18.80 Performance Share Units (PSUs) The Company approved grants of performance share units (“PSUs”) that are subject to both performance-based and service-based vesting provisions. The number of shares of Class A Common Stock issued to a recipient upon vesting of the PSU will be calculated based on performance against certain metrics that relate to the Company’s return on asset performance over the January 1, 2018 through December 31, 2020 performance period. The target number of shares of Class A Common Stock subject to each PSU is one; however, based on the achievement of performance criteria, the number of shares of Class A Common Stock that may be received in settlement of each PSU can range from zero to 175 times the target number. The PSUs are eligible to become earned at the end of the performance period after the attainment of the performance level has been certified by the compensation committee, no later than June 30, 2021, assuming the minimum performance metrics are achieved. The target PSUs that become earned PSUs during the performance period will be determined in accordance with the following table: Return on Assets at Performance Period End Date Percentage of Target PSUs Earned Less than 9.6% 0% 9.6% 50% 12% 100% 14.4% 175% Compensation expense related to the PSUs is determined by multiplying the number of shares of Class A Common Stock underlying such awards that, based on the Company’s estimate, are probable to vest, by the measurement-date (i.e., the last day of each reporting period date) fair value and recognized using the straight line attribution method. The Company recognized compensation expense of $0.2 million related to the PSUs for the three months ended March 31, 2018. During March 2018, the Company issued a total of 246,023 PSUs to certain of our employees. As of March 31, 2018, the fair value of outstanding PSUs issued during the first quarter 2018 was $3.1 million. The unrecognized compensation cost related to our unvested PSUs is estimated to be $2.9 million and is expected to be recognized over a weighted-average period of 2.8 years as of March 31, 2018. |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 3 Months Ended |
Mar. 31, 2018 | |
FAIR VALUE MEASUREMENT | |
FAIR VALUE MEASUREMENT | NOTE 11—FAIR VALUE MEASUREMENT The Company utilizes fair value measurements to measure assets and liabilities in a business combination or assess impairment of property and equipment, intangible assets and goodwill. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. ASC 820 establishes a three‑level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: Level 1 —Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in non‑active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 —Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the three months ended March 31, 2018 or the year ended December 31, 2017. Other fair value considerations The carrying values of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value at March 31, 2018 and December 31, 2017 due to the short‑term maturity of these instruments. The carrying value of debt as of March 31, 2018 and December 31, 2017 approximates fair value due to variable market rates of interest. The fair value of debt at March 31, 2018 and December 31, 2017, which is a Level 3 measurement, is estimated based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices are not available. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. The consideration transferred and the purchase price allocation of identified assets acquired and liabilities assumed related to the Rockwater Merger, GRR Acquisition and Resource Water Acquisition are based on the Company’s estimate of fair value utilizing Level 3 inputs at the date of acquisition. Refer to Note 3 – Acquisitions for further discussion. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2018 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 12—RELATED PARTY TRANSACTIONS The Company considers its related parties to be those stockholders who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons. The Company has entered into a significant number of transactions with related parties. In accordance with the Company’s related persons transactions policy, the Company’s board of directors regularly reviews these transactions; however, the Company’s results of operations may have been different if these transactions were conducted with non‑related parties. During the three months ended March 31, 2018, sales to related parties were $2.8 million and purchases from related party vendors were $3.5 million. These purchases comprised of $1.6 million relating to purchases of property and equipment, $0.2 million relating to inventory and consumables, $1.3 million relating to rent of certain equipment or other services used in operations and $0.4 million relating to management, consulting and other services. During the three months ended March 31, 2017, sales to related parties were $0.5 million and purchases from related party vendors were $1.2 million. These purchases comprised of $0.2 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.4 million relating to rent of certain equipment or other services used in operations, and $0.5 million relating to management, consulting and other services. Tax receivable agreements In connection with the Select 144A Offering, the Company entered into the Tax Receivable Agreements with the TRA Holders. The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview Partners II GP, L.P. (“Crestview GP”), generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the Select 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings LLC Units in connection with the Select 144A Offering or pursuant to the exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under such Tax Receivable Agreement. The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of the Contributing Legacy Owners and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the Select 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the Select 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement. On July 18, 2017, the Company’s board of directors approved amendments to each of the Tax Receivable Agreements revising the definition of a “change of control” for purposes of the Tax Receivable Agreements and acknowledging that the Rockwater Merger would not result in such a change of control. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE 13—INCOME TAXES Select Inc. is subject to U.S. federal, foreign and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain US and foreign corporate subsidiaries, are treated as flow‑through entities for income tax purposes and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, prior to the reorganization in connection with the Select 144A Offering, SES Holdings only recorded a provision for Texas franchise tax and U.S. federal and state provisions for certain corporate subsidiaries as SES Holdings’ taxable income or loss was includable in the income tax returns of the individual partners and members. However, for periods following the reorganization in connection with the Select 144A Offering, Select Inc. recognizes a tax liability on its allocable share of SES Holdings’ taxable income. The Company’s effective tax rates for the three months ended March 31, 2018 and 2017 were 2.8% and (0.9)%, respectively. The effective tax rates for the three months ended March 31, 2018 and 2017 differ from the statutory rate of 21% and 35%, respectively, due to net income allocated to noncontrolling interests, state income taxes, and valuation allowances. The change in the effective tax rate is primarily due to positive pretax income in March 31, 2018 relative to a loss in the March 31, 2017 period. The Company recorded income tax expense of $0.5 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively. The Tax Cuts and Jobs Act (“the TCJA”), was enacted on December 22, 2017, and the Company recorded provisional estimates for the impacts of the TCJA in the December 31, 2017 period. Such amounts remain provisional and the Company has not made any material adjustments as of March 31, 2018. Staff Accounting Bulletin No. 118 provides the Company with one year from the date of enactment to finalize its accounting related to the TCJA. Certain provisions of the TCJA became effective beginning on January 1, 2018 and the Company has incorporated reasonable estimates of these provisions into its calculation of its effective annual tax rate and its tax expense for the period ending March 31, 2018. The Company’s reasonable estimates may be affected in the future as additional regulatory guidance is provided and the Company gains a more thorough understanding of the TCJA. |
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS | 3 Months Ended |
Mar. 31, 2018 | |
NONCONTROLLING INTERESTS. | |
NONCONTROLLING INTERESTS | NOTE 14—NONCONTROLLING INTERESTS The Company has ownership interests in multiple subsidiaries that are consolidated within the Company’s financial statements but are not wholly owned. During the three months ended March 31, 2018 and 2017, the Company entered into transactions that impacted its ownership interest in certain of these subsidiaries while maintaining control over such subsidiaries. As a result of the Company’s change in ownership interest in these subsidiaries, the Company reduced its noncontrolling interests and recognized an increase in equity related to transactions with holders of noncontrolling interests. The Company reports a noncontrolling interest representing the common units of SES Holdings held by Legacy Owner Holdco. Changes in Select Inc.’s ownership interest in SES Holdings while it retains its controlling interest are accounted for as equity transactions. The following table summarizes the effects of changes in noncontrolling interests on equity for the three months ended March 31, 2018 and 2017: For the three months ended March 31, 2018 2017 (in thousands) Net income (loss) attributable to Select Energy Services, Inc. $ 10,099 $ (4,172) Transfers from noncontrolling interests: Decrease in additional paid-in capital as a result of the contribution of net assets acquired to SES Holdings, LLC in exchange for common units — (3,002) Decrease in additional paid-in capital as a result of stock option exercises (49) — Increase in additional paid-in capital as a result of restricted stock issuance 1,424 — Increase in additional paid-in capital as a result of issuance of common stock due to vesting of restricted stock units 2 — Increase in additional paid-in capital as a result of the repurchase of common units of SES Holdings, LLC 42 — Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests $ 11,518 $ (7,174) |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE 15—EARNINGS (LOSS) PER SHARE Earnings per share are based on the amount of income allocated to the shareholders and the weighted‑average number of shares outstanding during the period for each class of common stock. Outstanding options to purchase 1,400,008 shares are not included in the calculation of diluted weighted-average shares outstanding for the three months ended March 31, 2018 as the effect is antidilutive. The following table presents the Company’s calculation of basic and diluted earnings per share for the three months ended March 31, 2018 and 2017 (dollars in thousands, except share and per share amounts): Three Months Ended March 31, 2018 Select Energy Services, Inc. Class A Class A-2 Class B Numerator: Net income $ 16,132 Net income attributable to noncontrolling interests (6,033) Net income attributable to Select Energy Services, Inc. — basic 10,099 $ 9,097 $ 1,002 $ — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock 10 11 (1) — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options 25 29 (4) — Net income attributable to Select Energy Services, Inc. — diluted $ 10,134 $ 9,137 $ 997 $ — Denominator: Weighted-average shares of common stock outstanding — basic 59,064,958 6,507,445 40,331,989 Dilutive effect of restricted stock 165,402 - - Dilutive effect of stock options 443,106 - - Weighted-average shares of common stock outstanding — diluted 59,673,466 6,507,445 40,331,989 Earnings per share: Basic $ 0.15 $ 0.15 $ - Diluted $ 0.15 $ 0.15 $ - Three Months Ended March 31, 2017 Select Energy Services, Inc. Class A Class A-2 Class B Numerator: Net loss $ (12,280) Net loss attributable to noncontrolling interests 8,108 Net loss attributable to Select Energy Services, Inc. — basic & diluted $ (4,172) $ (809) $ (3,363) $ - Denominator: Weighted-average shares of common stock outstanding — basic & diluted 3,870,194 16,100,000 38,462,541 Earnings per share: Basic & diluted $ (0.21) $ (0.21) $ - |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2018 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | NOTE 16—SEGMENT INFORMATION Select Inc. is an oilfield services company that provides solutions to the North American onshore oil and natural gas industry. The Company’s services are offered through three operating segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker assesses performance and allocates resources on the basis of the three reportable segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. Each operating segment reflects a reportable segment led by separate managers that report directly to the Company’s CODM. As a result of the Rockwater Merger, during the fourth quarter 2017, the Company reorganized its reporting structure and aligned its segments and underlying businesses to execute on the strategies of the combined company. The Company’s revised operating and reportable segments are Water Solutions, Oilfield Chemicals and Wellsite Services. Accordingly, prior period segment information has been retrospectively revised as of and for the quarter ended March 31, 2017. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. The Company’s CODM assesses performance and allocates resources on the basis of the following three reportable segments: Water Solutions —The Water Solutions segment provides water‑related services to customers that include major integrated oil companies and independent oil and natural gas producers. These services include: the sourcing of water; the transfer of the water to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off‑ and on‑location; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids. Oilfield Chemicals — The Oilfield Chemicals segment develops, manufactures and provides a full suite of chemicals utilized in hydraulic fracturing, stimulation, cementing and well completions, including polymer slurries, crosslinkers, friction reducers, buffers, breakers and other chemical technologies, to leading pressure pumping service companies in the United States. Wellsite Services —The Wellsite Completion and Construction Services segment provides oil and natural gas operators with a variety of services, including provision of workforce accommodations and surface rental equipment, crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well or to otherwise facilitate other services performed on a well. Financial information by segment for the three months ended March 31, 2018 and 2017 is as follows: For the three months ended March 31, 2018 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 257,532 $ 28,203 $ 21,243 $ 23,894 Oilfield chemicals 63,630 931 2,915 2,255 Wellsite services 55,722 (705) 6,724 4,957 Eliminations (489) — — — Income from operations 28,429 Corporate — (9,826) 541 — Interest expense, net — (1,151) — — Other expense, net — (858) — — $ 376,395 $ 16,594 $ 31,423 $ 31,106 For the three months ended March 31, 2017 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 78,765 $ (7,672) $ 17,548 $ 11,955 Oilfield chemicals — — — — Wellsite services 21,810 (2,651) 3,656 2,055 Eliminations (650) — — — Loss from operations (10,323) Corporate — (2,185) 446 — Interest expense, net — (730) — — Other income, net — 1,064 — — $ 99,925 $ (12,174) $ 21,650 $ 14,010 Total assets by segment as of March 31, 2018 and December 31, 2017 is as follows: As of As of March 31, 2018 December 31, 2017 (in thousands) Water solutions $ 1,045,321 $ 994,159 Oilfield chemicals 172,900 186,333 Wellsite services 145,016 151,272 Corporate 27,772 24,604 $ 1,391,009 $ 1,356,368 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 17—SUBSEQUENT EVENTS The Company has evaluated subsequent events for potential recognition and/or disclosure through May 11, 2018, the date these consolidated financial statements were available to be issued. |
SIGNIFICANT ACCOUNTING POLICI26
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Use of estimates | Use of estimates : The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. |
Change in depreciable lives of property and equipment | Change in depreciable lives of property and equipment: In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review indicated that the economic lives of the assets were longer than the historic asset lives previously used by Select Inc. As a result, effective January 1, 2018, the Company changed its estimates of the useful lives of certain assets included in vehicles & equipment and machinery & equipment to better reflect the estimated periods during which these assets will remain in service. The average estimated useful lives of the assets impacted in vehicles and equipment category increased from 6.0 to 8.1 years while the average estimated useful lives of assets impacted in machinery & equipment increased from 5.5 years to 6.9 years. The change in the estimated useful lives of fixed assets is change implemented on a prospective basis and does not require restatement of previously reported depreciation and amortization. The effect of this change in accounting estimates was to reduce depreciation and amortization expense by $4.7 million, increase net income by $4.7 million and increase basic and diluted earnings per share by $0.04 each attributable to Class A and Class A-2 stockholders. |
Emerging Growth Company Status | Emerging Growth Company status: Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), the Company is an “emerging growth company,” or an “EGC,” which allows the Company to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company intends to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase‑in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. The Company’s election to use the phase‑in periods permitted by this election may make it difficult to compare the Company’s financial statements to those of non‑emerging growth companies and other emerging growth companies that have opted out of the longer phase‑in periods under Section 107 of the JOBS Act and who will comply with new or revised financial accounting standards. If the Company was to subsequently elect to immediately comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. The Company will remain an emerging growth company until, at the latest, December 31, 2022, the last day of the fiscal year following the fifth anniversary of our IPO, although we will lose that status sooner if we have $1.07 billion or more in revenues in a fiscal year, have more than $700 million in market value of our common stock held by non-affiliates as of any June 30 or issue more than $1.0 billion of non-convertible debt over a rolling three-year period. |
Recent accounting pronouncements: | Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) on a comprehensive new revenue recognition standard that will supersede Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASU 2014-09, Revenue from Contracts with Customers, creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. In accordance with the JOBS Act, the Company is afforded the extended transition period and therefore is not required to adopt the ASU until January 1, 2019. The Company has assembled a team to scope the project, identify relevant revenue streams and understand the revenue recognition implications of the new guidance. The Company is currently evaluating whether the adoption of the ASU will have a material impact on its consolidated financial statements and related disclosures, and internal controls over financial reporting, and the Company has not yet determined the method by which it will adopt the standard. In February 2016, the FASB issued ASU 2016-02, Leases , which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, using a modified retrospective approach. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which is intended to simplify several aspects of the accounting for share‑based payment award transactions. ASU 2016-09 was effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement was effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. Certain amendments in this update should be applied prospectively, while other amendments in the update should be applied retrospectively, with early adoption permitted in any interim or annual period. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies and distributions received from equity method investees. ASU 2016-15 was effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied using a retrospective approach. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01 , Clarifying the Definition of a Business , with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This update was effective for fiscal years and interim periods within fiscal years beginning after December 15, 2017. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied prospectively. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment . This pronouncement removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This update is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021. The amendments in this ASU should be applied prospectively. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting . This pronouncement provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. This update was effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. As an EGC utilizing the extended transition period for new accounting pronouncements, this pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The pronouncement should be applied prospectively to an award modified on or after the adoption date. This ASU became effective for the Company in 2018, and the adoption of this guidance did not materially affect its consolidated financial statements and related disclosures. In January 2018, the FASB issued ASU 2018-01, Land Easements . The amendments in this update permit an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity’s adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. The Company is currently evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. |
ACQUISITION (Tables)
ACQUISITION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Rockwater Merger | |
Schedule Of consideration transferred and the estimated fair value of identified assets acquired and liabilities | Preliminary purchase price allocation Amount Consideration transferred (in thousands) Class A Common Stock (25,914,260 shares) $ 423,957 Class A-2 Common Stock (6,731,845 shares) 110,133 Class B Common Stock (4,356,477 shares) and SES Holdings common units issued (4,356,477 units) 71,272 Fair value of previously held interest in Rockwater 2,310 Fair value of Rockwater share-based awards attributed to pre-acquisition service 12,529 Total consideration transferred 620,201 Less: identifiable assets acquired and liabilities assumed Working capital (1) 144,509 Property and equipment 185,601 Intangible assets Customer relationships 89,007 Trademarks and patents 31,215 Non-compete agreements 3,810 Other long-term assets 62 Deferred tax liabilities (408) Long-term debt (80,555) Other long-term liabilities (2,650) Total identifiable net assets acquired 370,591 Goodwill 249,610 Fair value allocated to net assets acquired $ 620,201 (1) During the three months ended March 31, 2018, the Company obtained additional information related to the working capital which led to a decrease of $2.4 million. The impact of this change resulted in a corresponding increase of $2.4 million in goodwill. |
Resource Water Acquisition | |
Schedule Of consideration transferred and the estimated fair value of identified assets acquired and liabilities | Purchase price allocation Amount Consideration transferred (in thousands) Cash paid $ 6,586 Class A Common Stock (156,909 shares) 2,380 Total consideration transferred 8,966 Less: identifiable assets acquired and liabilities assumed Working capital 1,189 Fixed assets 3,485 Customer relationship intangible assets 1,933 Other intangible assets 465 Total identifiable net assets acquired 7,072 Goodwill 1,894 Fair value allocated to net assets acquired $ 8,966 |
GRR Acquisition | |
Schedule Of consideration transferred and the estimated fair value of identified assets acquired and liabilities | Purchase price allocation Amount Consideration transferred (in thousands) Cash paid $ 53,032 Class A Common Stock (274,998 shares) 5,500 Assumed liabilities 1,106 Total consideration transferred 59,638 Less: identifiable assets acquired and liabilities assumed Working capital 7,728 Fixed assets 13,225 Customer relationship intangible assets 21,484 Other intangible assets 5,152 Total identifiable net assets acquired 47,589 Goodwill 12,049 Fair value allocated to net assets acquired $ 59,638 |
Schedule of unaudited consolidated pro forma information | Pro Forma Three Months Ended March 31, 2017 (unaudited) (in thousands) Revenue $ 229,235 Net loss (24,144) Less: net loss attributable to noncontrolling interests (1) 9,784 Net loss attributable to Select Energy Services, Inc. (1) $ (14,360) (1) The allocation of net loss attributable to noncontrolling interests and Select Inc. gives effect to the equity structure as of March 31, 2017 as though the Select 144A Offering, the IPO, the Rockwater Merger, the Resource Water Acquisition and the GRR Acquisition occurred as of January 1, 2016. However, the calculation of pro forma net loss does not give effect to any other pro forma adjustments for the Select 144A Offering or the subsequent IPO. |
EXIT AND DISPOSAL ACTIVITIES (T
EXIT AND DISPOSAL ACTIVITIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
EXIT AND DISPOSAL ACTIVITIES | |
Summary of exit and disposal activities | Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2017 March 31, 2018 March 31, 2018 March 31, 2018 (in thousands) Lease obligations and terminations $ 21,350 $ 871 $ 1,838 $ 20,383 Reclassification of deferred rent 1,254 1,254 Total $ 22,604 $ 21,637 Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2016 March 31, 2017 March 31, 2017 March 31, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 1,863 $ 712 $ 19,151 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 20,405 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
INVENTORIES | |
Schedule of inventory | March 31, 2018 December 31, 2017 (in thousands) Raw materials $ 11,951 $ 11,462 Finished goods 29,955 29,674 Materials and supplies 2,861 3,462 44,767 44,598 Inventory reserve (266) — $ 44,501 $ 44,598 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | March 31, 2018 December 31, 2017 (in thousands) Land $ 15,315 $ 15,286 Buildings and leasehold improvements 98,589 99,222 Vehicles and equipment 67,900 70,537 Vehicles and equipment - capital lease 2,757 2,810 Machinery and equipment 720,970 716,420 Machinery and equipment - capital lease 545 544 Computer equipment and software 12,534 12,466 Computer equipment and software - capital lease 356 356 Office furniture and equipment 4,320 4,320 Disposal wells 67,168 67,805 Other 497 497 Construction in progress 61,019 44,732 1,051,970 1,034,995 Less accumulated depreciation and impairment (578,220) (560,886) Total property and equipment, net $ 473,750 $ 474,109 |
GOODWILL AND OTHER INTANGIBLE31
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS. | |
Schedule of changes in the carrying amounts of goodwill by reportable segment | Water Oilfield Wellsite Solutions Chemicals Services Total (in thousands) Balance as of December 31, 2016 $ — $ — $ 12,242 $ 12,242 Additions 245,542 15,637 — 261,179 Balance as of December 31, 2017 245,542 15,637 12,242 273,421 Measurement period adjustment 1,765 609 — 2,374 Balance as of March 31, 2018 $ 247,307 $ 16,246 $ 12,242 $ 275,795 |
Summary of components of other intangible assets | As of March 31, 2018 As of December 31, 2017 Gross Accumulated Net Gross Accumulated Net Value Amortization Value Value Amortization Value (in thousands) (in thousands) Customer relationships $ 169,250 $ 61,008 $ 108,242 $ 169,250 $ 57,836 $ 111,414 Patents and trademarks 33,544 644 32,900 33,544 414 33,130 Other 14,704 3,631 11,073 14,704 3,182 11,522 Total other intangible assets $ 217,498 $ 65,283 $ 152,215 $ 217,498 $ 61,432 $ 156,066 |
Summary of future estimated amortization expense for other intangible assets | Amount (in thousands) Remainder of 2018 $ 9,185 2019 11,595 2020 11,301 2021 10,118 2022 9,904 Thereafter 71,396 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
DEBT | |
Summary of Company’s leverage ratio | Level Average Excess Availability Base Rate Margin Eurocurrency Rate Margin I < 33% of the commitments II < 66.67% of the commitments and ≥ 33.33% of the commitments III ≥ 66.67% of the commitments |
Schedule of fee Percentage on unused credit facility | Level Average Revolver Usage Unused Line Fee Percentage I ≥ 50% of the commitments II < 50% of the commitments |
EQUITY_BASED COMPENSATION (Tabl
EQUITY‑BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of assumptions used in determining the fair value of certain equity options | Assumptions Underlying equity $ 20.50 Strike price $ 20.50 - 30.75 Dividend yield (%) % Risk free rate (%) 2.3 % Volatility (%) 50.0 % Expected term (years) |
Schedule of equity option activity and related information | For the three months ended March 31, 2018 Weighted-average Stock Options Exercise Price Beginning balance, outstanding 3,495,935 $ 14.12 Granted 584,846 26.02 Exercised (19,398) 6.70 Forfeited (13,659) 16.84 Ending balance, outstanding 4,047,724 $ 15.86 Ending balance, exercisable 566,829 $ 8.46 Non-vested at end of period 1,097,790 $ 19.20 |
Restricted Stock | |
Schedule of restricted stock activity | For the three months ended March 31, 2018 Weighted-average Restricted Stock Awards Grant Date Fair Value Non-vested at December 31, 2017 299,801 $ 16.36 Granted 331,389 20.87 Vested (33,429) 16.36 Forfeited (18,640) 16.36 Non-vested at March 31, 2018 579,121 $ 18.94 |
Restricted Stock Units | |
Schedule of restricted stock activity | For the three months ended March 31, 2018 Weighted-average Restricted Stock Units Grant Date Fair Value Non-vested at December 31, 2017 30,360 $ 19.88 Granted — — Vested (27,235) 20.00 Non-vested at March 31, 2018 3,125 $ 18.80 |
Performance share units | |
Schedule of percentage of target PSUs earned | Return on Assets at Performance Period End Date Percentage of Target PSUs Earned Less than 9.6% 0% 9.6% 50% 12% 100% 14.4% 175% |
NONCONTROLLING INTERESTS (Table
NONCONTROLLING INTERESTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
NONCONTROLLING INTERESTS. | |
Summary of the effects of changes in noncontrolling interests | For the three months ended March 31, 2018 2017 (in thousands) Net income (loss) attributable to Select Energy Services, Inc. $ 10,099 $ (4,172) Transfers from noncontrolling interests: Decrease in additional paid-in capital as a result of the contribution of net assets acquired to SES Holdings, LLC in exchange for common units — (3,002) Decrease in additional paid-in capital as a result of stock option exercises (49) — Increase in additional paid-in capital as a result of restricted stock issuance 1,424 — Increase in additional paid-in capital as a result of issuance of common stock due to vesting of restricted stock units 2 — Increase in additional paid-in capital as a result of the repurchase of common units of SES Holdings, LLC 42 — Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests $ 11,518 $ (7,174) |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | |
Summary of calculation of basic and diluted earnings per share | Three Months Ended March 31, 2018 Select Energy Services, Inc. Class A Class A-2 Class B Numerator: Net income $ 16,132 Net income attributable to noncontrolling interests (6,033) Net income attributable to Select Energy Services, Inc. — basic 10,099 $ 9,097 $ 1,002 $ — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock 10 11 (1) — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options 25 29 (4) — Net income attributable to Select Energy Services, Inc. — diluted $ 10,134 $ 9,137 $ 997 $ — Denominator: Weighted-average shares of common stock outstanding — basic 59,064,958 6,507,445 40,331,989 Dilutive effect of restricted stock 165,402 - - Dilutive effect of stock options 443,106 - - Weighted-average shares of common stock outstanding — diluted 59,673,466 6,507,445 40,331,989 Earnings per share: Basic $ 0.15 $ 0.15 $ - Diluted $ 0.15 $ 0.15 $ - Three Months Ended March 31, 2017 Select Energy Services, Inc. Class A Class A-2 Class B Numerator: Net loss $ (12,280) Net loss attributable to noncontrolling interests 8,108 Net loss attributable to Select Energy Services, Inc. — basic & diluted $ (4,172) $ (809) $ (3,363) $ - Denominator: Weighted-average shares of common stock outstanding — basic & diluted 3,870,194 16,100,000 38,462,541 Earnings per share: Basic & diluted $ (0.21) $ (0.21) $ - |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
SEGMENT INFORMATION | |
Summary of financial information by segment | For the three months ended March 31, 2018 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 257,532 $ 28,203 $ 21,243 $ 23,894 Oilfield chemicals 63,630 931 2,915 2,255 Wellsite services 55,722 (705) 6,724 4,957 Eliminations (489) — — — Income from operations 28,429 Corporate — (9,826) 541 — Interest expense, net — (1,151) — — Other expense, net — (858) — — $ 376,395 $ 16,594 $ 31,423 $ 31,106 For the three months ended March 31, 2017 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 78,765 $ (7,672) $ 17,548 $ 11,955 Oilfield chemicals — — — — Wellsite services 21,810 (2,651) 3,656 2,055 Eliminations (650) — — — Loss from operations (10,323) Corporate — (2,185) 446 — Interest expense, net — (730) — — Other income, net — 1,064 — — $ 99,925 $ (12,174) $ 21,650 $ 14,010 Total assets by segment as of March 31, 2018 and December 31, 2017 is as follows: As of As of March 31, 2018 December 31, 2017 (in thousands) Water solutions $ 1,045,321 $ 994,159 Oilfield chemicals 172,900 186,333 Wellsite services 145,016 151,272 Corporate 27,772 24,604 $ 1,391,009 $ 1,356,368 |
BUSINESS AND BASIS OF PRESENT37
BUSINESS AND BASIS OF PRESENTATION (Details) | Jan. 12, 2018shares | Nov. 01, 2017USD ($)shares | May 10, 2017$ / sharesshares | May 05, 2017USD ($) | Apr. 26, 2017$ / sharesshares | Dec. 20, 2016USD ($)$ / sharesshares | May 31, 2017USD ($) | Mar. 31, 2018USD ($)segment$ / sharesshares | Dec. 31, 2017$ / sharesshares | Jun. 13, 2017shares | Dec. 31, 2016shares |
Share price | $ / shares | $ 20.50 | ||||||||||
Net proceeds from the IPO | $ | $ 128,500,000 | $ 130,000 | |||||||||
Payments on long-term debt | $ | $ 34,000,000 | ||||||||||
Settlement of phantom units | $ | $ 7,800,000 | ||||||||||
Common stock issued | 40,331,989 | 40,331,989 | |||||||||
Number of shares outstanding | 40,331,989 | 40,331,989 | |||||||||
Number of tax receivable agreements | $ | $ 2 | ||||||||||
Equity method investment | $ | $ 0 | ||||||||||
Number of operating segments | segment | 3 | ||||||||||
Number of reportable segments | segment | 3 | ||||||||||
Fair value of cost method investee | $ | $ 500,000 | ||||||||||
Impairment of investment | $ | $ 2,000,000 | ||||||||||
Revolving line of credit | |||||||||||
Maximum borrowing capacity | $ | $ 300,000,000 | $ 300,000,000 | |||||||||
Predecessor | |||||||||||
Ratio | 10.3583 | ||||||||||
Common units issued | 16,100,000 | ||||||||||
Class A-1 Common Stock | |||||||||||
Par value | $ / shares | $ 0.01 | ||||||||||
Conversion rate per share | 1 | ||||||||||
Class A-1 Common Stock | Private Placement | |||||||||||
Shares issued | 16,100,000 | ||||||||||
Share price | $ / shares | $ 20 | ||||||||||
Conversion rate per share | 1 | ||||||||||
Class A Common Stock | |||||||||||
Shares issued | 27,235 | ||||||||||
Par value | $ / shares | $ 0.01 | $ 0.01 | |||||||||
Common stock issued | 66,258,163 | 59,182,176 | |||||||||
Number of shares outstanding | 66,258,163 | 59,182,176 | |||||||||
Class A Common Stock | IPO | |||||||||||
Shares issued | 8,700,000 | ||||||||||
Share price | $ / shares | $ 14 | ||||||||||
Class A Common Stock | Over-allotment option | |||||||||||
Shares issued | 1,305,000 | ||||||||||
Share price | $ / shares | $ 14 | ||||||||||
Class A-2 Common Stock | |||||||||||
Par value | $ / shares | $ 0.01 | $ 0.01 | |||||||||
Common stock issued | 0 | 6,731,845 | |||||||||
Number of shares outstanding | 0 | 6,731,845 | |||||||||
Class B Common Stock | |||||||||||
Par value | $ / shares | $ 0.01 | $ 0.01 | |||||||||
Common stock issued | 40,331,989 | ||||||||||
Number of shares outstanding | 40,331,989 | ||||||||||
Legacy Owner Holdco | Class B Common Stock | Private Placement | |||||||||||
Common units issued | 38,462,541 | ||||||||||
Contributing Legacy Owners | Class A Common Stock | Predecessor | |||||||||||
Common units issued | 3,802,972 | ||||||||||
Common stock issued | 3,802,972 | ||||||||||
Rockwater Merger | Class A Common Stock | |||||||||||
Shares issued | 25,900,000 | ||||||||||
Number of shares resold | 25,914,260 | ||||||||||
Rockwater Merger | Class A-2 Common Stock | |||||||||||
Shares issued | 6,700,000 | ||||||||||
Number of shares resold | 6,653,777 | 6,731,845 | |||||||||
Rockwater Merger | Class B Common Stock | |||||||||||
Shares issued | 4,400,000 | ||||||||||
Number of shares resold | 4,356,477 | ||||||||||
Rockwater Merger | SES Holdings | |||||||||||
Common units issued | 37,300,000 | ||||||||||
Number of shares resold | 4,356,477 |
SIGNIFICANT ACCOUNTING POLICI38
SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 01, 2018 | Jan. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 |
PROPERTY AND EQUIPMENT | |||||
Reduction in depreciation and amortization expense | $ (541) | $ (446) | |||
Net income | 10,099 | (4,172) | |||
Class A Common Stock | |||||
PROPERTY AND EQUIPMENT | |||||
Net income | $ 9,097 | $ (809) | |||
Basic & Diluted | $ (0.21) | ||||
Change in depreciable lives of property and equipment | |||||
PROPERTY AND EQUIPMENT | |||||
Reduction in depreciation and amortization expense | $ 4,700 | ||||
Net income | $ 4,700 | ||||
Basic & Diluted | $ 0.04 | ||||
Change in depreciable lives of property and equipment | Vehicles and equipment | |||||
PROPERTY AND EQUIPMENT | |||||
Estimated useful lives of the assets | 8 years 1 month 6 days | 6 years | |||
Change in depreciable lives of property and equipment | Machinery and equipment | |||||
PROPERTY AND EQUIPMENT | |||||
Estimated useful lives of the assets | 6 years 10 months 24 days | 5 years 6 months |
ACQUISITIONS - Rockwater Merger
ACQUISITIONS - Rockwater Merger (Details) - USD ($) $ in Thousands | Jan. 12, 2018 | Nov. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Less: identified assets acquired and liabilities assumed | |||||
Goodwill | $ 275,795 | $ 273,421 | $ 12,242 | ||
SES Holdings | |||||
Business Acquisition [Line Items] | |||||
Gain on remeasurement of investment | 1,200 | ||||
Water Solutions | |||||
Less: identified assets acquired and liabilities assumed | |||||
Goodwill | 247,307 | 245,542 | |||
Oilfield Chemicals | |||||
Less: identified assets acquired and liabilities assumed | |||||
Goodwill | 16,246 | $ 15,637 | |||
Rockwater Merger | |||||
Business Acquisition [Line Items] | |||||
Transaction-related costs | $ 2,300 | ||||
Fair value accounts receivable | $ 196,900 | ||||
Accounts receivable gross contractual amount | 199,100 | ||||
Uncollectible amount | 2,200 | ||||
Consideration transferred | |||||
Fair value of previously held interest in Rockwater | 2,310 | ||||
Fair value of Rockwater share-based awards attributed to pre-acquisition service | 12,529 | ||||
Total consideration transferred | 620,201 | ||||
Less: identified assets acquired and liabilities assumed | |||||
Working capital | 144,509 | ||||
Property and equipment | 185,601 | ||||
Other long-term assets | 62 | ||||
Deferred tax liabilities | (408) | ||||
Long-term debt | (80,555) | ||||
Other long-term liabilities | (2,650) | ||||
Total identifiable net assets acquired | 370,591 | ||||
Goodwill | 249,610 | ||||
Fair value allocated to net assets acquired | 620,201 | ||||
Decrease in working capital | 2,400 | ||||
Increase in goodwill | $ 2,400 | ||||
Rockwater Merger | SES Holdings | |||||
Less: identified assets acquired and liabilities assumed | |||||
Shares issued in Merger Agreement | 4,356,477 | ||||
Rockwater Merger | Customer relationships | |||||
Less: identified assets acquired and liabilities assumed | |||||
Intangible assets | $ 89,007 | ||||
Rockwater Merger | Trademarks and patents | |||||
Less: identified assets acquired and liabilities assumed | |||||
Intangible assets | 31,215 | ||||
Rockwater Merger | Noncompete agreements | |||||
Less: identified assets acquired and liabilities assumed | |||||
Intangible assets | 3,810 | ||||
Rockwater Merger | Water Solutions | |||||
Less: identified assets acquired and liabilities assumed | |||||
Goodwill | 233,400 | ||||
Rockwater Merger | Oilfield Chemicals | |||||
Less: identified assets acquired and liabilities assumed | |||||
Goodwill | 16,200 | ||||
Class A Common Stock | Rockwater Merger | |||||
Consideration transferred | |||||
Common stock issued | $ 423,957 | ||||
Less: identified assets acquired and liabilities assumed | |||||
Shares issued in Merger Agreement | 25,914,260 | ||||
Class A-2 Common Stock | Rockwater Merger | |||||
Consideration transferred | |||||
Common stock issued | $ 110,133 | ||||
Less: identified assets acquired and liabilities assumed | |||||
Shares issued in Merger Agreement | 6,653,777 | 6,731,845 | |||
Class B Common Stock | Rockwater Merger | |||||
Consideration transferred | |||||
Common stock issued | $ 71,272 | ||||
Less: identified assets acquired and liabilities assumed | |||||
Shares issued in Merger Agreement | 4,356,477 |
ACQUISITIONS - Resource Water A
ACQUISITIONS - Resource Water Acquisition (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 15, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
ACQUISITION | ||||
Goodwill | $ 275,795 | $ 273,421 | $ 12,242 | |
Resource Water Acquisition | ||||
ACQUISITION | ||||
Miles of layflat hose | 24 | |||
Total consideration paid | $ 8,966 | |||
Cash paid | $ 6,586 | |||
Class A Common stock issued, Share Price | $ 15.17 | |||
Cash on hand | $ 6,600 | |||
Goodwill | 1,894 | |||
Resource Water Acquisition | Class A Common Stock | ||||
ACQUISITION | ||||
Common stock issued | $ 2,380 |
ACQUISITIONS - Resource Water41
ACQUISITIONS - Resource Water Acquisition - Purchase price allocation (Details) - USD ($) $ in Thousands | Sep. 15, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Less: identified assets acquired and liabilities assumed | ||||
Goodwill | $ 275,795 | $ 273,421 | $ 12,242 | |
Resource Water Acquisition | ||||
Consideration transferred | ||||
Cash paid | $ 6,586 | |||
Total consideration transferred | 8,966 | |||
Less: identified assets acquired and liabilities assumed | ||||
Working capital | 1,189 | |||
Fixed assets | 3,485 | |||
Total identifiable net assets acquired | 7,072 | |||
Goodwill | 1,894 | |||
Fair value allocated to net assets acquired | 8,966 | |||
Resource Water Acquisition | Class A Common Stock | ||||
Consideration transferred | ||||
Common stock issued | $ 2,380 | |||
Less: identified assets acquired and liabilities assumed | ||||
Shares issued in Merger Agreement | 156,909 | |||
Resource Water Acquisition | Customer relationships | ||||
Less: identified assets acquired and liabilities assumed | ||||
Intangible assets | $ 1,933 | |||
Resource Water Acquisition | Other | ||||
Less: identified assets acquired and liabilities assumed | ||||
Intangible assets | $ 465 |
ACQUISITIONS - GRR Acquisition
ACQUISITIONS - GRR Acquisition (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 10, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
ACQUISITION | ||||
Goodwill | $ 275,795 | $ 273,421 | $ 12,242 | |
GRR Acquisition | ||||
ACQUISITION | ||||
Miles of layflat hose | 1,200 | |||
Cash paid | $ 53,032 | |||
Class A Common Stock (274,998 shares) | 5,500 | |||
Total consideration paid | 59,638 | |||
Goodwill | $ 12,049 | |||
Class A Common stock issued, Share Price | $ 20 | |||
Cash on hand | $ 19,000 | |||
Proceeds from credit facility | $ 34,000 | |||
Transaction cost | $ 700 |
ACQUISITIONS - GRR Acquisitio43
ACQUISITIONS - GRR Acquisition - Purchase price allocation (Details) - USD ($) $ in Thousands | Mar. 10, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Less: identified assets acquired and liabilities assumed | ||||
Goodwill | $ 275,795 | $ 273,421 | $ 12,242 | |
GRR Acquisition | ||||
Consideration transferred | ||||
Cash paid | $ 53,032 | |||
Class A Common Stock (274,998 shares) | 5,500 | |||
Assumed liabilities | 1,106 | |||
Total consideration transferred | 59,638 | |||
Less: identified assets acquired and liabilities assumed | ||||
Working capital | 7,728 | |||
Fixed assets | 13,225 | |||
Total identifiable net assets acquired | 47,589 | |||
Goodwill | 12,049 | |||
Fair value allocated to net assets acquired | $ 59,638 | |||
Shares issued in Merger Agreement | 274,998 | |||
GRR Acquisition | Customer relationships | ||||
Less: identified assets acquired and liabilities assumed | ||||
Intangible assets | $ 21,484 | |||
GRR Acquisition | Other | ||||
Less: identified assets acquired and liabilities assumed | ||||
Intangible assets | $ 5,152 |
ACQUISITIONS - Proforma (Detail
ACQUISITIONS - Proforma (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
ACQUISITION | |||
Revenue | $ 376,395 | $ 99,925 | |
Net income | 10,099 | $ (4,172) | |
Pro forma information | |||
Revenue | 229,235 | ||
Net loss | (24,144) | ||
Less: net loss attributable to noncontrolling interests | 9,784 | ||
Net loss attributable to Select Energy Services, Inc. | $ (14,360) | ||
GRR Acquisition | |||
ACQUISITION | |||
Revenue | $ 1,900 | ||
Net income | $ 300 |
ACQUISITIONS - Other Acquisitio
ACQUISITIONS - Other Acquisitions (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
ACQUISITION | |||
Goodwill | $ 275,795 | $ 273,421 | $ 12,242 |
EXIT AND DISPOSAL ACTIVITIES (D
EXIT AND DISPOSAL ACTIVITIES (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($)item | Dec. 31, 2017USD ($) | |
Exit and disposal activities | ||||
Number of facilities closed | item | 15 | |||
Charges related to exit and disposal activities | $ 900 | $ 1,900 | ||
Amount reclassed to accrued lease obligations | 200 | |||
Accrued expenses and other current liabilities | 91,400 | $ 81,112 | ||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 22,604 | 19,069 | ||
Restructuring Reserve, Ending Balance | 21,637 | 20,405 | $ 19,069 | |
Accrued Liabilities | ||||
Exit and disposal activities | ||||
Accrued expenses and other current liabilities | 3,300 | |||
Lease obligations and terminations | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 21,350 | 18,000 | ||
Provision for Restructuring | 871 | 1,863 | ||
Payments for Restructuring | 1,838 | 712 | ||
Restructuring Reserve, Ending Balance | 20,383 | 19,151 | 18,000 | |
Reclassifications of deferred rent | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 1,254 | 1,069 | ||
Restructuring Reserve, Ending Balance | $ 1,254 | $ 1,254 | $ 1,069 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Significant components of inventory | ||
Raw materials | $ 11,951 | $ 11,462 |
Finished goods | 29,955 | 29,674 |
Materials and supplies | 2,861 | 3,462 |
Inventory gross | 44,767 | 44,598 |
Inventory reserve | (266) | 0 |
Inventory net | $ 44,501 | $ 44,598 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Property and equipment | |||
Property and equipment | $ 1,051,970 | $ 1,034,995 | |
Accumulated depreciation | (578,220) | (560,886) | |
Property and equipment, net | 473,750 | 474,109 | |
Depreciation | $ 27,500 | $ 19,600 | |
Leases expiry period | 5 years | ||
Capital lease obligations | |||
Property and equipment | |||
Depreciation | $ 400 | ||
Capital lease obligations | $ 0 | ||
Land | |||
Property and equipment | |||
Property and equipment | 15,315 | 15,286 | |
Buildings and leasehold improvements | |||
Property and equipment | |||
Property and equipment | 98,589 | 99,222 | |
Vehicles and equipment | |||
Property and equipment | |||
Property and equipment | 67,900 | 70,537 | |
Vehicles and equipment | Capital lease obligations | |||
Property and equipment | |||
Property and equipment | 2,757 | 2,810 | |
Machinery and equipment | |||
Property and equipment | |||
Property and equipment | 720,970 | 716,420 | |
Machinery and equipment | Capital lease obligations | |||
Property and equipment | |||
Property and equipment | 545 | 544 | |
Computer equipment and software | |||
Property and equipment | |||
Property and equipment | 12,534 | 12,466 | |
Computer equipment and software | Capital lease obligations | |||
Property and equipment | |||
Property and equipment | 356 | 356 | |
Office furniture and equipment | |||
Property and equipment | |||
Property and equipment | 4,320 | 4,320 | |
Disposal wells | |||
Property and equipment | |||
Property and equipment | 67,168 | 67,805 | |
Other | |||
Property and equipment | |||
Property and equipment | 497 | 497 | |
Construction in progress | |||
Property and equipment | |||
Property and equipment | $ 61,019 | $ 44,732 |
GOODWILL AND OTHER INTANGIBLE49
GOODWILL AND OTHER INTANGIBLE ASSETS - GOODWILL (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Goodwill | ||
Balance at the beginning of the period | $ 273,421 | $ 12,242 |
Additions | 261,179 | |
Measurement period adjustment | 2,374 | |
Balance at the end of the period | 275,795 | 273,421 |
Water Solutions | ||
Goodwill | ||
Balance at the beginning of the period | 245,542 | |
Additions | 245,542 | |
Measurement period adjustment | 1,765 | |
Balance at the end of the period | 247,307 | 245,542 |
Oilfield Chemicals | ||
Goodwill | ||
Balance at the beginning of the period | 15,637 | |
Additions | 15,637 | |
Measurement period adjustment | 609 | |
Balance at the end of the period | 16,246 | 15,637 |
Wellsite Services | ||
Goodwill | ||
Balance at the beginning of the period | 12,242 | 12,242 |
Balance at the end of the period | $ 12,242 | $ 12,242 |
GOODWILL AND OTHER INTANGIBLE50
GOODWILL AND OTHER INTANGIBLE ASSETS - OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Other intangible assets | |||
Gross Value | $ 217,498 | $ 217,498 | |
Accumulated Amortization | 65,283 | 61,432 | |
Net Value | 152,215 | 156,066 | |
Amortization expense | 3,900 | $ 2,100 | |
Annual amortization of intangible assets | |||
Remainder of 2018 | 9,185 | ||
2,019 | 11,595 | ||
2,020 | 11,301 | ||
2,021 | 10,118 | ||
2,022 | 9,904 | ||
Thereafter | 71,396 | ||
Water rights | |||
Other intangible assets | |||
Intangible assets | 5,300 | 5,300 | |
Trademarks | |||
Other intangible assets | |||
Intangible assets | 23,400 | 23,400 | |
Customer relationships | |||
Other intangible assets | |||
Gross Value | 169,250 | 169,250 | |
Accumulated Amortization | 61,008 | 57,836 | |
Net Value | 108,242 | 111,414 | |
Trademarks and patents | |||
Other intangible assets | |||
Gross Value | 33,544 | 33,544 | |
Accumulated Amortization | 644 | 414 | |
Net Value | 32,900 | 33,130 | |
Other | |||
Other intangible assets | |||
Gross Value | 14,704 | 14,704 | |
Accumulated Amortization | 3,631 | 3,182 | |
Net Value | $ 11,073 | $ 11,522 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Nov. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 20, 2016 |
Base Rate Advances | Subsequent Event | |||||
DEBT | |||||
Margin (as a percent) | 0.75% | ||||
Average excess availability, less than 33% of the commitments | Base Rate Advances | |||||
DEBT | |||||
Variable interest rate (as a percent) | 1.00% | ||||
Average excess availability, less than 33% of the commitments | LIBOR | |||||
DEBT | |||||
Variable interest rate (as a percent) | 2.00% | ||||
Average excess availability, less than 66.67% of the commitments and more than or equal to 33.33% of the commitments | Base Rate Advances | |||||
DEBT | |||||
Variable interest rate (as a percent) | 0.75% | ||||
Average excess availability, less than 66.67% of the commitments and more than or equal to 33.33% of the commitments | LIBOR | |||||
DEBT | |||||
Variable interest rate (as a percent) | 1.75% | ||||
Average excess availability, more than or equal to 66.67% of the commitments | Base Rate Advances | |||||
DEBT | |||||
Variable interest rate (as a percent) | 0.50% | ||||
Average excess availability, more than or equal to 66.67% of the commitments | LIBOR | |||||
DEBT | |||||
Variable interest rate (as a percent) | 1.50% | ||||
Average excess availability more than or equal to fifty percent | |||||
DEBT | |||||
Unused line fee (as a percent) | 0.25% | ||||
Average excess availability less than fifty percent | |||||
DEBT | |||||
Unused line fee (as a percent) | 0.375% | ||||
Eligible unbilled receivables | |||||
DEBT | |||||
Borrowing base (as a percent) | 75.00% | ||||
Letter of credit | |||||
DEBT | |||||
Amount outstanding | $ 75 | ||||
Revolving line of credit | |||||
DEBT | |||||
Maximum borrowing capacity | $ 300 | $ 300 | |||
Revolving line of credit | Letter of credit | |||||
DEBT | |||||
Maximum borrowing capacity | $ 255.6 | $ 262.1 | |||
Senior secured credit facility | |||||
DEBT | |||||
Additional borrowing capacity | $ 150 | ||||
Time frame for increasing borrowing capacity | 3 years | ||||
Percentage of borrowing base allowed | 35.00% | ||||
Margin (as a percent) | 2.00% | ||||
Weighted average interest rate (as a percent) | 3.627% | 3.319% | |||
Reduction in borrowing capacity | $ 19.8 | $ 19.8 | |||
Unused portion of available borrowing | 160 | ||||
Debt issuance costs | $ 3.2 | $ 3.3 | |||
Senior secured credit facility | Minimum | |||||
DEBT | |||||
Percentage of borrowing base allowed | 30.00% | ||||
Variable interest rate (as a percent) | 1.50% | ||||
Senior secured credit facility | Maximum | |||||
DEBT | |||||
Variable interest rate (as a percent) | 2.00% | ||||
Senior secured credit facility | Base Rate Advances | Minimum | |||||
DEBT | |||||
Margin (as a percent) | 0.50% | ||||
Senior secured credit facility | Base Rate Advances | Maximum | |||||
DEBT | |||||
Margin (as a percent) | 1.00% | ||||
Senior secured credit facility | LIBOR | |||||
DEBT | |||||
Margin (as a percent) | 1.00% | ||||
Senior secured credit facility | LIBOR | Minimum | |||||
DEBT | |||||
Margin (as a percent) | 1.50% | ||||
Senior secured credit facility | LIBOR | Maximum | |||||
DEBT | |||||
Margin (as a percent) | 2.00% | ||||
Senior secured credit facility | LIBOR | Subsequent Event | |||||
DEBT | |||||
Margin (as a percent) | 1.75% | ||||
Senior secured credit facility | Federal Funds Rate | |||||
DEBT | |||||
Margin (as a percent) | 0.50% | ||||
Senior secured credit facility | Eligible billed receivables | |||||
DEBT | |||||
Borrowing base (as a percent) | 85.00% | ||||
Senior secured credit facility | Eligible inventory | |||||
DEBT | |||||
Borrowing base (as a percent) | 70.00% | ||||
Senior secured credit facility | Net recovery percentage | |||||
DEBT | |||||
Borrowing base (as a percent) | 85.00% | ||||
Senior secured credit facility | Criteria for distributions, scenario one | |||||
DEBT | |||||
Lookback period | 30 days | ||||
Percentage outstanding | 25.00% | ||||
Base amount | $ 37.5 | ||||
Senior secured credit facility | Criteria for distributions, scenario two | |||||
DEBT | |||||
Lookback period | 30 days | ||||
Percentage outstanding | 20.00% | ||||
Base amount | $ 30 | ||||
Fixed charge coverage ratio | 1.00% | ||||
Senior secured credit facility | Coverage Ratio Criteria | |||||
DEBT | |||||
Lookback period | 60 days | ||||
Percentage outstanding | 10.00% | ||||
Base amount | $ 15 | ||||
Fixed charge coverage ratio | 1.00% | ||||
Senior secured credit facility | Letter of credit | |||||
DEBT | |||||
Maximum borrowing capacity | $ 40 | ||||
Senior secured credit facility | Swingline loan | |||||
DEBT | |||||
Maximum borrowing capacity | $ 30 | ||||
Previous Credit Facility | |||||
DEBT | |||||
Maximum borrowing capacity | $ 100 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | 3 Months Ended |
Mar. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
Percentage of vehicles in which certain employees at some of the facilities altered emissions controls systems | 4.00% |
EQUITY BASED COMPENSATION (Deta
EQUITY BASED COMPENSATION (Details) - $ / shares | 3 Months Ended | ||
Mar. 31, 2018 | May 10, 2017 | Apr. 26, 2017 | |
EQUITY-BASED COMPENSATION | |||
Share Price | $ 20.50 | ||
Vesting period | 3 years | ||
Class A Common Stock | Over-allotment option | |||
EQUITY-BASED COMPENSATION | |||
Share Price | $ 14 | ||
Class A Common Stock | IPO | |||
EQUITY-BASED COMPENSATION | |||
Share Price | $ 14 | ||
2016 plan | Maximum | |||
EQUITY-BASED COMPENSATION | |||
Equity options term | 10 years | ||
2016 plan | Class A Common Stock | |||
EQUITY-BASED COMPENSATION | |||
Maximum number of shares | 5,400,400 | ||
Rockwater Equity Plan | Class A Common Stock | |||
EQUITY-BASED COMPENSATION | |||
Maximum number of shares | 1,011,087 | ||
Substitute Awards | 2016 plan | Class A Common Stock | |||
EQUITY-BASED COMPENSATION | |||
Maximum number of shares | 2,879,112 |
EQUITY BASED COMPENSATION - Ass
EQUITY BASED COMPENSATION - Assumptions (Details) | 3 Months Ended |
Mar. 31, 2018$ / sharesshares | |
EQUITY-BASED COMPENSATION | |
Weighted-average grant date fair value of equity options granted | $ 8.98 |
Assumptions for equity options granted: | |
Underlying Equity | $ 20.50 |
Dividend Yield (%) | 0.00% |
Risk free rate(%) | 2.30% |
Volatility (%) | 50.00% |
Expected Term (Years) | 10 years |
Vested (in shares) | shares | 19,398 |
Minimum | |
Assumptions for equity options granted: | |
Strike Price | $ 20.50 |
Maximum | |
Assumptions for equity options granted: | |
Strike Price | $ 30.75 |
EQUITY BASED COMPENSATION - Equ
EQUITY BASED COMPENSATION - Equity Options Changed During Period (Details) | 3 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Equity Options | |
Beginning balance (in shares) | 3,495,935 |
Granted (in shares) | 584,846 |
Vested (in shares) | (19,398) |
Forfeited (in shares) | (13,659) |
Ending balance (in shares) | 4,047,724 |
Ending balance, exercisable (in shares) | 566,829 |
Non-vested at end of period (in shares) | 1,097,790 |
Weighted-average Exercise Price | |
Beginning balance (in dollars per share) | $ / shares | $ 14.12 |
Granted (in dollars per share) | $ / shares | 26.02 |
Vested (in dollars per share) | $ / shares | 6.70 |
Forfeited (in dollars per share) | $ / shares | 16.84 |
Ending balance (in dollars per share) | $ / shares | 15.86 |
Ending balance, exercisable | $ / shares | 8.46 |
Non-vested at end of period (in dollar per share) | $ / shares | $ 19.20 |
Equity options | |
Equity Options | |
Ending balance, exercisable (in shares) | 566,829 |
EQUITY BASED COMPENSATION - E56
EQUITY BASED COMPENSATION - Equity Options (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 29, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share Price | $ 20.50 | ||
Options exercisable | 566,829 | ||
Equity options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share Price | $ 12.62 | ||
Aggregate intrinsic value | $ 6 | ||
Weighted average remaining term of outstanding stock options | 8 years 8 months 12 days | ||
Options exercisable | 566,829 | ||
Aggregate intrinsic value of exercisable options | $ 2.4 | ||
Weighted average remaining term of exercisable options | 7 years 7 months 6 days | ||
Compensation expense | $ 1.3 | $ 0.5 | |
Unrecognized compensation expense | $ 8.9 | ||
Weighted-average period for recognition (in years) | 1 year 8 months 12 days | ||
Vested stock option activity | |||
Weighted average remaining term of outstanding stock options | 8 years 8 months 12 days |
EQUITY BASED COMPENSATION - Res
EQUITY BASED COMPENSATION - Restricted stock (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
EQUITY-BASED COMPENSATION | ||
Vesting period | 3 years | |
Restricted stock | ||
Ending balance (in shares) | 1,097,790 | |
Common Stock | ||
EQUITY-BASED COMPENSATION | ||
Compensation expense | $ 1 | $ 0.1 |
Unrecognized compensation expense | $ 7.9 | |
Weighted-average remaining life | 2 years 3 months 18 days | |
Common Stock | Minimum | ||
EQUITY-BASED COMPENSATION | ||
Vesting period | 1 year | |
Common Stock | Maximum | ||
EQUITY-BASED COMPENSATION | ||
Vesting period | 3 years | |
Restricted Stock | ||
Restricted stock | ||
Beginning balance (in shares) | 299,801 | |
Granted (in shares) | 331,389 | |
Vested (in shares) | (33,429) | |
Forfeited (in shares) | (18,640) | |
Ending balance (in shares) | 579,121 | |
Grant Date Fair Value | ||
Beginning balance (in dollars per share) | $ 16.36 | |
Granted (in dollars per share) | 20.87 | |
Vested (in dollars per share) | 16.36 | |
Forfeited | 16.36 | |
Ending balance (in dollars per share) | $ 18.94 | |
Restricted Stock Units | ||
Restricted stock | ||
Beginning balance (in shares) | 30,360 | |
Vested (in shares) | (27,235) | |
Ending balance (in shares) | 3,125 | |
Grant Date Fair Value | ||
Beginning balance (in dollars per share) | $ 19.88 | |
Vested (in dollars per share) | 20 | |
Ending balance (in dollars per share) | $ 18.80 |
EQUITY BASED COMPENSATION - Per
EQUITY BASED COMPENSATION - Performance share units (Details) - Performance share units $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($)itemshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Compensation expense | $ 0.2 |
Shares issued | shares | 246,023 |
Fair value of outstanding shares | $ 3.1 |
Unrecognized compensation expense | $ 2.9 |
Weighted-average remaining life | 2 years 9 months 18 days |
Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of times shares issued for each performance share settlement | item | 0 |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of times shares issued for each performance share settlement | item | 175 |
Return on assets Less than 9.6% | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Percentage of Target PSUs Earned | 0.00% |
Return on assets 9.6% | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Percentage of Target PSUs Earned | 50.00% |
Return on assets 12% | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Percentage of Target PSUs Earned | 100.00% |
Return on assets 14.4% | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Percentage of Target PSUs Earned | 175.00% |
FAIR VALUE MEASUREMENT (Details
FAIR VALUE MEASUREMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
FAIR VALUE MEASUREMENT | ||
Transfers into Level3 | $ 0 | $ 0 |
Transfers out of Level3 | $ 0 | $ 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
RELATED PARTY TRANSACTIONS | ||
Sales to related parties | $ 2,800,000 | $ 500,000 |
Purchases from related party vendors | $ 3,500,000 | 1,200,000 |
Minimum | ||
RELATED PARTY TRANSACTIONS | ||
Beneficial ownership (as a percent) | 5.00% | |
Tax Receivable Agreement | Legacy Owner Holdco and Crestview GP | ||
RELATED PARTY TRANSACTIONS | ||
Percentage of net tax savings for payment to TRA Holders | $ 85 | |
Tax Receivable Agreement | Contributing Legacy Owners | ||
RELATED PARTY TRANSACTIONS | ||
Percentage of net tax savings for payment to TRA Holders | 85 | |
Property and equipment | ||
RELATED PARTY TRANSACTIONS | ||
Purchases from related party vendors | 1,600,000 | 200,000 |
Inventory and consumables | ||
RELATED PARTY TRANSACTIONS | ||
Purchases from related party vendors | 200,000 | |
Inventory and consumables | Maximum | ||
RELATED PARTY TRANSACTIONS | ||
Purchases from related party vendors | 100,000 | |
Rent of certain equipment or other services | ||
RELATED PARTY TRANSACTIONS | ||
Purchases from related party vendors | 1,300,000 | 400,000 |
Management, consulting and other services | ||
RELATED PARTY TRANSACTIONS | ||
Purchases from related party vendors | $ 400,000 | $ 500,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
INCOME TAXES | |||
Effective Income tax (as percent) | 2.80% | (0.90%) | |
Statutory tax rate (as a percent) | 21.00% | 35.00% | |
Tax expense (benefit) | $ 462 | $ 106 |
NONCONTROLLING INTERESTS (Detai
NONCONTROLLING INTERESTS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Effects of changes in noncontrolling interests on equity | ||
Net income | $ 10,099 | $ (4,172) |
Transfers from noncontrolling interests: | ||
Decrease in additional paid-in capital as a result of the contribution of net assets acquired to SES Holdings, LLC in exchange for common units | (3,002) | |
Increase in additional paid-in capital as a result of stock option exercises | (49) | |
Increase in additional paid-in capital as a result of restricted stock issuance | 1,424 | |
Increase in additional paid-in capital as a result of issuance of common stock due to vesting of restricted stock units | 2 | |
Increase in additional paid-in capital as a result of the repurchase of common units of SES Holdings, LLC | 42 | |
Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests | $ 11,518 | $ (7,174) |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Calculation of basic and diluted earnings per share: | ||
Antidilutive shares | 1,400,008 | |
Net income (loss) | $ 16,132 | $ (12,280) |
Net income (loss) attributable to noncontrolling interests | (6,033) | 8,108 |
Net income (loss) attributable to Select Energy Services, Inc. | 10,099 | (4,172) |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock | 10 | |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options | 25 | |
Net income attributable to Select Energy Services, Inc. — diluted | 10,134 | |
Class A Common Stock | ||
Calculation of basic and diluted earnings per share: | ||
Net income (loss) attributable to Select Energy Services, Inc. | 9,097 | $ (809) |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock | 11 | |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options | 29 | |
Net income attributable to Select Energy Services, Inc. — diluted | $ 9,137 | |
Weighted-average shares of common stock outstanding — basic | 59,064,958 | |
Dilutive effect of restricted stock | 165,402 | |
Dilutive effect of stock options | 443,106 | |
Weighted-average shares of common stock outstanding — diluted | 59,673,466 | |
Earnings per share, Basic | $ 0.15 | $ (0.21) |
Earnings per share, Diluted | $ 0.15 | $ (0.21) |
Weighted-average shares of common stock outstanding — basic & diluted | 3,870,194 | |
Basic & Diluted | $ (0.21) | |
Class A-2 Common Stock | ||
Calculation of basic and diluted earnings per share: | ||
Net income (loss) attributable to Select Energy Services, Inc. | $ 1,002 | $ (3,363) |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock | (1) | |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options | (4) | |
Net income attributable to Select Energy Services, Inc. — diluted | $ 997 | |
Weighted-average shares of common stock outstanding — basic | 6,507,445 | |
Weighted-average shares of common stock outstanding — diluted | 6,507,445 | |
Earnings per share, Basic | $ 0.15 | |
Earnings per share, Diluted | $ 0.15 | |
Weighted-average shares of common stock outstanding — basic & diluted | 16,100,000 | |
Basic & Diluted | $ (0.21) | |
Class B Common Stock | ||
Calculation of basic and diluted earnings per share: | ||
Weighted-average shares of common stock outstanding — basic | 40,331,989 | |
Weighted-average shares of common stock outstanding — diluted | 40,331,989 | |
Weighted-average shares of common stock outstanding — basic & diluted | 38,462,541 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018USD ($)segment | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | |
SEGMENT INFORMATION | |||
Number of operating segments | segment | 3 | ||
Number of reportable segments | segment | 3 | ||
Assets | $ 1,391,009 | $ 1,356,368 | |
Segment information | |||
Revenue | 376,395 | $ 99,925 | |
Income (loss) before taxes | 16,594 | (12,174) | |
Depreciation and Amortization | 31,423 | 21,650 | |
Capital Expenditures | 31,106 | 14,010 | |
Income (loss) from operations | 18,603 | (12,508) | |
Interest expense, net | (1,151) | (730) | |
Other expense, net | (858) | ||
Other income, net | 1,064 | ||
Operating segment | |||
Segment information | |||
Income (loss) from operations | 28,429 | (10,323) | |
Operating segment | Water Solutions | |||
SEGMENT INFORMATION | |||
Assets | 1,045,321 | 994,159 | |
Segment information | |||
Revenue | 257,532 | 78,765 | |
Income (loss) before taxes | 28,203 | (7,672) | |
Depreciation and Amortization | 21,243 | 17,548 | |
Capital Expenditures | 23,894 | 11,955 | |
Operating segment | Oilfield Chemicals | |||
SEGMENT INFORMATION | |||
Assets | 172,900 | 186,333 | |
Segment information | |||
Revenue | 63,630 | ||
Income (loss) before taxes | 931 | ||
Depreciation and Amortization | 2,915 | ||
Capital Expenditures | 2,255 | ||
Operating segment | Wellsite Services | |||
SEGMENT INFORMATION | |||
Assets | 145,016 | 151,272 | |
Segment information | |||
Revenue | 55,722 | 21,810 | |
Income (loss) before taxes | (705) | (2,651) | |
Depreciation and Amortization | 6,724 | 3,656 | |
Capital Expenditures | 4,957 | 2,055 | |
Elimination | |||
Segment information | |||
Revenue | (489) | (650) | |
Corporate | |||
SEGMENT INFORMATION | |||
Assets | 27,772 | $ 24,604 | |
Segment information | |||
Income (loss) before taxes | (9,826) | (2,185) | |
Depreciation and Amortization | $ 541 | $ 446 |
SEGMENT INFORMATION - Total Ass
SEGMENT INFORMATION - Total Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Assets | $ 1,391,009 | $ 1,356,368 |
Operating segment | Water Solutions | ||
Segment Reporting Information [Line Items] | ||
Assets | 1,045,321 | 994,159 |
Operating segment | Oilfield Chemicals | ||
Segment Reporting Information [Line Items] | ||
Assets | 172,900 | 186,333 |
Operating segment | Wellsite Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 145,016 | 151,272 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Assets | $ 27,772 | $ 24,604 |