Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 02, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | Select Energy Services, Inc. | |
Entity Central Index Key | 1,693,256 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 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 | Q3 | |
Class A Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 80,658,534 | |
Class B Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 26,026,843 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 13,050 | $ 2,774 |
Accounts receivable trade, net of allowance for doubtful accounts of $2,549 and $2,979, respectively | 422,383 | 373,633 |
Accounts receivable, related parties | 2,313 | 7,669 |
Inventories, net | 49,457 | 44,598 |
Prepaid expenses and other current assets | 20,805 | 17,842 |
Total current assets | 508,008 | 446,516 |
Property and equipment | 1,112,138 | 1,034,995 |
Accumulated depreciation | (608,040) | (560,886) |
Property and equipment, net | 504,098 | 474,109 |
Goodwill | 274,753 | 273,421 |
Other intangible assets, net | 148,327 | 156,066 |
Other assets | 3,599 | 6,256 |
Total assets | 1,438,785 | 1,356,368 |
Current liabilities | ||
Accounts payable | 54,437 | 52,579 |
Accounts payable and accrued expenses, related parties | 4,341 | 2,772 |
Accrued salaries and benefits | 25,614 | 21,324 |
Accrued insurance | 20,492 | 12,510 |
Sales tax payable | 5,155 | 12,931 |
Accrued expenses and other current liabilities | 91,218 | 81,112 |
Current portion of capital lease obligations | 1,176 | 1,965 |
Total current liabilities | 202,433 | 185,193 |
Accrued lease obligations | 18,547 | 18,979 |
Other long-term liabilities | 10,133 | 13,827 |
Long-term debt | 65,000 | 75,000 |
Total liabilities | 296,113 | 292,999 |
Commitments and contingencies (Note 9) | ||
Preferred stock, $0.01 par value; 50,000,000 shares authorized and no shares issued and outstanding as of September 30, 2018 and December 31, 2017 | ||
Additional paid-in capital | 828,137 | 673,141 |
Retained earnings (accumulated deficit) | 32,153 | (17,859) |
Accumulated other comprehensive (deficit) income | (17) | 302 |
Total stockholders’ equity | 861,340 | 656,647 |
Noncontrolling interests | 281,332 | 406,722 |
Total equity | 1,142,672 | 1,063,369 |
Total liabilities and equity | 1,438,785 | 1,356,368 |
Class A Common Stock | ||
Current liabilities | ||
Common stock | 807 | 592 |
Total equity | 807 | 592 |
Class A-2 Common Stock | ||
Current liabilities | ||
Common stock | 67 | |
Total equity | 67 | |
Class B Common Stock | ||
Current liabilities | ||
Common stock | 260 | 404 |
Total equity | $ 260 | $ 404 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts | $ 2,549 | $ 2,979 |
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 | 80,658,534 | 59,182,176 |
Common Stock, Shares, Outstanding | 80,658,534 | 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 | 26,026,843 | 40,331,989 |
Common Stock, Shares, Outstanding | 26,026,843 | 40,331,989 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | ||||
Water solutions and related services | $ 301,410 | $ 125,086 | $ 880,411 | $ 311,275 |
Accommodations and rentals | 18,022 | 15,615 | 48,715 | 38,457 |
Wellsite completion and construction services | 13,553 | 13,179 | 45,064 | 38,522 |
Oilfield chemical product sales | 63,985 | 192,422 | ||
Total revenue | 396,970 | 153,880 | 1,166,612 | 388,254 |
Costs of revenue | ||||
Water solutions and related services | 226,622 | 88,087 | 665,805 | 226,737 |
Accommodations and rentals | 11,578 | 11,976 | 33,016 | 30,697 |
Wellsite completion and construction services | 11,047 | 10,888 | 38,480 | 32,155 |
Oilfield chemical product sales | 56,473 | 172,057 | ||
Depreciation and amortization | 31,853 | 23,420 | 93,180 | 67,144 |
Total costs of revenue | 337,573 | 134,371 | 1,002,538 | 356,733 |
Gross profit | 59,397 | 19,509 | 164,074 | 31,521 |
Operating expenses | ||||
Selling, general and administrative | 25,110 | 16,087 | 77,662 | 49,298 |
Depreciation and amortization | 984 | 375 | 2,332 | 1,312 |
Impairment of property and equipment | 2,282 | |||
Impairment of investment | 2,000 | |||
Lease abandonment costs | 1,045 | 590 | 4,142 | 2,871 |
Total operating expenses | 27,139 | 17,052 | 88,418 | 53,481 |
Income (loss) from operations | 32,258 | 2,457 | 75,656 | (21,960) |
Other income (expense) | ||||
Interest expense, net | (1,322) | (484) | (3,815) | (1,885) |
Foreign currency gain (loss), net | 248 | (492) | ||
Other income, net | 1,498 | 326 | 3,099 | 3,342 |
Income (loss) before tax expense | 32,682 | 2,299 | 74,448 | (20,503) |
Income tax (expense) benefit | (1,415) | 294 | (2,027) | 326 |
Net income (loss) | 31,267 | 2,593 | 72,421 | (20,177) |
Less: net (income) loss attributable to noncontrolling interests | (8,316) | (1,369) | (22,409) | 13,013 |
Net income (loss) attributable to Select Energy Services, Inc. | 22,951 | 1,224 | 50,012 | (7,164) |
Class A Common Stock | ||||
Other income (expense) | ||||
Net income (loss) attributable to Select Energy Services, Inc. | $ 22,951 | $ 1,224 | $ 48,523 | $ (4,485) |
EARNINGS (LOSS) PER SHARE | ||||
Net income (loss) per share attributable to common stockholders, basis | $ 0.29 | $ 0.04 | $ 0.69 | $ (0.28) |
Net income (loss) per share attributable to common stockholders, diluted | $ 0.29 | $ 0.04 | $ 0.69 | $ (0.28) |
Class A-1 Common Stock | ||||
Other income (expense) | ||||
Net income (loss) attributable to Select Energy Services, Inc. | $ (2,679) | |||
EARNINGS (LOSS) PER SHARE | ||||
Net income (loss) per share attributable to common stockholders, basis | $ (0.28) | |||
Net income (loss) per share attributable to common stockholders, diluted | $ (0.28) | |||
Class A-2 Common Stock | ||||
Other income (expense) | ||||
Net income (loss) attributable to Select Energy Services, Inc. | $ 1,489 | |||
EARNINGS (LOSS) PER SHARE | ||||
Net income (loss) per share attributable to common stockholders, basis | $ 0.69 | |||
Net income (loss) per share attributable to common stockholders, diluted | $ 0.69 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ 31,267 | $ 2,593 | $ 72,421 | $ (20,177) |
Other comprehensive income (loss) | ||||
Foreign currency translation adjustment, net of tax of $0 | 131 | (319) | ||
Net change in unrealized gain (loss) | 131 | (319) | ||
Comprehensive income (loss) | 31,398 | 2,593 | 72,102 | (20,177) |
Less: comprehensive (income) loss attributable to noncontrolling interests | (8,351) | (1,369) | (22,310) | 13,013 |
Comprehensive income (loss) attributable to Select Energy Services, Inc. | $ 23,047 | $ 1,224 | $ 49,792 | $ (7,164) |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Foreign currency translation adjustment, tax amount | $ 0 | $ 0 | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands | Class A Common StockConversion of Class A-1 to Class A | Class A Common StockConversion of Class A-2 to Class A | Class A Common StockConversion of Class B to Class A | Class A Common Stock | Class A-1 Common StockConversion of Class A-1 to Class A | Class A-1 Common Stock | Class A-2 Common StockConversion of Class A-2 to Class A | Class A-2 Common Stock | Class B Common StockConversion of Class B to Class A | Class B Common Stock | Conversion of Class B to Class ATotal Stockholders’ Equity | Conversion of Class B to Class AAdditional Paid-In Capital | Conversion of Class B to Class ANoncontrolling Interests | 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 | ||||||||||||||||
Conversion of common stock | $ 161 | $ (161) | |||||||||||||||||
Conversion of common stock (in shares) | 16,100,000 | (16,100,000) | |||||||||||||||||
Issuance of shares for acquisition | $ 6 | 4,366 | 4,360 | 5,514 | 9,880 | ||||||||||||||
Issuance of shares for acquisition (in shares) | 560,277 | ||||||||||||||||||
Issuance of shares for initial public offering | $ 100 | 87,935 | 87,835 | 40,569 | 128,504 | ||||||||||||||
Issuance of shares for initial public offering (in shares) | 10,005,000 | ||||||||||||||||||
Equity-based compensation | 788 | 788 | 993 | 1,781 | |||||||||||||||
Distributions to noncontrolling interest, net | (368) | (368) | |||||||||||||||||
Net income (loss) | (7,164) | (7,164) | (13,013) | (20,177) | |||||||||||||||
Ending balance at Sep. 30, 2017 | $ 305 | $ 385 | 198,641 | 206,158 | (8,207) | 255,687 | 454,328 | ||||||||||||
Ending balance (in shares) at Sep. 30, 2017 | 30,468,249 | 38,462,541 | |||||||||||||||||
Beginning balance at Dec. 31, 2017 | $ 592 | $ 67 | $ 404 | 656,647 | 673,141 | (17,859) | $ 302 | 406,722 | 1,063,369 | ||||||||||
Beginning balance (in shares) at Dec. 31, 2017 | 59,182,176 | 6,731,845 | 40,331,989 | ||||||||||||||||
Conversion of common stock | $ 67 | $ 144 | $ (67) | $ (144) | $ 146,865 | $ 146,865 | $ (146,865) | ||||||||||||
Conversion of common stock (in shares) | 6,731,839 | 14,305,146 | (6,731,839) | (14,305,146) | |||||||||||||||
ESPP shares issued | 99 | 99 | (13) | 86 | |||||||||||||||
ESPP shares issued (in shares) | 6,413 | ||||||||||||||||||
Equity-based compensation | 5,543 | 5,543 | 2,487 | 8,030 | |||||||||||||||
Issuance of restricted shares | $ 4 | 2,325 | 2,321 | (2,325) | |||||||||||||||
Issuance of restricted shares (in shares) | 438,182 | ||||||||||||||||||
Exercise of restricted stock units | 104 | 104 | (104) | ||||||||||||||||
Exercise of restricted stock units (in shares) | 27,860 | ||||||||||||||||||
Stock options exercised | $ 1 | 1,019 | 1,018 | (374) | $ 645 | ||||||||||||||
Stock options exercised (in shares) | (79,333) | (79,333) | |||||||||||||||||
Repurchase of common stock | $ (1) | (804) | (803) | (73) | $ (877) | ||||||||||||||
Repurchase of common stock ( in shares) | (62,777) | (6) | |||||||||||||||||
Restricted shares forfeited | (380) | (380) | 379 | (1) | |||||||||||||||
Restricted shares forfeited (in shares) | (49,638) | ||||||||||||||||||
Distributions to noncontrolling interest, net | (506) | (506) | |||||||||||||||||
NCI income tax adjustment | 229 | 229 | (229) | ||||||||||||||||
Foreign currency translation adjustment | (319) | (319) | (176) | (495) | |||||||||||||||
Net income (loss) | 50,012 | 50,012 | 22,409 | 72,421 | |||||||||||||||
Ending balance at Sep. 30, 2018 | $ 807 | $ 260 | $ 861,340 | $ 828,137 | $ 32,153 | $ (17) | $ 281,332 | $ 1,142,672 | |||||||||||
Ending balance (in shares) at Sep. 30, 2018 | 80,658,534 | 26,026,843 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities | ||
Net income (loss) | $ 72,421 | $ (20,177) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||
Depreciation and amortization | 95,512 | 68,456 |
Net gain on disposal of property and equipment | (2,959) | (3,127) |
Bad debt expense | 1,430 | 1,098 |
Amortization of debt issuance costs | 516 | 928 |
Inventory reserve | 430 | |
Equity-based compensation | 8,030 | 1,781 |
Impairment of property and equipment | 2,282 | |
Impairment of investment | 2,000 | |
Other operating items, net | 971 | (560) |
Changes in operating assets and liabilities | ||
Accounts receivable | (46,010) | (65,815) |
Prepaid expenses and other assets | (7,950) | (6,493) |
Accounts payable and accrued liabilities | (2,043) | 19,660 |
Net cash provided by (used in) operating activities | 124,630 | (4,249) |
Cash flows from investing activities | ||
Acquisitions, net of cash received | (1,953) | (62,199) |
Purchase of property and equipment | (109,500) | (66,013) |
Proceeds received from sale of property and equipment | 9,363 | 6,677 |
Net cash used in investing activities | (102,090) | (121,535) |
Cash flows from financing activities | ||
Proceeds from revolving line of credit and issuance of long-term debt | 45,000 | 34,000 |
Payments on long-term debt | (55,000) | (34,000) |
Payments of capital lease obligations | (1,517) | |
Proceeds from initial public offering | 140,070 | |
Proceeds from share issuance | 731 | |
Payments incurred for initial public offering | (11,566) | |
Distributions to noncontrolling interests, net | (506) | (368) |
Repurchase of common stock | (877) | |
Net cash (used in) provided by financing activities | (12,169) | 128,136 |
Effect of exchange rate changes on cash | (95) | |
Net increase in cash and cash equivalents | 10,276 | 2,352 |
Cash and cash equivalents, beginning of period | 2,774 | 40,041 |
Cash and cash equivalents, end of period | 13,050 | 42,393 |
Supplemental cash flow disclosure: | ||
Cash paid for interest | 3,356 | 1,139 |
Cash (refunds) paid for income taxes | (1,750) | 37 |
Supplemental disclosure of noncash investing activities: | ||
Capital expenditures included in accounts payable and accrued liabilities | $ 23,689 | $ 7,733 |
BUSINESS AND BASIS OF PRESENTAT
BUSINESS AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 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”). Rockwater operations described in this report describe the operations of Rockwater LLC. 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 North America. The oilfield water services market has grown rapidly over the past decade, driven by advances in drilling, completion and production technologies. Within the major unconventional 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. 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. 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 fluid-logistics services. In addition, we provide water transfer, fluid 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 of a shelf registration statement registering such shares for resale on June 13, 2017, 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 described below, (ii) $7.8 million was used for the cash settlement of outstanding phantom unit awards and (iii) the remaining net proceeds were 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 a $300.0 million senior secured revolving credit facility (the “Credit Agreement”). 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. Legacy Owner Holdco exercised this right in May 2018, and the registration statement registering these shares was declared automatically effective by the SEC on May 16, 2018. 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. This Form 10-Q relates to the three and nine months ended September 30, 2018 (the “Current Quarter” and the “Current Period”, respectively) and the three and nine months ended September 30, 2017 (the “Prior Quarter” and the “Prior Period”, respectively). The Company’s annual report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”) filed with the SEC on March 19, 2018, includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. All material adjustments (consisting solely of normal recurring adjustments) which, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been reflected. The results for the Current Quarter and the Current Period are not necessarily indicative of the results to be expected for the full year. 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. 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 September 30, 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 first quarter of 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 statements 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 | 9 Months Ended |
Sep. 30, 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 year ended December 31, 2017 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 Current Period. 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. Asset retirement obligations: The Company’s asset retirement obligations (“ARO”) relate to 19 disposal facilities with obligations for plugging wells, removing surface equipment, and returning land to its pre-drilling condition. The following table describes the changes to the Company’s ARO liability for the Current Period: Nine months ended September 30, 2018 (in thousands) Balance at beginning of Current Period $ 1,846 Accretion expense, included in depreciation and amortization expense 142 Change in estimate 386 Divestitures (508) Balance at end of Current Period $ 1,866 We review the adequacy of our ARO liabilities whenever indicators suggest that the estimated cash flows underlying the liabilities have changed. The Company’s ARO liabilities are included in accrued expenses and other current liabilities and other long-term liabilities in the accompanying consolidated balance sheets for the nine months ended September 30, 2018 and year ended December 31, 2017. Change in depreciable lives of property and equipment: In accordance with its policy, the Company reviews the estimated useful lives and estimated salvage values of its fixed assets on an ongoing basis. This most recent review, conducted in the first quarter of 2018, indicated that the economic lives of certain assets were longer than the historic asset lives previously used by the Company. This increase was positively supported by effective use, care and custody of the assets. Also, this review indicated increased salvage value estimates for certain assets within vehicles and equipment, which was supported by recent vehicle sales data, and is expected to continue prospectively. As a result, effective January 1, 2018, the Company changed its estimates of the useful lives of certain assets included in vehicles and equipment and machinery and equipment, and increased salvage value estimates for certain assets within vehicles and equipment, to better reflect the estimated periods and depreciable amounts during which these assets will remain in service. The average estimated useful lives of the assets impacted in the vehicles and equipment category increased from 6.0 to 8.1 years, while the average estimated useful lives of assets impacted in machinery and equipment increased from 5.5 years to 6.9 years. The impact of the increase of useful lives was to defer and extend out depreciation expense, including lower expense in 2018. The impact of the increase in salvage values was to permanently lower current and future depreciation expense. The fixed assets obtained in 2017 through mergers and acquisitions, including the Rockwater Merger, have consistent useful life and salvage value estimates with the rest of the Company’s fixed assets. The change in the estimated useful lives of fixed assets and change in salvage value estimates was implemented on a prospective basis starting January 1, 2018. Excluding fixed assets attained through mergers and acquisitions during 2017, the impact of the change in useful estimate of fixed assets purchased on or before December 31, 2017 was to reduce and defer depreciation expense by $2.7 million and $11.7 million during the Current Quarter and Current Period, respectively. Also, the increase in estimated vehicle salvage value produced a permanent depreciation expense reduction of $0.9 million and $2.9 million, during the Current Quarter and Current Period, respectively. For the Current Quarter and Current Period, the changes in useful life estimate and increased salvage value produced an increase to net income of $2.5 million and $9.9 million, respectively, and increased basic and diluted earnings per share attributable to our stockholders by $0.03 and $0.14, respectively. 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. The Company will lose its emerging growth company status as of December 31, 2018, as the market value of our common stock held by non-affiliates was greater than $700 million as of June 30, 2018. Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB deferred the effective date by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. The Company does not expect the adoption of the ASU or related ASUs 2016-08, 2016-10, 2016-12 and 2016-20, will have a material impact on its consolidated financial statements because (i) most customer agreements begin and end within the same period and (ii) our current revenue recognition methodologies are similar to the new guidance. The Company is evaluating the impact on the related disclosures and internal controls over financial reporting. The Company will use the modified retrospective method upon adoption of the ASU. In February 2016, the FASB issued ASU 2016-02, Leases , which modifies the lease recognition requirements and requires entities to recognize the assets and liabilities arising from leases on the balance sheet and to disclose key qualitative and quantitative information about the entity’s leasing arrangements. Based on the original guidance in ASU 2016-02, lessees and lessors would have been required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including a number of optional practical expedients. In July 2018, the FASB issued ASU No. 2018-11, Leases (ASC 842): Targeted Improvements, which provides entities with an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions. 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 the Company will lose its EGC status as of December 31, 2018, the ASU will become effective January 1, 2019. The Company currently anticipates that it will elect to recognize its lease assets and liabilities on a prospective basis, beginning on January 1, 2019, using an optional transition method. Additionally, the Company expects (i) not to set up right of use assets and lease liabilities for short-term leases, (ii) to elect to treat lease and non-lease components as a single lease component and (iii) to grandfather its current accounting for land easements that commenced before January 1, 2019. The Company expects the adoption of these ASUs to have a material increase to assets and liabilities on the consolidated balance sheets. However, because the Company is currently evaluating the impact of these ASUs and, ASU 2018-01, Land Easements, it is unable to quantify the overall impact at this time. 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. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, and requires a modified retrospective transition approach. The Company is currently evaluating the impact this standard will have on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends eight specific cash flow issues with the objective of reducing diversity in practice. 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. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. 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. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. The amendments in this ASU should be applied prospectively. The Company does not expect the adoption of the ASU will have a material impact 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. 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. The pronouncement should be applied prospectively to an award modified on or after the adoption date. The Company adopted this ASU in 2018, and the adoption of this guidance did not materially affect its consolidated financial statements and related disclosures. |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 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 statements of operations. For the Current Quarter and the Current Period, the Company expensed $2.6 million and $6.3 million of transaction-related costs, respectively, which are included in selling, general and administrative expenses within the consolidated statements of operations. The Rockwater Merger 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. The Company also engaged third-party valuation experts to assist in the purchase price allocation and the recorded valuation of property and equipment. Management estimated that total consideration paid exceeded the fair value of the net assets acquired and liabilities assumed by $248.6 million, with the excess recorded as goodwill. The goodwill recognized was primarily attributable to synergies driven by expanding into new geographies, service offerings and customer relationships, strengthening existing service lines and geographies, acquiring an established, trained workforce and expected cost reductions. Goodwill of $235.9 million and $12.7 million was allocated to the Company’s Water Solutions and Oilfield Chemicals segments, respectively. The acquired goodwill is not deductible for tax purposes. 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) 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) 141,720 Property and equipment (2) 188,610 Intangible assets Customer relationships (3) 89,661 Trademarks and patents 31,223 Non-compete agreements 3,811 Other long-term assets 88 Deferred tax liabilities (408) Long-term debt (80,555) Other long-term liabilities (3) (2,517) Total identifiable net assets acquired 371,633 Goodwill 248,568 Fair value allocated to net assets acquired $ 620,201 (1) During the Current Period, the Company obtained additional information related to working capital which led to a decrease of $5.2 million and a corresponding increase in goodwill of $5.2 million compared to the estimated fair values included in the 2017 Form 10-K. (2) During the Current Period, the Company obtained additional information related to property and equipment which led to an increase of $3.0 million and a corresponding decrease in goodwill of $3.0 million compared to the estimated fair values included in the 2017 Form 10-K. (3) During the Current Period, the Company obtained additional information related to customer relationships and other long-term liabilities which led to an increase of $0.7 million and a decrease of $0.1 million, respectively, and a corresponding decrease to goodwill of $0.8 million compared to the estimated fair values included in the 2017 Form 10-K. 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 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 acquired goodwill is deductible for tax purposes. 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. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. Management estimated that total consideration paid exceeded the fair value of the net assets acquired by $1.9 million, with the excess recorded 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 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 $ 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 nine months ended September 30, 2017, the Company expensed $1.0 million of transaction-related costs, which are included in selling, general and administrative expenses within the consolidated statements 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 by $12.0 million, with the excess recorded as goodwill. 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 acquired goodwill is deductible for tax purposes. 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 following unaudited consolidated pro forma information is presented as if the Rockwater Merger, the Resource Water Acquisition and the GRR Acquisition had occurred on January 1, 2017: Pro Forma Three months ended September 30, Nine months ended September 30, 2017 2017 (unaudited) (in thousands) Revenue $ 357,160 $ 889,442 Net income (loss) $ 21,935 $ (11,602) Less: net (income) loss attributable to noncontrolling interests (1) (8,885) 4,679 Net income (loss) attributable to Select Energy Services, Inc. (1) $ 13,050 $ (6,923) (1) The allocation of net income (loss) attributable to noncontrolling interests and Select Inc. gives effect to the equity structure as of September 30, 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, 2017. However, the calculation of pro forma net income (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, Resource Water Acquisition and GRR 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 Resource Water Acquisition or the GRR 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 Resource Water Acquisition and the GRR Acquisition had occurred as of January 1, 2017 or of future operating performance. Asset acquisitions On June 21, 2017 the Company completed the acquisition of fixed assets from Tex-Star Water Services, LLC for $4.2 million in cash. On May 30, 2017 the Company completed the acquisition of automated manifold intellectual property and related assets from Data Automated Water Systems, LLC (the “DAWS Acquisition”) for $4.0 million. This acquisition was paid with $2.0 million of cash and 128,370 shares of Class A Common Stock valued at $2.0 million. The DAWS Acquisition resulted in fixed assets of $1.8 million, patents of $1.9 million and software of $0.3 million. |
EXIT AND DISPOSAL ACTIVITIES
EXIT AND DISPOSAL ACTIVITIES | 9 Months Ended |
Sep. 30, 2018 | |
EXIT AND DISPOSAL ACTIVITIES | |
EXIT AND DISPOSAL ACTIVITIES | NOTE 4—EXIT AND DISPOSAL ACTIVITIES Due to a reduction in oil and gas industry activity that began in 2014, the Company decided 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 decided to consolidate or close additional facilities in relation to its Rockwater Merger. With the recent rebound in the oil and gas industry, the Company expects to ramp up operations in some areas while continuing to consolidate operations in others. During the Current Period and Prior Period, the Company recorded $4.1 million and $2.9 million, respectively, of charges related to exit and disposal activities. These costs are included in lease abandonment costs in the consolidated statements of operations. Additionally, during the Prior Period, we reclassified $0.2 million of deferred rent related to accrued lease obligations related to exited facilities. The Company had a remaining balance of $21.1 million, inclusive of a short‑term balance of $2.6 million in accrued expenses and other current liabilities, as of September 30, 2018, related to accrued lease obligations and terminations at exited facilities within its Water Solutions segment. The Company 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 Current Period and Prior Period are as follows: Provision during the Usage during the Balance as of nine months ended nine months ended Balance as of December 31, 2017 September 30, 2018 September 30, 2018 September 30, 2018 (in thousands) Lease obligations and terminations $ 21,350 $ 4,142 $ 5,709 $ 19,783 Reclassification of deferred rent 1,254 1,332 Total $ 22,604 $ 21,115 Provision during the Usage during the Balance as of nine months ended nine months ended Balance as of December 31, 2016 September 30, 2017 September 30, 2017 September 30, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 2,871 $ 2,153 $ 18,718 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 19,972 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 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: September 30, 2018 December 31, 2017 (in thousands) Raw materials $ 13,217 $ 11,462 Finished goods 33,753 29,674 Materials and supplies 2,917 3,462 49,887 44,598 Inventory reserve (430) — $ 49,457 $ 44,598 During the Current Quarter and the Current Period, the Company recorded charges to the reserve for excess and obsolete inventory for a nominal amount and $0.4 million, respectively, which were recognized within costs of revenue on the accompanying consolidated statements of operations. No charges were recorded during the Prior Quarter or Prior Period. 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 | 9 Months Ended |
Sep. 30, 2018 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 6—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 (in thousands) Land $ 17,111 $ 15,286 Buildings and leasehold improvements 100,900 99,222 Vehicles and equipment 84,394 70,537 Vehicles and equipment - capital lease 2,169 2,810 Machinery and equipment 744,086 716,420 Machinery and equipment - capital lease 532 544 Computer equipment and software 14,442 12,466 Computer equipment and software - capital lease 356 356 Office furniture and equipment 4,634 4,320 Disposal wells 63,422 67,805 Other 497 497 Construction in progress 79,595 44,732 1,112,138 1,034,995 Less accumulated depreciation and impairment (608,040) (560,886) Total property and equipment, net $ 504,098 $ 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 Current Period, the Company reviewed certain fluid disposal machinery and equipment used in our fluid hauling and disposal services that are included in our Water Solutions segment. Due to the condition of the equipment, the Company determined that long-lived assets with a carrying value of $2.3 million were no longer recoverable and were written down to their estimated fair value of zero. During the Current Quarter, Prior Quarter, Current Period and Prior Period, depreciation expense was $29.8 million, $21.2 million, $85.2 million and $61.1 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 leases for the Current Quarter and the Current Period was $0.3 million and $1.0 million, respectively, and is included in depreciation and amortization expense in the accompanying consolidated statements of operations. The Company had no capital lease obligations as of September 30, 2017. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 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 (see Note 11). The changes in the carrying amounts of goodwill by reportable segment as of September 30, 2018 and 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) 4,317 (2,985) — 1,332 Balance as of September 30, 2018 $ 249,859 $ 12,652 $ 12,242 $ 274,753 (1) See Note 3―Acquisitions for additional information. The components of other intangible assets as of September 30, 2018 and December 31, 2017 are as follows: As of September 30, 2018 As of December 31, 2017 Gross Accumulated Net Gross Accumulated Net Value Amortization Value Value Amortization Value (in thousands) (in thousands) Customer relationships $ 169,901 $ 65,837 $ 104,064 $ 169,250 $ 57,836 $ 111,414 Patents and trademarks 33,552 1,166 32,386 33,544 414 33,130 Other 16,458 4,581 11,877 14,704 3,182 11,522 Total other intangible assets $ 219,911 $ 71,584 $ 148,327 $ 217,498 $ 61,432 $ 156,066 The Company had $7.0 million and $5.3 million in indefinite-lived water rights at September 30, 2018 and December 31, 2017, respectively, and are included within the other component in the tables above. The Company had $23.4 million in indefinite-lived trademarks as of both September 30, 2018 and December 31, 2017 and are included in the patents and trademarks component in the table above. Amortization expense was $3 .0 million, $2.6 million, $10.3 million and $7.3 million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. Annual amortization of intangible assets for the next five years and beyond is as follows: Amount (in thousands) Remainder of 2018 $ 2,899 2019 11,595 2020 11,302 2021 10,118 2022 9,904 Thereafter 72,037 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 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”), had a maturity date of February 28, 2020 and a revolving line of credit of $100.0 million. On November 1, 2017, in connection with the closing of the Rockwater Merger (the “Closing”), SES Holdings entered into the Credit Agreement, the obligations of SES Holdings and Select LLC 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, SES Holdings and Select LLC 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) of 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 Select LLC 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. Interest is 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. 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 $65.0 million and $75.0 million outstanding under the Credit Agreement as of September 30, 2018 and December 31, 2017, respectively. The weighted‑average interest rate of outstanding borrowings under the Credit Agreement was 3.992% and 3.319% as of September 30, 2018 and December 31, 2017, respectively. As of September 30, 2018 and December 31, 2017, the borrowing base under the Credit Agreement was $290.8 million and $261.1 million, respectively. The borrowing capacity under the Credit Agreement was reduced by outstanding letters of credit of $20.8 million and $19.8 million as of September 30, 2018 and December 31, 2017, respectively. 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 $20 5.0 million at September 30, 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 September 30, 2018 and December 31, 2017 were $2.8 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. Amortization expense related to debt issuance costs were $0.2 million, $0.3 million, $0.5 million and $0.9 million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. The Company was in compliance with all debt covenants as of September 30, 2018. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 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 normal 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 U.S. Environmental Protection Agency (“U.S. EPA”). 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. Self-Insured Reserves We are self-insured up to certain retention limits with respect to workers’ compensation, general liability and vehicle liability matters. We maintain accruals for self-insurance retentions that we estimate using third-party data and claims history. |
EQUITY-BASED COMPENSATION
EQUITY-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 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 include 2,879,112 shares of Class A Common Stock related to substitute awards 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. This fair value measurement relied 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 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 January 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 January 2018. The weighted‑average grant date fair value of stock options granted was $8.98. 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 Current Period is as follows: For the nine months ended September 30, 2018 Weighted-average Weighted-average Remaining Contractual Aggregate Intrinsic Stock Options Exercise Price Term (Years) Value (in thousands) (a) Beginning balance, outstanding 3,495,935 $ 14.12 5.1 $ 16,368 Granted 584,846 26.02 Exercised (79,333) 8.12 Forfeited (85,849) 15.05 Expired (40,390) 17.32 Ending balance, outstanding 3,875,209 $ 15.98 5.1 $ 2,750 Ending balance, exercisable 2,850,903 $ 14.64 3.8 $ 1,702 Non-vested at end of period 1,024,306 $ 19.72 (a) 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 $11.84 and $18.24 as of September 28, 2018 and December 29, 2017, respectively. The Company recognized $1.2 million, $0.4 million, $3.9 million and $1.4 million of compensation expense related to stock options during the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. As of September 30, 2018, there was $5.9 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 1.3 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 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 $1.1 million, $0.1 million, $3.2 million and $0.4 million related to the restricted stock awards and restricted stock units for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. As of September 30, 2018, there was $6.8 million of unrecognized compensation expense with a weighted-average remaining life of 1.9 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 Current Period is as follows: For the nine months ended September 30, 2018 Weighted-average Restricted Stock Awards Grant Date Fair Value Non-vested at December 31, 2017 299,801 $ 16.36 Granted 438,182 19.52 Vested (191,400) 16.36 Forfeited (49,634) 17.62 Non-vested at September 30, 2018 496,949 $ 19.02 A summary of the Company’s restricted stock unit activity and related information for the Current Period is as follows: For the nine months ended September 30, 2018 Weighted-average Restricted Stock Units Grant Date Fair Value Non-vested at December 31, 2017 30,360 $ 19.88 Granted — — Vested (27,860) 19.96 Non-vested at September 30, 2018 2,500 $ 19.00 Performance Share Units (PSUs) During 2018, 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 1.75 times the target number. The PSUs become earned at the end of the performance period after the attainment of the performance level has been certified by the compensation committee, which will be 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 accelerated attribution method. The Company recognized compensation expense of $0.1 million and $0.7 million related to the PSUs for the Current Quarter and Current Period, respectively. As of September 30, 2018, the fair value of outstanding PSUs issued was $3.2 million. The unrecognized compensation cost related to our unvested PSUs is estimated to be $2.5 million and is expected to be recognized over a weighted-average period of 2.3 years as of September 30, 2018. The following table summarizes the information about the performance share units outstanding at September 30, 2018: Period Granted Target Shares Outstanding at Beginning of Period Target Shares Granted Target Shares Vested Target Shares Forfeited Target Shares Outstanding at End of Period 2018 — 280,021 — (11,852) 268,169 Total — 280,021 — (11,852) 268,169 Stock-Settled Incentive Awards Effective May 17, 2018, Company approved grants of stock-settled incentive awards to certain key employees under the 2016 Equity Incentive Plan that are subject to both market-based and service-based vesting provisions. These awards will vest after a two-year service period and, if earned, settled in shares of the Company stock. The ultimate amount earned is based on the achievement of the market metrics, which is based on the stock price of the Company at the vesting date, for which payout could range from 0% to 200%. Any award not earned on the vesting date is forfeited. The target amount that becomes earned during the performance period will be determined in accordance with the following table: Stock Price at Vesting Date (1) Percentage of Target Amount Earned Less than $20.00 0% At least $20.00, but less than $25.00 100% $25.00 or greater 200% (1) The stock price at vesting date equals the greater of (i) the fair market value of a share of the Company’s stock on the vesting date, or (ii) the volume weighted average closing price of a share of the Company’s stock, as reported on the NYSE, for the 30 trading days preceding the vesting date. The target amount of stock-settled incentive awards granted was $3.9 million. However, the ultimate settlement of the awards will be in shares of the Company’s stock with fair market value equal to the earned amount, which could range from 0% to 200% of the target amount depending on the stock price at vesting date. Compensation expense associated with the stock-settled incentive awards is recognized ratably over the corresponding requisite service period. The fair value of the stock-settled incentive awards was determined using a Monte Carlo option pricing model, similar to the Black-Scholes-Merton model, and adjusted for the specific characteristics of the awards. The key assumptions in the model included price, the expected volatility of our stock, risk-free interest rate based on U.S. Treasury yield curve, cross-correlations between us and our self-determined peer companies’ asset, equity and debt-to-equity volatility. During the Current Quarter and the Current Period, the Company recognized stock compensation expense of $0.1 million and $0.2 million, respectively, related to the stock-settled incentive awards. The unrecognized compensation cost related to our unvested stock-settled incentive awards is estimated to be $1.0 million and is expected to be recognized over approximately 20 months as of September 30, 2018. The following table summarizes the information about the stock-settled incentive awards outstanding at September 30, 2018: Award Value Value at Target Being Recognized Non-vested at December 31, 2017 $ — $ — Granted during 2018 3,871 1,479 Forfeited during 2018 (724) (277) Ending balance at September 30, 2018 $ 3,147 $ 1,202 Employee Stock Purchase Plan (ESPP) We have an Employee Stock Purchase Plan (“ESPP”) under which employees that have been continuously employed for at least one year may purchase shares of our common stock at a discount. The plan provides for four offering periods for purchases: December 1 through February 28, March 1 through May 31, June 1 through August 31 and September 1 through November 30. At the end of each offering period, enrolled employees purchase shares of our common stock at a price equal to 95% of the market value of the stock on the last day of such offering period. The purchases are made at the end of an offering period with funds accumulated through payroll deductions over the course of the offering period. Subject to limitations set forth in the plan and under IRS regulations, eligible employees may elect to contribute a maximum of $15,000 to the plan in a single calendar year. The plan is deemed to be noncompensatory. The following table summarizes ESPP activity (in thousands, except shares): For the nine months ended September 30, 2018 Cash received for shares issued $ 85,635 Shares issued 6,413 Phantom unit awards The Company’s phantom unit awards were cash settled awards that were contingent upon meeting certain equity returns and a liquidation event. The settlement amount was based on the fair market value of a share of the Company’s Class A common stock on the date of completion of the Company’s IPO, which constituted a liquidation event with respect to such phantom unit awards. As a result of the cash‑settlement feature of these awards, the Company considered these awards to be liability awards, which were measured at fair value at each reporting date and the pro rata vested portion of the award was recognized as a liability to the extent that the performance condition was deemed probable. On May 5, 2017, the Company settled its outstanding phantom unit awards for an aggregate amount equal to $7.8 million as a result of the completion of its IPO, which constituted a liquidity event with respect to such phantom unit awards. Based on the fair market value of a share of the Company’s Class A common stock on the date of the IPO of $14.00, the cash payment with respect to each phantom unit was approximately $5.53, before employer taxes. The Company recognized compensation expense of $7.8 million during both the Prior Quarter and the Prior Period related to the settlement of its phantom unit awards. As of September 30, 2018 and 2017 there were no phantom units outstanding. |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 9 Months Ended |
Sep. 30, 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 nine months ended September 30, 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 September 30, 2018 and December 31, 2017 due to the short‑term maturity of these instruments. The carrying value of debt as of September 30, 2018 and December 31, 2017 approximates fair value due to variable market rates of interest. The fair value of debt at September 30, 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, Resource Water Acquisition and GRR 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 | 9 Months Ended |
Sep. 30, 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 and an unconsolidated joint venture. 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 Current Quarter, sales to related parties were $2.7 million and purchases from related-party vendors were $5.2 million. These purchases consisted of $1.0 million relating to purchases of property and equipment, $4.0 million relating to the rental of certain equipment or other services used in operations and $0.2 million relating to management, consulting and other services. During the Prior Quarter, sales to related parties were $0.4 million and purchases from related-party vendors were $2.1 million. These purchases consisted of $0.7 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.8 million relating to the rental of certain equipment or other services used in operations, and $0.5 million relating to management, consulting and other services. During the Current Period, sales to related parties were $6.3 million and purchases from related-party vendors were $12.7 million. These purchases consisted of $3.5 million relating to purchases of property and equipment, $0.3 million relating to inventory and consumables, $7.8 million relating to the rental of certain equipment or other services used in operations and $1.1 million relating to management, consulting and other services. During the Prior Period, sales to related parties were $1.5 million and purchases from related-party vendors were $5.0 million. These purchases consisted of $1.4 million relating to purchases of property and equipment, $0.2 million relating to inventory and consumables, $1.7 million relating to the rental of certain equipment or other services used in operations, and $1.7 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 | 9 Months Ended |
Sep. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE 13—INCOME TAXES The Company’s effective tax rates for the Current Quarter, Prior Quarter, Current Period and Prior Period were 4.3%, (12.8)%, 2.7% and 1.6%, respectively. The effective tax rates for the Current and Prior Quarter and the Current and Prior Period 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 the Current Period relative to a loss in the Prior Period. The Company recorded income tax expense (benefit) of $1.4 million, $(0.3) million, $2.0 million and $(0.3) million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017, and the Company |
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS | 9 Months Ended |
Sep. 30, 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 Current Period and Prior Period, 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 Current Period and the Prior Period: For the nine months ended September 30, 2018 2017 (in thousands) Net income (loss) attributable to Select Energy Services, Inc. $ 50,012 $ (7,164) Transfers (to) from noncontrolling interests: Decrease in additional paid-in capital as a result of the contribution of proceeds from the IPO to SES Holdings, LLC in exchange for common units — (40,569) 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 — (5,514) Increase in additional paid-in capital as a result of stock option exercises 374 — Increase in additional paid-in capital as a result of restricted stock issuance, net of forfeitures 1,946 — Increase in additional paid-in capital as a result of issuance of common stock due to vesting of restricted stock units 104 — Increase in additional paid-in capital as a result of the repurchase of common units of SES Holdings, LLC 73 — Increase in additional paid-in capital as a result of the conversion of Class B to Class A shares 146,865 — Increase in additional paid-in capital as a result of the Employee Stock Purchase Plan shares issued 13 — Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests $ 199,387 $ (53,247) |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
EARNINGS (LOSS) 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 2,682,883 and 1,856,550 shares are not included in the calculation of diluted weighted-average shares outstanding for the Current Quarter and Current Period, respectively, as the effect is antidilutive. The following tables present the Company’s calculation of basic and diluted earnings per share for the Current and Prior Quarter and the Current and Prior Period (dollars in thousands, except share and per share amounts): Three months ended September 30, 2018 Three months ended September 30, 2017 Select Energy Services, Inc. Class A Class A-2 Class B Select Energy Services, Inc. Class A Class A-1 Class B Numerator: Net income $ 31,267 $ 2,593 Net (income) attributable to noncontrolling interests (8,316) (1,369) Net income attributable to Select Energy Services, Inc. — basic 22,951 $ 22,951 $ — $ — 1,224 $ 1,224 $ — $ — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock 4 4 — — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options 15 15 — — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of ESPP — — — — — — — — Net income attributable to Select Energy Services, Inc. — diluted $ 22,970 $ 22,970 $ — $ — $ 1,224 $ 1,224 $ — $ — Denominator: Weighted-average shares of common stock outstanding — basic 78,896,373 — 27,239,419 30,336,923 — 38,462,541 Dilutive effect of restricted stock 55,858 — — 14,307 — — Dilutive effect of stock options 188,179 — — 6,342 — — Dilutive effect of ESPP 92 — — — — — Weighted-average shares of common stock outstanding — diluted 79,140,502 — 27,239,419 30,357,572 — 38,462,541 Earnings per share: Basic $ 0.29 $ — $ — $ 0.04 $ — $ — Diluted $ 0.29 $ — $ — $ 0.04 $ — $ — Nine months ended September 30, 2018 Nine months ended September 30, 2017 Select Energy Services, Inc. Class A Class A-2 Class B Select Energy Services, Inc. Class A Class A-1 Class B Numerator: Net income (loss) $ 72,421 $ (20,177) Net (income) loss attributable to noncontrolling interests (22,409) 13,013 Net income (loss) attributable to Select Energy Services, Inc. — basic 50,012 $ 48,523 $ 1,489 $ — (7,164) $ (4,485) $ (2,679) $ — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock 8 10 (2) — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options 22 27 (5) — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of ESPP — — — — — — — — Net income (loss) attributable to Select Energy Services, Inc. — diluted $ 50,042 $ 48,560 $ 1,482 $ — $ (7,164) $ (4,485) $ (2,679) $ — Denominator: Weighted-average shares of common stock outstanding — basic 69,929,330 2,145,311 33,994,800 16,189,997 9,671,795 38,462,541 Dilutive effect of restricted stock 95,822 — — — — — Dilutive effect of stock options 285,606 — — — — — Dilutive effect of ESPP 94 — — — — — Weighted-average shares of common stock outstanding — diluted 70,310,852 2,145,311 33,994,800 16,189,997 9,671,795 38,462,541 Earnings (loss) per share: Basic $ 0.69 $ 0.69 $ — $ (0.28) $ (0.28) $ — Diluted $ 0.69 $ 0.69 $ — $ (0.28) $ (0.28) $ — |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 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 CODM 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 December 31, 2017 and for the Prior Quarter and Prior Period ended September 30, 2017. 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 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, field and well services, sand-hauling and fluid-logistics services. In addition, we provide water transfer, fluid hauling, containment and rental services in Canada. These services are performed to establish, maintain or 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 Current and Prior Quarter and the Current and Prior Period is as follows: For the three months ended September 30, 2018 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 281,361 $ 37,384 $ 23,548 $ 39,692 Oilfield chemicals 64,206 2,824 2,115 2,585 Wellsite services 51,956 1,167 6,190 2,853 Eliminations (553) — — — Income from operations 41,375 Corporate — (9,117) 984 — Interest expense, net — (1,322) — — Other income, net — 1,746 — — $ 396,970 $ 32,682 $ 32,837 $ 45,130 For the three months ended September 30, 2017 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 125,142 $ 9,844 $ 19,433 $ 22,260 Oilfield chemicals — — — — Wellsite services 29,275 (306) 3,987 4,844 Eliminations (537) — — — Income from operations 9,538 Corporate — (7,081) 375 — Interest expense, net — (484) — — Other income, net — 326 — — $ 153,880 $ 2,299 $ 23,795 $ 27,104 For the nine months ended September 30, 2018 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 812,681 $ 98,584 $ 66,390 $ 101,461 Oilfield chemicals 192,678 4,786 7,853 8,264 Wellsite services 163,078 2,445 18,937 12,330 Eliminations (1,825) — — — Income from operations 105,815 Corporate — (30,159) 2,332 — Interest expense, net — (3,815) — — Other income, net — 2,607 — — $ 1,166,612 $ 74,448 $ 95,512 $ 122,055 For the nine months ended September 30, 2017 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 311,645 $ 5,652 $ 55,623 $ 57,273 Oilfield chemicals — — — — Wellsite services 78,007 (3,757) 11,521 14,909 Eliminations (1,398) — — — Loss from operations 1,895 Corporate — (23,855) 1,312 — Interest expense, net — (1,885) — — Other income, net — 3,342 — — $ 388,254 $ (20,503) $ 68,456 $ 72,182 Total assets by segment as of September 30, 2018 and December 31, 2017 is as follows: As of As of September 30, 2018 December 31, 2017 (in thousands) Water solutions $ 1,087,425 $ 994,159 Oilfield chemicals 184,635 186,333 Wellsite services 135,378 151,272 Corporate 31,347 24,604 $ 1,438,785 $ 1,356,368 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 17—SUBSEQUENT EVENTS The Company has evaluated subsequent events for potential recognition and/or disclosure through November 7, 2018, the date these consolidated financial statements were available to be issued. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 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. |
Asset retirement obligations | Asset retirement obligations: The Company’s asset retirement obligations (“ARO”) relate to 19 disposal facilities with obligations for plugging wells, removing surface equipment, and returning land to its pre-drilling condition. The following table describes the changes to the Company’s ARO liability for the Current Period: Nine months ended September 30, 2018 (in thousands) Balance at beginning of Current Period $ 1,846 Accretion expense, included in depreciation and amortization expense 142 Change in estimate 386 Divestitures (508) Balance at end of Current Period $ 1,866 We review the adequacy of our ARO liabilities whenever indicators suggest that the estimated cash flows underlying the liabilities have changed. The Company’s ARO liabilities are included in accrued expenses and other current liabilities and other long-term liabilities in the accompanying consolidated balance sheets for the nine months ended September 30, 2018 and year ended December 31, 2017. |
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 and estimated salvage values of its fixed assets on an ongoing basis. This most recent review, conducted in the first quarter of 2018, indicated that the economic lives of certain assets were longer than the historic asset lives previously used by the Company. This increase was positively supported by effective use, care and custody of the assets. Also, this review indicated increased salvage value estimates for certain assets within vehicles and equipment, which was supported by recent vehicle sales data, and is expected to continue prospectively. As a result, effective January 1, 2018, the Company changed its estimates of the useful lives of certain assets included in vehicles and equipment and machinery and equipment, and increased salvage value estimates for certain assets within vehicles and equipment, to better reflect the estimated periods and depreciable amounts during which these assets will remain in service. The average estimated useful lives of the assets impacted in the vehicles and equipment category increased from 6.0 to 8.1 years, while the average estimated useful lives of assets impacted in machinery and equipment increased from 5.5 years to 6.9 years. The impact of the increase of useful lives was to defer and extend out depreciation expense, including lower expense in 2018. The impact of the increase in salvage values was to permanently lower current and future depreciation expense. The fixed assets obtained in 2017 through mergers and acquisitions, including the Rockwater Merger, have consistent useful life and salvage value estimates with the rest of the Company’s fixed assets. The change in the estimated useful lives of fixed assets and change in salvage value estimates was implemented on a prospective basis starting January 1, 2018. Excluding fixed assets attained through mergers and acquisitions during 2017, the impact of the change in useful estimate of fixed assets purchased on or before December 31, 2017 was to reduce and defer depreciation expense by $2.7 million and $11.7 million during the Current Quarter and Current Period, respectively. Also, the increase in estimated vehicle salvage value produced a permanent depreciation expense reduction of $0.9 million and $2.9 million, during the Current Quarter and Current Period, respectively. For the Current Quarter and Current Period, the changes in useful life estimate and increased salvage value produced an increase to net income of $2.5 million and $9.9 million, respectively, and increased basic and diluted earnings per share attributable to our stockholders by $0.03 and $0.14, respectively. |
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. The Company will lose its emerging growth company status as of December 31, 2018, as the market value of our common stock held by non-affiliates was greater than $700 million as of June 30, 2018. |
Recent accounting pronouncements: | Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB deferred the effective date by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. The Company does not expect the adoption of the ASU or related ASUs 2016-08, 2016-10, 2016-12 and 2016-20, will have a material impact on its consolidated financial statements because (i) most customer agreements begin and end within the same period and (ii) our current revenue recognition methodologies are similar to the new guidance. The Company is evaluating the impact on the related disclosures and internal controls over financial reporting. The Company will use the modified retrospective method upon adoption of the ASU. In February 2016, the FASB issued ASU 2016-02, Leases , which modifies the lease recognition requirements and requires entities to recognize the assets and liabilities arising from leases on the balance sheet and to disclose key qualitative and quantitative information about the entity’s leasing arrangements. Based on the original guidance in ASU 2016-02, lessees and lessors would have been required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including a number of optional practical expedients. In July 2018, the FASB issued ASU No. 2018-11, Leases (ASC 842): Targeted Improvements, which provides entities with an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions. 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 the Company will lose its EGC status as of December 31, 2018, the ASU will become effective January 1, 2019. The Company currently anticipates that it will elect to recognize its lease assets and liabilities on a prospective basis, beginning on January 1, 2019, using an optional transition method. Additionally, the Company expects (i) not to set up right of use assets and lease liabilities for short-term leases, (ii) to elect to treat lease and non-lease components as a single lease component and (iii) to grandfather its current accounting for land easements that commenced before January 1, 2019. The Company expects the adoption of these ASUs to have a material increase to assets and liabilities on the consolidated balance sheets. However, because the Company is currently evaluating the impact of these ASUs and, ASU 2018-01, Land Easements, it is unable to quantify the overall impact at this time. 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. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, and requires a modified retrospective transition approach. The Company is currently evaluating the impact this standard will have on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends eight specific cash flow issues with the objective of reducing diversity in practice. 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. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. 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. As the Company will lose its EGC status as of December 31, 2018, the ASU will become effective for calendar year 2018 at that time. The amendments in this ASU should be applied prospectively. The Company does not expect the adoption of the ASU will have a material impact 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. 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. The pronouncement should be applied prospectively to an award modified on or after the adoption date. The Company adopted this ASU in 2018, and the adoption of this guidance did not materially affect its consolidated financial statements and related disclosures. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Summary of change in asset retirement obligations | Nine months ended September 30, 2018 (in thousands) Balance at beginning of Current Period $ 1,846 Accretion expense, included in depreciation and amortization expense 142 Change in estimate 386 Divestitures (508) Balance at end of Current Period $ 1,866 |
ACQUISITION (Tables)
ACQUISITION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Rockwater Merger | |
Schedule Of consideration transferred and the estimated fair value of identified assets acquired and liabilities | 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) 141,720 Property and equipment (2) 188,610 Intangible assets Customer relationships (3) 89,661 Trademarks and patents 31,223 Non-compete agreements 3,811 Other long-term assets 88 Deferred tax liabilities (408) Long-term debt (80,555) Other long-term liabilities (3) (2,517) Total identifiable net assets acquired 371,633 Goodwill 248,568 Fair value allocated to net assets acquired $ 620,201 (1) During the Current Period, the Company obtained additional information related to working capital which led to a decrease of $5.2 million and a corresponding increase in goodwill of $5.2 million compared to the estimated fair values included in the 2017 Form 10-K. (2) During the Current Period, the Company obtained additional information related to property and equipment which led to an increase of $3.0 million and a corresponding decrease in goodwill of $3.0 million compared to the estimated fair values included in the 2017 Form 10-K. (3) During the Current Period, the Company obtained additional information related to customer relationships and other long-term liabilities which led to an increase of $0.7 million and a decrease of $0.1 million, respectively, and a corresponding decrease to goodwill of $0.8 million compared to the estimated fair values included in the 2017 Form 10-K. |
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 September 30, Nine months ended September 30, 2017 2017 (unaudited) (in thousands) Revenue $ 357,160 $ 889,442 Net income (loss) $ 21,935 $ (11,602) Less: net (income) loss attributable to noncontrolling interests (1) (8,885) 4,679 Net income (loss) attributable to Select Energy Services, Inc. (1) $ 13,050 $ (6,923) (1) The allocation of net income (loss) attributable to noncontrolling interests and Select Inc. gives effect to the equity structure as of September 30, 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, 2017. However, the calculation of pro forma net income (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) | 9 Months Ended |
Sep. 30, 2018 | |
EXIT AND DISPOSAL ACTIVITIES | |
Summary of exit and disposal activities | Provision during the Usage during the Balance as of nine months ended nine months ended Balance as of December 31, 2017 September 30, 2018 September 30, 2018 September 30, 2018 (in thousands) Lease obligations and terminations $ 21,350 $ 4,142 $ 5,709 $ 19,783 Reclassification of deferred rent 1,254 1,332 Total $ 22,604 $ 21,115 Provision during the Usage during the Balance as of nine months ended nine months ended Balance as of December 31, 2016 September 30, 2017 September 30, 2017 September 30, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 2,871 $ 2,153 $ 18,718 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 19,972 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
INVENTORIES | |
Schedule of inventory | September 30, 2018 December 31, 2017 (in thousands) Raw materials $ 13,217 $ 11,462 Finished goods 33,753 29,674 Materials and supplies 2,917 3,462 49,887 44,598 Inventory reserve (430) — $ 49,457 $ 44,598 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | September 30, 2018 December 31, 2017 (in thousands) Land $ 17,111 $ 15,286 Buildings and leasehold improvements 100,900 99,222 Vehicles and equipment 84,394 70,537 Vehicles and equipment - capital lease 2,169 2,810 Machinery and equipment 744,086 716,420 Machinery and equipment - capital lease 532 544 Computer equipment and software 14,442 12,466 Computer equipment and software - capital lease 356 356 Office furniture and equipment 4,634 4,320 Disposal wells 63,422 67,805 Other 497 497 Construction in progress 79,595 44,732 1,112,138 1,034,995 Less accumulated depreciation and impairment (608,040) (560,886) Total property and equipment, net $ 504,098 $ 474,109 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 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) 4,317 (2,985) — 1,332 Balance as of September 30, 2018 $ 249,859 $ 12,652 $ 12,242 $ 274,753 See Note 3―Acquisitions for additional information. |
Summary of components of other intangible assets | As of September 30, 2018 As of December 31, 2017 Gross Accumulated Net Gross Accumulated Net Value Amortization Value Value Amortization Value (in thousands) (in thousands) Customer relationships $ 169,901 $ 65,837 $ 104,064 $ 169,250 $ 57,836 $ 111,414 Patents and trademarks 33,552 1,166 32,386 33,544 414 33,130 Other 16,458 4,581 11,877 14,704 3,182 11,522 Total other intangible assets $ 219,911 $ 71,584 $ 148,327 $ 217,498 $ 61,432 $ 156,066 |
Summary of future estimated amortization expense for other intangible assets | Amount (in thousands) Remainder of 2018 $ 2,899 2019 11,595 2020 11,302 2021 10,118 2022 9,904 Thereafter 72,037 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 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) | 9 Months Ended |
Sep. 30, 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 nine months ended September 30, 2018 Weighted-average Weighted-average Remaining Contractual Aggregate Intrinsic Stock Options Exercise Price Term (Years) Value (in thousands) (a) Beginning balance, outstanding 3,495,935 $ 14.12 5.1 $ 16,368 Granted 584,846 26.02 Exercised (79,333) 8.12 Forfeited (85,849) 15.05 Expired (40,390) 17.32 Ending balance, outstanding 3,875,209 $ 15.98 5.1 $ 2,750 Ending balance, exercisable 2,850,903 $ 14.64 3.8 $ 1,702 Non-vested at end of period 1,024,306 $ 19.72 (a) 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 $11.84 and $18.24 as of September 28, 2018 and December 29, 2017, respectively. |
Schedule of percentage of stock settled incentives earned | Stock Price at Vesting Date (1) Percentage of Target Amount Earned Less than $20.00 0% At least $20.00, but less than $25.00 100% $25.00 or greater 200% The stock price at vesting date equals the greater of (i) the fair market value of a share of the Company’s stock on the vesting date, or (ii) the volume weighted average closing price of a share of the Company’s stock, as reported on the NYSE, for the 30 trading days preceding the vesting date. |
Schedule of stock-settled incentive awards outstanding | Award Value Value at Target Being Recognized Non-vested at December 31, 2017 $ — $ — Granted during 2018 3,871 1,479 Forfeited during 2018 (724) (277) Ending balance at September 30, 2018 $ 3,147 $ 1,202 |
summary of ESPP activity | The following table summarizes ESPP activity (in thousands, except shares): For the nine months ended September 30, 2018 Cash received for shares issued $ 85,635 Shares issued 6,413 |
Restricted Stock | |
Schedule of restricted stock activity | For the nine months ended September 30, 2018 Weighted-average Restricted Stock Awards Grant Date Fair Value Non-vested at December 31, 2017 299,801 $ 16.36 Granted 438,182 19.52 Vested (191,400) 16.36 Forfeited (49,634) 17.62 Non-vested at September 30, 2018 496,949 $ 19.02 |
Restricted Stock Units | |
Schedule of restricted stock activity | For the nine months ended September 30, 2018 Weighted-average Restricted Stock Units Grant Date Fair Value Non-vested at December 31, 2017 30,360 $ 19.88 Granted — — Vested (27,860) 19.96 Non-vested at September 30, 2018 2,500 $ 19.00 |
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% |
Summary of activity related to the units outstanding | Period Granted Target Shares Outstanding at Beginning of Period Target Shares Granted Target Shares Vested Target Shares Forfeited Target Shares Outstanding at End of Period 2018 — 280,021 — (11,852) 268,169 Total — 280,021 — (11,852) 268,169 |
NONCONTROLLING INTERESTS (Table
NONCONTROLLING INTERESTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
NONCONTROLLING INTERESTS. | |
Summary of the effects of changes in noncontrolling interests | For the nine months ended September 30, 2018 2017 (in thousands) Net income (loss) attributable to Select Energy Services, Inc. $ 50,012 $ (7,164) Transfers (to) from noncontrolling interests: Decrease in additional paid-in capital as a result of the contribution of proceeds from the IPO to SES Holdings, LLC in exchange for common units — (40,569) 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 — (5,514) Increase in additional paid-in capital as a result of stock option exercises 374 — Increase in additional paid-in capital as a result of restricted stock issuance, net of forfeitures 1,946 — Increase in additional paid-in capital as a result of issuance of common stock due to vesting of restricted stock units 104 — Increase in additional paid-in capital as a result of the repurchase of common units of SES Holdings, LLC 73 — Increase in additional paid-in capital as a result of the conversion of Class B to Class A shares 146,865 — Increase in additional paid-in capital as a result of the Employee Stock Purchase Plan shares issued 13 — Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests $ 199,387 $ (53,247) |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
EARNINGS (LOSS) PER SHARE | |
Summary of calculation of basic and diluted earnings per share | The following tables present the Company’s calculation of basic and diluted earnings per share for the Current and Prior Quarter and the Current and Prior Period (dollars in thousands, except share and per share amounts): Three months ended September 30, 2018 Three months ended September 30, 2017 Select Energy Services, Inc. Class A Class A-2 Class B Select Energy Services, Inc. Class A Class A-1 Class B Numerator: Net income $ 31,267 $ 2,593 Net (income) attributable to noncontrolling interests (8,316) (1,369) Net income attributable to Select Energy Services, Inc. — basic 22,951 $ 22,951 $ — $ — 1,224 $ 1,224 $ — $ — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock 4 4 — — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options 15 15 — — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of ESPP — — — — — — — — Net income attributable to Select Energy Services, Inc. — diluted $ 22,970 $ 22,970 $ — $ — $ 1,224 $ 1,224 $ — $ — Denominator: Weighted-average shares of common stock outstanding — basic 78,896,373 — 27,239,419 30,336,923 — 38,462,541 Dilutive effect of restricted stock 55,858 — — 14,307 — — Dilutive effect of stock options 188,179 — — 6,342 — — Dilutive effect of ESPP 92 — — — — — Weighted-average shares of common stock outstanding — diluted 79,140,502 — 27,239,419 30,357,572 — 38,462,541 Earnings per share: Basic $ 0.29 $ — $ — $ 0.04 $ — $ — Diluted $ 0.29 $ — $ — $ 0.04 $ — $ — Nine months ended September 30, 2018 Nine months ended September 30, 2017 Select Energy Services, Inc. Class A Class A-2 Class B Select Energy Services, Inc. Class A Class A-1 Class B Numerator: Net income (loss) $ 72,421 $ (20,177) Net (income) loss attributable to noncontrolling interests (22,409) 13,013 Net income (loss) attributable to Select Energy Services, Inc. — basic 50,012 $ 48,523 $ 1,489 $ — (7,164) $ (4,485) $ (2,679) $ — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock 8 10 (2) — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options 22 27 (5) — — — — — Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of ESPP — — — — — — — — Net income (loss) attributable to Select Energy Services, Inc. — diluted $ 50,042 $ 48,560 $ 1,482 $ — $ (7,164) $ (4,485) $ (2,679) $ — Denominator: Weighted-average shares of common stock outstanding — basic 69,929,330 2,145,311 33,994,800 16,189,997 9,671,795 38,462,541 Dilutive effect of restricted stock 95,822 — — — — — Dilutive effect of stock options 285,606 — — — — — Dilutive effect of ESPP 94 — — — — — Weighted-average shares of common stock outstanding — diluted 70,310,852 2,145,311 33,994,800 16,189,997 9,671,795 38,462,541 Earnings (loss) per share: Basic $ 0.69 $ 0.69 $ — $ (0.28) $ (0.28) $ — Diluted $ 0.69 $ 0.69 $ — $ (0.28) $ (0.28) $ — |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
SEGMENT INFORMATION | |
Summary of financial information by segment | For the three months ended September 30, 2018 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 281,361 $ 37,384 $ 23,548 $ 39,692 Oilfield chemicals 64,206 2,824 2,115 2,585 Wellsite services 51,956 1,167 6,190 2,853 Eliminations (553) — — — Income from operations 41,375 Corporate — (9,117) 984 — Interest expense, net — (1,322) — — Other income, net — 1,746 — — $ 396,970 $ 32,682 $ 32,837 $ 45,130 For the three months ended September 30, 2017 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 125,142 $ 9,844 $ 19,433 $ 22,260 Oilfield chemicals — — — — Wellsite services 29,275 (306) 3,987 4,844 Eliminations (537) — — — Income from operations 9,538 Corporate — (7,081) 375 — Interest expense, net — (484) — — Other income, net — 326 — — $ 153,880 $ 2,299 $ 23,795 $ 27,104 For the nine months ended September 30, 2018 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 812,681 $ 98,584 $ 66,390 $ 101,461 Oilfield chemicals 192,678 4,786 7,853 8,264 Wellsite services 163,078 2,445 18,937 12,330 Eliminations (1,825) — — — Income from operations 105,815 Corporate — (30,159) 2,332 — Interest expense, net — (3,815) — — Other income, net — 2,607 — — $ 1,166,612 $ 74,448 $ 95,512 $ 122,055 For the nine months ended September 30, 2017 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures (in thousands) Water solutions $ 311,645 $ 5,652 $ 55,623 $ 57,273 Oilfield chemicals — — — — Wellsite services 78,007 (3,757) 11,521 14,909 Eliminations (1,398) — — — Loss from operations 1,895 Corporate — (23,855) 1,312 — Interest expense, net — (1,885) — — Other income, net — 3,342 — — $ 388,254 $ (20,503) $ 68,456 $ 72,182 Total assets by segment as of September 30, 2018 and December 31, 2017 is as follows: As of As of September 30, 2018 December 31, 2017 (in thousands) Water solutions $ 1,087,425 $ 994,159 Oilfield chemicals 184,635 186,333 Wellsite services 135,378 151,272 Corporate 31,347 24,604 $ 1,438,785 $ 1,356,368 |
BUSINESS AND BASIS OF PRESENT_2
BUSINESS AND BASIS OF PRESENTATION (Details) | Jan. 12, 2018shares | Nov. 01, 2017USD ($)shares | May 10, 2017USD ($)$ / sharesshares | May 05, 2017USD ($) | Apr. 26, 2017$ / sharesshares | Dec. 20, 2016USD ($)$ / sharesshares | May 31, 2017USD ($) | Sep. 30, 2018USD ($)segment$ / sharesshares | Sep. 30, 2017USD ($)shares | Mar. 31, 2018USD ($) | Dec. 31, 2017$ / sharesshares | Jun. 13, 2017shares | Dec. 31, 2016shares |
Share price | $ / shares | $ 20.50 | ||||||||||||
Net proceeds from the IPO | $ | $ 128,500,000 | $ 731,000 | |||||||||||
Payments on long-term debt | $ | $ 34,000,000 | 55,000,000 | $ 34,000,000 | ||||||||||
Settlement of phantom units | $ | $ 7,800,000 | ||||||||||||
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 | 10,005,000 | ||||||||||||
Par value | $ / shares | $ 0.01 | $ 0.01 | |||||||||||
Common stock issued | 80,658,534 | 59,182,176 | |||||||||||
Number of shares outstanding | 80,658,534 | 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 | 26,026,843 | 40,331,989 | |||||||||||
Number of shares outstanding | 26,026,843 | 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 POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) $ / shares in Units, $ in Thousands | Jan. 01, 2018USD ($) | Sep. 30, 2018USD ($)facility$ / shares | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)facility$ / shares | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Jun. 30, 2018USD ($) |
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | |||||||
Balance at beginning of Current Period | $ 1,846 | $ 1,846 | |||||
Accretion expense, included in depreciation and amortization expense | 142 | ||||||
Change in estimate | 386 | ||||||
Divestitures | (508) | ||||||
Balance at end of Current Period | $ 1,866 | $ 1,866 | $ 1,846 | ||||
Number of disposal facilities | facility | 19 | 19 | |||||
PROPERTY AND EQUIPMENT | |||||||
Reduction in depreciation and amortization expense | $ (984) | $ (375) | $ (2,332) | $ (1,312) | |||
Net income | 22,951 | $ 1,224 | 50,012 | $ (7,164) | |||
Minimum | |||||||
PROPERTY AND EQUIPMENT | |||||||
Market value of stock held by non-affiliates | $ 700,000 | ||||||
Change in useful life estimate and increased salvage value | |||||||
PROPERTY AND EQUIPMENT | |||||||
Net income | $ 2,500 | $ 9,900 | |||||
Basic & Diluted | $ / shares | $ 0.03 | $ 0.14 | |||||
Change in depreciable lives of property and equipment | |||||||
PROPERTY AND EQUIPMENT | |||||||
Reduction in depreciation and amortization expense | $ 2,700 | $ 11,700 | |||||
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 | |||||
Vehicle salvage value | |||||||
PROPERTY AND EQUIPMENT | |||||||
Reduction in depreciation and amortization expense | $ 900 | $ 2,900 |
ACQUISITIONS - Rockwater Merger
ACQUISITIONS - Rockwater Merger (Details) - USD ($) $ in Thousands | Jan. 12, 2018 | Nov. 01, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2016 |
Less: identified assets acquired and liabilities assumed | ||||||
Goodwill | $ 274,753 | $ 273,421 | $ 274,753 | $ 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 | 249,859 | 245,542 | 249,859 | |||
Oilfield Chemicals | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Goodwill | 12,652 | $ 15,637 | 12,652 | |||
Rockwater Merger | ||||||
Business Acquisition [Line Items] | ||||||
Transaction-related costs | $ 2,600 | $ 6,300 | ||||
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 | 141,720 | |||||
Property and equipment | 188,610 | |||||
Other long-term assets | 88 | |||||
Deferred tax liabilities | (408) | |||||
Long-term debt | (80,555) | |||||
Other long-term liabilities | (2,517) | |||||
Total identifiable net assets acquired | 371,633 | |||||
Goodwill | 248,568 | |||||
Fair value allocated to net assets acquired | 620,201 | |||||
Decrease in working capital | 5,200 | |||||
Increase (Decrease) in goodwill | 5,200 | |||||
Decrease in other long-term liabilities | $ 100 | |||||
Rockwater Merger | SES Holdings | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Shares issued in Merger Agreement | 4,356,477 | |||||
Rockwater Merger | Property and equipment | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Increase (Decrease) in goodwill | $ (3,000) | |||||
Increase in Property and equipment | 3,000 | |||||
Rockwater Merger | Customer relationships | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Intangible assets | 89,661 | |||||
Increase (Decrease) in goodwill | (800) | |||||
Increase in customer relationships | 700 | |||||
Rockwater Merger | Trademarks and patents | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Intangible assets | 31,223 | |||||
Rockwater Merger | Noncompete agreements | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Intangible assets | 3,811 | |||||
Rockwater Merger | Water Solutions | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Goodwill | 235,900 | |||||
Rockwater Merger | Oilfield Chemicals | ||||||
Less: identified assets acquired and liabilities assumed | ||||||
Goodwill | 12,700 | |||||
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 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
ACQUISITION | ||||
Goodwill | $ 274,753 | $ 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 Water_2
ACQUISITIONS - Resource Water Acquisition - Purchase price allocation (Details) - USD ($) $ in Thousands | Sep. 15, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Less: identified assets acquired and liabilities assumed | ||||
Goodwill | $ 274,753 | $ 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 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
ACQUISITION | ||||
Goodwill | $ 274,753 | $ 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 | $ 1,000 |
ACQUISITIONS - GRR Acquisitio_2
ACQUISITIONS - GRR Acquisition - Purchase price allocation (Details) - USD ($) $ in Thousands | Mar. 10, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Less: identified assets acquired and liabilities assumed | ||||
Goodwill | $ 274,753 | $ 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) - GRR Acquisition - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Pro forma information | ||
Revenue | $ 357,160 | $ 889,442 |
Net loss (loss) | 21,935 | (11,602) |
Less: net (income) loss attributable to noncontrolling interests | (8,885) | 4,679 |
Net income (loss) attributable to Select Energy Services, Inc. | $ 13,050 | $ (6,923) |
ACQUISITIONS - Asset Acquisitio
ACQUISITIONS - Asset Acquisitions (Details) - USD ($) $ in Thousands | May 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jun. 21, 2017 |
Asset acquisitions | ||||||
Cash payment | $ 45,130 | $ 27,104 | $ 122,055 | $ 72,182 | ||
Tex-Star Water Services, LLC | Nonrecurring | ||||||
Asset acquisitions | ||||||
Fixed assets acquired | $ 4,200 | |||||
Data Automated Waters Systems, LLC | Nonrecurring | ||||||
Asset acquisitions | ||||||
Assets acquired | $ 4,000 | |||||
Cash payment | 2,000 | |||||
Fixed assets acquired | $ 1,800 | |||||
Data Automated Waters Systems, LLC | Nonrecurring | Class A Common Stock | ||||||
Asset acquisitions | ||||||
Shares of stock issued for asset purchase | 128,370 | |||||
Value os stock issued for asset purchase | $ 2,000 | |||||
Data Automated Waters Systems, LLC | Nonrecurring | Patents | ||||||
Asset acquisitions | ||||||
Intangible assets acquired | 1,900 | |||||
Data Automated Waters Systems, LLC | Nonrecurring | Software | ||||||
Asset acquisitions | ||||||
Intangible assets acquired | $ 300 |
EXIT AND DISPOSAL ACTIVITIES (D
EXIT AND DISPOSAL ACTIVITIES (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2016USD ($)item | Dec. 31, 2017USD ($) | |
Exit and disposal activities | ||||
Number of facilities closed | item | 15 | |||
Amount reclassed to accrued lease obligations | $ 200 | |||
Accrued expenses and other current liabilities | $ 91,218 | $ 81,112 | ||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 22,604 | 19,069 | ||
Restructuring Reserve, Ending Balance | 21,115 | 19,972 | $ 19,069 | |
Accrued Liabilities | ||||
Exit and disposal activities | ||||
Accrued expenses and other current liabilities | 2,600 | |||
Lease abandonment costs | ||||
Exit and disposal activities | ||||
Charges related to exit and disposal activities | 4,100 | 2,900 | ||
Lease obligations and terminations | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 21,350 | 18,000 | ||
Provision for Restructuring | 4,142 | 2,871 | ||
Payments for Restructuring | 5,709 | 2,153 | ||
Restructuring Reserve, Ending Balance | 19,783 | 18,718 | 18,000 | |
Reclassifications of deferred rent | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 1,254 | 1,069 | ||
Restructuring Reserve, Ending Balance | $ 1,332 | $ 1,254 | $ 1,069 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | |
Significant components of inventory | |||
Raw materials | $ 13,217 | $ 11,462 | |
Finished goods | 33,753 | 29,674 | |
Materials and supplies | 2,917 | 3,462 | |
Inventory gross | 49,887 | 44,598 | |
Inventory reserve | (430) | $ 0 | |
Inventory net | 49,457 | $ 44,598 | |
Inventory reserve | $ 430 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Property and equipment | |||||
Property and equipment | $ 1,112,138 | $ 1,112,138 | $ 1,034,995 | ||
Accumulated depreciation | (608,040) | (608,040) | (560,886) | ||
Property and equipment, net | 504,098 | 504,098 | 474,109 | ||
Write off of property and equipment | 2,282 | ||||
Depreciation | 29,800 | $ 21,200 | $ 85,200 | $ 61,100 | |
Leases expiry period | 5 years | ||||
Capital lease obligations | |||||
Property and equipment | |||||
Depreciation | 300 | $ 1,000 | |||
Capital lease obligations | $ 0 | $ 0 | |||
Land | |||||
Property and equipment | |||||
Property and equipment | 17,111 | 17,111 | 15,286 | ||
Buildings and leasehold improvements | |||||
Property and equipment | |||||
Property and equipment | 100,900 | 100,900 | 99,222 | ||
Vehicles and equipment | |||||
Property and equipment | |||||
Property and equipment | 84,394 | 84,394 | 70,537 | ||
Property and equipment - capital lease | 2,169 | 2,169 | 2,810 | ||
Machinery and equipment | |||||
Property and equipment | |||||
Property and equipment | 744,086 | 744,086 | 716,420 | ||
Property and equipment - capital lease | 532 | 532 | 544 | ||
Computer equipment and software | |||||
Property and equipment | |||||
Property and equipment | 14,442 | 14,442 | 12,466 | ||
Property and equipment - capital lease | 356 | 356 | 356 | ||
Office furniture and equipment | |||||
Property and equipment | |||||
Property and equipment | 4,634 | 4,634 | 4,320 | ||
Disposal wells | |||||
Property and equipment | |||||
Property and equipment | 63,422 | 63,422 | 67,805 | ||
Other | |||||
Property and equipment | |||||
Property and equipment | 497 | 497 | 497 | ||
Construction in progress | |||||
Property and equipment | |||||
Property and equipment | 79,595 | $ 79,595 | $ 44,732 | ||
Water Solutions | |||||
Property and equipment | |||||
Write off of property and equipment | $ 2,300 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - GOODWILL (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Goodwill | ||
Balance at the beginning of the period | $ 273,421 | $ 12,242 |
Additions | 261,179 | |
Measurement period adjustment | 1,332 | |
Balance at the end of the period | 274,753 | 273,421 |
Water Solutions | ||
Goodwill | ||
Balance at the beginning of the period | 245,542 | |
Additions | 245,542 | |
Measurement period adjustment | 4,317 | |
Balance at the end of the period | 249,859 | 245,542 |
Oilfield Chemicals | ||
Goodwill | ||
Balance at the beginning of the period | 15,637 | |
Additions | 15,637 | |
Measurement period adjustment | (2,985) | |
Balance at the end of the period | 12,652 | 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 INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Other intangible assets | |||||
Gross Value | $ 219,911 | $ 219,911 | $ 217,498 | ||
Accumulated Amortization | 71,584 | 71,584 | 61,432 | ||
Net Value | 148,327 | 148,327 | 156,066 | ||
Amortization expense | 3,000 | $ 2,600 | 10,300 | $ 7,300 | |
Annual amortization of intangible assets | |||||
Remainder of 2018 | 2,899 | 2,899 | |||
2,019 | 11,595 | 11,595 | |||
2,020 | 11,302 | 11,302 | |||
2,021 | 10,118 | 10,118 | |||
2,022 | 9,904 | 9,904 | |||
Thereafter | 72,037 | 72,037 | |||
Water rights | |||||
Other intangible assets | |||||
Intangible assets | 7,000 | 7,000 | 5,300 | ||
Trademarks | |||||
Other intangible assets | |||||
Intangible assets | 23,400 | 23,400 | 23,400 | ||
Customer relationships | |||||
Other intangible assets | |||||
Gross Value | 169,901 | 169,901 | 169,250 | ||
Accumulated Amortization | 65,837 | 65,837 | 57,836 | ||
Net Value | 104,064 | 104,064 | 111,414 | ||
Trademarks and patents | |||||
Other intangible assets | |||||
Gross Value | 33,552 | 33,552 | 33,544 | ||
Accumulated Amortization | 1,166 | 1,166 | 414 | ||
Net Value | 32,386 | 32,386 | 33,130 | ||
Other | |||||
Other intangible assets | |||||
Gross Value | 16,458 | 16,458 | 14,704 | ||
Accumulated Amortization | 4,581 | 4,581 | 3,182 | ||
Net Value | $ 11,877 | $ 11,877 | $ 11,522 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Thousands | Nov. 01, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 20, 2016 |
DEBT | |||||||
Amortization of debt issuance costs | $ 200 | $ 300 | $ 516 | $ 928 | |||
Average excess availability, less than 33% of the commitments | Base Rate Advances | |||||||
DEBT | |||||||
Variable interest rate (as a percent) | 1.00% | 1.00% | |||||
Average excess availability, less than 33% of the commitments | LIBOR | |||||||
DEBT | |||||||
Variable interest rate (as a percent) | 2.00% | 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% | 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% | 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% | 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% | 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 | $ 65,000 | $ 65,000 | $ 75,000 | ||||
Revolving line of credit | |||||||
DEBT | |||||||
Maximum borrowing capacity | $ 300,000 | $ 300,000 | |||||
Revolving line of credit | Letter of credit | |||||||
DEBT | |||||||
Maximum borrowing capacity | $ 290,800 | $ 290,800 | $ 261,100 | ||||
Senior secured credit facility | |||||||
DEBT | |||||||
Additional borrowing capacity | $ 150,000 | ||||||
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) | 3.992% | 3.992% | 3.319% | ||||
Reduction in borrowing capacity | $ 20,800 | $ 20,800 | $ 19,800 | ||||
Unused portion of available borrowing | 205,000 | 205,000 | |||||
Debt issuance costs | $ 2,800 | $ 2,800 | $ 3,300 | ||||
Senior secured credit facility | Minimum | |||||||
DEBT | |||||||
Percentage of borrowing base allowed | 30.00% | ||||||
Variable interest rate (as a percent) | 1.50% | 1.50% | |||||
Senior secured credit facility | Maximum | |||||||
DEBT | |||||||
Variable interest rate (as a percent) | 2.00% | 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 | 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 | $ 37,500 | ||||||
Senior secured credit facility | Criteria for distributions, scenario two | |||||||
DEBT | |||||||
Lookback period | 30 days | ||||||
Percentage outstanding | 20.00% | ||||||
Base amount | $ 30,000 | ||||||
Fixed charge coverage ratio | 1.00% | ||||||
Senior secured credit facility | Coverage Ratio Criteria | |||||||
DEBT | |||||||
Lookback period | 60 days | ||||||
Percentage outstanding | 10.00% | ||||||
Base amount | $ 15,000 | ||||||
Fixed charge coverage ratio | 1.00% | ||||||
Senior secured credit facility | Letter of credit | |||||||
DEBT | |||||||
Maximum borrowing capacity | $ 40,000 | ||||||
Senior secured credit facility | Swingline loan | |||||||
DEBT | |||||||
Maximum borrowing capacity | 30,000 | ||||||
Previous Credit Facility | |||||||
DEBT | |||||||
Maximum borrowing capacity | $ 100,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | 9 Months Ended |
Sep. 30, 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 | 9 Months Ended | ||
Sep. 30, 2018 | May 10, 2017 | Apr. 26, 2017 | |
EQUITY-BASED COMPENSATION | |||
Share Price | $ 20.50 | ||
offering 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) | 9 Months Ended |
Sep. 30, 2018$ / shares | |
EQUITY-BASED COMPENSATION | |
Weighted-average grant date fair value of equity options granted | $ 8.98 |
Assumptions for equity options granted: | |
Underlying Equity | 20.50 |
Strike Price | $ 30.75 |
Dividend Yield (%) | 0.00% |
Risk free rate(%) | 2.30% |
Volatility (%) | 50.00% |
Expected Term (Years) | 10 years |
Minimum | |
Assumptions for equity options granted: | |
Strike Price | $ 20.50 |
EQUITY-BASED COMPENSATION - Equ
EQUITY-BASED COMPENSATION - Equity Options Changed During Period (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Equity Options | ||
Beginning balance (in shares) | 3,495,935 | |
Granted (in shares) | 584,846 | |
Exercised (in shares) | 79,333 | |
Forfeited (in shares) | (85,849) | |
Expired (in shares) | 40,390 | |
Ending balance (in shares) | 3,875,209 | 3,495,935 |
Ending balance, exercisable (in shares) | 2,850,903 | |
Non-vested at end of period (in shares) | 1,024,306 | |
Weighted-average Exercise Price | ||
Beginning balance (in dollars per share) | $ 14.12 | |
Granted (in dollars per share) | 26.02 | |
Exercised (in dollars per share) | 8.12 | |
Forfeited (in dollars per share) | 15.05 | |
Expired (in dollars per share) | 17.32 | |
Ending balance (in dollars per share) | 15.98 | $ 14.12 |
Ending balance, exercisable | 14.64 | |
Non-vested at end of period (in dollar per share) | $ 19.72 | |
Weighted-average Remaining Contractual Term (Years) | ||
Outstanding | 5 years 1 month 6 days | 5 years 1 month 6 days |
Ending balance, exercisable | 3 years 9 months 18 days | |
Aggregate Intrinsic Value | ||
Beginning balance, outstanding | $ 16,368 | |
Ending balance, outstanding | 2,750 | $ 16,368 |
Ending balance, exercisable | $ 1,702 |
EQUITY-BASED COMPENSATION - E_2
EQUITY-BASED COMPENSATION - Equity Options (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 28, 2018 | Sep. 29, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Share Price | $ 20.50 | $ 20.50 | ||||
Equity options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Share Price | $ 11.84 | $ 18.24 | ||||
Compensation expense | $ 1.2 | $ 0.4 | $ 3.9 | $ 1.4 | ||
Unrecognized compensation expense | $ 5.9 | $ 5.9 | ||||
Weighted-average period for recognition (in years) | 1 year 3 months 18 days |
EQUITY-BASED COMPENSATION - Res
EQUITY-BASED COMPENSATION - Restricted stock (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
EQUITY-BASED COMPENSATION | ||||
offering period | 3 years | |||
Weighted-average remaining life | 2 years 3 months 18 days | |||
Common Stock | ||||
EQUITY-BASED COMPENSATION | ||||
Compensation expense | $ 1.1 | $ 0.1 | $ 3.2 | $ 0.4 |
Unrecognized compensation expense | $ 6.8 | $ 6.8 | ||
Weighted-average remaining life | 1 year 10 months 24 days | |||
Common Stock | Minimum | ||||
EQUITY-BASED COMPENSATION | ||||
offering period | 1 year | |||
Common Stock | Maximum | ||||
EQUITY-BASED COMPENSATION | ||||
offering period | 3 years | |||
Restricted Stock | ||||
Restricted stock | ||||
Beginning balance (in shares) | 299,801 | |||
Granted (in shares) | 438,182 | |||
Vested (in shares) | (191,400) | |||
Forfeited (in shares) | (49,634) | |||
Ending balance (in shares) | 496,949 | 496,949 | ||
Grant Date Fair Value | ||||
Beginning balance (in dollars per share) | $ 16.36 | |||
Granted (in dollars per share) | 19.52 | |||
Vested (in dollars per share) | 16.36 | |||
Forfeited | 17.62 | |||
Ending balance (in dollars per share) | $ 19.02 | $ 19.02 | ||
Restricted Stock Units | ||||
Restricted stock | ||||
Beginning balance (in shares) | 30,360 | |||
Vested (in shares) | (27,860) | |||
Ending balance (in shares) | 2,500 | 2,500 | ||
Grant Date Fair Value | ||||
Beginning balance (in dollars per share) | $ 19.88 | |||
Vested (in dollars per share) | 19.96 | |||
Ending balance (in dollars per share) | $ 19 | $ 19 |
EQUITY-BASED COMPENSATION - Per
EQUITY-BASED COMPENSATION - Performance share units (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018USD ($) | Sep. 30, 2018USD ($)item | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted-average remaining life | 2 years 3 months 18 days | |
Performance share units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 0.1 | $ 0.7 |
Fair value of outstanding shares | 3.2 | |
Unrecognized compensation expense | $ 2.5 | $ 2.5 |
Performance share units | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of times shares issued for each performance share settlement | item | 0 | |
Performance share units | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of times shares issued for each performance share settlement | item | 1.75 | |
Return on assets Less than 9.6% | Performance share units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Percentage of Target PSUs Earned | 0.00% | |
Return on assets 9.6% | Performance share units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Percentage of Target PSUs Earned | 50.00% | |
Return on assets 12% | Performance share units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Percentage of Target PSUs Earned | 100.00% | |
Return on assets 14.4% | Performance share units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Percentage of Target PSUs Earned | 175.00% |
EQUITY-BASED COMPENSATION - P_2
EQUITY-BASED COMPENSATION - Performance share units outstanding (Details) - Performance share units | 9 Months Ended |
Sep. 30, 2018shares | |
Performance share units | |
Target Shares Granted | 280,021 |
Target Shares Forfeited | (11,852) |
Ending balance (in shares) | 268,169 |
2,018 | |
Performance share units | |
Target Shares Granted | 280,021 |
Target Shares Forfeited | (11,852) |
Ending balance (in shares) | 268,169 |
EQUITY-BASED COMPENSATION - Sto
EQUITY-BASED COMPENSATION - Stock-Settled Incentive Awards (Details) - USD ($) $ in Millions | May 17, 2018 | Sep. 30, 2018 | Sep. 30, 2018 |
EQUITY-BASED COMPENSATION | |||
offering period | 3 years | ||
Stock-Settled Incentive Awards | |||
EQUITY-BASED COMPENSATION | |||
offering period | 2 years | ||
Vesting date | 30 days | ||
Compensation expense | $ 0.1 | $ 0.2 | |
Unrecognized compensation expense | $ 1 | $ 1 | |
Weighted-average period for recognition (in years) | 20 months | ||
Stock-Settled Incentive Awards | Minimum | |||
EQUITY-BASED COMPENSATION | |||
Pay out percentage | 0.00% | ||
Stock-Settled Incentive Awards | Maximum | |||
EQUITY-BASED COMPENSATION | |||
Pay out percentage | 200.00% | ||
Stock-Settled Incentive Awards | Less than $20.00 | |||
EQUITY-BASED COMPENSATION | |||
Percentage of Target Amount Earned | 0.00% | ||
Stock-Settled Incentive Awards | At least $20.00, but less than $25.00 | |||
EQUITY-BASED COMPENSATION | |||
Percentage of Target Amount Earned | 100.00% | ||
Stock-Settled Incentive Awards | $25.00 or greater | |||
EQUITY-BASED COMPENSATION | |||
Percentage of Target Amount Earned | 200.00% |
EQUITY-BASED COMPENSATION - S_2
EQUITY-BASED COMPENSATION - Stock-settled incentive awards outstanding (Details) - Stock-Settled Incentive Awards $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Value at Target | |
Granted during 2018 | $ 3,871 |
Forfeited during 2018 | (724) |
Non-vested at end of period | 3,147 |
Award Value Being Recognized | |
Granted during 2018 | 1,479 |
Forfeited during 2018 | (277) |
Non-vested at end of period | $ 1,202 |
EQUITY-BASED COMPENSATION - Emp
EQUITY-BASED COMPENSATION - Employee Stock Purchase Plan (ESPP) (Details) | 9 Months Ended |
Sep. 30, 2018USD ($)shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
offering period | 3 years |
ESPP | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Employee service period | 1 year |
offering period | 4 years |
Issue price (percentage) | 95.00% |
Maximum annual employees contribution | $ 15,000 |
Cash received for shares issued | $ 85,635,000 |
Shares issued | shares | 6,413 |
EQUITY-BASED COMPENSATION - Pha
EQUITY-BASED COMPENSATION - Phantom unit awards (Details) - USD ($) $ / shares in Units, $ in Millions | May 07, 2017 | May 05, 2017 | Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Payments For Settlement Of Phantom Units | $ 7.8 | ||||
Share price | $ 20.50 | ||||
Phantom unit awards [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Payments For Settlement Of Phantom Units | $ 7.8 | ||||
Share price | $ 14 | ||||
Cash payment (in dollars per share) | $ 5.53 | ||||
Compensation expense | $ 7.8 | $ 7.8 | |||
Outstanding units | 0 | 0 | 0 |
FAIR VALUE MEASUREMENT (Details
FAIR VALUE MEASUREMENT (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Transfers into Level3 | $ 0 | $ 0 |
Transfers out of Level3 | $ 0 | $ 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
RELATED PARTY TRANSACTIONS | ||||
Sales to related parties | $ 2,700,000 | $ 400,000 | $ 6,300,000 | $ 1,500,000 |
Purchases from related party vendors | $ 5,200,000 | 2,100,000 | $ 12,700,000 | 5,000,000 |
Minimum | ||||
RELATED PARTY TRANSACTIONS | ||||
Beneficial ownership (as a percent) | 5.00% | 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 | $ 1,000,000 | 700,000 | 3,500,000 | 1,400,000 |
Inventory and consumables | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 300,000 | 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 | 4,000,000 | 800,000 | 7,800,000 | 1,700,000 |
Management, consulting and other services | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | $ 200,000 | $ 500,000 | $ 1,100,000 | $ 1,700,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
INCOME TAXES | |||||
Effective Income tax (as percent) | 4.30% | (12.80%) | 2.70% | 1.60% | |
Statutory tax rate (as a percent) | 21.00% | 35.00% | |||
Tax expense (benefit) | $ 1,415 | $ (294) | $ 2,027 | $ (326) | |
Tax provision related to TCJA | $ 600 | ||||
Increase in efffective tax rate | 1.70% | 0.80% |
NONCONTROLLING INTERESTS (Detai
NONCONTROLLING INTERESTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Effects of changes in noncontrolling interests on equity | ||||
Net income(loss) attributable to Select Energy Services, Inc. | $ 22,951 | $ 1,224 | $ 50,012 | $ (7,164) |
Transfers (to) from noncontrolling interests: | ||||
Decrease in additional paid-in capital as a result of the contribution of proceeds from the IPO to SES Holdings, LLC in exchange for common units | (40,569) | |||
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 | (5,514) | |||
Increase in additional paid-in capital as a result of stock option exercises | 374 | |||
Increase in additional paid-in capital as a result of restricted stock issuance, net of forfeitures | 1,946 | |||
Increase in additional paid-in capital as a result of issuance of common stock due to vesting of restricted stock units | 104 | |||
Increase in additional paid-in capital as a result of the repurchase of common units of SES Holdings, LLC | 73 | |||
Increase in additional paid-in capital as a result of the conversion of Class B to Class A shares | 146,865 | |||
Increase in additional paid-in capital as a result of the Employee Stock Purchase Plan shares issued | 13 | |||
Change to equity from net income (loss) attributable to Select Energy Services, Inc. and transfers from noncontrolling interests | $ 199,387 | $ (53,247) |
EARNINGS (LOSS) PER SHARE (Deta
EARNINGS (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Calculation of basic and diluted earnings per share: | ||||
Antidilutive shares | 2,682,883 | 1,856,550 | ||
Net income (loss) | $ 31,267 | $ 2,593 | $ 72,421 | $ (20,177) |
Net (income) loss attributable to noncontrolling interests | (8,316) | (1,369) | (22,409) | 13,013 |
Net income (loss) attributable to Select Energy Services, Inc. | 22,951 | 1,224 | 50,012 | (7,164) |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock | 4 | 8 | ||
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options | 15 | 22 | ||
Net income (loss) attributable to Select Energy Services, Inc. — diluted | 22,970 | 1,224 | 50,042 | (7,164) |
Class A Common Stock | ||||
Calculation of basic and diluted earnings per share: | ||||
Net income (loss) attributable to Select Energy Services, Inc. | 22,951 | 1,224 | 48,523 | (4,485) |
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock | 4 | 10 | ||
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options | 15 | 27 | ||
Net income (loss) attributable to Select Energy Services, Inc. — diluted | $ 22,970 | $ 1,224 | $ 48,560 | $ (4,485) |
Weighted-average shares of common stock outstanding — basic | 78,896,373 | 30,336,923 | 69,929,330 | 16,189,997 |
Dilutive effect of restricted stock | 55,858 | 14,307 | 95,822 | |
Dilutive effect of stock options | 188,179 | 6,342 | 285,606 | |
Dilutive effect of ESPP | 92 | 94 | ||
Weighted-average shares of common stock outstanding — diluted | 79,140,502 | 30,357,572 | 70,310,852 | 16,189,997 |
Earnings (loss) per share, Basic | $ 0.29 | $ 0.04 | $ 0.69 | $ (0.28) |
Earnings (loss) per share, Diluted | $ 0.29 | $ 0.04 | $ 0.69 | $ (0.28) |
Class A-1 Common Stock | ||||
Calculation of basic and diluted earnings per share: | ||||
Net income (loss) attributable to Select Energy Services, Inc. | $ (2,679) | |||
Net income (loss) attributable to Select Energy Services, Inc. — diluted | $ (2,679) | |||
Weighted-average shares of common stock outstanding — basic | 9,671,795 | |||
Weighted-average shares of common stock outstanding — diluted | 9,671,795 | |||
Earnings (loss) per share, Basic | $ (0.28) | |||
Earnings (loss) per share, Diluted | $ (0.28) | |||
Class A-2 Common Stock | ||||
Calculation of basic and diluted earnings per share: | ||||
Net income (loss) attributable to Select Energy Services, Inc. | $ 1,489 | |||
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of restricted stock | (2) | |||
Add: Reallocation of net income attributable to noncontrolling interests for the dilutive effect of stock options | (5) | |||
Net income (loss) attributable to Select Energy Services, Inc. — diluted | $ 1,482 | |||
Weighted-average shares of common stock outstanding — basic | 2,145,311 | |||
Weighted-average shares of common stock outstanding — diluted | 2,145,311 | |||
Earnings (loss) per share, Basic | $ 0.69 | |||
Earnings (loss) per share, Diluted | $ 0.69 | |||
Class B Common Stock | ||||
Calculation of basic and diluted earnings per share: | ||||
Weighted-average shares of common stock outstanding — basic | 27,239,419 | 38,462,541 | 33,994,800 | 38,462,541 |
Weighted-average shares of common stock outstanding — diluted | 27,239,419 | 38,462,541 | 33,994,800 | 38,462,541 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)segment | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
SEGMENT INFORMATION | |||||
Number of operating segments | segment | 3 | ||||
Number of reportable segments | segment | 3 | ||||
Assets | $ 1,438,785 | $ 1,438,785 | $ 1,356,368 | ||
Segment information | |||||
Revenue | 396,970 | $ 153,880 | 1,166,612 | $ 388,254 | |
Income (loss) before taxes | 32,682 | 2,299 | 74,448 | (20,503) | |
Depreciation and Amortization | 32,837 | 23,795 | 95,512 | 68,456 | |
Capital Expenditures | 45,130 | 27,104 | 122,055 | 72,182 | |
Income (loss) from operations | 32,258 | 2,457 | 75,656 | (21,960) | |
Interest expense, net | (1,322) | (484) | (3,815) | (1,885) | |
Other income, net | 1,746 | 326 | 2,607 | 3,342 | |
Operating segment | |||||
Segment information | |||||
Income (loss) before taxes | 1,895 | ||||
Income (loss) from operations | 41,375 | 9,538 | 105,815 | ||
Operating segment | Water Solutions | |||||
SEGMENT INFORMATION | |||||
Assets | 1,087,425 | 1,087,425 | 994,159 | ||
Segment information | |||||
Revenue | 281,361 | 125,142 | 812,681 | 311,645 | |
Income (loss) before taxes | 37,384 | 9,844 | 98,584 | 5,652 | |
Depreciation and Amortization | 23,548 | 19,433 | 66,390 | 55,623 | |
Capital Expenditures | 39,692 | 22,260 | 101,461 | 57,273 | |
Operating segment | Oilfield Chemicals | |||||
SEGMENT INFORMATION | |||||
Assets | 184,635 | 184,635 | 186,333 | ||
Segment information | |||||
Revenue | 64,206 | 192,678 | |||
Income (loss) before taxes | 2,824 | 4,786 | |||
Depreciation and Amortization | 2,115 | 7,853 | |||
Capital Expenditures | 2,585 | 8,264 | |||
Operating segment | Wellsite Services | |||||
SEGMENT INFORMATION | |||||
Assets | 135,378 | 135,378 | 151,272 | ||
Segment information | |||||
Revenue | 51,956 | 29,275 | 163,078 | 78,007 | |
Income (loss) before taxes | 1,167 | (306) | 2,445 | (3,757) | |
Depreciation and Amortization | 6,190 | 3,987 | 18,937 | 11,521 | |
Capital Expenditures | 2,853 | 4,844 | 12,330 | 14,909 | |
Elimination | |||||
Segment information | |||||
Revenue | (553) | (537) | (1,825) | (1,398) | |
Corporate | |||||
SEGMENT INFORMATION | |||||
Assets | 31,347 | 31,347 | $ 24,604 | ||
Segment information | |||||
Income (loss) before taxes | (9,117) | (7,081) | (30,159) | (23,855) | |
Depreciation and Amortization | $ 984 | $ 375 | $ 2,332 | $ 1,312 |
SEGMENT INFORMATION - Total Ass
SEGMENT INFORMATION - Total Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Assets | $ 1,438,785 | $ 1,356,368 |
Operating segment | Water Solutions | ||
Segment Reporting Information [Line Items] | ||
Assets | 1,087,425 | 994,159 |
Operating segment | Oilfield Chemicals | ||
Segment Reporting Information [Line Items] | ||
Assets | 184,635 | 186,333 |
Operating segment | Wellsite Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 135,378 | 151,272 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Assets | $ 31,347 | $ 24,604 |