WTTR 8-K

Select Water Solutions, Inc. (WTTR)

8-K 2023-02-21 For: 2023-02-21

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SELECT ENERGY SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware	001-38066	81-4561945
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

	1233 West Loop South, Suite 1400 Houston, TX 77027
(Address of Principal Executive Offices)

	(713) 235-9500
(Registrant’s Telephone Number, including Area Code)


Title of each class	Ticker symbol(s)	Name of each exchange on which registered
Class A common stock, $0.01 par value	WTTR	New York Stock Exchange


Exhibit No.	Description
99.1	Press Release, dated February 21, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).
THE INFORMATION FURNISHED UNDER ITEM 2.02 OF THIS CURRENT REPORT, INCLUDING EXHIBIT 99.1 ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.

SELECT ENERGY SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except share and per share data)

	Three months ended						Twelve months ended
	December 31, 2022		September 30, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Revenue
Water Services	$	218,524	$	221,243	$	140,727	$	799,369	$	394,075
Water Infrastructure		77,178		74,396		46,873		270,412		154,789
Oilfield Chemicals		85,974		79,433		67,528		317,639		215,756
Total revenue		381,676		375,072		255,128		1,387,420		764,620
Costs of revenue
Water Services		178,146		170,845		118,994		644,097		346,730
Water Infrastructure		59,899		54,197		34,757		203,413		115,887
Oilfield Chemicals		70,978		64,519		59,012		265,648		191,115
Other		—		(1)		—		—		—
Depreciation and amortization		31,082		26,672		24,456		113,507		90,028
Total costs of revenue		340,105		316,232		237,219		1,226,665		743,760
Gross profit		41,571		58,840		17,909		160,755		20,860
Operating expenses
Selling, general and administrative		34,143		29,782		25,248		118,935		83,076
Depreciation and amortization		573		543		595		2,209		2,430
Lease abandonment costs		113		83		414		449		894
Total operating expenses		34,829		30,408		26,257		121,593		86,400
Income (loss) from operations		6,742		28,432		(8,348)		39,162		(65,540)
Other income (expense)
Gain (loss) on sales of property and equipment and divestitures, net		287		(479)		(147)		2,192		(2,068)
Interest expense, net		(870)		(616)		(457)		(2,700)		(1,711)
Foreign currency gain (loss), net		1		(6)		1		(8)		2
Bargain purchase gain		(416)		(3,273)		18,985		13,352		18,985
Other		2,449		1,153		1,629		4,726		673
Income (loss) before income tax (expense) benefit		8,193		25,211		11,663		56,724		(49,659)
Income tax expense		(285)		(276)		(358)		(957)		(147)
Equity in losses of unconsolidated entities		(337)		(218)		(150)		(913)		(279)
Net income (loss)		7,571		24,717		11,155		54,854		(50,085)
Less: net (income) loss attributable to noncontrolling interests		78		(3,393)		(1,662)		(6,576)		7,860
Net income (loss) attributable to Select Energy Services, Inc.	$	7,649	$	21,324	$	9,493	$	48,278	$	(42,225)

Net income (loss) per share attributable to common stockholders:
Class A—Basic	$	0.08	$	0.23	$	0.11	$	0.51	$	(0.48)
Class B—Basic	$	—	$	—	$	—	$	—	$	—

Net income (loss) per share attributable to common stockholders:
Class A—Diluted	$	0.07	$	0.22	$	0.10	$	0.50	$	(0.48)
Class B—Diluted	$	—	$	—	$	—	$	—	$	—

SELECT ENERGY SERVICES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

	As of December 31,
	2022		2021
Assets
Current assets
Cash and cash equivalents	$	7,322	$	85,801
Accounts receivable trade, net of allowance for credit losses of $4,918 and $4,401, respectively		429,983		232,824
Accounts receivable, related parties		5,087		219
Inventories		41,164		44,456
Prepaid expenses and other current assets		34,380		31,486
Total current assets		517,936		394,786
Property and equipment		1,084,005		943,515
Accumulated depreciation		(584,451)		(551,727)
Total property and equipment, net		499,554		391,788
Right-of-use assets, net		47,662		47,732
Other intangible assets, net		138,800		108,472
Other long-term assets, net		18,901		7,414
Total assets	$	1,222,853	$	950,192
Liabilities and Equity
Current liabilities
Accounts payable	$	61,539	$	36,049
Accrued accounts payable		67,462		52,051
Accounts payable and accrued expenses, related parties		3,305		1,939
Accrued salaries and benefits		28,686		22,233
Accrued insurance		26,180		13,408
Sales tax payable		3,056		2,706
Accrued expenses and other current liabilities		23,292		19,544
Current operating lease liabilities		17,751		13,997
Current portion of finance lease obligations		19		113
Total current liabilities		231,290		162,040
Long-term operating lease liabilities		46,388		53,198
Long-term debt		16,000		—
Other long-term liabilities		45,447		39,780
Total liabilities		339,125		255,018
Commitments and contingencies
Class A common stock, $0.01 par value; 350,000,000 shares authorized and 109,389,528 shares issued and outstanding as of December 31, 2022; 350,000,000 shares authorized and 94,172,920 shares issued and outstanding as of December 31, 2021		1,094		942
Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized; no shares issued or outstanding as of December 31, 2022 and December 31, 2021		—		—
Class B common stock, $0.01 par value; 150,000,000 shares authorized and 16,221,101 shares issued and outstanding as of December 31, 2022 and December 31, 2021		162		162
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of December 31, 2022 and December 31, 2021		—		—
Additional paid-in capital		1,075,915		950,464
Accumulated deficit		(311,194)		(359,472)
Total stockholders' equity		765,977		592,096
Noncontrolling interests		117,751		103,078
Total equity		883,728		695,174
Total liabilities and equity	$	1,222,853	$	950,192


	Three months ended,						Year Ended December 31,
	December 31, 2022		September 30, 2022		December 31, 2021		2022		2021
	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Net income (loss)	$	7,571	$	24,717	$	11,155	$	54,854	$	(50,085)
Interest expense, net		870		616		457		2,700		1,711
Income tax expense		285		276		358		957		147
Depreciation and amortization		31,655		27,215		25,051		115,716		92,458
EBITDA		40,381		52,824		37,021		174,227		44,231
Bargain purchase gain		416		3,273		(18,985)		(13,352)		(18,985)
Non-cash loss on sale of assets or subsidiaries		1,259		1,608		1,560		4,400		4,596
Non-recurring severance expenses		—		—		—		—		3,225
Non-cash compensation expenses		4,547		3,804		3,221		15,570		9,469
Non-recurring transaction costs		4,211		965		2,386		11,672		5,656
Lease abandonment costs		113		83		414		449		894
Non-recurring change in vacation policy		918		—		—		918		—
Other non-recurring charges		—		—		608		—		608
Equity in losses of unconsolidated entities		337		218		150		913		279
Foreign currency (gain) loss, net		(1)		6		(1)		8		(2)
Adjusted EBITDA	$	52,181	$	62,781	$	26,374	$	194,805	$	49,971


	Three months ended,						Year Ended December 31
	December 31, 2022		September 30, 2022		December 31, 2021		2022		2021
	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Gross profit (loss) by segment
Water services	$	20,479	$	33,471	$	7,047	$	87,516	$	(6,432)
Water infrastructure		7,892		12,728		4,720		30,272		11,945
Oilfield chemicals		13,200		12,640		6,142		42,967		15,347
Other		—		1		—		—		—
As reported gross profit		41,571		58,840		17,909		160,755		20,860

Plus depreciation and amortization
Water services		19,899		16,927		14,686		67,756		53,777
Water infrastructure		9,387		7,471		7,396		36,727		26,957
Oilfield chemicals		1,796		2,274		2,374		9,024		9,294
Total depreciation and amortization		31,082		26,672		24,456		113,507		90,028

Gross profit before D&A	$	72,653	$	85,512	$	42,365	$	274,262	$	110,888

Gross profit before D&A by segment
Water services		40,378		50,398		21,733		155,272		47,345
Water infrastructure		17,279		20,199		12,116		66,999		38,902
Oilfield chemicals		14,996		14,914		8,516		51,991		24,641
Other		—		1		—		—		—
Total gross profit before D&A	$	72,653	$	85,512	$	42,365	$	274,262	$	110,888

Gross margin before D&A by segment
Water services		18.5 %		22.8 %		15.4 %		19.4 %		12.0 %
Water infrastructure		22.4 %		27.2 %		25.8 %		24.8 %		25.1 %
Oilfield chemicals		17.4 %		18.8 %		12.6 %		16.4 %		11.4 %
Other		n/a		n/a		n/a		n/a		n/a
Total gross margin before D&A		19.0 %		22.8 %		16.6 %		19.8 %		14.5 %

Contacts:	Select Energy Services
	Chris George – Senior Vice President, Corporate
	Development, Investor Relations & Sustainability
	(713) 296-1073
	[email protected]

	Dennard Lascar Investor Relations
	Ken Dennard
	(713) 529-6600
	[email protected]


Item 9.01.	Financial Statements and Exhibits.

SELECT ENERGY SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)

	Three months ended						Twelve months ended
	December 31, 2022		September 30, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Cash flows from operating activities
Net income (loss)	$	7,571	$	24,717	$	11,155	$	54,854	$	(50,085)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization		31,655		27,215		25,051		115,716		92,458
(Gain) loss on disposal of property and equipment and divestitures		(287)		479		147		(2,192)		2,068
Equity in losses of unconsolidated entities		337		218		150		913		279
Bad debt (recovery) expense		(68)		828		512		2,023		(139)
Amortization of debt issuance costs		122		122		172		661		688
Inventory adjustments		(125)		(801)		100		(737)		239
Equity-based compensation		4,547		3,804		3,221		15,570		9,469
Bargain purchase gain		416		3,273		(18,985)		(13,352)		(18,985)
Unrealized (gain) loss on short-term investment		—		(40)		638		—		2,044
Other operating items, net		(1,279)		(232)		(1,486)		(1,989)		(1,795)
Changes in operating assets and liabilities
Accounts receivable		(20,789)		(51,815)		(47,618)		(162,257)		(80,127)
Prepaid expenses and other assets		1,464		(5,820)		(4,824)		1,264		(15,108)
Accounts payable and accrued liabilities		11,774		3,413		29,415		22,757		42,746
Net cash provided by (used in) operating activities		35,338		5,361		(2,352)		33,231		(16,248)
Cash flows from investing activities
Proceeds from sale of securities		—		—		730		—		730
Purchase of property and equipment		(21,069)		(19,839)		(10,069)		(71,884)		(39,994)
Investment in note receivable		—		—		—		—		(1,101)
Purchase of equity method investments		(900)		(2,500)		—		(7,667)		(2,200)
Collection of note receivable		—		—		167		184		167
Distribution from cost method investment		—		—		60		60		180
Acquisitions and divestitures		(11,671)		984		(16,096)		(5,259)		(34,740)
Proceeds received from sales of property and equipment		9,887		3,750		6,011		31,320		12,502
Net cash used in investing activities		(23,753)		(17,605)		(19,197)		(53,246)		(64,456)
Cash flows from financing activities
Borrowings from revolving line of credit		61,000		52,000		—		143,000		—
Payments on revolving line of credit		(45,000)		(52,000)		—		(127,000)		—
Payments on long-term debt		(3,295)		—		—		(22,075)		—
Payments of finance lease obligations		(4)		(5)		(82)		(112)		(320)
Payment of debt issuance costs		—		—		—		(2,144)		—
Dividends paid		(6,020)		—		—		(6,020)		—
Proceeds from share issuance		18		10		15		53		58