KLX Energy Services Holdings, Inc.
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
KLXE$1.00+4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001738827-24-000076
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001738827-25-000052
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 103 current paragraphs.
45 unchanged; 32 reworded; 26 added; 17 removed; 8 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Looking ahead to the year ending December 31, 2025, assuming economic activity holds at the recent level and commodity prices remain volatile, we anticipate that our customers will continue to cautiously allocate capital and operating expense spending. So far in the year ending December 31, 2025, WTI prices have increased slightly in the first quarter, before suddenly decreasing due to the above events, making it difficult to anticipate future changes in price. Currently, global oil inventories supplied from OPEC+ and other oil producing nations are expected to decrease and therefore put downwards pricing pressure globally. As oil price remains at the break-even level for some operators, we expect the industry to retain a cautious approach to drilling expansion, as evidenced by the U.S. rig count being flat through mid-April 2025.
Current report
We have taken several actions to continue to improve our liquidity position, including efficiencies gained from the QES Merger, equity issuances under our ATM Offering program, debt-for-equity exchanges that have reduced interest burden and monetized non-core and obsolete assets. Most recently, we completed a refinancing of our long-term indebtedness on March 12, 2025, as described in greater detail under “—Refinancing”, “—ABL Facilities—New ABL Facility” and “—Senior Secured Notes—2030 Senior Notes” below. As market conditions warrant and subject to our contractual restrictions, liquidity position and other factors, we may further access the public or private debt and equity markets or seek to recapitalize, refinance or otherwise restructure our capital structure.
Current report
Refinancing
Current report
On March 7, 2025, the Company and certain of our subsidiaries party thereto entered into a Securities Purchase Agreement with certain holders (the “Investors”) of our 11.5% senior secured notes due 2025 (the “2025 Senior Notes”), pursuant to which the Company agreed to issue and sell to the Investors (a) approximately $232.2 in aggregate principal amount of the Senior Secured Floating Rate Cash / PIK Notes due 2030 (the “2030 Senior Notes” and, together with the 2025 Senior Notes, the “Senior Secured Notes”) and (b) warrants entitling the holders thereof to purchase, in the aggregate, up to 2,373,187 shares of Common Stock, at an exercise price of $0.01 per share, subject to adjustment in exchange for (i) approximately $78.4 in aggregate cash consideration and (ii) approximately $143.6 aggregate principal amount of the 2025 Senior Notes, which were cancelled by the Company upon receipt thereof (collectively, the “Refinancing”). The Company consummated the Refinancing on March 12, 2025.
Current report
ABL Facilities
Current report
Prior ABL Facility
Current report
On August 10, 2018, the Company entered into a Credit Agreement, by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent (“Prior Administrative Agent”), as collateral agent and as issuing lender, and the lenders party thereto, which has been repaid in full and the commitments thereunder terminated (as amended, supplemented, or otherwise modified prior to the termination thereof, the “Prior ABL Facility”). The Prior ABL Facility became effective on September 14, 2018 and was scheduled to mature in 2025. Borrowings under the Prior ABL Facility bore interest at a rate equal to Term SOFR (as defined in the Prior ABL Facility) plus the Applicable Margin (as defined in the Prior ABL Facility).
Current report
On March 12, 2025, in connection with the completion of the Refinancing, the Prior ABL Facility was repaid in full using borrowings under the New ABL Facility and the commitments thereunder terminated. In connection with the prepayment and termination of the Prior ABL Facility, the Company provided Prior Administrative Agent cash collateral in support of certain existing letters of credit and existing purchasing card program in an aggregate amount of approximately $8.1.
Current report
New ABL Facility
Current report
On March 7, 2025, the Company also entered into a Credit Agreement, dated as of March 7, 2025 (the “New ABL Facility”), with the Company, as borrower, Eclipse Business Capital LLC, as administrative agent, as collateral agent and as FILO administrative agent and the lenders party thereto. The New ABL Facility is comprised of an asset-based revolving credit facility with a $125.0 commitment (the “Revolving Facility”), a first-in-last-out asset-based credit facility with a $10.0 commitment (the “FILO Facility”), and a committed incremental loan option under the Revolving Facility with a $25.0 commitment (the “Incremental Revolving Loans”). The availability of the Incremental Revolving Loans are subject to usual and customary conditions to effectiveness, including, for example, the Company electing to utilize such Incremental Revolving Loans by a date certain and the payment of required fees. Borrowings under the Revolving Facility (including, to the extent incurred, the Incremental Revolving Loans) bear interest at a rate equal to adjusted term SOFR plus an applicable margin of 4.625%. Borrowings under the FILO Facility bear interest at a rate equal to adjusted term SOFR plus an applicable margin of 6.00%. The applicable margin under the Revolving Facility is subject to a 0.125% reduction and the applicable margin under the FILO Facility is subject to a 0.50% reduction, in each case upon the repayment in full of a $5.0 over-advance provided on the initial funding date under the Revolving Facility. The New ABL Facility is secured by, among other things, a first priority lien on accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants.
Current report
The initial funding under the New ABL Facility occurred on March 12, 2025, and the proceeds therefrom were used to repay the Prior ABL Facility in full. After giving effect to the foregoing, we had approximately $39.9 of available borrowing capacity under the New ABL Facility. The New ABL Facility includes a springing financial covenant which requires the Company’s consolidated fixed charge coverage ratio to be at least 1.0 to 1.0 if availability under the Revolving Facility falls below $7.0.
Current report
As of March 31, 2025, the borrowings outstanding under the New ABL Facility were $55.0. The effective interest rate under the New ABL Facility was approximately 9.06% on March 31, 2025. Accrued interest related to the New ABL Facility was $0.3 as of March 31, 2025.
Current report
2025 Senior Notes
Current report
On March 12, 2025, approximately $143.6 aggregate principal amount of the 2025 Senior Notes were exchanged in connection with the Refinancing, and the Company deposited $97.1 in trust with the trustee for the 2025 Senior Notes and irrevocably instructed the trustee to apply such funds to effect the redemption of all of the remaining outstanding 2025 Senior Notes on March 30, 2025 at a redemption price of 100.000% of the principal amount thereof, plus accrued and unpaid interest. Upon deposit of such redemption amount, the indenture that governs the 2025 Senior Notes (the “2025 Senior Notes Indenture”) was satisfied and discharged in accordance with its terms and, as a result thereof, the Company has been released from its obligations under the 2025 Senior Notes and the 2025 Senior Notes Indenture except with respect to those provisions of the 2025 Senior Notes Indenture that, by their terms, survive the satisfaction and discharge of thereof.
Current report
2030 Senior Notes
Current report
On March 12, 2025, as part of the Refinancing, the Company and certain of its subsidiaries entered into an indenture, dated as of March 12, 2025 (the “2030 Senior Notes Indenture”), with U.S. Bank Trust Company, National Association, as the trustee and notes collateral agent, pursuant to which $232.2 of the 2030 Senior Notes were issued. The 2030 Senior Notes will mature on March 12, 2030 and bear a floating rate of interest of Term SOFR plus the Applicable Margin (as defined in the 2030 Senior Notes Indenture) based on the Secured Net Leverage Ratio (as defined in the 2030 Senior Notes Indenture) payable on the last day of the applicable interest period in cash or, at the Company’s election, additional 2030 Senior Notes paid-in-kind on one-, three- or six-month interest periods, which shall include a 100 basis point premium for any period where interest is paid-in-kind. The 2030 Senior Notes are senior secured obligations of the Company and are guaranteed on a senior secured basis by each of the Company’s current domestic subsidiaries and by certain future subsidiaries, subject to agreed guaranty and security principles and certain exclusions.
Current report
The 2030 Senior Notes were initially fully and unconditionally guaranteed by each of the Company’s current subsidiaries. The 2030 Senior Notes will also be guaranteed by each of the Company’s future subsidiaries that guarantee the Company’s indebtedness or indebtedness of guarantors, including under the New ABL Facility and such subsidiaries that become guarantors in the future will also pledge their collateral in support of such guarantees. These guarantees are senior secured obligations of the guarantors secured by a first priority security interest on substantially all of the guarantors’ assets (other than collateral securing the New ABL Facility on a first priority basis) and a second priority security interest on the guarantors’ assets which secure the New ABL Facility on a first priority basis, subject in each case to certain excluded assets.
Current report
The Company will be required to redeem the 2030 Senior Notes in an amount equal to 2.00% per annum of all 2030 Senior Notes outstanding as of the prior applicable Interest Payment Date (as defined in the 2030 Senior Notes Indenture) on the last business day of each of March, June, September and December, commencing on March 31, 2025. Additionally, upon certain changes of control, consummation of certain asset sales and other events, the Company will be required to repurchase the 2030 Senior Notes at the applicable redemption prices.
Current report
The 2030 Senior Notes Indenture contains certain financial covenants that include (i) a maximum total net leverage ratio of not greater than 4.50 to 1.0 for the test periods ending March 31, 2025 through December
Current report
31, 2025, stepping down to 4.00 to 1.0 for the test periods ending March 31, 2026 through December 31, 2026, 3.50 to 1.0 for the test periods ending March 31, 2027 through December 31, 2027, 3.00 to 1.0 for the test periods ending March 31, 2028 through December 31, 2028, and 2.50 to 1.0 for each test period thereafter and (ii) restrictions on making net capital expenditures in any test period in excess of the greater of (x) $65.0 in the aggregate or (y) 7% of revenues during such test period.
Current report
As of March 31, 2025, the principal amount outstanding under the 2030 Senior Notes was $231.0. On a net basis, after taking into consideration unamortized debt issuance costs and original issue discount for the 2030 Senior Notes, total debt related to the 2030 Senior Notes as of March 31, 2025 was $206.0. The effective interest rate under the 2030 Senior Notes was approximately 12.83% on March 31, 2025. Accrued interest related to the 2030 Senior Notes was $1.6 as of March 31, 2025.
Current report
Other debt-related items
Current report
The Company uses standby letters of credit to facilitate commercial transactions with third parties and to secure our performance to certain vendors. Total letters of credit outstanding under the New ABL Facility were $6.4 at March 31, 2025 and under the Prior ABL Facility were $6.5 at December 31, 2024. To the extent liabilities are incurred as a result of the activities covered by the letters of credit, such liabilities are included on the accompanying consolidated balance sheets. Restricted cash on the balance sheet is largely tied to cash collateralized letters of credit as we shift from our Prior ABL Facility to the New ABL Facility. As of the date of filing, $6.1 of the restricted cash is no longer restricted.
Current report
As of March 31, 2025, the Company had $0.6 of outstanding short-term indebtedness related to the financing of various insurance premiums.
Current report
Net cash used in operating activities
Current report
Net cash used in financing activities was $21.1 for the three months ended March 31, 2025, compared to net cash used in financing activities of $6.6 for the three months ended March 31, 2024. We refinanced both our 2025 Senior Notes and Prior ABL Facility during the three months ended March 31, 2025, which brought additional cash outlays. We also restarted sales under our ATM Offering program, which generated proceeds of $0.5.
Removed paragraphs (17)
Previous report
Looking ahead to the year ending December 31, 2025, assuming economic activity holds at the recent level and commodity prices remain volatile, we anticipate that our customers will continue to cautiously allocate capital and operating expense spending. So far in the year ending December 31, 2024, WTI prices have noted a slight increase, as demand for oil and gas products persists. Currently, expectations for future oil demand per OPEC and its allies (“OPEC+”) are to increase by 1.78 million barrels next year. This persisting demand is a positive sign that might help our business grow; however, there are a number of factors that might temper demand, such as those relating to U.S. elections and international events.
Previous report
In the medium term, we anticipate demand for oil and gas products to hold and even expand, as demand for energy generated from oil and gas grows across the United States. Per S&P Global, nearly 50GW of electricity generation capacity is expected to be added to the U.S. grid by 2028 to support the operations of datacenters. Per the Electric Reliability Council of Texas, generation capacity in the state is set to almost double by 2030, citing increased demand from artificial intelligence data centers and crypto-mining. In addition to domestic electricity generation, there are indications of higher demand for natural gas for export, with S&P Global projecting that feedgas demand could more than double by 2032. These and other expected developments point to increased demand for the products our services help to extract.
Previous report
Operating income (loss). The following is a summary of operating income (loss) by segment:
Previous report
Results of Operations
Previous report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Previous report
Selling, general and administrative expenses (“SG&A”). For the nine months ended September 30, 2024, SG&A expenses were $62.1, or 11.4% of revenues, as compared with $66.8, or 9.6% of revenues, in the prior year period. The increase in percentage of revenues is due to the more fixed cost nature of our SG&A costs which decreased at a slower pace than revenues during the nine-month period, as SG&A has decreased on a dollar basis compared to the nine months ended September 30, 2023.
Previous report
*NM = Not Meaningful
Previous report
For the nine months ended September 30, 2024, operating loss was $10.6 compared to operating income of $54.9 in the prior year period, due primarily to a reduction in activity and pricing.
Previous report
Our material cash commitments from known contractual and other obligations consist primarily of obligations for long-term debt and related interest as well as leases for property and equipment and purchase obligations as part of normal operations. See below “—ABL Facility” and “—Senior Secured Notes” for information regarding scheduled maturities of our long-term debt. See “Note 8 - Leases” of Item 8 in our 2023 Annual Report on Form 10-K filed with the SEC on March 8, 2024 for information regarding scheduled maturities of our operating and financing leases.
Previous report
As of September 30, 2024, we do not have enough cash on hand to redeem the $237.3 principal amount of Senior Secured Notes due November 1, 2025. The Company currently plans to satisfy these obligations by refinancing part or all of the Senior Secured Notes, including potentially using in part its cash reserves, seeking additional sources of capital, selling assets or a combination thereof. Any refinancing of our debt may involve the issuance of additional equity or convertible debt securities that could result in dilution to the Company’s stockholders. The Company’s ability to successfully execute these plans is dependent on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other market factors, many of which are beyond the Company’s control. Some of these alternatives may require the consent of current lenders, stockholders or noteholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all. In addition, incurring additional debt in excess of our existing outstanding indebtedness would result in increased interest expense and financial leverage.
Previous report
ABL Facility
Previous report
We entered into a $100.0 ABL Facility on August 10, 2018. The ABL Facility became effective on September 14, 2018 and is scheduled to mature on the ABL Maturity Date in 2025. Borrowings under the ABL Facility bear interest at a rate equal to Term SOFR (as defined in the ABL Facility) plus the Applicable Margin (as defined in the ABL Facility). The ABL Facility is tied to a borrowing base formula and the ABL Facility has no maintenance financial covenants as long as the minimum level of borrowing availability is maintained. The ABL Facility is secured by, among other things, a first priority lien on our accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants. $50.0 was outstanding under the ABL Facility as of September 30, 2024 and classified as a current liability given the current maturity date. The effective interest rate under the ABL Facility was approximately 7.9% on September 30, 2024.
Previous report
On June 20, 2023, the Company entered into a Fourth Amendment to the ABL Facility, with certain of its subsidiaries party thereto, as guarantors, with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing lender, and the other lenders and issuing lenders party thereto from time to time (the “ABL Amendment”).
Previous report
The ABL Amendment, among other things, (i) extended the maturity date of the ABL Facility from September 15, 2024 to the earlier of (A) September 15, 2025 or (B) August 1, 2025, if the Company's Senior Secured Notes are still outstanding as of such date (the earlier of the foregoing item (A) or item (B), the “ABL Maturity Date”) and (ii) increased the revolving credit commitment from $100.0 to $120.0. As of September 30, 2024, the balance outstanding under the ABL Facility has been classified as a current liability.
Previous report
The ABL Facility includes a springing financial covenant which requires the Company’s consolidated fixed charge coverage ratio (“FCCR”) to be at least 1.0 to 1.0 if availability falls below the greater of $15.0 or 20.0% of the line cap. At all times during the three months ended September 30, 2024, availability exceeded this threshold, and the Company was not subject to this financial covenant. As of September 30, 2024, the FCCR was below 1.0 to 1.0, and the Company was in full compliance with the ABL Facility.
Previous report
Net cash provided by operating activities
Previous report
Net cash used in financing activities was $17.4 for the nine months ended September 30, 2024, compared to net cash used in financing activities of $14.1 for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, there were no additional borrowings under our ABL Facility and no sales under our ATM program.
Reworded paragraphs (32)
Previous wording
The following discussion and analysis addresses the results of our operations for the three and nine months ended September 30, 2024, as compared to our results of operations for the three and nine months ended September 30, 2023. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.
Current wording
The following discussion and analysis addresses the results of our operations for the three months ended March 31, 2025, as compared to our results of operations for the three months ended March 31, 2024. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.
Previous wording
On March 8, 2023, KLXE acquired all of the equity interests of Greene’s Energy Group, LLC (“Greene’s”), in an all-stock transaction (the “Greene's Acquisition”), including $1.7 in cash remaining at Greene’s, which was subsequently adjusted to $1.1 due to a $0.6 working capital adjustment.
Current wording
On March 8, 2023, KLXE acquired all of the equity interests of Greene’s Energy Group, LLC (“Greene’s”), in an all-stock transaction, including $1.7 in cash remaining at Greene's, which was subsequently adjusted to $1.1 due to a $0.6 working capital adjustment.
Previous wording
We serve many of the leading companies engaged in the exploration and development of onshore conventional and unconventional oil and natural gas reserves in the United States. Our customers are primarily large independent and major oil and gas companies. We currently support these customer operations from over 50 service facilities located in the key major shale basins. We operate in three segments on a geographic basis, including the Rocky Mountains Region (the Bakken, Williston, DJ, Uinta, Powder River, Piceance and Niobrara basins), the Southwest Region (the Permian Basin, Eagle Ford Shale and the Gulf Coast as well as in industrial and petrochemical facilities) and the Northeast/Mid-Con Region (the Marcellus and Utica Shale as well as the Mid-Continent STACK and SCOOP and Haynesville Shale). Our revenues, operating earnings and identifiable assets are primarily attributable to these three reportable geographic segments. While we manage our business based upon these geographic groupings, our assets and our technical personnel are deployed on a dynamic basis across all of our service facilities to optimize utilization and profitability.
Current wording
We serve many of the leading companies engaged in the exploration and development of onshore conventional and unconventional oil and natural gas reserves in the United States. Our customers are primarily large independent and major oil and gas companies. We currently support these customer operations from over 60 service facilities located in the key major shale basins. We operate in three segments on a geographic basis, including the Rocky Mountains Region (the Bakken, Williston, DJ, Uinta, Powder River, Piceance and Niobrara basins), the Southwest Region (the Permian Basin, Eagle Ford Shale and the Gulf Coast as well as in industrial and petrochemical facilities) and the Northeast/Mid-Con Region (the Marcellus and Utica Shale as well as the Mid-Continent STACK and SCOOP and Haynesville Shale). Our revenues, operating earnings and identifiable assets are primarily attributable to these three reportable geographic segments. While we manage our business based upon these geographic groupings, our assets and our technical personnel are deployed on a dynamic basis across all of our service facilities to optimize utilization and profitability.
Previous wording
We offer a variety of targeted services that are differentiated by the technical competence and experience of our field service engineers and their deployment of a broad portfolio of specialized tools and proprietary equipment. Our innovative and adaptive approach to proprietary tool design has been employed by our in-house research and development (“R&D”) organization and, in selected instances, by our technology partners to develop tools covered by 38 patents and 9 pending patent applications, which we believe differentiates us from our regional competitors and also allows us to deliver more focused service and better outcomes in our specialized services than larger national competitors that do not discretely dedicate their resources to the services we provide.
Current wording
We offer a variety of targeted services that are differentiated by the technical competence and experience of our field service engineers and their deployment of a broad portfolio of specialized tools and proprietary equipment. Our innovative and adaptive approach to proprietary tool design has been employed by our in-house research and development (“R&D”) organization and, in selected instances, by our technology partners to develop tools covered by 37 patents and 7 pending patent applications, which we believe differentiates us from our regional competitors and also allows us to deliver more focused service and better outcomes in our specialized services than larger national competitors that do not discretely dedicate their resources to the services we provide.
Previous wording
Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility. The oil and gas industry experienced significant increases in activity in late 2021 and 2022 due to the recovery from the COVID-19 pandemic and increasing demand for oil and gas. Furthermore, sanctions and import bans on Russian oil have been implemented by various countries in response to the ongoing war in Ukraine, further impacting global oil supply. Natural gas prices also declined in the fourth quarter of 2023, however, they rebounded in the second and third quarters of 2024. Oil and natural gas prices have been, and may remain, volatile, which impacts demand for our business. West Texas Intermediate’s (“WTI") average daily price per barrel decreased by approximately 2.7%, to $76.43 per Bbl during the three months ended September 30, 2024, compared to the WTI average daily price per barrel of $78.53 per Bbl during the three months ended December 31, 2023. As of September 30, 2024, U.S. land rig count stood at 567, a decrease of 5.8% compared to December 31, 2023, when the U.S. rig count was 602.
Current wording
Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility. While oil prices declined in the first half of 2023 from their 2022 highs, oil prices rebounded in the third quarter of 2023 due to stronger than anticipated economic growth and sustained production cuts from Saudi Arabia and Russia, followed by oil price stabilization, through decreases, in the fourth quarter of 2023 due to a decrease in demand as the overall economy declined. During the first half of 2024, oil prices increased steadily, while in the second half of the year they fell back and traded within a relatively narrow band. Natural gas prices also declined since the fourth quarter of 2023, bottoming out in the first quarter of 2024 and remaining near historic lows for the remainder of the year, before increasing in early 2025 to a two-year high. Oil and natural gas prices have been, and may remain, volatile, which impacts demand for our business. West Texas Intermediate’s (“WTI") average daily price per barrel increased by approximately 1.4%, to $71.78 per Bbl during the three months ended March 31, 2025, compared to the WTI average daily price per barrel of $70.81 per Bbl during the three months ended December 31, 2024. In early April 2025, after the introduction of tariffs by the U.S. government and an announced increase in production from the Organization of the Petroleum Exporting Countries and its allies (“OPEC+”), the price of oil dropped by approximately 15%, from $71.87 per Bbl to $61.05 per Bbl. As of March 31, 2025, U.S. rig count stood at 592, which remained flat compared to December 31, 2024, when the U.S. rig count was 589.
Previous wording
Despite the slight decrease in industry metrics above for the first nine months of the year, the Company remains focused on providing the highest level of customer service across our regions and different service offerings, which has allowed us to make meaningful positive impacts to our revenue, operating margins, cash flows and Adjusted EBITDA (as defined below). We are taking steps to hire essential personnel and increase capital expenditures as activity rebounds, but we are measured in our growth and focused on returns.
Current wording
Despite the volatility in commodity prices during the fiscal year ended December 31, 2024, the Company remains focused on providing the highest level of customer service across our regions and different service offerings, which has allowed us to make meaningful positive impacts to our revenue, operating margins, cash flows and Adjusted EBITDA (as defined below). We are taking steps to hire essential personnel and increase capital expenditures as activity rebounds, but we are measured in our growth and focused on returns.
Previous wording
Oil and natural gas prices may fluctuate with changes in demand due to, among other things, the ongoing war in Ukraine, the Israel-Hamas conflict, rising tensions with Iran, international sanctions, speculation as to future actions by OPEC+, gas prices, interest rates, inflation and government efforts to reduce inflation, and possible changes in the overall health of the global economy, including a perceived economic recovery or any increased volatility in financial and credit markets or a recession. To what extent these and other external factors (such as government action with respect to climate change regulation) ultimately impact our future business, liquidity, financial condition, and results of operations is highly uncertain and dependent on numerous factors, including future developments, that are not within our control and cannot be accurately predicted.
Current wording
Oil and natural gas prices may fluctuate with changes in demand due to, among other things, the ongoing war in Ukraine, the Israel-Hamas conflict, rising tensions with Iran, international sanctions, speculation as to future actions by OPEC+, gas prices, interest rates, inflation and government efforts to reduce inflation, and possible changes in the overall health of the global economy, including a perceived economic recovery or any increased volatility in financial and credit markets, the imposition of increased, new and retaliatory tariffs or a recession. To what extent these and other external factors (such as government action with respect to climate change regulation) ultimately impact our future business, liquidity, financial condition, and results of operations is highly uncertain and dependent on numerous factors, including future developments, that are not within our control and cannot be accurately predicted.
Previous wording
For the quarter ended September 30, 2024, revenues were $188.9, a decrease of $31.7, or 14.4%, as compared with the prior year period. The overall decrease in revenues reflects a decline in industry activity and pricing during the quarter, leading to lower demand and pricing for our services. Lower weighted average price contributed to approximately 47% of the $31.7 decrease, and lower weighted average volume contributed to the remaining approximately 53%. This decrease was driven entirely by a decrease in weighted average volume. On a segment basis, Rocky Mountains segment revenue decreased by $9.1 or 11.8%. Lower weighted average price contributed to approximately 54% of the dollar decrease, and lower weighted average volume contributed to the remaining approximately 46%. Southwest segment revenue decreased by $9.2 or 11.8%. This decrease was driven entirely by a decrease in weighted average volume. Northeast/Mid-Con segment revenue decreased by $13.4 or 20.4%. This decrease was driven entirely by a decrease in weighted average price.
Current wording
For the quarter ended March 31, 2025, revenues were $154.0, a decrease of $20.7, or 11.8%, as compared with the prior year period. The overall decrease in revenues reflects a decline in activity during the quarter, leading to lower demand for our services. Lower weighted average price contributed to approximately 3% of the $20.7 decrease, and lower weighted average volume contributed to the remaining approximately 97%. On a segment basis, Rocky Mountains segment revenue increased by $2.2 or 4.8%. This increase was driven entirely by an increase in weighted average volume. Southwest segment revenue decreased by $4.2 or 6.1%. This decrease was driven entirely by a decrease in weighted average volume. Northeast/Mid-Con segment revenue decreased by $18.7 or 31.3%. Lower weighted average price contributed to approximately 13% of the dollar decrease, and lower weighted average volume contributed to the remaining approximately 87%.
Previous wording
Cost of sales. For the quarter ended September 30, 2024, cost of sales were $142.3, or 75.3% of sales, as compared to the three months ended September 30, 2023 of $166.2, or 75.3% of sales. Cost of sales as a percentage of revenues did not change during the quarter. The two largest components of cost of sales are labor and repair and maintenance. Although cost of sales as a percentage of revenues did not change, labor costs per employee decreased by 2.4% as compared with the three months ended September 30, 2023. Repair & maintenance costs as a percentage of revenues increased by 21.2% as compared to the three months ended September 30, 2023, largely due to the lower pricing during the quarter.
Current wording
Cost of sales. For the quarter ended March 31, 2025, cost of sales were $123.8, or 80.4% of sales, as compared to the three months ended March 31, 2024 of $144.0, or 82.4% of sales. Cost of sales as a percentage of revenues decreased primarily due to higher leverage of fixed costs during the quarter. The two largest components of cost of sales are labor and repair & maintenance. As cost of sales as a percentage of revenues decreased, labor costs per employee decreased by 2.6% as compared with the three months ended March 31, 2024. Repair & maintenance costs as a percentage of revenues decreased by 11.1% as compared to the three months ended March 31, 2024, due to a decrease in repair & maintenance costs during the quarter.
Previous wording
Selling, general and administrative expenses (“SG&A”). For the quarter ended September 30, 2024, SG&A expenses were $21.2, or 11.2% of revenues, as compared with $18.6, or 8.4% of revenues, in the prior year period. The increase in percentage of revenues is due to the more fixed cost nature of our SG&A costs which decreased at a slower pace than revenues, as SG&A has decreased on a dollar basis compared to the three months ended September 30, 2023.
Current wording
Selling, general and administrative expenses (“SG&A”). For the quarter ended March 31, 2025, SG&A expenses were $21.6, or 14.0% of revenues, as compared with $21.6, or 12.4% of revenues, in the prior year period. The increase in percentage of revenues is due to the lower revenues and lower leverage of fixed costs during the quarter, as SG&A remained the same on a dollar basis compared to the three months ended March 31, 2024.
Previous wording
For the quarter ended September 30, 2024, operating income was $1.1 compared to operating income of $16.4 in the prior year period, primarily due to a reduction in activity and pricing.
Current wording
For the quarter ended March 31, 2025, operating loss was $17.7 compared to operating loss of $13.1 in the prior year period, due to a reduction in activity and pricing.
Previous wording
The operating results across our three geographic segments declined as a function of lower revenues compared to the prior year period. Rocky Mountains segment operating income was $9.7, Southwest segment operating income was $0.7, and Northeast/Mid-Con segment operating income was $2.0 for the three months ended September 30, 2024. The operating loss for the Corporate and other segment was consistent with prior year.
Current wording
The operating results across our three geographic segments declined as a function of lower revenues compared to the prior year period. Rocky Mountains segment operating loss was $0.2, Southwest segment operating income was $3.0, and Northeast/Mid-Con segment operating loss was $8.1 for the three months ended March 31, 2025.
Previous wording
Income tax expense. For the quarter ended September 30, 2024, income tax expense was $0.2, as compared to income tax expense of $0.3 in the prior year period, and was comprised primarily of state and local taxes. The Company did not recognize a federal tax benefit on its year-to-date losses because it has a valuation allowance against its deferred tax balances.
Current wording
Income tax expense. For the quarter ended March 31, 2025, income tax expense was $0.2, consistent with income tax expense of $0.2 in the prior year period, and was comprised primarily of state and local taxes. The Company did not recognize a federal tax benefit on its year-to-date losses because it has a valuation allowance against its deferred tax balances.
Previous wording
Net (loss) income. For the quarter ended September 30, 2024, net loss was $8.2, as compared to net income of $7.6 in the prior year period, decreasing primarily as a result of lower revenues as discussed above.
Current wording
Net (loss) income. For the quarter ended March 31, 2025, net loss was $27.9, as compared to net loss of $22.2 in the prior year period, decreasing primarily as a result of lower revenues as discussed above.
Previous wording
We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, debt service obligations, investments and acquisitions. Our primary sources of liquidity to date have been capital contributions from our equity and noteholders, borrowings under the Company’s asset-based revolving credit facility, as amended by the ABL Amendment (as defined below) and other amendments (the “ABL Facility”) and cash flows from operations. At September 30, 2024, we had $82.7 of cash and cash equivalents and $43.6 available on the September 2024 ABL Facility Borrowing Base Certificate, which resulted in a liquidity position of $126.3.
Current wording
We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, debt service obligations, investments and acquisitions. Our primary sources of liquidity to date have been capital contributions from our equity and note holders, borrowings under our Prior ABL Facility and New ABL Facility and cash flows from operations. At March 31, 2025, we had $14.6 of cash and cash equivalents, and $43.5 available on the March 2025 ABL Facility Borrowing Base Certificate, which resulted in a total liquidity position of $58.1.
Previous wording
We have substantial indebtedness. As of September 30, 2024, we had total outstanding long-term indebtedness of $285.2 under our ABL Facility and 11.5% senior secured notes due 2025 (the “Senior Secured Notes”) as described in greater detail under “—ABL Facility” and “—Senior Secured Notes” below, including $50.0 in current portion of long-term indebtedness. Our ABL Facility matures on the ABL Maturity Date (as defined below) and our Senior Secured Notes mature on November 1, 2025. Our ability to pay the principal and interest on our long-term debt and to satisfy our other liabilities will depend on our financial condition and future operating performance and our ability to refinance our debt as it becomes due, which in turn will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources and related pricing for our services, increasing inflation and government efforts to reduce inflation, the condition of the public and private debt markets and the willingness of capital providers to lend to our industry, and other financial and business factors, many of which are beyond our control.
Current wording
Our ability to pay the principal and interest on our debt and to satisfy our other liabilities will depend on our future operating performance. Our future operating performance will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control. In addition, incurring additional debt in excess of our existing outstanding indebtedness would result in increased interest expense and financial leverage, and issuing Common Stock may result in dilution to our current stockholders.
Previous wording
We have taken several actions to continue to improve our liquidity position, including closing our Florida legacy headquarters and relocating all key functions to Houston, eliminating redundancies and duplicative functions throughout our operations following the QES Merger, issuing equity under our ATM Offering, executing debt-for-equity exchanges that have reduced our interest burden and monetizing non-core and obsolete assets. We actively manage our capital spending and are focused primarily on required maintenance spending. Additionally, ongoing volatility in commodity prices and increased inflation continue to affect our financial results. We believe that based on our current forecasts, our cash on hand, together with our operating cash flows, will provide us with the ability to fund our operations, including planned capital expenditures, for the next twelve months.
Current wording
We actively manage our capital spending and are focused primarily on required maintenance spending. For the past couple of years, due to increasing oil prices leading to an increase in demand for our services, our operating cash flow has been positive. Based on our current forecasts, we believe our cash on hand, availability under the New ABL Facility and our cash flows will provide us with the ability to fund our operations for at least the next twelve months.
Previous wording
The ABL Facility includes financial, operating and negative covenants that limit our ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. It also includes a covenant to deliver annual audited financial statements that are not qualified by a “going concern” or like qualification or exception. A failure to comply with the obligations contained in the ABL Facility could result in an event of default, which could permit acceleration of the debt, termination of undrawn commitments and enforcement against any liens securing the debt.
Current wording
The New ABL Facility includes financial, operating and negative covenants that limit our ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. It also includes a covenant to deliver annual audited financial statements that are not qualified by a “going concern” or like qualification or exception. A failure to comply with the obligations contained in the New ABL Facility could result in an event of default, which could permit acceleration of the debt, termination of undrawn commitments and enforcement against any liens securing the debt. The New ABL Facility contains certain other covenants (including the ability to incur indebtedness for the purpose of consummating permitted acquisitions, subject to the terms of the New ABL Facility), events of default and other customary provisions. Our New ABL Facility matures in 2028.
Previous wording
In conjunction with the acquisition of Motley in 2018, we issued $250.0 principal amount of the Senior Secured Notes offered pursuant to Rule 144A under the Securities Act of 1933 (as amended, the “Securities Act”) and to certain non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act. On a net basis, after taking into consideration the debt issuance costs for the Senior Secured Notes, total debt related to the Senior Secured Notes as of September 30, 2024 was $235.2. The Senior Secured Notes bear interest at an annual rate of 11.5%, payable semi-annually in arrears on May 1 and November 1 and mature in 2025. Accrued interest related to the Senior Secured Notes was $11.4 as of September 30, 2024.
Current wording
In conjunction with the acquisition of Motley Services, LLC (“Motley”) in 2018, we issued $250.0 principal amount of the 2025 Senior Notes offered pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act. On a net basis, after taking into consideration the debt issuance costs for the 2025 Senior Notes, total debt related to the 2025 Senior Notes as of December 31, 2024 was $235.1. The 2025 Senior Notes bore interest at an annual rate of 11.5%, payable semi-annually in arrears on May 1 and November 1. Accrued interest as of December 31, 2024 was $4.5.
Previous wording
The indenture contains customary affirmative and negative covenants restricting, among other things, the Company’s ability to incur indebtedness and liens, pay dividends or make other distributions, make certain other restricted payments or investments, sell assets, enter into restrictive agreements, enter into transactions with the Company’s affiliates, and merge or consolidate with other entities or sell substantially all of the Company’s assets.
Current wording
The 2030 Senior Notes Indenture also restricts, among other things, the Company’s ability to incur indebtedness and liens, pay dividends or make other distributions, make certain other restricted payments or investments, sell assets, enter into restrictive agreements, enter into transactions with the Company’s affiliates, and merge or consolidate with other entities or convey, transfer or lease all or substantially all of the Company’s properties and assets to another person, which, in each case, is subject to certain limitations and exceptions. The 2030 Senior Notes Indenture also contains customary events of default including, among other things, the failure to pay interest for three business days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the 2030 Senior Notes Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $7.5, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy. The 2030 Senior Notes Indenture permits the Company to incur additional pari passu indebtedness of up to $150.0 within twelve months of the Refinancing (including for the purpose of consummating permitted acquisitions and investments) subject to the terms and conditions contained in the 2030 Senior Notes Indenture and contains certain other covenants, events of default and other customary provisions.
Previous wording
Our capital expenditures were $49.8 during the nine months ended September 30, 2024, compared to $44.3 in the nine months ended September 30, 2023. Based on current industry conditions and our significant investments in capital expenditures over the past several years, we expect to incur between $55.0 and $60.0 in total capital expenditures for the year ending December 31, 2024, out of which approximately 80% is budgeted for maintenance capital spending. The nature of our capital expenditures is comprised of a base level of investment required to support our current operations and amounts related to growth and Company initiatives. Capital expenditures for growth and Company initiatives are discretionary. We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and Company initiatives.
Current wording
Our capital expenditures were $15.0 during the three months ended March 31, 2025, compared to $13.5 in the three months ended March 31, 2024. We offset $4.8 of capital spending during the three months ended March 31, 2025 with the same amount of proceeds from asset sales. Based on current industry conditions and our significant investments in capital expenditures over the past several years, we expect to incur between $40.0 and $50.0 in total capital expenditures for the year ending December 31, 2025. The nature of our capital expenditures is comprised of a base level of investment required to support our current operations and amounts related to growth and Company initiatives. Capital expenditures for growth and Company initiatives are discretionary. We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and Company initiatives.
Previous wording
On June 14, 2021, the Company entered into an Equity Distribution Agreement (as amended from time to time, the “Equity Distribution Agreement”) with Piper Sandler & Co. as sales agent (the “Agent”). Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Agent (the “ATM Offering”) the Company’s Common Stock, having an aggregate offering price of up to $50.0. On November 16, 2022, the Company entered into Amendment No. 1 to the Equity Distribution Agreement (the “EDA Amendment”). Among other things, the EDA Amendment allows for debt-for-equity exchanges in accordance with Section 3(a)(9) of the Securities Act. Under the terms of the Equity Distribution Agreement, the Company will pay the Agent a commission equal to 3.0% of the gross sales price of the Common Stock sold.
Current wording
On June 14, 2021, the Company entered into an Equity Distribution Agreement (as amended from time to time, the “Equity Distribution Agreement”) with Piper Sandler & Co. as sales agent (the “Agent”). Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Agent (the “ATM Offering”) the Company’s common stock, par value $0.01 per share (“Common Stock”), having an aggregate offering price of up to $50.0. On November 16, 2022, the Company entered into Amendment No. 1 to the Equity Distribution Agreement, which, among other things, allows for debt-for-equity exchanges in accordance with Section 3(a)(9) of the Securities Act. On March 14, 2025, the Company entered into Amendment No. 2 to the Equity Distribution Agreement (the “EDA Amendment”), which, among other things, increased the aggregate offering price to up to approximately $57.75 (which amount includes all of the Common Stock previously sold pursuant to the Equity Distribution Agreement prior to the EDA Amendment) and provides for the Company's election not to deliver a placement notice. Under the terms of the Equity Distribution Agreement, the Company will pay the Agent a commission equal to 3.0% of the gross sales price of the Common Stock sold.
Previous wording
Shares of Common Stock offered and sold in the ATM Offering were issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the ATM Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement. The Registration Statement expired on June 11, 2024 pursuant to Rule 415(a)(5) under the Securities Act. Sales under the ATM Offering program may restart when and if the Company files a prospectus supplement under a successor registration statement.
Current wording
Any Common Stock offered and sold in the ATM Offering may be issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-271182) filed with the SEC on April 7, 2023 and declared effective on April 19, 2023 (the “Registration Statement”), the prospectus supplement relating to the ATM Offering filed with the SEC on March 14, 2025 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement. Sales of Common Stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act.
Previous wording
The Company used the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which included funding acquisitions, capital expenditures and working capital.
Current wording
The Company has used and plans to use the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which may include, among other things, paying or refinancing all or a portion of the Company’s then-outstanding indebtedness, and funding acquisitions, capital expenditures and working capital.
Previous wording
During the three and nine months ended September 30, 2023, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $0.3 and $0.4, respectively.
Current wording
During the three months ended March 31, 2025, the Company sold 142,769 shares of Common Stock in exchange for gross proceeds of approximately $0.5 and incurred legal and administrative fees of $0.1.
Previous wording
During the three and nine months ended September 30, 2024, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $— and $0.2, respectively.
Current wording
During the three months ended March 31, 2024, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $0.1.
Previous wording
Our cash flows provided by operating activities for the nine months ended September 30, 2024 were approximately $28.2 as compared to approximately $77.0 provided by operating activities for the nine months ended September 30, 2023. Our operating cash flows are sensitive to many variables, the most significant of which are utilization and profitability, the timing of billing and customer collections, payments to our vendors, repair and maintenance costs and personnel, any of which may affect our available cash. Additionally, should our customers experience financial distress for any reason, they could default on their payments owed to us, which would affect our cash flows and liquidity.
Current wording
Our cash flows used in operating activities for the three months ended March 31, 2025 were approximately $37.6 as compared to approximately $10.8 used in operating activities for the three months ended March 31, 2024. Our operating cash flows are sensitive to many variables, the most significant of which are utilization and profitability, the timing of billing and customer collections, payments to our vendors, repair and maintenance costs and personnel, any of which may affect our available cash. Additionally, should our customers experience financial distress for any reason, they could default on their payments owed to us, which would affect our cash flows and liquidity.
Previous wording
At September 30, 2024, we had $82.7 of cash and cash equivalents. Cash on hand at September 30, 2024 decreased by $29.8, as a result of $28.2 of cash flows provided by operating activities, $40.6 of cash flows used in investing activities and $17.4 used in financing activities. Our liquidity requirements consist of working capital needs, debt service obligations and ongoing capital expenditure requirements. Our primary requirements for working capital are directly related to the activity level of our operations.
Current wording
At March 31, 2025, we had $14.6 of cash and cash equivalents and $8.1 of restricted cash. Cash on hand at March 31, 2025 decreased by $68.9, as a result of $37.6 of cash flows used in operating activities, $10.2 of cash flows used in investing activities and $21.1 used in financing activities. Our liquidity requirements consist of working capital needs, debt service obligations and ongoing capital expenditure requirements. Our primary requirements for working capital are directly related to the activity level of our operations.
Previous wording
Net cash provided by operating activities was $28.2 for the nine months ended September 30, 2024, as compared to net cash provided by operating activities of $77.0 for the nine months ended September 30, 2023. The lower operating cash flows were attributable to the change from a net income to a net loss position, partially offset by higher depreciation and amortization in 2024.
Current wording
Net cash used in operating activities was $37.6 for the three months ended March 31, 2025, as compared to net cash used in operating activities of $10.8 for the three months ended March 31, 2024. The negative operating cash flows were attributable to the net loss position, an increase in days receivable outstanding and a decrease in days payable outstanding.
Previous wording
Net cash used in investing activities was $40.6 for the nine months ended September 30, 2024, as compared to net cash used in investing activities of $29.9 for the nine months ended September 30, 2023. The cash flows used in investing activities for the nine months ended September 30, 2024 were primarily driven by maintenance capital spending tied to the operation of our existing asset base offset by sales of property and equipment.
Current wording
Net cash used in investing activities was $10.2 for the three months ended March 31, 2025, as compared to net cash used in investing activities of $10.2 for the three months ended March 31, 2024. The cash flows used in investing activities for the three months ended March 31, 2025 were primarily driven by maintenance capital spending tied to the operation of our existing asset base offset by sales of property and equipment.
Previous wording
We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our financial statements. We believe that our critical accounting policies are limited to those described in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Annual Report on Form 10-K filed with the SEC on March 8, 2024.
Current wording
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our financial statements. Other than the critical accounting policy included below, we believe that our critical accounting policies are limited to those described in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Annual Report on Form 10-K filed with the SEC on March 13, 2025.
Previous wording
We continue to evaluate any recently issued accounting pronouncements for future adoption. See Note 2 - Recent Accounting Pronouncements above for upcoming adoptions of new accounting pronouncements.
Current wording
We continue to evaluate any recently issued accounting pronouncements for future adoption.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Revenue. The following is a summary of revenue by segment and product line for the periods indicated:
Previous report — wording carried elsewhere
For the nine months ended September 30, 2024, revenues were $543.8, a decrease of $150.4, or 21.7%, as compared with the prior year period. The overall decrease in revenues reflects a decline in activity and pricing during the nine-month period, leading to lower demand for our services. Lower weighted average price contributed to approximately 20% of the $150.4 decrease, and lower weighted average volume contributed to the remaining approximately 80%. On a segment basis, Rocky Mountains segment revenue decreased by $36.4 or 17.2%. Lower weighted average price contributed to approximately 1% of the dollar decrease, and lower weighted average volume contributed to the remaining approximately 99%. Southwest segment revenue decreased by $29.6 or 12.5%. This decrease was driven entirely by a decrease in weighted average volume. Northeast/Mid-Con segment revenue decreased by $84.4 or 34.4%. Lower weighted average price contributed to approximately 68% of the dollar decrease, and lower weighted average volume contributed to the remaining approximately 32%.
Previous report — wording carried elsewhere
Cost of sales. For the nine months ended September 30, 2024, cost of sales were $422.3, or 77.7% of sales, as compared to the nine months ended September 30, 2023 of $520.4, or 75.0% of sales. Cost of sales as a percentage of revenues increased primarily due to a decrease in pricing which led to lower operating leverage of fixed costs during the nine-month period ended September 30, 2024. The two largest components of cost of sales are labor and repair and maintenance. Although cost of sales as a percentage of revenues increased, labor costs per employee decreased by 10.9% as compared with the nine months ended September 30, 2023. Repair & maintenance costs as a percentage of revenues increased by 20.9% as compared to the nine months ended September 30, 2023, largely due to the lower pricing during the nine-month period.
Previous report — wording carried elsewhere
The operating results across our three geographic segments declined as a function of lower revenues compared to the prior year period. Rocky Mountains segment operating income was $19.0, Southwest segment operating income was $2.6, and Northeast/Mid-Con segment operating income was $1.9 for the nine months ended September 30, 2024. The operating loss for the Corporate and other segment decreased slightly due to non-recurring costs related to the Greene's Acquisition in the prior year.
Previous report — wording carried elsewhere
Income tax expense. For the nine months ended September 30, 2024, income tax expense was $0.6, as compared to income tax expense of $0.2 in the prior year period, and was comprised primarily of state and local taxes. The Company did not recognize a federal tax benefit on its year-to-date losses because it has a valuation allowance against its deferred tax balances.
Previous report — wording carried elsewhere
Net (loss) income. For the nine months ended September 30, 2024, net loss was $38.4, as compared to net income of $28.4 in the prior year period, decreasing primarily as a result of lower revenues as discussed above.
Previous report — wording carried elsewhere
The indenture also contains customary events of default including, among other things, the failure to pay interest for 30 days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.
Previous report — wording carried elsewhere
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis.