Cactus Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

whd-20200630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________________

FORM 10-Q

______________________________________________________________________________

(MARK ONE)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-38390

______________________________________________________________________________

Cactus, Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________


Delaware			35-2586106
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

920 Memorial City Way, Suite 300			77024
Houston,	Texas	(Zip Code)
(Address of principal executive offices)

(713) 626-8800

(Registrant’s telephone number, including area code)

______________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01

WHD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 28, 2020, the registrant had 47,478,234 shares of Class A common stock, $0.01 par value per share, and 27,883,286 shares of Class B common stock, $0.01 par value per share, outstanding.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Forward-looking statements may include statements about:

•demand for our products and services, which is affected by, among other things, changes in the price of crude oil and natural gas in domestic and international markets;

•the level of growth or decline in number of rigs, pad sizes, well spacings and associated well count, availability of takeaway capacity and availability of storage capacity;

•availability of capital and the associated capital spending discipline exercised by customers;

•the financial health of our customers and our credit risk of customer non-payment;

•changes in the number of drilled but uncompleted wells and the level of completion activity;

•the size and timing of orders;

•availability of raw materials and imported items;

•transportation differentials associated with reduced capacity in and out of the storage hub in Cushing, Oklahoma;

•expectations regarding raw materials, overhead and operating costs and margins;

•availability of skilled and qualified workers;

•potential liabilities such as warranty and product liability claims arising out of the installation, use or misuse of our products;

•the possibility of cancellation of orders;

•our business strategy;

•our financial strategy, operating cash flows, liquidity and capital required for our business;

•our future revenue, income and operating performance;

•our ability to pay dividends and the amounts of any such dividends;

•the termination of relationships with major customers or suppliers;

•laws and regulations, including environmental regulations, that may increase our costs, limit the demand for our products and services or restrict our operations;

•disruptions in the political, regulatory, economic and social conditions domestically or internationally;

•the ultimate severity and duration of the ongoing outbreak of coronavirus (“COVID-19”) and the extent of its impact on our business;

•outbreaks of other pandemic or contagious diseases that may disrupt our operations, suppliers or customers or impact demand for oil and gas;

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•the impact of actions taken by the Organization of Petroleum Exporting Countries (“OPEC”) and other oil and gas producing countries affecting the supply of oil and natural gas;

•increases in import tariffs assessed on products from China and imported raw materials used in the manufacture of our goods in the United States which could negatively impact margins and our working capital;

•the significance of future liabilities under the Tax Receivable Agreement (the “TRA”) we entered into with certain current or past direct and indirect owners of Cactus LLC (the “TRA Holders”) in connection with our initial public offering;

•a failure of our information technology infrastructure or any significant breach of security;

•potential uninsured claims and litigation against us;

•competition within the oilfield services industry;

•our dependence on the continuing services of certain of our key managers and employees;

•currency exchange rate fluctuations associated with our international operations; and

•plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 (our “2019 Annual Report”), this Quarterly Report and in our other filings with the SEC, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements.

Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	June 30, 2020		December 31, 2019
	(in thousands, except per share data)
Assets
Current assets
Cash and cash equivalents	$	270,673	$	202,603
Accounts receivable, net of allowance of $1,270 and $837, respectively	46,824		87,865
Inventories	90,719		113,371
Prepaid expenses and other current assets	8,450		11,044
Total current assets	416,666		414,883
Property and equipment, net	157,145		161,748
Operating lease right-of-use assets, net	22,500		26,561
Goodwill	7,824		7,824
Deferred tax asset, net	216,732		222,545
Other noncurrent assets	1,285		1,403
Total assets	$	822,152	$	834,964
Liabilities and Equity
Current liabilities
Accounts payable	$	13,288	$	40,957
Accrued expenses and other current liabilities	13,925		22,067
Current portion of liability related to tax receivable agreement	21,402		14,630
Finance lease obligations, current portion	5,398		6,735
Operating lease liabilities, current portion	4,765		6,737
Total current liabilities	58,778		91,126
Deferred tax liability, net	718		1,348
Liability related to tax receivable agreement, net of current portion	194,101		201,902
Finance lease obligations, net of current portion	2,977		3,910
Operating lease liabilities, net of current portion	17,671		20,283
Total liabilities	274,245		318,569
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000 shares authorized, none issued and outstanding	—		—
Class A common stock, $0.01 par value, 300,000 shares authorized, 47,478 and 47,159 shares issued and outstanding	475		472
Class B common stock, $0.01 par value, 215,000 shares authorized, 27,884 and 27,958 shares issued and outstanding	—		—
Additional paid-in capital	197,484		194,456
Retained earnings	149,356		132,990
Accumulated other comprehensive loss	(569)		(452)
Total stockholders’ equity attributable to Cactus Inc.	346,746		327,466
Non-controlling interest	201,161		188,929
Total stockholders’ equity	547,907		516,395
Total liabilities and equity	$	822,152	$	834,964

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share data)
Revenues
Product revenue	$	40,893	$	94,494	$	127,924	$	181,134
Rental revenue	11,535		39,576		47,698		78,073
Field service and other revenue	14,120		34,423		45,065		68,161
Total revenues	66,548		168,493		220,687		327,368
Costs and expenses
Cost of product revenue	25,962		57,517		82,097		110,535
Cost of rental revenue	10,675		19,450		30,014		37,241
Cost of field service and other revenue	11,486		26,824		35,297		53,730
Selling, general and administrative expenses	8,693		13,252		22,355		25,920
Severance expenses	857		—		1,864		—
Total costs and expenses	57,673		117,043		171,627		227,426
Income from operations	8,875		51,450		49,060		99,942

Interest income, net	223		93		633		116
Other income (expense), net	1,310		—		1,310		(1,042)
Income before income taxes	10,408		51,543		51,003		99,016
Income tax expense	1,313		10,793		8,810		9,820
Net income	$	9,095	$	40,750	$	42,193	$	89,196
Less: net income attributable to non-controlling interest	3,067		19,342		17,182		40,981
Net income attributable to Cactus Inc.	$	6,028	$	21,408	$	25,011	$	48,215

Earnings per Class A share - basic	$	0.13	$	0.46	$	0.53	$	1.13
Earnings per Class A share - diluted	$	0.11	$	0.45	$	0.51	$	1.07

Weighted average Class A shares outstanding - basic	47,436		46,881		47,353		42,819
Weighted average Class A shares outstanding - diluted	75,367		47,145		75,347		75,326

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Net income	$	9,095	$	40,750	$	42,193	$	89,196
Foreign currency translation adjustments	879		(371)		(204)		(101)
Comprehensive income	$	9,974	$	40,379	$	41,989	$	89,095
Less: comprehensive income attributable to non-controlling interest	3,448		19,203		17,095		40,989
Comprehensive income attributable to Cactus Inc.	$	6,526	$	21,176	$	24,894	$	48,106

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)


	Class A				Class B						Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest	Total Equity (Deficit)
	Common Stock				Common Stock
(in thousands)	Shares	Amount		Shares	Amount
Balance at March 31, 2020	47,398	$	474	27,958	$	—	$	195,381	$	147,670	$	(1,067)	$	199,968	$	542,426
Member distributions	—	—		—	—		—		—		—		(2,509)		(2,509)
Effect of CW Unit redemptions	74	1		(74)	—		539		—		—		(540)		—
Tax impact of equity transactions	—	—		—	—		156		—		—		—		156
Equity award vestings	6	—		—	—		3		—		—		(32)		(29)
Other comprehensive income	—	—		—	—		—		—		498		381		879
Stock-based compensation	—	—		—	—		1,405		—		—		826		2,231
Cash dividends declared on Class A common stock ($0.09 per share)	—	—		—	—		—		(4,342)		—		—		(4,342)
Net income	—	—		—	—		—		6,028		—		3,067		9,095
Balance at June 30, 2020	47,478	$	475	27,884	$	—	$	197,484	$	149,356	$	(569)	$	201,161	$	547,907

Balance at March 31, 2019	46,391	$	464	28,718	$	—	$	189,902	$	78,490	$	(259)	$	147,764	$	416,361
Member distributions	—	—		—	—		—		—		—		(3,613)		(3,613)
Effect of CW Unit redemptions	698	7		(698)	—		4,406		—		(7)		(4,406)		—
Adjustment to deferred tax asset from CW Unit redemptions	—	—		—	—		(1,519)		—		—		—		(1,519)
Tax impact of equity transactions	—	—		—	—		1,072		—		—		—		1,072
Equity award vestings	4	—		—	—		(2,593)		—		—		2,551		(42)
Other comprehensive loss	—	—		—	—		—		—		(232)		(139)		(371)
Stock-based compensation	—	—		—	—		1,892		—		—		—		1,892
Net income	—	—		—	—		—		21,408		—		19,342		40,750
Balance at June 30, 2019	47,093	$	471	28,020	$	—	$	193,160	$	99,898	$	(498)	$	161,499	$	454,530

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(unaudited)


	Class A				Class B						Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest	Total Equity (Deficit)
	Common Stock				Common Stock
(in thousands)	Shares	Amount		Shares	Amount
Balance at December 31, 2019	47,159	$	472	27,958	$	—	$	194,456	$	132,990	$	(452)	$	188,929	$	516,395
Member distributions	—	—		—	—		—		—		—		(4,712)		(4,712)
Effect of CW Unit redemptions	74	1		(74)	—		539		—		—		(540)		—
Tax impact of equity transactions	—	—		—	—		62		—		—		—		62
Equity award vestings	245	2		—	—		(218)		—		—		(1,170)		(1,386)
Other comprehensive loss	—	—		—	—		—		—		(117)		(87)		(204)
Stock-based compensation	—	—		—	—		2,645		—		—		1,559		4,204
Cash dividends declared on Class A common stock ($0.18 per share)	—	—		—	—		—		(8,645)		—		—		(8,645)
Net income	—	—		—	—		—		25,011		—		17,182		42,193
Balance at June 30, 2020	47,478	$	475	27,884	$	—	$	197,484	$	149,356	$	(569)	$	201,161	$	547,907

Balance at December 31, 2018	37,654	$	377	37,236	$	—	$	126,418	$	51,683	$	(820)	$	184,670	$	362,328
Adjustment to prior periods	—	—		—	—		14,035		—		488		(14,523)		—
Member distributions	—	—		—	—		—		—		—		(3,848)		(3,848)
Effect of CW Unit redemptions	9,216	92		(9,216)	—		48,305		—		(57)		(48,340)		—
Adjustment to deferred tax asset from CW Unit redemptions	—	—		—	—		(9,751)		—		—		—		(9,751)
Tax impact of equity transactions	—	—		—	—		14,652		—		—		—		14,652
Equity award vestings	223	2		—	—		(4,067)		—		—		2,551		(1,514)
Other comprehensive income (loss)	—	—		—	—		—		—		(109)		8		(

Price	1.00	EPS	-141,953,000
Shares	-0	P/E	-0
MCap	-0	P/FCF	-0
Net Debt	-168	EBIT	164
TEV	-168	TEV/EBIT	-1
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-28
10-Q	2019-09-30	Filed 2019-10-31
10-Q	2019-06-30	Filed 2019-08-02
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-03-15
10-Q	2018-09-30	Filed 2018-11-02
S-1	2018-07-09	Public Filing
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-11
S-1	2018-01-12	Public Filing
10-K	2017-12-31	Filed 2018-03-19

8-K	2020-09-08	Amend Bylaw, Regulation FD, Exhibits
8-K	2020-07-29	Earnings, Exhibits
8-K	2020-05-20
8-K	2020-05-11
8-K	2020-04-29
8-K	2020-04-22
8-K	2020-03-30
8-K	2020-03-11
8-K	2020-02-26
8-K	2020-01-28
8-K	2019-12-09
8-K	2019-11-25
8-K	2019-11-12
8-K	2019-10-30
8-K	2019-09-11
8-K	2019-08-12
8-K	2019-07-31
8-K	2019-06-17
8-K	2019-05-22
8-K	2019-05-07
8-K	2019-05-01
8-K	2019-03-19
8-K	2019-03-19
8-K	2019-03-18
8-K	2019-03-06
8-K	2019-02-15
8-K	2019-02-11
8-K	2018-12-10
8-K	2018-11-14
8-K	2018-10-31
8-K	2018-09-04
8-K	2018-08-21
8-K	2018-08-01
8-K	2018-07-11
8-K	2018-07-09
8-K	2018-06-21
8-K	2018-06-18
8-K	2018-05-09
8-K	2018-03-27
8-K	2018-03-08
8-K	2018-02-12

EX-31.1	whd-20200630xex311.htm
EX-31.2	whd-20200630xex312.htm
EX-32.1	whd-20200630xex321.htm
EX-32.2	whd-20200630xex322.htm


Cautionary Note Regarding Forward-Looking Statements			i

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	22
	Signatures	23

WHD 10Q Quarterly Report

Cactus Earnings 2020-06-30