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SEC Filings

10-Q
KEY ENERGY SERVICES INC filed this Form 10-Q on 11/09/2017
Entire Document
 

Mexico and Russia and a $40.0 million impairment to reduce the carrying value of the assets and related liabilities of our Mexican business unit, which was sold in 2016, to fair market value.
Functional Support
Operating expenses for Functional Support, which represent expenses associated with managing our U.S. and International reporting segments, decreased $29.2 million, or 30.6%, to $66.3 million (20.7% of consolidated revenues) for the nine months ended September 30, 2017 compared to $95.5 million (31.0% of consolidated revenues) for the same period in 2016. The decrease is primarily due to lower employee compensation costs due to reduced staffing levels and reduction in wages, a $5.0 million FCPA settlement accrual and a decrease of $20.9 million in professional fees related to the 2016 corporate restructuring.
LIQUIDITY AND CAPITAL RESOURCES
Current Financial Condition and Liquidity
As of September 30, 2017, we had total liquidity of $104.2 million which consists of $77.7 million cash and cash equivalents and $26.5 million of borrowing capacity available under our ABL Facility. This compares to total liquidity of $118.2 million which consists of $90.5 million cash and cash equivalents and $27.7 million of borrowing capacity available under our ABL Facility as of December 31, 2016. Our working capital was $99.0 million as of September 30, 2017, compared to $120.3 million as of December 31, 2016. Our working capital decreased from the prior year end primarily as a result of a decrease in restricted cash, accounts receivable and other current assets partially offset by a decrease in other current liabilities. As of September 30, 2017, we had no borrowings outstanding and $33.7 million in committed letters of credit outstanding under our ABL Facility.
The following table summarizes our cash flows for the nine months ended September 30, 2017 and 2016 (in thousands):
 
 
Successor
 
 
Predecessor
 
 
Nine Months Ended September 30, 2017
 
 
Nine Months Ended September 30, 2016
Net cash used in operating activities
 
$
(48,633
)
 
 
$
(104,809
)
Cash paid for capital expenditures
 
(9,610
)
 
 
(7,420
)
Proceeds received from sale of fixed assets
 
31,844

 
 
13,376

Repayments of long-term debt
 
(1,875
)
 
 
(24,548
)
Restricted cash
 
16,007

 
 
(18,605
)
Payment of deferred financing costs
 
(350
)
 
 

Other financing activities, net
 
(85
)
 
 
(3,329
)
Effect of exchange rates on cash
 
(146
)
 
 
(1,908
)
Net decrease in cash and cash equivalents
 
$
(12,848
)
 
 
$
(147,243
)
Cash used in operating activities was $48.6 million for the nine months ended September 30, 2017 compared to cash used in operating activities of $104.8 million for the nine months ended September 30, 2016. Cash used in operating activities for the nine months ended September 30, 2017 was primarily related to net loss adjusted for noncash items and decrease in accrued liabilities. Cash used in operating activities for the nine months ended September 30, 2016 was primarily related to net loss adjusted for noncash items partially offset by a decrease in accounts receivable.
Cash provided by investing activities was $22.2 million for the nine months ended September 30, 2017 compared to cash provided by investing activities of $6.0 million for the nine months ended September 30, 2016. Cash inflows during these periods consisted primarily of proceeds from sales of fixed assets. Cash outflows during these periods consisted primarily of capital expenditures. Our capital expenditures primarily relate to maintenance of our equipment.
Cash provided by financing activities was $13.7 million for the nine months ended September 30, 2017 compared to cash used in financing activities of $46.5 million for the nine months ended September 30, 2016. Overall financing cash inflows for the nine months ended September 30, 2017 primarily relate to the decrease in restricted cash. Overall financing cash outflows for the nine months ended September 30, 2016 primarily relate to the increase in restricted cash and repayment of long-term debt.
Sources of Liquidity and Capital Resources
We believe that our internally generated cash flows from operations, current reserves of cash and availability under our ABL Facility are sufficient to finance our cash requirements for current and future operations, budgeted capital expenditures, debt service and other obligations for the next twelve months.

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