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SEC Filings

10-K
KEY ENERGY SERVICES INC filed this Form 10-K on 02/28/2018
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determined by measuring the number of injury incidents involving our employees against the number of exposure hours worked. Incidents that are considered recordable include injuries resulting in a fatality, an employee missing work, an employee having to switch to “light” duty or restricted work or an employee requiring medical treatment.

Free Cash Flow (weighted 10%). Cash flow management is critical. This goal measures the ability to provide accurate and signed work tickets for invoicing in less than 12 days in order to invoice more quickly and drive down the days of sales outstanding (“DSO”). Earnout of the Free Cash Flow portion of the cash bonus could range between 0% and 100% of the applicable target.

The 2017 AIP was originally divided into five measurement periods with each quarter representing 12.5% of an individual’s bonus opportunity and the whole year actual versus the original plan representing 50%. Performance metric goals under the 2017 AIP were originally based on an average oil price of over $54. Actual oil prices remained lower throughout the majority of 2017. In response to the continued depressed oil prices and in order to keep executive officers motivated to perform, in August 2017, the compensation committee determined to adjust the Adjusted EBITDA targets for the third and fourth quarters of 2017, increase the weighting of both measurement periods from 12.5% to 25% each and eliminate the annual Adjusted EBITDA measurement period (which originally represented 50% of an individual’s bonus opportunity). The 2017 AIP goals and related actual performance were as follows:

2017 AIP Measurements (January - March 2017 “First Performance Period”)

Adjusted EBITDA (weighted 80%). The Adjusted EBITDA target for the First Performance Period was set at negative $9.75 million with no threshold. Because this goal was negative, the potential earnout was capped at 100% if actual performance was above target but still negative, with the maximum earnout of 126% possible if actual performance was positive. The Adjusted EBITDA results for the First Performance Period was negative $8.67 million which exceeded the target. As discussed below, the compensation committee used negative discretion to cap Adjusted EBITDA earnings at 100% of target. Thus, the Company attained 100% of the Adjusted EBITDA target for the period.

Safety (weighted 10%). The target safety goal for the First Performance Period was a corporate-wide Safety Performance Index ("SPI") of 100%. The SPI for the First Performance Period was 75% resulting in attainment of 50% of the safety target for the period.

Free Cash Flow (weighted 10%). The target Free Cash Flow goal for the First Performance Period was to provide accurate and signed work tickets for invoicing in less than 12 days. Free Cash Flow for the First Performance Period was 15 days resulting in 0% attainment of the Free Cash Flow target for the period.

2017 AIP Measurements (April - June 2017 “Second Performance Period”)

Adjusted EBITDA (weighted 80%). The Adjusted EBITDA target for the Second Performance Period was set at $5.44 million. The Adjusted EBITDA results for the Second Performance Period was $32,000. Of the $14.1 million targeted improvement in Adjusted EBITDA above actual First Performance Period Adjusted EBITDA, the Company achieved $8.7 million. Based on this improvement, the compensation committee approved attainment of the Adjusted EBITDA target for the period at 62%, calculated by determining the extent to which earnings increased during the Second Performance Period as compared to the First Performance Period.

Safety (weighted 10%). The target safety goal for the Second Performance Period was a corporate-wide SPI of 100%. The SPI for the Second Performance Period was 50% resulting in attainment of 0% of the safety target for the period.

Free Cash Flow (weighted 10%). The target Free Cash Flow goal for the Second Performance Period was to provide accurate and signed work tickets for invoicing in less than 12 days. Free Cash Flow for the Second Performance Period was 14 days resulting in 0% attainment of the Free Cash Flow target for the period.

2017 AIP Measurements (July - September 2017 “Third Performance Period”)

Adjusted EBITDA (weighted 80%). The Adjusted EBITDA target was originally set at $16.1 million and adjusted to $1.62 million in August 2017. The Adjusted EBITDA results for the Third Performance Period was $1.87 million which was $0.24 million more than target. As discussed below, the compensation committee used negative discretion to cap the Adjusted EBITDA earnings at 100% of target, which resulted in 100% attainment of the Adjusted EBITDA target for the period.


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