Cactus(WHD) - 2019 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section cautions that forward-looking statements involve known and unknown risks that may cause actual results to differ materially - This Quarterly Report contains forward-looking statements based on current expectations and assumptions about future events, identified by words like "could," "believe," "anticipate," "intend," "estimate," "expect," and "project"[8] - Forward-looking statements cover various aspects including demand for products/services, rig growth, capital spending, fracturing activity, raw material availability, costs, potential liabilities, business strategy, financial performance, and regulatory impacts[9] - These statements involve known and unknown risks, uncertainties, and other factors, as described in Item 1A, "Risk Factors" of the Annual Report on Form 10-K, which may cause actual results to differ materially[11] PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements, with detailed notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2019, and December 31, 2018 | Metric | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :------------------------------- | :--------- | :--------- | | Total assets | $793,765 | $584,744 | $209,021 | 35.7% | | Total liabilities | $339,235 | $222,416 | $116,819 | 52.5% | | Total stockholders' equity | $454,530 | $362,328 | $92,202 | 25.4% | - Cash and cash equivalents increased significantly from $70,841 thousand at December 31, 2018, to $131,149 thousand at June 30, 2019[17] - Deferred tax asset, net, saw a substantial increase from $159,053 thousand to $239,754 thousand[17] Condensed Consolidated Statements of Income This section presents the company's financial performance, detailing revenues, income from operations, and net income for the three and six months ended June 30, 2019 and 2018 | Metric (in thousands) | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenues | $168,493 | $138,543 | $29,950 | 21.6% | | Income from operations| $51,450 | $46,487 | $4,963 | 10.7% | | Net income | $40,750 | $41,542 | $(792) | (1.9)% | | EPS - basic | $0.46 | $0.47 | $(0.01) | (2.1)% | | EPS - diluted | $0.45 | $0.46 | $(0.01) | (2.2)% | | Metric (in thousands) | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenues | $327,368 | $253,653 | $73,715 | 29.1% | | Income from operations| $99,942 | $81,704 | $18,238 | 22.3% | | Net income | $89,196 | $67,950 | $21,246 | 31.3% | | EPS - basic | $1.13 | $0.61 | $0.52 | 85.2% | | EPS - diluted | $1.07 | $0.60 | $0.47 | 78.3% | - Income tax expense for the three months ended June 30, 2019, significantly increased by 129.8% to $10,793 thousand, primarily due to a valuation allowance increase[18][157] Condensed Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income components, for the three and six months ended June 30, 2019 and 2018 | Metric (in thousands) | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Comprehensive income | $40,379 | $40,952 | $(573) | (1.4)% | | Comprehensive income attributable to Cactus Inc. | $21,176 | $12,159 | $9,017 | 74.2% | | Metric (in thousands) | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Comprehensive income | $89,095 | $67,599 | $21,496 | 31.8% | | Comprehensive income attributable to Cactus Inc. | $48,106 | $15,897 | $32,209 | 202.6% | Condensed Consolidated Statements of Stockholders' Equity This section details changes in stockholders' equity, including net income, additional paid-in capital, and non-controlling interest adjustments, for the periods presented - Total stockholders' equity increased from $362,328 thousand at December 31, 2018, to $454,530 thousand at June 30, 2019[22] - The increase in equity was driven by net income, additional paid-in capital related to the tax receivable agreement, and the effect of CW Unit redemptions, which increased Cactus Inc.'s ownership in Cactus LLC[22][34] - A correction for misstatements of equity related to the July 2018 follow-on offering reduced non-controlling interest by $14.5 million and increased additional paid-in capital by $14.0 million and accumulated other comprehensive income by $0.5 million[35] Condensed Consolidated Statements of Cash Flows This section presents the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2019 and 2018 | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $98,318 | $80,705 | $17,613 | 21.8% | | Net cash used in investing activities | $(28,749) | $(31,348) | $2,599 | (8.3)% | | Net cash used in financing activities | $(9,087) | $(28,396) | $19,309 | (68.0)% | - The net increase in cash and cash equivalents was $60,308 thousand for the six months ended June 30, 2019, compared to $20,829 thousand in the prior year period[25] - Financing activities in 2018 included significant proceeds from equity offerings ($469.6 million) and repayments of long-term debt ($248.5 million) related to the IPO, which were not present in 2019[25][179] Notes to Condensed Consolidated Financial Statements Note 1. Organization and Nature of Operations This note describes Cactus, Inc.'s business, its structure as a holding company, the IPO, and the mechanics of CW Unit redemptions and the associated Tax Receivable Agreement - Cactus, Inc. designs, manufactures, and sells wellhead and pressure control equipment, and offers rental, repair, refurbishment, and service crews for onshore unconventional oil and gas wells[27] - Cactus Inc. is a holding company that became the sole managing member of Cactus LLC after its IPO on February 12, 2018, consolidating Cactus LLC's financial results and reporting non-controlling interest[28][29] | CW Unit Holders | As of Feb 7, 2018 | IPO | July 2018 Offering | Other Redemptions | As of Dec 31, 2018 | March 2019 Offering | Other Redemptions | As of June 30, 2019 | | :---------------- | :---------------- | :-- | :----------------- | :---------------- | :----------------- | :------------------ | :---------------- | :------------------ | | No. of CW Units | 60,558 | (12,118) | (11,197) | (7) | 37,236 | (8,474) | (742) | 28,020 | - As of June 30, 2019, Cactus Inc. owned 62.7% of Cactus LLC, an increase from 50.3% at December 31, 2018, due to CW Unit redemptions[36] Note 2. Preparation of Interim Financial Statements and Other Items This note outlines the basis of presentation for interim financial statements, including GAAP compliance, consolidation principles, key accounting policies, and recent accounting pronouncement adoption - The financial statements are prepared in accordance with GAAP for interim financial information and include all adjustments of a normal recurring nature[38][39] - The company operates as a single reporting segment[41] - One customer accounted for 10% and 11% of consolidated revenues for the six months ended June 30, 2019 and 2018, respectively[44] - The company adopted ASC Topic 842, Leases, on January 1, 2019, resulting in the recognition of operating lease ROU assets of $25.3 million and corresponding lease liabilities[47][49] - The company is evaluating the impact of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which is effective for fiscal years beginning after December 15, 2019[55] Note 3. Inventories This note provides a breakdown of the company's inventory components, including raw materials, work-in-progress, and finished goods, as of June 30, 2019, and December 31, 2018 | Inventory Type (in thousands) | June 30, 2019 | December 31, 2018 | | :---------------------------- | :------------ | :---------------- | | Raw materials | $1,733 | $1,925 | | Work-in-progress | $3,767 | $3,582 | | Finished goods | $104,560 | $94,330 | | Total Inventories | $110,060 | $99,837 | Note 4. Property and Equipment, net This note details the composition of property and equipment, net, including land, buildings, machinery, finance lease assets, rental equipment, and construction in progress | Property & Equipment (in thousands) | June 30, 2019 | December 31, 2018 | | :---------------------------------- | :------------ | :---------------- | | Gross property and equipment | $249,960 | $225,907 | | Less: Accumulated depreciation | $(109,167) | $(96,412) | | Net property and equipment | $140,793 | $129,495 | | Construction in progress | $15,195 | $12,559 | | Total property and equipment, net | $155,988 | $142,054 | Note 5. Long-term Debt This note clarifies that Cactus, Inc. had no long-term debt outstanding and details its $75.0 million ABL Credit Facility, its terms, covenants, and compliance - Cactus LLC had no long-term debt outstanding as of June 30, 2019, and December 31, 2018[58] - The company has a $75.0 million senior secured asset-based revolving credit facility (ABL Credit Facility) maturing on August 21, 2023, with full access to its capacity at June 30, 2019[59][60] - The ABL Credit Facility contains various covenants limiting additional indebtedness, investments, asset sales, restricted payments, and affiliate transactions, and requires a fixed charge coverage ratio under certain conditions[64] - The company was in compliance with all covenants under the ABL Credit Facility as of June 30, 2019, and December 31, 2018[66] Note 6. Revenue This note describes the company's revenue recognition policies, performance obligations, and disaggregation of revenue by category, highlighting short-term contracts - Revenues are recognized when performance obligations are satisfied by transferring control of promised goods or services to customers, primarily from short-term contracts[68][69] | Revenue Category (in thousands) | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Product revenue | $94,494 | $73,281 | $181,134 | $132,207 | | Rental revenue | $39,576 | $34,944 | $78,073 | $64,089 | | Field service and other revenue | $34,423 | $30,318 | $68,161 | $57,357 | | Total revenue | $168,493 | $138,543 | $327,368 | $253,653 | - For the six months ended June 30, 2019, product revenue constituted 55% of total revenues, rental revenue 24%, and field service and other revenue 21%, with approximately 99% of revenues from U.S. operations[71][134] Note 7. Leases This note details the company's adoption of ASC Topic 842, Leases, and its impact on financial statements, including recognition of ROU assets and liabilities - Adoption of ASC Topic 842 on January 1, 2019, resulted in the recognition of operating lease ROU assets of $25.3 million and corresponding operating short-term and long-term lease liabilities of $6.2 million and $19.6 million, respectively[49] | Lease Cost Component (in thousands) | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2019 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Finance lease cost | $2,120 | $4,204 | | Operating lease cost | $1,944 | $3,809 | | Short-term lease cost | $161 | $336 | | Variable lease cost | $136 | $263 | | Sublease income | $(119) | $(218) | | Total lease cost | $4,242 | $8,394 | | Future Lease Payments (in thousands) | Operating Leases | Finance Leases | | :----------------------------------- | :--------------- | :------------- | | Total undiscounted lease payments | $27,978 | $15,678 | | Less: imputed interest | $3,362 | $1,421 | | Present value of lease payments | $24,616 | $14,257 | | Lease Metric (as of June 30, 2019) | Value | | :--------------------------------- | :---------- | | Weighted average remaining lease term: Finance leases | 1.89 years | | Weighted average remaining lease term: Operating leases | 5.66 years | | Weighted average discount rate: Finance leases | 11.89 % | | Weighted average discount rate: Operating leases | 4.47 % | Note 8. Tax Receivable Agreement This note details the Tax Receivable Agreement (TRA), obligating Cactus Inc. to pay TRA Holders 85% of net cash savings from tax basis adjustments, and its financial implications - The TRA obligates Cactus Inc. to pay TRA Holders 85% of net cash savings in U.S. federal, state, and local income/franchise tax resulting from tax basis adjustments due to CW Unit redemptions and IPO-related debt repayment[88] - The total TRA liability recorded as of June 30, 2019, was $230.6 million, with future payments expected to be substantial and continue for over 25 years if not terminated early[89][97] - Payments under the TRA are dependent on future taxable income, timing and number of CW Unit redemptions, stock price, and applicable tax rates[90][91] | Period (in thousands) | Liability related to TRA | | :-------------------- | :----------------------- | | Remainder of 2019 | $9,574 | | 2020 | $14,424 | | 2021 | $12,186 | | 2022 | $12,423 | | 2023 | $12,690 | | Thereafter | $169,320 | | Total | $230,617 | Note 9. Income Taxes This note explains Cactus Inc.'s income tax structure, effective tax rates, and the treatment of deferred tax assets and valuation allowances, highlighting ownership structure impacts - Cactus Inc. is subject to U.S. federal and state income taxes on its share of Cactus LLC's income, while non-controlling interest income is not subject to these taxes[105][107] | Metric (in thousands) | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income tax expense | $10,793 | $4,697 | $9,820 | $6,349 | | Effective tax rate | 20.9% | 10.2% | 9.9% | 8.5% | - The second quarter of 2019 included $4.0 million in tax expense for establishing additional valuation allowance against a deferred tax asset, while the six months ended June 30, 2019, saw a $4.2 million tax benefit from the release of valuation allowance due to CW Unit redemptions[107][110] Note 10. Related Party Transactions This note discloses related party transactions, including plane rentals, the Tax Receivable Agreement (TRA) with certain officers, and pro-rata distributions by Cactus LLC - The company rents a plane under dry-lease from a company owned by a Cactus LLC member, with expenses totaling less than $0.1 million for the three months ended June 30, 2019, and $0.1 million for the six months ended June 30, 2019[111] - The TRA involves certain officers, directors, and employees as TRA Holders, with a total liability of $230.6 million as of June 30, 2019[112] - Cactus LLC distributed $5.8 million to Cactus Inc. to fund TRA liability payments and $3.8 million to other members during the six months ended June 30, 2019[113] Note 11. Commitments and Contingencies This note addresses legal contingencies, stating that management does not believe current disputes will have a material adverse effect on the company's financial position or results - Management believes that pending or threatened legal matters will not have a material adverse impact on the company's consolidated financial position or results of operations[114] Note 12. Employee Benefit Plans This note describes the company's 401(k) plan for U.S. employees, including eligibility, contribution matching, and discretionary non-elective contributions, as well as similar foreign plans - The company matches 100% of the first 3% of gross pay contributed by employees and 50% of the next 4% contributed to the 401(k) plan[115] - Employer matching contributions totaled $0.6 million for the three months ended June 30, 2019, and $1.7 million for the six months ended June 30, 2019[117] Note 13. Stock-based Compensation This note outlines the Long-term Incentive Plan (LTIP) and the accounting for restricted stock units (RSUs), providing a summary of RSU activity and compensation expense - The LTIP allows for various equity awards to incentivize individuals providing services to the company or its affiliates[118] | RSU Activity (in thousands) | No. of RSU's | Weighted Average Grant Date Fair Value | | :-------------------------- | :----------- | :------------------------------------- | | Nonvested as of Dec 31, 2018| 782 | $19.84 | | Granted | 204 | $37.37 | | Vested | (269) | $19.23 | | Nonvested as of June 30, 2019| 717 | $25.07 | - Stock-based compensation expense was $1.9 million for the three months and $3.6 million for the six months ended June 30, 2019[122] - Approximately $14.9 million of unrecognized compensation expense related to unvested RSUs remains as of June 30, 2019, to be recognized over a weighted average remaining vesting period of 2.3 years[122] Note 14. Earnings per Share This note details the calculation of basic and diluted earnings per share (EPS) for Class A common stock, including methods for potentially dilutive shares - Basic EPS is calculated by dividing net income attributable to Cactus Inc. by the weighted average Class A shares outstanding, while diluted EPS considers the potential dilutive effect of CW Units and unvested restricted stock units[123][124] | EPS Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :--------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.46 | $0.47 | $1.13 | $0.61 | | Diluted EPS| $0.45 | $0.46 | $1.07 | $0.60 | - For the three months ended June 30, 2019, 28.2 million shares of Class B common stock were excluded from diluted EPS calculation as their effect would be anti-dilutive[129] Note 15. Supplemental Cash Flow Information This note provides supplemental information on non-cash investing and financing activities, such as property and equipment acquired under capital lease and Class A common stock issuance | Non-Cash Activity (in thousands) | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :------------------------------- | :--------------------------- | :--------------------------- | | Property and equipment acquired under capital lease | $2,359 | $5,860 | | Property and equipment in payables | $3,943 | $3,500 | - During the six months ended June 30, 2019, the company issued 9.2 million shares of Class A common stock for no proceeds due to redemptions of CW Units[129] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and operational results, including market factors, consolidated results, and liquidity Executive Summary This section provides an overview of Cactus's business, including its core products, services, operational footprint, and revenue composition by category - Cactus designs, manufactures, sells, and rents highly engineered wellhead and pressure control equipment for onshore unconventional oil and gas wells, also providing field services[131] - The company operates through U.S. service centers in key oil and gas regions and in Eastern Australia, with manufacturing facilities in Louisiana and China[132] - Revenues are primarily derived from product sales (wellhead systems, production trees), equipment rentals (frac valves, drilling tools), and field services (installation, maintenance, repair)[133] - For the six months ended June 30, 2019, product sales accounted for 55% of total revenues, rentals 24%, and field services 21%, with 99% of sales from U.S. operations[134] Market Factors and Trends This section discusses market factors and trends influencing the company's demand, including oil and gas industry activity, rig count, drilling efficiencies, and trade tariffs - Demand for products and services is driven by oil and gas industry activity, including rig count, wells drilled, completion activity, and capital spending by E&P companies, which are influenced by volatile oil and gas prices[135] - The U.S. onshore rig count trended down through July 2019, with the weekly average at 992 rigs for the six months ended June 30, 2019, down from 1,011 rigs in 2018[138][139] - Increased horizontal wells, pad drilling, and wells per rig are favorable trends enhancing demand for products relative to active rig count[140] - The U.S. Trade Representative increased tariffs on approximately $200 billion worth of Chinese imports from 10% to 25% on May 10, 2019, affecting about 50% of the company's inventory sourced from China[143][144] - Cactus will become a large accelerated filer for the year ended December 31, 2019, and will no longer be considered an emerging growth company[146] Consolidated Results of Operations Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018 For the three months ended June 30, 2019, total revenues increased by 21.6%, driven by strong growth across all categories, though net income slightly decreased due to higher costs and increased income tax expense | Metric (in thousands) | June 30, 2019 | June 30, 2018 | Change ($) | Change (%) | | :-------------------- | :------------ | :------------ | :--------- | :--------- | | Product revenue | $94,494 | $73,281 | $21,213 | 28.9% | | Rental revenue | $39,576 | $34,944 | $4,632 | 13.3% | | Field service revenue | $34,423 | $30,318 | $4,105 | 13.5% | | Total revenues | $168,493 | $138,543 | $29,950 | 21.6% | - Product revenue increased primarily due to increased sales of wellhead and production-related equipment, driven by market share gains and greater customer drilling efficiencies[149] - Cost of rental revenue increased by 39.4% to $19.5 million, largely due to higher depreciation on a larger rental fleet and increased repair costs associated with greater deployment and activity[153] - Selling, general and administrative expenses rose by 34.5% to $13.3 million, attributed to higher payroll, incentive compensation, stock-based compensation, and public company costs[155] - Income tax expense surged by 129.8% to $10.8 million, including a $4.0 million valuation allowance increase, reflecting Cactus Inc.'s increased ownership in Cactus LLC (62.7% vs. 35.3% YoY)[157] Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018 For the six months ended June 30, 2019, total revenues grew by 29.1% and net income increased by 31.3%, despite higher operating costs, partially offset by a tax benefit | Metric (in thousands) | June 30, 2019 | June 30, 2018 | Change ($) | Change (%) | | :-------------------- | :------------ | :------------ | :--------- | :--------- | | Product revenue | $181,134 | $132,207 | $48,927 | 37.0% | | Rental revenue | $78,073 | $64,089 | $13,984 | 21.8% | | Field service revenue | $68,161 | $57,357 | $10,804 | 18.8% | | Total revenues | $327,368 | $253,653 | $73,715 | 29.1% | | Net income | $89,196 | $67,950 | $21,246 | 31.3% | - Product revenue increased by 37% due to higher sales of wellhead and production equipment, driven by increased market share and customer efficiencies[159] - Cost of rental revenue increased by 43% to $37.2 million, primarily due to higher depreciation on an expanded rental fleet and increased costs for asset deployment and repairs[164] - Interest income, net, improved significantly from an expense of $3.1 million in 2018 to income of $0.1 million in 2019, mainly due to the repayment of the previous term loan post-IPO[167] - Income tax expense for the six months ended June 30, 2019, was $9.8 million (9.9% effective tax rate), which included a $4.2 million tax benefit from the release of a valuation allowance due to CW Unit redemptions and the March 2019 Secondary Offering[169] Liquidity and Capital Resources This section discusses the company's liquidity and capital resources, including cash flows, the ABL Credit Facility, and the financial impact of the Tax Receivable Agreement Cash Flows The company's liquidity is primarily supported by cash flows from operating activities and its ABL Credit Facility, with changes in investing and financing activities detailed - As of June 30, 2019, cash and cash equivalents totaled $131.1 million, with $75.0 million available under the ABL Credit Facility and no outstanding borrowings[172] - Net cash provided by operating activities increased by $17.6 million to $98.3 million for the six months ended June 30, 2019, driven by higher net income[176] - Net cash used in investing activities decreased by $2.6 million to $28.7 million, primarily due to slightly lower capital expenditures and higher proceeds from asset sales[177] - Net cash used in financing activities decreased significantly by $19.3 million to $9.1 million for the six months ended June 30, 2019, compared to $28.4 million in 2018, which included large IPO-related transactions[178] - The company estimates net capital expenditures for 2019 to range from $50 million to $60 million, mostly for rental fleet investments[174] Tax Receivable Agreement (Liquidity) This section discusses the potential financial impact of the Tax Receivable Agreement (TRA) on the company's liquidity, particularly in the event of an early termination - If the TRA were terminated as of June 30, 2019, estimated termination payments would be approximately $347 million (discounted), based on an undiscounted liability of $471 million[181] - A 10% increase in Class A common stock price would increase the discounted TRA liability by $16 million to $363 million, while a 10% decrease would reduce it by $17 million to $330 million[181] Contractual Obligations This section provides a summary of the company's contractual obligations, including operating lease liabilities, finance lease obligations, and the Tax Receivable Agreement liability | Obligation (in thousands) | Remainder of 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | | :------------------------ | :---------------- | :------ | :------ | :------ | :------ | :--------- | :-------- | | Operating lease liabilities | $3,410 | $6,068 | $3,855 | $2,878 | $2,024 | $6,381 | $24,616 | | Finance lease obligations | $4,038 | $6,655 | $3,014 | $550 | — | — | $14,257 | | Liability related to TRA | $9,574 | $14,424 | $12,186 | $12,423 | $12,690 | $169,320 | $230,617 | | Total | $17,022 | $27,147 | $19,055 | $15,851 | $14,714 | $175,701 | $269,490 | Off-Balance Sheet Arrangements This section states that the company currently does not have any off-balance sheet arrangements - The company currently does not have any off-balance sheet arrangements[183] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's 2018 Annual Report for detailed market risk disclosures, noting no material changes since December 31, 2018 - The company's exposure to market risk has not changed materially since December 31, 2018[184] - For detailed disclosures on market risk, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in the 2018 Annual Report[184] Item 4. Controls and Procedures This section reports on the ineffectiveness of disclosure controls and procedures due to a material weakness, with no material changes in internal control over financial reporting - The company's disclosure controls and procedures were not effective as of June 30, 2019, due to a previously disclosed material weakness in internal control over financial reporting[185] - There has been no change in internal control over financial reporting during the second quarter of 2019 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[186] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section addresses legal proceedings, stating that management believes current disputes will not have a material adverse impact on the company's financial condition or results - Management believes that pending or threatened legal matters will not have a material adverse impact on the company's financial condition or consolidated results of operations[189][190] Item 1A. Risk Factors This section directs readers to the risk factors detailed in the company's 2018 Annual Report and other SEC filings, noting no material changes - There have been no material changes in the company's risk factors from those described in its 2018 Annual Report or other SEC filings[191] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on issuer purchases of equity securities, specifically Class A common stock repurchased from employees to satisfy tax withholding obligations related to vested restricted stock units | Period | Total shares purchased | Average price paid per share | | :-------------- | :--------------------- | :--------------------------- | | April 1-30, 2019| 200 | $35.60 | | May 1-31, 2019 | - | - | | June 1-30, 2019 | 1,032 | $32.55 | | Total | 1,232 | $33.05 | - Shares of Class A common stock were repurchased from employees to satisfy tax withholding obligations related to vested restricted stock units[193] Item 6. Exhibits This section lists the exhibits filed as part of the report, including corporate organizational documents, CEO and CFO certifications, and XBRL taxonomy documents - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, CEO and CFO Certifications (Sarbanes-Oxley Act), and XBRL Instance and Taxonomy Documents[197] Signatures This section confirms the report was signed on August 1, 2019, by the President, CEO, Director, and the Vice President, CFO, and Treasurer - The report was signed on August 1, 2019, by Scott Bender, President, Chief Executive Officer and Director, and Stephen Tadlock, Vice President, Chief Financial Officer and Treasurer[201]