NCS Multistage(NCSM) - 2020 Q4 - Annual Report

PART I Business Overview NCS Multistage provides engineered products and services for oil and natural gas well completions, emphasizing organic growth, innovation, and financial stability - NCS is a leading provider of engineered products and services for oil and natural gas well completions, focusing on onshore unconventional wells in North America and selected international markets[20][217] - Key offerings include fracturing systems (pinpoint stimulation), composite frac plugs (Repeat Precision), tracer diagnostics, and well construction products[21][22][23][24][218][219] - The business strategy emphasizes disciplined organic growth, innovative technology development, financial stability, and selective M&A[26] Key Financial Metrics (in millions) | Metric | 2020 (in millions) | 2019 (in millions) | 2018 (in millions) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | | Total Revenues | $107.0 | $205.5 | $227.0 | | Net Loss attributable to NCS Multistage | $(57.6) | $(32.8) | $(190.3) | | Total Assets | $138.7 | $202.6 | $229.7 | - Revenue diversification in 2020: Fracturing systems (50%), Repeat Precision (30%), well construction (10%), and tracer diagnostics (10%). Canadian market revenue share reduced from 71% in 2016 to 45% in 2020[27] - The company holds 40 U.S. utility patents (expiring 2030-2039) and 43 international utility patents (expiring 2025-2036), along with pending applications, and relies on trade secrets[35][36][38] - Customer base includes over 200 oil and natural gas producers and oilfield service companies. Crescent Point Energy accounted for 10% of 2020 revenue, and the top five customers for 31%[39] - Business is subject to quarterly variability, with higher activity in Canada during Q1 and declines in Q2 due to weather conditions, and potential Q4 reductions in the U.S. due to capital budget exhaustion[44] - Supply chain experienced modest disruptions in 2020 due to COVID-19, including delays in chemical imports and reduced capacity at Repeat Precision's Mexico machine shop, but sufficient inventory was maintained[48] - The company operates in highly competitive markets, competing on technology, service quality, safety, and price, and is subject to stringent environmental, health, and safety regulations[50][53][54] Risk Factors NCS Multistage faces significant risks from volatile oil and natural gas markets, COVID-19 impacts, intense competition, intellectual property issues, and financial indebtedness - The COVID-19 pandemic negatively impacted crude oil demand, E&P capital expenditures, and NCS's revenue and pricing in 2020, leading to workforce reductions and significant asset impairment charges[67][68][72][75][234] - Business success is highly dependent on volatile oil and natural gas prices and E&P activity levels, with prolonged low commodity prices leading to reduced customer spending and credit risk (e.g., $0.8 million provision for doubtful accounts in 2020)[75][78][79][227] - Challenges in increasing U.S. market share for pinpoint stimulation against traditional completion techniques and intense competition from larger, more resourced companies pose significant risks[81][82][84] - Reliance on developing new technologies, protecting intellectual property, and managing operational hazards (e.g., equipment failures, personal injury claims) are critical, with potential for substantial liabilities[86][90][91][96][98] - Approximately 45% of 2020 revenue was denominated in Canadian dollars, exposing the company to significant foreign currency exchange rate risk[102][338] - The company's outstanding indebtedness ($5.8 million as of Dec 31, 2020) and restrictive covenants in its Senior Secured Credit Facility (matures May 2023, $25.0 million capacity, limited by borrowing base) could adversely affect financial condition and flexibility[152][156][158][300] - Advent International Corporation controls 62.6% of the company's voting power, which may lead to interests differing from public stockholders and limit their influence on corporate matters[166][167] - As an 'emerging growth company' and 'smaller reporting company,' NCS benefits from reduced reporting requirements, which could make its common stock less attractive to some investors[180][182][334] Unresolved Staff Comments There are no unresolved staff comments to report - No unresolved staff comments[189] Properties NCS Multistage's corporate headquarters are in Houston, Texas, owning one property in Calgary and leasing 19 others for various operations - Corporate headquarters are in Houston, Texas[190] - Owns one property in Calgary, Alberta, for engineering and R&D activities[190] - Leases 19 additional properties for corporate, sales, manufacturing, engineering, district operations, laboratory, warehousing, and storage yards[190] - Existing facilities are deemed adequate for current operations[190] Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 10, 'Commitments and Contingencies,' of the consolidated financial statements - Refer to Note 10. Commitments and Contingencies for details on legal proceedings[191] Mine Safety Disclosures This item is not applicable to the company - Not applicable[192] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities NCS Multistage's common stock trades on NASDAQ under 'NCSM,' with 2.36 million shares outstanding as of March 4, 2021, and no anticipated cash dividends or equity repurchases - Common stock trades on the NASDAQ Capital Market under the symbol "NCSM"[195] - As of March 4, 2021, there were 2,360,007 shares of common stock outstanding, held by approximately 17 record holders[6][196] - The company does not intend to pay cash dividends on its common stock in the foreseeable future[197] - No issuer purchases of equity securities were made[200] Selected Financial Data This section presents selected consolidated financial data for 2016-2020, including statements of operations, cash flows, and balance sheets, adjusted for a 1-for-20 reverse stock split Consolidated Statements of Operations Data (in thousands, except per share amounts) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------------------- | :----- | :----- | :----- | :----- | :----- | | Product sales | $75,197 | $145,826 | $156,781 | $144,666 | $73,220 | | Services | $31,780 | $59,659 | $70,182 | $56,968 | $25,259 | | Total revenues | $106,977 | $205,485 | $226,963 | $201,634 | $98,479 | | Total cost of sales (excl. D&A) | $62,907 | $108,030 | $108,306 | $98,792 | $53,833 | | Selling, general and administrative expenses | $59,425 | $88,554 | $82,813 | $64,707 | $37,061 | | Depreciation | $4,426 | $5,877 | $4,747 | $3,193 | $1,766 | | Amortization | $1,465 | $4,559 | $13,090 | $24,458 | $23,801 | | Impairments | $50,194 | $7,919 | $227,543 | $0 | $0 | | Loss from operations | $(71,440) | $(9,491) | $(206,664) | $4,959 | $(17,982) | | Gain on patent infringement settlement | $25,678 | $0 | $0 | $0 | $0 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(57,599) | $(32,823) | $(190,317) | $2,102 | $(17,927) | | Basic loss per common share | $(24.37) | $(14.08) | $(85.00) | $1.01 | $(10.55) | | Diluted loss per common share | $(24.37) | $(14.08) | $(85.00) | $0.96 | $(10.55) | | Weighted average common shares outstanding (Basic) | 2,364 | 2,332 | 2,239 | 2,024 | 1,700 | | Weighted average common shares outstanding (Diluted) | 2,364 | 2,332 | 2,239 | 2,179 | 1,700 | Consolidated Statements of Cash Flows Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Net cash provided by (used in) Operating activities | $35,117 | $17,949 | $14,026 | $16,114 | $10,684 | | Net cash used in Investing activities | $(1,059) | $(5,002) | $(15,410) | $(85,221) | $(1,840) | | Net cash used in Financing activities | $(29,773) | $(27,306) | $(5,130) | $84,033 | $(315) | Other Financial Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Adjusted EBITDA | $2,184 | $28,184 | $49,739 | $49,498 | $13,880 | | Adjusted EBITDA Less Share-Based Compensation | $(5,539) | $15,980 | $38,809 | $43,390 | $12,526 | Consolidated Balance Sheet Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Cash and cash equivalents | $15,545 | $11,243 | $25,131 | $33,809 | $18,275 | | Total assets | $138,678 | $202,577 | $229,701 | $463,913 | $326,827 | | Total debt, net | $5,789 | $12,917 | $25,691 | $27,036 | $89,166 | | Total liabilities | $25,192 | $39,032 | $53,470 | $94,922 | $149,349 | | Total stockholders' equity | $93,608 | $144,610 | $161,301 | $356,847 | $177,478 | - All share and per share information has been retrospectively adjusted for the 1-for-20 reverse stock split effective December 1, 2020[204] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes NCS Multistage's financial condition and operational results, focusing on COVID-19 impacts, liquidity, capital resources, and critical accounting policies Overview NCS Multistage provides engineered products and support services for oil and natural gas well completions, operating as a single reportable segment - NCS provides highly engineered products and support services for oil and natural gas well completions, primarily in onshore unconventional wells[217] - Key offerings include fracturing systems for pinpoint stimulation, composite frac plugs (Repeat Precision), tracer diagnostics, and well construction products[218][219] - The company operates in one reportable segment[219] COVID-19 Impacts on the Oil & Gas Market and NCS Multistage The COVID-19 pandemic severely impacted the oil and gas market in 2020, leading to reduced demand, pricing pressure, cost cuts, and significant asset impairment charges for NCS - COVID-19 caused an 8.8 MMBBL/D contraction in global crude oil demand in 2020 and a decline in WTI crude oil prices (average $27.96/BBL in Q2 2020)[223][225] - E&P companies significantly reduced 2020 capital expenditure budgets (30-100% cuts), leading to substantial reductions in drilling and completion activity[226] - NCS experienced reduced demand and pricing for its products and services, delayed international operations, and modest supply chain disruptions[229][230] - Workforce reductions: Approximately 190 employees in U.S. and Canada - Salary reductions: Executives averaged 20% cuts - Bonus elimination: No 2019 or 2020 bonuses paid - Benefit suspension: Temporary elimination of employer matching contributions for 401(k) and RRSP - Severance expense: $5.7 million recorded in 2020 - Recorded impairment charges of $9.7 million in property and equipment and $40.5 million in identifiable intangible assets during Q1 2020 due to market decline[234] - Amended Senior Secured Credit Facility in August 2020, reducing U.S. commitments to $25.0 million and limiting borrowings to an $11.0 million borrowing base (as of Dec 31, 2020)[235][300] Outlook NCS anticipates modestly lower North American drilling and completions activity in 2021, with flat international activity and intense competitive pressure impacting margins - North American drilling and completions activity is expected to be modestly lower in 2021 than in 2020[238] - E&P companies are committed to generating free cash flow and maintaining production at late 2020 levels[238] - International industry activity is expected to be approximately flat in 2021 compared to 2020, with increases through the year[238] - Intense competitive pressure is expected across all product and service offerings in North America, impacting market share and margins[238] Market Conditions Oil and natural gas prices remained volatile in 2020, impacting North American drilling activity, though a trend towards complex wells benefits NCS's specialized products - WTI crude oil prices were volatile, falling to approximately $48 per barrel in December 2020, while natural gas prices fell to an average of $2.03 per MMBtu in 2020[240][244] - OPEC+ implemented significant oil production reductions throughout 2020 and early 2021 to stabilize crude oil prices and reduce global storage capacity[240] Average Drilling Rig Count (U.S. Land, Canada Land, North America Land) | Quarter Ended | U.S. Land | Canada Land | North America Land | | :-------------- | :-------- | :---------- | :----------------- | | 3/31/2020 | 764 | 194 | 958 | | 6/30/2020 | 378 | 23 | 401 | | 9/30/2020 | 241 | 46 | 287 | | 12/31/2020 | 297 | 88 | 385 | - The trend towards longer, more complex wells and increased focus on completion optimization has led to higher sales of NCS's sliding sleeves, composite frac plugs, and tracer diagnostics services[255] How We Generate Revenues NCS generates revenue from product sales (70% in 2020) and services, with 45% of 2020 revenue from Canada, exposing it to currency fluctuations and well complexity - Revenues are derived from product sales (fracturing systems, well construction, composite plug products) and services (downhole frac isolation assembly, tracer diagnostics)[256] Revenue Breakdown | Category | 2020 | 2019 | 2018 | | :--------------- | :--- | :--- | :--- | | Product sales | 70% | 71% | 69% | | Services | 30% | 29% | 31% | - Approximately 45% of 2020 revenues were from sales in Canada and denominated in Canadian dollars, making the company susceptible to foreign currency fluctuations[260] - Revenue is impacted by well complexity (more stages lead to increased sales) and pricing adjustments in competitive markets[259] Costs of Conducting our Business Costs include manufacturing, support services, and SG&A, with tariffs increasing cost of sales and approximately 19% of total costs denominated in Canadian dollars in 2020 - Cost of sales includes manufacturing expenses (raw materials, machining, product assembly, quality control) and support services (employee compensation, travel)[262] - SG&A expenses cover compensation, R&D, facility costs, IT, software licensing, marketing, insurance, and professional services[263] - Tariffs on imported steel and Chinese commodities have increased cost of sales[262] - Approximately 19% of total costs (cost of sales and SG&A) were denominated in Canadian dollars for the year ended December 31, 2020[264] How We Evaluate our Results of Operations Management evaluates performance using revenues, Adjusted EBITDA, Free Cash Flow, and related non-GAAP measures to assess core business operations and comparability - Management uses revenues, Adjusted EBITDA, Adjusted EBITDA Less Share-Based Compensation, Free Cash Flow, and Free Cash Flow Less Distributions to Non-Controlling Interest to analyze performance[265][267][268] - Adjusted EBITDA and Adjusted EBITDA Less Share-Based Compensation are non-GAAP measures that exclude items not reflective of ongoing operating performance or non-cash in nature, such as impairments and share-based compensation[267] - Free Cash Flow is defined as net cash from operating activities less capital expenditures plus proceeds from asset sales, providing insight into cash available beyond investment needs[268] Results of Operations NCS Multistage reported a significant revenue decline and increased net loss in 2020 due to COVID-19, partially offset by a patent settlement gain and a shift to an income tax benefit Key Financial Results (2020 vs. 2019, in thousands) | Metric | 2020 | 2019 | Variance ($) | Variance (%) | | :------------------------------------------------- | :----- | :----- | :----------- | :----------- | | Total revenues | $106,977 | $205,485 | $(98,508) | (47.9)% | | Total cost of sales (excl. D&A) | $62,907 | $108,030 | $(45,123) | (41.8)% | | Selling, general and administrative expenses | $59,425 | $88,554 | $(29,129) | (32.9)% | | Depreciation | $4,426 | $5,877 | $(1,451) | (24.7)% | | Amortization | $1,465 | $4,559 | $(3,094) | (67.9)% | | Impairments | $50,194 | $7,919 | $42,275 | 533.8% | | Loss from operations | $(71,440) | $(9,491) | $(61,949) | NM | | Gain on patent infringement settlement | $25,678 | $0 | $25,678 | 100.0% | | Income tax (benefit) expense | $(7,783) | $10,752 | $(18,535) | (172.4)% | | Net loss attributable to NCS Multistage Holdings, Inc. | $(57,599) | $(32,823) | $(24,776) | (75.5)% | - Revenue decrease primarily due to reduced North American activity and lower international product sales, driven by the COVID-19 pandemic[272] - Cost of sales as a percentage of revenues increased from 52.6% in 2019 to 58.8% in 2020 due to significant revenue reduction and fixed cost under-absorption[273] - SG&A expenses decreased due to lower compensation, share-based compensation, bad debt, R&D, ERP expenses, and travel, partially offset by $4.9 million higher severance charges[275] - Depreciation and amortization decreased primarily due to non-cash impairment charges of $9.7 million on property and equipment and $40.5 million on identifiable intangible assets in Q1 2020[276][277][278] - Income tax shifted to a benefit of $(7.8) million in 2020, influenced by a $(0.9) million NOL carryback benefit from the CARES Act and a $6.5 million expense for an increased valuation allowance on deferred tax assets[284] Liquidity and Capital Resources NCS Multistage's liquidity is supported by cash, operating cash flows, and its Senior Secured Credit Facility, with $15.5 million in cash and $5.8 million in debt as of December 31, 2020 - Primary liquidity sources are cash and cash equivalents, cash provided by operating activities, and borrowings under the Senior Secured Credit Facility[287] Liquidity and Debt (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $15,545 | $11,243 | | Total outstanding indebtedness | $5,789 | $12,917 | | Outstanding under Senior Secured Credit Facility | $0 | $10,000 | | Borrowing base under Senior Secured Credit Facility | $11,000 | N/A | - Anticipates $1-2 million in capital expenditures during 2021 for machining, software, tracer diagnostics equipment, and international vehicles[288] Cash Flow Summary (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $35,117 | $17,949 | $14,026 | | Net cash used in investing activities | $(1,059) | $(5,002) | $(15,410) | | Net cash used in financing activities | $(29,773) | $(27,306) | $(5,130) | | Free cash flow | $34,058 | $12,947 | $(1,384) | | Free cash flow less distributions to non-controlling interest | $16,508 | $6,947 | $(3,684) | - Net cash provided by operating activities increased in 2020 due to $21.4 million cash from a patent infringement settlement, no contingent consideration payment, and favorable changes in accounts receivable and inventories[292] - Net cash used in financing activities increased in 2020 primarily due to higher distributions to the joint venture partner ($17.6 million vs. $6.0 million in 2019)[296] Contractual Obligations As of December 31, 2020, NCS Multistage had total contractual obligations of $17.4 million, primarily comprising finance lease obligations, purchase obligations, tax obligations, and operating leases Contractual Obligations (in thousands) | Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :----------------------------------- | :----- | :--------------- | :-------- | :-------- | :---------------- | | Finance lease obligations (incl. interest) | $6,780 | $1,597 | $2,016 | $985 | $2,182 | | Purchase obligations | $3,300 | $3,300 | $0 | $0 | $0 | | Tax obligations | $796 | $235 | $317 | $244 | $0 | | Equipment and office operating leases | $6,533 | $2,074 | $2,172 | $1,357 | $930 | | Total | $17,409 | $7,206 | $4,505 | $2,586 | $3,112 | Off-Balance Sheet Arrangements NCS Multistage Holdings, Inc. does not have any off-balance sheet financing arrangements - The company has no off-balance sheet financing arrangements[308] Effects of Inflation Inflation has not materially affected NCS Multistage's business to date, but future significant pressures could adversely impact financial performance if not offset by price increases - Inflation has not had a material effect on the business, financial condition, or results of operations[309] - Inability to offset future significant inflationary cost increases through price adjustments could materially adversely affect financial results[309] Critical Accounting Policies NCS Multistage's financial statements rely on critical accounting policies involving significant judgment, including revenue recognition, impairment assessments, income taxes, and share-based compensation - Revenue recognition: Product sales recognized when control transfers (shipment/delivery); service revenue recognized upon job completion or over time using a unit rate output method[311][314][315][316][379][382][383][384] - Impairment assessments for property, equipment, finite-lived intangibles, and goodwill require significant judgment regarding future cash flows, market conditions, and other assumptions. $50.2 million impairment recorded in 2020[320][321][395][396][398] - Income taxes are accounted for using the liability method, with deferred tax assets subject to a valuation allowance if their realization is not more likely than not[328][406] - Share-based compensation is measured at fair value using various models (Black-Scholes, Monte Carlo) depending on the award type, with liability-classified ESUs remeasured each period[330][407] - Recently adopted ASU 2018-15 (cloud computing) and ASU 2018-13 (fair value disclosures) in 2020 with no material impact. Evaluating ASU 2020-04 (reference rate reform) and ASU 2019-12 (income taxes)[416][417][418][419] Emerging Growth Company and Smaller Reporting Company Status NCS Multistage's status as an 'emerging growth company' and 'smaller reporting company' allows for reduced reporting requirements until certain financial thresholds are met - NCS is an "emerging growth company" and a "smaller reporting company"[334] - This status allows for reduced reporting requirements, including exemption from auditor attestation on internal controls and reduced executive compensation disclosures[334] - The company will retain this status until it meets certain thresholds, such as $1.07 billion in annual gross revenues or a public float exceeding $700 million[334] Quantitative and Qualitative Disclosures About Market Risk NCS Multistage is exposed to commodity price, foreign currency, interest rate, and credit risks, amplified by COVID-19, with no current hedging strategies in place - The company is indirectly exposed to commodity price risk through fluctuations in crude oil and natural gas prices, which impact customer drilling and completion activity. No current hedging is in place[336] - Significant foreign currency exchange rate risk exists as approximately 45% of 2020 revenues were derived in Canada and denominated in Canadian dollars. No current hedging for CAD or other foreign currencies[338] - Interest rate risk arises from the variable interest rates on the Senior Secured Credit Facility, with an applicable interest rate of 4.375% at December 31, 2020[339][340] - Credit risk is heightened due to the concentration of customers in the oil and gas industry, managed through financial condition analysis and credit limit monitoring[341] - These market risks and related uncertainties have increased due to heightened volatility in oil and gas prices and financial markets as a result of the COVID-19 pandemic[335] Financial Statements and Supplementary Data This section presents audited consolidated financial statements for 2018-2020, including balance sheets, statements of operations, cash flows, and comprehensive notes detailing accounting policies and financial data Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on NCS Multistage's consolidated financial statements for 2018-2020, without an audit of internal control over financial reporting - PricewaterhouseCoopers LLP provided an unqualified opinion on the consolidated financial statements for 2020, 2019, and 2018[348] - The audit was conducted in accordance with PCAOB standards[351] - An audit of internal control over financial reporting was not performed[351] Consolidated Balance Sheets NCS Multistage's consolidated balance sheets show total assets decreased from $202.6 million in 2019 to $138.7 million in 2020, primarily due to reductions in receivables, intangibles, and property and equipment Consolidated Balance Sheet (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $15,545 | $11,243 | | Accounts receivable—trade, net | $21,925 | $41,960 | | Inventories, net | $34,871 | $39,921 | | Prepaid expenses and other current assets | $2,975 | $2,444 | | Other current receivables | $8,358 | $5,028 | | Total current assets | $83,674 | $100,596 | | Property and equipment, net | $24,435 | $32,974 | | Goodwill | $15,222 | $15,222 | | Identifiable intangibles, net | $6,413 | $45,248 | | Operating lease assets | $5,170 | $5,071 | | Deposits and other assets | $3,559 | $3,460 | | Deferred income taxes, net | $205 | $6 | | Total noncurrent assets | $55,004 | $101,981 | | Total assets | $138,678 | $202,577 | | Accounts payable—trade | $4,943 | $8,549 | | Accrued expenses | $3,347 | $3,451 | | Income taxes payable | $653 | $1,883 | | Operating lease liabilities | $1,826 | $2,052 | | Current maturities of long-term debt | $1,347 | $1,481 | | Other current liabilities | $2,768 | $2,364 | | Total current liabilities | $14,884 | $19,780 | | Long-term debt, less current maturities | $4,442 | $11,436 | | Operating lease liabilities, long-term | $3,989 | $3,487 | | Other long-term liabilities | $1,864 | $1,373 | | Deferred income taxes, net | $13 | $2,956 | | Total noncurrent liabilities | $10,308 | $19,252 | | Total liabilities | $25,192 | $39,032 | | Total stockholders' equity | $93,608 | $144,610 | | Non-controlling interest | $19,878 | $18,935 | | Total equity | $113,486 | $163,545 | | Total liabilities and stockholders' equity | $138,678 | $202,577 | Consolidated Statements of Operations Total revenues for NCS Multistage decreased significantly to $107.0 million in 2020, resulting in a net loss of $(57.6) million, influenced by impairment charges and a patent settlement gain Consolidated Statements of Operations (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------- | :----- | :----- | :----- | | Product sales | $75,197 | $145,826 | $156,781 | | Services | $31,780 | $59,659 | $70,182 | | Total revenues | $106,977 | $205,485 | $226,963 | | Total cost of sales (excl. D&A) | $62,907 | $108,030 | $108,306 | | Selling, general and administrative expenses | $59,425 | $88,554 | $82,813 | | Depreciation | $4,426 | $5,877 | $4,747 | | Amortization | $1,465 | $4,559 | $13,090 | | Change in fair value of contingent consideration | $0 | $37 | $(2,872) | | Impairments | $50,194 | $7,919 | $227,543 | | Loss from operations | $(71,440) | $(9,491) | $(206,664) | | Interest expense, net | $(1,796) | $(1,925) | $(1,963) | | Gain on patent infringement settlement | $25,678 | $0 | $0 | | Other income, net | $1,729 | $308 | $182 | | Foreign currency exchange (loss) gain | $(1,060) | $(958) | $162 | | Total other income (expense) | $24,551 | $(2,575) | $(1,619) | | Loss before income tax | $(46,889) | $(12,066) | $(208,283) | | Income tax (benefit) expense | $(7,783) | $10,752 | $(23,052) | | Net loss | $(39,106) | $(22,818) | $(185,231) | | Net income attributable to non-controlling interest | $18,493 | $10,005 | $5,086 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(57,599) | $(32,823) | $(190,317) | | Basic loss per common share | $(24.37) | $(14.08) | $(85.00) | | Diluted loss per common share | $(24.37) | $(14.08) | $(85.00) | | Weighted average common shares outstanding (Basic) | 2,364 | 2,332 | 2,239 | | Weighted average common shares outstanding (Diluted) | 2,364 | 2,332 | 2,239 | Consolidated Statements of Comprehensive Loss NCS Multistage's comprehensive loss attributable to the company was $(58.6) million in 2020, driven by net loss and foreign currency translation adjustments Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------- | :----- | :----- | :----- | | Net loss | $(39,106) | $(22,818) | $(185,231) | | Foreign currency translation adjustments, net of tax of $0 | $(969) | $3,219 | $(17,323) | | Comprehensive loss | $(40,075) | $(19,599) | $(202,554) | | Comprehensive income attributable to non-controlling interest | $18,493 | $10,005 | $5,086 | | Comprehensive loss attributable to NCS Multistage Holdings, Inc. | $(58,568) | $(29,604) | $(207,640) | Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased from $144.6 million in 2019 to $93.6 million in 2020, primarily due to net loss and distributions to non-controlling interest Total Stockholders' Equity (in thousands) | Date | Total Stockholders' Equity | | :------------------- | :----------------------- | | Dec 31, 2017 | $368,991 | | Dec 31, 2018 | $176,231 | | Dec 31, 2019 | $163,545 | | Dec 31, 2020 | $113,486 | - Key changes in 2020 include a net loss attributable to NCS Multistage Holdings, Inc. of $(57.6) million and distributions to non-controlling interest of $17.6 million, partially offset by $7.7 million in share-based compensation[363] Consolidated Statements of Cash Flows Net cash from operating activities increased to $35.1 million in 2020 due to a patent settlement, while investing cash use decreased and financing cash use increased due to higher distributions Consolidated Statements of Cash Flows (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $35,117 | $17,949 | $14,026 | | Net cash used in investing activities | $(1,059) | $(5,002) | $(15,410) | | Net cash used in financing activities | $(29,773) | $(27,306) | $(5,130) | | Effect of exchange rate changes on cash and cash equivalents | $17 | $471 | $(2,164) | | Net change in cash and cash equivalents | $4,302 | $(13,888) | $(8,678) | | Cash and cash equivalents end of period | $15,545 | $11,243 | $25,131 | - Net cash provided by operating activities increased to $35.1 million in 2020, partly due to $21.4 million in net proceeds from a patent infringement settlement[292][366] - Net cash used in investing activities decreased to $1.1 million in 2020, primarily due to reduced capital expenditures[294][366] - Net cash used in financing activities increased to $29.8 million in 2020, mainly driven by $17.6 million in distributions to non-controlling interest[296][366] Notes to Consolidated Financial Statements These notes provide detailed disclosures on NCS Multistage's accounting policies, revenue, inventory, debt, commitments, and other financial data, crucial for understanding financial reporting Organization and Basis of Presentation NCS Multistage provides engineered products and services for oil and gas well completions, with financial statements prepared under GAAP and adjusted for a 1-for-20 reverse stock split - NCS provides engineered products and support services for oil and natural gas well completions and field development strategies[368] - Consolidated financial statements are prepared in accordance with GAAP, consolidating subsidiaries where NCS has a controlling voting interest[369] - A 1-for-20 reverse stock split was effective on December 1, 2020, and authorized common stock shares were decreased[370] Summary of Significant Accounting Policies This note details NCS Multistage's critical accounting policies, including revenue recognition, impairment tests, income taxes, and share-based compensation, along with recently adopted and evaluated ASUs - Financial statements require management to make estimates and assumptions, including for accounts receivable, inventories, goodwill impairment, long-lived assets, share-based compensation, and income tax contingencies[371] - Revenue from product sales is recognized when control transfers (shipment/delivery), while service revenue is recognized upon job completion or over time using a unit rate output method[379][382][383][384] - Impairment tests for property, equipment, finite-lived intangibles, and goodwill are performed when triggering events occur or annually, using estimates and assumptions about future cash flows and market conditions[395][396][398] - Income taxes are accounted for using the liability method, with deferred tax assets subject to a valuation allowance if realization is not more likely than not[406] - Share-based compensation is measured at fair value using Black-Scholes (options, ESPP), Monte Carlo (PSUs), or market price (RSUs, ESUs), with liability-classified ESUs remeasured each period[407] - Adopted ASU No. 2018-15 (cloud computing) and ASU No. 2018-13 (fair value measurement) in 2020 with no material impact. Evaluating ASU No. 2020-04 (reference rate reform) and ASU No. 2019-12 (income taxes)[416][417][418][419] Revenues NCS Multistage disaggregates revenue by geographic area, with most product and service revenues considered single performance obligations, and current contract liabilities of $51 thousand as of December 31, 2020 - Revenue is disaggregated by geographic area (U.S., Canada, Other Countries) based on the customer's billing address[423] Current Contract Liabilities (in thousands) | Date | Balance | | :------------------- | :------ | | Dec 31, 2018 | $515 | | Dec 31, 2019 | $59 | | Dec 31, 2020 | $51 | - Approximately 99% of product and service revenues are considered a single performance obligation[425] - The company expenses sales commissions when incurred and does not disclose unsatisfied performance obligations for contracts with a duration of one year or less[426][427] Inventories, net Inventories, net, decreased to $34.9 million in 2020, valued at the lower of cost or net realizable value, using standard costs approximating FIFO or average cost Inventories, net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :--------------- | :----------- | :----------- | | Raw materials | $1,752 | $1,986 | | Work in process | $287 | $523 | | Finished goods | $32,832 | $37,412 | | Total inventories, net | $34,871 | $39,921 | - Inventories are stated at the lower of cost or estimated net realizable value, with cost determined at standard costs approximating FIFO or average cost basis[394] - The company continuously evaluates inventories for obsolescence, slow-moving, and excess items, with adjustments recorded to cost of sales[394] Other Current Receivables Other current receivables increased to $8.4 million in 2020, comprising current income tax receivables, employee receivables, and other miscellaneous receivables Other Current Receivables (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :------------------------ | :----------- | :----------- | | Current income tax receivables | $6,295 | $4,777 | | Employee receivables | $544 | $5 | | Other receivables | $1,519 | $246 | | Total other receivables, net | $8,358 | $5,028 | - Employee receivables primarily relate to foreign withholding tax paid on behalf of employees, expected to be reimbursed[431] Property and Equipment Property and equipment, net, decreased from $33.0 million in 2019 to $24.4 million in 2020. This decline was primarily due to a $9.7 million impairment charge recorded in Q1 2020 on land, buildings, and machinery, triggered by adverse industry conditions and the COVID-19 pandemic. Depreciation expense for 2020 was $4.4 million, a decrease from $5.9 million in 2019, also influenced by lower capital expenditures Property and Equipment, net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Land | $1,695 | $2,090 | | Building and improvements | $8,511 | $12,242 | | Machinery and equipment | $18,211 | $21,469 | | Computers and software | $2,374 | $2,694 | | Furniture and fixtures | $1,150 | $1,208 | | Vehicles | $442 | $646 | | Right of use assets - finance leases | $8,020 | $5,739 | | Service equipment | $244 | $244 | | Construction in progress | $100 | $975 | | Less: Accumulated depreciation and amortization | $(16,312) | $(14,333) | | Property and equipment, net | $24,435 | $32,974 | Depreciation Expense (in thousands) | Category | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Cost of product sales | $1,679 | $2,711 | $2,003 | | Cost of services | $1,043 | $1,266 | $1,070 | | Selling, general and administrative expenses | $1,704 | $1,900 | $1,674 | | Total depreciation | $4,426 | $5,877 | $4,747 | - A $9.7 million impairment charge was recorded in Q1 2020 on property and equipment, primarily land, buildings, and machinery, due to adverse industry conditions and the COVID-19 pandemic[435] Goodwill and Identifiable Intangibles Goodwill remained at $15.2 million as of December 31, 2020, primarily related to Repeat Precision, with no impairment recorded in 2020. Identifiable intangibles, net, significantly decreased from $45.2 million in 2019 to $6.4 million in 2020, primarily due to $40.5 million in impairment charges recorded in Q1 2020 on technology, software, customer relationships, and trademarks. Amortization expense for 2020 was $1.5 million Goodwill (in thousands) | Date | Net Goodwill | | :------------------- | :----------- | | Dec 31, 2018 | $23,112 | | Dec 31, 2019 | $15,222 | | Dec 31, 2020 | $15,222 | - No goodwill impairment was recorded in 2020. A $7.9 million impairment was recorded in 2019 for the tracer diagnostic services reporting unit, and $154.0 million in 2018 for fracturing systems and well construction[437][438][441] Identifiable Intangibles, net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Technology | $3,871 | $15,341 | | Trademarks | $0 | $1,227 | | Customer relationships | $2,494 | $24,761 | | Internally developed software | $0 | $3,919 | | Technology - not subject to amortization | $48 | $0 | | Total identifiable intangibles, net | $6,413 | $45,248 | - A $40.5 million impairment charge was recorded in Q1 2020 on finite-lived intangible assets (technology, internally-developed software, customer relationships, and trademarks) due to adverse industry conditions[444] Total Amortization Expense (in thousands) | Year | Amortization Expense | | :--- | :------------------- | | 2020 | $1,465 | | 2019 | $4,559 | | 2018 | $13,090 | Accrued Expenses Accrued expenses decreased slightly to $3.3 million in 2020, including payroll, taxes, and an increased severance accrual reflecting workforce reductions Accrued Expenses (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Accrued payroll and bonus | $999 | $2,558 | | Property and franchise taxes accrual | $505 | $462 | | Severance and other termination benefits | $730 | $0 | | Accrued other miscellaneous liabilities | $1,113 | $431 | | Total accrued expenses | $3,347 | $3,451 | Debt Total debt decreased to $5.8 million in 2020, with no outstanding balance on the Senior Secured Credit Facility, which was amended to $25.0 million capacity and an $11.0 million borrowing base Total Debt (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Senior Secured Credit Facility | $0 | $10,000 | | Finance leases | $5,789 | $2,917 | | Total debt | $5,789 | $12,917 | | Less: current portion | $(1,347) | $(1,481) | | Long-term debt | $4,442 | $11,436 | - The Senior Secured Credit Facility was amended in August 2020, reducing U.S. commitments to $25.0 million and establishing an $11.0 million borrowing base as of December 31, 2020. It matures on May 1, 2023[455][300] - Repeat Precision has outstanding promissory notes with an aggregate borrowing capacity of up to $9.3 million[305][465][466] - NCS was in compliance with all financial covenants under the Amended Credit Agreement as of December 31, 2020[459] Commitments and Contingencies NCS Multistage is involved in patent infringement lawsuits and settled one for a $25.7 million gain in 2020, with management not expecting material adverse effects from current proceedings - NCS is involved in patent infringement lawsuits against Kobold Corporation (Canada), Nine Energy Service, Inc. (U.S.), and TCO AS (U.S.)[468][473] - A patent infringement settlement with Diamondback Industries, Inc. in 2020 resulted in a $25.7 million gain, including cash payments and the transfer of a patent[469][472] - A technical services and assistance agreement with SOS generated $1.6 million in tracer diagnostics services revenue and $0.9 million in other income in 2020[475] - Management does not expect current legal proceedings to have a material adverse effect on the company's financial position, results of operations, or cash flows[474] Severance and Other Termination Benefits NCS Multistage incurred $5.7 million in cash severance costs in 2020 due to workforce reductions, with a remaining liability of $0.7 million expected to be paid by May 2021 - Incurred $5.7 million in cash severance costs during 2020 due to workforce reductions in response to market conditions and the COVID-19 pandemic[478] Severance and Other Termination Benefits Liability (in thousands) | Metric | Amount | | :-------------------------------- | :----- | | Beginning balance, Dec 31, 2019 | $0 | | Additions for costs expensed | $5,661 | | Severance payments | $(4,969) | | Currency translation adjustment | $38 | | Ending balance, Dec 31, 2020 | $730 | - The remaining severance liability of $0.7 million as of December 31, 2020, is expected to be paid by May 2021[479] Stockholders' Equity NCS Multistage implemented a 1-for-20 reverse stock split in December 2020, resulting in 2.36 million shares outstanding, with Advent International Corporation controlling 62.6% of voting power - A 1-for-20 reverse stock split was implemented on December 1, 2020, to regain compliance with Nasdaq listing rules[480][481] - The number of authorized common stock shares was decreased from 225,000,000 to 11,250,000[483] - As of December 31, 2020, 2,359,918 shares of common stock were outstanding[483] - Funds affiliated with Advent International Corporation beneficially own approximately 62.6% of the combined voting power[480] - No dividends were declared on common stock during the years ended December 31, 2020, or 2019[485] Share-Based Compensation NCS Multistage grants stock options, RSUs, ESUs, and PSUs under its equity plans, with total share-based compensation expense of $8.5 million in 2020, and the ESPP temporarily suspended - The company operates under the 2012 Equity Incentive Plan (no new grants) and the 2017 Equity Incentive Plan (551,626 authorized shares, 383,848 available for future issuance)[489][490] - Stock options, RSUs, ESUs, and PSUs are granted, with fair values estimated using Black-Scholes (options), market price (RSUs, ESUs), and Monte Carlo simulation (PSUs)[492][500][503][505][506] Total Share-Based Compensation Expense (in thousands) | Category | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Stock options | $1,459 | $5,263 | $5,865 | | Restricted stock units | $3,921 | $5,032 | $3,672 | | Equivalent stock units | $759 | $338 | $0 | | Performance stock unit awards | $2,343 | $1,682 | $800 | | ESPP | $0 | $227 | $593 | | Total share-based compensation expense | $8,482 | $12,542 | $10,930 | - The Employee Stock Purchase Plan (ESPP) was temporarily suspended for future offering periods beginning July 1, 2019[509] Employee Benefit Plan NCS Multistage offers 401(k) and RRSP plans, but employer matching contributions were suspended from June 1, 2020, resulting in $0.6 million in contributions for the year - U.S. employees participate in a 401(k) plan, and Canadian employees in a Group Registered Retirement Savings Program[512] - Employer matching contributions to these benefit plans were suspended beginning June 1, 2020[512] Employer Contributions to Benefit Plans (in thousands) | Year | Contributions | | :--- | :------------ | | 2020 | $600 | | 2019 | $1,500 | | 2018 | $1,300 | Leases NCS Multistage accounts for operating and finance leases, with total leased ROU assets of $11.0 million and lease liabilities of $11.6 million as of December 31, 2020, and a total lease cost of $5.3 million - ROU assets and lease liabilities are recognized for operating and finance leases with terms longer than 12 months[514][515] Lease Information (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Total leased right-of-use assets | $11,021 | $8,450 | | Total lease liabilities | $11,604 | $8,456 | | Total lease cost | $5,276 | $5,455 | - Weighted-average remaining lease terms in 2020 were 4.1 years for operating leases and 7.2 years for finance leases, with weighted-average discount rates of 5.4% and 4.9%, respectively[527] - In 2020, commenced an operating lease for corporate headquarters ($2.4 million ROU asset) and a finance lease for land and a building in Odessa, Texas ($4.0 million asset)[517][518] Income Taxes NCS Multistage reported an income tax benefit of $(7.8) million in 2020, influenced by CARES Act provisions and an increased valuation allowance against deferred tax assets Total Income Taxes (in thousands) | Metric | 2020 | 2019 | 2018 | | :---------------- | :----- | :----- | :----- | | Current tax expense (benefit) | $(4,581) | $1,752 | $5,788 | | Deferred tax expense (benefit) | $(3,202) | $9,000 | $(28,840) | | Total income taxes | $(7,783) | $10,752 | $(23,052) | - The effective tax rate was 16.6% in 2020, (89.1)% in 2019, and 11.1% in 2018[530] - 2020 tax benefit included a $(0.9) million NOL carryback benefit from the CARES Act and a $6.5 million expense for an increased valuation allowance on deferred tax assets[530] Net Deferred Tax Assets (Liabilities) (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Total deferred tax assets | $305 | $68 | | Total deferred tax liabilities | $(113) | $(3,018) | | Net deferred tax assets (liabilities) | $192 | $(2,950) | - A valuation allowance of $20.7 million (U.S.) and $1.4 million (Canadian) was provided against deferred tax assets in 2020[534] Loss Per Share NCS Multistage reported basic and diluted loss per common share of $(24.37) for 2020, with potentially dilutive securities excluded due to anti-dilutive effects from the net loss Loss Per Common Share | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Basic loss per common share | $(24.37) | $(14.08) | $(85.00) | | Diluted loss per common share | $(24.37) | $(14.08) | $(85.00) | - Weighted average common shares outstanding (Basic) were 2,364 thousand in 2020, 2,332 thousand in 2019, and 2,239 thousand in 2018[537] - Potentially dilutive securities (221 thousand in 2020) were excluded from the diluted EPS calculation as they were anti-dilutive[537] Segment and Geographic Information NCS Multistage operates as one reportable segment, with revenue and long-lived assets disaggregated by geographic area, primarily the United States and Canada - The company operates in one reportable segment[538] Revenue by Geographic Area (in thousands) | Country | 2020 | 2019 | 2018 | | :-------------- | :----- | :----- | :----- | | United States | $46,179 | $103,291 | $103,442 | | Canada | $48,549 | $86,563 | $109,478 | | Other Countries | $12,249 | $15,631 | $14,043 | | Total revenues | $106,977 | $205,485 | $226,963 | Long-Lived Assets by Geographic Area (in thousands) | Country | Dec 31, 2020 | Dec 31, 2019 | | :-------------- | :----------- | :----------- | | United States | $16,616 | $18,137 | | Canada | $10,356 | $17,831 | | Other Countries | $2,633 | $2,077 | | Total | $29,605 | $38,045 | Quarterly Financial Data (Unaudited) This note provides unaudited quarterly financial data for 2019-2020, highlighting significant variability, including a sharp Q2 2020 revenue decline and a $50.2 million impairment charge in Q1 2020 Unaudited Quarterly Financial Data (in thousands, except per share amounts) | Metric | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | | :------------------------------------------------- | :------ | :------ | :------ | :------ | | Revenue | $54,550 | $8,732 | $16,312 | $27,383 | | Gross profit | $22,937 | $1,695 | $5,595 | $11,121 | | Impairments | $50,194 | $0 | $0 | $0 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(51,549) | $(8,757) | $(5,863) | $8,570 | | Basic loss per common share | $(21.92) | $(3.70) | $(2.48) | $3.62 | | Diluted loss per common share | $(21.92) | $(3.70) | $(2.48) | $3.59 | | | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | | Revenue | $52,850 | $39,768 | $60,773 | $52,094 | | Gross profit | $25,139 | $15,671 | $27,562 | $25,106 | | Impairments | $0 | $7,919 | $0 | $0 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(11,966) | $(22,301) | $3,621 | $(2,177) | | Basic loss per common share | $(5.20) | $(9.54) | $1.54 | $(0.93) | | Diluted loss per common share | $(5.20) | $(9.54) | $1.54 | $(0.93) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[544] Controls and Procedures Management concluded that NCS Multistage's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes due to COVID-19 - Disclosure controls and procedures were effective as of December 31, 2020[545] - Internal control over financial reporting was effective as of December 31, 2020[547] - As an "emerging growth company" and non-accelerated filer, auditor attestation on internal control over financial reporting is not required[548] - No material changes to internal controls were experienced during the quarter ended December 31, 2020, despite most employees working remotely due to COVID-19[549] Other Information There is no other information to report under this item - No other information to report[550] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement, with a Code of Business Conduct and Ethics available online - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement[554] - A Code of Business Conduct and Ethics applies to employees, officers, and directors, available on the company's website[553] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2021 Proxy Statement - Information on executive compensation will be included in the 2021 Proxy Statement[555] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of December 31, 2020, 227,031 securities are issuable under equity compensation plans, with 493,177 shares remaining available for future issuance, and the ESPP temporarily suspended Equity Compensation Plans (as of Dec 31, 2020) | Metric | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :------------------------ | :-------------------------------------------------------------------------- | :-------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------ | | Approved by stockholders | 227,031 | $122.33 | 493,177 | | Not approved by stockholders | $0 | $0 | $0 | - The number of shares subject to outstanding PSUs is based on the target number of shares, with potential for larger amounts if performance metrics are met[556] - 86,416 shares remained available for issuance under the ESPP, which was temporarily suspended for future offering periods beginning July 1, 2019[560] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, as well as director independence, is incorporated by reference from the company's 2021 Proxy Statement - Information on certain relationships and related transactions, and director independence will be included in the 2021 Proxy Statement[558] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's 2021 Proxy Statement - Information on principal accounting fees and services will be included in the 2021 Proxy Statement[559] PART IV Exhibits, Financial Statement Schedules This section lists documents filed as part of the 10-K report, including financial statements and exhibits, with schedules om