Item 2.05 Costs Associated with Exit or Disposal Activities.
On April 3, 2020, Cactus, Inc. ("Cactus" or the "Company") announced that as
part of the Company's comprehensive response to the weakened macroeconomic
environment, Cactus reduced its total U.S. associate headcount by approximately
30% effective April 1, 2020 in anticipation of the activity declines expected by
early in the second quarter. Cactus also implemented large-scale salary
reductions for its workforce beginning in March 2020, inclusive of a 50%
reduction to the CEO's base salary, and salary reductions ranging from 25% to
50% for its other named executive officers. Board Member remuneration has also
been reduced by 25%.
As a result of the abovementioned cost rationalization efforts, Cactus will
record approximately $1 million in non-routine charges primarily related to
severance benefits as of March 31, 2020. These salary and headcount reductions
are estimated to result in approximately $35 million of annualized cost savings,
$5 million of which are associated with selling, general and administrative
expenses. These cost savings estimates include items such as overtime
reductions, benefits and payroll taxes. These estimates are, however, exclusive
of additional or alternative potential cost saving measures that will be taken
by the Company, such as a reduction in discretionary payments to associates
related to annual incentive bonuses associated with the Company's financial
performance, which totaled approximately $8 million in 2019, $4 million of which
was categorized as selling, general and administrative expenses.
In light of the recent macroeconomic events, Cactus has also withdrawn its full
year net capital expenditure guidance for 2020. Net capital expenditures are now
expected to be in the range of $20 million to $30 million in 2020, representing
a reduction of more than 50% from 2019's level. A majority of this spend will be
allocated to the first half of the year. The Company's cash balance rose to
approximately $230 million as of March 31, 2020, and its $75 million revolver
remains fully available. Going forward, Cactus will continue to respond quickly
to deteriorating conditions while protecting its reputation for operational
excellence.
A copy of the press release dated April 3, 2020 is included as Exhibit 99.1 to
this report and is being furnished to the SEC and shall not be deemed filed for
any purpose.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this Current Report on Form 8-K constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
risks, uncertainties and other factors, many of which are outside of Cactus'
control, that could cause actual results to differ materially from the results
discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking
terminology including "may," "believe," "expect," "intend," "anticipate,"
"estimate," "continue," "potential," "will," "hope" or other similar words and
include the Company's expectation of future performance contained herein. These
statements discuss future expectations, contain projections of results of
operations or of financial condition, or state other "forward-looking"
information. You are cautioned not to place undue reliance on any
forward-looking statements, which can be affected by assumptions used or by
known risks or uncertainties. Consequently, no forward-looking statements can be
guaranteed. When considering these forward-looking statements, you should keep
in mind the risk factors and other factors noted in the Company's Annual Report
on Form 10-K, any Quarterly Reports on Form 10-Q and the other documents that
the Company files with the Securities and Exchange Commission. The risk factors
and other factors noted therein could cause actual results to differ materially
from those contained in any forward-looking statement.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
99.1 Press Release dated April 3, 2020.
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