Filing Overview
Kodiak Gas Services, Inc. filed a Form 8-K under Item 4.02 on August 8, 2023, reporting that certain previously issued interim financial statements should no longer be relied upon. The affected period is the three months ended March 31, 2022, as presented in the Company’s Form S-1 registration statement.
Restatement and Financial Impact
| Metric | Previously reported | Restated |
|---|---|---|
| Unrealized gain on derivatives | $7.8 million | $36.2 million |
| Income tax expense | $8.6 million | $15.4 million |
| Net income | $27.9 million | $49.6 million |
| Basic and diluted earnings per share | $279,390 | $495,550 |
The adjustment reflects a $28.4 million understatement of the non-cash mark-to-market adjustment for interest rate swap derivatives. Offsetting changes to net income, deferred tax provision, and working capital had no effect on net cash provided by operating activities.
Scope and Comparability
- The error is limited to the unaudited condensed consolidated financial statements for the three months ended March 31, 2022.
- The error does not affect the six months ended June 30, 2022 financial statements or the consolidated financial statements for the year ended December 31, 2022.
- Revenue, financial covenants, Adjusted Gross Margin, Adjusted EBITDA, Discretionary Cash Flow, and Free Cash Flow were unaffected.
- Cash, liquidity, operations, and business fundamentals were unaffected.
Remediation, Controls, and Outlook
Kodiak will restate the affected interim financial statements in its Form 10-Q for the period ended June 30, 2023. The Audit Committee and management concluded that a material weakness exists in internal controls over financial reporting as a result of the restatement. The Company stated that its remediation efforts would be reported in that Form 10-Q. The filing provides no separate operating guidance or financial outlook.
Investor Verification Items
- Verify the corrected March 31, 2022 financial statements in the Company’s Form 10-Q for the period ended June 30, 2023.
- Review the disclosed material weakness and the effectiveness and status of remediation efforts.
- Confirm that the derivative accounting correction did not alter cash flow, liquidity, financial covenants, or non-GAAP operating metrics.
- Review the corrected income tax and earnings-per-share presentation, including the unusual per-share amounts reported in the filing.