Trading Symbol:
"TESO" on NASDAQ
HOUSTON, TX, Aug. 5 /PRNewswire-FirstCall/ - Tesco Corporation ("TESCO" or the "Company") today reported net income for the quarter ended June 30, 2010 of $0.7 million, or $0.02 per diluted share. This compares to net loss of $4.2 million, or $0.11 per diluted share, for the second quarter of 2009, and a net income of $2.2 million, or $0.06 per diluted share, for the first quarter of 2010. Revenue was $85.4 million for the quarter ended June 30, 2010, compared to revenue of $88.4 million for the comparable period in 2009 and $86.0 million for the first quarter of 2010.
Summary of Results
(in millions of U.S. $, except per share amounts)
U.S. GAAP-Unaudited
Six Months
Quarter 2 Quarter 1 Ended
2010 2009 2010 06/30/10 06/30/09
------------------------------------------------
Revenue $ 85.4 $ 88.4 $ 86.0 $ 171.4 $ 198.6
Operating Income (Loss) $ 1.2 $ (7.8) $ 2.9 $ 4.1 $ (3.3)
Net Income (Loss) $ 0.7 $ (4.2) $ 2.2 $ 2.9 $ 3.3
Earnings (Loss) per
Share (diluted) $ 0.02 $ (0.11) $ 0.06 $ 0.08 $ 0.09
Adjusted EBITDA(a) (as
defined) $ 11.4 $ 3.4 $ 13.5 $ 25.0 $ 19.0
---------------------
(a) See explanation of Non-GAAP measure on page 5
Commentary
Julio Quintana, TESCO's Chief Executive Officer, commented "Each of our revenue generating segments continues to exhibit positive trends. In the past six months, our Top Drive backlog has grown from 11 units at the end of last year to 22 units at the end of the second quarter and stands at 26 units today. We have also added five units to our top drive rental fleet since the beginning of the year. For our Tubular Services business, we are penetrating new markets, on the back of our CDS(TM) tools, which should serve to increase critical mass and improve future profitability within this segment. Activity in North America continues to strengthen and we are seeing promising opportunities in other key regions around the world. With current market indications, TESCO is looking forward to the second half of 2010."
Segment Information
(in millions of U.S. $)
Unaudited
Six Months
Quarter 2 Quarter 1 Ended
------------------ --------- -------------------
2010 2009 2010 06/30/10 06/30/09
-------- --------- --------- --------- ---------
Revenue:
-------------------------
Top Drives:
Sales $ 17.9 $ 27.8 $ 17.1 $ 34.9 $ 56.5
Rental Services 24.8 18.1 24.1 49.0 27.7
Aftermarket Sales and
Service 10.8 11.9 10.9 21.7 41.7
-------- --------- --------- --------- ---------
53.5 57.8 52.1 105.6 125.9
-------- --------- --------- --------- ---------
Tubular Services :
Conventional 4.3 4.5 5.5 9.8 14.1
Proprietary 24.9 23.4 25.8 50.7 50.8
-------- --------- --------- --------- ---------
29.2 27.9 31.3 60.5 64.9
-------- --------- --------- --------- ---------
CASING DRILLING(TM) 2.7 2.7 2.6 5.3 7.8
-------- --------- --------- --------- ---------
Total Revenue $ 85.4 $ 88.4 $ 86.0 $ 171.4 $ 198.6
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
Operating Income (Loss):
-------------------------
Top Drives $ 13.0 $ 9.9 $ 12.4 $ 25.4 $ 27.1
Tubular Services 1.7 (1.7) 3.5 5.2 0.5
CASING DRILLING(TM) (2.9) (4.9) (2.9) (5.8) (6.2)
Research and Engineering (2.0) (1.8) (1.6) (3.6) (4.5)
Corporate/Other (8.6) (9.3) (8.5) (17.1) (20.2)
-------- --------- --------- --------- ---------
Total Operating Income
(Loss) $ 1.2 $ (7.8) $ 2.9 $ 4.1 $ (3.3)
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
Q2 2010 Financial and Operating Highlights
Top Drives Segment
------------------
- Revenue from the Top Drive segment for Q2 2010 was $53.5 million, up
3% from revenue of $52.1 million in Q1 2010, primarily due to an
increase in Top Drive rental activities and an increase in average
sales price per unit during the current quarter. Revenue for Q2 2009
was $57.8 million.
- Top Drive sales for Q2 2010 included 13 units (10 new and 3 used from
the rental fleet), compared to 14 units (12 new, 1 from the rental
fleet and 1 consignment sale) sold in Q1 2010 and 28 units sold in Q2
2009 (27 new and 1 from the rental fleet).
- At June 30, 2010, Top Drive backlog was 22 units, with a total value
of $28.5 million, versus 18 units at March 31, 2010, with a total
value of $25.9 million. This compares to a backlog of 10 units at
June 30, 2009, with a total value of $10.0 million. Today, our
backlog stands at 26 units.
- Operating days for the Top Drive rental fleet were 5,524 for Q2 2010
compared to 5,373 in Q1 2010 and were up from 3,682 for Q2 2009. The
improvement from Q2 2009 was primarily due to a recovery in rental
activity throughout our operating units, particularly in North
America, Russia and Latin America.
- Revenue from after-market sales and service for Q2 2010 was $10.8
million, down 1% from revenue of $10.9 million in Q1 2010 and down 9%
from revenue of $11.9 in Q2 2009.
- Our Top Drive operating margins were 24% in Q2 2010, flat with Q1
2010 and up from 17% in Q2 2009.
Tubular Services Segment
------------------------
- Revenue from the Tubular Services segment for Q2 2010 was $29.2
million, down 7% from revenue of $31.3 million in Q1 2010. Revenue
was $27.9 million in Q2 2009. Revenue decreased from Q1 due to lower
offshore proprietary work in the US Gulf and less conventional work
due to spring break-up in Canada. We performed a total of 783
proprietary casing running jobs in Q2 2010 compared to 797 in Q1 2010
and 538 in Q2 2009. We remain focused on converting the market to
running casing with our proprietary CDS(TM) technology.
- Operating Income in the Tubular Services segment for Q2 2010 was $1.7
million, compared to income of $3.5 million in Q1 2010 and loss of
$1.7 million in Q2 2009. The decrease compared to Q1 2010 is
primarily due to a shift from higher margin offshore work to lower
margin onshore work.
CASING DRILLING(TM) Segment
---------------------------
- CASING DRILLING(TM) revenue in Q2 2010 was $2.7 million compared to
$2.6 million in Q1 2010 and $2.7 million in Q2 2009.
- Operating Loss of $2.9 million in our CASING DRILLING(TM) segment for
Q2 2010 was flat compared to $2.9 million in Q1 2010 and down from
$4.9 million in Q2 2009. The improved performance in 2010 versus 2009
is due to cost saving and restructuring initiatives that occurred in
2009.
Other Segments and Expenses
---------------------------
- Corporate costs for Q2 2010 were $8.6 million, compared to $8.5
million for Q1 2010 and $9.3 million in Q2 2009. Total Selling,
General and Administrative costs in Q2 2010 were $11.9 million
compared to $10.8 million in Q1 2010 and $13.2 million in Q2 2009.
The decrease from Q2 2009 was driven by litigation costs incurred
during the prior year's period.
- Research and Engineering costs for Q2 2010 of $2.0 million were up
from $1.6 million in Q1 2010 and $1.8 million in Q2 2009.
- Other Income and Expense, excluding net interest, was negligible for
Q2 2010, compared to income of $0.3 million for Q1 2010 and expense
of $0.9 million in Q2 2009.
- Our effective tax rate for Q2 2010 remained flat at 32% compared to
Q1 2010 and was 54% in Q2 2009.
Financial Condition
-------------------
- At June 30, 2010, cash and cash equivalents were $41.5 million,
compared to $39.9 million at December 31, 2009. During the first
quarter of 2010, we paid the remaining $8.6 million of debt
outstanding under our revolving credit facility and we remain debt-
free at the end of Q2 2010.
- Total capital expenditures were $11.6 million in Q2 2010, compared to
$2.5 million in Q1 2010 and $7.6 million in Q2 2009. We project our
total capital expenditures for 2010 to be between $45 million and $50
million, based on current market conditions.
---------------------
Conference Call
The Company will conduct a conference call to discuss its results for the second quarter 2010 tomorrow (Friday, August 6, 2010) at 10:00 a.m. CDT. Individuals who wish to participate in the conference call should dial US/Canada (877) 312-5422 or International (253) 237-1122 approximately five to ten minutes prior to the scheduled start time of the call. The conference ID for this call is 87209017. The conference call and all questions and answers will be recorded and made available until September 8, 2010. To listen to the recording, call (800) 642-1687 or (706) 645-9291 and enter conference ID 87209017. The conference call will be webcast live as well as for on-demand listening at the Company's web site, www.tescocorp.com. Listeners may access the call through the "Conference Calls" link in the Investor Relations section of the site.
Tesco Corporation is a global leader in the design, manufacture and service of technology based solutions for the upstream energy industry. The Company's strategy is to change the way people drill wells by delivering safer and more efficient solutions that add real value by reducing the costs of drilling for and producing oil and natural gas. TESCO(R) is a registered trademark in the United States and Canada. TESCO CASING DRILLING(R) is a registered mark in the United States. CASING DRILLING(R) is a registered mark in Canada and CASING DRILLING(TM) is a trademark in the United States. Casing Drive System(TM), CDS(TM), Multiple Control Line Running System(TM) and MCLRS(TM) are trademarks in the United States and Canada.
Non-GAAP Measure - Adjusted EBITDA (as defined below)
Six Months
(in millions of U.S. $) Quarter 2 Quarter 1 Ended
------------------------ ------------------ --------- -------------------
2010 2009 2010 06/30/10 06/30/09
-------- --------- --------- --------- ---------
Net Income (Loss) under
U.S. GAAP $ 0.7 $ (4.2) $ 2.2 $ 2.9 $ 3.3
Income Taxes 0.3 (4.9) 1.0 1.4 (8.1)
Depreciation and
Amortization 8.8 9.1 8.8 17.6 18.3
Net Interest (income)
expense 0.1 0.4 - 0.1 0.9
Stock Compensation
Expense - non-cash 1.5 1.2 1.5 3.0 2.8
Impairment of Inventory
and Assets - non-cash - 1.8 - - 1.8
-------- --------- --------- --------- ---------
Adjusted EBITDA $ 11.4 $ 3.4 $ 13.5 $ 25.0 $ 19.0
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
Our management reports our financial statements in accordance with U.S. GAAP but evaluates Company performance based on non-GAAP measures, of which a primary performance measure is Adjusted EBITDA. Adjusted EBITDA consists of earnings (net income or loss) available to common stockholders before interest expense, income tax expense, non-cash stock compensation, non-cash impairments, depreciation and amortization and other non-cash items. This measure may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as substitutes for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.
We believe Adjusted EBITDA is useful to an investor in evaluating our operating performance because:
- it is widely used by investors in our industry to measure a company's
operating performance without regard to items such as net interest
expense, depreciation and amortization, which can vary substantially
from company to company depending upon accounting methods and book
value of assets, financing methods, capital structure and the method
by which assets were acquired;
- it helps investors more meaningfully evaluate and compare the results
of our operations from period to period by removing the impact of our
capital structure (primarily interest) and asset base (primarily
depreciation and amortization) and actions that do not affect
liquidity (stock compensation expense and non-cash impairments) from
our operating results; and
- it helps investors identify items that are within our operational
control. Depreciation and amortization charges, while a component of
operating income, are fixed at the time of the asset purchase in
accordance with the depreciable lives of the related asset and as
such are not a directly controllable period operating charge.
Our management uses Adjusted EBITDA:
- as a measure of operating performance because it assists us in
comparing our performance on a consistent basis as it removes the
impact of our capital structure and asset base from our operating
results;
- as one method we use to evaluate potential acquisitions;
- in presentations to our Board of Directors to enable them to have the
same consistent measurement basis of operating performance used by
management;
- to assess compliance with financial ratios and covenants included in
our credit agreements; and
- in communications with investors, analysts, lenders, and others
concerning our financial performance.
Caution Regarding Forward-Looking Information; Risk Factors
This press release contains forward-looking statements within the meaning of Canadian and United States securities laws, including the United States Private Securities Litigation Reform Act of 1995. From time to time, our public filings, press releases and other communications (such as conference calls and presentations) will contain forward-looking statements. Forward-looking information is often, but not always identified by the use of words such as "anticipate", "believe", "expect", "plan", "intend", "forecast", "target", "project", "may", "will", "should", "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook. Forward-looking statements in this press release include, but are not limited to, statements with respect to expectations of our prospects, future revenue, earnings, activities and technical results.
Forward-looking statements and information are based on current beliefs as well as assumptions made by, and information currently available to, us concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. The forward-looking statements in this press release are made as of the date it was issued and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that outcomes implied by forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements.
These risks and uncertainties include, but are not limited to, the impact of changes in oil and natural gas prices and worldwide and domestic economic conditions on drilling activity and demand for and pricing of our products and services, other risks inherent in the drilling services industry (e.g. operational risks, potential delays or changes in customers' exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to levels of rental activities, uncertainty of estimates and projections of costs and expenses, risks in conducting foreign operations, the consolidation of our customers, and intense competition in our industry), risks, including litigation, associated with our intellectual property and with the performance of our technology. These risks and uncertainties may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.
Copies of our Canadian public filings are available at www.tescocorp.com and on SEDAR at www.sedar.com. Our U.S. public filings are available at www.sec.gov and at www.tescocorp.com.
The risks included here are not exhaustive. Refer to "Part I, Item 1A - Risk Factors" in our annual report on Form 10-K filed for the year ended December 31, 2009 and "Part II, Item 1A - Risk Factors" in our quarterly report on Form 10-Q to be filed for the quarter ended June 30, 2010 for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such factors, nor to assess the impact such factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
TESCO CORPORATION
(in Millions of U.S. Dollars, except share and per share information)
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------------------------------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
REVENUE $ 85.4 $ 88.4 $ 171.4 $ 198.6
OPERATING EXPENSES
Cost of Sales and
Services 70.4 81.2 141.0 170.4
Selling, General and
Administrative 11.9 13.2 22.7 27.1
Research and Engineering 1.9 1.8 3.6 4.4
----------- ----------- ----------- -----------
84.2 96.2 167.3 201.9
----------- ----------- ----------- -----------
OPERATING INCOME 1.2 (7.8) 4.1 (3.3)
Interest Expense, net 0.1 0.4 0.1 0.9
Other (Income) Expense,
net 0.1 0.9 (0.3) 0.6
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 1.0 (9.1) 4.3 (4.8)
Income taxes 0.3 (4.9) 1.4 (8.1)
----------- ----------- ----------- -----------
NET INCOME $ 0.7 $ (4.2) $ 2.9 $ 3.3
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share:
Basic $ 0.02 $ (0.11) $ 0.08 $ 0.09
Diluted $ 0.02 $ (0.11) $ 0.08 $ 0.09
Weighted average number
of shares:
Basic 37,792,070 37,565,006 37,775,743 37,540,794
Diluted 38,649,878 37,565,006 38,679,766 38,330,560
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2010 2009
-----------------------
(Unaudited)
ASSETS
Cash and Cash Equivalents $ 41.5 $ 39.9
Accounts Receivable, net 60.8 54.0
Inventories 66.3 74.3
Other Current Assets 50.4 43.6
----------- -----------
Current Assets 219.0 211.8
Property, Plant and Equipment, net 177.3 183.0
Goodwill 29.4 29.4
Other Assets 18.5 18.4
----------- -----------
$ 444.2 $ 442.6
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $ 21.7 $ 16.0
Accrued and Other Current Liabilities 41.7 43.3
----------- -----------
Current Liabilities 63.4 59.3
Long Term Debt - 8.6
Deferred Income Taxes 12.3 12.5
Shareholders' Equity 368.5 362.2
----------- -----------
$ 444.2 $ 442.6
----------- -----------
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SOURCE Tesco Corporation
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