HOUSTON, May 5, 2014 /PRNewswire/ -- Tesco Corporation
(NASDAQ: TESO) ("TESCO" or the "Company") today reported net income
for the quarter ended March 31, 2014 was $3.0 million, or $0.07 per diluted share. Adjusted net income for
the quarter ended March 31, 2014, was $8.4 million, or $0.21 per diluted share. Adjusted net income for
the first quarter 2014 excludes the after-tax impact of foreign
currency translation losses in Argentina, Venezuela and Russia, totaling $2.9
million, or $0.08 per diluted
share, bad debt from two international customers totaling
$1.6 million after-tax, or
$0.04 per diluted share, and certain
tax related charges in Latin
America totaling $0.9 million,
or $0.02 per diluted share. This
compares to net income of $5.5
million and $8.8 million, or
$0.14 and $0.22 per diluted share, for the fourth quarter
of 2013 and for the comparable period in 2013, respectively.
The first quarter of 2013 included an after-tax gain on sale of our
Casing Drilling business of $0.9
million, or $0.02 per diluted
share, and a reversal for tax penalties and interest in one
jurisdiction of $1.6 million, or
$0.04 per diluted share. Revenue was
$121.4 million for the quarter ended
March 31, 2014, compared to revenue of $136.9 million for the fourth quarter of 2013 and
$127.1 million for the comparable
period in 2013.
Commentary
Julio Quintana, TESCO's Chief
Executive Officer, commented, "Due mainly to a number of one off
charges associated with our international operations, reported Q1
2014 bottom line results came in below our expectations.
Adjusting for these items our EPS would have been $0.21 per share. As we expected, top drive
shipments were lower in Q1 2014 due to the timing of shipments from
backlog and we had lower top drive rental utilization in
Mexico due to annual contract
startup delays.
However, during the first quarter, there were several positive
trends that give us greater optimism for the full year 2014
results. Tubular Services generated record quarterly revenues of
$56.7 million, record adjusted
operating income of $12.3 million,
and record adjusted operating margin of 21.7%. With continued
growth of our offshore work and improving activity levels in
North America, we believe Tubular
Services is on track to post another record year. In addition, we
ended the quarter with a backlog of 45 units with the total
potential value of $54.7 million, an
increase of potential value of 24% over the prior quarter. With a
backlog of 43 units with a total potential value of $51.9 million at present and the number of active
quotations, we believe the expected new top drive shipments in 2014
could be near 2012 levels.
Our balance sheet and cash flow generation continued to be
strong. Cash levels remained flat during a quarter that typically
has higher cash outflows. This strength combined with improving
profitability will allow us to make investments that drive growth
along with returning cash to shareholders."
Tables to follow
TESCO
CORPORATION
|
Summary of
Results
|
(in millions,
except per share information)
|
|
|
Quarter
1
|
|
Quarter
4
|
|
2014
|
|
2013
|
|
2013
|
Segment
revenue
|
(Unaudited)
|
|
(Unaudited)
|
Top Drives
|
|
|
|
|
|
|
|
|
Sales
|
$
|
25.3
|
|
|
$
|
32.8
|
|
|
$
|
34.6
|
|
Rental
services
|
24.7
|
|
|
29.7
|
|
|
32.0
|
|
After-market sales
and service
|
14.7
|
|
|
13.1
|
|
|
15.3
|
|
|
64.7
|
|
|
75.6
|
|
|
81.9
|
|
Tubular
Services
|
|
|
|
|
|
|
|
|
Automated
|
45.0
|
|
|
40.2
|
|
|
45.3
|
|
Conventional
|
11.7
|
|
|
10.9
|
|
|
9.7
|
|
|
56.7
|
|
|
51.1
|
|
|
55.0
|
|
|
|
|
|
|
|
|
|
|
Casing
Drilling
|
—
|
|
|
0.4
|
|
|
—
|
|
Consolidated
revenue
|
$
|
121.4
|
|
|
$
|
127.1
|
|
|
$
|
136.9
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
|
Top Drives
|
$
|
10.7
|
|
|
$
|
15.0
|
|
|
$
|
15.8
|
|
Tubular
Services
|
10.9
|
|
|
7.4
|
|
|
8.6
|
|
Casing
Drilling
|
(0.3)
|
|
|
1.8
|
|
|
0.1
|
|
Research and
Engineering
|
(2.5)
|
|
|
(2.0)
|
|
|
(1.9)
|
|
Corporate and
other
|
(9.7)
|
|
|
(10.5)
|
|
|
(10.4)
|
|
Consolidated
operating income
|
$
|
9.1
|
|
|
$
|
11.7
|
|
|
$
|
12.2
|
|
Net income
|
$
|
3.0
|
|
|
$
|
8.8
|
|
|
$
|
5.5
|
|
Earnings per share
(diluted)
|
$
|
0.07
|
|
|
$
|
0.22
|
|
|
$
|
0.14
|
|
Adjusted
EBITDA(a) (as defined)
|
$
|
22.0
|
|
|
$
|
23.2
|
|
|
$
|
24.4
|
|
|
|
(a)
|
See explanation of
Non-GAAP measure below
|
TESCO
CORPORATION
|
Operating
Metrics
|
|
|
Quarter
1
|
|
Quarter
4
|
|
2014
|
|
2013
|
|
2013
|
Number of Top Drive
Sales:
|
|
|
|
|
|
New
|
19
|
|
22
|
|
24
|
Used or
consignment
|
1
|
|
2
|
|
2
|
|
20
|
|
24
|
|
26
|
End of period number
of top drives in rental fleet
|
127
|
|
136
|
|
129
|
Rental operating
days(a)
|
5,084
|
|
5,827
|
|
5,899
|
Average daily
operating rate
|
$
|
4,858
|
|
$
|
5,103
|
|
$
|
5,425
|
|
|
|
|
|
|
Tubular
Services:
|
|
|
|
|
|
Number
of automated jobs
|
1,008
|
|
956
|
|
1,014
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Defined as a day that
a unit in our rental fleet is under contract and operating; does
not include stand-by days.
|
TESCO
CORPORATION
|
Non-GAAP Measure -
Adjusted EBITDA (1)
|
(in
millions)
|
|
|
Quarter
1
|
|
Quarter
4
|
|
2014
|
|
2013
|
|
2013
|
Net income under U.S.
GAAP
|
$
|
3.0
|
|
|
$
|
8.8
|
|
|
$
|
5.5
|
|
Income tax
expense
|
2.1
|
|
|
3.8
|
|
|
3.6
|
|
Depreciation and
amortization
|
9.7
|
|
|
10.0
|
|
|
10.1
|
|
Net interest
expense
|
0.6
|
|
|
(0.5)
|
|
|
0.7
|
|
Stock compensation
expense—non-cash
|
1.7
|
|
|
1.7
|
|
|
1.3
|
|
Severance
charges
|
—
|
|
|
—
|
|
|
0.9
|
|
Bad debt from certain
accounts
|
1.6
|
|
|
—
|
|
|
—
|
|
Foreign exchange
losses
|
3.3
|
|
|
0.4
|
|
|
2.3
|
|
Gain on sale of
Casing Drilling
|
—
|
|
|
(1.0)
|
|
|
—
|
|
Adjusted
EBITDA
|
$
|
22.0
|
|
|
$
|
23.2
|
|
|
$
|
24.4
|
|
|
|
|
|
(1)
|
Our management
reports our financial statements in accordance with U.S. GAAP but
evaluates our 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, foreign
exchange gains or losses, noted income or charges from certain
accounts, non-cash stock compensation, non-cash impairments,
depreciation and amortization, gains or losses from merger and
acquisition transactions 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), merger and
acquisition transactions (primarily gains/losses on sale of a
business), 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.
TESCO
CORPORATION
|
Reconciliation of
GAAP Net Income to Adjusted Net Income (2)
|
(in millions.
except earnings per share data)
|
|
|
Quarter
1
|
|
Quarter
4
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
Net income under U.S.
GAAP
|
$
|
3.0
|
|
|
$
|
8.8
|
|
|
$
|
5.5
|
|
Severance
charges
|
—
|
|
|
—
|
|
|
0.9
|
|
Certain foreign
exchange losses
|
2.9
|
|
|
—
|
|
|
1.9
|
|
Bad debt on certain
accounts
|
1.6
|
|
|
—
|
|
|
—
|
|
Certain tax-related
charges
|
0.9
|
|
|
(1.6)
|
|
|
—
|
|
(Gain)/Loss on sale
of Casing Drilling
|
—
|
|
|
(1.0)
|
|
|
—
|
|
Adjusted Net
Income
|
$
|
8.4
|
|
|
$
|
6.2
|
|
|
$
|
8.3
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Net income under U.S.
GAAP
|
$
|
0.07
|
|
|
$
|
0.22
|
|
|
$
|
0.14
|
|
Severance
charges
|
—
|
|
|
—
|
|
|
0.02
|
|
Certain foreign
exchange losses
|
0.08
|
|
|
—
|
|
|
0.05
|
|
Bad debt on certain
accounts
|
0.04
|
|
|
—
|
|
|
—
|
|
Certain tax-related
charges
|
0.02
|
|
|
(0.04)
|
|
|
—
|
|
(Gain)/Loss on
sale of Casing Drilling
|
—
|
|
|
(0.02)
|
|
|
—
|
|
Adjusted Net
Income
|
$
|
0.21
|
|
|
$
|
0.16
|
|
|
$
|
0.21
|
|
|
|
(2)
|
Adjusted net income
is a non-GAAP measure comprised of net income attributable to Tesco
excluding the impact of certain identified items. The Company
believes that adjusted net income is useful to investors because it
is a consistent measure of the underlying results of the Company's
business. Furthermore, management uses adjusted net income as a
measure of the performance of the Company's operations.
|
Q1 2014 Financial and Operating Highlights
Top Drives Segment
- Revenue from the Top Drive segment for Q1 2014 was $64.7 million, a decrease from revenue of
$81.9 million in Q4
2013. Revenue for Q1 2013 was $75.6 million.
- Top Drive sales for Q1 2014 included 20 units (19 new and 1
used), compared to 26 units (24 new and 2 used) sold in Q4 2013 and
24 units sold in Q1 2013 (22 new and 2 used).
- Operating days for the Top Drive rental fleet were 5,084 for Q1
2014 compared to 5,899 in Q4 2013 and 5,827 for Q1 2013.
- Revenue from after-market sales and service for Q1 2014 was
$14.7 million, a decrease of 4% from
revenue of $15.3 million in Q4
2013. Revenue was $13.1 million
in Q1 2013.
- Operating income before adjustments in the Top Drive segment
for Q1 2014 was $10.7 million,
compared to $15.8 million in Q4 2013
and $15.0 million in Q1 2013.
Our Top Drive operating margins before adjustments were 17% in Q1
2014, a decrease from 19% in Q4 2013 and 20% in Q1
2013. Excluding adjustments of $0.9 million, operating income was $11.6 million and operating margins were
18%.
- At March 31, 2014, Top Drive backlog was 45 units, with a
total potential value of $54.7
million, compared to 32 units at December 31, 2013,
with a potential value of $44.2
million. This compares to a backlog of 20 units
at March 31, 2013, with a potential value of $28.9 million. Today, our backlog
stands at 43 units.
Tubular Services Segment
- Revenue from the Tubular Services segment for Q1 2014 was
$56.7 million, an increase from
revenue of $55.0 million in Q4
2013. Revenue was $51.1
million in Q1 2013. Revenue increased from Q4
2013 levels due to increased demand internationally for our
automated offerings.
- We performed 1,008 automated casing running jobs in Q1 2014
compared to 1,014 in Q4 2013 and 956 in Q1 2013.
- Operating income before adjustments in the Tubular Services
segment for Q1 2014 was $10.9
million, compared to $8.6
million in Q4 2013 and $7.4
million in Q1 2013. Our Tubular Services operating
margins were 19% for Q1 2014, up from 16% in Q4 2013 and 15% in Q1
2013. Excluding adjustments of $1.4
million, operating income was $12.3
million and operating margins were 22%.
Other Segments and Expenses
- Research and engineering costs for Q1 2014 were $2.5 million, compared to $1.9 million in Q4 2013 and $2.0 million in Q1 2013. We continue to
invest in the development, commercialization, and enhancements of
our proprietary technologies relating to our Top Drive and Tubular
Services segments.
- Corporate costs for Q1 2014 were $9.7
million, compared to $10.4
million for Q4 2013 and $10.5
million in Q1 2013.
- Foreign exchange losses for Q1 2014 were $3.3 million, compared to $2.3 million in Q4 2013 and $0.4 million in Q1 2013. The foreign exchange
losses increase is primarily driven by Latin American and Russian
currency devaluations during Q1 2014. The most significant impact
was from the Argentina peso
devalued from approximately 6.4 to 8.0, resulting in a $2.0 million foreign exchange loss during Q1
2014.
- Our effective tax rate for Q1 2014 was 41% compared to 39% in
Q4 2013 and 30% in Q1 2013. Our effective tax rate, which is income
tax expense as a percentage of pre-tax earnings, increased from Q4
2013 due to the fluctuating mix of pre-tax earnings in the various
tax jurisdictions in which we operate around the world, the
nondeductible nature of foreign exchange losses, and a $0.4 million increase to tax expense for audit
adjustments in certain foreign jurisdiction.
- Total capital expenditures were $8.0
million in Q1 2014, compared to $12.8
million in Q4 2013 and $8.7
million in Q1 2013.
Conference Call
The Company will conduct a conference call to discuss its
results for the first quarter 2014 on May 5, 2014 at
8:00 a.m. Central
Time. Individuals who wish to participate in the
conference call should dial US/Canada (877) 941-9205 or International (480)
629-9771 approximately ten minutes prior to the scheduled start
time of the call. The conference call and all questions and answers
will be recorded and made available until May 19, 2014. To listen to the recording, call
(800) 406-7325 or (303) 590-3030 and enter conference ID 4680975#.
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 and the accompanying slides 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® is a registered trademark in
the United States and Canada. Casing Drive System™, CDS™, Multiple
Control Line Running System™ and MCLRS™ are trademarks in
the United States and Canada.
For further information please
contact:
Julio Quintana
(713) 359-7000
Chris Boone (713) 359-7000
Tesco Corporation
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, 2013 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
|
Condensed
Consolidated Statements of Income
|
(in millions,
except per share information)
|
|
|
Three Months
Ended
March
31,
|
|
2014
|
|
2013
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenue
|
$
|
121.4
|
|
|
$
|
127.1
|
|
Operating
expenses
|
|
|
|
|
|
Cost of sales and
services
|
95.9
|
|
|
102.1
|
|
Selling, general and
administrative
|
13.9
|
|
|
12.8
|
|
(Gain) Loss on sale
of Casing Drilling
|
—
|
|
|
(1.5)
|
|
Research and
engineering
|
2.5
|
|
|
2.0
|
|
|
112.3
|
|
|
115.4
|
|
Operating
income
|
9.1
|
|
|
11.7
|
|
Interest expense,
net
|
0.6
|
|
|
(0.5)
|
|
Other expense
(income), net
|
3.4
|
|
|
(0.4)
|
|
Income before income
taxes
|
5.1
|
|
|
12.6
|
|
Income
taxes
|
2.1
|
|
|
3.8
|
|
Net income
|
$
|
3.0
|
|
|
$
|
8.8
|
|
Earnings per
share:
|
|
|
|
|
|
Basic
|
$
|
0.08
|
|
|
$
|
0.23
|
|
Diluted
|
$
|
0.07
|
|
|
$
|
0.22
|
|
Weighted average
number of shares:
|
|
|
|
|
|
Basic
|
39.7
|
|
|
38.9
|
|
Diluted
|
40.5
|
|
|
39.4
|
|
TESCO
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
(in
millions)
|
|
|
March 31,
2014
|
|
December
31,
2013
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
97.2
|
|
|
$
|
97.3
|
Accounts receivable,
net
|
136.5
|
|
|
142.6
|
Inventories,
net
|
106.9
|
|
|
97.4
|
Other current
assets
|
46.8
|
|
|
44.1
|
Total current
assets
|
387.4
|
|
|
381.4
|
Property, plant and
equipment, net
|
202.4
|
|
|
204.9
|
Goodwill
|
32.7
|
|
|
32.7
|
Other
assets
|
19.0
|
|
|
18.7
|
Total
assets
|
$
|
641.5
|
|
|
$
|
637.7
|
Liabilities and Shareholders'
Equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Current portion of
long term debt
|
$
|
0.1
|
|
|
$
|
0.4
|
Accounts
payable
|
50.9
|
|
|
45.6
|
Accrued and other
current liabilities
|
50.7
|
|
|
59.1
|
Income taxes
payable
|
5.0
|
|
|
5.9
|
Total current
liabilities
|
106.7
|
|
|
111.0
|
Other
liabilities
|
0.3
|
|
|
0.2
|
Long-term
debt
|
—
|
|
|
—
|
Deferred income
taxes
|
9.1
|
|
|
9.5
|
Shareholders'
equity
|
525.4
|
|
|
517.0
|
Total
liabilities and shareholders' equity
|
$
|
641.5
|
|
|
$
|
637.7
|
SOURCE Tesco Corporation