Published: August 04, 2011
Tesco Corporation Reports Q2 2011 Results
Trading Symbol:
"TESO" on NASDAQ
HOUSTON, TX, Aug. 4, 2011 /PRNewswire/ - Tesco Corporation ("TESCO" or the
"Company") today reported net income for the quarter ended June 30,
2011 of $7.4 million or $0.19 per diluted share. This compares to net
income of $0.7 million, or $0.02 per diluted share, for the second
quarter of 2010, and a net income of $4.3 million, or $0.11 per diluted
share, for the first quarter of 2011. Revenue was $117.3 million for
the quarter ended June 30, 2011, compared to revenue of $85.5 million
for the comparable period in 2010 and $105.6 million for the first
quarter of 2011. The results for the quarter ended June 30, 2011
includes a positive impact of $2.1 million, net of tax, related to a
refund from the Mexican tax authorities.
Commentary
Julio Quintana, TESCO's Chief Executive Officer, commented "Our top
drive business continued to perform in the second quarter. Top drive
revenue grew from the first quarter due to incremental unit sales and
we ended the quarter with backlog of 67 units. Today, our backlog
stands at 72 units. Further, we delivered the highest quarterly top
drive rental revenue in our history. Our proprietary tubular service
business is improving and we performed a record 914 CDS jobs during the
quarter. With current market conditions and the momentum in the
business today, we believe that TESCO is well positioned to deliver
future profitable growth."
Summary of Results
(in millions of U.S. $)
Six months ended
Quarter 2 Quarter 1 June30,
2011 2010 2011(b) 2011 2010
Revenue: (Unaudited) (Unaudited) (Unaudited)
Top Drives:
Sales $ 30.9 $ 17.9 $ 25.0 $ 55.9 $ 34.9
Rental 34.7 24.8 33.2 67.9 48.9
services
Aftermarket 13.0 10.8 12.2 25.2 21.7
sales and
service
78.6 53.5 70.4 149.0 105.5
Tubular
Services:
Proprietary 29.2 24.9 24.5 53.7 50.7
Conventional 5.6 4.3 7.8 13.4 9.9
34.8 29.2 32.3 67.1 60.6
CASING
DRILLINGTM 3.9 2.8 2.9 6.8 5.5
Total revenue $ 117.3 $ 85.5 $ 105.6 $ 222.9 $ 171.6
Operating
Income (Loss):
Top Drives $ 21.7 $ 13.0 $ 21.2 $ 42.9 $ 25.4
Tubular 2.5 1.6 1.6 4.1 5.2
Services
CASING
DRILLINGTM (3.7 ) (2.8 ) (3.1 ) (6.8 ) (5.6 )
Research and (2.4 ) (1.9 ) (2.9 ) (5.3 ) (3.6 )
Engineering
Corporate/Other (9.2 ) (8.6 ) (9.3 ) (18.5 ) )
(17.1
Total operating $ 8.9 $ 1.3 $ 7.5 $ 16.4 $ 4.3
income
Net income $ 7.4 $ 0.7 $ 4.3 $ 11.7 $ 2.9
Earnings per $ 0.19 $ 0.02 $ 0.11 $ 0.30 $ 0.08
share (diluted)
Adjusted EBITDA
(a)(asdefined) $ 19.7 $ 11.4 $ 19.1 $ 38.8 $ 25.0
________________________
(a) See explanation of Non-GAAP measure on page 5
(b) Revised to include $0.7 million of Colombian net worth tax ($0.5
million reduction to Top Drive operating income and $0.2 million
reduction to Tubular Services operating income).
Q2 2011 Financial and Operating Highlights
Top Drives Segment
-- Revenue from the Top Drive segment for Q2 2011 was $78.6
million, an increase of 12% from revenue of $70.4 million in Q1
2011, primarily due to an increase in the number of units sold
during the current quarter. Revenue for Q2 2010 was $53.5
million.
o Top Drive sales for Q2 2011 included 24 units (21 new, 2
consignment and 1 used), compared to 18 units (17 new and 1
consignment) sold in Q1 2011 and 13 units sold in Q2 2010 (10 new
and 3 used).
o Operating days for the Top Drive rental fleet were 7,039 for Q2
2011 compared to 6,870 in Q1 2011 and 5,524 for Q2 2010. The
improvement from Q1 2011 was primarily due to an increase in rental
activity throughout our operating units, particularly in North
America, Russia and Latin America and the result of additional
units added to our rental fleet in Q2.
o Revenue from after-market sales and service for Q2 2011 was $13.0
million, an increase of 7% from revenue of $12.2 million in Q1
2011, and 20% from revenue of $10.8 million in Q2 2010 due to
additional market demand in Q2 2011.
-- Our Top Drive operating margins were 28% in Q2 2011, a decrease
from 30% in Q1 2011 and an increase from 24% in Q2 2010. The
decrease from Q1 2011 is primarily due to the mix of new top
drive models delivered in Q2.
-- At June 30, 2011, Top Drive backlog was 67 units, with a total
value of $75.1 million, compared to 43 units at March 31, 2011,
with a total value of $57.4 million. This compares to a backlog
of 22 units at June 30, 2010, with a total value of $28.4
million. Today, our backlog stands at 72 units.
Tubular Services Segment
-- Revenue from the Tubular Services segment for Q2 2011 was $34.8
million, an increase of 8% from revenue of $32.3 million in Q1
2011. Revenue was $29.2 million in Q2 2010. Revenue increased
from prior periods due to increased demand from customers in
the shale resource regions in the United States and Canada. We
performed a record 914 proprietary casing running jobs in Q2
2011 compared to 819 in Q1 2011 and 783 in Q2 2010. 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 2011
was $2.5 million, compared to $1.6 million in Q1 2011 and $1.6
million in Q2 2010.
CASING DRILLING(TM)( )Segment
-- CASING DRILLINGTM revenue in Q2 2011 was $3.9 million compared
to $2.9 million in Q1 2011 and $2.8 million in Q2 2010. The
increase from prior periods is due to completion of jobs under
multi-well contracts, primarily outside of North America.
-- Operating loss of $3.7 million in our CASING DRILLINGTM segment
for Q2 2011 was up from $3.1 million in Q1 2011 and $2.8
million in Q2 2010. The increase is due to our increased
investment in personnel and other infrastructure costs.
Other Segments and Expenses
-- Corporate costs for Q2 2011 were $9.2 million, compared to $9.3
million for Q1 2011 and $8.6 million in Q2 2010. Total selling,
general and administrative costs in Q2 2011 were $11.6 million
compared to $11.7 million in Q1 2011 and $11.9 million in Q2
2010. Corporate costs increased due to increased property
taxes and increased incentive stock compensation expense.
-- Research and engineering costs for Q2 2011 of $2.4 million
decreased from $2.9 million in Q1 2011 and increased from $1.9
million in Q2 2010. Specifically, we have increased our
personnel and incurred additional costs for engineering,
prototype construction and training compared to the same period
in 2010. We continue to invest in the development,
commercialization and enhancements of our proprietary
technologies.
-- Our effective tax rate for Q2 2011 was 29% compared to 35% in
Q1 2011 and 32% in Q2 2010.
Financial Condition
-- At June 30, 2011, cash and cash equivalents were $41.3 million,
compared to $60.6 million at December 31, 2010. In the first
half of 2011, we used cash to purchase and build capital
equipment and to purchase inventory to meet the needs of our
increasing top drive backlog.
-- Total capital expenditures were $12.1 million in Q2 2011,
compared to $7.3 million in Q1 2011 and $11.6 million in Q2
2010. We project our total capital expenditures for 2011 to be
between $55 million and $65 million, based on current market
conditions.
________________
Conference Call
The Company will conduct a conference call to discuss its results for
the second quarter 2011 tomorrow (Friday, August 5, 2011) at 10:00 a.m.
Central Time. 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 73126134. The
conference call and all questions and answers will be recorded and made
available until September 5, 2011. To listen to the recording, call
(800) 642-1687 or (706) 645-9291 and enter conference ID 73126134. 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(®) is a registered trademark in the United States and Canada. TESCO CASING
DRILLING(®) is a registered mark in the United States. CASING DRILLING(®) 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 definedbelow)
(in millions Six months ended
of U.S. $) Quarter 2 Quarter1 June30,
2011 2010 2011 2011 2010
Net income $ 7.4 $ 0.7 $ 4.3 $ 11.7 $ 2.9
under U.S.
GAAP
Income tax 3.0 0.3 2.7 5.7 1.4
expense
(benefit)
Depreciation 9.2 8.8 9.3 18.5 17.6
and
amortization
Interest (1.7 ) 0.1 0.3 (1.4 ) 0.1
expense, net
Stock 1.8 1.5 2.5 4.3 3.0
compensation
expense
(non-cash)
Adjusted $ 19.7 $ 11.4 $ 19.1 $ 38.8 $ 25.0
EBITDA
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, 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, 2010 and "Part II, Item 1A - Risk Factors" in our
Quarterly Report on Form 10-Q to be filed for the quarter ended June
30, 2011 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 earnings per share)
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months For the Six Months Ended
Ended June 30,
June 30,
2011 2010 2011 2010
(Unaudited) (Unaudited)
Revenue $ 117.3 $ 85.5 $ 222.9 $ 171.6
Operating expenses
Cost of sales 94.4 70.4 177.9 141.0
and services
Selling, 11.6 11.9 23.3 22.7
general and
administrative
Research and 2.4 1.9 5.3 3.6
engineering
108.4 84.2 206.5 167.3
Operating income 8.9 1.3 16.4 4.3
Interest expense (1.7 ) 0.1 (1.4 ) 0.1
(income), net
Other (income) 0.2 0.2 0.4 (0.1 )
expense, net
Income before 10.4 1.0 17.4 4.3
income taxes
Income taxes 3.0 0.3 5.7 1.4
Net income $ 7.4 $ 0.7 $ 11.7 $ 2.9
Earnings per
share:
Basic $ 0.19 $ 0.02 $ 0.31 $ 0.08
Diluted $ 0.19 $ 0.02 $ 0.30 $ 0.08
Weighted average
number of shares:
Basic 38,164 37,792 38,120 37,776
Diluted 38,928 38,650 38,831 38,680
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2011 2010
(Unaudited)
ASSETS
Cash and cash equivalents $ 41.3 $ 60.6
Accounts receivable, net 95.0 72.9
Inventories 87.0 59.2
Other current assets 36.7 33.3
Current assets 260.0 226.0
Property, plant and equipment, net 183.6 182.7
Goodwill 29.4 29.4
Other assets 15.8 16.8
$ 488.8 $ 454.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 37.1 $ 23.8
Accrued and other current 53.9 49.4
liabilities
Current liabilities 91.0 73.2
Other liabilities 2.8 1.1
Long-term debt -- --
Deferred income taxes 3.4 4.9
Shareholders' equity 391.6 375.7
$ 488.8 $ 454.9
SOURCE Tesco Corporation
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