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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Tesco Corp. (MM) | NASDAQ:TESO | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 3.70 | 3.75 | 3.80 | 0 | 01:00:00 |
Alberta | 76-0419312 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
11330 Clay Road Suite 350 Houston, Texas | 77041 |
(Address of Principal Executive Offices) | (Zip Code) |
TESCO CORPORATION | ||
Date: August 6, 2015 | By: | /s/ Christopher L. Boone |
Christopher L. Boone, Sr. Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Tesco Corporation Press Release announcing Q2 2015 Earnings dated August 6, 2015. | |
99.2 | Tesco Corporation Press Release announcing Q3 dividend dated August 4, 2015. | |
• | Global restructuring efforts generating cumulative annualized savings of $30 million |
• | 6 Top Drive bookings suggest market resilience |
• | Company readies deployment of new technologies as investments in R&E totaled $2.1 million |
• | Second quarter reported diluted EPS loss of $0.71 |
• | Second quarter adjusted diluted EPS loss of $0.21, after $0.50 in charges, and positive adjusted EBITDA of $1.8 million |
• | Revenue from the Top Drive segment for Q2 2015 was $41.5 million, an $8.5 million, or 17.0%, decrease from Q1 2015 and a $44.8 million, or 51.9%, decrease from Q2 2014. |
◦ | Top Drive sales for Q2 2015 included 11 units (10 new and 1 used), compared to 14 units (14 new and 0 used) sold in Q1 2015 and 35 units (33 new and 2 used) sold in Q2 2014. |
◦ | The rental top drive fleet remained unchanged at 135 during the second quarter with a utilization of 30%. |
• | Operating loss before adjustments in the Top Drive segment for Q2 2015 was $2.8 million, a $7.4 million, or 160.9%, decrease from Q1 2015 and a $22.0 million, or 114.6%, decrease from Q2 2014. Our Top Drive operating margins before adjustments were (7)% in Q2 2015, a decrease from 9% and 22% in Q1 2015 and Q2 2014, respectively. Second quarter operating income and operating margin after adjustments were $0.7 million and 1.7%, respectively, with sequential decremental adjusted margins of 62%. This sequential decline in profitability is primarily related to the impact of reduced global top drive sales, lower rental pricing and utilization in North and South America, continued weakness in after-market bookings as customers defer maintenance and low manufacturing activity on plant utilization. |
• | At June 30, 2015, Top Drive backlog was 20 units, with a total potential value of $20.0 million, compared to 24 units at March 31, 2015, with a potential value of $23.1 million. This compares to a backlog of 51 units at June 30, 2014, with a potential value of $56.7 million. Thirteen units of the backlog at the end of the second quarter are not scheduled to ship until 2016. Today, our backlog stands at 21 units with a potential value of $22.0 million. |
• | Revenue from the Tubular Services segment for Q2 2015 was $33.0 million, a $8.7 million, or 20.9%, decrease from Q1 2015 and a $25.8 million, or 43.9%, decrease from Q2 2014. |
• | Operating loss before adjustments in the Tubular Services segment for Q2 2015 was $2.8 million, a $4.8 million, or 240.0%, decrease from Q1 2015 and a $14.1 million, or 124.8%, decrease from Q2 2014. Our Tubular Services operating margins were (9)% for Q2 2015, down from 5% and 19% in Q1 2015 and Q2 2014, respectively. Second quarter operating losses and operating margin after adjustments were $1.7 million and 5.2%, respectively, with sequential adjusted decremental margins of 52%. This sequential decline in profitability is primarily related to the full quarter impact of lower North America activity and pricing as well as lower activity and pricing in certain Latin America and Asia Pacific markets. |
• | Research and engineering costs for Q2 2015 were $2.1 million, compared to $2.9 million in Q1 2015 and $2.5 million in Q2 2014. We continue to invest in the development, commercialization, and enhancements of our proprietary technologies relating to our Top Drive and Tubular Services segments. |
• | Corporate and other costs for Q2 2015 were $6.0 million, a $3.3 million, or 35.5%, decrease from Q1 2015 and a $3.2 million, or 34.8%, decrease from Q2 2014. Adjusted costs would have been $5.9 million primarily as a result of the restructuring efforts. |
• | Net foreign exchange losses for Q2 2015 were $1.4 million, compared to losses of $3.2 million in Q1 2015 and gains of $1.1 million in Q2 2014. The largest foreign exchange losses were from Latin America. |
• | Our effective tax rate for Q2 2015 was a 79% expense compared to a 6% benefit in Q1 2015 and a 36% expense in Q2 2014. The effective tax rate was mostly affected by a $15.3 million valuation allowance related to deferred tax assets in Canada. |
• | Total capital expenditures were $2.9 million in Q2 2015, primarily for tubular services equipment and our test rig, a $4.4 million, or 60%, decrease from Q1 2015 and a $8.6 million, or 75%, decrease from Q2 2014. |
• | During the second half of 2015 the Company expects to ship approximately 3-5 top drives per quarter with bookings predicted to occur at a similar pace. After-market and rental activity recovery will depend on rig count increases. |
• | Operating margins are expected to decline sequentially in the third quarter due to leverage impact on infrastructure of lower expected sales in all product lines. |
• | Revenue increases from the Tubular Services segment will depend on higher drilling activity, despite some expected improvement in North America market share. |
• | Operating margins are not expected to improve sequentially as additional weakness in certain international markets offsets restructuring benefits. |
• | Research and engineering costs are expected to run approximately $2.0 million per quarter and corporate and other costs are expected to run approximately $6.0 to $7.0 million per quarter for the balance of 2015. |
• | The effective tax rate for the second half of 2015 will be sensitive to the impact of earnings and losses by tax jurisdiction as well as non-deductible items such as certain foreign exchange gains and losses. |
• | Total capital expenditures for 2015 are expected to be approximately $12 to $15 million. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenue | $ | 74.5 | $ | 145.1 | $ | 166.1 | $ | 266.5 | |||||||
Operating expenses | |||||||||||||||
Cost of sales and services | 76.7 | 110.5 | 160.0 | 206.3 | |||||||||||
Selling, general and administrative | 9.4 | 13.3 | 20.6 | 27.3 | |||||||||||
Research and engineering | 2.1 | 2.5 | 4.9 | 5.0 | |||||||||||
88.2 | 126.3 | 185.5 | 238.6 | ||||||||||||
Operating income (loss) | (13.7 | ) | 18.8 | (19.4 | ) | 27.9 | |||||||||
Interest expense, net | 0.3 | 0.2 | 0.5 | 0.6 | |||||||||||
Other expense (income), net | 1.3 | (1.1 | ) | 4.2 | 2.2 | ||||||||||
Income (loss) before income taxes | (15.3 | ) | 19.7 | (24.1 | ) | 25.1 | |||||||||
Income taxes | 12.2 | 7.0 | 11.6 | 9.1 | |||||||||||
Net income (loss) | $ | (27.5 | ) | $ | 12.7 | $ | (35.7 | ) | $ | 16.0 | |||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | (0.71 | ) | $ | 0.32 | $ | (0.92 | ) | $ | 0.40 | |||||
Diluted | $ | (0.71 | ) | $ | 0.31 | $ | (0.92 | ) | $ | 0.39 | |||||
Dividends per share: | |||||||||||||||
Basic | $ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.05 | |||||||
Weighted average number of shares: | |||||||||||||||
Basic | 39.0 | 40.2 | 39.0 | 40.0 | |||||||||||
Diluted | 39.0 | 40.8 | 39.0 | 40.6 |
June 30, 2015 | December 31, 2014 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 62.7 | $ | 72.5 | |||
Accounts receivable, net | 87.6 | 128.7 | |||||
Inventories, net | 118.0 | 114.7 | |||||
Other current assets | 35.9 | 44.8 | |||||
Total current assets | 304.2 | 360.7 | |||||
Property, plant and equipment, net | 189.3 | 202.5 | |||||
Goodwill | 34.4 | 34.4 | |||||
Other assets | 12.2 | 21.7 | |||||
Total assets | $ | 540.1 | $ | 619.3 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities | |||||||
Current portion of long term debt | $ | — | $ | — | |||
Accounts payable | 22.0 | 36.1 | |||||
Accrued and other current liabilities | 32.9 | 46.7 | |||||
Income taxes payable | 1.0 | 8.9 | |||||
Total current liabilities | 55.9 | 91.7 | |||||
Other liabilities | 1.5 | 2.2 | |||||
Long-term debt | — | — | |||||
Deferred income taxes | 7.3 | 12.3 | |||||
Shareholders' equity | 475.4 | 513.1 | |||||
Total liabilities and shareholders’ equity | $ | 540.1 | $ | 619.3 |
Three Months Ended June 30, | Three Months Ended March 31, | Six Months Ended June 30, | |||||||||||||||||
2015 | 2014 | 2015 | 2015 | 2014 | |||||||||||||||
Segment revenue | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Top Drives | |||||||||||||||||||
Sales | $ | 13.7 | $ | 40.6 | $ | 17.8 | $ | 31.5 | $ | 65.9 | |||||||||
Rental services | 17.8 | 26.7 | 20.1 | 37.7 | 51.4 | ||||||||||||||
After-market sales and service | 10.0 | 19.0 | 12.1 | 22.2 | 33.7 | ||||||||||||||
41.5 | 86.3 | 50.0 | 91.4 | 151.0 | |||||||||||||||
Tubular Services | |||||||||||||||||||
Land | 23.5 | 39.6 | 30.6 | 54.1 | 79.5 | ||||||||||||||
Offshore | 8.7 | 10.0 | 9.8 | 18.6 | 20.9 | ||||||||||||||
CDS, Parts, & Accessories | 0.8 | 9.2 | 1.3 | 2.0 | 15.1 | ||||||||||||||
33.0 | 58.8 | 41.7 | 74.7 | 115.5 | |||||||||||||||
Casing Drilling | — | — | — | — | — | ||||||||||||||
Consolidated revenue | $ | 74.5 | $ | 145.1 | $ | 91.7 | $ | 166.1 | $ | 266.5 | |||||||||
Segment operating income (loss): | |||||||||||||||||||
Top Drives | $ | (2.8 | ) | $ | 19.2 | $ | 4.6 | $ | 1.7 | $ | 30.0 | ||||||||
Tubular Services | (2.8 | ) | 11.3 | 2.0 | (0.8 | ) | 22.1 | ||||||||||||
Casing Drilling | — | — | — | — | (0.3 | ) | |||||||||||||
Research and Engineering | (2.1 | ) | (2.5 | ) | (2.9 | ) | (4.9 | ) | (5.0 | ) | |||||||||
Corporate and other | (6.0 | ) | (9.2 | ) | (9.3 | ) | (15.4 | ) | (18.9 | ) | |||||||||
Consolidated operating income | $ | (13.7 | ) | $ | 18.8 | $ | (5.6 | ) | $ | (19.4 | ) | $ | 27.9 | ||||||
Net income (loss) | $ | (27.5 | ) | $ | 12.7 | $ | (8.3 | ) | $ | (35.7 | ) | $ | 16.0 | ||||||
Earnings (loss) per share (diluted) | $ | (0.71 | ) | $ | 0.31 | $ | (0.21 | ) | $ | (0.92 | ) | $ | 0.39 | ||||||
Adjusted EBITDA(a) (as defined) | $ | 1.8 | $ | 30.3 | $ | 9.6 | $ | 11.4 | $ | 52.4 |
(a) | See explanation of Non-GAAP measure below |
Three Months Ended June 30, | Three Months Ended March 31, | Six Months Ended June 30, | |||||||||||||||||
2015 | 2014 | 2015 | 2015 | 2014 | |||||||||||||||
Net income (loss) under U.S. GAAP | $ | (27.5 | ) | $ | 12.7 | $ | (8.3 | ) | $ | (35.7 | ) | $ | 16.0 | ||||||
Income tax expense (benefit) | 12.2 | 7.0 | (0.5 | ) | 11.6 | 9.1 | |||||||||||||
Depreciation and amortization | 9.6 | 10.4 | 10.1 | 19.7 | 20.1 | ||||||||||||||
Net interest expense | 0.3 | 0.2 | 0.2 | 0.5 | 0.6 | ||||||||||||||
Stock compensation expense—non-cash | 1.1 | 1.1 | 1.0 | 2.1 | 2.8 | ||||||||||||||
Severance & executive retirement charges | 3.0 | — | 2.6 | 5.6 | — | ||||||||||||||
Bad debt from certain accounts | 0.4 | — | — | 0.4 | 1.6 | ||||||||||||||
Foreign exchange (gain) loss | 1.4 | (1.1 | ) | 3.2 | 4.6 | 2.2 | |||||||||||||
Warranty & legal reserves | 1.3 | — | — | 1.3 | — | ||||||||||||||
Financial revision costs | — | — | 1.3 | 1.3 | — | ||||||||||||||
Adjusted EBITDA | $ | 1.8 | $ | 30.3 | $ | 9.6 | $ | 11.4 | $ | 52.4 |
(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. |
• | 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. |
• | 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. |
• |
Three Months Ended June 30, | Three Months Ended March 31, | Six Months Ended June 30, | |||||||||||||||||
2015 | 2014 | 2015 | 2015 | 2014 | |||||||||||||||
Net income (loss) under U.S. GAAP | $ | (27.5 | ) | $ | 12.7 | $ | (8.3 | ) | $ | (35.7 | ) | $ | 16.0 | ||||||
Severance & executive retirement charges | 2.2 | — | 1.8 | 4.0 | — | ||||||||||||||
Warranty & Legal reserves | 1.0 | — | — | 1.0 | — | ||||||||||||||
Certain foreign exchange losses | 0.7 | (0.8 | ) | 2.4 | 3.1 | 2.1 | |||||||||||||
Bad debt on certain accounts | 0.3 | — | — | 0.3 | 1.6 | ||||||||||||||
Certain tax-related charges | 15.3 | — | — | 15.3 | — | ||||||||||||||
Financial revision costs | — | — | 0.8 | 0.8 | — | ||||||||||||||
Adjusted Net Income (Loss) | $ | (8.0 | ) | $ | 11.9 | $ | (3.3 | ) | $ | (11.2 | ) | $ | 19.7 | ||||||
Diluted earnings (loss) per share: | |||||||||||||||||||
Net income (loss) under U.S. GAAP | $ | (0.71 | ) | $ | 0.31 | $ | (0.21 | ) | $ | (0.92 | ) | $ | 0.39 | ||||||
Severance & executive retirement charges | 0.06 | — | 0.05 | 0.10 | — | ||||||||||||||
Warranty & Legal reserves | 0.03 | — | — | 0.03 | — | ||||||||||||||
Certain foreign exchange losses | 0.01 | (0.02 | ) | 0.06 | 0.08 | 0.05 | |||||||||||||
Bad debt on certain accounts | 0.01 | — | — | 0.01 | 0.04 | ||||||||||||||
Certain tax-related charges | 0.39 | — | — | 0.39 | — | ||||||||||||||
Financial revision costs | — | — | 0.02 | 0.02 | — | ||||||||||||||
Adjusted Net Income (Loss) | $ | (0.21 | ) | $ | 0.29 | $ | (0.08 | ) | $ | (0.29 | ) | $ | 0.48 |
(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. |
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