Tesco (NASDAQ:TESOF)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Tesco Charts. Click Here for more Tesco Charts.](/p.php?pid=staticchart&s=N%5ETESOF&p=8&t=15)
Trading Symbol: "TESOF" on NASDAQ "TEO" on TSX
HOUSTON, March 8 /PRNewswire-FirstCall/ -- Tesco Corporation ("TESCO" or the "Company") today reported record net income for the quarter ended December 31, 2006 of $10.2 million, or $0.28 per diluted share, compared to a net loss of $1.5 million, or $(0.04) per diluted share, for the fourth quarter of 2005 and net income of $8.5 million, or $0.23 per diluted share, for the third quarter of 2006 (as restated). Revenue, also the strongest in the Company's history, was $114.3 million for the quarterly period ended December 31, 2006 compared to revenue of $65.6 million for the comparable period in 2005 and $101.5 million in the third quarter of 2006. Both the Top Drive and Casing Services business segments reported strong year-over-year and sequential quarterly gains in revenue.
Summary of Results
(in millions of U.S.$, except per share amounts and percentages)
U.S. GAAP - Unaudited
Quarter 4 Quarter 3 Twelve Months
--------- --------- -------------
2006 2005 2006(x) 2006 2005
--------- --------- --------- --------- ---------
Revenues $ 114.3 $ 65.6 $ 101.5 $ 386.2 $ 202.7
-------------------------------------------------
-------------------------------------------------
Operating Income (loss) 18.7 1.1 14.4 60.5 17.7
-------------------------------------------------
-------------------------------------------------
Net Income (loss) 10.2 (1.5) 8.5 30.5 7.0
-------------------------------------------------
-------------------------------------------------
EPS (diluted) $ 0.28 $ (0.04) $ 0.23 $ 0.83 $ 0.20
-------------------------------------------------
-------------------------------------------------
EBITDA (as defined)(xx) $ 26.1 $ 6.1 $ 22.8 $ 85.4 $ 35.6
-------------------------------------------------
(x) As restated, as more fully described in "Additional Disclosures"
below.
(xx) As defined to consist of net income (loss) before net interest
expense, depreciation and amortization, non-cash stock compensation
expense and other non-cash items: See "Non-GAAP Measures" below.
Commentary
Julio Quintana, TESCO's Chief Executive Officer, commented "2006 represented a watershed year in the Company's history. We achieved a 91% year-on-year growth in revenues as well as record earnings. Favorable market conditions combined with our ability to increase our capacity to deliver Top Drives to the market translated into a bottom line performance across Top Drive sales, after market and Top Drive rentals. Last year also marked a major movement by the Company in all phases of the Casing Services business (a combination of CASING DRILLING(R) and Tubular Services). We built a substantial position as a world class casing running company on the back of our proprietary automated CDS(TM) technology and still see running room in this offering. We have introduced our Multi Control Line Running System (MCLRS(TM)) into the market with excellent reception and expect future growth from these technologies. On the CASING DRILLING(R) front, we saw substantial revenue increases in our service component of this technology, moved our offering into a higher end offshore market and have seen a major shift in interest by our clients. The Casing Services segment is beginning to provide substantial bottom line value to the Company. In 2007, we also look forward to leveraging our Top Drive "franchise" in light of continuing favorable market conditions as well as advancing our proprietary casing running technologies and expanding our market position in CASING DRILLING(R)."
Segment Information
Unaudited--millions of U.S.$
Quarter 4 Quarter 3 Twelve Months
--------- --------- -------------
2006 2005 2006(x) 2006 2005
--------- --------- --------- --------- ---------
Revenues:
-------------------------------------------------
Top Drives: -------------------------------------------------
Sales and aftermarket $ 38.9 $ 13.5 $ 32.9 $ 117.3 $ 51.3
-------------------------------------------------
Rental 27.9 20.7 25.6 101.9 74.5
--------- --------- --------- --------- ---------
-------------------------------------------------
66.8 34.2 58.5 219.2 125.8
-------------------------------------------------
Casing Services: 47.6 31.4 43.0 167.0 77.0
--------- --------- --------- --------- ---------
-------------------------------------------------
Total Revenues $ 114.3 $ 65.6 $ 101.5 $ 386.2 $ 202.7
--------- --------- --------- --------- ---------
-------------------------------------------------
-------------------------------------------------
Operating Income(xx):
Top Drives $ 22.9 $ (1.1) $ 17.7 $ 70.6 $ 25.0
-------------------------------------------------
Casing Services 8.3 2.6 8.3 31.7 12.8
-------------------------------------------------
Research and
Engineering (2.7) (0.6) (1.2) (6.0) (3.9)
-------------------------------------------------
Corporate/Unallocated (9.8) 0.2 (10.4) (35.8) (16.2)
--------- --------- --------- --------- ---------
-------------------------------------------------
Total Operating
Income $ 18.7 $ 1.1 $ 14.4 $ 60.5 $ 17.7
--------- --------- --------- --------- ---------
-------------------------------------------------
(x) As restated, as more fully described in "Additional Disclosure"
below.
(xx) The Company is reporting its Research and Engineering Expenses(R&E)
as a separate reportable segment. Previously R&E was included in the
Corporate and Unallocated reporting segment. All prior periods have
been reclassified to be consistent with these reportable segments.
Financial and Operating Highlights
- Year on year:
- A 91% increase in Revenue.
- A 240% increase in Operating Income.
- A 335% increase in Net Income.
- A 131% increase in Top Drive sales and aftermarket support
revenue.
- A 36% increase in Top Drive rental revenue.
- A 138% increase in Top Drive operating income. 2005 Top Drive
operating income includes a $6.6 million charge to Cost of Sales
and Services related to its Top Drive "Load Path" replacement
program.
- A 116% increase in Casing Services revenue.
- A 183% increase in Casing Services operating income.
- Top Drive sales for Q4 2006 were 30 units (29 new and 1 from the
rental fleet). This compares to 26 units sold in Q3 2006 and 7 sold
in Q4 2005.
- At December 31, 2006, Top Drive backlog amounted to 68 units versus
80 units at September 30, 2006. Based on current production levels,
our capacity to deliver Top Drives, assuming sustained market demand
and orders, is expected to be about 30 units per quarter in 2007.
- The utilization of the Company's Top Drive rental fleet increased to
23,873 operating days for 2006 compared to 21,713 operating days for
2005. Additionally, we continued to see an increase in our average
rental revenues per operating day. Our rental fleet today stands at
115 units.
- The growth in TESCO's Casing Services revenues for the quarter and
the year ended December 31, 2006 reflect the impact of the two
acquisitions made in November 2005 as well as organic growth
associated with the Company's automated proprietary Casing Drive
System(TM). Our 2006 proprietary Casing Running revenues more than
doubled as compared to 2005 and we experienced a 10% increase in
Q4 2006 revenues as compared to Q3 2006.
- In January 2007, we announced the successful deployment of our CASING
DRILLING(R) technology to drill the first ever offshore well
utilizing industry standard rotary drillable systems. We believe this
technology will generate serious industry interest and represents an
important strategic initiative for TESCO's future.
- By the end of 2006, we had drilled our 300th well and over 2 million
feet with our proprietary CASING DRILLING(R) technology.
- At December 31, 2006, cash and cash equivalents totaled $14.9 million
while debt totaled $44.5 million. This represents a net debt to book
capitalization of 11%(1).
- Total capital expenditures in 2006 amounted to $45.7 million. We have
budgeted capital expenditures in 2007 close to $50 million.
- Selling, General and Administrative (SG&A) costs for Q4 2006 amounted
to $12.2 million which compares to $10.9 million for Q4 2005. For
all of 2006, SG&A totaled $37.2 million compared to $28.1 million for
2005. This represents a drop in SG&A as a percent of revenue from 14%
to 10%. The increase in SG&A for the 4th quarter of 2006 compared to
the same quarter in 2005 primarily relates to expanded sales and
marketing expenses associated with both the growth in the business as
well as the acquisitions associated with our Casing Services segment
in 2005. In addition, we incurred increased legal, accounting and
compliance costs (including, Section 404 of the Sarbanes Oxley Act)
associated with our transition from a foreign private issuer to a
domestic reporting issuer under the Securities Exchange Act of 1934.
- Research and Engineering (R&E) costs for Q4 2006 amounted to
$2.7 million which compares to $0.6 million for Q4 2005. For all of
2006, R&E totaled $6.0 million compared to $3.9 million for 2005.
This increase in R&E was due to additional product development
activity focusing on the commercialization and enhancement of
existing proprietary technologies in Casing Services and the
development of a new generation of Top Drive units. The Company plans
to increase R&E spending 80% in 2007 primarily to further expand our
commercialization and enhancement of existing proprietary
technologies in Casing Services.
- The Company's effective tax rate for Q4 2006 was 44%. This effective
tax rate was primarily impacted by reserves recorded against certain
foreign tax credit carry forwards. The Company expects its effective
tax rate in 2007 to be in the range of 35-40%.
(1) This ratio is calculated by dividing financial debt, less cash by the
sum of financial debt, net of cash plus shareholders' equity.
Additional Disclosures
As a result of our transition from a foreign private issuer to a domestic reporting issuer under the Securities Exchange Act of 1934, we became subject to the reporting and disclosure requirements under the Securities Exchange Act and related rules. We also conducted an evaluation of our internal controls over financial reporting as of December 31, 2006 in accordance with Section 404 of the Sarbanes Oxley Act. In addition, as part of the transition process, our board of directors and management conducted a self-initiated review of our past stock option granting practices and related accounting. We note that our review of our stock option practices did not uncover any evidence of fraud or manipulative intent.
During the course of preparing our initial annual report on Form 10-K for December 31, 2006 (including the financial statements to be filed therewith), the related evaluation of internal controls, and the review of our stock option practices and accounting, we made the following determinations (all of which will be more thoroughly described in our annual report on Form 10-K for December 31, 2006):
- For years prior to 2006, we identified certain errors totaling
$0.8 million; specifically, additional stock compensation expense
($0.5 million), depreciation expense ($0.5 million), billings
($0.1 million), a reduction in accrued cost of sales and services
($0.1 million) and related tax effects of these items ($0.2 million).
Applying SEC Staff Accounting Bulletin # 99, we determined that the
errors did not result in a material misstatement with respect to any
of the prior periods that would be impacted by their correction,
either individually or in the aggregate. As these adjustments are not
material to any of the years prior to 2006, we have elected to apply
the guidance in Staff Accounting Bulletin # 108 by adjusting the
carrying values of assets and liabilities as of January 1, 2006 with
an offsetting adjustment of $0.8 million recorded to retained
earnings as of such date, as the cumulative amount of these errors
would be material to the year prior to the adoption of Staff
Accounting Bulletin # 108.
- In 2006, we also identified errors in recording stock compensation
and depreciation expense and in posting from sub accounts to our
general ledger that resulted in a material misstatement of our
previously reported results for the second and third quarters of
2006. Accordingly, we are filing restated financial statements with
securities regulatory authorities in Canada and furnishing such
statements pursuant to amended Form 6Ks that will be filed with the
Securities and Exchange Commission. The stock compensation and
depreciation errors mentioned above also impacted the first quarter
of 2006; however, the Company determined that the net impact was not
material to the previously reported amounts and therefore will not be
amending such financial statements previously reported on a Form 6K.
A summary of these adjustments, as related to Q2 and Q3 2006 are
reconciled below:
(in millions of U.S.$) Reconciliation Reconciliation
to Q2 2006 to Q3 2006
(after tax) (after tax)
-------------- --------------
Net income, as previously reported-
Canadian GAAP $ 3.1 $ 9.3
Stock Compensation adjustment (0.2) (0.3)
Under-accrued expenses (0.3) (0.7)
Depreciation corrections and other
errors (0.1) (0.1)
-------------- --------------
Adjusted net income-Canadian GAAP $ 2.5 $ 8.2
Conversion to U.S. GAAP 0.5 0.3
Net income on a U.S. GAAP basis $ 3.0 $ 8.5
-------------- --------------
- Based upon our testing performed to date, we have identified certain
material weaknesses in internal controls in the Company's U.S. Casing
Services business unit. These include a material weakness related to
the Company's monitoring of reporting controls over this business
unit; including, the timely preparation of bank account
reconciliations; the preparation, review and approval of journal
entries; the review of key spreadsheets and certain controls over
fixed assets that will be more fully described in our annual report
on Form 10-K for the year ended December 31, 2006. Our management has
concluded that these weaknesses, at this business unit, constitute
material weaknesses. A material weakness is a control deficiency, or
combination of control deficiencies, that results in more than a
remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected.
Management, with the oversight of the Audit Committee has begun to
address these control deficiencies and is committed to correcting
these deficiencies expeditiously. However, as a result, management
has concluded that our internal control over financial reporting was
not effective as of December 31, 2006.
Financial Reporting
Last year, TESCO, an Alberta corporation, determined that it no longer qualified for foreign private issuer status related to periodic reporting of its financial results with the U.S. Securities and Exchange Commission. As a result, TESCO is preparing and filing a Form 10-K annual report beginning with the year ended December 31, 2006 and will file quarterly Form 10-Qs for quarterly periods thereafter. In addition, at December 31, 2006 TESCO is reporting results in accordance with U.S. GAAP.
Conference Call
The Company will conduct a conference call to discuss its results for the fourth quarter of 2006 today (Thursday, March 8, 2007) at 10:00 a.m. CST. Individuals who wish to participate in the conference call should dial US/Canada (866) 433-0163 or International (706) 679-3976 approximately five to ten minutes prior to the scheduled start of the call. The conference ID for this call is 1949511. The conference call will also be webcast live and available for replay at the Company web site, http://www.tescocorp.com/. Listeners may access the call through the "Conference Calls" link in the Investor Relations section of the site. The conference call and all questions and answers will be recorded and made available until March 22, 2007. To listen to the recording, call (800) 642-1687 or (706) 645-9291 and enter conference ID 1949511.
Tesco Corporation is a global leader in the design, manufacture and service of technology based solutions for the upstream energy industry. The Corporation'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 gas.
Non-GAAP Measures- EBITDA (as defined below)
(in millions of U.S. $)
Quarter 4 Quarter 3 Twelve Months
--------- --------- -------------
2006 2005 2006(x) 2006 2005
--------- --------- --------- --------- ---------
Net Income (loss) $ 10.2 $ (1.5) $ 8.5 $ 30.5 $ 7.0
-------------------------------------------------
Income Taxes 8.0 (0.1) 5.2 23.3 6.3
-------------------------------------------------
Depreciation and
Amortization 5.6 5.4 6.7 23.3 17.3
-------------------------------------------------
Net Interest expense 0.8 1.3 0.7 2.8 1.4
-------------------------------------------------
Stock Compensation
Expense- non-cash 1.5 1.0 1.7 5.7 3.6
-------------------------------------------------
Cumulative Change in
accounting method - - - (0.2) -
-------------------------------------------------
EBITDA $ 26.1 $ 6.1 $ 22.8 $ 85.4 $ 35.6
-------------------------------------------------
(x) As restated, as more fully described in "Additional Disclosures"
above.
Our management evaluates Company performance based on non-GAAP measures, of which a primary performance measure is EBITDA. 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. They 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 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) 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 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 TESCO's prospects, future revenues, 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, TESCO 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 TESCO does not undertake any obligation to up date 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), and risks 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.
Further information regarding these factors may be found in TESCO's most recent annual information form and in TESCO's most recent consolidated financial statements, management information circular, quarterly reports, management's discussion and analysis, material change reports and news releases and in TESCO's Annual Report on Form 10-K for the year ended December 31, 2006 and in TESCO's Annual Report on Form 40-F for the year ended December 31, 2005. Copies of TESCO's Canadian public filings are available at http://www.tescocorp.com/ and on SEDAR at http://www.sedar.com/. TESCO's U.S. public filings are available at http://www.sec.gov/ and at http://www.tescocorp.com/.
TESCO CORPORATION
(Millions of U.S. Dollars, except share and per share information)
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the For the
Three Months Twelve Months
Ended December 31, Ended December 31,
---------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- -----------
(unaudited)
REVENUE $ 114.3 $ 65.6 $ 386.2 $ 202.7
COST OF SALES AND
SERVICES 80.7 61.3 282.5 161.9
---------- ---------- ---------- -----------
Direct Profit 33.6 4.3 103.7 40.8
OPERATING EXPENSES
Selling, General and
Administrative 12.2 10.9 37.2 28.1
Research and Engineering 2.7 0.6 6.0 3.9
Gain on Sales of
Operating Assets - (8.4) - (8.9)
---------- ---------- ---------- -----------
14.9 3.2 43.1 23.1
---------- ---------- ---------- -----------
OPERATING INCOME 18.7 1.1 60.5 17.7
Interest Expense, net 0.8 1.3 2.8 1.4
Other (Income) Expense,
net (0.3) 1.4 4.1 3.0
---------- ---------- ---------- -----------
INCOME BEFORE INCOME
TAXES 18.2 (1.6) 53.6 13.3
Income taxes 8.0 (0.1) 23.3 6.3
---------- ---------- ---------- -----------
NET INCOME BEFORE
CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE 10.2 (1.5) 30.3 7.0
Cumulative Effect of
Accounting Change, net - - 0.2 -
---------- ---------- ---------- -----------
NET INCOME $ 10.2 $ (1.5) $ 30.5 $ 7.0
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Earnings per share:
Basic $ 0.28 ($0.04) $ 0.85 $ 0.20
Diluted $ 0.28 ($0.04) $ 0.83 $ 0.20
Weighted average number
of shares:
Basic 35,995,353 35,294,639 35,847,266 35,173,264
Diluted 36,545,812 35,294,639 36,593,409 35,628,543
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
-----------------------
2006 2005
---------- -----------
(unaudited)
ASSETS
Cash and Cash Equivalents $ 14.9 $ 35.4
Accounts Receivables, net 80.3 56.3
Inventories 85.4 40.1
Other Current Assets 14.3 18.4
---------- -----------
Current Assets 194.9 150.2
Property, Plant and Equipment, net 131.8 109.7
Goodwill 16.6 16.9
Other Assets 24.8 25.3
---------- -----------
$ 368.1 $ 302.1
---------- -----------
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Maturities of Long Term Debt $ 10.0 $ 0.4
Accounts Payable 27.8 23.0
Accrued and Other Current Liabilities 49.3 29.6
---------- -----------
Current Liabilities 87.1 53.0
Long Term Debt 34.5 40.9
Deferred Income Taxes 5.9 4.7
Shareholders' Equity 240.6 203.5
---------- -----------
$ 368.1 $ 302.1
---------- -----------
---------- -----------
DATASOURCE: Tesco Corporation
CONTACT: Julio Quintana, (713) 359-7000, Anthony Tripodo, (713) 359-7000,
Tesco Corporation