Trading Symbol: "TESOF" on NASDAQ "TEO" on TSX CALGARY, Aug. 8
/PRNewswire-FirstCall/ -- Tesco Corporation ("TESCO" or the
"Company") today reported record revenue of US$87.2 million for the
quarterly period ended June 30, 2006 compared to revenue of US$83.6
million in the first quarter of 2006 and US$41.5 million for the
comparable period in 2005. Net income for the quarterly period
ended June 30, 2006 was US$3.1 million, or US$0.08 per diluted
share, compared to net income of US$8.3 million, or US$0.23 per
diluted share, for the first quarter of 2006 and net income of
US$3.0 million, or US$0.08 per diluted share, for the comparable
period in 2005. The second quarter 2006 results include a US$0.8
million pre-tax charge related to a court judgment against the
Company in a foreign jurisdiction, a US$3.8 million pre-tax accrual
for withholding tax, interest and penalties related to payments in
2000 through 2004 in a foreign jurisdiction (included in other
expense) and a one-time US$1.6 million charge to income tax expense
for the impact of the Canadian and Alberta income tax rate change
that occurred during the second quarter. Excluding the after-tax
impact of these items, net income for the second quarter ended June
30, 2006 would have been US$7.9 million, or US$0.21 per diluted
share. Both of the Company's business segments reported strong
year-over-year quarterly gains in revenue and operating income. Top
Drive segment revenue of US$47.4 million for the second quarter of
2006 increased 74% over the comparable prior year period and was 2%
higher than the first quarter of 2006. This sharp increase in
revenue compared to the second quarter of 2005 was driven by the
sale of 18 Top Drive units during the quarter compared with seven
sold in the second quarter of 2005. Of the 18 Top Drives sold in
the second quarter of 2006, 16 units were new and two units were
from the rental fleet. In the first quarter of 2006, the Company
sold 15 new Top Drive units and five used rental fleet units. The
increased production during the first half of 2006 compared to the
same period in 2005 is due to increased market demand and improved
capacity associated with ongoing manufacturing changes. During the
second quarter of 2006, 36 new Top Drive orders were placed with
TESCO resulting in a backlog of 91 Top Drives at June 30, 2006
compared with 71 units and 62 units in backlog at March 31, 2006
and December 31, 2005, respectively. Top Drive rental revenue was
up 42% compared with the same period in 2005 due to increased
average day rates and rental days. Operating income in the second
quarter of 2006 for the Top Drive segment was US$16.4 million, up
116% from the comparable prior year period and 21% higher than the
operating income for the first quarter of 2006. As discussed
previously, the Top Drive segment's operating income for the second
quarter of 2006 includes a US$0.8 million pre-tax charge related to
a court judgment against the Company in litigation in a foreign
jurisdiction. The Company intends to appeal this decision. Casing
Services revenue in the second quarter of 2006 was a record US$39.8
million, up 180% over the comparable quarter in 2005 and 8% over
the first quarter of 2006. The revenue growth was the result of the
two casing services acquisitions in November 2005 and increased
activity in conventional and proprietary casing running services.
Operating income for the Casing Services segment totaled US$6.7
million in the second quarter of 2006, up 123% over the second
quarter of 2005 and 25% less than the prior quarter. The decrease
in Casing Services operating income in the second quarter of 2006
as compared to the previous quarter was the result of costs
associated with the rapid expansion of casing running services,
increased direct labor, higher repair and maintenance costs and
increased losses related to the operation of leased drilling rigs
which will expire in the fourth quarter of 2006. Total company cost
of sales and service for the second quarter of 2006 increased to
US$64.5 million from US$30.7 million in the second quarter of 2005
primarily due to the acquisitions associated with the Casing
Services segment and significantly increased activity levels.
Selling, general and administrative expenses also increased US$1.7
million year-over-year and US$0.9 million compared to the first
quarter because of an increased sales force due to the two Casing
Services acquisitions in November 2005, increased legal expenses
and higher expenses related to compliance with Sarbanes Oxley
Section 404. Other expense includes net interest expense, change in
the value of share purchase warrants, foreign exchange gains and
losses and other income and expense. For the second quarter of
2006, other expense increased to US$5.9 million from income of
US$1.0 million in the second quarter of 2005 primarily due to the
accrual for withholding tax, penalties and interest related to
payments in years 2000 through 2004 in a foreign jurisdiction. Net
interest expense, excluding US$1.2 million related to the claim for
withholding tax discussed previously, was US$0.3 million in the
current quarter compared to US$0.2 million in the same period in
2005. Foreign exchange losses were US$1.4 million in the second
quarter of 2006 compared to a foreign exchange gain of US$1.2
million for the prior year period due to the strengthening of the
Canadian dollar during the current quarter. During the second
quarter, Canadian income tax laws changed which incrementally
reduced the statutory tax rates for both Canadian federal and
Alberta provincial income taxes. The effect was a one-time decrease
to the Corporation's future tax asset, which increased tax expense
by approximately US$1.6 million. While this is a significant charge
in the second quarter, the Company believes the reduction in future
cash taxes will more than offset this amount. Balance Sheet At June
30, 2006, cash and cash equivalents totaled US$17.9 million, down
US$17.5 million from the December 31, 2005 balance. This decrease
in cash is primarily the result of the increase in inventory levels
as the Company manufactures orders in backlog, which grew to 91 Top
Drives at June 30, 2006. Total debt at the end of the second
quarter of 2006 was US$38.6 million, down US$2.7 million from the
end of 2005. TESCO had net debt of US$20.7 million at June 30, 2006
compared to net debt of US$5.9 million at year-end 2005. Capital
expenditures totaled US$13.6 million during the second quarter of
2006 for a total of US$23.2 million for the six month period ended
June 30, 2006. TESCO's capital expenditure plan for full year 2006
is estimated to be approximately US$37.0 million, of which the
largest component is targeted for its Casing Services segment.
Commentary Julio Quintana, TESCO's President and Chief Executive
Officer commented, "We are excited about the top line and operating
income performance for this quarter. It is an excellent indicator
of the increasing traction of our key technology-based offerings.
We continue to be bullish on our prospects to maintain our recent
top line growth trend and believe incremental margins will improve
as we increase our Casing Services utilization rates. The
increasing adoption of our proprietary technologies, particularly
CASING DRILLING(R), gives us comfort that we are on the right
track." Conference Call The Company will conduct a conference call
to discuss its results for the second quarter of 2006 today at
11:00 a.m. CDT. 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 3890225. The conference call will also be webcast live
and available for replay at the Company's web site,
http://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 Corporation's mandate 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. FORWARD-LOOKING STATEMENTS This
presentation contains statements that may constitute
"forward-looking statements" within the meaning of the US Private
Securities Litigation Reform Act of 1995. These statements include,
among others, statements regarding expectations of future revenues,
activities, capital expenditures and earnings and technical
results. These statements are based on current expectations that
involve a number of risks and uncertainties, which could cause
actual results to differ from those anticipated. These risks
include, but are not limited to: the background risks of the
drilling services industry (e.g. operational risks; potential
delays or changes in plans with respect to 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 (e.g. political and fiscal
instability) and exchange rate fluctuations); uncertainty and risks
in technical results and performance of technology; and other
uncertainties. TESCO CORPORATION CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS (Unaudited) (Thousands of U.S. Dollars,
except per share information) For the Three Months For the Six
Months Ended June 30, Ended June 30, -----------------------
----------------------- 2006 2005 2006 2005 ----------- -----------
----------- ----------- REVENUE $ 87,176 $ 41,477 $ 170,758 $
85,859 EXPENSES Cost of Sales and Services 64,484 30,662 125,449
61,215 Research and Engineering 861 1,097 2,425 2,055 Selling,
General and Administrative 7,983 6,284 15,068 11,950 -----------
----------- ----------- ----------- 73,328 38,043 142,942 75,220
----------- ----------- ----------- ----------- Operating income
13,848 3,434 27,816 10,639 Other expense 5,929 (970) 6,670 (895)
----------- ----------- ----------- ----------- Income from
operations before restructuring and other exceptional items 7,919
4,404 21,146 11,534 ----------- ----------- ----------- -----------
(Gain) on restructuring and other exceptional items - (417) - (612)
----------- ----------- ----------- ----------- Income before
income taxes 7,919 4,821 21,146 12,146 ----------- -----------
----------- ----------- Income taxes Current 5,308 2,736 9,492
4,134 Future (498) (884) 288 681 ----------- -----------
----------- ----------- 4,810 1,852 9,780 4,815 -----------
----------- ----------- ----------- Net income 3,109 2,969 11,366
7,331 Retained earnings, beginning of period 53,943 41,816 45,686
37,454 ----------- ----------- ----------- ----------- Retained
earnings, end of period $ 57,052 $ 44,785 $ 57,052 $ 44,785
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- Earnings per share: Basic $0.09
$0.08 $0.32 $0.21 Diluted $0.08 $0.08 $0.31 $0.21 Weighted average
number of shares: Basic 35,812,458 35,149,780 35,722,465 35,102,097
Diluted 36,684,647 35,312,522 36,604,835 35,279,095 TESCO
CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (Thousands of
U.S. Dollars) June 30, December 31, 2006 2005 -----------
------------- ASSETS CURRENT ASSETS Cash and cash equivalents $
17,885 $ 35,396 Accounts receivable - trade 74,594 56,433 - prepaid
and other 12,946 12,808 Income taxes recoverable 986 1,607
Inventories 69,485 40,064 Future income taxes 5,677 5,287
---------- ---------- Total Current Assets 181,573 151,595
Property, plant and equipment, net 120,179 109,732 Investments
1,049 2,132 Goodwill 17,216 16,885 Future income taxes 7,726 9,539
Intangible and other assets 13,884 15,460 ---------- ----------
Total Assets $ 341,627 $ 305,343 ---------- ---------- ----------
---------- LIABILITIES & SHAREHOLDERS' EQUITY CURRENT
LIABILITIES Current portion of long term debt and capital lease $
5,302 $ 425 Accounts payable 35,119 22,961 Accrued liabilities
36,724 29,655 ---------- ---------- Total Current Liabilities
77,145 53,041 Capital Lease Long term debt and capital lease 33,336
40,853 Future income taxes 3,600 4,736 ---------- ---------- Total
Liabilities 114,081 98,630 ---------- ---------- Contingencies
SHAREHOLDERS' EQUITY Share capital 122,230 115,195 Contributed
surplus 7,542 6,501 Cumulative translation account 40,722 39,331
Retained earnings 57,052 45,686 ---------- ---------- Total
Shareholders' Equity 227,546 206,713 ---------- ---------- Total
Liabilities & Shareholders' Equity $ 341,627 $ 305,343
---------- ---------- ---------- ---------- SEGMENT INFORMATION:
The Corporation operates in two segments: Top Drives and Casing
Services. Financial information relating to these segments is as
follows: For the Three Months Ended June 30, 2006
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 47,343 $
39,833 $ - $ 87,176 Depreciation and Amortization 2,189 3,115 260
5,564 Operating Income 16,404 6,709 (9,265) 13,848
-------------------------------------------- Other expense 5,929
Restructuring (gain) and other exceptional items - ----------
Income before taxes $ 7,919 ---------- ---------- For the Three
Months Ended June 30, 2005
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 27,263 $
14,214 $ - $ 41,477 Depreciation and Amortization 1,616 2,075 321
4,012 Operating Income 7,636 2,951 (7,153) 3,434
-------------------------------------------- Other expense (970)
Restructuring (gain) and other exceptional items (417) ----------
Income before taxes $ 4,821 ---------- ---------- For the Six
Months Ended June 30, 2006
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 93,962 $
76,796 $ - $170,758 Depreciation and Amortization 3,684 5,960 1,311
10,955 Operating Income 30,089 15,560 (17,833) 27,816
-------------------------------------------- Other expense 6,670
Restructuring (gain) and other exceptional items - ----------
Income before taxes $ 21,146 ---------- ---------- For the Six
Months Ended June 30, 2005
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 57,865 $
27,994 $ - $ 85,859 Depreciation and Amortization 3,253 3,702 665
7,620 Operating Income 16,495 6,775 (12,631) 10,639
-------------------------------------------- Other expense (895)
Restructuring (gain) and other exceptional items (612) ----------
Income before taxes $ 12,146 ---------- ---------- OTHER EXPENSE:
Items comprising other (income) expense are: For the Three Months
For the Six Months Ended June 30, Ended June 30,
--------------------- --------------------- 2006 2005 2006 2005
----------------------------- ---------------------
--------------------- Interest income $ (473) $ (86) $ (861) $
(197) Interest expense(1) 1,509 191 2,204 376 Withholding tax claim
2,589 - 2,589 - Decrease (increase) in fair market value of share
purchase warrants 596 - 1,083 - Foreign exchange loss (gain) 1,358
(1,110) 1,171 (1,139) Other 350 35 484 65
----------------------------- ---------------------
--------------------- Total $ 5,929 $ (970) $ 6,670 $ (895)
----------------------------- ---------------------
--------------------- -----------------------------
--------------------- --------------------- (1) Includes an
interest expense accrual of $1.2 million related to a claim for
withholding tax on payments made in 2000 to 2004. DATASOURCE: Tesco
Corporation CONTACT: Mike Kearney at (713) 849-5900, Tesco
Corporation
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