- Cash increased by $44 million
during the quarter from $47 million
of proceeds from an issuance of shares, ending at $97 million with no debt
- Reported U.S. GAAP diluted EPS was a loss of $(0.47) on a net loss of $(18.9) million and adjusted EPS was a loss of
$(0.39) on an adjusted net loss of
$(15.8) million, after $0.08 in charges
- Adjusted EBITDA was $(7.5)
million for the second quarter, up from $(7.7) million for the first quarter, despite a
sequential decline in revenue of 5%.
HOUSTON, Aug. 9, 2016
/CNW/ -- Tesco Corporation ("TESCO" or the "Company") (NASDAQ:
TESO) today reported second quarter 2016 financial and operating
results.
Second Quarter Operating Results
Fernando Assing, Tesco's Chief
Executive Officer, commented, "With liquidity of approximately
$97 million at the end of the quarter
and no debt, we are in a strong position to take advantage of
opportunities to start growing our business even though the timing
of a market recovery remains uncertain. In this quarter, our
restructuring actions drove improved results despite a sequential
decline in sales. As additional restructuring opportunities become
more limited, we are putting increased focus on bringing our new
technologies to market as well as other options to add scale and
critical mass."
"To fund these strategic initiatives and be prepared for the
market recovery, we successfully raised $47
million through a secondary offering this quarter. We must
make the investments to continue to adapt our business and
commercial models to create a more sustainable and competitive
company."
Tesco reported revenue of $33.6
million for the second quarter ended June 30, 2016,
down from $35.5 million, or 5%, in
the first quarter of 2016, and down from $74.5 million, or 55%, for the second quarter of
2015. The sequential decline in revenue was primarily from lower
tubular service activity in U.S. land and offshore markets,
partially offset by higher sales of new products.
Tesco reported a U.S. GAAP net loss of $(18.9) million, or $(0.47) per diluted share, for the second quarter
ended June 30, 2016. Our adjusted net loss for the quarter was
$(15.8) million, or $(0.39) per diluted share, excluding special
items, consisting primarily of several charges related to
restructuring costs. This compares to a U.S. GAAP net loss of
$(56.8) million, or $(1.45) per diluted share, in the first quarter
of 2016, and a U.S. GAAP net loss of $(27.5)
million, or $(0.71) per
diluted share, for the second quarter of 2015. Adjusted net loss in
the first quarter of 2016 was $(17.9)
million, or $(0.46) per
diluted share, and in the second quarter of 2015 was $(8.0) million, or $(0.21) per diluted share.
Adjusted EBITDA was $(7.5) million
for the second quarter ended June 30, 2016 compared to
adjusted EBITDA of $(7.7) million in
the first quarter of 2016 on nearly 5% revenue decline, reflecting
the benefits of restructuring in the last several quarters.
Additional restructuring was completed in the second quarter, with
further initiatives expected in the second half of the year.
For the second quarter ended June 30, 2016, U.S. GAAP
operating loss was $(19.2) million
and adjusted operating loss was $(16.0)
million, which excludes the impact of $3.2 million of charges. This is an improvement
over the first quarter 2016 U.S. GAAP operating loss of
$(54.8) million and adjusted
operating loss of $(17.2) million,
which excludes $37.6 million of
charges.
Cash and cash equivalents as of June 30, 2016 increased
from the first quarter by $43.6 million to
$97.5 million, primarily due to the June 2016 secondary public equity offering of 7.0
million shares that generated proceeds of $46.7 million, net of underwriting discounts,
commissions and issuance costs. In July
2016, our underwriter partially exercised its over-allotment
option to purchase an additional 130,752 common shares that
generated nearly $1 million in
additional proceeds. The offering proceeds provide Tesco
optionality to address working capital and capital spending needs
in a potential market recovery while also funding strategic
initiatives to gain market share through technology offerings and
possibly through acquisitions.
From an operational perspective, free cash flow was near
break-even before approximately $3
million of restructuring payments. Accounts receivable
declined by over $9 million through
continued collection efforts. Inventory declined by approximately
$5 million, from product sales and
improved supply chain management. In addition, cash was consumed
for capital expenditures of $1.1
million offset by $1.5 million
of proceeds from the sale of used equipment.
While negotiations continue on a new, smaller ABL-facility,
Tesco's prior facility, which had no borrowing capacity, was
cancelled today to reduce banking fees. In the interim, letters of
credit of approximately $2 million
have been cash-collateralized.
Products Segment
- Revenue for Q2 2016 was $20.6
million, a $4 million, or 24%,
increase from Q1 2016 and a $20.9
million, or 50%, decrease from Q2 2015.
- Product sales for Q2 2016 included 8 top drive units (5 new and
3 used), compared to 6 units (3 new and 3 used) sold in Q1 2016 and
11 units (10 new and 1 used) sold in Q2 2015. In addition, Q2 2016
sales included the planned offshore pipe handling system but the
offshore catwalk sale was delayed to Q3 2016.
- There were 118 top drives in our rental fleet at the end of the
second quarter with a utilization of 15%, down from 121 units at
the end of the first quarter of 2016.
- U.S. GAAP operating loss before adjustments in the Products
segment for Q2 2016 was $(2.7)
million, or (13)% of sales, a $36.5
million, or 93%, increase from Q1 2016 and $0.1 million, or 4% increase from Q2 2015.
Second quarter operating loss and operating margin after
adjustments were $2.4 million and
12%, respectively, with sequential incremental margins of 40%. This
improvement in profitability is primarily related to the impact of
higher new product sales and cost reduction initiatives.
- At June 30, 2016, top drive backlog was 9 units, with a
total potential value of $8.5
million, compared to 10 units at March 31, 2016, with a
potential value of $9.5
million. This compares to a backlog of 20 units at
June 30, 2015, with a potential value of $20.0 million. Today, our top drive backlog
stands at 9 units with a potential value of $8.5 million.
Tubular Services Segment
- Revenue for Q2 2016 was $13.0
million, a $5.9 million, or
31%, decrease from Q1 2016 and a $20.0
million, or 61%, decrease from Q2 2015. This sequential
decline was driven primarily by expected lower activity in U.S.
land and offshore markets.
- U.S. GAAP operating loss before adjustments in the Tubular
Services segment for Q2 2016 was $(9.3)
million, a $3.3 million
decrease from Q1 2016 and a $6.5
million decrease from Q2 2015. Second quarter operating
loss after adjustments was $6.6
million. The sequential adjusted decremental margin was 17%,
reflecting the benefit of cost reduction initiatives mitigating the
impact of lower volumes.
Other Segments and Expenses
- Research and engineering U.S. GAAP costs for Q2 2016 were
$1.4 million, compared to
$1.6 million in Q1 2016 and
$2.1 million in Q2 2015. On an
adjusted basis, Q2 2016 costs were $1.3
million. We continue to invest in the development,
commercialization, and enhancement of our proprietary
technologies.
- Corporate and other U.S. GAAP costs for Q2 2016 were
$5.8 million, a $2.2 million, or 28%, decrease from Q1 2016 and a
$0.2 million, or 3%, decrease from Q2
2015. On an adjusted basis, the Q2 2016 costs decreased by
$0.2 million from Q1 2016 and Q2
2015, respectively.
- Net foreign exchange losses for Q2 2016 were $0.0 million, compared to $1.2 million in Q1 2016 and $1.4 million in Q2 2015.
- The effective tax rate for Q2 2016 was a 1% benefit compared to
a (1)% expense in Q1 2016 and a (79)% expense in Q2 2015.
- Total capital expenditures were $1.1
million in Q2 2016, primarily for tubular services
equipment, a $0.3 million, or 38%,
increase from Q1 2016 and a $1.8
million, or 62%, decrease from Q2 2015.
Outlook
Our markets continue to be challenging as recent rig count
increases in the U.S. are offset by declines in some international
markets, particularly in Mexico
and Argentina, and the short-lived
oil price rally has retreated. We do not expect any pricing
improvement in the near-term given the excess service capacity in
the market.
Bookings in the second quarter were impacted by lower
international rig counts and lower commodity prices earlier this
year. As a result, we expect to ship only 1-2 top drives in
addition to the offshore catwalk that was delayed from last
quarter. Product rentals and AMSS results are expected to be
relatively flat to slightly down sequentially. Products adjusted
operating profit is expected to decrease over the second quarter
primarily due to the effect of lower product sales with a less
profitable mix.
Tubular Services revenue is expected to be flat sequentially as
increased volumes in U.S. land are offset by lower international
activity. Adjusted operating profit also is also expected to be
flat sequentially.
Sequential Corporate and R&E expenses are expected to
decrease slightly in the third quarter. Depreciation expense in the
third quarter should remain flat sequentially.
As a result of these factors, adjusted EBITDA loss is expected
to decline sequentially in the third quarter. We also expect cash
to decline as working capital reductions slow and capital
spending levels increase slightly over first half levels.
"As we complete restructuring actions, we will begin to shift to
initiatives and investments to add volume and improve our operating
efficiencies. These initiatives are aligned with our long-term
strategy and will focus on service offering integration and
drilling performance. Investments that offer performance and cost
advantages can still be attractive even in today's challenging
markets."
"Within Products, we will be focused on new pipe-handling
technologies for both newbuilds and rig upgrades and the
commercialization of our first generation rig-control software that
provides advanced drilling functionalities through the top drive,
including stick-slip mitigation and drill string oscillation. We
will continue developing additional features for this software as
well as after-market upgrade kits for existing TESCO and
third-party equipment. We have seen progress in these initiatives
with the recent signing of our first commercial Automated Rig
Control ("ARC") contracts, which have demonstrated meaningful ROP
improvement, longer bit life, improved tool face control and higher
top drive operating performance. We also shipped our first offshore
pipe handling system in the second quarter."
"Tubular Services is focused on converting land customers to the
automated Evolution offering, which reduces the number of people
and equipment on the rig floor, and in gaining offshore market
share through impeccable QHSE, innovative business models and tool
designs. At the close of the second quarter we were pleased with
the pace of Evolution conversion in our targeted U.S. markets and
the pipeline of opportunities developed for execution over the
coming quarters."
"Finally, we are also pushing the same drive for automation and
efficiency through our internal business processes to reduce the
need to rehire indirect personnel as the market recovers. These
measures will transform TESCO in to a leaner, more efficient
company that will generate greater operating leverage in the
recovery."
"Looking ahead, we see signs that our markets are beginning to
stabilize, but it is still premature to believe the market has
bottomed. It is likely our markets will remain challenged until
excess capacity is reduced and pricing support returns. As a
result, we continue to plan for a lower for longer market
environment while we begin to make investments to gain scale and
leverage the subsequent recovery," Mr. Assing concluded.
Conference Call
The Company will conduct a conference call to discuss its
results for the second quarter 2016 on August 9 at 9:00 a.m.
Central Time. To participate in the conference call,
dial 1-877-407-0672 inside the U.S. or 1-412-902-0003 outside the
U.S. approximately 10 minutes prior to the scheduled start time.
The conference call and all questions and answers will be recorded
and made available until August 23.
To listen to the replay, call 1-877-660-6853 inside the U.S. or
1-201-612-7415 outside the U.S. and enter conference ID
13641567#.
The conference call will be webcast live as well as by replay at
the Company's web site, www.tescocorp.com. Listeners may access the
call through the "Conference Calls" link in the Investors 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, Canada and the European Union. Casing Drive
System™, CDS™ is a trademark in the
United States and Canada.
For further information please contact:
Chris
Boone (713) 359-7000
Tesco Corporation
Caution Regarding Forward-Looking Information and Risk
Factors
This news 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 news
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: levels and volatility of oil and gas
prices; cyclical nature of the energy industry and credit risks of
our customers; fluctuations of our revenue and earnings; operating
hazards inherent in our operations; changes in governmental
regulations, including those related to the climate and hydraulic
fracturing; consolidation or loss of our customers; the highly
competitive nature of our business; technological advancements and
trends in our industry, and improvements in our competitors'
products; global economic and political environment, and financial
markets; terrorist attacks, natural disasters and pandemic
diseases; our presence in international markets, including
political or economic instability, currency restrictions and trade
and economic sanctions; cybersecurity incidents; protecting and
enforcing our intellectual property rights; changes in, or our
failure to comply with, environmental regulations; restrictions
under our credit facility that that may limit our ability to
finance future operations or capital needs and could accelerate our
debt payments; failure of our manufactured products and claims
under our product warranties; availability of raw materials,
component parts and finished products to produce our products, and
our ability deliver the products we manufacture in a timely manner;
retention and recruitment of a skilled workforce and key employees;
and ability to identify and complete acquisitions. 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 through
www.tescocorp.com and on SEDAR at www.sedar.com. Our U.S. public
filings are available at www.sec.gov and through
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, 2015 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
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited)
|
Revenue
|
$
|
33.6
|
|
|
$
|
74.5
|
|
|
$
|
69.0
|
|
|
$
|
166.1
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of sales and
services
|
43.7
|
|
|
76.7
|
|
|
90.5
|
|
|
160.0
|
|
Selling, general and
administrative
|
7.7
|
|
|
9.4
|
|
|
14.0
|
|
|
20.6
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Research and
engineering
|
1.4
|
|
|
2.1
|
|
|
3.0
|
|
|
4.9
|
|
|
52.8
|
|
|
88.2
|
|
|
143.0
|
|
|
185.5
|
|
Operating
loss
|
(19.2)
|
|
|
(13.7)
|
|
|
(74.0)
|
|
|
(19.4)
|
|
Interest expense
(income), net
|
(0.2)
|
|
|
0.3
|
|
|
0.2
|
|
|
0.5
|
|
Foreign exchange
loss
|
—
|
|
|
1.4
|
|
|
1.2
|
|
|
4.6
|
|
Other expense
(income)
|
0.1
|
|
|
(0.1)
|
|
|
—
|
|
|
(0.4)
|
|
Loss before income
taxes
|
(19.1)
|
|
|
(15.3)
|
|
|
(75.4)
|
|
|
(24.1)
|
|
Income tax provision
(benefit)
|
(0.2)
|
|
|
12.2
|
|
|
0.3
|
|
|
11.6
|
|
Net loss
|
$
|
(18.9)
|
|
|
$
|
(27.5)
|
|
|
$
|
(75.7)
|
|
|
$
|
(35.7)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.47)
|
|
|
$
|
(0.71)
|
|
|
$
|
(1.90)
|
|
|
$
|
(0.92)
|
|
Diluted
|
$
|
(0.47)
|
|
|
$
|
(0.71)
|
|
|
$
|
(1.90)
|
|
|
$
|
(0.92)
|
|
Dividends per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.10
|
|
Weighted average
number of shares:
|
|
|
|
|
|
|
|
Basic
|
40.4
|
|
|
39.0
|
|
|
39.8
|
|
|
39.0
|
|
Diluted
|
40.4
|
|
|
39.0
|
|
|
39.8
|
|
|
39.0
|
|
TESCO
CORPORATION
Condensed Consolidated Balance Sheets
(in millions)
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
97.5
|
|
|
$
|
51.5
|
|
Accounts receivable
trade, net
|
39.3
|
|
|
64.3
|
|
Inventories,
net
|
88.7
|
|
|
95.5
|
|
Other current
assets
|
19.4
|
|
|
25.2
|
|
Total current
assets
|
244.9
|
|
|
236.5
|
|
Property, plant and
equipment, net
|
129.9
|
|
|
177.7
|
|
Other
assets
|
5.0
|
|
|
7.5
|
|
Total
assets
|
$
|
379.8
|
|
|
$
|
421.7
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
10.6
|
|
|
14.3
|
|
Accrued and other
current liabilities
|
17.4
|
|
|
27.2
|
|
Income taxes
payable
|
0.8
|
|
|
1.4
|
|
Total current
liabilities
|
28.8
|
|
|
42.9
|
|
Other
liabilities
|
2.1
|
|
|
2.2
|
|
Deferred income
taxes
|
0.9
|
|
|
1.6
|
|
Shareholders'
equity
|
348.0
|
|
|
375.0
|
|
Total
liabilities and shareholders' equity
|
$
|
379.8
|
|
|
$
|
421.7
|
|
TESCO
CORPORATION
Consolidated Statement of Cash Flows
(in millions)
|
|
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
(Unaudited)
|
Operating
Activities
|
|
|
|
Net loss
|
$
|
(75.7)
|
|
|
$
|
(35.7)
|
|
Adjustments to
reconcile net loss to cash provided by (used in) operating
activities:
|
|
|
|
Depreciation and
amortization
|
15.2
|
|
|
19.7
|
|
Stock compensation
expense
|
2.1
|
|
|
2.1
|
|
Bad debt
expense
|
0.6
|
|
|
0.1
|
|
Deferred income
taxes
|
(0.3)
|
|
|
7.1
|
|
Amortization of
financial items
|
0.3
|
|
|
0.2
|
|
Gain (loss) on sale
of operating assets
|
(0.4)
|
|
|
(0.7)
|
|
Long-lived asset
impairments
|
35.5
|
|
|
—
|
|
Changes in the fair
value of contingent earn-out obligations
|
(0.1)
|
|
|
(0.4)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable
trade, net
|
24.6
|
|
|
40.8
|
|
Inventories,
net
|
6.7
|
|
|
(3.3)
|
|
Prepaid and other
current assets
|
4.3
|
|
|
2.9
|
|
Accounts payable and
accrued liabilities
|
(14.8)
|
|
|
(26.5)
|
|
Income taxes
recoverable
|
0.9
|
|
|
(7.8)
|
|
Other noncurrent
assets and liabilities, net
|
(0.2)
|
|
|
3.2
|
|
Net cash provided by
(used in) operating activities
|
(1.3)
|
|
|
1.7
|
|
Investing
Activities
|
|
|
|
Additions to
property, plant and equipment
|
(1.9)
|
|
|
(10.2)
|
|
Proceeds on sale of
operating assets
|
2.5
|
|
|
0.7
|
|
Other, net
|
—
|
|
|
1.8
|
|
Net cash provided by
(used in) investing activities
|
0.6
|
|
|
(7.7)
|
|
Financing
Activities
|
|
|
|
Proceeds from
exercise of stock options
|
—
|
|
|
0.1
|
|
Dividend
distribution
|
—
|
|
|
(3.9)
|
|
Proceeds from stock
issuance
|
47.0
|
|
|
—
|
|
Stock issuance
costs
|
(0.3)
|
|
|
—
|
|
Net cash provided by
(used in) financing activities
|
46.7
|
|
|
(3.8)
|
|
Change in cash and
cash equivalents
|
46.0
|
|
|
(9.8)
|
|
Cash and cash
equivalents, beginning of period
|
51.5
|
|
|
72.5
|
|
Cash and cash
equivalents, end of period
|
$
|
97.5
|
|
|
$
|
62.7
|
|
Supplemental cash
flow information
|
|
|
|
Cash payments for
interest
|
$
|
0.2
|
|
|
$
|
0.3
|
|
Cash payments for
income taxes, net of refunds
|
0.9
|
|
|
12.8
|
|
Property, plant and
equipment accrued in accounts payable
|
1.3
|
|
|
2.6
|
|
TESCO
CORPORATION
Segment Results
(in millions, except per share information)
|
|
|
|
|
|
|
|
Three Months Ended
June
30,
|
|
Three Months
Ended March
31,
|
|
Six Months Ended
June 30,
2016
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Segment
revenue
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Products
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
8.4
|
|
|
$
|
13.7
|
|
|
$
|
4.2
|
|
|
$
|
12.6
|
|
|
$
|
31.5
|
|
Rental
services
|
5.9
|
|
|
17.8
|
|
|
6.6
|
|
|
12.5
|
|
|
37.7
|
|
After-market sales and
service
|
6.3
|
|
|
10.0
|
|
|
5.8
|
|
|
12.1
|
|
|
22.2
|
|
|
20.6
|
|
|
41.5
|
|
|
16.6
|
|
|
37.2
|
|
|
91.4
|
|
Tubular
Services
|
|
|
|
|
|
|
|
|
|
Land
|
7.8
|
|
|
23.5
|
|
|
10.8
|
|
|
18.6
|
|
|
54.1
|
|
Offshore
|
4.4
|
|
|
8.7
|
|
|
7.4
|
|
|
11.8
|
|
|
18.6
|
|
CDS, Parts &
Accessories
|
0.8
|
|
|
0.8
|
|
|
0.7
|
|
|
1.4
|
|
|
2.0
|
|
|
13.0
|
|
|
33.0
|
|
|
18.9
|
|
|
31.8
|
|
|
74.7
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
revenue
|
$
|
33.6
|
|
|
$
|
74.5
|
|
|
$
|
35.5
|
|
|
$
|
69.0
|
|
|
$
|
166.1
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
|
|
Products
|
$
|
(2.7)
|
|
|
$
|
(2.8)
|
|
|
$
|
(39.2)
|
|
|
$
|
(41.9)
|
|
|
$
|
1.7
|
|
Tubular
Services
|
(9.3)
|
|
|
(2.8)
|
|
|
(6.0)
|
|
|
(15.3)
|
|
|
(0.8)
|
|
Research and
Engineering
|
(1.4)
|
|
|
(2.1)
|
|
|
(1.6)
|
|
|
(3.0)
|
|
|
(4.9)
|
|
Corporate and
Other
|
(5.8)
|
|
|
(6.0)
|
|
|
(8.0)
|
|
|
(13.8)
|
|
|
(15.4)
|
|
Operating
loss
|
$
|
(19.2)
|
|
|
$
|
(13.7)
|
|
|
$
|
(54.8)
|
|
|
$
|
(74.0)
|
|
|
$
|
(19.4)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
consolidated net loss
|
$
|
(18.9)
|
|
|
$
|
(27.5)
|
|
|
$
|
(56.8)
|
|
|
$
|
(75.7)
|
|
|
$
|
(35.7)
|
|
U.S. GAAP loss per
share (diluted)
|
$
|
(0.47)
|
|
|
$
|
(0.71)
|
|
|
$
|
(1.45)
|
|
|
$
|
(1.90)
|
|
|
$
|
(0.92)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(a) (as defined)
|
$
|
(7.5)
|
|
|
$
|
1.9
|
|
|
$
|
(7.7)
|
|
|
$
|
(15.2)
|
|
|
$
|
11.5
|
|
________________________
(a)
|
See explanation of
Non-GAAP measure below.
|
Non-GAAP Measures
Our management reports our financial statements in accordance
with United States Generally Accepted Accounting Principles ("U.S.
GAAP") but evaluates our performance based on non-GAAP measures as
defined under the SEC's Regulation G. These measures may not be
comparable to similarly titled measures employed by other companies
and is not a measure of performance calculated in accordance with
GAAP. Non-GAAP measures 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.
Our management uses Non-GAAP measures:
- to assess the performance of the Company's operations;
- as a method used 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; and
- in communications with investors, analysts, lenders, and others
concerning our financial performance.
TESCO
CORPORATION
Non-GAAP Measure - Adjusted EBITDA (1) (in
millions)
|
|
|
|
|
|
|
|
Three Months
Ended June 30,
|
|
Three Months
Ended March
31,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Net loss under U.S.
GAAP
|
$
|
(18.9)
|
|
|
$
|
(27.5)
|
|
|
$
|
(56.8)
|
|
|
$
|
(75.7)
|
|
|
$
|
(35.7)
|
|
Income tax expense
(benefit)
|
(0.2)
|
|
|
12.2
|
|
|
0.5
|
|
|
0.3
|
|
|
11.6
|
|
Depreciation and
amortization
|
7.2
|
|
|
9.6
|
|
|
8.0
|
|
|
15.2
|
|
|
19.7
|
|
Interest
expense
|
0.2
|
|
|
0.4
|
|
|
0.5
|
|
|
0.7
|
|
|
0.6
|
|
Stock compensation
expense—non-cash
|
1.0
|
|
|
1.1
|
|
|
1.1
|
|
|
2.1
|
|
|
2.1
|
|
Severance &
restructuring charges
|
2.9
|
|
|
3.0
|
|
|
3.0
|
|
|
5.9
|
|
|
5.6
|
|
Bad debt from certain
accounts
|
—
|
|
|
0.4
|
|
|
0.3
|
|
|
0.3
|
|
|
0.4
|
|
Foreign exchange
loss
|
—
|
|
|
1.4
|
|
|
1.2
|
|
|
1.2
|
|
|
4.6
|
|
Asset sale
reserves
|
(0.7)
|
|
|
—
|
|
|
(2.3)
|
|
|
(3.0)
|
|
|
—
|
|
Warranty & legal
reserves
|
0.7
|
|
|
1.3
|
|
|
—
|
|
|
0.7
|
|
|
1.3
|
|
Inventory
reserves
|
0.2
|
|
|
—
|
|
|
1.1
|
|
|
1.3
|
|
|
—
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
35.5
|
|
|
35.5
|
|
|
—
|
|
Credit facility
costs
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
0.3
|
|
|
—
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Adjusted
EBITDA
|
$
|
(7.5)
|
|
|
$
|
1.9
|
|
|
$
|
(7.7)
|
|
|
$
|
(15.2)
|
|
|
$
|
11.5
|
|
|
|
(1)
|
Adjusted EBITDA
consists of earnings (net income or loss) attributable to Tesco
before interest expense, income tax expense (benefit), depreciation
and amortization, severance and restructuring charges, foreign
exchange gains or losses, noted income or charges from certain
accounts, non-cash stock compensation, non-cash impairments and
other non-cash items. Adjusted EBITDA is used by management to
assess compliance with financial ratios and covenants included in
our credit agreement.
|
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
interest expense, income tax expense (benefit), depreciation and
amortization, which can vary substantially from company to company
depending upon accounting methods and book value of assets,
severance and restructuring charges, 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.
TESCO
CORPORATION
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(Loss) (2) (in millions. except earnings
per share data)
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended March
31,
|
|
Six Months Ended
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Net loss under U.S.
GAAP
|
$
|
(18.9)
|
|
|
$
|
(27.5)
|
|
|
$
|
(56.8)
|
|
|
$
|
(75.7)
|
|
|
$
|
(35.7)
|
|
Severance &
restructuring charges
|
2.6
|
|
|
2.2
|
|
|
3.0
|
|
|
5.6
|
|
|
4.0
|
|
Bad debt on certain
accounts
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
Certain foreign
exchange losses
|
0.2
|
|
|
0.7
|
|
|
1.1
|
|
|
1.3
|
|
|
3.1
|
|
Asset sale
reserves
|
(0.7)
|
|
|
—
|
|
|
(2.3)
|
|
|
(3.0)
|
|
|
—
|
|
Warranty & legal
reserves
|
0.7
|
|
|
1.0
|
|
|
—
|
|
|
0.7
|
|
|
1.0
|
|
Inventory
reserves
|
0.2
|
|
|
—
|
|
|
1.1
|
|
|
1.3
|
|
|
—
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
35.5
|
|
|
35.5
|
|
|
—
|
|
Credit facility
costs
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
0.3
|
|
|
—
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Certain tax-related
charges
|
—
|
|
|
15.3
|
|
|
—
|
|
|
—
|
|
|
15.3
|
|
Adjusted net
loss
|
$
|
(15.8)
|
|
|
$
|
(8.0)
|
|
|
$
|
(17.9)
|
|
|
$
|
(33.7)
|
|
|
$
|
(11.2)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per
share under U.S. GAAP
|
$
|
(0.47)
|
|
|
$
|
(0.71)
|
|
|
$
|
(1.45)
|
|
|
$
|
(1.90)
|
|
|
$
|
(0.92)
|
|
Severance &
restructuring charges
|
0.07
|
|
|
0.06
|
|
|
0.07
|
|
|
0.14
|
|
|
0.10
|
|
Bad debt on certain
accounts
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
Certain foreign
exchange losses
|
—
|
|
|
0.01
|
|
|
0.03
|
|
|
0.03
|
|
|
0.08
|
|
Asset sale
reserves
|
(0.01)
|
|
|
—
|
|
|
(0.06)
|
|
|
(0.08)
|
|
|
—
|
|
Warranty & legal
reserves
|
0.02
|
|
|
0.03
|
|
|
—
|
|
|
0.02
|
|
|
0.03
|
|
Inventory
reserves
|
—
|
|
|
—
|
|
|
0.03
|
|
|
0.03
|
|
|
—
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
0.90
|
|
|
0.89
|
|
|
—
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|
—
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.02
|
|
Certain tax-related
charges
|
—
|
|
|
0.39
|
|
|
—
|
|
|
—
|
|
|
0.39
|
|
Adjusted diluted loss
per share
|
$
|
(0.39)
|
|
|
$
|
(0.21)
|
|
|
$
|
(0.46)
|
|
|
$
|
(0.85)
|
|
|
$
|
(0.29)
|
|
|
|
(2)
|
Adjusted net income
(loss) is a non-GAAP measure comprised of net income attributable
to Tesco excluding the impact of severance and restructuring
charges, non-cash impairments, noted income or charges from certain
accounts and certain tax-related charges.
|
We believe adjusted net income (loss) is useful to an investor
in evaluating our operating performance because:
- it is a consistent measure of the underlying results of the
Company's business by excluding items that could mask the Company's
operating performance;
- it is widely used by investors in our industry to measure a
company's operating performance, especially when comparing those
results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluding items to be outside of the Company's normal operating
results; and
- it helps investors identify and analyze underlying trends in
the business.
TESCO
CORPORATION
Non-GAAP Measure - Adjusted Operating Income
(Loss)(3) (in millions)
|
|
|
|
Three Months Ended
June 30, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate &
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(2.7)
|
|
|
(9.3)
|
|
|
(1.4)
|
|
|
$
|
(5.8)
|
|
|
$
|
(19.2)
|
|
Severance &
restructuring charges
|
0.8
|
|
|
2.0
|
|
|
0.1
|
|
|
—
|
|
|
2.9
|
|
Warranty and legal
reserves
|
—
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
Asset sale
reserves
|
(0.6)
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
(0.7)
|
|
Inventory
reserves
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Adjusted operating
loss
|
$
|
(2.4)
|
|
|
$
|
(6.6)
|
|
|
$
|
(1.3)
|
|
|
$
|
(5.7)
|
|
|
$
|
(16.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2015
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate &
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(2.8)
|
|
|
$
|
(2.8)
|
|
|
$
|
(2.1)
|
|
|
$
|
(6.0)
|
|
|
$
|
(13.7)
|
|
Severance &
restructuring charges
|
1.8
|
|
|
1.1
|
|
|
—
|
|
|
0.1
|
|
|
3.0
|
|
Bad debt on certain
accounts
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Warranty & legal
reserves
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Adjusted operating
income (loss)
|
$
|
0.7
|
|
|
$
|
(1.7)
|
|
|
$
|
(2.1)
|
|
|
$
|
(5.9)
|
|
|
$
|
(9.0)
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate &
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(39.2)
|
|
|
$
|
(6.0)
|
|
|
$
|
(1.6)
|
|
|
$
|
(8.0)
|
|
|
$
|
(54.8)
|
|
Severance &
restructuring charges
|
0.6
|
|
|
2.3
|
|
|
(0.1)
|
|
|
0.2
|
|
|
3.0
|
|
Bad debt on certain
accounts
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Asset sale
reserves
|
(0.2)
|
|
|
(2.1)
|
|
|
—
|
|
|
—
|
|
|
(2.3)
|
|
Inventory
reserves
|
0.9
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
Long-lived asset
impairments
|
33.6
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
35.5
|
|
Adjusted operating
loss
|
$
|
(4.0)
|
|
|
$
|
(5.6)
|
|
|
$
|
(1.7)
|
|
|
$
|
(5.9)
|
|
|
$
|
(17.2)
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate &
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(41.9)
|
|
|
$
|
(15.3)
|
|
|
$
|
(3.0)
|
|
|
$
|
(13.8)
|
|
|
$
|
(74.0)
|
|
Severance &
restructuring charges
|
1.4
|
|
|
4.3
|
|
|
—
|
|
|
0.2
|
|
|
5.9
|
|
Bad debt on certain
accounts
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Asset sale
reserves
|
(0.8)
|
|
|
(2.2)
|
|
|
—
|
|
|
—
|
|
|
(3.0)
|
|
Warranty & legal
reserves
|
—
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
Inventory
reserves
|
1.0
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Long-lived asset
impairments
|
33.6
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
35.5
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Adjusted operating
loss
|
$
|
(6.4)
|
|
|
$
|
(12.2)
|
|
|
$
|
(3.0)
|
|
|
$
|
(11.6)
|
|
|
$
|
(33.2)
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2015
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate &
Other
|
|
Total
|
Operating income
(loss) under U.S. GAAP
|
$
|
1.7
|
|
|
$
|
(0.8)
|
|
|
$
|
(4.9)
|
|
|
$
|
(15.4)
|
|
|
$
|
(19.4)
|
|
Severance &
restructuring charges
|
3.2
|
|
|
2.0
|
|
|
—
|
|
|
0.4
|
|
|
5.6
|
|
Bad debt on certain
accounts
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Warranty & legal
reserves
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
Adjusted operating
income (loss)
|
$
|
6.6
|
|
|
$
|
1.2
|
|
|
$
|
(4.9)
|
|
|
$
|
(13.7)
|
|
|
$
|
(10.8)
|
|
|
|
(3)
|
Adjusted operating
income (loss) is a non-GAAP measure comprised of operating income
(loss) attributable to Tesco excluding the impact of severance and
restructuring charges, non-cash impairments and noted income or
charges from certain accounts. Management uses adjusted operating
income (loss) as a measure of the performance of the Company's
operations.
|
We believe adjusted operating income (loss) is useful to an
investor in evaluating our operating performance because:
- it is a consistent measure of the underlying results of the
Company's business by excluding items that could mask the Company's
operating performance;
- it is widely used by investors in our industry to measure a
company's operating performance, especially when comparing those
results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluding items to be outside of the Company's normal operating
results; and
- it helps investors identify and analyze underlying trends in
the business.
TESCO
CORPORATION
Non-GAAP Measure - Free Cash Flow(4) (in
millions)
|
|
|
|
|
|
Three Months
Ended June 30,
2016
|
|
Six Months
Ended June 30,
2016
|
Net cash used in
operating activities
|
$
|
(3.4)
|
|
|
$
|
(1.3)
|
|
Capital
expenditures
|
(1.1)
|
|
|
(1.9)
|
|
Proceeds on asset
sales
|
1.5
|
|
|
2.5
|
|
Free cash
flow
|
(3.0)
|
|
|
(0.7)
|
|
Severance &
restructuring payments
|
(2.9)
|
|
|
(6.6)
|
|
Adjusted free cash
flow
|
$
|
(0.1)
|
|
|
$
|
5.9
|
|
|
|
(4)
|
Free cash flow is a
non-GAAP measure comprised of cash flow from operations, capital
expenditures and proceeds on asset sales. Adjusted free cash flow
excludes the impact of severance and restructuring
payments.
|
We believe free cash flow is useful to an investor in evaluating
our operating performance because:
- it measures the Company's ability to generate cash;
- it is widely used by investors in our industry to measure a
company's cash flow performance; and
- it helps investors identify and analyze underlying trends in
the business.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/tesco-corporation-reports-second-quarter-2016-results-300310888.html
SOURCE Tesco Corporation