HOUSTON, Nov. 4, 2016
/PRNewswire/ -- Tesco Corporation ("TESCO" or the "Company")
(NASDAQ: TESO) today reported third quarter 2016 financial and
operating results.
Third Quarter Operating Results
Fernando Assing, Tesco's Chief
Executive Officer, commented, "With global energy markets signaling
the formation of an oilfield services activity bottom late in 2016,
we are well positioned competitively and have a liquidity position
that will allow us to take advantage of opportunities to start
growing our business and deploying our new technologies."
Tesco reported revenue of $30.4
million for the third quarter ended September 30, 2016,
down from $33.6 million, or 10%, in
the second quarter of 2016, and down from $61.4 million, or 50%, for the third quarter of
2015. The sequential decline in revenue was primarily from expected
lower new product sales.
Tesco reported a U.S. GAAP net loss of $22.1 million, or $(0.48) per share, for the third quarter ended
September 30, 2016. Our adjusted net loss for the quarter was
$17.3 million, or $(0.37) per share, excluding special items,
consisting primarily of several charges related to inventory and
restructuring costs. This compares to a U.S. GAAP net loss of
$18.9 million, or $(0.47) per diluted share, in the second quarter
of 2016, and a U.S. GAAP net loss of $19.9
million, or $(0.51) per
diluted share, for the third quarter of 2015. Adjusted net loss in
the second quarter of 2016 was $15.8
million, or $(0.39) per
diluted share, and in the third quarter of 2015 was $12.5 million, or $(0.32) per diluted share.
Adjusted EBITDA loss was $9.1
million for the third quarter compared to adjusted EBITDA
loss of $7.5 million in the second
quarter of 2016 on a 10% revenue decline. For the third quarter of
2016, U.S. GAAP operating loss was $21.9
million and adjusted operating loss was $17.4 million, which excludes the impact of
$4.5 million of charges. This
compares to the second quarter 2016 U.S. GAAP operating loss of
$19.2 million and adjusted operating
loss of $16.0 million, which excludes
$3.2 million of charges.
Cash and cash equivalents as of September 30, 2016
decreased from the second quarter by $7.3
million to $90.1 million
primarily due to restructuring payments of $0.8 million, $3
million of certain international receivables not collected
until October and the cash collateralization of $2 million of letters of credit due to the
non-renewal of the credit facility. During the quarter, Tesco
elected not to proceed with a credit facility replacement as the
costs and restrictions were not proportional to the borrowing
availability.
Free cash flow was a use of cash of $5.7
million before approximately $0.8
million of restructuring payments. The sequential decline
was primarily caused by the $3
million in collection delays, higher capital spending of
over $1 million and lower used
equipment sales of over $1 million.
However, inventory declined by approximately $5 million, excluding reserves, from product
sales and improved supply chain management.
Products Segment
- Revenue for Q3 2016 was $17.0
million, a $4 million, or 17%,
decrease from Q2 2016 and an $11.8
million, or 41%, decrease from Q3 2015.
- Product sales for Q3 2016 included three top drive units (3 new
and 0 used), compared to six units (3 new and 3 used) sold in Q2
2016 and five units (5 new and 0 used) sold in Q3 2015. During the
third quarter, the carrying value of inventory associated with new
hydraulic top drives was determined to be above current market
prices due to availability of used equipment in the market.
- There were 118 top drives in our rental fleet at the end of the
third quarter with a utilization of 21%. While the rental fleet
remained flat, utilization improved from 15% in the prior
quarter.
- U.S. GAAP operating loss before adjustments in the Products
segment for Q3 2016 was $7.4 million,
or (44)% of sales, a $4.7 million, or
174%, a decrease from Q2 2016. Third quarter operating loss and
operating margin after adjustments were $3.8
million and (22)%, respectively, with sequential decremental
margins of 39%. This sequential decline in profitability was due to
lower sales and a less profitable mix of product sales.
- At September 30, 2016, top drive
backlog was nine units, with a total potential value of
$7.8 million, compared to nine units
at June 30, 2016, with a potential
value of $8.5 million. This compares
to a backlog of 20 units at September 30,
2015, with a potential value of $20.0
million. Today, our top drive backlog stands at 12 units
with a potential value of $11.5
million.
Tubular Services Segment
- Revenue for Q3 2016 was $13.4
million, a $0.4 million, or
3%, increase from Q2 2016 and a $19.2
million, or 59%, decrease from Q3 2015. This sequential
increase was driven primarily by higher sales of accessories and
used CDS equipment that offset weakness in offshore markets. While
activity in U.S. land increased during the quarter, unsustainable
pricing by smaller competitors continued but is slowly leading to
attrition.
- U.S. GAAP operating loss before adjustments in the Tubular
Services segment for Q3 2016 was $8.0
million, a $1.3 million
improvement from Q2 2016. Third quarter operating loss and
operating margin after adjustments were $7.2
million and (54)%, respectively. This slight sequential
decrease was primarily due to the lower mix of offshore revenue and
ramp-up costs for reactivating U.S. land crews for expected fourth
quarter activity.
Other Segments and Expenses
- Research and engineering U.S. GAAP costs for Q3 2016 were
$1.2 million, compared to
$1.4 million in Q2 2016 and
$2.1 million in Q3 2015. We continue
to invest in the development, commercialization, and enhancement of
our proprietary technologies.
- Corporate and other U.S. GAAP costs for Q3 2016 were
$5.3 million, a $0.5 million, or 9%, decrease from Q2 2016 and a
$0.9 million, or 15%, decrease from
Q3 2015. On an adjusted basis, the Q3 2016 costs decreased by
$0.5 million and $0.6 million from Q2 2016 and Q3 2015,
respectively.
- Net foreign exchange losses for Q3 2016 were $0.4 million, compared to $0.0 million in Q2 2016 and $2.0 million in Q3 2015.
- The effective tax rate for Q3 2016 was a 2% benefit compared to
a 1% benefit in Q2 2016 and an 11% expense in Q3 2015.
- Total capital expenditures were $2.6
million in Q3 2016, primarily for tubular services
equipment, a $1.5 million increase
from Q2 2016 and a $0.5 million, or
24%, increase from Q3 2015.
Outlook
While U.S. rig count is expected to continue to increase in the
fourth quarter of 2016, weakness in international markets and
pricing pressure in most markets is expected to continue. We do not
expect any pricing improvement in the near-term given the excess
service capacity in the market.
Products revenue is expected to be flat to slightly down
sequentially as rental utilization in certain markets is expected
to decline and the mix of new products has a lower average selling
price. Aftermarket Sales and Services revenue is expected to
increase slightly following recent increases in quoting activity.
Products adjusted operating loss is expected to be flat to slightly
improved sequentially as higher-margin product sales and
aftermarket activity offset lower rental utilization.
Tubular Services revenue is expected to increase slightly
sequentially from increased U.S. land activity and market share
gains. Offshore activity is expected to run at levels similar to
the third quarter. Adjusted operating loss is expected to be flat
sequentially as improved profitability in U.S. land is offset by
lower profits from accessory and used CDS sales.
Sequential Corporate and R&E expenses are expected to
decrease slightly in the fourth quarter. Depreciation expense in
the fourth quarter should remain flat sequentially.
As a result of these factors, adjusted EBITDA loss is expected
to slightly improve sequentially in the fourth quarter. We also
expect cash usage to decline but at a reduced pace compared with
the third quarter as collections improve.
"During the third quarter we completed key short-term
restructuring activities. We continue to look for cost optimization
opportunities and to evaluate the effectiveness of our global
footprint, with further actions identified for implementation
before the end of 2016," Mr. Assing said. "We made progress on our
initiatives and investments to add volume and improve our operating
efficiencies. These initiatives are aligned with our long-term
strategy and will focus on reduced costs, service offering
integration and drilling performance, that deliver operational and
well improvements and clear cost advantages."
"Within Products, we made progress on our new pipe-handling
technologies for both newbuilds and rig upgrades. During the
quarter we completed in-house testing of the Pipe Drive System and
expect the first field trials to begin in the fourth quarter. We
shipped our first offshore catwalk and are seeing increased demand
for high-end automated land catwalks in the Middle East, especially for rentals. We also
commercialized our first generation automated rig-control software
("ARC") that provides advanced drilling functionalities through the
top drive. We have six ARC contracts primarily in North America with growing customer interest
in international markets."
"In Tubular Services, we were pleased with the pace of CDS
Evolution conversion in our targeted trial U.S. markets, with
revenue doubling sequentially to almost one third of the total in
those markets. We are performing field trials of the new multi-plug
launcher, which will round out our cementing accessories portfolio.
By incorporating cementing accessories with our CDS Evolution
offering, the value proposition for the customer and quality of the
cementing job is greatly enhanced and costs significantly reduced.
The combined offering should allow us to continue to increase the
conversion adoption rate next year while gaining market share and
improving profitability even as prices remain under pressure.
Offshore, we have developed several new customer relationships, an
indication Tesco is increasingly considered a clear alternative to
the two dominant players in the market."
"Finally, as we commercialize the R&E projects developed
over the last few years, we will continue to invest in drilling
performance innovation in 2017. Our focus will be on shorter
development time rig mechanization products and rig controls that
provide clear economic benefits to our customers."
"Looking ahead, we see signs that our markets are beginning to
bottom. North America rig count
has been steadily improving and international rig count in our key
markets has started to stabilize. However, it is likely pricing
will remain challenged until excess capacity is reduced and some
pricing power returns. As a result, we continue to plan for a
lower-for-longer market environment while we begin to make
investments to gain market share and scale to leverage the eventual
recovery," Mr. Assing concluded.
Conference Call
The Company will conduct a conference call to discuss its
results for the third quarter 2016 on November 4 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 November 18.
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
13648080#.
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
September
30,
|
|
Nine Months
Ended
September
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited)
|
Revenue
|
$
|
30.4
|
|
|
$
|
61.4
|
|
|
$
|
99.5
|
|
|
$
|
227.5
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of sales and
services
|
44.3
|
|
|
65.7
|
|
|
134.9
|
|
|
225.7
|
|
Selling, general and
administrative
|
6.8
|
|
|
9.3
|
|
|
20.7
|
|
|
29.9
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Research and
engineering
|
1.2
|
|
|
2.1
|
|
|
4.3
|
|
|
7.0
|
|
|
52.3
|
|
|
77.1
|
|
|
195.4
|
|
|
262.6
|
|
Operating
loss
|
(21.9)
|
|
|
(15.7)
|
|
|
(95.9)
|
|
|
(35.1)
|
|
Interest expense
(income), net
|
0.2
|
|
|
0.2
|
|
|
0.4
|
|
|
0.7
|
|
Foreign exchange
loss
|
0.4
|
|
|
2.0
|
|
|
1.5
|
|
|
6.5
|
|
Other expense
(income)
|
0.2
|
|
|
0.1
|
|
|
0.3
|
|
|
(0.2)
|
|
Loss before income
taxes
|
(22.7)
|
|
|
(18.0)
|
|
|
(98.1)
|
|
|
(42.1)
|
|
Income tax provision
(benefit)
|
(0.6)
|
|
|
1.9
|
|
|
(0.3)
|
|
|
13.5
|
|
Net loss
|
$
|
(22.1)
|
|
|
$
|
(19.9)
|
|
|
$
|
(97.8)
|
|
|
$
|
(55.6)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.48)
|
|
|
$
|
(0.51)
|
|
|
$
|
(2.33)
|
|
|
$
|
(1.43)
|
|
Diluted
|
$
|
(0.48)
|
|
|
$
|
(0.51)
|
|
|
$
|
(2.33)
|
|
|
$
|
(1.43)
|
|
Dividends per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.15
|
|
Weighted average
number of shares:
|
|
|
|
|
|
|
|
Basic
|
46.4
|
|
|
39.0
|
|
|
42.0
|
|
|
39.0
|
|
Diluted
|
46.4
|
|
|
39.0
|
|
|
42.0
|
|
|
39.0
|
|
TESCO
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
(in
millions)
|
|
|
|
|
|
September
30,
2016
|
|
December
31,
2015
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
90.1
|
|
|
$
|
51.5
|
|
Accounts receivable
trade, net
|
38.9
|
|
|
64.3
|
|
Inventories,
net
|
80.5
|
|
|
95.5
|
|
Other current
assets
|
22.5
|
|
|
25.2
|
|
Total current
assets
|
232.0
|
|
|
236.5
|
|
Property, plant and
equipment, net
|
125.6
|
|
|
177.7
|
|
Other
assets
|
4.5
|
|
|
7.5
|
|
Total
assets
|
$
|
362.1
|
|
|
$
|
421.7
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
11.8
|
|
|
14.3
|
|
Accrued and other
current liabilities
|
18.4
|
|
|
27.2
|
|
Income taxes
payable
|
1.1
|
|
|
1.4
|
|
Total current
liabilities
|
31.3
|
|
|
42.9
|
|
Other
liabilities
|
1.7
|
|
|
2.2
|
|
Deferred income
taxes
|
1.1
|
|
|
1.6
|
|
Shareholders'
equity
|
328.0
|
|
|
375.0
|
|
Total
liabilities and shareholders' equity
|
$
|
362.1
|
|
|
$
|
421.7
|
|
TESCO
CORPORATION
|
Consolidated
Statement of Cash Flows
|
(in
millions)
|
|
|
|
Nine Months
Ended
September
30,
|
|
2016
|
|
2015
|
|
(Unaudited)
|
Operating
Activities
|
|
|
|
Net loss
|
$
|
(97.8)
|
|
|
$
|
(55.6)
|
|
Adjustments to
reconcile net loss to cash provided by (used in) operating
activities:
|
|
|
|
Depreciation and
amortization
|
22.5
|
|
|
29.1
|
|
Stock compensation
expense
|
3.2
|
|
|
3.0
|
|
Bad debt
expense
|
0.5
|
|
|
0.1
|
|
Deferred income
taxes
|
0.2
|
|
|
8.9
|
|
Amortization of
financial items
|
0.4
|
|
|
0.2
|
|
Loss on sale of
operating assets
|
(0.6)
|
|
|
(0.7)
|
|
Long-lived asset
impairments
|
35.5
|
|
|
—
|
|
Changes in the fair
value of contingent earn-out obligations
|
(0.1)
|
|
|
(0.6)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable
trade, net
|
24.8
|
|
|
52.8
|
|
Inventories,
net
|
14.9
|
|
|
0.7
|
|
Prepaid and other
current assets
|
3.2
|
|
|
2.8
|
|
Accounts payable and
accrued liabilities
|
(12.7)
|
|
|
(29.3)
|
|
Income taxes
recoverable
|
0.6
|
|
|
(9.8)
|
|
Other non-current
assets and liabilities, net
|
(0.2)
|
|
|
(1.8)
|
|
Net cash used in
operating activities
|
(5.6)
|
|
|
(0.2)
|
|
Investing
Activities
|
|
|
|
Additions to
property, plant and equipment
|
(4.5)
|
|
|
(12.3)
|
|
Proceeds on sale of
operating assets
|
2.9
|
|
|
0.8
|
|
Other, net
|
0.2
|
|
|
1.8
|
|
Net cash used in
investing activities
|
(1.4)
|
|
|
(9.7)
|
|
Financing
Activities
|
|
|
|
Proceeds from
exercise of stock options
|
—
|
|
|
—
|
|
Dividend
distribution
|
—
|
|
|
(5.8)
|
|
Proceeds from stock
issuance
|
47.9
|
|
|
—
|
|
Stock issuance
costs
|
(0.3)
|
|
|
—
|
|
Restricted cash used
as collateral for outstanding letters of credit
|
(2.0)
|
|
|
—
|
|
Net cash provided by
(used in) financing activities
|
45.6
|
|
|
(5.8)
|
|
Change in cash and
cash equivalents
|
38.6
|
|
|
(15.7)
|
|
Cash and cash
equivalents, beginning of period
|
51.5
|
|
|
72.5
|
|
Cash and cash
equivalents, end of period
|
$
|
90.1
|
|
|
$
|
56.8
|
|
Supplemental cash
flow information
|
|
|
|
Cash payments for
interest
|
$
|
0.4
|
|
|
$
|
0.4
|
|
Cash payments for
income taxes, net of refunds
|
1.4
|
|
|
17.4
|
|
Property, plant and
equipment accrued in accounts payable
|
2.3
|
|
|
1.9
|
|
TESCO
CORPORATION
|
Segment
Results
|
(in millions,
except per share information)
|
|
|
|
|
|
|
|
Three Months
Ended
September
30,
|
|
Three
Months
Ended June
30,
|
|
Nine Months
Ended
September 30,
2016
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Segment
revenue
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Products
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
4.4
|
|
|
$
|
5.4
|
|
|
$
|
8.4
|
|
|
$
|
17.0
|
|
|
$
|
36.9
|
|
Rental
services
|
7.1
|
|
|
14.0
|
|
|
5.9
|
|
|
19.6
|
|
|
51.7
|
|
After-market sales and
service
|
5.5
|
|
|
9.4
|
|
|
6.3
|
|
|
17.5
|
|
|
31.6
|
|
|
17.0
|
|
|
28.8
|
|
|
20.6
|
|
|
54.1
|
|
|
120.2
|
|
Tubular
Services
|
|
|
|
|
|
|
|
|
|
Land
|
7.7
|
|
|
21.0
|
|
|
7.8
|
|
|
26.4
|
|
|
75.1
|
|
Offshore
|
4.1
|
|
|
7.4
|
|
|
4.4
|
|
|
15.9
|
|
|
26.0
|
|
CDS, Parts &
Accessories
|
1.6
|
|
|
4.2
|
|
|
0.8
|
|
|
3.1
|
|
|
6.2
|
|
|
13.4
|
|
|
32.6
|
|
|
13.0
|
|
|
45.4
|
|
|
107.3
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
revenue
|
$
|
30.4
|
|
|
$
|
61.4
|
|
|
$
|
33.6
|
|
|
$
|
99.5
|
|
|
$
|
227.5
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
|
|
Products
|
$
|
(7.4)
|
|
|
$
|
(3.9)
|
|
|
$
|
(2.7)
|
|
|
$
|
(49.3)
|
|
|
$
|
(2.2)
|
|
Tubular
Services
|
(8.0)
|
|
|
(3.5)
|
|
|
(9.3)
|
|
|
(23.3)
|
|
|
(4.3)
|
|
Research and
Engineering
|
(1.2)
|
|
|
(2.1)
|
|
|
(1.4)
|
|
|
(4.3)
|
|
|
(7.0)
|
|
Corporate and
Other
|
(5.3)
|
|
|
(6.2)
|
|
|
(5.8)
|
|
|
(19.0)
|
|
|
(21.6)
|
|
Operating
loss
|
$
|
(21.9)
|
|
|
$
|
(15.7)
|
|
|
$
|
(19.2)
|
|
|
$
|
(95.9)
|
|
|
$
|
(35.1)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
consolidated net loss
|
$
|
(22.1)
|
|
|
$
|
(19.9)
|
|
|
$
|
(18.9)
|
|
|
$
|
(97.8)
|
|
|
$
|
(55.6)
|
|
U.S. GAAP loss per
share (diluted)
|
$
|
(0.48)
|
|
|
$
|
(0.51)
|
|
|
$
|
(0.47)
|
|
|
$
|
(2.33)
|
|
|
$
|
(1.43)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(a) (as defined)
|
$
|
(9.1)
|
|
|
$
|
(0.9)
|
|
|
$
|
(7.5)
|
|
|
$
|
(24.3)
|
|
|
$
|
10.4
|
|
|
|
|
(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
September
30,
|
|
Three
Months
Ended
June
30,
|
|
Nine
Months
Ended
September
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Net loss under U.S.
GAAP
|
$
|
(22.1)
|
|
|
$
|
(19.9)
|
|
|
$
|
(18.9)
|
|
|
$
|
(97.8)
|
|
|
$
|
(55.6)
|
|
Income tax expense
(benefit)
|
(0.6)
|
|
|
1.9
|
|
|
(0.2)
|
|
|
(0.3)
|
|
|
13.5
|
|
Depreciation and
amortization
|
7.3
|
|
|
9.4
|
|
|
7.2
|
|
|
22.5
|
|
|
29.1
|
|
Interest
expense
|
0.2
|
|
|
0.3
|
|
|
0.2
|
|
|
0.9
|
|
|
0.8
|
|
Stock compensation
expense—non-cash
|
1.1
|
|
|
0.9
|
|
|
1.0
|
|
|
3.2
|
|
|
3.0
|
|
Severance &
restructuring charges
|
1.0
|
|
|
1.7
|
|
|
2.9
|
|
|
6.9
|
|
|
7.3
|
|
Bad debt from certain
accounts
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.4
|
|
Foreign exchange
loss
|
0.3
|
|
|
2.0
|
|
|
—
|
|
|
1.5
|
|
|
6.5
|
|
Asset sale
reserves
|
(0.5)
|
|
|
—
|
|
|
(0.7)
|
|
|
(3.5)
|
|
|
—
|
|
Warranty & legal
reserves
|
0.7
|
|
|
—
|
|
|
0.7
|
|
|
1.4
|
|
|
1.3
|
|
Inventory
reserves
|
3.1
|
|
|
2.8
|
|
|
0.2
|
|
|
4.4
|
|
|
2.8
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Credit facility
costs
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.4
|
|
|
—
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Adjusted
EBITDA
|
$
|
(9.1)
|
|
|
$
|
(0.9)
|
|
|
$
|
(7.5)
|
|
|
$
|
(24.3)
|
|
|
$
|
10.4
|
|
|
|
(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.
|
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
September
30,
|
|
Three
Months
Ended
June
30,
|
|
Nine Months
Ended
September
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Net loss under U.S.
GAAP
|
$
|
(22.1)
|
|
|
$
|
(19.9)
|
|
|
$
|
(18.9)
|
|
|
$
|
(97.8)
|
|
|
$
|
(55.6)
|
|
Severance &
restructuring charges
|
1.0
|
|
|
1.7
|
|
|
2.6
|
|
|
6.6
|
|
|
5.7
|
|
Bad debt on certain
accounts
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.3
|
|
Certain foreign
exchange losses
|
0.2
|
|
|
1.8
|
|
|
0.2
|
|
|
1.5
|
|
|
4.9
|
|
Asset sale
reserves
|
(0.5)
|
|
|
—
|
|
|
(0.7)
|
|
|
(3.5)
|
|
|
—
|
|
Warranty & legal
reserves
|
0.7
|
|
|
—
|
|
|
0.7
|
|
|
1.4
|
|
|
1.0
|
|
Inventory
reserves
|
2.9
|
|
|
2.8
|
|
|
0.2
|
|
|
4.2
|
|
|
2.8
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Credit facility
costs
|
0.2
|
|
|
—
|
|
|
0.1
|
|
|
0.5
|
|
|
—
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Certain tax-related
charges
|
—
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
16.4
|
|
Adjusted net
loss
|
$
|
(17.3)
|
|
|
$
|
(12.5)
|
|
|
$
|
(15.8)
|
|
|
$
|
(51.0)
|
|
|
$
|
(23.7)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per
share under U.S. GAAP
|
$
|
(0.48)
|
|
|
$
|
(0.51)
|
|
|
$
|
(0.47)
|
|
|
$
|
(2.33)
|
|
|
$
|
(1.43)
|
|
Severance &
restructuring charges
|
0.02
|
|
|
0.04
|
|
|
0.07
|
|
|
0.16
|
|
|
0.15
|
|
Bad debt on certain
accounts
|
0.01
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
Certain foreign
exchange losses
|
—
|
|
|
0.05
|
|
|
—
|
|
|
0.04
|
|
|
0.13
|
|
Asset sale
reserves
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
(0.08)
|
|
|
—
|
|
Warranty & legal
reserves
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
0.03
|
|
|
0.03
|
|
Inventory
reserves
|
0.07
|
|
|
0.07
|
|
|
—
|
|
|
0.11
|
|
|
0.07
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
0.84
|
|
|
—
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.02
|
|
Certain tax-related
charges
|
—
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
0.42
|
|
Adjusted diluted loss
per share
|
$
|
(0.37)
|
|
|
$
|
(0.32)
|
|
|
$
|
(0.39)
|
|
|
$
|
(1.21)
|
|
|
$
|
(0.60)
|
|
|
|
(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
September 30, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research
&
Engineering
|
|
Corporate
&
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(7.4)
|
|
|
$
|
(8.0)
|
|
|
$
|
(1.2)
|
|
|
$
|
(5.3)
|
|
|
$
|
(21.9)
|
|
Severance &
restructuring charges
|
—
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Bad debt on certain
accounts
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Warranty & legal
reserves
|
0.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
Asset sale
reserves
|
(0.4)
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
(0.5)
|
|
Inventory
reserves
|
3.0
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Adjusted operating
loss
|
$
|
(3.8)
|
|
|
$
|
(7.2)
|
|
|
$
|
(1.2)
|
|
|
$
|
(5.2)
|
|
|
$
|
(17.4)
|
|
|
|
|
|
|
Three Months Ended
September 30, 2015
|
|
Products
|
|
Tubular
Services
|
|
Research
&
Engineering
|
|
Corporate
&
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(3.9)
|
|
|
$
|
(3.5)
|
|
|
$
|
(2.1)
|
|
|
$
|
(6.2)
|
|
|
$
|
(15.7)
|
|
Severance &
restructuring charges
|
0.8
|
|
|
0.5
|
|
|
—
|
|
|
0.4
|
|
|
1.7
|
|
Inventory
reserves
|
2.2
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
Adjusted operating
loss
|
$
|
(0.9)
|
|
|
$
|
(2.4)
|
|
|
$
|
(2.1)
|
|
|
$
|
(5.8)
|
|
|
$
|
(11.2)
|
|
|
|
|
|
|
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 & 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)
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research
&
Engineering
|
|
Corporate
&
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(49.3)
|
|
|
$
|
(23.3)
|
|
|
$
|
(4.3)
|
|
|
$
|
(19.0)
|
|
|
$
|
(95.9)
|
|
Severance &
restructuring charges
|
1.4
|
|
|
5.1
|
|
|
—
|
|
|
0.2
|
|
|
6.7
|
|
Bad debt on certain
accounts
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
Warranty & legal
reserves
|
0.7
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
1.4
|
|
Asset sale
reserves
|
(1.2)
|
|
|
(2.3)
|
|
|
—
|
|
|
—
|
|
|
(3.5)
|
|
Inventory
reserves
|
4.0
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
Long-lived asset
impairments
|
33.6
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
35.5
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Adjusted operating
loss
|
$
|
(10.2)
|
|
|
$
|
(19.4)
|
|
|
$
|
(4.3)
|
|
|
$
|
(16.7)
|
|
|
$
|
(50.6)
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2015
|
|
Products
|
|
Tubular
Services
|
|
Research
&
Engineering
|
|
Corporate
&
Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(2.2)
|
|
|
$
|
(4.3)
|
|
|
$
|
(7.0)
|
|
|
$
|
(21.6)
|
|
|
$
|
(35.1)
|
|
Severance &
restructuring charges
|
4.0
|
|
|
2.5
|
|
|
—
|
|
|
0.8
|
|
|
7.3
|
|
Bad debt on certain
accounts
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Warranty & legal
reserves
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Inventory
reserves
|
2.2
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
Adjusted operating
income (loss)
|
$
|
5.7
|
|
|
$
|
(1.2)
|
|
|
$
|
(7.0)
|
|
|
$
|
(19.5)
|
|
|
$
|
(22.0)
|
|
|
|
(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
September
30,
2016
|
|
Three
Months
Ended
June
30,
2016
|
|
Nine
Months
Ended
September
30,
2016
|
Net cash used in
operating activities
|
|
$
|
(4.3)
|
|
|
$
|
(3.4)
|
|
|
$
|
(5.6)
|
|
Capital
expenditures
|
|
(2.5)
|
|
|
(1.1)
|
|
|
(4.5)
|
|
Proceeds on asset
sales
|
|
0.3
|
|
|
1.5
|
|
|
2.9
|
|
Free cash
flow
|
|
(6.5)
|
|
|
(3.0)
|
|
|
(7.2)
|
|
Severance &
restructuring payments
|
|
(0.8)
|
|
|
(2.9)
|
|
|
(7.4)
|
|
Adjusted free cash
flow
|
|
$
|
(5.7)
|
|
|
$
|
(0.1)
|
|
|
$
|
0.2
|
|
|
|
(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-third-quarter-2016-results-300357472.html
SOURCE Tesco Corporation