• Liquidity of $83.1 million and no debt at the
end of the first quarter, after funding approximately $1.1 million
of payments for restructuring, $1.6 million for U.S. property taxes
and $6 million of receivables growth
Tesco Corporation ("TESCO" or the "Company") (NASDAQ:TESO) today
reported first quarter 2017 financial and operating results.
First Quarter Operating
Results
Fernando Assing, TESCO's President and Chief
Executive Officer, commented, "While our first quarter results
reflect the benefit of the stronger U.S. land market, the results
also reflect the continued weakness in multiple international and
offshore markets. We continue to deploy our new technologies and
commercial innovation to be positioned to take advantage of
opportunities in these markets as they begin to recover in
subsequent quarters."
TESCO reported revenue of $36.7 million in the
first quarter of 2017, up from $35.3 million, or 4%, in the fourth
quarter of 2016, and up from $35.5 million, or 3%, in the first
quarter of 2016. The sequential increase in revenue was primarily
from higher sales of new products and aftermarket services as well
as land tubular services in the U.S.
TESCO reported a U.S. GAAP net loss of $13.7
million, or $(0.29) per share, in the first quarter of 2017.
Adjusted net loss for the quarter was $13.4 million, or $(0.29) per
share, excluding special items, consisting primarily of charges
related to restructuring costs. This compares to a U.S. GAAP net
loss of $20.1 million, or $(0.43) per diluted share, in the fourth
quarter of 2016, and a U.S. GAAP net loss of $56.8 million, or
$(1.45) per diluted share, in the first quarter of 2016. Adjusted
net loss in the fourth quarter of 2016 was $13.3 million, or
$(0.28) per diluted share, and in the first quarter of 2016 was
$17.9 million, or $(0.46) per diluted share.
Adjusted EBITDA loss was $4.7 million in the
first quarter of 2017 compared to an adjusted EBITDA loss of $4.4
million in the fourth quarter of 2016 on a 4% revenue increase. For
the first quarter of 2017, U.S. GAAP operating loss was $12.9
million and adjusted operating loss was $12.1 million, which
excludes the impact of $0.8 million of charges. This compares to
the fourth quarter 2016 U.S. GAAP operating loss of $18.9 million
and adjusted operating loss of $13.1 million, which excluded $5.8
million of charges.
Cash and cash equivalents as of March 31,
2017 decreased from the fourth quarter of 2016 by $8.4 million to
$83.1 million primarily due to restructuring payments of $1.1
million, U.S. property taxes of $1.6 million and higher receivables
of $6.0 million.
Free cash flow was a use of cash of $9.2 million
before approximately $1.1 million of restructuring payments. The
sequential decline was primarily caused by an increase in accounts
receivable of over $6.0 million, driven by sequential revenue
increase and nearly $4 million in international collection delays
that have been substantially collected so far this quarter.
Products Segment
• Revenue in the first quarter of 2017 was $20.1
million, a $1.3 million, or 7%, increase from the fourth quarter of
2016 and a $3.5 million, or 21%, increase from the first quarter of
2016.
- Product sales in the first quarter of 2017 included six top
drive units (5 new and 1 used), compared to six units (4 new and 2
used) sold in the fourth quarter of 2016, and six units (3 new and
3 used) sold in the first quarter of 2016. Product sales in the
first quarter of 2017 also included one new catwalk compared to two
used catwalks in the fourth quarter of 2016.
- Aftermarket sales and services increased by $1.6 million, or
22%, compared to the fourth quarter of 2016 primarily due to higher
recertification activity, which included several top drive
upgrades, partially offset by reduced part sales.
- There were 116 top drives in our rental fleet at the end of the
first quarter with a utilization of 14%. The decreased sequential
utilization was primarily due to reduced rental activity in
Russia.
• U.S. GAAP operating loss before adjustments in
the Products segment for the first quarter of 2017 was $0.9
million, or (4)% of revenue, a $4.4 million, or 83%, improvement
from the fourth quarter of 2016. First quarter operating loss and
operating margin after adjustments were $0.7 million and (3)%
respectively. This sequential increase in profitability was due to
the volume and mix benefit from higher new product sales and
aftermarket activity, partially offset by lower rental
activity.
• At March 31, 2017, the top drive backlog
was 5 units with a total potential value of $4.1 million, compared
to 10 units at December 31, 2016, with a potential value of
$9.3 million. This compares to a backlog of 10 units at
March 31, 2016, with a potential value of $9.5 million. The
trend towards short delivery times and intra-quarter book-and-ship
transactions continued in 2017. Most of the top drives expected to
ship in the second quarter are likely to be booked and shipped
intra-quarter. Today, our top drive backlog stands at 5 units with
a potential value of $4.1 million, with several contracts signed
but awaiting receipt of deposits.
Tubular Services Segment
• Revenue in the first quarter of 2017 was $16.6
million, a slight increase from the fourth quarter of 2016 of $16.5
million and a decrease from the first quarter of 2016 of $18.9
million. This sequential increase was driven primarily by higher
service activity in U.S. land, partially offset by lower
international and offshore activity in multiple markets.
• U.S. GAAP operating loss before adjustments in
the Tubular Services segment in the first quarter of 2017 was $5.7
million, a $1.2 million improvement from the fourth quarter of
2016. First quarter operating loss and operating margin after
adjustments were $5.1 million and (31)%, respectively, compared to
$5.3 million and (32)% in the fourth quarter of 2016. The
sequential improvement was primarily driven by improved
profitability in U.S. land, partially offset by the impact of lower
offshore activity.
Other Segments and Expenses
• Research and Engineering U.S. GAAP costs for
the first quarter of 2017 were $0.8 million, compared to $1.5
million in the fourth quarter of 2016 and $1.6 million in the first
quarter of 2016. We continue to invest in the development,
commercialization, and enhancement of our proprietary
technologies.
• Corporate and other U.S. GAAP costs for the
first quarter of 2017 were $5.5 million, a $0.3 million, or 6%,
increase from the fourth quarter of 2016 and a $2.5 million, or
31%, decrease from the first quarter of 2016. On an adjusted basis,
the first quarter costs increased by $0.6 million compared to
fourth quarter due to approximately $0.5 million higher
employee-related costs.
• Net foreign exchange gain in the first quarter
of 2017 was $0.1 million, compared to net foreign exchange losses
of $1.1 million in the fourth quarter of 2016 and $1.2 million in
the first quarter of 2016.
• The effective tax rate for the first quarter
of 2017 was an 8% expense compared to a 1% benefit in the fourth
quarter of 2016 and a 1% expense in the first quarter of 2016.
Income tax expense increased sequentially as taxable income
increased in certain international markets with limited loss
carrybacks.
• Capital expenditures were $0.7 million in the
first quarter of 2017, primarily for tubular services equipment and
infrastructure projects, a $1.9 million decrease from the fourth
quarter of 2016 and a $0.1 million, or 13%, decrease from the first
quarter of 2016.
Outlook
We anticipate U.S. rig count to continue to
increase during the second quarter of 2017 but flatten in the
second half of 2017. In addition, international and offshore
markets are not expected to show much improvement in 2017. We have
started to see some opportunities to increase pricing in U.S. land,
however persistent overcapacity will likely limit our pricing power
throughout 2017. We are also facing risks that cost escalation,
which includes labor inflation and shortages, incremental logistics
and equipment reactivation costs, will exceed price increases in
the short term.
In the second quarter of 2017;• Products revenue
is expected to be higher sequentially, primarily from higher new
and used product sales and some improvement in top drive rental
utilization in various markets, as well as additional catwalk
rentals. Products adjusted operating loss is expected to improve
sequentially.• Tubular Services revenue is expected to increase
sequentially from increased North America land activity and higher
new and used CDS sales. Tubular Services adjusted operating loss is
expected to improve sequentially but incrementals are expected to
be impacted by the onshore/offshore mix and activation costs for
planned third quarter activity increases.• Corporate and R&E
expenses are expected to be slightly higher sequentially in the
second quarter.• As a result, adjusted EBITDA loss is expected to
improve sequentially in the second quarter.• Cash levels are
expected to decline due to operating losses and certain tax
payments, although at a reduced rate compared to the first
quarter.
"During the first quarter and through this
quarter, we have made continued progress on several key
initiatives, including CDS™ Evolution adoption and top drive
performance upgrades. Customer interest in offerings that reduce
cost and improve drilling performance continues to increase,” Mr.
Assing said.
“Within Products, we completed several top drive
upgrade projects with more booked for delivery over the next few
quarters. We sold one catwalk and mobilized additional rental units
internationally. With ARC, the number of contracted installations
increased in established markets with customer trials in new
international markets ongoing. Finally, we completed the upgrade of
our test rig in Houston and showcased many of our new technologies
to customers during the Offshore Technology Conference in May. Not
only will the rig upgrades improve our testing capability, but they
also increase the marketability for third party rental.”
“In Tubular Services, we continue to gain
adoption of the CDS Evolution model in our targeted trial U.S.
markets. For example, we recently converted a multi-rig U.S. client
based on the service quality and cost efficiency of this offering.
In addition, our new multi-plug launcher system completed several
field jobs with positive results and we will continue to ramp up
our capacity in the second quarter. Global markets are increasingly
understanding the value proposition of our automated offerings,
with CDS sales expected to increase in the second quarter.”
“As the market recovers, we remain highly
focused on returning to a quarterly breakeven EBITDA run rate while
minimizing cash usage over the next several quarters. The key
drivers to achieving this will be: 1) growing CDS land Evolution
adoption and gaining market share, particularly in North America,
2) accelerating CDS and tubular accessories sales 3) Gaining
offshore Tubular Services market share in our established markets,
including the benefits from rig reactivations, and 4) accelerating
all AMSS offerings including ARC, as rigs reactivate. At the same
time, we must carefully manage the ramp-up risks related to safety,
quality, cost escalation and working capital management. With
available technologies and a strong balance sheet and cash position
to fund growth, our priority is on executing on these market
opportunities," Mr. Assing concluded.
Conference Call
The Company will conduct a conference call to
discuss its results for the first quarter 2017 on May 9 at 9:00
a.m. Central Time. To participate in the conference call, dial
1-844-356-6029 inside the U.S. or 1-209-905-5912 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 May 16. To listen to the replay, call
1-855-859-2056 inside the U.S. or 1-404-537-3406 outside the U.S.
and enter conference ID 10366353#.
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 "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 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.
Caution Regarding Forward-Looking
Information
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; 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 most recent Annual
Report on Form 10-K 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 March 31, |
|
2017 |
2016 |
|
(Unaudited) |
Revenue |
$ |
36.7 |
|
|
$ |
35.5 |
|
Operating expenses |
|
|
Cost of sales and
services |
42.5 |
|
|
46.9 |
|
Selling, general and
administrative |
6.3 |
|
|
6.3 |
|
Long-lived asset
impairments |
— |
|
|
35.5 |
|
Research and
engineering |
0.8 |
|
|
1.6 |
|
|
49.6 |
|
|
90.3 |
|
Operating loss |
(12.9 |
) |
|
(54.8 |
) |
Interest expense,
net |
— |
|
|
0.4 |
|
Foreign exchange loss
(gain) |
(0.1 |
) |
|
1.2 |
|
Other income |
(0.1 |
) |
|
(0.1 |
) |
Loss before income
taxes |
(12.7 |
) |
|
(56.3 |
) |
Income tax
provision |
1.0 |
|
|
0.5 |
|
Net loss |
$ |
(13.7 |
) |
|
$ |
(56.8 |
) |
Loss per share: |
|
|
Basic |
$ |
(0.29 |
) |
|
$ |
(1.45 |
) |
Diluted |
$ |
(0.29 |
) |
|
$ |
(1.45 |
) |
Weighted average number
of shares: |
|
|
Basic |
46.7 |
|
|
39.3 |
|
Diluted |
46.7 |
|
|
39.3 |
|
TESCO CORPORATION |
Condensed Consolidated Balance
Sheets |
(in millions) |
|
|
March 31, 2017 |
|
December 31, 2016 |
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash
equivalents |
$ |
83.1 |
|
|
$ |
91.5 |
|
Accounts receivable
trade, net |
39.7 |
|
|
33.3 |
|
Inventories, net |
73.6 |
|
|
76.2 |
|
Other current
assets |
17.7 |
|
|
20.0 |
|
Total current
assets |
214.1 |
|
|
221.0 |
|
Property, plant and
equipment, net |
115.4 |
|
|
120.7 |
|
Other assets |
2.4 |
|
|
2.6 |
|
Total assets |
$ |
331.9 |
|
|
$ |
344.3 |
|
Liabilities and Shareholders’ Equity |
|
|
|
Current
liabilities |
|
|
|
Accounts payable |
$ |
12.9 |
|
|
$ |
13.5 |
|
Accrued and other
current liabilities |
16.9 |
|
|
17.1 |
|
Income taxes
payable |
3.1 |
|
|
2.1 |
|
Total current
liabilities |
32.9 |
|
|
32.7 |
|
Deferred income
taxes |
0.4 |
|
|
0.4 |
|
Other liabilities |
1.5 |
|
|
1.6 |
|
Shareholders'
equity |
297.1 |
|
|
309.6 |
|
Total
liabilities and shareholders’ equity |
$ |
331.9 |
|
|
$ |
344.3 |
|
TESCO CORPORATION |
Consolidated Statement of Cash
Flows |
(in millions) |
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
Operating
Activities |
|
|
Net loss |
$ |
(13.7 |
) |
|
$ |
(56.8 |
) |
Adjustments to
reconcile net loss to cash provided by (used in) operating
activities: |
|
|
|
Depreciation and
amortization |
6.0 |
|
|
8.0 |
|
Stock compensation
expense |
1.2 |
|
|
1.1 |
|
Bad debt expense
(recovery) |
(0.1 |
) |
|
0.5 |
|
Amortization of
financial items |
— |
|
|
0.2 |
|
Gain on sale of
operating assets |
(0.7 |
) |
|
(0.3 |
) |
Long-lived asset
impairments |
— |
|
|
35.5 |
|
Changes in the fair
value of contingent earn-out obligations |
— |
|
|
(0.1 |
) |
Changes in operating
assets and liabilities: |
|
|
|
Accounts receivable
trade, net |
(6.0 |
) |
|
15.3 |
|
Inventories, net |
2.6 |
|
|
2.2 |
|
Prepaid and other
current assets |
1.7 |
|
|
2.3 |
|
Accounts payable and
accrued liabilities |
(0.9 |
) |
|
(5.9 |
) |
Income taxes
payable |
0.8 |
|
|
0.1 |
|
Other non-current
assets and liabilities, net |
0.2 |
|
|
— |
|
Net cash provided by
(used in) operating activities |
(8.9 |
) |
|
2.1 |
|
Investing
Activities |
|
|
|
Additions to property,
plant and equipment |
(0.7 |
) |
|
(0.8 |
) |
Proceeds on sale of
operating assets |
0.4 |
|
|
1.1 |
|
Other, net |
— |
|
|
— |
|
Net cash provided by
(used in) investing activities |
(0.3 |
) |
|
0.3 |
|
Financing
Activities |
|
|
|
Changes in restricted
cash |
0.8 |
|
|
— |
|
Net cash provided by
financing activities |
0.8 |
|
|
— |
|
Change in cash and cash
equivalents |
(8.4 |
) |
|
2.4 |
|
Cash and cash
equivalents, beginning of period |
91.5 |
|
|
51.5 |
|
Cash and cash
equivalents, end of period |
$ |
83.1 |
|
|
$ |
53.9 |
|
Supplemental
cash flow information |
|
|
|
Cash payments for
interest |
$ |
— |
|
|
$ |
0.1 |
|
Cash payments for
income taxes, net of refunds |
0.2 |
|
|
0.5 |
|
Property, plant and
equipment accrued in accounts payable |
1.3 |
|
|
0.6 |
|
TESCO CORPORATION |
Segment Results |
(in millions, except per share
information) |
|
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
|
2017 |
|
2016 |
|
2016 |
Segment revenue |
|
|
|
|
|
Products |
|
|
|
|
Products sales |
$ |
5.9 |
|
|
|
|
$ |
4.2 |
|
|
|
$ |
4.8 |
|
Rental services |
5.3 |
|
|
|
6.6 |
|
|
|
6.7 |
|
After-market sales and
service |
8.9 |
|
|
|
5.8 |
|
|
|
7.3 |
|
|
20.1 |
|
|
|
16.6 |
|
|
|
18.8 |
|
Tubular Services |
|
|
|
|
|
Land |
10.3 |
|
|
|
10.8 |
|
|
|
9.6 |
|
Offshore |
4.2 |
|
|
|
7.4 |
|
|
|
4.8 |
|
CDS, Parts &
Accessories |
2.1 |
|
|
|
0.7 |
|
|
|
2.1 |
|
|
16.6 |
|
|
|
18.9 |
|
|
|
16.5 |
|
|
|
|
|
|
|
Consolidated
revenue |
$ |
36.7 |
|
|
|
|
$ |
35.5 |
|
|
|
$ |
35.3 |
|
|
|
|
|
|
|
Segment operating
loss: |
|
|
|
|
|
Products |
(0.9 |
) |
|
|
(39.2 |
) |
|
|
(5.3 |
) |
Tubular Services |
(5.7 |
) |
|
|
(6.0 |
) |
|
|
(6.9 |
) |
Research and
Engineering |
(0.8 |
) |
|
|
(1.6 |
) |
|
|
(1.5 |
) |
Corporate and
Other |
(5.5 |
) |
|
|
(8.0 |
) |
|
|
(5.2 |
) |
Operating loss |
$ |
(12.9 |
) |
|
|
|
$ |
(54.8 |
) |
|
|
$ |
(18.9 |
) |
|
|
|
|
|
|
U.S.
GAAP consolidated net loss |
$ |
(13.7 |
) |
|
|
|
$ |
(56.8 |
) |
|
|
$ |
(20.1 |
) |
U.S.
GAAP loss per share (diluted) |
$ |
(0.29 |
) |
|
|
|
$ |
(1.45 |
) |
|
|
$ |
(0.43 |
) |
|
|
|
|
|
|
Adjusted EBITDA(a) (as
defined) |
$ |
(4.7 |
) |
|
|
|
$ |
(7.8 |
) |
|
|
$ |
(4.4 |
) |
________________________
- 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 March 31, |
|
Three Months Ended December 31, |
|
2017 |
|
2016 |
|
2016 |
Net loss under U.S.
GAAP |
$ |
(13.7 |
) |
|
$ |
(56.8 |
) |
|
$ |
(20.1 |
) |
Income tax expense |
1.0 |
|
|
0.5 |
|
|
0.2 |
|
Depreciation and
amortization |
6.0 |
|
|
8.0 |
|
|
6.8 |
|
Interest expense |
0.1 |
|
|
0.4 |
|
|
— |
|
Stock compensation
expense-non-cash |
1.2 |
|
|
1.1 |
|
|
1.8 |
|
Severance &
restructuring charges |
0.7 |
|
|
3.0 |
|
|
2.3 |
|
Bad debt from certain
accounts |
— |
|
|
0.3 |
|
|
3.1 |
|
Foreign exchange loss
(gain) |
(0.1 |
) |
|
1.2 |
|
|
1.1 |
|
Asset sale
reserves |
— |
|
|
(2.3 |
) |
|
— |
|
Warranty & legal
reserves |
0.1 |
|
|
— |
|
|
(0.4 |
) |
Inventory reserves |
— |
|
|
1.1 |
|
|
0.8 |
|
Long-lived asset
impairments |
— |
|
|
35.5 |
|
|
— |
|
Credit facility
costs |
— |
|
|
0.2 |
|
|
— |
|
Adjusted EBITDA |
$ |
(4.7 |
) |
|
$ |
(7.8 |
) |
|
$ |
(4.4 |
) |
|
(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 March 31, |
|
Three Months Ended December 31, |
|
2017 |
|
2016 |
|
2016 |
Net loss under U.S.
GAAP |
$ |
(13.7 |
) |
|
$ |
(56.8 |
) |
|
$ |
(20.1 |
) |
Severance &
restructuring charges |
0.6 |
|
|
3.0 |
|
|
2.2 |
|
Bad debt on certain
accounts |
— |
|
|
0.3 |
|
|
3.1 |
|
Certain foreign
exchange losses (gains) |
(0.4 |
) |
|
1.1 |
|
|
1.1 |
|
Asset sale
reserves |
— |
|
|
(2.3 |
) |
|
— |
|
Warranty & legal
reserves |
0.1 |
|
|
— |
|
|
(0.4 |
) |
Inventory reserves |
— |
|
|
1.1 |
|
|
0.8 |
|
Long-lived asset
impairments |
— |
|
|
35.5 |
|
|
— |
|
Credit facility
costs |
— |
|
|
0.2 |
|
|
— |
|
Adjusted net loss |
$ |
(13.4 |
) |
|
$ |
(17.9 |
) |
|
$ |
(13.3 |
) |
|
|
|
|
|
|
Diluted loss per share
under U.S. GAAP |
$ |
(0.29 |
) |
|
$ |
(1.45 |
) |
|
$ |
(0.43 |
) |
Severance &
restructuring charges |
0.01 |
|
|
0.07 |
|
|
0.05 |
|
Bad debt on certain
accounts |
— |
|
|
0.01 |
|
|
0.07 |
|
Certain foreign
exchange losses (gains) |
(0.01 |
) |
|
0.03 |
|
|
0.02 |
|
Asset sale
reserves |
— |
|
|
(0.06 |
) |
|
— |
|
Warranty & legal
reserves |
— |
|
|
— |
|
|
(0.01 |
) |
Inventory reserves |
— |
|
|
0.03 |
|
|
0.02 |
|
Long-lived asset
impairments |
— |
|
|
0.90 |
|
|
— |
|
Prepaid credit facility
costs |
— |
|
|
0.01 |
|
|
— |
|
Adjusted diluted loss
per share |
$ |
(0.29 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.28 |
) |
(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 March 31,
2017 |
|
Products |
|
Tubular Services |
|
Research & Engineering |
|
Corporate& Other |
|
Total |
Operating loss under
U.S. GAAP |
$ |
(0.9 |
) |
|
$ |
(5.7 |
) |
|
$ |
(0.8 |
) |
|
$ |
(5.5 |
) |
|
$ |
(12.9 |
) |
Severance &
restructuring charges |
0.1 |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
0.7 |
|
Warranty & legal
reserves |
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
Adjusted operating
loss |
$ |
(0.7 |
) |
|
$ |
(5.1 |
) |
|
$ |
(0.8 |
) |
|
$ |
(5.5 |
) |
|
$ |
(12.1 |
) |
|
Three Months Ended December 31,
2016 |
|
Products |
|
Tubular Services |
|
Research & Engineering |
|
Corporate & Other |
|
Total |
Operating loss under
U.S. GAAP |
$ |
(5.3 |
) |
|
$ |
(6.9 |
) |
|
$ |
(1.5 |
) |
|
$ |
(5.2 |
) |
|
$ |
(18.9 |
) |
Severance &
restructuring charges |
0.3 |
|
|
1.5 |
|
|
0.2 |
|
|
0.3 |
|
|
2.3 |
|
Bad debt on certain
accounts |
3.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
3.1 |
|
Warranty & legal
reserves |
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
Inventory reserves |
0.7 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
0.8 |
|
Adjusted operating
loss |
$ |
(1.6 |
) |
|
$ |
(5.3 |
) |
|
$ |
(1.3 |
) |
|
$ |
(4.9 |
) |
|
$ |
(13.1 |
) |
|
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 &
executive retirement 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 |
) |
(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 March 31, 2017 |
|
Three Months Ended December 31,
2016 |
Net cash provided by
(used in) operating activities |
|
$ |
(8.9 |
) |
|
$ |
3.5 |
|
Capital
expenditures |
|
(0.7 |
) |
|
(2.6 |
) |
Proceeds on asset
sales |
|
0.4 |
|
|
1.2 |
|
Free cash flow |
|
(9.2 |
) |
|
2.1 |
|
Severance &
restructuring payments |
|
(1.1 |
) |
|
(0.4 |
) |
Adjusted free cash
flow |
|
$ |
(8.1 |
) |
|
$ |
2.5 |
|
(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.
For further information please
contact:Chris Boone (713) 359-7000Tesco
Corporation
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