HOUSTON, March 2, 2009 (GLOBE NEWSWIRE) -- T-3 Energy Services, Inc. ("T-3 Energy") (Nasdaq:TTES) reported fourth quarter 2008 loss from continuing operations of ($8.7) million, or ($0.69) per diluted share, which included a goodwill impairment charge of $23.5 million, or $1.62 per diluted share. The quarter also included a tax benefit of ($0.9) million, or ($0.07) per diluted share, related to costs incurred in prior quarters related to the pursuit of strategic alternatives, that became fully deductible for tax purposes. By comparison, net income was $8.5 million, or $0.67 per diluted share, for the fourth quarter of 2007. Full year 2008 net income from continuing operations of $13.0 million, or $1.02 per diluted share, included the goodwill impairment charge previously mentioned and $4.7 million of costs related to the pursuit of strategic alternatives. Net income from continuing operations and diluted earnings per share for the year ended December 31, 2008 were down 51% and 53%, respectively, from $26.5 million, or $2.19 per diluted share, reported for the year ended December 31, 2007.
Excluding the goodwill impairment charge and strategic alternatives costs tax benefit, fourth quarter 2008 net income from continuing operations and diluted earnings per share was $10.9 million and $0.86, respectively.
Revenues for the fourth quarter of 2008 increased 22% to $78.6 million from $64.4 million for the same period in 2007. Full year 2008 revenues increased 31% to $285.3 million from $217.4 million for full year 2007. The Company's revenues increased primarily due to past acquisitions being included for a full year in 2008 and only a partial year for 2007 and the continued demand for its pressure and flow control and pipeline original equipment products and services. Backlog increased 17% to $76.1 million at December 31, 2008, versus $64.8 million at December 31, 2007.
Operating loss for the fourth quarter of 2008 was ($7.3) million, compared to operating income of $13.4 million for the fourth quarter of 2007, due to the aforementioned goodwill impairment charge. Full year 2008 operating income decreased 29% to $29.1 million from $40.8 million for the full year 2007, primarily due to the aforementioned goodwill impairment charge and strategic alternative costs incurred in 2008. Gross margins were 39% for the fourth quarter of 2008, compared to 36% for the fourth quarter of 2007. Gross margins were 39% for the year ended December 31, 2008, compared to 37% for the year ended December 31, 2007. This gross margin increase resulted from the sale of a larger percentage of higher margin products and services and operational efficiencies, partially offset by costs of approximately $1.4 million associated with lost absorption, downtime pay and minimal property damage due to the impact of Hurricanes Gustav and Ike.
Gus D. Halas, T-3 Energy's Chairman, President and Chief Executive Officer commented: "I want to commend our employees for strong execution during 2008, where we achieved record revenues and, excluding the goodwill impairment charge, income from continuing operations, continued building our global brand recognition and exited the year with our highest ever year-end backlog. While 2008 was operationally a very good year for T-3 Energy Services, 2009 will present many challenges due to macroeconomic conditions and decreased customer spending. The management team has performed well in the past and is now ready to face new challenges. We must and will continue to reduce our material and overhead costs, expand our sales footprint and continue to provide exemplary customer service."
T-3 Energy Services, Inc. provides a broad range of oilfield products and services primarily to customers in the drilling and completion of new oil and gas wells, the workover of existing wells and the production and transportation of oil and gas.
Certain comments contained in this news release concerning the anticipated financial results of the Company constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Whenever possible, the Company has identified these "forward-looking" statements by words such as "believe", "encouraged", "expect", "expected" and similar phrases. The forward-looking statements are based upon management's expectations and beliefs and, although these statements are based upon reasonable assumptions, actual results might differ materially from expected results due to a variety of factors including, but not limited to, overall demand for and pricing of the Company's products, changes in the level of oil and natural gas exploration and development, and variations in global business and economic conditions. The Company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. For a discussion of additional risks and uncertainties that could impact the Company's results, review the T-3 Energy Services, Inc. Annual Report on Form 10-K for the year ended December 31, 2008 and other filings of the Company with the Securities and Exchange Commission.
Non-GAAP Financial Measures. Certain information discussed in this news release are considered non-GAAP financial measures. See the Supplementary Data - Schedule 1 in this news release for the corresponding reconciliations to GAAP financial measures for the quarters and years ended December 31, 2008 and 2007. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results.
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
Revenues:
Products $ 65,942 $ 54,836 $241,328 $176,579
Services 12,689 9,535 44,001 40,855
-------- -------- -------- --------
78,631 64,371 285,329 217,434
Cost of revenues:
Products 40,852 35,234 148,667 112,566
Services 7,450 5,765 25,784 24,890
-------- -------- -------- --------
48,302 40,999 174,451 137,456
Gross profit 30,329 23,372 110,878 79,978
Operating expenses:
Impairment of goodwill 23,500 -- 23,500 --
Selling, general and
administrative expenses 14,092 9,987 58,318 39,217
-------- -------- -------- --------
37,592 9,987 81,818 39,217
Income (loss) from operations (7,263) 13,385 29,060 40,761
Interest expense (411) (877) (2,357) (1,231)
Interest income 5 171 148 876
Other income (expense), net 225 208 568 988
-------- -------- -------- --------
Income (loss) from continuing
operations before provision
for income taxes (7,444) 12,887 27,419 41,394
Provision for income taxes 1,246 4,413 14,374 14,887
-------- -------- -------- --------
Income (loss) from continuing
operations (8,690) 8,474 13,045 26,507
Loss from discontinued
operations, net of tax (28) (90) (48) (1,257)
-------- -------- -------- --------
Net income (loss) $ (8,718) $ 8,384 $ 12,997 $ 25,250
======== ======== ======== ========
Basic earnings (loss) per
common share:
Continuing operations $ (.69) $ .69 $ 1.05 $ 2.26
======== ======== ======== ========
Discontinued operations $ -- $ (.01) $ -- $ (.11)
======== ======== ======== ========
Net income (loss) per common
share $ (.69) $ .68 $ 1.05 $ 2.15
======== ======== ======== ========
Diluted earnings (loss) per
common share:
Continuing operations $ (.69) $ .67 $ 1.02 $ 2.19
======== ======== ======== ========
Discontinued operations $ -- $ (.01) $ -- $ (.11)
======== ======== ======== ========
Net income (loss) per
common share $ (.69) $ .66 $ 1.02 $ 2.08
======== ======== ======== ========
Weighted average common
shares outstanding:
Basic 12,514 12,249 12,457 11,726
======== ======== ======== ========
Diluted 12,677 12,720 12,812 12,114
======== ======== ======== ========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except for share amounts)
December 31, December 31,
------------ ------------
2008 2007
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 838 $ 9,522
Accounts receivable - trade, net 47,822 44,180
Inventories 58,422 47,457
Deferred income taxes 5,131 3,354
Prepaids and other current assets 4,585 5,824
--------- ---------
Total current assets 116,798 110,337
Property and equipment, net 46,071 40,073
Goodwill, net 87,929 112,249
Other intangible assets, net 33,477 35,065
Other assets 2,837 2,838
--------- ---------
Total assets $ 287,112 $ 300,562
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 26,331 $ 20,974
Accrued expenses and other 19,274 15,156
Current maturities of long-term debt 5 74
--------- ---------
Total current liabilities 45,610 36,204
Long-term debt, less current maturities 18,753 61,423
Other long-term liabilities 1,628 1,101
Deferred income taxes 10,026 11,186
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 25,000,000
shares authorized, no shares issued or
outstanding -- --
Common stock, $.001 par value, 50,000,000
shares authorized, 12,547,458 and 12,320,341
shares issued and outstanding at December
31, 2008 and 2007, respectively 13 12
Warrants, 10,157 and 13,138 issued and
outstanding at December 31, 2008 and 2007,
respectively 20 26
Additional paid-in capital 171,042 160,446
Retained earnings 40,036 27,039
Accumulated other comprehensive income (16) 3,125
--------- ---------
Total stockholders' equity 211,095 190,648
--------- ---------
Total liabilities and stockholders' equity $ 287,112 $ 300,562
========= =========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Year ended
December 31,
---------------
2008 2007
---- ----
Cash flows from operating activities:
Net income $ 12,997 $ 25,250
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss from discontinued operations, net of tax 48 1,257
Bad debt expense 384 151
Depreciation and amortization 8,349 4,971
Amortization of deferred loan costs 212 223
Write-off of deferred loan costs -- 54
Loss (gain) on sale of assets (26) 12
Deferred taxes (2,900) (732)
Employee stock-based compensation expense and
amortization of stock compensation 5,529 3,223
Excess tax benefits from stock-based
compensation (1,820) (2,019)
Equity in earnings of unconsolidated
affiliate (115) (638)
Write-off of property and equipment, net 101 27
Impairment of goodwill 23,500 --
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
Accounts receivable - trade (4,247) (6,026)
Inventories (11,859) (8,942)
Prepaids and other current assets 896 229
Other assets (414) (136)
Accounts payable - trade 5,714 497
Accrued expenses and other 6,789 (3,430)
-------- --------
Net cash provided by operating activities 43,138 13,971
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (11,300) (7,045)
Proceeds from sales of property and equipment 94 101
Cash paid for acquisitions, net of cash
acquired (2,732) (90,893)
Equity investment in unconsolidated affiliate -- (467)
Collections on notes receivable 15 --
-------- --------
Net cash used in investing activities (13,923) (98,304)
-------- --------
Cash flows from financing activities:
Net borrowings (repayments) under swing line
credit facility (2,665) 3,330
Borrowings under revolving credit facility 5,000 58,000
Repayments under revolving credit facility (45,000) --
Payments on long-term debt (97) (68)
Debt financing costs (78) (1,062)
Proceeds from exercise of stock options 3,211 2,348
Net proceeds from issuance of common stock -- 22,157
Proceeds from exercise of warrants 38 4,028
Excess tax benefits from stock-based
compensation 1,820 2,019
-------- --------
Net cash provided by (used in) financing
activities (37,771) 90,752
-------- --------
Effect of exchange rate changes on cash and
cash equivalents (34) (81)
-------- --------
Cash flows of discontinued operations:
Operating cash flows (94) (209)
-------- --------
Net cash used in discontinued operations (94) (209)
-------- --------
Net increase (decrease) in cash and cash
equivalents (8,684) 6,129
Cash and cash equivalents, beginning of year 9,522 3,393
-------- --------
Cash and cash equivalents, end of year $ 838 $ 9,522
======== ========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA - SCHEDULE 1 (UNAUDITED)
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
Three Months Ended Year Ended
------------------ ----------
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
INCOME FROM CONTINUING
OPERATIONS:
GAAP Income (loss) from
continuing operations $ (8,690) $ 8,474 $ 13,045 $ 26,507
Goodwill impairment, net
of tax (A) 20,526 -- 20,526 --
Strategic alternatives
costs, net of tax (B) (895) -- 3,055
Change of control charge,
net of tax (C) -- -- -- 1,929
-------- -------- -------- --------
Non-GAAP Income from
continuing operations (D) $ 10,941 $ 8,474 $ 36,626 $ 28,436
======== ======== ======== ========
DILUTED EARNINGS PER
SHARE:
GAAP continuing
operations diluted
earnings (loss) per
share $ (0.69) $ 0.67 $ 1.02 $ 2.19
Goodwill impairment, net
of tax 1.62 -- 1.60 --
Strategic alternatives
costs, net of tax (0.07) -- 0.24 --
Change of control charge,
net of tax -- -- -- 0.16
-------- -------- -------- --------
Non-GAAP continuing
operations diluted
earnings per share (D) $ 0.86 $ 0.67 $ 2.86 $ 2.35
======== ======== ======== ========
ADJUSTED EBITDA:
GAAP Income (loss) from
continuing operations $ (8,690) $ 8,474 $ 13,045 $ 26,507
Goodwill impairment, net
of tax 20,526 -- 20,526 --
Strategic alternatives
costs, net of tax (895) -- 3,055 --
Change of control charge,
net of tax -- -- -- 1,929
Provision for income
taxes (E) 5,115 4,413 18,993 15,480
Depreciation and
amortization 1,905 1,790 8,349 4,971
Interest Expense 411 877 2,357 1,231
Interest Income (5) (171) (148) (876)
-------- -------- -------- --------
Adjusted EBITDA (F) $ 18,367 $ 15,383 $ 66,177 $ 49,242
======== ======== ======== ========
(A) Represents costs of $23.5 million before tax and $20.5 million
after tax related to impairment of goodwill for the Company's
pressure and flow control reporting unit for the three months and
year ended December 31, 2008, respectively.
(B) Represents $0.9 million of tax benefit recorded during the three
months ended December 31, 2008 as a result of the deductibility
of $2.6 million of strategic alternative costs, of which $2.2
million was recorded in the quarter ended September 30, 2008 and
$0.4 million was recorded in the quarter ended June 30, 2008.
During the year ended December 31, 2008, $4.7 million before tax
and $3.1 million after tax of these costs was recorded.
(C) Represents costs of $2.5 million before tax and $1.9 million
after tax associated with a change of control payment and the
immediate vesting of previously unvested stock options and
restricted stock held by Gus D. Halas, the Company's Chairman,
President and Chief Executive Officer, pursuant to the terms of
his then existing employment agreement, for the year ended
December 31, 2007.
(D) Non-GAAP income from continuing operations is equal to income
from continuing operations plus the goodwill impairment charges,
strategic alternatives costs and change of control compensation
charge. Non-GAAP continuing operations diluted earnings per
share is equal to continuing operations diluted earnings per
share plus the goodwill impairment charges, strategic
alternatives costs and change of control compensation charge, net
of tax per share. We have presented Non-GAAP income from
continuing operations and Non-GAAP continuing operations diluted
earnings per share because the Company believes that reporting
income from continuing operations and diluted earnings per share
excluding the goodwill impairment charges, strategic alternatives
costs and change of control compensation costs provides useful
supplemental information regarding the Company's on-going
economic performance and, therefore, uses this financial measure
internally to evaluate and manage the Company's operations. The
Company has chosen to provide this information to investors to
enable them to perform more meaningful comparisons of the
operating results and as a means to emphasize the results of on-
going operations.
(E) Provision for income taxes in the Adjusted EBITDA calculation has
been increased by $3.0 million and $3.0 million for the tax
effect of the goodwill impairment charges and $0.9 million and
$1.6 million for the tax effect of the strategic alternative
costs for the three months and year ended December 31, 2008,
respectively. Provision for income taxes in the Adjusted EBITDA
calculation has been increased by $0.6 million for the tax effect
of the change of control charge for the year ended December 31,
2007.
(F) Adjusted EBITDA is a non-generally accepted accounting principle,
or GAAP, financial measure equal to income from continuing
operations, the most directly comparable GAAP measure, excluding
the goodwill impairment charges, strategic alternatives costs,
and change of control compensation charge, plus interest expense,
net of interest income, provision for income taxes, depreciation
and amortization. We have presented Adjusted EBITDA because we
use Adjusted EBITDA as an integral part of our internal reporting
to measure our performance and to evaluate the performance of our
senior management. We consider Adjusted EBITDA to be an
important indicator of the operational strength of our business.
Management uses Adjusted EBITDA:
* as a measure of operating performance that assists us in
comparing our performance on a consistent basis because it
removes the impact of our capital structure and asset base
from our operating results;
* as a measure for budgeting and for evaluating actual results
against our budgets;
* to assess compliance with financial ratios and covenants
included in our senior credit facility;
* in communications with lenders concerning our financial
performance; and
* to evaluate the viability of potential acquisitions and
overall rates of return.
Adjusted EBITDA eliminates the effect of considerable amounts of
non-cash depreciation and amortization. A limitation of this
measure, however, is that it does not reflect the periodic costs
of certain capitalized tangible and intangible assets used in
generating revenues in our business. Management evaluates the
costs of such tangible and intangible assets and the impact of
related impairments through other financial measures, such as
capital expenditures, investment spending and return on capital.
Therefore, we believe that Adjusted EBITDA provides useful
information to our investors regarding our performance and
overall results of operations. Adjusted EBITDA is not intended
to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either income from
continuing operations as an indicator of operating performance or
to cash flows from operating activities as a measure of liquidity.
In addition, Adjusted EBITDA is not intended to represent funds
available for dividends, reinvestment or other discretionary uses,
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. The
Adjusted EBITDA measure presented above may not be comparable to
similarly titled measures presented by other companies, and may
not be identical to corresponding measures used in our various
agreements.