2006 Revenues At Record High Level 2006 Income From Continuing Operations Up 129% Fourth Quarter Revenues Up 39% Fourth Quarter Income From Continuing Operations Up 75%
HOUSTON, March 16, 2007 (PRIME NEWSWIRE) -- T-3 Energy Services, Inc. ("T-3 Energy") (Nasdaq:TTES) reported fourth quarter 2006 income from continuing operations of $5.1 million, or $0.46 per diluted share, up 75% and 70%, respectively, from $2.9 million or $0.27 for the fourth quarter of 2005. For the year ended December 31, 2006, income from continuing operations of $18.4 million, or $1.68 per diluted share, was up 129% and 124%, respectively, from $8.1 million, or $0.75 per diluted share, reported for 2005. Revenues for the fourth quarter of 2006 increased 39% over the fourth quarter of 2005. For the year ended December 31, 2006, revenues increased 58% over the prior year.
The annual 2006 financial results include a charge of $1.5 million, net of tax, which is the sum of stock based compensation costs and costs related to the Form S-1/S-3 Registration Statements and subsequent Amendments ("public offering costs"). The fourth quarter 2006 results reflect $0.4 million, net of tax, of these charges. The fourth quarter and annual 2005 results include a charge of $0.4 million, net of tax, for similar public offering costs. Excluding the impact of the stock based compensation costs and public offering costs, T-3 Energy's 2006 income from continuing operations increased 64% and 135% from the fourth quarter and annual 2005 results, respectively.
For the fourth quarter and year 2006, the Company reported Adjusted EBITDA (defined as income from continuing operations, excluding stock based compensation costs and public offering costs, plus interest expense, net of interest income, provision for income taxes and depreciation and amortization), of $9.2 million and $35.2 million, respectively, a 57% and 99% increase over the same periods for 2005, respectively.
The Company's results were attributable to the favorable oil and gas operating environment that existed throughout 2006, in addition to the strong operational performance by the Company throughout its product lines. These positive conditions increased the demand for the Company's products and services resulting in additional market share. The Company's capital spending for 2006 was $9.1 million. This capital was primarily used to increase its new BOP manufacturing capacity and geographical expansions into East Texas, the Rocky Mountain and Midwest regions. The positive impact of this capital spending was noticeable in the fourth quarter of 2006. In 2007, the Company plans to incur slightly more in capital spending to increase its BOP repair capacity and continue with its geographical expansions into other wellhead production and transmission operating environments. The Company believes it will continue to see a demand for its original equipment products, particularly BOPs, through 2007. The Company also believes that there will be an increase in market demand for the repair of BOP equipment, especially in the larger sizes. As a result, the Company has commenced with its 2007 aftermarket repair capacity expansion program to address these market demands by upgrading machine tools and manufacturing repair processes, increasing its capacity and improving efficiencies. The Company plans to incur approximately $5.6 million in 2007 related to its aftermarket repair capacity expansion program. The Company believes its 2007 results will be favorable due to the continuance of its increasing shipments and backlog compared to prior years, as well as its expansion into the wellhead completion market with the introduction of its original equipment wellhead product line. Backlog has increased to $63.3 million at December 31, 2006, a 110% increase over December 31, 2005 backlog of $30.1 million. Management believes that its T-3 branded products continue to gain market acceptance, resulting in greater sales to customers that use its products in both their domestic and international operations. The 2006 results reflect an increase in wellhead engineering costs compared to prior years as the Company increased its engineering staff to provide additional focus on the engineering and design of its wellhead product line.
Gus D. Halas, T-3 Energy's Chairman, President and Chief Executive Officer commented, "Our revenues and profits for 2006 improved substantially for the third consecutive year. The strategy we set out in 2003 continues to allow the Company to gain market share with its original equipment products and aftermarket services. Our backlog has continued to grow while our shipments have increased period over period. The 2006 expansion of our manufacturing capacity resulted in positive financial results for 2006 which we expect to continue into 2007. Additionally, with the planned expansion of our BOP repair capacity, we expect to see positive results in the latter half of 2007. This capacity expansion program is intended to allow us to increase our revenues in the pressure and flow control aftermarket business and improve our operational results, especially for the larger equipment we have and will be receiving for service. Our goal is to continue to increase our market share in all product lines with our original equipment products and aftermarket services and to be the preferred provider of choice by our customers."
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. Quarterly Report on Form 10-Q for the period ending September 30, 2006 and its Annual Report on Form 10-K for the year ended December 31, 2005 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, 2006 and 2005. 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,
2006 2005 2006 2005
---- ---- ---- ----
Revenues:
Products $ 34,391 $ 24,081 $ 121,294 $ 65,635
Services 10,823 8,525 41,851 37,583
--------- --------- --------- ---------
45,214 32,606 163,145 103,218
Cost of revenues:
Products 22,873 15,310 79,285 42,397
Services 6,282 5,463 23,734 23,887
--------- --------- --------- ---------
29,155 20,773 103,019 66,284
Gross profit 16,059 11,833 60,126 36,934
Operating expenses 8,316 7,407 31,372 23,121
--------- --------- --------- ---------
Income from operations 7,743 4,426 28,754 13,813
Interest expense 159 272 903 1,491
Interest income (91) (14) (109) (83)
Other (income)
expense, net 69 (35) (612) (16)
--------- --------- --------- ---------
Income from continuing
operations before
provision for
income taxes 7,606 4,203 28,572 12,421
Provision for
income taxes 2,544 1,314 10,157 4,366
--------- --------- --------- ---------
Income from continuing
operations 5,062 2,889 18,415 8,055
Income (loss) from
discontinued
operations,
net of tax (173) 239 (323) (3,542)
--------- --------- --------- ---------
Net income $ 4,889 $ 3,128 $ 18,092 $ 4,513
========= ========= ========= =========
Basic earnings (loss)
per common share:
Continuing
operations $ .48 $ .27 $ 1.74 $ .76
========= ========= ========= =========
Discontinued
operations $ (.02) $ .02 $ (.03) $ (.33)
========= ========= ========= =========
Net income (loss)
per common share $ .46 $ .29 $ 1.71 $ .43
========= ========= ========= =========
Diluted earnings (loss)
per common share:
Continuing
operations $ .46 $ .27 $ 1.68 $ .75
========= ========= ========= =========
Discontinued
operations $ (.02) $ .02 $ (.03) $ (.33)
========= ========= ========= =========
Net income (loss)
per common share $ .44 $ .29 $ 1.65 $ .42
========= ========= ========= =========
Weighted average
common shares
outstanding:
Basic 10,651 10,582 10,613 10,582
========= ========= ========= =========
Diluted 11,070 10,700 10,934 10,670
========= ========= ========= =========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands except for share amounts)
December 31, December 31,
2006 2005
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 3,393 $ 1,162
Accounts receivable - trade, net 25,634 21,527
Inventories 27,227 18,268
Notes receivable, current portion 14 480
Deferred income taxes 2,208 1,731
Prepaids and other current assets 5,557 5,887
-------- --------
Total current assets 64,033 49,055
Property and equipment, net 24,639 18,652
Notes receivable, less current
portion 325 327
Goodwill, net 70,569 69,607
Other intangible assets, net 2,510 2,325
Other assets 567 822
-------- --------
Total assets $162,643 $140,788
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 14,453 $ 12,943
Accrued expenses and other 14,457 9,439
Current maturities of long-term debt 85 36
-------- --------
Total current liabilities 28,995 22,418
Long-term debt, less current
maturities -- 7,058
Other long-term liabilities 34 82
Deferred income taxes 3,454 2,018
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value,
5,000,000 and 25,000,000 shares
authorized at December 31, 2006
and 2005, respectively, no shares
issued or outstanding -- --
Common stock, $.001 par value,
20,000,000 and 25,000,000 shares
authorized at December 31, 2006
and 2005,respectively, 10,762,016
and 10,581,986 shares issued and
outstanding at December 31, 2006
and 2005, respectively 11 11
Warrants, 327,862 and 332,862
issued and outstanding at
December 31, 2006 and 2005,
respectively 644 644
Additional paid-in capital 126,054 123,175
Retained earnings (deficit) 2,672 (15,420)
Accumulated other comprehensive
income 779 802
-------- --------
Total stockholders' equity 130,160 109,212
-------- --------
Total liabilities and stockholders'
equity $162,643 $140,788
======== ========
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,
------------ ------------
2006 2005 2006 2005
---- ---- ---- ----
INCOME FROM CONTINUING
OPERATIONS:
GAAP Income from
continuing operations $ 5,062 $ 2,889 $ 18,415 $ 8,055
Stock-based compensation
costs, net of tax 367 -- 1,230 --
Public offering costs,
net of tax -- 423 257 423
-------- -------- -------- --------
Non-GAAP Income from
continuing
operations (B) $ 5,429 $ 3,312 $ 19,902 $ 8,478
======== ======== ======== ========
DILUTED EARNINGS PER SHARE:
GAAP continuing
operations diluted
earnings per share $ 0.46 $ 0.27 $ 1.68 $ 0.75
Stock-based compensation
costs, net of tax 0.03 -- 0.12 --
Public offering costs,
net of tax -- 0.04 0.02 0.04
-------- -------- -------- --------
Non-GAAP continuing
operations diluted
earnings per share (B) $ 0.49 $ 0.31 $ 1.82 $ 0.79
======== ======== ======== ========
ADJUSTED EBITDA:
GAAP Income from
continuing operations $ 5,062 $ 2,889 $ 18,415 $ 8,055
Stock-based compensation
costs, net of tax 367 -- 1,230 --
Public offering costs,
net of tax -- 423 257 423
Provision for income
taxes 2,762 1,532 10,958 4,584
Depreciation and
amortization 970 771 3,520 3,183
Interest Expense 159 272 903 1,491
Interest Income (91) (14) (109) (83)
-------- -------- -------- --------
Adjusted EBITDA (A) $ 9,229 $ 5,873 $ 35,174 $ 17,653
======== ======== ======== ========
(A) 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 stock-based compensation costs and public offering costs, 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.
(B) Non-GAAP income from continuing operations is equal to income from continuing operations plus stock-based compensation costs and public offering costs, net of tax. Non-GAAP continuing operations diluted earnings per share is equal to continuing operations diluted earnings per share plus stock-based compensation costs and public offering costs, 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 stock-based compensation costs and public offering 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.