HOUSTON, Aug. 6, 2008 (PRIME NEWSWIRE) -- T-3 Energy Services, Inc. ("T-3 Energy") (Nasdaq:TTES) reported second quarter 2008 net income from continuing operations of $7.5 million, or $0.58 per diluted share, up 41% and 32%, respectively, from $5.3 million or $0.44 per diluted share for the second quarter of 2007. Year to date 2008 net income from continuing operations of $17.0 million, or $1.32 per diluted share, was up 58% and 40%, respectively, from $10.8 million, or $0.94 per diluted share, reported during 2007.
The second quarter 2008 financial results include costs, which were $2.5 million before tax and $1.6 million after tax, related to the pursuit of strategic alternatives for the Company. The second quarter 2007 financial results include a charge, which was $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. Excluding the impact of these strategic alternatives costs and change of control costs, T-3 Energy's net income from continuing operations and diluted earnings per share for the second quarter of 2008 were $9.1 million and $0.70, respectively, which is an increase of 26% and 17%, respectively, from $7.2 million and $0.60 per diluted share in 2007.
Revenues for the second quarter of 2008 increased 30% to $67.7 million from $51.9 million for the same period in 2007. Year to date 2008 revenues increased 37% to $136.9 million from $99.8 million for the same period in 2007. The Company's revenues increased primarily due to the acquisitions of Energy Equipment Corporation ("EEC") and Pinnacle Wellhead, Inc. ("Pinnacle") along with the continued demand for its pressure and flow control and pipeline original equipment products and services. As a result of the continued demand for the Company's pressure and flow control and pipeline products and services, its backlog has increased approximately 31% from $61.8 million at June 30, 2007 to $80.7 million at June 30, 2008.
Operating income for the second quarter of 2008 increased 42% to $11.3 million from $7.9 million for the same period in 2007. Year to date 2008 operating income increased 53% to $25.7 million from $16.8 million for the same period in 2007. The increase in the Company's operating income is primarily related to increased revenues and gross margins. Gross margins were 40% during the three and six months ended June 30, 2008, compared to 38% and 37% during the three and six months ended June 30, 2007, respectively. This gross margin increase resulted from the sale of higher margin products and services and operational efficiencies.
Gus D. Halas, T-3 Energy's Chairman, President and Chief Executive Officer commented, "The demand for our products and services remains strong as our backlog continues to grow from previous periods. We look forward to the second half of 2008 when we expect to realize the benefits of some of the international multi-rig packages that we have been quoting. We also will continue to focus on expanding our geographic presence during the second half of 2008 through acquisitions and/or joint venture arrangements. We are excited about the joint venture arrangement that we recently entered into with Aswan International Engineering Company LLC in Dubai and believe this relationship will provide us with a strong presence in the Middle East. We recently exercised our option to purchase the India manufacturing operations of HP&T Products, Inc. to provide us with another means of low cost country sourcing. Our gross margin of 40% for 2008 is another milestone for T-3 Energy. We will continue to work on sourcing and manufacturing efficiency opportunities to improve our margins. To date, 2008 has provided several new financial and operational records for T-3, such as gross profit margin and backlog levels.
"Despite the slight sequential decline, the second quarter was an important quarter for T-3 Energy and it set the stage for what we believe will be a successful second half of the year. This is demonstrated by our strong closing backlog. T-3 Energy continues to execute on our strategic growth plan as our results demonstrate. Most importantly, we continue to gain recognition as a name-brand original equipment manufacturer and service provider on an international scale and we remain steadily committed to providing responsive value to 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 June 30, 2008 and its Annual Report on Form 10-K for the year ended December 31, 2007 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 periods ended June 30, 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
---- ---- ---- ----
Revenues:
Products $ 57,724 $ 41,001 $ 115,751 $ 78,840
Services 9,966 10,932 21,109 20,993
--------- --------- --------- ---------
67,690 51,933 136,860 99,833
Cost of revenues:
Products 35,271 25,526 70,375 49,839
Services 5,339 6,519 12,234 12,755
--------- --------- --------- ---------
40,610 32,045 82,609 62,594
Gross profit 27,080 19,888 54,251 37,239
Operating expenses 15,781 11,953 28,530 20,441
--------- --------- --------- ---------
Income from
operations 11,299 7,935 25,721 16,798
Interest expense (601) (103) (1,493) (256)
Interest income 24 259 63 281
Other income, net 367 478 507 479
--------- --------- --------- ---------
Income from
continuing
operations before
provision for income
taxes 11,089 8,569 24,798 17,302
Provision for income
taxes 3,573 3,256 7,769 6,490
--------- --------- --------- ---------
Income from
continuing
operations 7,516 5,313 17,029 10,812
Loss from
discontinued
operations, net of
tax (9) (1,075) (11) (1,075)
--------- --------- --------- ---------
Net income $ 7,507 $ 4,238 $ 17,018 $ 9,737
========= ========= ========= =========
Basic earnings (loss)
per common share:
Continuing
operations $ .60 $ .45 $ 1.37 $ .96
========= ========= ========= =========
Discontinued
operations $ -- $ (.09) $ -- $ (.09)
========= ========= ========= =========
Net income per
common share $ .60 $ .36 $ 1.37 $ .87
========= ========= ========= =========
Diluted earnings
(loss) per common
share:
Continuing
operations $ .58 $ .44 $ 1.32 $ .94
========= ========= ========= =========
Discontinued
operations $ -- $ (.09) $ -- $ (.10)
========= ========= ========= =========
Net income per
common share $ .58 $ .35 $ 1.32 $ .84
========= ========= ========= =========
Weighted average
common shares
outstanding:
Basic 12,477 11,779 12,404 11,235
========= ========= ========= =========
Diluted 13,063 12,127 12,926 11,558
========= ========= ========= =========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands except for share amounts)
June 30, Dec. 31,
2008 2007
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,755 $ 9,522
Accounts receivable - trade, net 49,329 44,180
Inventories 52,856 47,457
Deferred income taxes 4,169 3,354
Prepaids and other current assets 5,134 5,824
-------- --------
Total current assets 118,243 110,337
Property and equipment, net 43,411 40,073
Goodwill, net 112,732 112,249
Other intangible assets, net 34,783 35,065
Other assets 3,152 2,838
-------- --------
Total assets $312,321 $300,562
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 24,888 $ 20,974
Accrued expenses and other 20,267 15,156
Current maturities of long-term debt 74 74
-------- --------
Total current liabilities 45,229 36,204
Long-term debt, less current maturities 39,006 61,423
Other long-term liabilities 1,283 1,101
Deferred income taxes 12,281 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, 12,520,791 and
12,320,341 shares issued and outstanding at
June 30, 2008 and December 31, 2007,
respectively 13 12
Warrants, 10,157 and 13,138 issued and
outstanding at June 30, 2008 and December
31, 2007, respectively 20 26
Additional paid-in capital 167,777 160,446
Retained earnings 44,057 27,039
Accumulated other comprehensive income 2,655 3,125
-------- --------
Total stockholders' equity 214,522 190,648
-------- --------
Total liabilities and stockholders' equity $312,321 $300,562
======== ========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended
June 30,
2008 2007
---- ----
Cash flows from operating activities:
Net income $ 17,018 $ 9,737
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss from discontinued operations, net of tax 11 1,075
Bad debt expense 68 110
Depreciation and amortization 4,444 2,096
Amortization of deferred loan costs 117 126
Loss on sale of assets -- 9
Write-off of property and equipment, net 25 --
Deferred taxes (228) (63)
Employee stock-based compensation expense 2,505 1,989
Excess tax benefits from stock-based
compensation (1,688) (435)
Equity in earnings of unconsolidated affiliate (381) (310)
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
Accounts receivable - trade (4,628) (5,159)
Inventories (5,775) (9,110)
Prepaids and other current assets 1,090 (70)
Other assets (90) (31)
Accounts payable - trade 4,001 2,445
Accrued expenses and other 6,866 1,040
-------- --------
Net cash provided by operating activities 23,355 3,449
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (5,626) (2,247)
Proceeds from sales of property and equipment -- 25
Cash paid for acquisitions, net of cash
acquired (2,732) --
Equity investment in unconsolidated affiliate -- (160)
-------- --------
Net cash used in investing activities (8,358) (2,382)
-------- --------
Cash flows from financing activities:
Net repayments under swing line credit
facility (3,415) (85)
Net repayments under revolving credit
facility (19,000) --
Payments on long-term debt (93) --
Debt financing costs (78) --
Net proceeds from issuance of common stock -- 22,157
Proceeds from exercise of stock options 3,084 836
Proceeds from exercise of warrants 38 4,018
Excess tax benefits from stock-based
compensation 1,688 435
-------- --------
Net cash provided by (used in) financing
activities (17,776) 27,361
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 12 14
-------- --------
Net increase (decrease) in cash and cash
equivalents (2,767) 28,442
Cash and cash equivalents, beginning of period 9,522 3,393
-------- --------
Cash and cash equivalents, end of period $ 6,755 $ 31,835
======== ========
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 Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
2008 2007 2008 2007
---- ---- ---- ----
INCOME FROM CONTINUING
OPERATIONS:
GAAP Income from
continuing operations $ 7,516 $ 5,313 $ 17,029 $ 10,812
Strategic alternatives
costs, net of tax (A) 1,606 -- 1,606 --
Change of control charge,
net of tax (B) -- 1,929 -- 1,929
-------- -------- -------- --------
Non-GAAP Income from
continuing operations (C) $ 9,122 $ 7,242 $ 18,635 $ 12,741
======== ======== ======== ========
DILUTED EARNINGS PER SHARE:
GAAP continuing operations
diluted earnings per
share $ 0.58 $ 0.44 $ 1.32 $ 0.94
Strategic alternatives
costs, net of tax 0.12 -- 0.12 --
Change of control charge,
net of tax -- 0.16 -- 0.16
-------- -------- -------- --------
Non-GAAP continuing
operations diluted
earnings per share (C) $ 0.70 $ 0.60 $ 1.44 $ 1.10
======== ======== ======== ========
ADJUSTED EBITDA:
GAAP Income from
continuing operation $ 7,516 $ 5,313 $ 17,029 $ 10,812
Strategic alternatives
costs, net of tax 1,606 -- 1,606 --
Change of control charge,
net of tax -- 1,929 -- 1,929
Provision for income
taxes (D) 4,438 3,849 8,634 7,083
Depreciation and
amortization 2,259 1,075 4,444 2,096
Interest Expense 601 103 1,493 256
Interest Income (24) (259) (63) (281)
-------- -------- -------- --------
Adjusted EBITDA (E) $ 16,396 $ 12,010 $ 33,143 $ 21,895
======== ======== ======== ========
(A) Represents costs of $2.5 million before tax and $1.6 million
after tax related to the pursuit of strategic alternatives for
the Company for the three and six months ended June 30, 2008.
(B) 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 three and six
months ended June 30, 2007.
(C) Non-GAAP income from continuing operations is equal to income
from continuing operations plus the strategic alternatives
costs and change of control compensation charge, net of tax.
Non-GAAP continuing operations diluted earnings per share is
equal to continuing operations diluted earnings per share plus
the 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
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.
(D) Provision for income taxes in the Adjusted EBITDA calculation
has been increased by $865,000 for the tax effect of the
strategic alternatives costs for the three and six months ended
June 30, 2008, and $593,000 for the tax effect of the change of
control charge for the three and six months ended June 30,
2007.
(E) 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 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.