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T-3 Energy Services, Inc. Announces Earnings for Third Quarter 2008 HOUSTON, Nov. 5, 2008 (GLOBE NEWSWIRE) -- T-3 Energy Services,
Inc. (``T-3 Energy'') (NasdaqGS:TTES - News) reported third quarter
2008 net income from continuing operations of $4.7 million,
or $0.37 per diluted share, which included the negative
impact of hurricanes and the cost for strategic alternatives
of $0.24 and $0.18 per diluted share, respectively. Net
income from continuing operations is down 35% and 36%, respectively,
from $7.2 million or $0.58 per diluted share for the third
quarter of 2007. Year to date 2008 net income from continuing
operations of $21.7 million, or $1.69 per diluted share,
included the negative impact of hurricanes and the cost
for strategic alternatives of $0.24 and $0.31 per diluted
share, respectively. Net income from continuing operations
was up 21% and 11%, respectively, from $18.0 million, or
$1.52 per diluted share reported during 2007. As previously released by the Company, the third quarter 2008 financial results include costs, which were $2.2 million before tax and $2.3 million after tax, related to the pursuit of strategic alternatives for the Company, and the impact of hurricanes Gustav and Ike, which was $4.7 million before tax and $3.1 million after tax. Revenues for the third quarter of 2008 increased 31% to $69.8 million from $53.2 million for the same period in 2007. Year to date 2008 revenues increased 35% to $206.7 million from $153.1 million for the same period in 2007. The Company's revenues increased primarily due to past acquisitions and the continued demand for its pressure and flow control and pipeline original equipment products and services. These revenue increases were partially offset by the impact of the hurricanes, which delayed sales of approximately $8.5 million originally anticipated to ship during the third quarter of 2008 into the fourth quarter of 2008 and the first quarter of 2009. Backlog has increased approximately 61% to $94.2 million at September 30, 2008 from $58.7 million at September 30, 2007, primarily as a result of the continued demand for the Company's products and services and the delayed sales due to the hurricanes. Operating income for the third quarter of 2008 was $10.6 million, and was flat compared with the same period in 2007, despite the strategic alternatives costs and the hurricanes. Year to date 2008 operating income increased 33% to $36.3 million from $27.4 million for the same period in 2007. The increase in the Company's year to date operating income is primarily related to increased revenues and gross margins. Gross margins were 38% and 39% during the three and nine months ended September 30, 2008, compared to 36% and 37% during the three and nine months ended September 30, 2007, respectively. This gross margin increase resulted from the sale of higher margin products and services and operational efficiencies, partially offset by hurricane-related costs associated with lost absorption, downtime pay and minimal property damage. As of September 30, 2008, availability under our senior credit facility, which matures October 26, 2012, was $147.3 million. Gus D. Halas, T-3 Energy's Chairman, President and Chief Executive Officer commented, ``The third quarter of 2008 provided record revenues for T-3, even with the impact of the hurricanes on our Gulf Coast facilities. Despite the current economic environment, the demand for our products and services remains strong as evidenced by our backlog continuing to grow as compared to prior periods and outstanding quotes remaining at high levels. Our gross margin of 39% for 2008 is down slightly from the 40% achieved through June 30, 2008, due to the hurricane impact, but is still higher year over year. ``We believe that our strong liquidity and past success gaining recognition as a name-brand original equipment manufacturer and service provider on an international scale leave us well positioned for potential industry volatility in the upcoming quarters, 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 September 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.
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
Revenues:
Products $ 59,635 $ 42,903 $ 175,386 $ 121,743
Services 10,203 10,327 31,312 31,320
--------- --------- --------- ---------
69,838 53,230 206,698 153,063
Cost of revenues:
Products 37,440 27,493 107,815 77,332
Services 6,100 6,370 18,334 19,125
--------- --------- --------- ---------
43,540 33,863 126,149 96,457
Gross profit 26,298 19,367 80,549 56,606
Selling, general and
administrative expenses 15,696 8,789 44,226 29,230
--------- --------- --------- ---------
Income from operations 10,602 10,578 36,323 27,376
Interest expense (453) (98) (1,946) (354)
Interest income 80 424 143 705
Other income (expense),
net (164) 301 343 780
--------- --------- --------- ---------
Income from continuing
operations before
provision for income
taxes 10,065 11,205 34,863 28,507
Provision for income
taxes 5,359 3,984 13,128 10,474
--------- --------- --------- ---------
Income from continuing
operations 4,706 7,221 21,735 18,033
Loss from discontinued
operations, net of tax (9) (92) (20) (1,167)
--------- --------- --------- ---------
Net income $ 4,697 $ 7,129 $ 21,715 $ 16,866
========= ========= ========= =========
Basic earnings (loss)
per common share:
Continuing operations $ .38 $ .59 $ 1.75 $ 1.56
========= ========= ========= =========
Discontinued operations $ --- $ --- $ --- $ (.10)
========= ========= ========= =========
Net income per common
share $ .38 $ .59 $ 1.75 $ 1.46
========= ========= ========= =========
Diluted earnings (loss)
per common share:
Continuing operations $ .37 $ .58 $ 1.69 $ 1.52
========= ========= ========= =========
Discontinued operations $ --- $ (.01) $ --- $ (.10)
========= ========= ========= =========
Net income per common
share $ .37 $ .57 $ 1.69 $ 1.42
========= ========= ========= =========
Weighted average common
shares outstanding:
Basic 12,504 12,170 12,437 11,550
========= ========= ========= =========
Diluted 12,872 12,523 12,885 11,879
========= ========= ========= =========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except for share amounts)
Sept. 30, Dec. 31,
2008 2007
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,620 $ 9,522
Accounts receivable - trade, net 43,182 44,180
Inventories 59,819 47,457
Deferred income taxes 4,754 3,354
Prepaids and other current assets 6,162 5,824
-------- --------
Total current assets 115,537 110,337
Property and equipment, net 43,982 40,073
Goodwill, net 112,531 112,249
Other intangible assets, net 34,124 35,065
Other assets 2,972 2,838
-------- --------
Total assets $309,146 $300,562
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 24,296 $ 20,974
Accrued expenses and other 18,880 15,156
Current maturities of long-term debt 5 74
-------- --------
Total current liabilities 43,181 36,204
Long-term debt, less current maturities 31,834 61,423
Other long-term liabilities 1,614 1,101
Deferred income taxes 12,408 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, 12,530,791 and
12,320,341 shares issued and outstanding at
September 30, 2008 and December 31, 2007,
respectively 13 12
Warrants, 10,157 and 13,138 issued and
outstanding at September 30, 2008 and
December 31, 2007, respectively 20 26
Additional paid-in capital 169,317 160,446
Retained earnings 48,754 27,039
Accumulated other comprehensive income 2,005 3,125
-------- --------
Total stockholders' equity 220,109 190,648
-------- --------
Total liabilities and stockholders' equity $309,146 $300,562
======== ========
T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine Months Ended
September 30,
2008 2007
---- ----
Cash flows from operating activities:
Net income $ 21,715 $ 16,866
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations, net of tax 20 1,167
Bad debt expense 340 171
Depreciation and amortization 6,444 3,181
Amortization of deferred loan costs 174 189
Loss (gain) on sale of assets (33) 12
Write-off of property and equipment, net 25 --
Deferred taxes (718) (266)
Employee stock-based compensation expense 4,025 2,463
Excess tax benefits from stock-based
compensation (1,688) (653)
Equity in earnings of unconsolidated
affiliate (175) (485)
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
Accounts receivable - trade 1,249 (3,985)
Inventories (12,630) (11,496)
Prepaids and other current assets (539) 2,034
Other assets (219) (472)
Accounts payable - trade 3,452 1,128
Accrued expenses and other 5,868 (515)
-------- --------
Net cash provided by operating activities 27,310 9,339
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (7,488) (4,305)
Proceeds from sales of property and equipment 92 40
Cash paid for acquisitions, net of cash
acquired (2,732) --
Equity investment in unconsolidated affiliate -- (460)
-------- --------
Net cash used in investing activities (10,128) (4,725)
-------- --------
Cash flows from financing activities:
Net borrowings (repayments) under swing line
credit facility 4,414 (85)
Net repayments under revolving credit
facility (34,000) --
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 1,152
Proceeds from exercise of warrants 38 4,018
Excess tax benefits from stock-based
compensation 1,688 653
-------- --------
Net cash provided by (used in) financing
activities (24,947) 27,895
-------- --------
Effect of exchange rate changes on cash and
cash equivalents (137) 65
-------- --------
Net increase (decrease) in cash and cash
equivalents (7,902) 32,574
Cash and cash equivalents, beginning of period 9,522 3,393
-------- --------
Cash and cash equivalents, end of period $ 1,620 $ 35,967
======== ========
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 Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- -------------
2008 2007 2008 2007
---- ---- ---- ----
INCOME FROM CONTINUING
OPERATIONS:
GAAP Income from continuing
operations $ 4,706 $ 7,221 $ 21,735 $ 18,033
Strategic alternatives costs,
net of tax (A) 2,344 -- 3,950 --
Change of control charge, net
of tax (B) -- -- -- 1,929
Hurricane-related impact, net
of tax (C) 3,057 -- 3,057 --
-------- -------- -------- --------
Non-GAAP Income from
continuing operations (D) $ 10,107 $ 7,221 $ 28,742 $ 19,962
======== ======== ======== ========
DILUTED EARNINGS PER SHARE:
GAAP continuing operations
diluted earnings per share $ 0.37 $ 0.58 $ 1.69 $ 1.52
Strategic alternatives costs,
net of tax 0.18 -- 0.31 --
Change of control charge, net
of tax -- -- -- 0.16
Hurricane-related impact, net
of tax 0.24 -- 0.24 --
-------- -------- -------- --------
Non-GAAP continuing
operations diluted earnings
per share (D) $ 0.79 $ 0.58 $ 2.24 $ 1.68
======== ======== ======== ========
ADJUSTED EBITDA:
GAAP Income from continuing
operations $ 4,706 $ 7,221 $ 21,735 $ 18,033
Strategic alternatives costs,
net of tax 2,344 -- 3,950 --
Change of control charge, net
of tax -- -- -- 1,929
Hurricane-related impact, net
of tax 3,057 -- 3,057 --
Provision for income taxes
(E) 6,890 3,984 15,524 11,067
Depreciation and amortization 2,000 1,085 6,444 3,181
Interest Expense 453 98 1,946 354
Interest Income (80) (424) (143) (705)
-------- -------- -------- --------
Adjusted EBITDA (F) $ 19,370 $ 11,964 $ 52,513 $ 33,859
======== ======== ======== ========
(A) Represents costs of $2.2 million and $4.7 million before tax and
$2.3 million and $4.0 million after tax related to the pursuit of
strategic alternatives for the Company for the three and nine months
ended September 30, 2008, respectively.
(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 nine months ended September 30, 2007.
(C) Represents the impact of $8.5 million of third quarter of 2008
sales delayed into the fourth quarter of 2008 and the first quarter
of 2009, which resulted in $3.3 million of deferred gross profit and
$1.4 million of costs associated with lost absorption, downtime pay
and minimal property damage due to the impacts of hurricanes Gustav
and Ike. The effect was $4.7 million before tax and $3.1 million
after tax for the three and nine months ended September 30, 2008.
(D) Non-GAAP income from continuing operations is equal to income
from continuing operations plus the strategic alternatives costs,
change of control compensation charge and hurricane-related impact,
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, change of control compensation
charge and hurricane-related impact, 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, change
of control compensation costs and hurricane-related impact 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 decreased by $0.1 million and increased by $0.8 million for the
tax effect of the strategic alternatives costs and increased by $1.6
million and $1.6 million for the tax effect of the hurricane-related
impact for the three and nine months ended September 30, 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 nine months ended September 30,
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 strategic
alternatives costs, change of control compensation charge and
hurricane-related impact, 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.
Contact: T-3 Energy Services, Inc.
James M. Mitchell, Senior Vice President
and Chief Financial Officer
713-996-4118
Source: T-3 Energy Services, Inc.
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