Tesco Corporation Reports Q1 2009 Results



    
    Trading Symbol:
    "TESO" on NASDAQ
    

    HOUSTON, TX, May 5 /CNW/ - Tesco Corporation ("TESCO" or the "Company")
today reported net income for the quarter ended March 31, 2009 of $4.4
million, or $0.12 per diluted share. This compares to net income of $12.0
million, or $0.31 per diluted share, for the fourth quarter of 2008, and net
income of $10.7 million, or $0.29 per diluted share, for the first quarter of
2008. Operating income for the current quarter was negatively impacted by $1.6
million in severance and relocation fees, $2.2 million for the settlement of
an outstanding lawsuit and $1.0 million for legal and other fees related to
ongoing contingencies. We also recorded a one-time tax benefit of $1.6 million
resulting from a change in the Canadian tax law. Without these items, net
income would have been $6.7 million, or $0.17 per share.
    Revenue was $110.2 million for the quarter ended March 31, 2009, compared
to revenue of $139.4 million for the fourth quarter of 2008 and $129.4 million
for the first quarter of 2008.

    
                             Summary of Results
              (in millions of U.S. $, except per share amounts)
                            U.S. GAAP-Unaudited

                                              Quarter 1            Quarter 4
                                        -----------------------   -----------
                                            2009          2008          2008
                                        ----------   ----------   -----------
    Revenues                            $  110.2      $  129.4      $  139.4

    Operating Income                         4.0          16.4          16.9

    Net Income                               4.4          10.7          12.0

    EPS (diluted)                       $   0.12      $   0.29      $   0.31

    Adjusted EBITDA(*) (as defined)     $   15.1      $   24.2      $   28.7

    (*)See explanation of Non-GAAP measure below
    

    Commentary

    Julio Quintana, TESCO's Chief Executive Officer, commented "In light of
the current economic environment, we are satisfied with our Q1 results.
Revenue from our proprietary tubular business set another record last quarter
and we reduced our net debt by $4.3 million. Our focus on CASING DRILLING(TM)
costs is beginning to pay off. CASING DRILLING(TM) margins improved both
sequentially and year over year. However, we had decreased revenues in all
three of our operating segments. Drilling activity, particularly in North
America, declined at a pronounced rate. We are taking strong action to control
our costs and have reduced our global headcount by approximately 15% during
the quarter, with almost all reductions occurring in North America. We will
continue to aggressively manage all of our costs. Longer term, we believe the
fundamentals driving the growth of our global business remain intact. This
should give us the ability to maintain our core strengths and weather the
current downturn while sustaining free cash flow."

    
                             Segment Information
                           (in millions of U.S. $)
                                  Unaudited

                                              Quarter 1            Quarter 4
                                        -----------------------   -----------
                                            2009          2008          2008
                                        ----------   ----------   -----------
    Revenues:
    ---------
    Top Drives:
      Sales                             $   28.7      $   38.5      $   43.1
      Aftermarket Support                   15.8          15.0          17.1
      Rental                                23.6          27.7          29.8
                                        ----------   ----------   -----------
                                            68.1          81.2          90.0
                                        ----------   ----------   -----------
    Tubular Services(*):
      Conventional                           9.6          23.6          16.8
      Proprietary                           27.4          18.2          26.2
                                        ----------   ----------   -----------
                                            37.0          41.8          43.0

    CASING DRILLING(TM)(*)                   5.1           6.4           6.4
                                        ----------   ----------   -----------
    Total Revenues                      $  110.2      $  129.4      $  139.4
                                        ----------   ----------   -----------
                                        ----------   ----------   -----------

    Operating Income:
    -----------------
      Top Drives                        $   16.0      $   23.8      $   26.1
      Tubular Services                       2.7           6.0           5.0
      CASING DRILLING(TM)                   (1.4)         (2.6)         (3.4)
      Research and Engineering              (2.6)         (2.8)         (2.9)
      Corporate/Other                      (10.7)         (8.0)         (7.9)
                                        ----------   ----------   -----------
    Total Operating Income              $    4.0      $   16.4      $   16.9
                                        ----------   ----------   -----------
                                        ----------   ----------   -----------

    (*) Effective December 31, 2008, we began reporting our CASING
        DRILLING(TM) operations as a distinct operating segment separate from
        our Tubular Services business and we have recast prior periods to be
        presented consistently with this structure.


                 Q1 2009 Financial and Operating Highlights

    Top Drives Segment
    ------------------

    -   Revenues from the Top Drive segment for Q1 2009 were $68.1 million,
        down 24% from revenues of $90.0 million in Q4 2008, primarily due to
        a decrease in Top Drive sales. Top Drive sales for Q1 2009 included
        32 units (31 new units sold and 1 from the rental fleet). This
        compares to record number of 38 units (37 new units sold and 1 from
        the rental fleet) sold in Q4 2008 and 31 units sold in Q1 2008 (25
        new and 6 from the rental fleet).

    -   At March 31, 2009, Top Drive backlog was 35 units, with a total value
        of $34 million, versus 65 units at December 31, 2008, with a total
        value of $57 million. This compares to a backlog of 39 units at
        March 31, 2008 with a total value of $41 million.

    -   Operating days for the Top Drive rental fleet decreased to 4,673 for
        Q1 2009 compared to 5,808 in Q4 2008 and 5,689 in Q1 2008, primarily
        due to a fall off of rental activity in North America directly
        resulting from the decline in rig count.

    -   Our Top Drive operating margins were 23% in Q1 2009 compared to 29%
        in Q4 2008 and 29% in Q1 2008. The margin decrease compared to Q4
        2008 is due to the sale of smaller Top Drive units during the current
        quarter, decreased rental activities, lower margins in our
        aftermarket business and severance costs of $0.4 million.

    Tubular Services Segment
    ------------------------

    -   Revenues from the Tubular Services segment for Q1 2009 were
        $37.0 million, a decrease of $6.0 million from Q4 2008, primarily
        related to a decline in our conventional revenues, but partially
        offset by an increase in our proprietary revenues. Our conventional
        business is primarily conducted in North America and is directly tied
        to the rig count which has sharply declined over the past six months.
        We performed a record total of 562 proprietary casing running jobs in
        Q1 2009 compared to 540 in Q4 2008 and 460 in Q1 2008. We remain
        focused on converting the market to running casing with our
        proprietary CDS(TM) technology.

    -   Operating Income in our Tubular Services segment for Q1 2009 was
        $2.7 million, compared to $5.0 million in Q4 2008 and $6.0 million in
        Q1 2008. Q1 2009's operating income was unfavorably impacted by lower
        activity and pricing pressure in North America and severance costs of
        $0.2 million.

    CASING DRILLING(TM) Segment
    ---------------------------

    -   CASING DRILLING(TM) revenue in Q1 2009 was $5.1 million, compared to
        $6.4 million in Q4 2008 and $6.4 million in Q1 2008. The decrease in
        Q1 2009 compared to the Q4 and Q1 2008 was primarily due to lower
        revenue in Latin America.

    -   Operating Loss in our CASING DRILLING(TM) segment for Q1 2009 was
        $1.4 million, compared to $3.4 million in Q4 2008 and $2.6 million in
        Q1 2008. As a percentage of revenues, operating margin was a loss of
        27% compared to a loss of 54% in Q4 2008 and a loss of 41% in Q1
        2008. The improvement in our margins was due to strong efforts made
        by our CASING DRILLING(TM) team to maximize operating synergies and
        reduce costs.

    Other Segments and Expenses
    ---------------------------

    -   Corporate costs for Q1 2009 were $10.7 million, compared to
        $7.9 million for Q4 2008 and $8.0 million in Q1 2008. This increase
        was primarily due to a litigation settlement of $2.2 million,
        $0.6 million in severance costs recorded in Q1 2009 and higher legal
        costs incurred during the quarter associated with patent litigation.
        Total Selling, General and Administrative costs in Q1 2009 were
        $13.6 million compared to $12.1 million in Q4 2008 and $13.4 million
        in Q1 2008, due to the litigation settlement and severance costs
        discussed above, partially offset by lower bonus accruals recorded in
        Q1 2009 compared to Q4 2008.

    -   Research and Engineering costs for Q1 2009 of $2.6 million were down
        from $2.9 million in Q4 2008 and $2.8 million in Q1 2008. We plan to
        continue to invest in our proprietary technology through 2009.

    -   Other Income and Expense, excluding net interest expense, for Q1 2009
        totaled income of $0.2 million, compared to income of $1.4 million
        for Q4 2008 and expense of $1.6 million in Q1 2008. Other Income for
        Q1 2009 included $0.1 million of gains on foreign exchange
        valuations, while Other Income for Q4 2008 included a gain of
        $1.1 million related to foreign exchange valuations. Other Expense
        for Q1 2008 primarily consisted of $1.7 million in foreign exchange
        losses.

    -   Our effective tax rate for Q1 2009 was a benefit of 21% compared to a
        provision of 31% in Q4 2008 and a provision of 22% in Q1 2008. During
        the first quarter of 2009, a new Canadian tax law was passed, and the
        effect was a one-time tax benefit of $1.6 million to the Company's
        income tax expense. Excluding this one-time tax benefit, our
        effective tax rate was a provision of 24%.

    Financial Condition
    -------------------

    -   At March 31, 2009, cash and cash equivalents increased to $22.3
        million from $20.6 million at December 31, 2008, while debt decreased
        during the same period by $2.7 million. Our net debt(1) of $24.6
        million at March 31, 2009 represents a net debt to book
        capitalization of 6.4%(2). Net debt was $29.0 million at December 31,
        2008 and $71.7 million at March 31, 2008.

    -   Total capital expenditures were $5.2 million in Q1 2009, compared to
        $21.6 million in Q4 2008 and $20.1 million in Q1 2008. We project our
        total capital expenditures for 2009 to be approximately $20 to
        $30 million.

    Conference Call
    ---------------
    

    The Company will conduct a conference call to discuss its results for the
first quarter of 2009 tomorrow (Wednesday, May 6, 2009) at 10:00 a.m. CDT.
Individuals who wish to participate in the conference call should dial
US/Canada (866) 433-0163 or International (706) 679-3976 approximately five to
ten minutes prior to the scheduled start time of the call. The conference ID
for this call is 96967059. The conference call and all questions and answers
will be recorded and made available until June 6, 2009. To listen to the
recording call (800) 642-1687 or (706) 645-9291 and enter conference ID
96967059. The conference call will be webcast live as well as for on-demand
listening 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.


    
           Non-GAAP Measures - Adjusted EBITDA (as defined below)

    (in millions of U.S. $)                    Quarter 1           Quarter 4
    -----------------------             -----------------------   -----------
                                            2009          2008          2008
                                        ----------   ----------   -----------
    Net Income                          $    4.4      $   10.7      $   12.0
    Income Taxes                            (0.7)          3.0           5.3
    Depreciation and Amortization            9.3           7.8           8.7
    Net Interest expense                     0.5           1.1           1.0
    Stock Compensation Expense -
     non-cash                                1.6           1.6           1.7
                                        ----------   ----------   -----------
    Adjusted EBITDA                     $   15.1      $   24.2      $   28.7
                                        ----------   ----------   -----------
                                        ----------   ----------   -----------
    Our management evaluates Company performance based on non-GAAP measures,
of which a primary performance measure is EBITDA. EBITDA consists of earnings
(net income or loss) available to common stockholders before interest expense,
income tax expense, non-cash stock compensation, non-cash impairments,
depreciation and amortization and other non-cash items. This measure may not
be comparable to similarly titled measures employed by other companies and is
not a measure of performance calculated in accordance with GAAP. EBITDA 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.
    We believe 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 net interest
        expense, depreciation and amortization, which can vary substantially
        from company to company depending upon accounting methods and book
        value of assets, 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) and asset base (primarily
        depreciation and amortization) and actions that do not affect
        liquidity (stock compensation expense) 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.

    Our management uses EBITDA:

    -   as a measure of operating performance because it assists us in
        comparing our performance on a consistent basis as it removes the
        impact of our capital structure and asset base from our operating
        results;

    -   as one method we use 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;

    -   to assess compliance with financial ratios and covenants included in
        our credit agreements; and

    -   in communications with investors, analysts, lenders, and others
        concerning our financial performance.
    

    Caution Regarding Forward-Looking Information; Risk Factors

    This press 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 revenues,
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 press 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 changes in oil and natural gas prices and worldwide and domestic economic
conditions on drilling activity and demand for and pricing of our products and
services, other risks inherent in the drilling services industry (e.g.
operational risks, potential delays or changes in customers' exploration or
development projects or capital expenditures, the uncertainty of estimates and
projections relating to levels of rental activities, uncertainty of estimates
and projections of costs and expenses, risks in conducting foreign operations,
the consolidation of our customers, and intense competition in our industry),
risks, including litigation, associated with our intellectual property and
with the performance of our technology. 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 at www.tescocorp.com
and on SEDAR at www.sedar.com. Our U.S. public filings are available at
www.sec.gov and at www.tescocorp.com.
    The risks included here are not exhaustive. Refer to "Part I, Item 1A -
Risk Factors" in our annual report on Form 10-K for the year ended December
31, 2008 and "Part II, Item 1A - Risk Factors" in our quarterly report on Form
10-Q to be filed for the quarter ended March 31, 2009 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.

    
    ---------------------
    (1) Net debt is calculated by subtracting cash and cash equivalents from
        the sum of long term debt plus the current portion of long term debt.
    (2) Net debt to book capitalization is calculated by dividing net debt by
        the sum of net debt plus shareholders' equity.


                              TESCO CORPORATION
     (Millions of U.S. Dollars, except share and per share information)

                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                       For the Three Months
                                                          Ended March 31,
                                                     ------------------------
                                                         2009         2008
                                                     -----------  -----------
                                                            (unaudited)

    REVENUE                                           $   110.2    $   129.4

    OPERATING EXPENSES
    Cost of Sales and Services                             90.0         96.8
    Selling, General and Administrative                    13.6         13.4
    Research and Engineering                                2.6          2.8
                                                     -----------  -----------
                                                          106.2        113.0
                                                     -----------  -----------
      OPERATING INCOME                                      4.0         16.4
    Interest Expense, net                                   0.5          1.1
    Other (Income) Expense, net                            (0.2)         1.6
                                                     -----------  -----------
      INCOME BEFORE INCOME TAXES                            3.7         13.7
    Income taxes                                           (0.7)         3.0
                                                     -----------  -----------
      NET INCOME                                      $     4.4    $    10.7
                                                     -----------  -----------
                                                     -----------  -----------
    Earnings per share:
      Basic                                           $    0.12    $    0.29
      Diluted                                         $    0.12    $    0.29
    Weighted average number of shares:
      Basic                                          37,516,582   36,845,888
      Diluted                                        38,347,352   37,410,041



                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                                      March 31,  December 31,
                                                        2009        2008
                                                     ----------- ------------
                                                           (unaudited)
    ASSETS
      Cash and Cash Equivalents                       $    22.3    $    20.6
      Accounts Receivable, net                             78.1         97.7
      Inventories                                         105.9         96.0
      Other Current Assets                                 29.7         24.6
                                                     -----------  -----------
        Current Assets                                    236.0        238.9
      Property, Plant and Equipment, net                  204.2        209.0
      Goodwill                                             28.7         28.7
      Other Assets                                         18.6         16.6
                                                     -----------  -----------
                                                      $   487.5    $   493.2
                                                     -----------  -----------
                                                     -----------  -----------
    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current Maturities of Long Term Debt            $     7.5    $    10.2
      Accounts Payable                                     33.6         38.9
      Accrued and Other Current Liabilities                42.0         44.5
                                                     -----------  -----------
        Current Liabilities                                83.1         93.6
      Long Term Debt                                       39.4         39.4
      Deferred Income Taxes                                 7.7          8.2
      Shareholders' Equity                                357.3        352.0
                                                     -----------  -----------
                                                      $   487.5    $   493.2
                                                     -----------  -----------
                                                     -----------  -----------
    





For further information:

For further information: Julio Quintana, (713) 359-7000; Bob Kayl, (713)
359-7000, Tesco Corporation

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