UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period ended June 30, 2010
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period from
to
Commission File Number: 000-19580
T-3 ENERGY SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
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76-0697390
(IRS Employer
Identification No.)
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7135 Ardmore, Houston, Texas
(Address of Principal Executive Offices)
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77054
(Zip Code)
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(Registrants telephone number, including area code):
(713) 996-4110
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large Accelerated Filer
o
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Accelerated Filer
þ
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Non-Accelerated Filer
o
(Do not check if a smaller reporting company)
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Smaller
reporting company
o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes
o
No
þ
At July 28, 2010 the registrant had 13,338,149 shares of common stock outstanding.
TABLE OF CONTENTS
FORM 10-Q
i
PART I FINANCIAL INFORMATION
T-3 ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except for share amounts)
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June 30,
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December 31,
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2010
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2009
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(unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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7,833
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$
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11,747
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Accounts receivable trade, net
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32,713
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28,450
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Inventories
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62,412
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53,689
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Deferred income taxes
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3,114
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2,485
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Prepaids and other current assets
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6,516
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7,311
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Total current assets
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112,588
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103,682
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Property and equipment, net
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49,093
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49,353
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Goodwill, net
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88,699
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88,779
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Other intangible assets, net
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30,877
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32,091
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Other assets
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5,699
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5,916
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Total assets
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$
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286,956
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$
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279,821
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable trade
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$
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15,166
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$
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17,213
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Accrued expenses and other
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12,138
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14,359
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Current maturities of long-term debt
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Total current liabilities
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27,304
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31,572
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Long-term debt, less current maturities
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Other long-term liabilities
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959
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1,144
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Deferred income taxes
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8,710
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8,009
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Commitments and contingencies
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Stockholders equity:
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Preferred stock, $.001 par value, 25,000,000 shares
authorized, no shares issued or outstanding
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Common stock, $.001 par value, 50,000,000 shares authorized,
13,337,819 and 13,038,143 shares issued and outstanding at
June 30, 2010 and December 31, 2009
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13
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13
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Warrants, 10,157 issued and outstanding at June 30, 2010 and
December 31, 2009
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20
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20
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Additional paid-in capital
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186,835
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181,115
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Retained earnings
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61,562
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56,201
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Accumulated other comprehensive income
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1,553
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1,747
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Total stockholders equity
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249,983
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239,096
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Total liabilities and stockholders equity
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$
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286,956
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$
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279,821
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
T-3 ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands except per share amounts)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2010
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2009
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2010
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2009
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Revenues:
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Products
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$
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39,630
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$
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49,206
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$
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76,262
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$
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102,547
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Services
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8,803
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6,542
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17,173
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15,987
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48,433
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55,748
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93,435
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118,534
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Cost of revenues:
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Products
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26,032
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31,226
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50,162
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64,407
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Services
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5,066
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3,860
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10,273
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9,439
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31,098
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35,086
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60,435
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73,846
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Gross profit
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17,335
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20,662
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33,000
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44,688
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Selling, general and administrative expenses
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12,745
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13,468
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25,702
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31,546
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Equity in earnings of unconsolidated affiliates
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458
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359
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|
564
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|
553
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Income from operations
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5,048
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7,553
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7,862
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13,695
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Interest expense
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(175
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)
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(232
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)
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(342
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)
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(482
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)
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Other income, net
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75
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|
225
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137
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250
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Income from continuing operations before provision
for income taxes
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4,948
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7,546
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7,657
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13,463
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Provision for income taxes
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1,643
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2,658
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2,372
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4,755
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Income from continuing operations
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3,305
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|
|
4,888
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|
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5,285
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8,708
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Income from discontinued operations, net of tax
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76
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76
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Net income
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$
|
3,381
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$
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4,888
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|
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$
|
5,361
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$
|
8,708
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Basic earnings per common share:
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Continuing operations
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$
|
.25
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$
|
.39
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$
|
.41
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|
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$
|
.69
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Discontinued operations
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$
|
.01
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|
$
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|
$
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$
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|
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|
|
|
|
|
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|
|
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Net income per common share
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$
|
.26
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|
$
|
.39
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|
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$
|
.41
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|
$
|
.69
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|
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|
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|
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|
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Diluted earnings per common share:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Continuing operations
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$
|
.25
|
|
|
$
|
.38
|
|
|
$
|
.40
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|
|
$
|
.69
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Discontinued operations
|
|
$
|
.01
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|
|
$
|
|
|
|
$
|
.01
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|
|
$
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|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income per common share
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|
$
|
.26
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|
$
|
.38
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$
|
.41
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$
|
.69
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|
|
|
|
|
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|
|
|
|
|
|
|
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Weighted average common shares outstanding:
|
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|
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Basic
|
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|
13,022
|
|
|
|
12,638
|
|
|
|
12,969
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|
|
|
12,583
|
|
|
|
|
|
|
|
|
|
|
|
|
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Diluted
|
|
|
13,195
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|
|
|
12,744
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|
|
|
13,143
|
|
|
|
12,698
|
|
|
|
|
|
|
|
|
|
|
|
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
T-3 ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
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|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,361
|
|
|
$
|
8,708
|
|
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
|
(76
|
)
|
|
|
|
|
Bad debt expense
|
|
|
68
|
|
|
|
341
|
|
Depreciation and amortization
|
|
|
4,535
|
|
|
|
4,227
|
|
Amortization of deferred loan costs
|
|
|
114
|
|
|
|
114
|
|
Loss (gain) on sale of assets
|
|
|
(33
|
)
|
|
|
18
|
|
Write-off of property and equipment and inventory, net
|
|
|
191
|
|
|
|
76
|
|
Deferred taxes
|
|
|
(226
|
)
|
|
|
(885
|
)
|
Employee stock-based compensation expense
|
|
|
2,195
|
|
|
|
3,477
|
|
Excess tax benefits from stock-based compensation
|
|
|
(445
|
)
|
|
|
(178
|
)
|
Equity in earnings of unconsolidated affiliate
|
|
|
(564
|
)
|
|
|
(553
|
)
|
Changes in assets and liabilities, net of effect of
acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
Accounts receivable trade
|
|
|
(4,389
|
)
|
|
|
18,298
|
|
Inventories
|
|
|
(9,085
|
)
|
|
|
2,300
|
|
Prepaids and other current assets
|
|
|
797
|
|
|
|
810
|
|
Other assets
|
|
|
595
|
|
|
|
(201
|
)
|
Accounts payable trade
|
|
|
(2,017
|
)
|
|
|
(10,455
|
)
|
Accrued expenses and other
|
|
|
(1,835
|
)
|
|
|
(3,917
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(4,814
|
)
|
|
|
22,180
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(2,972
|
)
|
|
|
(2,932
|
)
|
Proceeds from sales of property and equipment
|
|
|
130
|
|
|
|
116
|
|
Equity investments in unconsolidated affiliates
|
|
|
|
|
|
|
(2,039
|
)
|
Cash paid for acquisitions, net of cash acquired
|
|
|
|
|
|
|
(7,474
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(2,842
|
)
|
|
|
(12,329
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net repayments under swing line credit facility
|
|
|
|
|
|
|
(750
|
)
|
Borrowings on revolving credit facility
|
|
|
|
|
|
|
18,000
|
|
Repayments on revolving credit facility
|
|
|
|
|
|
|
(30,000
|
)
|
Payments on long-term debt
|
|
|
|
|
|
|
(113
|
)
|
Proceeds from exercise of stock options
|
|
|
3,338
|
|
|
|
2,369
|
|
Excess tax benefits from stock-based compensation
|
|
|
445
|
|
|
|
178
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
3,783
|
|
|
|
(10,316
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(41
|
)
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(3,914
|
)
|
|
|
(416
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
11,747
|
|
|
|
838
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
7,833
|
|
|
$
|
422
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial
statements.
3
T-3 ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net income
|
|
$
|
3,381
|
|
|
$
|
4,888
|
|
|
$
|
5,361
|
|
|
$
|
8,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment, net of tax
|
|
|
(571
|
)
|
|
|
1,021
|
|
|
|
(194
|
)
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
2,810
|
|
|
$
|
5,909
|
|
|
$
|
5,167
|
|
|
$
|
9,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
T-3 ENERGY SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
T-3 Energy Services, Inc. has prepared the accompanying unaudited condensed consolidated
financial statements in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included. These financial
statements include the accounts of T-3 Energy Services, Inc. and its wholly owned subsidiaries
(collectively, T-3 or the Company). The Company accounts for its 50% investments in its
unconsolidated Mexico and Dubai affiliates under the equity method of accounting and has eliminated
all significant intercompany balances and transactions in consolidation. Operating results for the
three and six months ended June 30, 2010 may not be indicative of the results for the full year
ending December 31, 2010. The Company has made certain reclassifications to conform prior year
financial information to the current period presentation. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2009.
Fair Value of Financial Instruments
The Companys financial instruments consist of cash, accounts receivable, accounts payable and
accrued expenses. The carrying amounts of cash, accounts receivable, accounts payable and accrued
expenses approximate their respective fair values because of the short maturities of those
instruments.
Goodwill and Other Long-Lived Assets
The Company tests for the impairment of goodwill on at least an annual basis and for the
impairment of other long-lived assets upon the occurrence of a triggering event.
The Company has assessed the current market conditions and has concluded, at the present time,
that no triggering events requiring an impairment analysis of goodwill or long-lived assets have
occurred in 2010. The Company will continue to monitor for events or conditions that could change
this assessment.
New Accounting Pronouncements
On January 1, 2009, the Company adopted prospectively a new framework for measuring fair value
for non-financial assets and liabilities for which companies do not measure fair value on a
recurring basis. The application of the new principles to the Companys non-financial assets and
liabilities primarily relate to assets acquired and liabilities assumed in business combinations
and asset impairments, including goodwill and long-lived assets occurring subsequent to the
effective date. The initial application of the new principles did not have a material impact on
the Companys consolidated financial position, results of operations and cash flows, nor does the
Company expect the impact in future periods to be material.
On January 1, 2009, the Company adopted a new accounting principle on accounting for business
combinations. Due to the adoption of these new principles, approximately $125,000 of transaction
costs was expensed during the first quarter of 2009 that, prior to the issuance of these new
principles, would have been capitalized. The effect of this adoption for periods beyond the first
quarter of 2009 will be dependent upon acquisitions at that time and therefore is not currently
estimable.
In May 2009, new accounting principles were issued that establish general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available
to be issued. These new principles became effective for interim and annual periods ending
after June 15, 2009 and set forth the period after the balance sheet date during which management
of the Company should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the
5
circumstances under which the Company should recognize
events or transactions occurring after the balance sheet date in its financial statements and the
disclosures that the Company should make about events or transactions that occurred after the
balance sheet date. The Company adopted these new principles on June 30, 2009. The adoption of
these new principles did not have any impact on the Companys consolidated financial position,
results of operations and cash flows.
In October 2009, an update was issued to existing guidance on revenue recognition for
arrangements with multiple deliverables. This update will allow companies to allocate
consideration received for qualified separate deliverables using estimated selling price for both
delivered and undelivered items when vendor-specific objective evidence or third-party evidence is
unavailable. Additional disclosures discussing the nature of multiple element arrangements, the
types of deliverables under the arrangements, the general timing of their delivery, and significant
factors and estimates used to determine estimated selling prices are required. The Company will
adopt this update for new revenue arrangements entered into or materially modified beginning
January 1, 2011. The Company does not expect the provisions of this update to have a material
impact on the Companys consolidated financial position, results of operations and cash flows.
2. BUSINESS COMBINATIONS AND DISPOSITIONS
Business Combinations
On March 4, 2009, the Company purchased the assets of the surface wellhead business of Azura
Energy Systems Surface, Inc. (Azura) for $8.1 million in cash (subject to a customary working
capital adjustment) plus the assumption of accounts payable and other liabilities. During the
third quarter of 2009, the Company finalized the working capital adjustment and subsequently
adjusted the purchase price to $7.4 million. This business, which has been consolidated with the
Companys current wellhead business, provides additional geographic locations in key markets such
as the Marcellus and Barnett Shales. The Company funded the purchase of these assets from its
working capital and the use of borrowings under its senior credit facility.
On May 29, 2008, the Company exercised its option to purchase certain fixed assets and
inventory of HP&T Products, Inc. (HP&T) in India at their estimated fair value of $0.4 million.
During the first quarter of 2009, the Company made a further payment of $0.1 million based on the
final fair market valuation of the fixed assets and inventory. The Company funded the purchase of
these assets from the Companys working capital and the use of borrowings under its senior credit
facility.
These acquisitions were accounted for using the purchase method of accounting. Results of
operations for the above acquisitions are included in the accompanying condensed consolidated
financial statements since the dates of acquisition. The Company allocated the purchase prices to
the net assets acquired based upon their estimated fair market values at the dates of acquisition.
The Company considers the balances included in the consolidated balance sheets at December 31, 2009
and June 30, 2010 related to the HP&T acquisition to be final. The Company based the balances
included in the consolidated balance sheet at December 31, 2009 related to the Azura acquisition on
preliminary information and, at June 30, 2010, the Company considers these balances to be final.
These acquisitions are not material to the Companys condensed consolidated financial statements,
and therefore the Company does not present a preliminary purchase price allocation and pro forma
information.
The Company had no acquisitions for the six months ended June 30, 2010. The following
schedule summarizes investing activities related to the Companys acquisitions presented in the
condensed consolidated statements of cash flows for the six months ended June 30, 2009 (dollars in
thousands):
|
|
|
|
|
Fair value of tangible and intangible assets,
net of cash acquired
|
|
$
|
8,865
|
|
Goodwill recorded
|
|
|
|
|
Total liabilities assumed
|
|
|
(1,391
|
)
|
Common stock issued
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
$
|
7,474
|
|
|
|
|
|
6
3. INVENTORIES
Inventories consist of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Raw materials
|
|
$
|
5,812
|
|
|
$
|
5,304
|
|
Work in process
|
|
|
13,710
|
|
|
|
11,891
|
|
Finished goods and component parts
|
|
|
42,890
|
|
|
|
36,494
|
|
|
|
|
|
|
|
|
|
|
$
|
62,412
|
|
|
$
|
53,689
|
|
|
|
|
|
|
|
|
4. DEBT
The Companys senior credit facility provides for a $180 million revolving line of credit,
maturing October 26, 2012, that can be increased by up to $70 million (not to exceed a total
commitment of $250 million) with the approval of the senior lenders. The senior credit facility
consists of a U.S. revolving credit facility that includes a swing line subfacility and a letter of
credit subfacility up to $25 million and $50 million. The Companys senior credit facility also
provides for a separate Canadian revolving credit facility, which includes a swing line subfacility
of up to U.S. $5 million and a letter of credit subfacility of up to U.S. $5 million. The
revolving credit facility matures on the same date as the senior credit facility, and is subject to
the same covenants and restrictions. As of June 30, 2010, the Company had no outstanding
borrowings under its senior credit facility and Canadian revolving credit facility. However, at
June 30, 2010, the Company used the senior credit facility for letters of credit of approximately
$0.4 million that mature at various dates through 2010. The senior credit facility provides, among
other covenants and restrictions, that the Company comply with the following financial covenants: a
minimum interest coverage ratio of 3.0 to 1.0, a maximum leverage ratio of 3.0 to 1.0 and a
limitation on capital expenditures of no more than 75% of current year EBITDA (as defined under the
senior credit facility). As of June 30, 2010, the Company was in compliance with the covenants
under the senior credit facility, with an interest coverage ratio of 83.2 to 1.0, a leverage ratio
of 0.0 to 1.0, and year-to-date capital expenditures of $3.0 million, which represents 20% of
current year EBITDA.
As of June 30, 2010, the Companys availability under its senior credit facility was $98.2
million. The Companys availability in future periods is limited to the lesser of (a) three times
the Companys EBITDA on a trailing-twelve-months basis, which totals $98.6 million at June 30,
2010, less the Companys outstanding borrowings, standby letters of credits and other debt (as each
of these terms are defined under the Companys senior credit facility) and (b) the amount of
additional borrowings that would result in interest payments on all of the Companys debt
that exceed one third of the Companys EBITDA on a trailing-twelve-months basis. See Note 7 to the
Companys consolidated financial statements included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2009 for additional information related to the Companys long-term
debt.
5. EARNINGS PER SHARE
The Company computes basic net income per common share by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net income per common share
is the same as basic, but the computation also includes dilutive stock options, restricted stock
and warrants using the treasury stock method. The following tables reconcile the numerators and
denominators of the basic and diluted per common share computations for net income for the three
and six months ended June 30, 2010 and 2009, as follows (in thousands except per share data):
7
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
3,305
|
|
|
$
|
4,888
|
|
Income from discontinued operations
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,381
|
|
|
$
|
4,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
13,022
|
|
|
|
12,638
|
|
Shares for dilutive stock options, restricted stock
and warrants
|
|
|
173
|
|
|
|
106
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted
|
|
|
13,195
|
|
|
|
12,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
.25
|
|
|
$
|
.39
|
|
Discontinued operations
|
|
|
.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
$
|
.26
|
|
|
$
|
.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
.25
|
|
|
$
|
.38
|
|
Discontinued operations
|
|
|
.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
$
|
.26
|
|
|
$
|
.38
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2010 and 2009, there were 531,283 and 959,392 options that
were not included in the computation of diluted earnings per share because their inclusion would
have been anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
5,285
|
|
|
$
|
8,708
|
|
Income from discontinued operations
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,361
|
|
|
$
|
8,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
12,969
|
|
|
|
12,583
|
|
Shares for dilutive stock options,
restricted stock and warrants
|
|
|
174
|
|
|
|
115
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
diluted
|
|
|
13,143
|
|
|
|
12,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
.41
|
|
|
$
|
.69
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
$
|
.41
|
|
|
$
|
.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
.40
|
|
|
$
|
.69
|
|
Discontinued operations
|
|
|
.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
$
|
.41
|
|
|
$
|
.69
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2010 and 2009, there were 529,771 and 934,212 options that
were not included in the computation of diluted earnings per share because their inclusion would
have been anti-dilutive.
6. SEGMENT INFORMATION
The Companys determination of reportable segments considers the strategic operating units
under which the Company sells various types of products and services to various customers.
Financial information for purchase transactions is included in the segment disclosures only for
periods subsequent to the dates of acquisition.
The pressure control segment manufactures, remanufactures and repairs high pressure, severe
service products including valves, chokes, actuators, blowout preventers, accumulators, rubber
goods, manifolds and wellhead equipment.
The accounting policies of the segment are the same as those of the Company. The Company
evaluates
performance based on income from operations excluding certain corporate costs not allocated to the
segment.
8
Substantially all revenues are from domestic sources and Canada, and the Company holds
substantially all assets in the United States, Canada and India.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
Pressure
|
|
|
|
|
|
|
|
|
|
Control
|
|
|
Corporate
|
|
|
Consolidated
|
|
Three months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
48,433
|
|
|
$
|
|
|
|
$
|
48,433
|
|
Depreciation and amortization
|
|
|
2,078
|
|
|
|
234
|
|
|
|
2,312
|
|
Income (loss) from operations
|
|
|
8,699
|
|
|
|
(3,651
|
)
|
|
|
5,048
|
|
Capital expenditures
|
|
|
1,759
|
|
|
|
195
|
|
|
|
1,954
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
55,748
|
|
|
$
|
|
|
|
$
|
55,748
|
|
Depreciation and amortization
|
|
|
1,960
|
|
|
|
231
|
|
|
|
2,191
|
|
Income (loss) from operations
|
|
|
11,680
|
|
|
|
(4,127
|
)
|
|
|
7,553
|
|
Capital expenditures
|
|
|
1,061
|
|
|
|
325
|
|
|
|
1,386
|
|
|
|
|
Pressure
|
|
|
|
|
|
|
|
|
|
Control
|
|
|
Corporate
|
|
|
Consolidated
|
|
Six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
93,435
|
|
|
$
|
|
|
|
$
|
93,435
|
|
Depreciation and amortization
|
|
|
4,065
|
|
|
|
470
|
|
|
|
4,535
|
|
Income (loss) from operations
|
|
|
15,360
|
|
|
|
(7,498
|
)
|
|
|
7,862
|
|
Capital expenditures
|
|
|
2,662
|
|
|
|
310
|
|
|
|
2,972
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
118,534
|
|
|
$
|
|
|
|
$
|
118,534
|
|
Depreciation and amortization
|
|
|
3,787
|
|
|
|
440
|
|
|
|
4,227
|
|
Income (loss) from operations
|
|
|
26,725
|
|
|
|
(13,030
|
)
|
|
|
13,695
|
|
Capital expenditures.
|
|
|
2,399
|
|
|
|
533
|
|
|
|
2,932
|
|
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising in the ordinary course of business.
The Companys environmental remediation and compliance costs have not been material during any
of the periods presented. As part of the sale of a business in 2001, the Company agreed to
indemnify the buyers for certain environmental cleanup and monitoring activities associated with a
former manufacturing site. The Company and the buyers have engaged a licensed engineering firm to
conduct a post-closure corrective action subsurface investigation on the property and Phase II and
III investigations. During 2009, the Company recorded approximately $380,000 for incurred and
estimated future Phase III investigation costs to determine the location, nature and extent of any
contamination and potential future remediation costs based on the preliminary results of the Phase
III investigation. During the three months ended June 30, 2010, the Company recorded an additional
$65,000 of costs related to the Phase III investigation. The Company anticipates the environmental
monitoring activities, for which the Company bears partial liability, to continue at least through
the year 2024. While no agency-approved final remediation plan has been made of the Companys
liability for remediation costs with respect to the site, management does not expect that its
ultimate remediation costs will have a material impact on its financial position, results of
operations or cash flows.
The Company has been identified as a potentially responsible party with respect to the Lake
Calumet Cluster site near Chicago, Illinois, which has been designated for cleanup under CERCLA and
Illinois state law. Management believes that the Companys involvement at this site was minimal.
While no agency-approved final allocation has been made of the Companys liability with respect to
the Lake Calumet Cluster site, management does not expect that its ultimate share of remediation
costs will have a material impact on its financial position, results of operations or cash flows.
In July 2003, a lawsuit was filed against the Company in the U.S. District Court, Eastern
District of Louisiana as
Chevron, U.S.A. v. Aker Maritime, Inc
. The lawsuit alleged that a wholly
owned subsidiary of the Company, the assets and liabilities of which were sold in 2004, failed to
deliver the proper bolts and/or sold
defective bolts to the plaintiffs contractor to be used in connection with a drilling and
production platform in the Gulf of Mexico. The plaintiff claimed that the bolts failed and were
replaced at a cost of approximately $3.0
9
million. The complaint named the plaintiffs contractor
and seven of its suppliers and subcontractors (including the Companys subsidiary) as the
defendants and alleged negligence on the part of all defendants. The lawsuit was called to trial
during June 2007 and resulted in a jury finding of negligence against the Company and three other
defendants. The jury awarded the plaintiffs damages in the amount of $2.9 million, of which the
Company estimates its share to be $1.0 million. The Company appealed this decision, and on April
27, 2010 the Court of Appeals issued an opinion that affirmed the judgment for damages but reversed
the judgment awarding attorney fees to Chevron. Additionally, the Court of Appeals remanded the
partiescontract claims to the District Court for further consideration. The Company accrued
approximately $1.1 million, net of tax, for its share of the damages and attorney fees, court costs
and interest, as a loss from discontinued operations in the consolidated statement of operations
during the year ended December 31, 2007. During the three months ended June 30, 2010, the Company
reversed $0.1 million, net of tax, of this accrual to reflect the reversal of the judgment awarding
attorneys fees to Chevron.
At June 30, 2010, the Company had $0.4 million of letters of credit outstanding.
8. STOCKHOLDERS EQUITY
Common Stock
The Company issued 299,676 shares of common stock during the six months ended June 30, 2010 in
connection with the exercise of 202,176 stock options by option holders under the Companys 2002
Stock Incentive Plan and the granting of 102,500 shares of restricted stock to Company employees
and members of the Companys Board of Directors, less the forfeiture of 5,000 shares of restricted
stock granted in 2009.
Warrants
No warrants were exercised during the six months ended June 30, 2010. At June 30, 2010,
warrants to acquire 10,157 shares of common stock at $12.80 per share remain outstanding. Each of
these warrants expire on December 17, 2011.
Additional Paid-In Capital
During the six months ended June 30, 2010, additional paid-in capital increased as a result of
the net employee stock-based compensation cost recorded, stock options exercised by employees under
the Companys 2002 Stock Incentive Plan (as discussed above), and the excess tax benefits from the
stock options exercised and vesting of restricted stock. Partially offsetting these increases to
additional paid-in capital is a decrease principally related to the reversal of deferred tax assets
related to vested stock options that expired unexercised.
9. STOCK-BASED COMPENSATION
The T-3 Energy Services, Inc. 2002 Stock Incentive Plan, as amended (the Plan) provides
officers, employees and non-employee directors equity-based incentive awards, including stock
options and restricted stock. The Plan, after an amendment approved by the shareholders on June
14, 2010, provides for the issuance of up to 3,573,000 shares of common stock thereunder, and will
remain in effect until December 31, 2011, unless terminated earlier. Stock options granted reduce
the number of available shares under the Plan on a one share for one share basis, whereas
restricted stock reduce the number of available shares under the Plan on a 1.72 shares for one
share basis. As of June 30, 2010, the Company had 1,096,650 equivalent shares available for
issuance as stock options or 745,038 equivalent shares available for issuance as restricted stock
in connection with the Plan. Outstanding stock options and unvested restricted stock awards under
the Plan as of June 30, 2010 were 938,523 options and 206,200 shares.
Stock Option Awards
Stock options under the Companys Plan generally expire 7 to 10 years from the grant date and
vest over three years from the grant date. The Company amortizes to selling, general and
administrative expense, on a straight-line basis over the vesting period, the fair value of the
options. The Company has recorded an estimate
10
for forfeitures of awards of stock options. The
Company will adjust this estimate as actual forfeitures differ from the estimate. The Company
estimates the fair value of each stock option on the grant date using the Black-Scholes
option-pricing model, using assumptions made for the expected volatility, expected term and the
risk-free interest rate. The Company estimates the expected volatility based on historical and
implied volatilities of the Companys stock and historical and implied volatilities of comparable
companies. The Company bases the expected term on historical employee exercises of options. The
Company bases the risk-free interest rate upon the U.S. Treasury yield curve in effect at the time
of grant. The Company does not expect to pay any dividends on its common stock. Assumptions used
for stock options granted during 2010 and 2009 were as follows:
|
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|
|
|
|
|
|
|
|
|
Six Months Ended
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|
|
Six Months Ended
|
|
|
|
June 30,
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|
June 30,
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|
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2010
|
|
|
2009
|
|
Expected volatility
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|
57.00
|
%
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57.96
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%
|
Risk-free interest rate
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|
1.84
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%
|
|
|
2.33
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%
|
Expected term (in years)
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4.6
|
|
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|
4.5
|
|
The Company granted 128,000 and 207,500 options during the six months ended June 30, 2010 and
2009. The weighted average grant date fair value of options granted during the six months ended
June 30, 2010 and 2009 was $14.81 and $7.65. The Company recognized employee stock-based
compensation expense related to stock options of $1,684,000 and $3,168,000 during the six months
ended June 30, 2010 and 2009. As further discussed in Note 11 of the Companys Quarterly Report on
Form 10-Q for the period ended March 31, 2009, the stock-based compensation expense related to
stock options for the six months ended June 30, 2009 includes a charge of $651,000 related to the
immediate vesting of 50,000 unvested stock options held by the Companys former President, Chief
Executive Officer and Chairman of the Board, pursuant to the terms of his separation agreement.
On June 4, 2009, the Company converted phantom stock options awarded to Steven W. Krablin,
representing the value of the right to acquire 100,000 shares of the Companys stock, to 100,000
stock options granted pursuant to the Plan. The Company originally awarded these phantom stock
options on March 23, 2009, in connection with Mr. Krablins appointment as President, Chief
Executive Officer and Chairman of the Board, and they had a strike price of $14.85, which was equal
to the fair market value of the Companys common stock on March 23, 2009. The terms and conditions
of the stock options are unchanged from the terms and conditions of the phantom stock options. On
March 23, 2010, 50,000 of these stock options vested, and the remaining 50,000 stock options will
vest on March 23, 2011, conditioned on Mr. Krablins continued employment with the Company. For
further discussion of Mr. Krablins appointment, please refer to Note 16 of the Companys Annual
Report on Form 10-K for the year ended December 31, 2009.
Restricted Stock Awards
On June 14, 2010, the Company granted 92,500 shares of restricted stock to certain employees
of the Company and 10,000 shares of restricted stock to non-executive members of the Board of
Directors. The fair value of these restricted shares was determined based on the closing price of
the Companys stock on the grant date. The shares granted to employees will vest annually in
one-third increments beginning June 14, 2012, and the shares granted to the Board members will vest
on June 14, 2011.
On June 4, 2009, the Company converted a phantom 10,000 share restricted stock grant to Mr.
Krablin to a grant of 10,000 shares of restricted stock granted pursuant to the Plan. The Company
originally awarded this phantom restricted stock grant on March 23, 2009, in connection with Mr.
Krablins appointment with the Company. The Company determined the fair value of these restricted
shares based on the closing price of the Companys stock on June 4, 2009. On March 23, 2010, 5,000
shares of this restricted stock grant vested, and the remaining 5,000 shares will vest on March 23,
2011, conditioned on Mr. Krablins continued employment with the Company.
Additionally, on June 4, 2009, the Company granted 102,000 shares of restricted stock to
certain employees of the Company and 16,000 shares of restricted stock to non-executive members of
the Board of Directors. The Company determined the fair value of these restricted shares based on
the closing price of the Companys stock on the grant date. The shares granted to employees will
vest annually in one-third increments beginning on June
11
4, 2011, and the shares granted to the
Board members vested on June 4, 2010.
The Company recognized employee stock-based compensation expense related to restricted stock
awards of $511,000 and $309,000 during the six months ended June 30, 2010 and 2009.
10. INCOME TAXES
The Companys effective tax rate was 33.2% for the three months ended June 30, 2010 compared
to 35.2% for the three months ended June 30, 2009. The tax rate in 2010 was lower than the
statutory rate as well as the rate in 2009 primarily due to an increase in income in lower-taxed
foreign jurisdictions.
The Companys effective tax rate was 31.0% for the six months ended June 30, 2010 compared to
35.3% for the six months ended June 30, 2009. The tax rate in 2010 was lower than the statutory
rate as well as the rate in 2009 primarily due to an increase in income in lower-taxed foreign
jurisdictions as well as benefits relating to tax positions taken in prior years that have been
settled as a result of the conclusion of certain examinations by the taxing authorities.
11. OTHER
Subsequent Events
The Companys management has evaluated subsequent events for events or transactions that have
occurred after June 30, 2010 through the date of the filing of this Form 10-Q.
No events or transactions have occurred during this period that the Company believes should be
recognized or disclosed in the June 30, 2010 financial statements.
12
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis of our historical results of operations and financial
condition for the three and six months ended June 30, 2010 and 2009 should be read in conjunction
with the condensed consolidated financial statements and related notes included elsewhere in this
Form 10-Q and our financial statements and related Managements Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the
year ended December 31, 2009.
We operate under one reporting segment, pressure control. Our pressure control business has
three product lines: pressure and flow control, wellhead and pipeline, which generated 67%, 27% and
6% of our total revenue for the three months ended June 30, 2010 and 69%, 25% and 6% of our total
revenue for the six months ended June 30, 2010. We offer original equipment products and
aftermarket parts and services for each product line. Aftermarket parts and services include all
remanufactured products and parts, repair and field services. Original equipment products
generated 77% and 78% and aftermarket parts and services generated 23% and 22% of our total
revenues for the three and six months ended June 30, 2010.
Recent Industry Event
On April 22, 2010, a deepwater Gulf of Mexico semi-submersible drilling rig known as the
Deepwater Horizon
that was operated by BP Exploration & Production, Inc. (BP) sank after a
blowout and fire that began on April 20, 2010 resulting in loss of life and a substantial discharge
of hydrocarbons in the U.S. Gulf of Mexico (the
Deepwater Horizon
Incident). A blowout preventer
(BOP) originally manufactured by one of our competitors was deployed by the
Deepwater Horizon
.
In response, on May 28, 2010, the U.S. Department of the Interior, acting through the Bureau
of Ocean Energy, Management, Regulation and Enforcement, at the time known as the Minerals
Management Service (the BOEM), issued a Notice to Lessees seeking to implement a six-month
moratorium on the drilling of new wells in deep waters of the U.S. Gulf of Mexico. In addition,
the notice ordered the operators of 33 deepwater wells that were being drilled to halt drilling and
take steps to secure the affected wells. The notice also provided for certain exceptions to the
moratorium, including, among others, operations necessary to sustain reservoir pressure from
producing wells and workover operations. On June 22, 2010, a federal district court in Louisiana
issued a preliminary injunction prohibiting the enforcement of the six-month moratorium. In
response to the preliminary injunction, the U.S. Department of the Interior filed a notice of
appeal of the preliminary injunction, as well as requests for stay in both the federal district
court and the U.S. Court of Appeals for the Fifth Circuit. Each court denied the departments
request for stay of the preliminary injunction during the appeals process.
On July 12, 2010 the BOEM issued another notice to lessees and operators imposing a new
moratorium on drilling activities in the U.S. Gulf of Mexico. The notice directs the suspension of
drilling operations that use subsea BOPs or surface BOPs on floating facilities. In addition,
during the moratorium, the BOEM will not consider approval of pending and future applications for
permits to drill wells using subsea BOPs or surface BOPs on floating facilities. The moratorium
will apply through November 30, 2010, subject to modification by the BOEM. We cannot currently
predict the impact or ultimate duration of the newly issued moratorium. Even if the July 12, 2010
moratorium is invalidated, the BOEM has imposed numerous new safety requirements on the drilling of
new wells in offshore waters and these new requirements have slowed the issuance of permits for new
wells in shallow waters not subject to the moratorium.
We derive a significant portion of our revenue from the manufacture and sale of BOPs and the
repair and refurbishment of BOPs and related products. Moreover, while the majority of our
business is land-based, a number of our customers have ongoing operations in the U.S. Gulf of
Mexico and we cannot predict the full impact of the
Deepwater Horizon
Incident and the resulting
moratorium may have on our operations. In addition, we cannot predict how the United States and
other foreign governments or regulatory agencies will respond to the incident or whether changes in
laws and regulations concerning operations in the U.S. Gulf of
13
Mexico and other foreign regions offshore or more generally will be enacted. For example,
legislation is currently being considered in Congress to regulate standards, certification, testing
and documentation related to BOPs. Significant changes in regulations regarding future exploration
and production activities in the U.S. Gulf of Mexico and other foreign regions offshore or other
government or regulatory actions could reduce drilling and production activity, or increase the
costs of our products or services, which could have a material adverse impact on our business.
Conversely, other regulations may have a positive impact on our business by creating increased
demand for service, certification and sales of our equipment.
Outlook
Our business is driven by the level and complexity of worldwide oil and natural gas drilling
and completion activity, which is, in turn, primarily driven by current and anticipated price
levels for oil and natural gas. We believe that oil and natural gas prices and the drilling rig
counts in the world serve as key indirect indicators of demand for the products we manufacture and
sell and for the services we provide. As a general matter, changes in our revenue levels and our
backlog tend to lag changes in the activity levels of the industry. Industry issues also affect
our business, and, as noted above, the
Deepwater Horizon
Incident is causing our customers and the
regulators who oversee our industry to reevaluate capabilities, servicing and buying patterns of
many of the items we sell and service.
Looking forward, we are optimistic of a continued recovery. General industry improvements
since the second quarter of last year have helped us steadily increase our quarterly order intake,
or bookings. We booked approximately $50.8 million in the second quarter of 2010, which is up
from $50.3 million in the first quarter of 2010 and $45.7 million in the fourth quarter of 2009.
Backlog now stands at $42.1 million, which is up 6% from the end of the first quarter. The
majority of our business continues to be land-based, and recently we have seen our bookings shift
towards domestic land-based activity along with an uptick in bookings for service and certification
work on items that may be used in offshore surface and subsea operations. Ultimately, we
anticipate the issuance of new regulations and requirements that should have a positive impact on
our business by creating increased demand for service, certification and sales of equipment.
Results of Operations
Three Months ended June 30, 2010 Compared with Three Months ended June 30, 2009
Revenues.
Revenues decreased $7.3 million, or 13.1%, in the three months ended June 30, 2010
compared to the three months ended June 30, 2009. Our pressure and flow control products revenue
decreased approximately $10.6 million, or 24.6%, from the three months ended June 30, 2009,
primarily due to decreased demand for our pressure and flow control products and services resulting
from lower capital spending. Additionally, our pressure and flow control revenues have decreased
when compared to the second quarter of 2009 due to pricing pressure carryover from the second half
of 2009 into the first half of 2010 for some of our product offerings. Our wellhead product line
revenues increased approximately $3.8 million, or 41.7%, from the three months ended June 30, 2009,
primarily due to success in implementing our strategy to increase sales to international and larger
E&P customers. Our pipeline product line revenues decreased approximately $0.5 million, or 13.7%,
from the three months ended June 30, 2009, due to a period over period decrease in bookings for
larger pipeline-related projects.
Gross Profit.
Gross profit as a percentage of revenues was 35.8% in the three months ended
June 30, 2010 compared to 37.1% in the three months ended June 30, 2009. Gross profit margin was
lower in 2010 primarily due to changes in customer mix and product mix for our wellhead product
line. Our gross profit margins for our pressure and flow control, wellhead and pipeline product
lines were 39.9%, 23.9% and 36.6% for the three months ended June 30, 2010 compared to 38.9%, 29.7%
and 29.2% for the three months ended June 30, 2009.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses
decreased $0.7 million, or 5.4%, in the three months ended June 30, 2010 compared to the three
months ended June 30, 2009 primarily due to decreased employee stock-based compensation expense of
$0.4 million, decreased payroll-related expense of $0.1 million, decreased facility closing costs
of $0.1 million and decreased accounts receivable
14
reserves of $0.1 million.
Equity in Earnings of Unconsolidated Affiliates.
Equity in earnings of unconsolidated
affiliates for the three months ended June 30, 2010 was $0.5 million compared to $0.4 million in
the three months ended June 30, 2009. The increase was attributable to our share of the increased
earnings of our Mexico joint venture during the three months ended June 30, 2010.
Interest Expense.
Interest expense for the three months ended June 30, 2010 was $0.2 million
compared to $0.2 million in the three months ended June 30, 2009.
Income Taxes.
Income tax expense for the three months ended June 30, 2010 was $1.6 million as
compared to $2.7 million in the three months ended June 30, 2009. The decrease was primarily due
to a decrease in income before taxes. Our effective tax rate was 33.2% for the three months ended
June 30, 2010 compared to 35.2% for the three months ended June 30, 2009 primarily due to an
increase in income in lower-taxed foreign jurisdictions.
Income from Continuing Operations.
Income from continuing operations was $3.3 million in the
three months ended June 30, 2010 compared with $4.9 million in the three months ended June 30, 2009
as a result of the foregoing factors.
Discontinued Operations
.
Income from discontinued operations, net of tax for the three months
ended June 30, 2010 was $0.1 million. During 2007, the Company accrued $1.1 million, net of tax,
as a result of a jury verdict against one of the Companys discontinued businesses and, during the
three months ended June 30, 2010, the Company reversed $0.1 million, net of tax, of this accrual to
reflect the reversal of a judgment awarding attorneys fees to the plaintiff. See further discussion in
Note 7 to our condensed consolidated financial statements.
Six Months ended June 30, 2010 Compared with Six Months ended June 30, 2009
Revenues.
Revenues decreased $25.1 million, or 21.2%, in the six months ended June 30, 2010
compared to the six months ended June 30, 2009. Our pressure and flow control products revenue
decreased approximately $28.5 million, or 30.6%, from the six months ended June 30, 2009, primarily
due to decreased demand for our pressure and flow control products and services resulting from
lower capital spending. Additionally, for our pressure and flow control product line, revenues
have decreased when compared to the first six months of 2009 due to pricing pressure carryover from
the second half of 2009 into the first half of 2010 for some of our product offerings. Our
wellhead product line revenues increased approximately $6.0 million, or 33.6%, from the six months
ended June 30, 2009, primarily due to the integration of Azura, as well as success in implementing
our strategy to increase sales to international and larger E&P customers. Our pipeline product
line revenues decreased approximately $2.6 million, or 32.7%, from the six months ended June 30,
2009, due to a period over period decrease in bookings for larger pipeline-related projects.
Gross Profit.
Gross profit as a percentage of revenues was 35.3% in the six months ended June
30, 2010 compared to 37.7% in the six months ended June 30, 2009. Gross profit margin was lower in
2010 primarily due to changes in customer mix and product mix for our wellhead product line. Our
gross profit margins for our pressure and flow control, wellhead and pipeline product lines were
39.3%, 23.0% and 31.0% for the six months ended June 30, 2010 compared to 39.2%, 30.7% and 30.4%
for the six months ended June 30, 2009.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses
decreased $5.8 million, or 18.5%, in the six months ended June 30, 2010 compared to the six months
ended June 30, 2009. Selling, general and administrative expenses for the six months ended June
30, 2009 included $3.9 million of separation costs for our former President, Chief Executive
Officer and Chairman of the Board. Selling, general and administrative expenses, excluding the
separation costs in 2009, decreased $1.9 million during the six months ended June 30, 2010
primarily due to decreased employee stock-based compensation expense of $0.6 million, decreased
payroll-related expense of $0.5 million, decreased third-party sales commissions of $0.4 million,
decreased accounts receivable reserves of $0.3 million and decreased acquisition costs of $0.3
million, partially offset by increased legal and environmental costs of $0.1 million.
15
Equity in Earnings of Unconsolidated Affiliates.
Equity in earnings of unconsolidated
affiliates for the six months ended June 30, 2010 was $0.6 million compared to $0.6 million in the
six months ended June 30, 2009.
Interest Expense.
Interest expense for the six months ended June 30, 2010 was $0.3 million
compared to $0.5 million in the six months ended June 30, 2009. The decrease was attributable to
lower outstanding debt levels during the six months ending June 30, 2010.
Income Taxes.
Income tax expense for the six months ended June 30, 2010 was $2.4 million as
compared to $4.8 million in the six months ended June 30, 2009. The decrease was primarily due to
a decrease in income before taxes. Our effective tax rate was 31.0% for the six months ended June
30, 2010 compared to 35.3% for the six months ended June 30, 2009. The tax rate in 2010 was lower
than the statutory rate as well as the rate in 2009 primarily due to an increase in income in
lower-taxed foreign jurisdictions as well as benefits relating to tax positions taken in prior
years that have been settled as a result of the conclusion of certain examinations by the taxing
authorities.
Income from Continuing Operations.
Income from continuing operations was $5.3 million in the
six months ended June 30, 2010 compared with $8.7 million in the six months ended June 30, 2009 as
a result of the foregoing factors.
Discontinued Operations
.
Income from discontinued operations, net of tax for the six months
ended June 30, 2010 was $0.1 million. During 2007, the Company accrued $1.1 million, net of tax, as
a result of a jury verdict against one of the Companys discontinued businesses and, during the six
months ended June 30, 2010, the Company reversed $0.1 million, net of tax, of this accrual to
reflect the reversal of a judgment awarding attorneys fees to the paintiff. See further discussion in
Note 7 to our condensed consolidated financial statements.
Liquidity and Capital Resources
At June 30, 2010, we had working capital of $85.3 million, net available cash of $7.8 million,
no long-term debt, availability under our senior credit facility of $98.2 million and stockholders
equity of $250.0 million. Historically, our principal liquidity requirements and uses of cash have
been for debt service, capital expenditures, working capital and acquisitions, and our principal
sources of liquidity and cash have been from cash flows from operations, borrowings under our
senior credit facility and issuances of equity securities.
Net Cash Provided by (Used in) Operating Activities.
Net cash used in operating activities was
$4.8 million for the six months ended June 30, 2010 compared to net cash provided by operating
activities of $22.2 million for the six months ended June 30, 2009. The decrease in net cash
provided by operating activities was primarily attributable to decreased profit, increases in
accounts receivable and inventory and reductions in accounts payable and accrued expenses. The increase in inventory
primarily relates to stocking plans for booked and expected future orders at our pressure and flow control product line,
as well as receipt of low-cost country sourced items in association with booked and expected future orders at our wellhead product line.
Net Cash Used in Investing Activities.
Our principal uses of cash recently have been for
capital expenditures and acquisitions. For the six months ended June 30, 2010 and 2009, we made
capital expenditures of approximately $3.0 million and $2.9 million. We made equity investments
in our unconsolidated affiliates of $2.0 million for the six months ended June 30, 2009, with no
such investments for the six months ended June 30, 2010. Cash consideration paid for business
acquisitions, net of cash acquired, was $7.5 million for the six months ended June 30, 2009, with
no such acquisitions in the six months ended June 30, 2010 (see Note 2 to our condensed
consolidated financial statements).
Net Cash Provided by (Used in) Financing Activities.
Sources of cash from financing activities
primarily include borrowings under our senior credit facility and proceeds from the exercise of
stock options. Principal uses of cash include payments on our senior credit facility. Financing
activities provided net cash of $3.8 million for the six months ended June 30, 2010 compared to
using net cash of $10.3 million for the six months ended
June 30, 2009. We made net repayments under our swing line credit facility of $0.8 million during the six
16
months ended June 30, 2009, with no such repayments during the six months ended June 30, 2010. We
repaid a net $12.0 million on our revolving credit facility during the six months ended June 30,
2009, with no such repayments for the six months ended June 30, 2010. We had proceeds from the
exercise of stock options of $3.3 million and $2.4 million and from the excess tax benefits from
stock-based compensation of $0.4 million and $0.2 million during the six months ended June 30, 2010
and 2009.
Principal Debt Instruments.
Our senior credit facility provides for a $180 million revolving
line of credit, maturing October 26, 2012, that can be increased by up to $70 million (not to
exceed a total commitment of $250 million) with the approval of the senior lenders. The senior
credit facility consists of a U.S. revolving credit facility that includes a swing line subfacility
and letter of credit subfacility up to $25 million and $50 million. The senior credit facility
also provides for a separate Canadian revolving credit facility, which includes a swing line
subfacility of up to U.S. $5.0 million and a letter of credit subfacility of up to U.S. $5.0
million. The revolving credit facility matures on the same date as the senior credit facility and
is subject to the same covenants and restrictions. As of June 30, 2010, we had no outstanding
borrowings under our senior credit facility or Canadian revolving credit facility. However, at
June 30, 2010, we used the senior credit facility for letters of credit of approximately $0.4
million that mature at various dates throughout 2010. As of June 30, 2010, availability under our
senior credit facility was $98.2 million.
Our availability in future periods is limited to the lesser of (a) three times our EBITDA on a
trailing-twelve-months basis, which totals $98.6 million at June 30, 2010, less our outstanding
borrowings, standby letters of credits and other debt (as each of these terms are defined under our
senior credit facility) and (b) the amount of additional borrowings that would result in interest
payments on all of our debt that exceed one third of our EBITDA on a trailing-twelve-months
basis. Given our internal projections for the remainder of 2010, we expect availability to
increase for the last half of 2010.
Our leverage ratio governs the applicable interest rate of the senior credit facility and
ranges from the Base Rate (as defined in the senior credit facility) to the Base Rate plus 1.25% or
LIBOR plus 1.00% to LIBOR plus 2.25%. We have the option to choose between Base Rate and LIBOR
when borrowing under the revolver portion of our senior credit facility, whereas any borrowings
under the swing line portion of our senior credit facility are at the Base Rate plus the specified
margin. At June 30, 2010, we had no outstanding borrowings under the revolver and swing line
portions of our senior credit facility. We are required to prepay the senior credit facility under
certain circumstances with the net cash proceeds of certain asset sales, insurance proceeds and
equity issuances subject to certain conditions. The senior credit facility also limits our ability
to secure additional forms of debt, with the exception of secured debt (including capital leases)
with a principal amount not exceeding 10% of our consolidated net worth at any time.
The senior credit facility provides, among other covenants and restrictions, that we comply
with the following financial covenants: a minimum interest coverage ratio of 3.0 to 1.0, a maximum
leverage ratio of 3.0 to 1.0 and a limitation on capital expenditures of no more than 75% of
current year EBITDA. As of June 30, 2010, we were in compliance with the covenants under the
senior credit facility, with an interest coverage ratio of 83.2 to 1.0, a leverage ratio of 0.0 to
1.0, and year-to-date capital expenditures of $3.0 million, which represents 20% of current year
EBITDA. Substantially all of our assets collateralize the senior credit facility.
We believe that cash generated from operations and amounts available under our senior credit
facility will be sufficient to fund existing operations, working capital needs, capital expenditure
requirements, continued new product development and expansion of our geographic areas of operation,
and financing obligations during 2010.
We intend to make strategic acquisitions but cannot predict the timing, size or success of any
strategic acquisition and the related potential capital commitments. We expect to fund future
acquisitions primarily with cash flow from operations and borrowings, including the unborrowed
portion of our senior credit facility or new debt issuances, but we may also issue additional
equity either directly or in connection with an acquisition. There can be no assurance that
acquisition funds will be available at terms acceptable to us.
17
Off-Balance Sheet Arrangements
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We had no off-balance sheet arrangements as of June 30, 2010.
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Critical Accounting Policies and Estimates
The preparation of our financial statements requires us to make certain estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
Our estimation process generally relates to potential bad debts, obsolete and slow moving
inventory, and the valuation of goodwill and other long-lived assets. We base our estimates on
historical experience and on our future expectations that we believe to be reasonable under the
circumstances. The combination of these factors results in the amounts shown as carrying values of
assets and liabilities in the financial statements and accompanying notes. Actual results could
differ from our current estimates and those differences may be material.
We test for the impairment of goodwill on at least an annual basis and for the impairment of
other long-lived assets upon the occurrence of a triggering event.
We have assessed the current market conditions and have concluded, at the present time, that
no triggering events requiring an impairment analysis of goodwill or long-lived assets have
occurred in 2010. We will continue to monitor for events or conditions that could change this
assessment.
These critical accounting estimates may change as events occur, as additional information is
obtained and as our operating environment changes. There have been no material changes or
developments in our evaluation of the accounting estimates and the underlying assumptions or
methodologies that we believe to be Critical Accounting Policies and Estimates from those as
disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.
New Accounting Pronouncements
On January 1, 2009, we adopted prospectively a new framework for measuring fair value for
non-financial assets and liabilities for which companies do not measure fair value on a recurring
basis. The application of the new principles to our non-financial assets and liabilities primarily
relate to assets acquired and liabilities assumed in business combinations and asset impairments,
including goodwill and long-lived assets occurring subsequent to the effective date. The initial
application of the new principles did not have a material impact on our consolidated financial
position, results of operations and cash flows, nor do we expect the impact in future periods to be
material.
On January 1, 2009, we adopted a new accounting principle on accounting for business
combinations. Due to the adoption of these new principles during the first quarter of 2009,
approximately $125,000 of transaction costs was expensed that, prior to the issuance of these new
principles, would have been capitalized. The effect of this adoption for periods beyond the first
quarter of 2009 will be dependent upon acquisitions at that time and therefore is not currently
estimable.
In May 2009, new accounting principles were issued that establish general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. These new principles became effective
for interim and annual periods ending after June 15, 2009 and set forth the period after the
balance sheet date during which we should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, the circumstances under which we
should recognize events or transactions occurring after the balance sheet date in our financial
statements and the disclosures that we should make about events or transactions that occurred after
the balance sheet date. We adopted these new principles on June 30, 2009. The adoption of these
new principles did not have any impact on our consolidated financial position, results of
operations and cash flows.
In October 2009, an update was issued to existing guidance on revenue recognition for
arrangements with multiple deliverables. This update will allow companies to allocate
consideration received for qualified separate
18
deliverables using estimated selling price for both delivered and undelivered items when
vendor-specific objective evidence or third-party evidence is unavailable. Additional disclosures
discussing the nature of multiple element arrangements, the types of deliverables under the
arrangements, the general timing of their delivery, and significant factors and estimates used to
determine estimated selling prices are required. We will adopt this update for new revenue
arrangements entered into or materially modified beginning January 1, 2011. We do not expect the
provisions of this update to have a material impact on our consolidated financial position, results
of operations and cash flows.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in or incorporated by reference in this Quarterly Report on Form
10-Q, our filings with the SEC, and our public releases, including, but not limited to, information
regarding the status and progress of our operating activities, the plans and objectives of our
management, assumptions regarding our future performance and plans, our liquidity and capital
resources, and any financial guidance provided therein are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section
21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) and the Private
Securities Litigation Act of 1995. The words believe, may, will, estimate, continues,
anticipate, intend, budget, predict, project, expect and similar expressions identify
these forward-looking statements, although not all forward-looking statements contain these
identifying words. These forward-looking statements are made subject to certain risks and
uncertainties that could cause actual results to differ materially from those stated. Risks and
uncertainties that could cause or contribute to such differences include, without limitation, those
discussed in the section entitled Risk Factors included in our Annual Report on Form 10-K for the
year ended December 31, 2009 and our subsequent SEC filings, as well as those factors summarized
below:
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sustained or further declines in the prices for oil and natural gas;
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declines in spending levels in the oil and natural gas industry;
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general economic and business conditions, either internationally or domestically or in
the jurisdictions in which we operate;
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our ability to deliver our backlog in a timely fashion;
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our ability to successfully manage our growth and implement our business plan, including
risks and uncertainties associated with acquisitions;
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failing to develop and commercialize new products;
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damage to our brand name;
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shortages of products used in the manufacture of our products, including raw materials;
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competition in the oilfield services industry;
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our exposure to product liability claims, warranty claims or other claims or litigation;
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the effects of governmental regulation and other legal requirements; and
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shortages of qualified personnel.
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We largely base these forward-looking statements on our expectations and beliefs concerning
future events, which reflect estimates and assumptions made by our management. These estimates and
assumptions reflect our
19
best judgment based on currently known market conditions and other factors relating to our
operations and business environment, all of which are difficult to predict and many of which are
beyond our control.
Although we believe our estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are beyond our control. Our
assumptions about future events may prove to be inaccurate. We caution you that the
forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of
future performance, and we cannot assure you that those statements will be realized or the
forward-looking events and circumstances will occur. Actual results may differ materially from
those anticipated or implied in the forward-looking statements due to the factors listed in the
section entitled Risk Factors included in our Annual Report on Form 10-K for the year ended
December 31, 2009 and our subsequent SEC filings. All forward-looking statements speak only as of
the date of this report. We do not intend to publicly update or revise any forward-looking
statements as a result of new information, future events or otherwise, except as required by law.
These cautionary statements qualify all forward-looking statements attributable to us or persons
acting on our behalf.
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk that losses may occur in the value of financial
instruments as a result of movements in interest rates, foreign currency exchange rates and
commodity prices.
We are exposed to some market risk due to the floating interest rate under our senior credit
facility and our Canadian revolving credit facility. As of June 30, 2010, our senior credit
facility and our Canadian revolving credit facility did not have an outstanding principal balance,
and therefore, we did not have any exposure to rising interest rates.
The foreign currency exchange rates related to our Canadian and Indian operations and our
unconsolidated affiliates in Mexico and Dubai also expose us to some market risk. However, the
changes in foreign currency in relation to the United States dollar impact less than 1% of our net
assets.
The functional currency for our Indian operations and our Dubai affiliate is the United States
dollar. The functional currency for our Canadian operations and our Mexico affiliate is their
respective local currency. We maintain the accounting records for all of our international
subsidiaries in local currencies.
We translate the results of operations for foreign subsidiaries with functional currencies
other than the United States dollar using average exchange rates during the period. We translate
assets and liabilities of these foreign subsidiaries using the exchange rates in effect at the
balance sheet dates, and the resulting translation adjustments are included as Accumulated Other
Comprehensive Income, a component of stockholders equity. We recorded a $0.2 million loss
adjustment to our equity account for the six months ended June 30, 2010 to reflect the net impact
of the change in foreign currency exchange rate related to our international operations.
For our non-U.S. subsidiaries where the functional currency is the United States dollar, we
translate our inventories, property, plant and equipment and other non-monetary assets and
liabilities, together with their related elements of revenue and expense, at historical rates of
exchange. We translate monetary assets and liabilities at current exchange rates. We translate
all other revenues and expenses at average exchange rates. We recognize translation gains and
losses for these subsidiaries in our results of operations during the period incurred. We reflect
the gain or loss related to individual foreign currency transactions in results of operations when
incurred. We recorded a gain of approximately $0.1 million during the six months ended June 30,
2010.
21
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that
material information required to be disclosed in our reports filed under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified by the Securities
and Exchange Commission (the SEC), and that any material information relating to us is recorded,
processed, summarized and reported to our management including our Chief Executive Officer (CEO),
and our Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding
required disclosures. In designing and evaluating our disclosure controls and procedures, our
management recognizes that controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving desired control objectives. In reaching a
reasonable level of assurance, our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) of the Exchange Act, our management carried out an evaluation,
with the participation of our principal executive officer (our CEO) and our principal financial
officer (our CFO), of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of
the period covered by this report. Based on those evaluations, our CEO and CFO have concluded that
our disclosure controls and procedures are effective in ensuring that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms,
and that such information is accumulated and communicated to our management, including our CEO and
CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal controls over financial reporting (as defined in
Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2010 that
have materially affected, or are reasonably likely to materially affect, our internal controls over
financial reporting.
22
PART II OTHER INFORMATION
Item 1A. Risk Factors
Our business faces numerous risks. Any of the risks discussed below or elsewhere in this
Quarterly Report on Form 10-Q or our other SEC filings, could have a material impact on our
business, financial position or results of operations. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also impair our business
operations. For a detailed discussion of the risk factors that should be understood by any
investor contemplating an investment in us, please refer to the section entitled Item 1A. Risk
Factors in our Annual Report on Form 10-K for the year ended December 31, 2009 as supplemented by
the risk factors set forth below. There has been no material change in the risk factors set forth
in our Annual Report on Form 10-K for the year ended December 31, 2009 other than those set forth
below.
Recent events in the U.S. Gulf of Mexico and the regulatory response may have a material adverse
impact on our business.
In May, June and July of 2010, the U.S. Department of the Interior, acting through the Bureau
of Ocean Energy, Management, Regulation and Enforcement (the BOEM) issued a series of Notices to
Lessees (the NTLs) seeking to implement a six-month moratorium, until at least November 30, 2010,
on the drilling of new wells in deep waters of the U.S. Gulf of Mexico. In addition, the NTLs
ordered the operators of 33 deepwater wells that were being drilled to halt drilling and take steps
to secure the affected wells. The NTLs provide for certain exceptions to the moratorium,
including, among others, operations necessary to sustain reservoir pressure from producing wells
and workover operations. In addition, the BOEM has imposed numerous new safety requirements on the
drilling of new wells in offshore waters and these new requirements have slowed the issuance of
permits for new wells in shallow waters not subject to the moratorium. The NTLs are in response to
the April 20, 2010 explosion and fire on the
Deepwater Horizon
and the resulting oil spill. Please
see Part I, Item 2. Managements Discussion and Analysis of Financial Condition and Results of
OperationRecent Industry Event.
We cannot predict the full impact of the incident and resulting moratorium on our operations.
In addition, we cannot predict how the United States and other foreign governments or regulatory
agencies will respond to the incident or whether changes in laws and regulations concerning
operations in the U.S. Gulf of Mexico and other foreign regions offshore or more generally will be
enacted. Significant changes in regulations regarding future exploration and production activities
in the U.S. Gulf of Mexico and other foreign regions offshore or other government or regulatory
actions could reduce drilling and production activity, or increase the costs of our services, which
could have a material adverse impact on our business.
Federal and state legislation and regulatory initiatives relating to hydraulic fracturing could
result in certain of our customers encountering increased costs or additional operating
restrictions or delays in connection with their drilling activities in shale formations throughout
the United States. This could negatively impact our operations and expansion efforts in the
Marcellus Shale region.
Hydraulic fracturing is an important and common practice that is used to stimulate production
of hydrocarbons, particularly natural gas, from tight formations. The process involves the
injection of water, sand and chemicals under pressure into the formation to fracture the
surrounding rock and stimulate production. The process is typically regulated by state oil and gas
commissions but is not subject to regulation at the federal level. The U.S. Environmental
Protection Agency, or the EPA, has commenced a study of the potential environmental impacts of
hydraulic fracturing activities, and a committee of the U.S. House of Representatives is also
conducting an investigation of hydraulic fracturing practices. Legislation has been introduced
before Congress to provide for federal regulation of hydraulic fracturing and to require disclosure
of the chemicals used in the fracturing process. In addition, some states are considering adopting
regulations that could restrict hydraulic fracturing in certain circumstances.
The adoption of any future federal or state laws or implementation of regulations imposing
reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make it
more difficult for certain of
23
our customers to complete natural gas wells in shale formations, including the Marcellus Shale
in the northeastern United States, and increase the costs of compliance and doing business for our
customers operating in these geographical areas. This could lead to a decrease in the demand for
our services and have a material negative impact on our efforts to expand into the Marcellus Shale
region, which we began in 2009.
24
Item 6. Exhibits
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Exhibit Number
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Identification of Exhibit
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3.1
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Certificate of Incorporation of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 31,
2001).
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3.2
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Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2005).
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3.3
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Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2006).
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3.4
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Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2007).
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3.5
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Amended and Restated Bylaws of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 11,
2007).
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4.1
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Specimen Certificate of Common Stock, $.001 par value, of
the Company (incorporated herein by reference to Exhibit
4.1 to the Companys 2001 Annual Report on Form 10-K).
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10.1+
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Employment Agreement by and between James M. Mitchell and
T-3 Energy Services, Inc. (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the period ended March 31, 2010).
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10.2+
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Amended and Restated 2002 Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated June 16, 2010).
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31.1*
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Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.
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31.2*
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Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.
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32.1**
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Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Executive Officer).
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32.2**
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Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Financial Officer).
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*
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Filed herewith.
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**
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Furnished herewith.
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+
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Management contract or compensatory plan or arrangement
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25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th
day of July 2010.
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T-3 ENERGY SERVICES, INC.
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By:
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/s/ Jason P. Clark
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Jason P. Clark (Corporate Controller
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and Chief Accounting Officer)
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26
INDEX TO EXHIBITS
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Exhibit Number
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Identification of Exhibit
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3.1
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Certificate of Incorporation of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 31,
2001).
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3.2
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Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2005).
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3.3
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Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2006).
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3.4
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Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2007).
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3.5
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Amended and Restated Bylaws of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 11,
2007).
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4.1
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Specimen Certificate of Common Stock, $.001 par value, of
the Company (incorporated herein by reference to Exhibit
4.1 to the Companys 2001 Annual Report on Form 10-K).
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10.1+
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Employment Agreement by and between James M. Mitchell and
T-3 Energy Services, Inc. (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the period ended March 31, 2010).
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10.2+
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Amended and Restated 2002 Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated June 16, 2010).
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31.1*
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Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.
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31.2*
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Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.
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32.1**
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Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Executive Officer).
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32.2**
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Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Financial Officer).
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*
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Filed herewith.
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**
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Furnished herewith.
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+
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Management contract or compensatory plan or arrangement
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