Boots & Coots, Inc. (NYSE:WEL), announced revenues of $53.3
million for the first quarter ended March 31, 2010, compared to
revenues of $54.7 million for the same period last year. Net income
for the quarter was $0.7 million, or $0.01 per diluted share,
compared to $1.9 million, or $0.03 per diluted share for the first
quarter of 2009. EBITDA (earnings before interest, income taxes,
depreciation and amortization; see the reconciliation and rationale
for this non-GAAP financial measure below), adjusted for foreign
currency translation costs, was $6.5 million or 12.2% of revenues
for the quarter, compared to $6.6 million or 12.1% of revenues for
the first quarter of 2009.
“We have started to see signs of increased utilization in the
domestic market, and demand for our services in the international
markets continues to improve; however, several events had a
negative impact on the quarter,” said Jerry Winchester, chief
executive officer of Boots & Coots. “One event was the
mobilization cost for the new ONGC secure and salvage
project. By the end of the quarter we had mobilized and expect
to realize the positive financial impact of the project in the
second quarter. In addition there were costs associated with a
higher than expected currency devaluation expense in Venezuela
and expenses incurred relating to our announced merger agreement
with Halliburton, both non-operational items.”
Business Segment Results
Pressure Control
For the quarter ended March 31, 2010, the Pressure Control
segment generated revenues of $22.6 million compared to $27.0
million in the first quarter of 2009 and $23.1 million in the prior
2009 fourth quarter. Adjusted EBITDA for the first quarter was $2.2
million compared to $2.9 million for the first quarter of 2009 and
$3.5 million for the prior quarter. The quarter-over-quarter
decrease is primarily due to non-recurring international project
revenue in the fourth quarter of 2009 and a reduction in the
current quarter response revenue, offset by an increase in revenue
from Safeguard contracts and other prevention and risk management
projects in North Africa and North America. Margins in the quarter
were also negatively impacted by the mobilization on the new ONGC
project.
Well Intervention
For the quarter ended March, 2010, the Well Intervention segment
generated revenues of $23.3 million compared to $20.5 million in
the first quarter of 2009 and $23.2 million in the prior 2009
fourth quarter. Adjusted EBITDA for the first quarter was $2.8
million compared to $0.9 million for the first quarter of 2009 and
$1.9 million for the prior quarter. The increases were primarily
due to the increased performance and utilization in North Africa
and North America.
Equipment Services
For the quarter ended March 31, 2010, the Equipment Services
segment generated revenues of $7.4 million compared to $7.2 million
for the same period in 2009 and $6.7 million for the fourth quarter
of 2009. Adjusted EBITDA for the quarter was $1.4 million compared
to $2.8 million for the first quarter of 2009 and $1.4 million for
the fourth quarter of 2009. During the quarter EBITDA was
negatively impacted by expenses associated with new offices and
personnel added in South Texas to service customers operating in
the Eagle Ford shale.
For the quarter ended March 31, 2010, consolidated SG&A
expenses were $3.2 million, compared to $2.9 million in the first
quarter of 2009 and $2.9 for the prior quarter. The increase in
total SG&A expense was primarily due to increases in
professional fees related to our recently announced merger
agreement with Halliburton.
Interest expense in the 2010 first quarter was $0.8 million
compared to $1.0 million in the first quarter of last year and $0.9
million in the prior fourth quarter. The first quarter of 2009
included a write off of the remaining deferred financing charges
from the credit facility that was replaced by a new syndicated
credit agreement in February 2009. The remaining decrease from last
year’s first quarter was due to a lower composite interest rate
resulting from the February 2009 repayment of the $21.2 million
subordinated debt to Oil States Energy Services, Inc.
The Company incurred foreign currency translation costs of $1.2
million in the first quarter due to the devaluation of the
Venezuelan Bolivar effective January 11, 2010.
For the quarter ended March 31, 2010, the effective income tax
rate was 37.3% of pre-tax income compared to 31.6% of pre-tax
income in the quarter ended March 31, 2009. The change in the
Company’s annual effective rate reflects, among other items, our
best estimates of operating results and foreign currency exchange
rates.
About Boots & Coots
Boots & Coots, Inc., with its headquarters in Houston,
Texas, provides a suite of integrated pressure control services to
onshore and offshore oil and gas exploration companies around the
world. Boots & Coots’ products and services include well
intervention services designed to enhance production for oil and
gas operators. These services consist primarily of hydraulic
workover and snubbing services. Boots & Coots’ equipment
services segment provides high pressure, high temperature rental
tools. The company’s pressure control services are designed to
reduce the number and severity of critical events such as oil and
gas well fires, blowouts or other incidences due to loss of control
at the well. This segment consists primarily of the company’s
Safeguard prevention and emergency response services. Additional
information can be found at www.boots-coots.com.
Additional Information
As previously announced, on April 9, 2010, Boots & Coots
entered into a definitive merger agreement with Halliburton
pursuant to which Halliburton will acquire all of the outstanding
stock of Boots & Coots in a stock and cash transaction. The
Boards of Directors of both companies have approved the merger
agreement, and each has recommended approval of the transaction to
its respective stockholders. Completion of the transaction is
subject to the approval of the stockholders of Boots & Coots,
regulatory approvals, and other customary conditions.
In connection with the proposed merger, Halliburton and Boots
& Coots intend to file materials relating to the transaction
with the SEC, including a registration statement of Halliburton,
which will include a prospectus of Halliburton and a proxy
statement of Boots & Coots. INVESTORS AND SECURITY HOLDERS ARE
URGED TO CAREFULLY READ THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT/PROSPECTUS AND ANY OTHER MATERIALS REGARDING THE PROPOSED
MERGER WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT HALLIBURTON, BOOTS & COOTS AND THE
PROPOSED TRANSACTION. Investors and security holders may obtain a
free copy of the registration statement and the proxy
statement/prospectus when they are available and other documents
containing information about Halliburton and Boots & Coots,
without charge, at the SEC’s web site at www.sec.gov. Copies of
Halliburton’s SEC filings may also be obtained for free by
directing a request to investors@halliburton.com. Copies of the
Boots & Coots’ SEC filings may also be obtained for free by
directing a request to investorrelations@boots-coots.com.
Participants in Solicitation
Halliburton and Boots & Coots and their respective directors
and executive officers may be deemed to be participants in the
solicitation of proxies from Boots & Coots’ stockholders in
respect of the merger. Information about these persons can be found
in Halliburton’s proxy statement relating to its 2010 Annual
Meeting of Stockholders, as filed with the SEC on April 5, 2010,
and Boots & Coots’ Annual Report on Form 10-K/A, as filed with
the SEC on April 30, 2010. These documents can be obtained free of
charge from the sources indicated above. Additional information
about the interests of such persons in the solicitation of proxies
in respect of the merger will be included in the registration
statement and the proxy statement/prospectus to be filed with the
SEC in connection with the proposed transaction.
Certain statements included in this news release are intended as
"forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. Boots & Coots cautions that
actual future results may vary materially from those expressed or
implied in any forward-looking statements. More information about
the risks and uncertainties relating to these forward-looking
statements are found in Boots & Coots' SEC filings, which are
available free of charge on the SEC's web site at www.sec.gov.
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(000s except share and per
share amounts)
(unaudited)
Three Months
EndedMarch 31,
2010 2009
REVENUES $ 53,311 $ 54,662 COST OF SALES, excluding
depreciation and amortization 37,413 36,886 OPERATING EXPENSES
6,198 8,232 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,225
2,897 DEPRECIATION AND AMORTIZATION
3,414
2,831
OPERATING INCOME
3,061 3,816 INTEREST EXPENSE 776 961 FOREIGN CURRENCY
TRANSLATION 1,173 (28 ) OTHER EXPENSE, net
4
40 INCOME BEFORE INCOME TAXES
1,108 2,843 INCOME TAX EXPENSE
413
897 NET INCOME
$
695
$
1,946
Basic Earnings per Common Share
$
0.01 $ 0.03
Weighted Average Common Shares Outstanding – Basic
76,654,000 76,651,000
Diluted Earnings per Common Share
$
0.01 $ 0.03
Weighted Average Common Shares Outstanding – Diluted
80,167,000 77,752,000
Information concerning operations in our business segments for
the three months ended March 31, 2010 and 2009 is presented below.
Certain reclassifications have been made to the prior period to
conform to the current presentation.
Three Months
EndedMarch 31,
2010 2009 (in
thousands) (unaudited) Revenues Pressure Control
$ 22,558 $ 27,034 Well Intervention 23,328 20,469 Equipment
Services
7,425 7,159
$ 53,311 $
54,662 Adjusted EBITDA (a) (b) Pressure
Control $ 2,235 $ 2,949 Well Intervention 2,826 942 Equipment
Services
1,414 2,756
$ 6,475 $ 6,647
Depreciation and Amortization (c) Pressure Control $
181 $ 146 Well Intervention 2,241 2,066 Equipment Services
992 619 $
3,414 $ 2,831
Operating Income (Loss) Pressure Control $ 2,054 $ 2,803
Well Intervention 585 (1,124 ) Equipment Services
422 2,137 $
3,061 $ 3,816
_________________________________
(a) EBITDA represents earnings before interest, income taxes,
depreciation and amortization. See the reconciliation and rationale
for this non-GAAP financial measure.
(b) Adjusted EBITDA represents EBITDA before foreign currency
translation costs.
(c) Operating expenses and depreciation and amortization have
been charged to each segment based upon specific identification of
expenses and an allocation of remaining non-segment specific
expenses pro rata between segments based upon relative
revenues.
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
RECONCILIATION BETWEEN
CONSOLIDATED STATEMENTS OF
INCOME AND ADJUSTED EARNINGS
BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(in thousands)
(unaudited)
Three Months
EndedMarch 31,
2010 2009
Net Income
$
695
$
1,946
Income Tax Expense $ 413 $ 897
Interest Expense and Other,
net
$ 780 $ 1,001 Depreciation and Amortization $ 3,414 $ 2,831
Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) (a) $ 5,302 $ 6,675 Foreign Currency
Translation $ 1,173 $ (28 ) Adjusted EBITDA (b) $ 6,475 $
6,647
_________________________________
(a) Earnings before interest, income taxes, depreciation and
amortization (“EBITDA”) is a non-GAAP financial measure, as it
excludes amounts or is subject to adjustments that effectively
exclude amounts, included in the most directly comparable measure
calculated and presented in accordance with GAAP in financial
statements. “GAAP” refers to generally accepted accounting
principles in the United States of America. Non-GAAP financial
measures disclosed by management are provided as additional
information to investors in order to provide them with an
alternative method for assessing our financial condition and
operating results. These measures are not in accordance with, or a
substitute for, GAAP, and may be different from or inconsistent
with non-GAAP financial measures used by other companies. Whenever
we refer to a non-GAAP financial measure, we also present the most
directly comparable financial measure and present it in accordance
with GAAP, along with a reconciliation of the differences between
the non-GAAP financial measure and such comparable GAAP financial
measure. Management believes that EBITDA may provide additional
information with respect to the Company’s performance or ability to
meet its debt service and working capital requirements.
(b) Adjusted EBITDA represents EBITDA before foreign currency
translation costs.
BOOTS & COOTS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(000s except share and per
share amounts)
ASSETS
March
31,2010
December
31,2009
(unaudited) CURRENT ASSETS: Cash and cash equivalents $
6,794 $ 7,357 Restricted cash 323 323 Receivables, net 75,523
70,471 Inventory 4,005 3,569 Prepaid expenses and other current
assets
8,109 10,928
Total current assets
94,754
92,648 PROPERTY AND EQUIPMENT,
net 81,492 80,289 GOODWILL 14,313 14,313 INTANGIBLE ASSETS, net
7,258 7,500 OTHER ASSETS
2,757
2,616 Total assets
$
200,574 $ 197,366
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Current maturities of long-term debt $ 6,932 $ 6,931
Accounts payable 22,952 17,857 Income tax payable 5,798 3,587
Accrued compensation and benefits 3,663 6,004 Accrued taxes, other
than income tax 4,702 5,003 Accrued liabilities
6,611 6,262 Total
current liabilities
50,658
45,644 LONG-TERM DEBT, net of current
maturities 32,316 32,359 RELATED PARTY LONG-TERM DEBT 3,000 3,000
DEFERRED TAXES 3,017 5,638 OTHER LIABILITIES
605 1,108 Total
liabilities 89,596 87,749 COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock ($.00001 par
value, 5,000,000 shares authorized, 0 shares issued and outstanding
at March 31, 2010 and December 31, 2009, respectively)
—
—
Common stock ($.00001 par value,
125,000,000 shares authorized, 81,604,000 and 80,046,000 shares
issued and outstanding at March 31, 2010 and December 31, 2009)
1
1
Additional paid-in capital 130,621 129,955 Accumulated other
comprehensive loss (1,234 ) (1,234 ) Accumulated deficit
(18,410 ) (19,105
) Total stockholders' equity
110,978 109,617
Total liabilities and stockholders' equity
$
200,574 $ 197,366
BOOTS & COOTS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(000s)
(Unaudited)
Three Months
EndedMarch 31,
2010 2009 CASH FLOWS
FROM OPERATING ACTIVITIES: Net income $ 695 $ 1,946
Adjustments to reconcile net
income to net cash provided by (used in) operating activities:
Depreciation and amortization 3,414 2,831 Deferred tax expense
(credit) (2,621 ) 803 Stock-based compensation 515 375 Excess tax
expense from stock options exercised 192 — Bad debt provision, net
83 10 Gain on sale/disposal of assets (3 ) (22 )
Changes in operating assets and
liabilities, net of business acquisitions:
Receivables (5,135 ) (3,418 ) Inventory (436 ) (348 ) Prepaid
expenses and other current assets 2,819 8 Other assets (141 )
(2,829 ) Accounts payable and accrued liabilities
4,319 (359 )
Net cash provided by (used in) operating activities
3,701 (1,003 )
CASH FLOWS FROM INVESTING ACTIVITIES: Business acquired, net
of cash received — (6,668 ) Property and equipment additions (4,380
) (6,052 ) Proceeds from sale of property and equipment
8 43 Net cash used
in investing activities
(4,372 )
(12,677 ) CASH FLOWS FROM
FINANCING ACTIVITIES: Payments of related party debt — (21,166 )
Payments of term loan (1,720 ) (3,927 ) Revolving credit net
borrowings 1,690 394 Principal payments under capital lease
obligations (13 ) (10 ) Term loan borrowings — 34,400 Increase in
restricted cash — (381 ) Stock options exercised 343 — Excess tax
expense from stock options exercised
(192
) — Net cash provided by
financing activities
108
9,310 Net (decrease) in cash and cash
equivalents (563 ) (4,370 ) CASH AND CASH EQUIVALENTS, beginning of
period
7,357 6,220
CASH AND CASH EQUIVALENTS, end of period
$
6,794 $ 1,850
SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for interest $
687 $ 645 Cash paid for income taxes 225 761 NON-CASH INVESTING AND
FINANCING ACTIVITIES Long-term notes issued for acquisition of
business − 3,000
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