Logan International Inc. (TSX:LII) ("Logan" or the "Company") today announced
the results of its third quarter ended September 30, 2013. Revenue in the third
quarter was $46.7 million as compared to $44.6 million in the prior year's third
quarter. Net earnings were $4.9 million or $.14 per diluted share in this year's
third quarter, as compared to $15.5 million or $.46 per diluted share in last
year's third quarter. In last year's third quarter, the Company recorded a gain
of approximately $11 million or $.33 per diluted share from the change in the
fair value of contingent consideration relating to the acquisition of Xtend
Energy Services Inc. ("Xtend"). This year's third quarter Modified EBITDA (a
non-GAAP measure) increased to $11.3 million from $10.7 million in last year's
third quarter. The increases in revenue and in Modified EBITDA are mostly
attributable to the operating performance of Logan Oil Tools, Xtend and Logan
SuperAbrasives, formerly known as Dennis Tool Company.
Logan recorded year to date revenue of $148.5 million in 2013 as compared to
$125.7 million in the corresponding period of last year and reported net
earnings of $14.9 million in 2013 or $.44 per diluted share, as compared to
$20.7 million or $.61 per diluted share in the corresponding period last year.
Current year-to-date Modified EBITDA was $36.6 million as compared to prior
year-to-date Modified EBITDA of $27.6 million.
The interim financial reports for the three and nine month periods ended
September 30, 2013 include the operating results of the Sup-R-Jar business,
which was acquired in April 2013. In addition, the interim financial reports for
the three and nine month periods ended September 30, 2012 include the
post-acquisition operating results of Xtend, which was acquired on March 1,
2012.
Logan's Chief Executive Officer Gerald Hage stated, "We are pleased to report
increases in our quarterly revenue and Modified EBITDA, despite a slight decline
in drilling rig activity in North America and a slower than expected recovery
from the Canadian break-up. Logan Oil Tools' quarterly sales and operating
profit both grew by approximately 8% from the prior year, mostly on the strength
of the Eagle Ford and Permian basins. Order flow continued at a steady pace
throughout the quarter. Xtend also recorded solid gains over the prior year
quarter as revenue increased by 7% and operating profit by over 10%. The
improvement in Xtend's quarterly performance was due mostly to continued gains
in the US. We are in the process of combining the Xciter tool and the Sup-R-Jar
under one sales and management team - we believe that these tools are very
complementary and will benefit from the combination. Logan Completion Systems
("LCS") recorded declines in revenue and operating profit for this year's
quarter as compared to last year. The declines were mostly due to adverse
weather conditions in Canada, a slower recovery from the Canadian break-up and
start-up costs incurred in the opening of the US location in Longview, Texas.
During the quarter, we also finalized a supply agreement with a Chinese service
company for the sale of completion products into China and we initiated
negotiations of a similar arrangement with a Russian service company. We expect
to close the Russian agreement in the fourth quarter. As we develop new
geographic markets, we may experience greater unevenness in our quarterly
revenue and profits as customer orders can be large. Combined operating results
for Kline Oilfield Equipment, Inc. ("Kline"), Logan SuperAbrasives and Scope
Production Developments included a slight improvement in operating profit,
despite a small decline in sales. During the quarter, Kline manufactured and
sold completion products, including packers and composite bridge plugs, to LCS,
providing not only a cost savings but also quality assurance. We also
reorganized certain manufacturing processes at Dennis Tool Company and changed
its name to Logan SuperAbrasives. Finally, we reduced total debt by over $3
million in the quarter. Looking to the fourth quarter, we expect to close the
year with another positive quarter, due to continued industry strength and
market share gains. As we have disclosed in prior reports, our Board of
Directors is conducting a strategic review process to enhance shareholder value
that has not yet been completed."
Logan manufactures and sells a comprehensive line of quality fishing and
intervention tools, including retrieving, surface, stroking and remedial tools
for a variety of well workover, intervention, drilling, and completion
activities (Logan Oil Tools, Inc.); manufactures and sells high-performance
poly-crystalline diamond compact ("PDC") cutters and bearings (Logan
SuperAbrasives), manufactures and sells packers, bridge plugs, and other
completion products (Kline Oilfield Equipment, Inc.); provides proprietary
multi-zonal completion technology and conventional completion production
products and services (Logan Completion Systems Inc.); provides proprietary
products, services and technologies to enhance production in sand-laden heavy
oil wells (Scope Production Development Ltd.); and rents a proprietary tool that
improves horizontal drilling effectiveness by reducing well-bore friction (Xtend
Energy Services Inc.) and rents drilling jars in North America (Logan Jar, LLC).
Common shares of Logan are traded on the Toronto Stock Exchange (TSX) under the
ticker symbol "LII".
Selected Consolidated Financial Information
(in thousands of US dollars, except per share data)
Three month periods Nine month periods
ended ended
September 30, September 30,
--------------------- ---------------------
--------------------- ---------------------
2013 2012 2013 2012
---------- ---------- ---------- ----------
Revenue $ 46,692 $ 44,647 $ 148,488 $ 125,717
Net earnings for the period 4,858 15,529 14,905 20,709
Earnings per share:
Basic $ 0.15 $ 0.46 $ 0.45 $ 0.62
Diluted $ 0.14 $ 0.46 $ 0.44 $ 0.61
EBITDA (1) $ 10,431 $ 21,313 $ 34,349 $ 35,282
Modified EBITDA (1) $ 11,255 $ 10,747 $ 36,638 $ 27,562
---------- ----------
---------- ----------
September December
30, 31,
2013 2012
---------- ----------
---------- ----------
Working Capital $ 87,928 $ 74,295
Total Assets $ 295,776 $ 275,976
Debt (2) $ 68,320 $ 60,192
Shareholders' Equity $ 188,802 $ 175,393
Note: The purchase of Xtend was completed on March 1, 2012 and, accordingly, the
Company's nine month period ended September 30, 2012 operating results included
seven months of Xtend. In addition, the purchase of the Sup-R-Jar product line
occurred on April 17, 2013. All of this product line's operating results after
this date are included in the Company's three and nine month periods ended
September 30, 2013.
(1)
Management calculates: (a) EBITDA as earnings before net finance cost, taxes,
depreciation and amortization ("EBITDA"), and (b) Modified EBITDA as EBITDA
before acquisition accounting adjustments, transaction fees, share-based
compensation payments and severance costs ("Modified EBITDA"). Neither of these
measurements should be considered an alternative to, or more meaningful than,
"net earnings from continuing operations" or "cash flow from operating
activities" as determined in accordance with International Financial Reporting
Standards ("IFRS") as an indicator of the Company's financial performance.
EBITDA and Modified EBITDA do not have standardized definitions as prescribed by
IFRS; therefore, the Company's presentation of these measurements may not
conform to similar presentations by other companies. Management calculates
EBITDA and Modified EBITDA each period and evaluates the Company's operating
performance based on these measurements. Management believes that Modified
EBITDA, which eliminates significant non-cash or non-recurring items of revenue
or cost, more accurately presents the results of the Company's ongoing
operations and its ability to generate the cash required to fund or finance
future growth, acquisitions and capital investments. A reconciliation of EBITDA
and Modified EBITDA with net earnings for each period follows.
Three month periods Nine month periods
ended ended
September 30, September 30,
-------------------------------------------
2013 2012 2013 2012
---------- ---------- ---------- ----------
Net earnings for the period $ 4,858 $ 15,529 $ 14,905 $ 20,709
Addbacks:
Depreciation and amortization 3,399 2,578 9,601 7,646
Finance cost, net 427 900 3,259 2,207
Income tax expense 1,747 2,306 6,584 4,720
---------- ---------- ---------- ----------
EBITDA 10,431 21,313 34,349 35,282
Adjustments:
Contingent consideration gain-
Xtend Energy Services
acquisition - (11,064) - (11,064)
Acquisition accounting
adjustments - - 612 354
Transaction fees 373 63 663 1,272
Severance costs - - 162 -
Share-based compensation 451 435 852 1,718
---------- ---------- ---------- ----------
Modified EBITDA $ 11,255 $ 10,747 $ 36,638 $ 27,562
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EBITDA and Modified EBITDA are provided as measures of the Company's operating
performance without regard to financing decisions, share- based compensation,
age and cost of equipment used and income tax impacts, all of which are factors
that are not controlled at the operating management level. The contingent
consideration gain in 2012 is the change in fair value of expected earnout
payments to the former owners of Xtend based on post-closing operating results.
The acquisition accounting adjustments reverse the effect of the increase or
step-up in cost basis of inventories and subsequently sold fixed assets acquired
in business combinations. The transaction fees include professional and other
fees incurred in connection with acquisitions completed in 2012 and 2013, as
well as the Company's previously announced strategic review process. Share-based
compensation relates to expense recognized from the granting of stock
appreciation rights, stock options and restricted share units.
(2) Includes bank and other borrowed debt and capital leases.
Forward-Looking Statements
This press release contains forward-looking statements. These statements relate
to future events or future performance of Logan. When used in this press
release, the words "may", "would", "could", "will", "intend", "plan",
"anticipate", "believe", "estimate", "propose", "expect", "potential",
"continue", and similar expressions, are intended to identify forward-looking
statements. These statements involve known and unknown risks, uncertainties, and
other factors that may cause actual results or events to differ materially from
those anticipated in such forward-looking statements. Such statements reflect
Logan's current views with respect to certain events, including the previously
announced strategic review process and fourth quarter
operating results, and are subject to certain risks, uncertainties and
assumptions. Although Logan believes that the expectations and assumptions on
which the forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because the Company can
give no assurance that they will prove to be correct. Many factors could cause
Logan's actual results, performance, or achievements to materially differ from
those described in this press release. Readers are referred to Logan's Annual
Information Form filed on www.sedar.com, which identifies significant risk
factors that could cause actual results to differ from those contained in the
forward-looking statements. Should one or more risks or uncertainties
materialize, or should assumptions underlying forward-looking statements prove
incorrect, actual results may vary materially from those described in this press
release. The forward-looking statements contained in this press release are
expressly qualified in their entirety by this cautionary statement. These
statements speak only as of the date of this press release. Logan does not
intend and does not assume any obligation, to update these forward-looking
statements to reflect new information, subsequent events or otherwise, except as
required by law. This press release shall not constitute an offer to sell or the
solicitation of an offer to buy the securities described herein in any
jurisdiction.
FOR FURTHER INFORMATION PLEASE CONTACT:
Logan International Inc.
Gerald Hage
Chief Executive Officer
281-617-5300 Houston
Logan International Inc.
Larry Keister
Chief Financial Officer
832-386-2534 Houston
www.loganinternationalinc.com
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