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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Ladies and gentlemen, welcome to your Boots & Coots first quarter earnings call for 2008. Your hosts for today's call are Jerry Winchester, President and Chief Executive Officer, Gabe Aldape, Chief Financial Officer, and Dee Edwards, Executive Vice President. At this time, all lines are in a listen only mode with a question-and-answer session to follow. Boots & Coots earnings release was distributed yesterday evening, and for those of you who did not receive a copy of the release, please contact Jennifer Tweeton at (281)931-8884, or at jptweeton@ boots-coots.com or download it from Boots & Coots website. For those that wish to listen to a recording of today's call, a replay will be available by phone or via webcast.
Some of the statements made in this call are forward-looking and as such are subject to many factors that could cause actual results to differ materially from expectations reflected in the forward-looking statements. These factors are described in the company's SEC documents. Boots & Coots undertakes no obligation to publicly update or revise any forward-looking statements. Today's presentations will also include certain non-GAAP financial measures as defined under the SEC rules. To comply with these rules, the company has provided a reconciliation of the non-GAAP measures in its earnings release. Now I would like to turn the call over to your host, Jerry Winchester.
JERRY WINCHESTER, CEO & DIRECTOR, BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.: Thanks, Savannah, and good morning, everyone and thank you for joining us today to discuss our first quarter results. The first quarter of 2008 was our largest revenue generator thus far. As we discussed on the last call, our safeguard team managed an extensive project in Bangladesh providing our client risk management engineering, wall control snubbing, and pressure control services. Safeguard also led a significant project in Oman that combined several of our service lines. These projects demonstrated the value of our safeguard prevention and risk management services to our clients and bought significant pull-through revenue for the quarter.
Continuing to look at the international business during the quarter, we saw profitability increase in almost every location. We had a full quarter under our new snubbing contract in north Africa that led to significant growth for the region. Activity remains strong in both West Africa and the Middle East, which provided snubbing services on the Bangladesh project. In Venezuela, revenues were off by $600,000 as compared to the first quarter '07. We saw the bottom line improvement of over $400,000 as a result of cost control measures taken during the fourth quarter of last year. Domestically we were up more than 150% over the first quarter of last year. About half of that growth was driven by higher activity in the Mid-Continent in the Gulf of Mexico. The balance came from our '07 acquisition of Stasco in the Rocky Mountains and the startup of our pressure control rental business. Our response business had a good quarter and high activity domestically, participation in the referenced safeguard projects and a significant project in west Africa.
After Gabe goes through the numbers, I'll discuss the outlook for the second quarter and the balance of the year. Gabe?
GABE ALDAPE, CFO, BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.: Thank you, Jerry. For the quarter ended March 31, 2008, we reported net income of $5.1 million or $0.07 per diluted share. This compared to net income of $0.5 million or $0.01 per diluted share for the first quarter of 2007. Revenues for the three months were $45 million compared to $22.3 million for the first quarter of 2007. EBITDA was $9.8 million in the first quarter of 2008 compared to $2.7 million for the same period in 2007. Income tax expense was $2 million for the quarter, which represents an effective tax rate of 27.9% compared to a tax expense of $221,000 or an effective tax rate of 32.3% for the first quarter of 2007. The percentage decrease in 2008 was due to a tax benefit from the use of net operating losses of $2.1 million incurred prior to the purchase of the HWC business.
On a segment basis, for the first quarter of 2008, Well Intervention generated $37.9 million in revenue and $7.2 million in EBITDA compared to $20.8 million and $2.4 million respectively in 2007, reflecting a year-over-year increase of 82% in revenue and 204% in EBITDA. The increase in revenue is primarily due to growth initiatives in the company's international operations. In the current quarter, we started a two unit snubbing contract in Algeria that more than doubles our existing stubbing business in that area. We also completed a one well project in Bangladesh, generating $9.2 million in revenues during the current quarter as well as generated international revenues from our pressure control equipment rental business. Domestically we benefited from increases in revenue in the Mid-Continent and Gulf of Mexico areas as well as from our U.S. growth initiatives in the Rocky Mountain region and our pressure control equipment rental and service business. The utilization rate for our hydraulic workover and snubbing units during the first quarter of 2008 was 50% compared to 32% during the first quarter of 2007 and 42% in the prior quarter. The hydraulic workover snubbing business contributed $27.2 million in revenue in the first quarter of 2008 while our prevention business contributed $7.4 million and pressure control equipment rentals contributed $3.4 million for the first quarter of 2008.
Moving over to our response segment, for the first quarter of 2008, the response segment reported revenues of $7.1 million and EBITDA of $2.7 million compared to $1.4 million and $0.4 million respectively in the first quarter of 2007. Increased international activity, particularly in Africa, contributed to higher revenues and EBITDA margins during the quarter. At March 31, 2008, we had working capital of $35.7 million compared to $34.7 million at December 31, 2007. Our cash balance at March 31, 2008, was $6 million compared to $6.5 million at December 31 of 2007. We ended the quarter with stockholder's equity of $2.7 million, which increased $5.7 million compared to $77 million at year end 2007, primarily due to our 2008 net income of $5.1 million.
Capital additions during the first quarter were $6.8 million, which included $4.7 million of expansionary capital and $2.1 million of maintenance capital expenditures. Our total debt was $28.7 million at the end of the first quarter, which was up from $28.1 million sequentially due to borrowing against our revolver facility. Our outstanding debt balance is comprised of a term credit facility balance of $5.4 million, a revolving credit facility balance of $2.2 million, and an unsecured subordinated debt outstanding to Oil States International of $21.2 million. We made principal payments of $485,000 against our term credit facility during the March 2008 quarter. Our credit availability under the revolver was $8.5 million at the end of the quarter. Jerry?
JERRY WINCHESTER: Thank you, Gabe. As you know, our domestic activity is driven by natural gas, and with firming gas prices we expect our domestic operations to continue to build momentum in the second quarter. We've taken initiatives to expand our prevention and risk management services domestically and are expanding our training capabilities throughout our operating regions. We have opened a pressure control facility in east Texas to capitalize on the Hainesville Shale activity and we're looking for opportunities to expand into western Colorado. We're continuing to see improved activity levels in the Gulf of Mexico and are optimistic looking through the third quarter.
While the safeguard project in Bangladesh finished up in March and the project in Oman is a much lower level this quarter, we have several new international projects either underway or anticipated to begin soon. We just mobilized on a significant safeguard recovery job in India. We'll have a team of five positioned off the shore of India to recover a damaged BOP stack laying 800 feet down on the ocean floor. We'll also function as project manager in a role similar to the ones
we took in Bangladesh and Oman. We're currently mobilizing on a hydraulic workover contract utilizing a 460K unit in [Cutter]. That...
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