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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Ladies and gentlemen, welcome to your Boots and Coots Second Quarter Earnings Call for 2008. Your hosts for today's call are Jerry Winchester, President and Chief Executive Officer, Bill Bulcher, interim Principal Accounting Officer, and Dee Edwards, Chief Operating Officer.
At this time, all lines are in a listen-only mode with a question and answer session to follow.
Boots and Coots' earning release was distributed yesterday afternoon, and for those who did not receive a copy of the release, please contact Jennifer Tweeton at 281-931-8884 or at JTWEETON@boots/coots.com, or download it from Boots and Coots' website.
For those who wish to listen to the recording of today's call, a replay will be available by phone 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 and Coots undertakes no obligations to publicly update or revise any forward-looking statements.
Today's presentation 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 the earning release.
I would now like to turn the call over to your host, Jerry Winchester. You may proceed, sir.
JERRY WINCHESTER, PRESIDENT AND CEO, BOOTS AND COOTS INTERNATIONAL WELL CONTROL, INC.: Thanks, Jasmine, and good morning, everyone, and thank you for joining us today to discuss our second quarter results.
Also here with us today is our new CFO, Cary Baetz. Cary, you on there?
CARY BAETZ, CFO, BOOTS AND COOTS INTERNATIONAL WELL CONTROL, INC.: Yes, thank you, Jerry, for the introduction and the opportunity to join the Boots and Coots team. I look forward to being able to take a more active role in future calls and visiting with our investors, our prospective investors, and about the Company, our strategy, and our growth opportunities.
JERRY WINCHESTER: Thanks a lot, and we're very excited to have Cary join us. His background in finance and M&A will bring a tremendous value to our team and to the Company as well.
So for the third consecutive quarter we've posted record revenues. Internationally, SafeGuard and pressure control services led the way with prevention growing 148% over the second quarter of last year.
For the quarter, we've been managing an extensive recovery project offshore India that we are recovering a damaged BOP stack. We expect this project will continue through August and possibly into September.
Our hydraulic workover business was up internationally 50%, and 150% domestically over the second quarter of last year. Activity remains strong in West Africa, and Venezuela had a much stronger quarter as well.
Domestically, our hydraulic workover growth was spurred by the addition of our business in Wyoming and resurgence of work in the Gulf of Mexico. Led by integration initiatives in our international operations, our rental tool business nearly doubled its revenue to $6.5 million compared to $3.4 million in the first quarter of this year. Domestically, we've opened facilities that will continue to expand our capabilities in East Texas and North Louisiana.
Our strategic investment last year into both our HWO snubbing and pressure control businesses are providing the returns that we'd hoped for and we'll continue to be able to build upon these investments.
Last but not least, we had another strong quarter in response due to some very sizeable jobs in West Africa. After Bill goes through the numbers, I'll discuss the outlook for the second half of the year. Bill?
BILL BULCHER, INTERIM PRINCIPAL ACCOUNTING OFFICER, BOOTS AND COOTS INTERNATIONAL WELL CONTROL, INC.: Thank you, Jerry.
For the quarter ended June 30th, 2008, we reported net income of $6.1 million, or $0.08 per diluted share. This compares to net income of $.3 million or $0.00 per diluted share for the second quarter of 2007.
Revenues for the three months were $51.9 million, compared to $22 million in the second quarter of 2007. EBITDA was $9.3 million in the second quarter of 2008, compared to $2 million for the same period in 2007.
For the six months ended June 30th, 2008, we reported net income of $11.2 million, or $0.14 per diluted share compared to $.7 million, or $0.01 per diluted share for the same six-month period in 2007.
Revenues for the current six months were $96.9 million compared to $44.2 million for the prior six months. EBITDA was $19.1 million in 2008 compared to $4.8 million in 2007.
The effective income tax rate in the second quarter was 5% of pre-tax income, compared to a rate of 28.5% for the second quarter of 2007. The decrease in the effective tax rate is largely due to the utilization of foreign tax credits, the utilization of US net operating loss carried forward, and the release of valuation allowances due to the increase in foreign net income with lower tax rates compared to the US-based source income.
This caused an effective tax rate of 17.1% for the six-month period compared to 30.9% in 2007. We expect an effective rate similar to the 17.1% for the second half of the year, due to the same reasons.
On a segment basis for the second quarter of 2008, well intervention generated $45.4 million in revenue and $7.1 million in EBITDA compared to $18.3 million and $.6 million, respectively, in 2007, reflecting a year-over-year increase of 148% in revenue and 1,083% in EBITDA.
The increase in revenues and EBITDA is primarily due to growth initiatives in the Company's prevention business. We started a risk management project in India which generated $9.6 million in the second quarter. This project is expected to be concluded in the third quarter.
Also contributing to the growth were the addition of the Company's pressure control rentals business, growth initiatives in Algeria and Wyoming, and the increase in snubbing services revenue in the Gulf of Mexico and mid-continent.
The utilization rate on our hydraulic workover and snubbing units during the second quarter of 2008 was 50% compared to 34% during the second quarter of 2007, and 50% in the prior quarter. The hydraulic workover and snubbing business contributed $22.8 million in revenue in the second quarter of 2008, while our prevention business contributed $16.1 million and pressure control equipment rentals contributed $6.5 million for the second quarter of 2008.
For the six months ended June 30th, 2008, the well intervention segment generated revenues of $83.4 million and EBITDA of $14.3 million, compared to revenue of $39.2 million and EBITDA of $3 million for the 2007 six-month period. The increase in revenues and EBITDA are primarily due to the addition of the Company's pressure controls rental business, the risk management project in India, and the hydraulic workover and risk management project in Bangladesh, which was concluded in the first quarter.
The remaining increase resulted from the Company's snubbing services, growth initiatives in Algeria, Oman, and Wyoming, and the increase in snubbing services revenue in the Gulf of Mexico, Mid-Continent, and Venezuela.
Moving over to our response segment for the second quarter of 2008, the response segment reported $6.5 million in revenue and EBITDA of $2.2 million compared to $3.6 million, and $1.4 million respectively in the second quarter of 2007.
Increased international activity, particularly in Africa and the Middle East, contributed to the higher revenue and EBITDA during the quarter. For the six months, our response segment reported $13.6 million in revenue and $4.8 million in EBITDA compared to $5 million and $1.7 million respectively in 2007.
At June 30th, 2008, we had working capital of $42.5 million, compared to $35.7 million in the first quarter and $34.7 million at the end of 2007. Our cash balance of June 30th, 2008 was $8.6 million compared to $6.5 million at December 2007.
We ended the quarter with stockholders' equity of $89.6 million, which increased $12.6 million compared to $77 million at year-end 2007, primarily due to our 2008 net income of $11.2 million.
Capital additions during the second quarter were $12.4 million, which included $7.8 million of expansion area and $4.6 million of maintenance capital expenditures.
Our total debt was $31.7 million at the end of the quarter, which was up from $28 million sequentially due to borrowing against our revolver credit facility. Our outstanding debt balance is comprised of a term credit facility balance of $4.9 million, a revolving credit facility...
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