Tesco Corp. (NASDAQ:TESO) filed Quarterly Report for the period ended 2009-03-31.
Tesco Corp. has a market cap of $419.1 million; its shares were traded at around $11.17 with a P/E ratio of 8.73 and P/S ratio of 0.78. Tesco Corp. had an annual average earning growth of 43.9% over the past 5 years.
Highlight of Business Operations:Operating Income for the three months ended March 31, 2009 was $4.0 million, compared to $16.4 million in the three months ended March 31, 2008, a decrease of $12.4 million, or 76%. This decrease is primarily due to lower revenues in all of our segments due to decreased drilling activity in North America and $2.2 million in expenses for a litigation settlement, $1.3 million in severance costs and $0.8 million in reserves recorded related to a regulatory review of certain payroll practices in North America.
Net Income for the three months ended March 31, 2009 was $4.4 million, compared to $10.7 million in the same period in 2008, a decrease of $6.3 million or 59%. This decrease is due primarily to decreased operating income as discussed above, which was partially offset by a $0.7 million decrease in interest expense and a $1.8 million improvement in foreign exchange (gains) losses, as discussed below. In addition, our effective tax rate decreased from a provision of 22% in the first quarter of 2008 to a benefit of 21% during the first quarter of 2009. During the first quarter of 2009, Canadian tax law changed which resulted in a one-time tax benefit of approximately $1.6 million to increase the Companys deferred tax assets. Excluding this one-time tax benefit, our effective tax rate for the three months ended March 31, 2009 was a provision of 24%.
RevenuesRevenues for the three months ended March 31, 2009 decreased $4.8 million, or 12%, to $37.0 million as compared to the same period in 2008. This was primarily due to a $14.0 million decrease in our conventional Tubular Services business, partially offset by a $9.2 million increase in our proprietary service offerings. The decrease in our conventional revenues is due to our continued focus to shift our customers to our proprietary product offerings and a 20% decline in our business in North America. Our conventional business is primarily conducted in North America and is directly tied to the rig count which has sharply declined over the past 12 months. The increase in our proprietary business is primarily due to our shift from conventional offerings and a $3.0 million increase in proprietary equipment sales. This is partially offset by a decrease in MCLRS revenues from $2.9 million to $2.2 million for the three months ended March 31, 2009 compared to the same period last year due to a reduction in the number of MCLRS projects that were in progress during the three months ended March 31, 2009.
Corporate and Other Expenses primarily consist of the corporate level general and administrative expenses and certain operating level selling and marketing expenses. Corporate and Others operating loss for the three months ended March 31, 2009 increased $2.7 million to a $10.7 million loss, compared to a loss of $8.0 million for the same period in 2008. This increase is primarily due to a $2.2 million legal settlement, a $0.3 million increase in salaries and $0.6 million in severance costs, partially offset by decreased legal and audit fees and other corporate expenses from the same period in 2008.
Foreign Exchange (Gains) LossesForeign exchange (gains) losses increased to a gain of $0.1 million from a loss of $1.7 million primarily due to the comparative weakening of the Canadian dollar between the periods and a $1.6 million loss on settling and marking to market certain foreign currency contracts during the three months ended March 31, 2008. During the year ended December 31, 2007, we entered into a series of 25 bi-weekly foreign currency forward contracts with notional amounts aggregating C$43.8 million. During the three months ended March 31, 2008, we terminated these bi-weekly foreign currency forward contracts and replaced them with 14 foreign monthly currency forward contracts. We recognized a loss of $0.6 million related to the termination of the bi-weekly foreign currency forward contracts and recognized an unrealized loss of $1.0 million on 13 of the new monthly foreign currency forward contracts. During the three months ended March 31, 2008, one of our new foreign currency forward contracts settled, and the net loss on this foreign currency exchange contract was immaterial. We were not party to foreign currency forward contracts during the three months ended March 31, 2009.
Operating Income for the three months ended March 31, 2009 was $4.0 million, compared to $16.9 million in the three months ended December 31, 2008, a decrease of $12.9 million or 76%. This decrease is primarily due to a $10.1 million decrease in the Top Drive segment and a $2.4 million decrease in operating income in the Tubular Services segment, offset by a $2.0 million improvement in operating losses in the CASING DRILLING segment. The decrease in Top Drive operating income was primarily due to a lower number of Top Drive units sold in the current quarter as discussed above. The decrease in Tubular Services operating income was primarily due to the decline in conventional work described above, particularly in North America. The increase in CASING DRILLING operating income was primarily due to decreased overhead and management expenses during the three months ended March 31, 2009.
Read the The complete ReportTESO is in the portfolios of David Swensen of Yale University, John Keeley of Keeley Fund Management.