Logan International Inc.
TSX : LII

Logan International Inc.

March 31, 2014 09:00 ET

Logan International Reports 2013 Financial Results

(All reported figures are in US dollars unless otherwise noted)

CALGARY, ALBERTA--(Marketwired - March 31, 2014) - Logan International Inc. (TSX:LII) ("Logan" or the "Company") today reported the results of its fourth quarter and year ended December 31, 2013. The financial reports for the quarters and years ended December 31, 2013 and 2012 include the post-acquisition operating results of the Sup-R-Jar business which was acquired in April 2013 and the post-acquisition operating results of Xtend which was acquired in March 2012.

Highlights include:

  • In 2013, the Company recorded record Revenue of $194 million and record Modified EBITDA of over $46 million.
  • Logan expanded its international presence with sales of completion products and services to China and Mexico and PDC inserts to Russia.
  • Logan strengthened its senior management team with the addition of David MacNeill as its Chief Operating Officer.

Logan recorded revenue of $45.6 million in this year's fourth quarter and $45.4 million in the prior year's fourth quarter. For the three month period ended December 31, 2013, Logan earned $3.8 million, $.11 per share, from continuing operations as compared to $4.8 million, $.14 per share the prior year period. The Company's management utilizes Modified EBITDA to evaluate operational performance because this measurement eliminates the effects of significant noncash and nonrecurring items of revenue and cost. Modified EBITDA declined in this year's fourth quarter to $9.7 million from $10.1 million in last year's fourth quarter.

For the quarter ended December 31, 2013, the Downhole Tool segment, which includes Logan Oil Tools, Logan Completion Systems ("Logan Completions"), Kline Oilfield Equipment, Logan SuperAbrasives ("SuperAbrasives") and Scope Production Developments, recorded revenue of $41.8 million as compared to $42.2 million for the quarter ended December 31, 2012. For the quarter ended December 31, 2013, this segment generated EBITDA of $10.1 million as compared to $10.9 million for the quarter ended December 31, 2012. For the fourth quarter of 2013, the Rental Tool segment, which includes Xtend Energy Services ("Xtend") and Logan Jar, recorded revenues of $3.8 million and EBITDA of approximately $900 thousand as compared to revenues of $3.2 million and EBITDA of $1.2 million in last year's fourth quarter.

Gerald Hage, President and Chief Executive Officer, commented, "Our fourth quarter performance was slightly below expectations as sales in both segments were essentially flat with last year's fourth quarter. While the gross profit margins in this year's period in both of our operating segments were consistent with 2012, increased administrative expenses resulted in a decline in this year's quarterly earnings. Our quarterly operating performance was also affected by distractions related to the strategic review process."

For the year ended December 31, 2013, Logan recorded revenue of $194.1 million, an increase of $23 million or 13% as compared to $171.1 million in 2012. Net earnings from continuing operations declined by $6.8 million in 2013 to $18.7 million, $.55 per diluted share, from $25.5 million, $.75 per diluted share, in 2012. Net earnings from continuing operations for 2012 included nonrecurring gain of approximately $11 million, $.33 per diluted share, which resulted from the change in the fair value of the contingent consideration relating to the Xtend acquisition. Excluding the unusual gain, Logan's 2013 net earnings from continuing operations would have increased by $4.2 million or by 29%. For 2013, Modified EBITDA increased to $46.4 million, or by 23%, from $37.7 million in 2012.

For the year ended December 31, 2013, the Downhole Tool segment's sales increased by $16.3 million or 10% to $179.2 million from $162.9 million in 2012. This segment's EBITDA also increased in 2013 by 10% to $46.1 million from $41.9 in 2012. The Rental Tool segment reported an increase in 2013 revenues of $6.7 million or 82%, to $14.9 million from $8.2 million in 2012. This segment also reported a sharp increase, 123%, in its FY 2013 EBITDA to $5.8 million from $2.6 million in 2012.

Mr. Hage further stated, "We are proud to report record sales and operating results for the full year and even more pleased to report that each of our operating segments contributed to the record setting performance. Consolidated revenue increased by 13% and segment revenue by 10% and 82% for the Downhole Tool segment and Rental Tool segment, respectively. More importantly, Modified EBITDA increased by $8.7 million, or 23%, to a record of $46.4 million in 2013. We are proud that we were able to achieve record operating results despite a slight slowdown in North America, especially Canada, the effects of a strengthening dollar on our Canadian operating results and expenses incurred in the strategic review process. Logan Oil Tools, Logan Completions and SuperAbrasives all expanded their geographic reach from increased sales to China, Russia, Algeria, Latin America and the Middle East. In addition, we are also pleased to report that Xtend's Xciter tool made significant gains in the U.S. market, primarily in South and West Texas. As we begin the New Year, we have reset the bar at a higher level and, given the forecast for the energy business in 2014, expect to improve upon our 2013 financial results."

"We strengthened the Logan management team just this past week with the hiring of David MacNeill as our Chief Operating Officer. David brings over 25 years of international industry experience as an engineer and executive manager of leading international oilfield services companies." Said Mr. Hage.

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 and patented products and services that are focused on production optimization in sand-laden heavy oil wells (Scope Production Development Ltd.); and provides proprietary tools that enhance the effectiveness of horizontal drilling (Xtend Energy Services Inc. and Logan Jars, 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 ended Twelve months ended
December 31, December 31,
2013 2012 2013 2012
Revenue $ 45,576 $ 45,397 $ 194,064 $ 171,114
Net earnings from continuing operations 3,751 4,815 18,656 25,524
Earnings per share from continuing operations:
Basic $ 0.11 $ 0.14 $ 0.56 $ 0.76
Diluted $ 0.11 $ 0.14 $ 0.55 $ 0.75
EBITDA (1) $ 9,586 $ 10,132 $ 43,935 $ 45,414
Modified EBITDA (1) $ 9,740 $ 10,139 $ 46,378 $ 37,701
December 31,
2013 2012
Working Capital $ 82,399 $ 76,933
Total Assets $ 283,559 $ 275,976
Loans and Borrowings (2) $ 57,788 $ 60,192
Shareholders' Equity $ 191,144 $ 175,393

Note: The purchase of Xtend was completed on March 1, 2012, and, accordingly, the Company's twelve month period ended December 31, 2012 operating results included ten months of Xtend. In addition, on April 17, 2013, the Company, through its wholly-owned subsidiaries Logan Oil Tools, Inc. and Logan Jar, LLC, purchased certain assets and operations related to the Sup-R-Jar drilling jar product line. As such, eight and one-half months of the Sup-R-Jar product line's operations have been included in the Company's consolidated financial statements for the year ended December 31, 2013.

  1. Non-IFRS Measurements: The MD&A presents: (a) EBITDA as earnings before net finance cost, income taxes, and depreciation and amortization ("EBITDA"), and (b) Modified EBITDA as EBITDA before acquisition accounting adjustments, transaction fees, share-based compensation and severance costs ("Modified EBITDA"). Neither of these measurements should be considered an alternative to, or more meaningful than, "net earnings from the period" or "cash flow from operating activities" as determined in accordance with 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 ended Twelve months ended
December 31, December 31,
2013 2012 2013 2012
Net earnings from continuing operations $ 3,751 $ 4,815 $ 18,656 $ 25,524
Addbacks:
Depreciation and amortization 3,406 2,617 13,007 10,263
Finance cost, net 1,451 911 4,710 3,118
Income tax expense 978 1,789 7,562 6,509
EBITDA 9,586 10,132 43,935 45,414
Adjustments:
Contingent consideration gain -
Xtend Energy Services acquisition - - - (11,064 )
Acquisition accounting adjustments - - 612 354
Severance Costs 86 528 248 528
Transaction fees 131 16 794 1,288
Share-based compensation payments (63 ) (537 ) 789 1,181
Modified EBITDA $ 9,740 $ 10,139 $ 46,378 $ 37,701

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 fees and other costs 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.

  1. Includes bank and other borrowed debt and capital leases.
Reconciliation of EBITDA by Segment
Twelve months ended December 31, 2013 Twelve months ended December 31, 2012
Downhole
Tool

Rental Tool

Corporate
Downhole
Tool

Rental Tool

Corporate
Revenue $ 179,150 $ 14,914 $ - $ 162,865 $ 8,249 $ -
Operating income (expense) $ 36,125 $ 2,970 $ (8,167 ) $ 33,191 $ 1,197 $ (10,301 )
Gain on Xtend contingent consideration - - - - - 11,064
Depreciation and amortization 9,961 2,853 193 8,668 1,437 158
EBITDA $ 46,086 $ 5,823 $ (7,974 ) $ 41,859 $ 2,634 $ 921
Three months ended December 31, 2013 Three months ended December 31, 2012
Downhole
Tool

Rental Tool

Corporate
Downhole
Tool

Rental Tool

Corporate
Revenue $ 41,752 $ 3,824 $ - $ 42,198 $ 3,199 $ -
Operating income (expense) $ 7,585 $ 134 $ (1,539 ) $ 8,785 $ 722 $ (1,992 )
Depreciation and amortization 2,556 801 49 2,130 437 50
EBITDA $ 10,141 $ 935 $ (1,490 ) $ 10,915 $ 1,159 $ (1,942 )

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 we 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 which 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 more information about Logan International Inc., please visit our website at www.loganinternationalinc.com.

Contact Information

  • 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