Logan International Inc.
TSX : LII

Logan International Inc.

November 13, 2013 16:57 ET

Logan International Reports 2013 Third Quarter Financial Results

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

CALGARY, ALBERTA--(Marketwired - Nov. 13, 2013) - 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 ended Nine month periods 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 30, December 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 ended Nine month periods 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.

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