Logan International Inc.
TSX : LII

Logan International Inc.

March 30, 2016 19:59 ET

Logan International Reports Fourth Quarter and Fiscal 2015 Results

CALGARY, ALBERTA--(Marketwired - March 30, 2016) -

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

Logan International Inc. (TSX:LII) ("Logan" or the "Company") today reported the results of its fourth quarter and year ended December 31, 2015.

Recent highlights include:

  • Reported positive operating results, as measured by Modified EBITDA, in Logan Oil Tools, Inc., and in our Logan Rentals business group, despite the severe industry downturn for the fourth quarter and for the year.
  • In the fourth quarter, we initiated a process to sell Logan Completion Systems Inc. which reported operating and cash flow losses during 2015. We have reported these operating results as discontinued operations.

Logan recorded revenue from continuing operations of $14.1 million in the fourth quarter of 2015 and $33.3 million in the prior year's fourth quarter. For the three month period ended December 31, 2015, Logan reported a net loss from continuing operations of $9.9 million, $(0.29) per diluted share, as compared to a net loss from continuing operations of $8.0 million, $(0.24) per diluted share, in the prior year's fourth quarter. The Company recorded an impairment loss on goodwill of $6.5 million, $0.19 per diluted share, in this year's fourth quarter and also recorded an impairment loss of $10.6 million, $0.31 per diluted share, in the fourth quarter of 2014. Both impairment losses were recorded in the Company's Xtend rental operations. Excluding the effects of the impairment losses, the Company would have reported a net loss from continuing operations of $3.4 million, $(0.10) per diluted share, for the 2015 fourth quarter and net earnings from continuing operations of $2.6 million, $0.08 per diluted share, in the corresponding period in 2014. Modified EBITDA, which excludes the effects of the impairment losses and the results of the discontinued operations, declined from $6.4 million in the fourth quarter of 2014 to a loss of $0.1 million in the fourth quarter of 2015. Management utilizes Modified EBITDA to evaluate its operating results because this measurement eliminates the revenue and cost effects of significant noncash and nonrecurring items.

The Company has presented the results of Logan Completion Systems' operations as discontinued operations in all periods. In the fourth quarter of 2015, Logan reported a net loss from discontinued operations of $9.6 million, $(0.29), per diluted share, which included total impairment losses of $10.0 million, as compared to a net loss from discontinued operations of $1.5 million, $(0.04) per diluted share in the previous year's fourth quarter.

For the quarter ended December 31, 2015, the downhole tool segment, which includes Logan Oil Tools, Logan Kline Tools, Logan SuperAbrasives and Scope Production Developments, recorded revenue of $13.0 million as compared to $29.6 million for the quarter ended December 31, 2014. For the fourth quarter of 2015, this segment generated EBITDA of $1.2 million as compared to $6.7 million for the previous year's fourth quarter. For the fourth quarter of 2015, the rental tool segment, which includes Xtend Energy Services and Logan Jar, recorded revenue of $1.1 million and an EBITDA loss of $0.3 million as compared to revenue of $3.7 million and EBITDA of $0.5 million in the previous year's fourth quarter.

For the year ended December 31, 2015, Logan's revenue from continuing operations declined to $77.7 million from $147.2 million in 2014, or by 47%. For the fiscal year 2015, Logan reported a net loss from continuing operations of $12.9 million, $(0.38) per diluted share, as compared to net earnings from continuing operations of $2.6 million, $0.08 per diluted share, in the prior year. The Company recorded an impairment loss on goodwill of $6.5 million, $0.19 per diluted share, in 2015 and $10.6 million, $0.31 per diluted share in 2014. Excluding the effects of the impairment loss, the Company would have reported a net loss from continuing operations of $6.4 million, $(0.19) per diluted share, in 2015 and net earnings from continuing operations of $13.2 million, $0.39 per diluted share in 2014. Modified EBITDA for the year ended December 31, 2015 decreased to $7.9 million from $34.7 million in the prior year.

The Company has presented the results of Logan Completion Systems' operations as discontinued operations in all periods. For 2015, Logan reported a net loss from discontinued operations of $20.4 million, $(0.61) per diluted share, which included impairment losses of $18.9 million, as compared to a net loss from discontinued operations of $2.4 million, $(0.07) per diluted share in 2014.

The downhole tool segment recorded revenue of $71.8 million and EBITDA of $13.4 million in 2015. This segment recorded revenue of $133.4 million and EBITDA of $36.7 million in 2014. The rental tool segment recorded revenue of $5.9 million and EBITDA of $0.7 million in 2015 as compared to revenue of $13.8 million and EBITDA of $2.9 million in 2014.

David MacNeill, President and Chief Executive Officer, commented, "Our fourth quarter operating results were consistent with the trends in the industry. Each quarter was marked with lower oilfield activity, which caused weaker operating results. The entire year presented very stressful times for everyone in the oilfield. The exploration and production companies spending continued to fall through the entire year as the prospect of a meaningful recovery in oil prices was moved out into 2017. Our operating results certainly reflected the industry trends. This year's revenues from continuing operations fell by 47% from last year. Each of our business units was affected. Logan Oil Tools, which is our strongest performer, experienced a significant decline in annual revenue. The decreased revenues led to reduced plant hours which, in turn, led to lower profit margins as we were unable to fully recover our fixed costs. On a positive note, we were able to reduce overhead costs which allowed us to report positive Modified EBITDA of $7.9 million in 2015."

Mr. MacNeill continued, "Unfortunately, the start to 2016 has not provided much relief. This year began as 2015 left off; commodity prices and rig counts have continued their downward trends, as exploration and production companies continue to reduce capital budgets to new lows. Recently, we have seen an improvement in commodity prices; however, we have not yet felt the effects in our order book. Furthermore, we do not anticipate a significant uptick as recently announced exploration and production capital budgets are materially less than last year's."

Mr. MacNeill added, "Last year we made significant cuts to our costs, both in direct costs and in administrative expenses. In 2016, we will continue to challenge our cost structure and adjust accordingly. In addition, it is our intention to sell Logan Completion Systems in 2016 and will pursue the disposition of any asset that does not contribute to profitability. Finally, we have begun the process to replace the current credit facility which matures in December 2016."

About Logan

Logan provides specialized downhole tools and services to oilfield service providers, drilling contractors and exploration and production operators. It is organized into three classifications:

  • Manufacturing and sales of fishing and intervention tools, including retrieving, stroking and remedial tools and power swivels used in well workover, intervention, drilling and completion activities (Logan Oil Tools, Inc.); and high- performance poly-crystalline diamond compact cutters and bearings (Logan SuperAbrasives, Inc.)
  • Manufacturing and sales of completion products and services including packers and bridge plugs, (Logan Kline Tools); proprietary multi-zonal completion technology and conventional completion products and services (Logan Completion Systems Inc) and patented products and services used to optimize production in sand-laden, heavy-oil wells (Scope Production Developments);
  • Rental of specialty drilling and workover tools including drilling, fishing and coiled tubing stroking tools and the Xciter vibration tools (Xtend Energy Services, Inc. and 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 Twelve month periods ended
December 31, December 31,
2015 2014 2015 2014
Revenue $ 14,105 $ 33,339 $ 77,695 $ 147,187
Net earnings (loss) from continuing operations (9,918 ) (8,043 ) (12,940 ) 2,574
Earnings per share from continuing operations:
Basic $ (0.29 ) $ (0.24 ) $ (0.38 ) $ 0.08
Diluted $ (0.29 ) $ (0.24 ) $ (0.38 ) $ 0.08
EBITDA (1) (419 ) 6,655 6,468 33,514
Modified EBITDA (1) (132 ) 6,428 7,853 34,691
December 31,
2015 2014
Working Capital $ 43,037 $ 97,807
Total Assets $ 221,265 $ 271,763
Loans and Borrowings (2) $ 51,195 $ 49,327
Shareholders' Equity $ 150,644 $ 188,591
(1) Non-IFRS Measurements: The MD&A presents: (a) EBITDA as earnings (loss) before net finance cost, income taxes, and depreciation, amortization and impairment losses ("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 (loss) from continuing operations" 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 (loss) from continuing operations for each period follows.
(2) Includes bank and other borrowed debt and capital leases.
Three month periods ended Twelve months ended
December 31, December 31,
2015 2014 2015 2014
Net earnings (loss) from continuing operations $ (9,918 ) $ (8,043 ) $ (12,940 ) $ 2,574
Addbacks:
Depreciation and amortization 2,571 2,927 10,368 10,910
Impairment loss on goodwill 6,535 10,590 6,535 10,590
Finance cost, net 877 1,314 3,721 4,219
Income tax expense (484 ) (133 ) (1,216 ) 5,221
EBITDA (419 ) 6,655 6,468 33,514
Adjustments:
Acquisition accounting adjustments - - - 188
Severance Costs 20 - 357 401
Transaction fees - 78 146 215
Share-based compensation payments 267 (305 ) 882 373
Modified EBITDA $ (132 ) $ 6,428 $ 7,853 $ 34,691

EBITDA and Modified EBITDA are provided as measures of the Company's operating performance without regard to financing decisions, share-based compensation payments, 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 acquisition accounting adjustments reverse the effect of the increase or step- up in cost basis of inventories and fixed assets acquired in business combinations when they are sold. The transaction fees include the professional and other fees incurred in connection with the Company's strategic review, as well as business acquisitions. Share-based compensation relates to expense recognized from the granting of stock appreciation rights, stock options and restricted share units.

Reconciliation of EBITDA by Segment

Twelve months ended
December 31, 2015
Twelve months ended
December 31, 2014
Downhole Tool Rental Tool Corporate Downhole Tool Rental Tool Corporate
Revenue $ 71,779 $ 5,916 $ - $ 133,388 $ 13,799 $ -
Operating earnings (loss) $ 8,180 $ (10,868 ) $ (7,747 ) $ 30,768 $ (12,454 ) $ (6,300 )
Depreciation and amortization 5,184 5,057 127 5,968 4,775 167
Impairment loss on goodwill - 6,535 - - 10,590 -
EBITDA $ 13,364 $ 724 $ (7,620 ) $ 36,736 $ 2,911 $ (6,133 )
Three months ended
December 31, 2015
Three months ended
December 31, 2014
Downhole Tool Rental Tool Corporate Downhole Tool Rental Tool Corporate
Revenue $ 12,957 $ 1,148 $ - $ 29,607 $ 3,732 $ -
Operating earnings (loss) $ (88 ) $ (8,022 ) $ (1,415 ) $ 5,178 $ (11,448 ) $ (592 )
Depreciation and amortization 1,319 1,223 29 1,539 1,356 32
Impairment loss on goodwill - 6,535 - - 10,590 -
EBITDA $ 1,231 $ (264 ) $ (1,386 ) $ 6,717 $ 498 $ (560 )

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. The forward-looking statements included in this press release include statements relating to future demand for the Company's products and services, further cost saving initiatives to be undertaken by the Company, potential asset dispositions, including the sale of Logan Completion Systems and the replacement of the Company's current credit facility. The forward-looking statements included in this press release 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 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.

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

Contact Information

  • Logan International Inc.
    David MacNeill
    Chief Executive Officer
    281-617-5300 (Houston)

    Logan International Inc.
    Larry Keister
    Chief Financial Officer
    832-386-2534 (Houston)
    www.loganinternationalinc.com