Attached files
file | filename |
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EX-31.2 - EX-31.2 - T-3 ENERGY SERVICES INC | h68397exv31w2.htm |
EX-32.1 - EX-32.1 - T-3 ENERGY SERVICES INC | h68397exv32w1.htm |
EX-31.1 - EX-31.1 - T-3 ENERGY SERVICES INC | h68397exv31w1.htm |
EX-32.2 - EX-32.2 - T-3 ENERGY SERVICES INC | h68397exv32w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period ended September 30, 2009
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number: 000-19580
T-3 ENERGY SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 76-0697390 | |
(State or Other Jurisdiction | (IRS Employer | |
of Incorporation or Organization) | Identification No.) | |
7135 Ardmore, Houston, Texas | 77054 | |
(Address of Principal Executive Offices) | (Zip Code) |
(Registrants telephone number, including area code): (713) 996-4110
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
At
November 2, 2009 the registrant had 12,951,125 shares of common stock outstanding.
TABLE OF CONTENTS
FORM 10-Q
PART I
i
Table of Contents
T-3
ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except for share amounts)
(in thousands except for share amounts)
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 2,797 | $ | 838 | ||||
Accounts receivable trade, net |
32,159 | 47,822 | ||||||
Inventories |
58,158 | 58,422 | ||||||
Deferred income taxes |
6,962 | 5,131 | ||||||
Prepaids and other current assets |
3,220 | 4,585 | ||||||
Total current assets |
103,296 | 116,798 | ||||||
Property and equipment, net |
48,770 | 46,071 | ||||||
Goodwill, net |
88,563 | 87,929 | ||||||
Other intangible assets, net |
32,607 | 33,477 | ||||||
Other assets |
5,499 | 2,837 | ||||||
Total assets |
$ | 278,735 | $ | 287,112 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable trade |
$ | 17,044 | $ | 26,331 | ||||
Accrued expenses and other |
16,910 | 19,274 | ||||||
Current maturities of long-term debt |
| 5 | ||||||
Total current liabilities |
33,954 | 45,610 | ||||||
Long-term debt, less current maturities |
| 18,753 | ||||||
Other long-term liabilities |
1,091 | 1,628 | ||||||
Deferred income taxes |
10,898 | 10,026 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $.001 par value, 25,000,000 shares authorized,
no shares issued or outstanding |
| | ||||||
Common stock, $.001 par value, 50,000,000 shares authorized,
12,950,458 and 12,547,458 shares issued and outstanding at
September 30, 2009 and December 31, 2008 |
13 | 13 | ||||||
Warrants, 10,157 issued and outstanding at September 30, 2009 and
December 31, 2008 |
20 | 20 | ||||||
Additional paid-in capital |
178,601 | 171,042 | ||||||
Retained earnings |
52,823 | 40,036 | ||||||
Accumulated other comprehensive income (loss) |
1,335 | (16 | ) | |||||
Total stockholders equity |
232,792 | 211,095 | ||||||
Total liabilities and stockholders equity |
$ | 278,735 | $ | 287,112 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
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T-3
ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands except per share amounts)
(in thousands except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues: |
||||||||||||||||
Products |
$ | 39,098 | $ | 59,635 | $ | 141,645 | $ | 175,386 | ||||||||
Services |
8,392 | 10,203 | 24,379 | 31,312 | ||||||||||||
47,490 | 69,838 | 166,024 | 206,698 | |||||||||||||
Cost of revenues: |
||||||||||||||||
Products |
25,819 | 37,440 | 90,226 | 107,815 | ||||||||||||
Services |
5,049 | 6,100 | 14,488 | 18,334 | ||||||||||||
30,868 | 43,540 | 104,714 | 126,149 | |||||||||||||
Gross profit |
16,622 | 26,298 | 61,310 | 80,549 | ||||||||||||
Selling, general and administrative expenses |
12,876 | 15,696 | 44,422 | 44,226 | ||||||||||||
Income from operations |
3,746 | 10,602 | 16,888 | 36,323 | ||||||||||||
Interest expense |
(159 | ) | (453 | ) | (641 | ) | (1,946 | ) | ||||||||
Interest income |
15 | 80 | 15 | 143 | ||||||||||||
Equity in earnings (loss) of unconsolidated
affiliates |
359 | (206 | ) | 912 | 175 | |||||||||||
Other income, net |
1,219 | 42 | 1,469 | 168 | ||||||||||||
Income from continuing operations before
provision for income taxes |
5,180 | 10,065 | 18,643 | 34,863 | ||||||||||||
Provision for income taxes |
1,101 | 5,359 | 5,856 | 13,128 | ||||||||||||
Income from continuing operations |
4,079 | 4,706 | 12,787 | 21,735 | ||||||||||||
Loss from discontinued operations, net of tax |
| (9 | ) | | (20 | ) | ||||||||||
Net income |
$ | 4,079 | $ | 4,697 | $ | 12,787 | $ | 21,715 | ||||||||
Basic earnings per common share: |
||||||||||||||||
Continuing operations |
$ | .32 | $ | .38 | $ | 1.01 | $ | 1.75 | ||||||||
Discontinued operations |
$ | | $ | | $ | | $ | | ||||||||
Net income per common share |
$ | .32 | $ | .38 | $ | 1.01 | $ | 1.75 | ||||||||
Diluted earnings per common share: |
||||||||||||||||
Continuing operations |
$ | .32 | $ | .37 | $ | 1.00 | $ | 1.69 | ||||||||
Discontinued operations |
$ | | $ | | $ | | $ | | ||||||||
Net income per common share |
$ | .32 | $ | .37 | $ | 1.00 | $ | 1.69 | ||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
12,811 | 12,504 | 12,660 | 12,437 | ||||||||||||
Diluted |
12,887 | 12,872 | 12,758 | 12,885 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
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T-3
ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
(in thousands)
Nine Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 12,787 | $ | 21,715 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Loss from discontinued operations, net of tax |
| 20 | ||||||
Bad debt expense |
361 | 340 | ||||||
Depreciation and amortization |
6,484 | 6,444 | ||||||
Amortization of deferred loan costs |
171 | 174 | ||||||
Loss (gain) on sale of assets |
18 | (33 | ) | |||||
Write-off of property and equipment, net |
93 | 25 | ||||||
Deferred taxes |
(1,137 | ) | (718 | ) | ||||
Employee stock-based compensation expense |
5,026 | 4,025 | ||||||
Excess tax benefits from stock-based compensation |
(122 | ) | (1,688 | ) | ||||
Equity in earnings of unconsolidated affiliate |
(912 | ) | (175 | ) | ||||
Changes in assets and liabilities, net of effect of
acquisitions and dispositions: |
||||||||
Accounts receivable trade |
17,445 | 1,249 | ||||||
Inventories |
3,176 | (12,630 | ) | |||||
Prepaids and other current assets |
1,497 | (539 | ) | |||||
Other assets |
58 | (219 | ) | |||||
Accounts payable trade |
(10,325 | ) | 3,452 | |||||
Accrued expenses and other |
(2,840 | ) | 5,868 | |||||
Net cash provided by operating activities |
31,780 | 27,310 | ||||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(4,181 | ) | (7,488 | ) | ||||
Proceeds from sales of property and equipment |
116 | 92 | ||||||
Equity investments in unconsolidated affiliates |
(2,039 | ) | | |||||
Cash paid for acquisitions, net of cash acquired |
(7,474 | ) | (2,732 | ) | ||||
Net cash used in investing activities |
(13,578 | ) | (10,128 | ) | ||||
Cash flows from financing activities: |
||||||||
Net borrowings (repayments) under swing line credit facility |
(750 | ) | 4,414 | |||||
Borrowings on revolving credit facility |
19,000 | | ||||||
Repayments on revolving credit facility |
(37,000 | ) | (34,000 | ) | ||||
Payments on long-term debt |
(113 | ) | (93 | ) | ||||
Debt financing costs |
| (78 | ) | |||||
Proceeds from exercise of stock options |
2,404 | 3,084 | ||||||
Proceeds from exercise of warrants |
| 38 | ||||||
Excess tax benefits from stock-based compensation |
122 | 1,688 | ||||||
Net cash used in financing activities |
(16,337 | ) | (24,947 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
94 | (137 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
1,959 | (7,902 | ) | |||||
Cash and cash equivalents, beginning of period |
838 | 9,522 | ||||||
Cash and cash equivalents, end of period |
$ | 2,797 | $ | 1,620 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
T-3
ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
(in thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income |
$ | 4,079 | $ | 4,697 | $ | 12,787 | $ | 21,715 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation adjustment, net of tax |
679 | (650 | ) | 1,351 | (1,120 | ) | ||||||||||
Comprehensive income |
$ | 4,758 | $ | 4,047 | $ | 14,138 | $ | 20,595 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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T-3
ENERGY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
T-3 Energy Services, Inc. has prepared the accompanying unaudited condensed consolidated
financial statements in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included. These financial
statements include the accounts of T-3 Energy Services, Inc. and its wholly owned subsidiaries
(collectively, T-3 or the Company). The Company accounts for its 50% investments in its
unconsolidated Mexico and Dubai affiliates under the equity method of accounting, and has
eliminated all significant intercompany balances and transactions in consolidation. Operating
results for the three and nine months ended September 30, 2009 may not necessarily be indicative of
the results for the year ending December 31, 2009. The Company has made certain reclassifications
to conform prior year financial information to the current period presentation. For further
information, refer to the consolidated financial statements and footnotes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008.
Fair Value of Financial Instruments
The Companys financial instruments consist of cash, accounts receivable, accounts payable,
accrued expenses and long-term debt. The carrying amounts of cash, accounts receivable, accounts
payable and accrued expenses approximate their respective fair values because of the short
maturities of those instruments. The Companys long-term debt consists of its revolving credit
facility. The December 31, 2008 carrying value of the revolving credit facility approximates fair
value because of its variable short-term interest rates.
Goodwill and Other Long-Lived Assets
The Company tests for the impairment of goodwill on at least an annual basis. The Company
will perform its 2009 annual test of impairment of goodwill as of October 1.
The Company recognized $23.5 million of goodwill impairment for its pressure and flow control
reporting unit for the year ended December 31, 2008. At December 31, 2008, the wellhead and
pipeline reporting units were not considered to be impaired as the estimated fair value exceeded
the recorded net book value of these reporting units by 6% and 23%. At September 30, 2009,
goodwill by reporting unit was $71.4 million, $13.6 million and $3.6 million for the pressure and
flow control, wellhead and pipeline reporting units.
During the first nine months of 2009, the Company has assessed the following indicators of
impairment, and determined there were no triggering events that would require an interim goodwill
impairment test:
| further, and sustained, deterioration in global economic conditions; | ||
| changes in the Companys outlook for future profits and cash flows; | ||
| further reductions in the market price of the Companys common stock; | ||
| increased costs of capital; and/or | ||
| reductions in valuations of other public companies within the Companys industry or valuations observed in acquisition transactions within the Companys industry. |
The Company has no indefinite-lived intangible assets. The Company tests for the impairment
of other long-lived assets upon the occurrence of a triggering event based upon indicators such as:
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| changes in the nature of the assets; | ||
| changes in the future economic benefit of the assets; and/or | ||
| changes in any historical or future profitability measurements and other external market conditions or factors that may be present. |
The Company has assessed the current market conditions and has concluded, at the present time,
that no triggering events requiring an impairment analysis of long-lived assets have occurred in
2009. The Company will continue to monitor for events or conditions that could change this
assessment.
New Accounting Pronouncements
In September 2006, new accounting principles were issued that define fair value, establish a
framework for measuring fair value under generally accepted accounting principles, and expand
disclosures about fair value measurements. The initial application of these new principles is
limited to financial assets and liabilities and non-financial assets and liabilities recognized at
fair value on a recurring basis. The Company adopted these principles on January 1, 2008. The
adoption of the new principles did not have any impact on the Companys consolidated financial
position, results of operations and cash flows. On January 1, 2009, these new principles became
effective on a prospective basis for non-financial assets and liabilities for which companies do
not measure fair value on a recurring basis. The application of the new principles to the
Companys non-financial assets and liabilities will primarily relate to assets acquired and
liabilities assumed in a business combination and asset impairments, including goodwill and
long-lived assets. The Company does not expect this application of the new principles to have a
material impact on the its consolidated financial position, results of operations and cash flows.
In December 2007, new accounting principles were issued that change the requirements for an
acquirers recognition and measurement of the assets acquired and the liabilities assumed in a
business combination. These new principles are effective for annual periods beginning after
December 15, 2008, with prospective application for all business combinations entered into after
the date of adoption. The Company adopted these new principles on January 1, 2009. Due to the
adoption of these new principles during the first quarter of 2009, approximately $125,000 of
transaction costs were expensed that, prior to the issuance of these new principles, would have
been capitalized. The effect of this adoption for periods beyond the first quarter of 2009 will be
dependent upon acquisitions at that time and therefore is not currently estimable. Management does
not expect the provisions of these new principles that modify the income statement recognition
associated with changes to deferred tax valuation allowances and tax uncertainties established in
connection with prior business combinations to have a material impact on the Companys consolidated
financial position, results of operations and cash flows.
In May 2009, new accounting principles were issued that establish general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. These new principles are effective for
interim and annual periods ending after June 15, 2009 and set forth the period after the balance
sheet date during which management of the Company should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the circumstances under
which the Company should recognize events or transactions occurring after the balance sheet date in
its financial statements and the disclosures that the Company should make about events or
transactions that occurred after the balance sheet date. The Company adopted these new principles
on June 30, 2009. The adoption of these new principles did not have any impact on the Companys
consolidated financial position, results of operations and cash flows.
Subsequent Events
The Companys management has evaluated subsequent events for events or transactions that have
occurred after September 30, 2009 through the date of the filing of this Form 10-Q.
No events or transactions have occurred during this period that the Company feels should
be recognized or disclosed in the September 30, 2009 financial statements.
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2. BUSINESS COMBINATIONS AND DISPOSITIONS
Business Combinations
On March 4, 2009, the Company purchased the assets of the surface wellhead business of Azura
Energy Systems Surface, Inc. (Azura) for $8.1 million in cash (subject to a customary working
capital adjustment) plus the assumption of accounts payable and other liabilities. During the
third quarter of 2009, the Company finalized the working capital adjustment and the purchase amount
was subsequently adjusted to $7.4 million. This business, when consolidated with the Companys
current wellhead business, provides additional geographic locations in key markets and allow
consolidation of several facilities where both the Company and Azura are presently located. The
Company funded the purchase of these assets from its working capital and the use of its senior
credit facility.
On May 29, 2008, the Company exercised its option to purchase certain fixed assets and
inventory of HP&T Products, Inc. in India (HP&T) at their estimated fair value of $0.4 million.
During the first quarter of 2009, the Company made a further payment of $0.1 million based on the
final fair market valuation of the fixed assets and inventory. The Company funded the purchase of
these assets from the Companys working capital and the use of its senior credit facility.
On January 24, 2008, the Company completed the purchase of Pinnacle Wellhead, Inc.
(Pinnacle) for approximately $2.3 million, net of cash acquired. Pinnacle is located in Oklahoma
City, Oklahoma and has been in business for over twenty years as a service provider that assembles,
tests, installs and performs repairs on wellhead production products, primarily in Oklahoma. The
Company funded this acquisition from the Companys working capital and the use of its senior credit
facility.
These acquisitions discussed above were accounted for using the purchase method of accounting.
Results of operations for the above acquisitions are included in the accompanying condensed
consolidated financial statements since the dates of acquisition. The Company allocated the
purchase prices to the net assets acquired based upon their estimated fair market values at the
dates of acquisition. The Company recorded as goodwill the excess of the purchase price over the
net assets acquired. The Company considers the balances included in the consolidated balance
sheets at December 31, 2008 and September 30, 2009 related to the Pinnacle acquisition to be final.
The Company based the balances included in the consolidated balance sheets at December 31, 2008
related to the HP&T acquisition on preliminary information and, at September 30, 2009, the Company
considers these balances to be final. During the three months ended September 30, 2009, the
Company revised the balances related to the Azura acquisition but these balances are based on
preliminary information and are subject to change when final asset valuations are determined and
the potential for liabilities has been evaluated. These acquisitions are not material to the
Companys condensed consolidated financial statements, and therefore the Company does not present a
preliminary purchase price allocation and pro forma information.
The following schedule summarizes investing activities related to the Companys acquisitions
presented in the condensed consolidated statements of cash flows for the nine months ended
September 30, 2009 and 2008 (dollars in thousands):
2009 | 2008 | |||||||
Fair value of tangible and intangible assets,
net of cash acquired |
$ | 8,798 | $ | 2,801 | ||||
Goodwill recorded |
| 758 | ||||||
Total liabilities assumed |
(1,324 | ) | (827 | ) | ||||
Common stock issued |
| | ||||||
Cash paid for acquisitions, net of cash
acquired |
$ | 7,474 | $ | 2,732 | ||||
Dispositions
During 2004 and 2005, the Company sold substantially all of the assets of its products and
distribution segments. The assets of the products and distribution segments sold constituted
businesses and thus we reported their results of operations as discontinued operations. The
Company had no income or loss from discontinued
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operations for the three or nine months ended
September 30, 2009. The Companys loss before income taxes from discontinued operations for the
three and nine months ended September 30, 2008 was not significant.
3. INVENTORIES
Inventories consist of the following (dollars in thousands):
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
Raw materials |
$ | 6,185 | $ | 8,063 | ||||
Work in process |
13,095 | 14,680 | ||||||
Finished goods and component parts |
38,878 | 35,679 | ||||||
$ | 58,158 | $ | 58,422 | |||||
4. DEBT
The Companys senior credit facility provides for a $180 million revolving line of credit,
maturing October 26, 2012 that can be increased by up to $70 million (not to exceed a total
commitment of $250 million) with the approval of the senior lenders. The senior credit facility
consists of a U.S. revolving credit facility that includes a swing line subfacility and a letter of
credit subfacility up to $25 million and $50 million. The Companys senior credit facility also
provides for a separate Canadian revolving credit facility, which includes a swing line subfacility
of up to U.S. $5 million and a letter of credit subfacility of up to U.S. $5 million. The
revolving credit facility matures on the same date as the senior credit facility, and is subject to
the same covenants and restrictions. As of September 30, 2009, the Company had no outstanding
borrowings under its senior credit facility and Canadian revolving credit facility. The senior
credit facility provides, among other covenants and restrictions, that the Company complies with
the following financial covenants: a minimum interest coverage ratio of 3.0 to 1.0, a maximum
leverage ratio of 3.0 to 1.0 and a limitation on capital expenditures of no more than 75% of
current year EBITDA (as defined under the senior credit facility). As of September 30, 2009, the
Company was in compliance with the covenants under the senior credit facility, with an interest
coverage ratio of 50.2 to 1.0, a leverage ratio of 0.01 to 1.0, and year-to-date capital
expenditures of $4.2 million, which represents 14% of current year EBITDA.
As of September 30, 2009, the Companys availability under its senior credit facility was
$151.5 million. The Companys availability in future periods is limited to the lesser of (a) three
times the Companys EBITDA on a trailing-twelve-months basis, which totals $151.8 million at
September 30, 2009, less the Companys outstanding borrowings, standby letters of credits and other
debt (as each of these terms are defined under the Companys senior credit facility) and (b) the
amount of additional borrowings that would result in interest payments on all of the Companys debt
that exceed one third of the Companys EBITDA on a trailing-twelve-months basis. See Note 7 to the
Companys consolidated financial statements included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2008 for additional information related to the Companys debt.
5. EARNINGS PER SHARE
The Company computes basic net income per common share by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net income per common share
is the same as basic but includes dilutive stock options, restricted stock and warrants using the
treasury stock method. The following tables reconcile the numerators and denominators of the basic
and diluted per common share computations for net income for the three and nine months ended
September 30, 2009 and 2008, as follows (in thousands except per share data):
8
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Three Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Numerator: |
||||||||
Income from continuing operations |
$ | 4,079 | $ | 4,706 | ||||
Loss from discontinued operations |
| (9 | ) | |||||
Net income |
$ | 4,079 | $ | 4,697 | ||||
Denominator: |
||||||||
Weighted average common shares
outstanding basic |
12,811 | 12,504 | ||||||
Shares for dilutive stock options,
restricted stock and warrants |
76 | 368 | ||||||
Weighted average common shares
outstanding diluted |
12,887 | 12,872 | ||||||
Basic earnings per common share: |
||||||||
Continuing operations |
$ | .32 | $ | .38 | ||||
Discontinued operations |
| | ||||||
Net income per common share |
$ | .32 | $ | .38 | ||||
Diluted earnings per common share: |
||||||||
Continuing operations |
$ | .32 | $ | .37 | ||||
Discontinued operations |
| | ||||||
Net income per common share |
$ | .32 | $ | .37 | ||||
For the three months ended September 30, 2009 and 2008, there were 846,000 and 574,000 options
that were not included in the computation of diluted earnings per share because their inclusion
would have been anti-dilutive. For the three months ended September 30, 2008, there were 10,000
shares of restricted stock that were not included in the computation of diluted earnings per share
because their inclusion would have been anti-dilutive.
Nine Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Numerator: |
||||||||
Income from continuing operations |
$ | 12,787 | $ | 21,735 | ||||
Loss from discontinued operations |
| (20 | ) | |||||
Net income |
$ | 12,787 | $ | 21,715 | ||||
Denominator: |
||||||||
Weighted average common shares
outstanding basic |
12,660 | 12,437 | ||||||
Shares for dilutive stock options,
restricted stock and warrants |
98 | 448 | ||||||
Weighted average common shares
outstanding diluted |
12,758 | 12,885 | ||||||
Basic earnings per common share: |
||||||||
Continuing operations |
$ | 1.01 | $ | 1.75 | ||||
Discontinued operations |
| | ||||||
Net income per common share |
$ | 1.01 | $ | 1.75 | ||||
Diluted earnings per common share: |
||||||||
Continuing operations |
$ | 1.00 | $ | 1.69 | ||||
Discontinued operations |
| | ||||||
Net income per common share |
$ | 1.00 | $ | 1.69 | ||||
For the nine months ended September 30, 2009 and 2008, there were 974,000 and 178,000 options
that were not included in the computation of diluted earnings per share because their inclusion
would have been anti-dilutive. For the nine months ended September 30, 2008, there were 3,400
shares of restricted stock that were not included in the computation of diluted earnings per share
because their inclusion would have been anti-dilutive.
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6. SEGMENT INFORMATION
The Companys determination of reportable segments considers the strategic operating units
under which the Company sells various types of products and services to various customers.
Financial information for purchase transactions is included in the segment disclosures only for
periods subsequent to the dates of acquisition.
The pressure control segment manufactures, remanufactures and repairs high pressure, severe
service products including valves, chokes, actuators, blowout preventers, accumulators, rubber
goods, manifolds and wellhead equipment.
The accounting policies of the segment are the same as those of the Company. The Company
evaluates performance based on income from operations excluding certain corporate costs not
allocated to the segment. Substantially all revenues are from domestic sources and Canada and the
Company holds all assets in the United States, Canada and India.
(dollars in thousands) | ||||||||||||
Pressure | ||||||||||||
Control | Corporate | Consolidated | ||||||||||
Three months ended September 30: |
||||||||||||
2009 |
||||||||||||
Revenues |
$ | 47,490 | $ | | $ | 47,490 | ||||||
Depreciation and amortization |
2,019 | 238 | 2,257 | |||||||||
Income (loss) from operations |
8,048 | (4,302 | ) | 3,746 | ||||||||
Capital expenditures |
1,230 | 19 | 1,249 | |||||||||
2008 |
||||||||||||
Revenues |
$ | 69,838 | $ | | $ | 69,838 | ||||||
Depreciation and amortization |
1,733 | 267 | 2,000 | |||||||||
Income (loss) from operations |
17,749 | (7,147 | ) | 10,602 | ||||||||
Capital expenditures |
1,553 | 309 | 1,862 |
(dollars in thousands) | ||||||||||||
Pressure | ||||||||||||
Control | Corporate | Consolidated | ||||||||||
Nine months ended September 30: |
||||||||||||
2009 |
||||||||||||
Revenues |
$ | 166,024 | $ | | $ | 166,024 | ||||||
Depreciation and amortization |
5,806 | 678 | 6,484 | |||||||||
Income (loss) from operations |
34,220 | (17,332 | ) | 16,888 | ||||||||
Capital expenditures |
3,629 | 552 | 4,181 | |||||||||
2008 |
||||||||||||
Revenues |
$ | 206,698 | $ | | $ | 206,698 | ||||||
Depreciation and amortization |
5,511 | 933 | 6,444 | |||||||||
Income (loss) from operations |
54,604 | (18,281 | ) | 36,323 | ||||||||
Capital expenditures |
6,658 | 830 | 7,488 |
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising in the ordinary course of business.
The Companys environmental remediation and compliance costs have not been material during any
of the periods presented. As part of the sale of a business in 2001, the Company agreed to
indemnify the buyers for certain environmental cleanup and monitoring activities associated with a
former manufacturing site. The Company and the buyers have engaged a licensed engineering firm to
conduct a post-closure corrective action subsurface investigation on the property and Phase II and
III investigations. During the first nine months of 2009, the Company recorded approximately
$140,000 for incurred and estimated future Phase III investigation costs to determine the location,
nature and extent of any contamination. The Company anticipates the environmental monitoring
activities, for which the Company bears partial liability, to continue at least through the year
2024. Although the Company currently believes that it is more likely than not that it will incur
future remediation costs at this site, it has not accrued for these costs beyond the estimated
Phase III assessment costs as it is presently unable to estimate those future costs that may be
incurred in connection with this indemnification agreement.
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The Company has been identified as a potentially responsible party with respect to the Lake
Calumet Cluster site near Chicago, Illinois, which has been designated for cleanup under CERCLA and
Illinois state law. Management believes that the Companys involvement at this site was minimal.
While no agency-approved final allocation has been made of the Companys liability with respect to
the Lake Calumet Cluster site, management does not expect that its ultimate share of remediation
costs will have a material impact on its financial position, results of operations or cash flows.
In July 2003, a lawsuit was filed against the Company in the U.S. District Court, Eastern
District of Louisiana as Chevron, U.S.A. v. Aker Maritime, Inc. The lawsuit alleged that a wholly
owned subsidiary of the Company, the assets and liabilities of which were sold in 2004, failed to
deliver the proper bolts and/or sold defective bolts to the plaintiffs contractor to be used in
connection with a drilling and production platform in the Gulf of Mexico. The plaintiff claimed
that the bolts failed and were replaced at a cost of approximately $3.0 million. The complaint
named the plaintiffs contractor and seven of its suppliers and subcontractors (including the
Companys subsidiary) as the defendants and alleged negligence on the part of all defendants. The
lawsuit was called to trial during June 2007 and resulted in a jury finding of negligence against
the Company and three other defendants. The jury awarded the plaintiffs damages in the amount of
$2.9 million, of which the Company estimates its share to be $1.0 million. The Company has
appealed this decision and has accrued approximately $1.1 million, net of tax, for its share of the
damages and attorney fees, court costs and interest, as a loss from discontinued operations in the
consolidated statement of operations during the year ended December 31, 2007.
At September 30, 2009, the Company had no significant letters of credit outstanding.
8. STOCKHOLDERS EQUITY
Common Stock
The Company issued 403,000 shares of common stock during the nine months ended September 30,
2009 as the result of 275,000 stock options exercised by option holders under the Companys 2002
Stock Incentive Plan and the granting of 128,000 shares of restricted stock to Company employees
and members of the Companys Board of Directors.
Warrants
There were no warrants exercised during the nine months ended September 30, 2009. At
September 30, 2009, warrants to acquire 10,157 shares of common stock at $12.80 per share remain
outstanding. Each of these warrants expire on December 17, 2011.
Additional Paid-In Capital
During the nine months ended September 30, 2009, additional paid-in capital increased as a
result of the compensation cost recorded, stock options exercised by employees under the Companys
2002 Stock Incentive Plan (as discussed above), and the excess tax benefits from the stock options
exercised.
9. STOCK-BASED COMPENSATION
The T-3 Energy Services, Inc. 2002 Stock Incentive Plan, as amended (the Plan) provides
officers, employees and non-employee directors equity-based incentive awards, including stock
options and restricted stock. The Plan, after an amendment approved by the stockholders on June 4,
2009, provides for the issuance of up to 2,623,000 shares of common stock thereunder, and will
remain in effect until December 31, 2011, unless terminated earlier. Stock options granted will
reduce the number of available shares under the Plan on a one share for one share basis, whereas
restricted stock will reduce the number of available shares under the Plan on a 1.22 shares for one
share basis. As of September 30, 2009, the Company had 329,126 equivalent shares available for
issuance as stock options or 269,776 equivalent shares available for issuance as restricted stock
in connection with the Plan. Outstanding stock options and unvested restricted stock awards under
the Plan as of September 30, 2009 were 1,215,007 shares and 134,700 shares.
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Stock Option Awards
Stock options under the Companys Plan generally expire 10 years from the grant date and vest
over three to four years from the grant date. The Company uses the Black-Scholes option pricing
model to estimate the fair value of stock options granted to employees on the date of grant. The
Company amortizes to expense, on a straight-line basis over the vesting period, the fair value of
the options. The Company has recorded an estimate for forfeitures of awards of stock options. The
Company will adjust this estimate as actual forfeitures differ from the estimate. The Company
estimated the fair value of each stock option on the grant date using the Black-Scholes option
pricing model using the assumptions noted in the following table. The Company estimated the
expected volatility based on historical and implied volatilities of the Companys stock and
historical and implied volatilities of comparable companies. The Company based the expected term
on historical employee exercises of options. The Company based the risk-free interest rate upon
the U.S. Treasury yield curve in effect at the time of grant. The Company does not expect to pay
any dividends on its common stock. Assumptions used for stock options granted during 2009 and
2008 were as follows:
Nine Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
2009 | 2008 | |||||||
Expected volatility |
57.96 | % | 50.00 | % | ||||
Risk-free interest rate |
2.33 | % | 2.28 | % | ||||
Expected term (in years) |
4.5 | 4.7 |
The Company granted 207,500 and 436,500 options during the nine months ended September 30,
2009 and 2008. The weighted average grant date fair value of options granted during the nine
months ended September 30, 2009 and 2008 was $7.65 and $19.13.
The Company recognized employee stock-based compensation expense
related to stock options of $1,317,000 and $1,308,000 during the three
months ended September 30, 2009 and 2008 and $4,485,000 and
$3,390,000 during the nine months ended September 30, 2009 and 2008. As further discussed in Note 11 of the Companys
Quarterly Report on Form 10-Q for the period ended March 31, 2009, the stock-based compensation
expense related to stock options for the nine months ended September 30, 2009 includes a charge of
$651,000 related to the immediate vesting of 50,000 unvested stock options held by the Companys
former President, Chief Executive Officer and Chairman of the Board, pursuant to the terms of his
separation agreement.
On June 4, 2009, the Company converted phantom stock options awarded to Steven W. Krablin,
representing the value of the right to acquire 100,000 shares of the Companys stock to 100,000
stock options granted pursuant to the Plan. The Company originally awarded these phantom stock
options on March 23, 2009, in connection with Mr. Krablins appointment as President, Chief
Executive Officer and Chairman of the Board, and they had a strike price of $14.85, which was equal
to the fair market value of the Companys common stock on March 23, 2009. The terms and conditions
of the stock options are unchanged from the terms and conditions of the phantom stock options.
These stock options will vest one-half on March 23, 2010 and one-half on March 23, 2011,
conditioned on Mr. Krablins continued employment with the Company. For further discussion of Mr.
Krablins appointment, please refer to Note 11 of the Companys Quarterly Report on Form 10-Q for
the period ending March 31, 2009.
Restricted Stock Awards
On June 4, 2009, the Company converted a phantom 10,000 share restricted stock grant to Mr.
Krablin to a grant of 10,000 shares of restricted stock granted pursuant to the Plan. The Company
originally awarded this phantom restricted stock grant on March 23, 2009, in connection with Mr.
Krablins appointment with the Company. The Company determined the fair value of these restricted
shares based on the closing price of the Companys stock on June 4, 2009. This restricted stock
grant will vest one-half on March 23, 2010, with the other half vesting March 23, 2011, conditioned
on Mr. Krablins continued employment with the Company.
Additionally, on June 4, 2009, the Company granted 102,000 shares of restricted stock to
certain employees of the Company and 16,000 shares of restricted stock to non-executive members of
the Board of Directors. The Company determined the fair value of these restricted shares based on
the closing price of the Companys stock
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on the grant date. The shares granted to employees will vest annually in one-third increments
beginning on June 4, 2011, and the shares granted to the Board members will vest on June 4, 2010.
The
Company recognized employee stock-based compensation expense related
to restricted stock awards of $232,000 and $212,000 during the three
months ended September 30, 2009 and 2008 and $541,000 and $635,000
during the nine months ended September 30, 2009 and 2008.
10. INCOME TAXES
The Companys effective tax rate was 21.3% for the three months ended September 30, 2009
compared to 53.2% for the three months ended September 30, 2008. The tax rate was lower than the
statutory rate in 2009 primarily due to $0.5 million of tax benefits from prior periods that were
realized as a result of the expiration of the statute of limitations in the U.S. The tax rate in
2008 was higher than the statutory rate primarily due to $2.6 million of non-recurring
non-deductible costs, of which $0.4 million of these costs were recorded in the second quarter of
2008, related to the pursuit of strategic alternatives for the Company.
The Companys effective tax rate was 31.4% for the nine months ended September 30, 2009
compared to 37.7% for the nine months ended September 30, 2008. The tax rate was lower than the
statutory tax rate in 2009 primarily due to $0.5 million of tax benefits from prior years that were
realized as a result of the expiration of the statute of limitations in the U.S. The tax rate in
2008 was higher than the statutory rate primarily due to $2.6 million of non-recurring
non-deductible costs incurred in 2008 related to the pursuit of strategic alternatives for the
Company as well as non-deductible employee compensation costs. These were partially offset by
extraterritorial income tax deductions.
11. OTHER
Change in Accounting Principle
During the quarter ended March 31, 2009, the Company changed the date of its annual goodwill
impairment assessment from December 31 to October 1. This change was effected to allow more time
and better support the completion of the assessment prior to the Companys filing requirements for
its Annual Report on Form 10-K as an accelerated filer. The Company believes that the resulting
change in accounting principle related to the annual testing date will not delay, accelerate or
avoid an impairment charge. The Company determined that the change in accounting principle related
to the annual testing date is preferable under the circumstances and does not result in adjustments
to the financial statements when applied retrospectively.
Strategic Alternatives Costs
During the nine months ended September 30, 2008, approximately $4.7 million of costs were
incurred related to the pursuit of strategic alternatives for the Company, of which $2.2 million
were incurred in the three months ended September 30, 2008 and $2.5 million were incurred in the
three months ended June 30, 2008. The Company classified these costs as selling, general and
administrative expenses within the Companys condensed consolidated statements of operations for
the three and nine months ended September 30, 2008. The Company did not incur any similar costs
during the three or nine months ended September 30, 2009.
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ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
General
The following discussion and analysis of our historical results of operations and financial
condition for the three and nine months ended September 30, 2009 and 2008 should be read in
conjunction with the condensed consolidated financial statements and related notes included
elsewhere in this Form 10-Q and our financial statements and related managements discussion and
analysis of financial condition and results of operations included in our Annual Report on Form
10-K for the year ended December 31, 2008.
We operate under one reporting segment, pressure control. Our pressure control business has
three product lines: pressure and flow control, wellhead and pipeline, which generated 75%, 18% and
7% of our total revenue for the three months ended September 30, 2009 and 77%, 16% and 7% of our
total revenue for the nine months ended September 30, 2009. We offer original equipment products
and aftermarket parts and services for each product line. Aftermarket parts and services include
all remanufactured products and parts, repair and field services. Original equipment products
generated 77% and 82% and aftermarket parts and services generated 23% and 18% of our total
revenues for the three and nine months ended September 30, 2009.
Outlook
Our business is driven by the level and complexity of worldwide oil and natural gas drilling
and completion, which is, in turn, primarily driven by current and anticipated price levels for oil
and natural gas. We believe that oil and gas market prices and the drilling rig count in the
United States, Canada and international markets serve as key indirect indicators of demand for the
products we manufacture and sell and for the services we provide. The following table sets forth
average oil and gas price information and average monthly rig count data for each fiscal quarter
for the past two years:
WTI | Henry Hub | United States | Canada | International | ||||||||||||||||
Quarter Ended: | Oil | Gas | Rig Count | Rig Count | Rig Count | |||||||||||||||
September 30, 2007 |
$ | 75.46 | $ | 6.25 | 1,788 | 348 | 1,020 | |||||||||||||
December 31, 2007 |
$ | 90.68 | $ | 7.40 | 1,790 | 356 | 1,017 | |||||||||||||
March 31, 2008 |
$ | 97.94 | $ | 8.72 | 1,770 | 507 | 1,046 | |||||||||||||
June 30, 2008 |
$ | 126.35 | $ | 11.47 | 1,864 | 169 | 1,084 | |||||||||||||
September 30, 2008 |
$ | 118.05 | $ | 9.00 | 1,978 | 432 | 1,096 | |||||||||||||
December 31, 2008 |
$ | 58.35 | $ | 6.38 | 1,898 | 408 | 1,090 | |||||||||||||
March 31, 2009 |
$ | 42.91 | $ | 4.49 | 1,326 | 329 | 1,025 | |||||||||||||
June 30, 2009 |
$ | 59.44 | $ | 3.80 | 936 | 90 | 982 | |||||||||||||
September 30, 2009 |
$ | 68.20 | $ | 3.42 | 973 | 187 | 969 |
Source: West Texas Intermediate Crude Average Spot Price for the Quarter indicated: Department of
Energy, Energy Information Administration (www.eia.doe.gov); NYMEX Henry Hub Natural Gas Average
Spot Price for the Quarter indicated: (www.oilnergy.com); Average Rig count for the Quarter
indicated: Baker Hughes, Inc. (www.bakerhughes.com).
As noted in the table above, during the third quarter, the average worldwide rig count
increased 6% from the second quarter of 2009; unfortunately, these levels were approximately 39%
below their peak quarterly average in the third quarter of 2008. Activity levels were particularly
depressed in the United States where average quarterly drilling during 2009 was down approximately
45% from their third quarter 2008 average.
During the quarter, our revenues and earnings declined as our business continued to approach
current bookings levels and backlog continued to decline. Our backlog at September 30, 2009 was
$41.2 million, which is down $4.2 million from June 30, 2009 and $34.9 million from December 31,
2008. Despite the depressed levels of domestic drilling, we have succeeded in selling product
outside of the United States, and approximately
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50% of third quarter revenues came from orders destined for use outside of the United States.
Overall booking levels appear to have stabilized, and we booked approximately $43.3 million in the
third quarter, up from $41.8 million during the second quarter of 2009. Although fourth quarter
bookings may seasonally decline as companies postpone certain orders during the holiday season, we
believe the longer-term trend is positive. During the quarter, revenues for repair,
remanufacturing and service work, which typically increases ahead of our main product lines, all
improved. Beyond 2009, we believe the long-term outlook for our industry remains positive,
although the timing for a recovery is uncertain.
Results of Operations
Three Months ended September 30, 2009 Compared with Three Months ended September 30, 2008
Revenues. Revenues decreased $22.3 million, or 32.0%, in the three months ended September 30,
2009 compared to the three months ended September 30, 2008. Our pressure and flow control products
revenue decreased approximately $13.9 million, or 28.1%, from the three months ended September 30,
2008, primarily due to decreased purchases by our customers, which is attributable to decreased
demand resulting from the depressed global economy and consequent lower commodity prices and their
effects on drilling activities. Our wellhead product line revenues decreased approximately $2.5
million, or 22.1%, from the three months ended September 30, 2008, primarily due to decreased
purchases by our customers, which is due to the depressed global economy and resulting lower
activity in 2009 with certain larger customers. Our pipeline product line revenues decreased
approximately $5.9 million, or 65.2%, from the three months ended September 30, 2008, due to a
decrease in bookings for larger pipeline-related projects quarter-over-quarter, which is a result
of the depressed global economy. Across all three product lines, we have experienced pricing
pressures that have resulted in a decrease in our standard pricing on some of our product
offerings. Additionally, our wellhead and pipeline product line businesses are closely tied to
North American drilling and production activities, and the drop in their revenues resulted from the
52% decrease in the third quarter of 2009 average North American rig counts from their third
quarter of 2008 high.
Gross Profit. Gross profit as a percentage of revenues was 35.0% in the three months ended
September 30, 2009 compared to 37.7% in the three months ended September 30, 2008. Gross profit
margin was lower in 2009 primarily due to pricing pressure across all three product lines, an
increase in our slow-moving inventory reserve for our wellhead product line and delays in our
ability to secure low-cost country sourcing for some of our wellhead product offerings. Our gross
profit margins for our pressure and flow control, wellhead and pipeline product lines were 36.3%,
29.8% and 29.0% for the three months ended September 30, 2009 compared to 37.6%, 40.9% and 34.1%
for the three months ended September 30, 2008.
Selling, General and Administrative Expenses. Selling, general and administrative expenses
decreased $2.8 million, or 18%, in the three months ended September 30, 2009 compared to the three
months ended September 30, 2008. Selling, general and administrative expenses for the three months
ended September 30, 2008 included $2.2 million of costs related to the pursuit of strategic
alternatives. Selling, general and administrative expenses, excluding the strategic alternative
costs in 2008, decreased $0.6 million during the three months ended September 30, 2009 primarily
due to a $0.3 million decrease in bad debt expense and a $0.2 million decrease in legal and
environmental expenses.
Interest Expense. Interest expense for the three months ended September 30, 2009 was $0.2
million compared to $0.5 million in the three months ended September 30, 2008. The decrease was
attributable to lower outstanding debt levels during the three months ending September 30, 2009.
Equity in Earnings (Loss) of Unconsolidated Affiliates. Equity in earnings (loss) of
unconsolidated affiliates for the three months ended September 30, 2009 was $0.4 million compared
to ($0.2) million in the three months ended September 30, 2008. The increase was attributable to
our share of the earnings of our joint ventures in Mexico and Dubai during the three months ending
September 30, 2009.
Other Income, Net. Other income, net for the three months ended September 30, 2009 was $1.2
million compared to $42,000 in the three months ended September 30, 2008. The increase was
primarily attributable to
income of $1.1 million related to the settlement of a business interruption insurance claim for
Hurricane Ike.
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Income Taxes. Income tax expense for the three months ended September 30, 2009 was $1.1
million as compared to $5.4 million in the three months ended September 30, 2008. Our effective
tax rate was 21.3% for the three months ended September 30, 2009 compared to 53.2% for the three
months ended September 30, 2008. The tax rate was lower than the statutory rate in 2009 primarily
due to $0.5 million of tax benefits from prior periods that were realized as a result of the
expiration of the statute of limitations in the U.S. The tax rate in 2008 was higher than the
statutory rate primarily due to $2.6 million of non-recurring non-deductible costs, of which $0.4
million of these costs were recorded in the second quarter of 2008, related to the pursuit of
strategic alternatives.
Income from Continuing Operations. Income from continuing operations was $4.1 million in the
three months ended September 30, 2009 compared with $4.7 million in the three months ended
September 30, 2008 as a result of the foregoing factors.
Nine Months ended September 30, 2009 Compared with Nine Months ended September 30, 2008
Revenues. Revenues decreased $40.7 million, or 19.7%, in the nine months ended September 30,
2009 compared to the nine months ended September 30, 2008. Our pressure and flow control products
revenue decreased approximately $20.7 million, or 13.9%, from the nine months ended September 30,
2008, primarily due to decreased purchases by our customers, which is attributable to decreased
demand for our pressure and flow control products and services resulting from the depressed global
economy and consequent lower commodity prices and their effects on drilling activities. Our
wellhead product line revenues decreased approximately $4.6 million, or 14.8%, from the nine months
ended September 30, 2008, primarily due to decreased purchases by our customers, which is due to
the depressed global economy and resulting lower activity in 2009 with certain larger customers.
Our pipeline product line revenues decreased approximately $15.4 million, or 58.2%, from the nine
months ended September 30, 2008, due to a decrease in bookings for larger pipeline-related projects
period-over-period, which is a result of the depressed global economy. Across all three product
lines, we have experienced pricing pressures that have resulted in a decrease in our standard
pricing on some of our product offerings. Additionally, our wellhead and pipeline product line
businesses are closely tied to North American drilling and production activities, and the drop in
their revenues resulted from the 47% decrease in year-to-date average North American rig counts
from their third quarter of 2008 high.
Gross Profit. Gross profit as a percentage of revenues was 36.9% in the nine months ended
September 30, 2009 compared to 39.0% in the nine months ended September 30, 2008. Gross profit
margin was lower in 2009 primarily due to pricing pressure across all three product lines, an
increase in our slow-moving inventory reserve for our wellhead product line and delays in our
ability to secure low-cost country sourcing for some of our wellhead product offerings. Our gross
profit margins for our pressure and flow control, wellhead and pipeline product lines were 38.7%,
30.6% and 30.0% for the nine months ended September 30, 2009 compared to 38.9%, 40.8% and 37.5% for
the nine months ended September 30, 2008.
Selling, General and Administrative Expenses. Selling, general and administrative expenses
increased $0.2 million, or 0.4%, in the nine months ended September 30, 2009 compared to the nine
months ended September 30, 2008. Selling, general and administrative expenses for the nine months
ended September 30, 2009 included $3.9 million of separation costs for our former President, Chief
Executive Officer and Chairman of the Board, as well as $0.1 million related to Azura acquisition
costs. Selling, general and administrative expenses for the nine months ended September 30, 2008
included $4.7 million of costs related to the pursuit of strategic alternatives. Selling, general
and administrative expenses, excluding the separation and Azura costs in 2009 and the strategic
alternatives costs in 2008, increased $0.9 million primarily due to increased employee stock-based
compensation expense of $0.4 million, abandoned acquisition costs of $0.2 million and facility
closing costs of $0.1 million.
Interest Expense. Interest expense for the nine months ended September 30, 2009 was $0.6
million compared to $1.9 million in the nine months ended September 30, 2008. The decrease was
attributable to lower outstanding debt levels during the nine months ending September 30, 2009.
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Equity in Earnings of Unconsolidated Affiliates. Equity in earnings of unconsolidated
affiliates for the nine months ended September 30, 2009 was $0.9 million compared to $0.2 million
in the nine months ended September 30, 2008. The increase was attributable to our share of the
earnings of our joint ventures in Mexico and Dubai during the nine months ending September 30,
2009.
Other Income, Net. Other income, net for the nine months ended September 30, 2009 was $1.5
million compared to $0.2 million in the nine months ended September 30, 2008. The increase was
primarily attributable to income of $1.5 million related to the settlement of business interruption
insurance claims for Hurricanes Gustav and Ike.
Income Taxes. Income tax expense for the nine months ended September 30, 2009 was $5.9 million
as compared to $13.1 million in the nine months ended September 30, 2008. The decrease was
primarily due to a decrease in income before taxes. Our effective tax rate was 31.4% for the nine
months ended September 30, 2009 compared to 37.7% for the nine months ended September 30, 2008.
The tax rate was lower than the statutory tax rate in 2009 primarily due to $0.5 million of tax
benefits from prior years that were realized as a result of the expiration of the statute of
limitations in the U.S. The tax rate in 2008 was higher than the statutory rate primarily due to
$2.6 million of non-recurring non-deductible costs incurred in 2008 related to the pursuit of
strategic alternatives as well as non-deductible employee compensation costs. These were partially
offset by extraterritorial income tax deductions.
Income from Continuing Operations. Income from continuing operations was $12.8 million in the
nine months ended September 30, 2009 compared with $21.7 million in the nine months ended September
30, 2008 as a result of the foregoing factors.
Liquidity and Capital Resources
At September 30, 2009, we had working capital of $69.3 million, no long-term debt and
stockholders equity of $232.8 million. Historically, our principal liquidity requirements and
uses of cash have been for debt service, capital expenditures, working capital and acquisitions,
and our principal sources of liquidity and cash have been from cash flows from operations,
borrowings under our senior credit facility and issuances of equity securities.
Net Cash Provided by Operating Activities. Net cash provided by operating activities was $31.8
million for the nine months ended September 30, 2009 compared to $27.3 million for the nine months
ended September 30, 2008. The increase in net cash provided by operating activities was primarily
attributable to improved accounts receivable collections and increased customer prepayments for our
products, partially offset by decreased profit and reductions in accounts payable.
Net Cash Used in Investing Activities. Our principal uses of cash are for capital expenditures
and acquisitions. For the nine months ended September 30, 2009 and 2008, we made capital
expenditures of approximately $4.2 million and $7.5 million. We made equity investments in our
unconsolidated affiliates of $2.0 million for the nine months ended September 30, 2009, with no
such investments for the nine months ended September 30, 2008. Cash consideration paid for
business acquisitions, net of cash acquired, was $7.5 million and $2.7 million for the nine months
ended September 30, 2009 and 2008 (see Note 2 to our condensed consolidated financial statements).
Net Cash Used in Financing Activities. Sources of cash from financing activities primarily
include borrowings under our senior credit facility and proceeds from the exercise of warrants and
stock options. Principal uses of cash include payments on our senior credit facility. Financing
activities used net cash of $16.3 million for the nine months ended September 30, 2009 compared to
$24.9 million for the nine months ended September 30, 2008. We made net repayments under our
senior credit facility of $18.8 million and $29.6 million during the nine months ended September
30, 2009 and 2008. We had proceeds from the exercise of stock options of $2.4 million and $3.1
million and from the excess tax benefits from stock-based compensation of $0.1 million and $1.7
million during the nine months ended September 30, 2009 and 2008.
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Principal Debt Instruments. Our senior credit facility provides for a $180 million revolving
line of credit, maturing October 26, 2012, that we can increase by up to $70 million (not to exceed
a total commitment of $250 million) with the approval of the senior lenders. The senior credit
facility consists of a U.S. revolving credit facility that includes a swing line subfacility and
letter of credit subfacility up to $25 million and $50 million. We expect to use the proceeds from
any advances made pursuant to the senior credit facility for working capital purposes, for capital
expenditures, to fund acquisitions and for general corporate purposes. As of September 30, 2009,
we had no outstanding balances under our senior credit facility and debt instruments entered into
or assumed in connection with acquisitions, as well as other bank financings. As of September 30,
2009, availability under our senior credit facility was $151.5 million.
Our availability in future periods is limited to the lesser of (a) three times our EBITDA on a
trailing-twelve-months basis, which totals $151.8 million at September 30, 2009, less our
outstanding borrowings, standby letters of credits and other debt (as each of these terms are
defined under our senior credit facility) and (b) the amount of additional borrowings that would
result in interest payments on all of our debt that exceed one third of our EBITDA on a
trailing-twelve-months basis. As such, given the decline in our EBITDA from the second to the
third quarter, and the industry outlook for the remainder of the year, we expect availability to
continue to decrease in 2009.
Our leverage ratio governs the applicable interest rate of the senior credit facility and
ranges from the Base Rate (as defined in the senior credit facility) to the Base Rate plus 1.25% or
LIBOR plus 1.00% to LIBOR plus 2.25%. We have the option to choose between Base Rate and LIBOR
when borrowing under the revolver portion of our senior credit facility, whereas any borrowings
under the swing line portion of our senior credit facility are at prime. At September 30, 2009, we
had no outstanding borrowings under the revolver and swing line portions of our senior credit
facility. The effective interest rate of our senior credit facility, including amortization of
deferred loan costs, was 5.7% during the first nine months of 2009. The effective interest rate,
excluding amortization of deferred loan costs, was 4.5% during the first nine months of 2009. We
are required to prepay the senior credit facility under certain circumstances with the net cash
proceeds of certain asset sales, insurance proceeds and equity issuances subject to certain
conditions. The senior credit facility also limits our ability to secure additional forms of debt,
with the exception of secured debt (including capital leases) with a principal amount not exceeding
10% of our consolidated net worth at any time. The senior credit facility provides, among other
covenants and restrictions, that we comply with the following financial covenants: a minimum
interest coverage ratio of 3.0 to 1.0, a maximum leverage ratio of 3.0 to 1.0 and a limitation on
capital expenditures of no more than 75% of current year EBITDA. As of September 30, 2009, we were
in compliance with the covenants under the senior credit facility, with an interest coverage ratio
of 50.2 to 1.0, a leverage ratio of 0.01 to 1.0, and year-to-date capital expenditures of $4.2
million, which represents 14% of current year EBITDA. Substantially all of our assets
collateralize the senior credit facility.
Our senior credit facility also provides for a separate Canadian revolving credit facility,
which includes a swing line subfacility of up to U.S. $5.0 million and a letter of credit
subfacility of up to U.S. $5.0 million. As of September 30, 2009, there was no outstanding balance
on our Canadian revolving credit facility.
We believe that cash generated from operations and amounts available under our senior credit
facility will be sufficient to fund existing operations, working capital needs, capital expenditure
requirements, continued new product development and expansion of our geographic areas of operation,
and financing obligations during 2009.
We intend to make strategic acquisitions but cannot predict the timing, size or success of any
strategic acquisition and the related potential capital commitments. We expect to fund future
acquisitions primarily with cash flow from operations and borrowings, including the unborrowed
portion of our senior credit facility or new debt issuances, but we may also issue additional
equity either directly or in connection with an acquisition. There can be no assurance that
acquisition funds will be available at terms acceptable to us.
Off-Balance Sheet Arrangements. We had no off-balance sheet arrangements as of September 30,
2009.
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Critical Accounting Policies and Estimates
The preparation of our financial statements requires us to make certain estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
Our estimation process generally relates to potential bad debts, obsolete and slow moving
inventory, and the valuation of goodwill and other long-lived assets. Our estimates are based on
historical experience and on our future expectations that we believe to be reasonable under the
circumstances. The combination of these factors results in the amounts shown as carrying values of
assets and liabilities in the financial statements and accompanying notes. Actual results could
differ from our current estimates and those differences may be material.
During the quarter ended March 31, 2009, we changed the date of our annual goodwill impairment
assessment from December 31 to October 1. This change was effected to allow more time and better
support the completion of the assessment prior to our filing requirement for the Annual Report on
Form 10-K as an accelerated filer. We believe that the resulting change in accounting principle
related to the annual testing date will not delay, accelerate or avoid an impairment charge. We
determined that the change in accounting principle related to the annual testing date is preferable
under the circumstances and does not result in adjustments to the financial statements when applied
retrospectively.
We recognized $23.5 million of goodwill impairment for our pressure and flow control reporting
unit for the year ended December 31, 2008. At December 31, 2008, the wellhead and pipeline
reporting units were not considered to be impaired as the estimated fair value exceeded the
recorded net book value of these reporting units by 6% and 23%. At September 30, 2009, goodwill by
reporting unit was $71.4 million, $13.6 million and $3.6 million for the pressure and flow control,
wellhead and pipeline reporting units.
During the first nine months of 2009, we assessed the following indicators of impairment, and
determined there were no triggering events that would require an interim goodwill impairment test:
| further, and sustained, deterioration in global economic conditions; | ||
| changes in our outlook for future profits and cash flows; | ||
| further reductions in the market price of our stock; | ||
| increased costs of capital; and/or | ||
| reductions in valuations of other public companies within our industry or valuations observed in acquisition transactions within our industry. |
We have no indefinite-lived intangible assets. We test for the impairment of other long-lived
assets upon the occurrence of a triggering event based upon indicators such as:
| changes in the nature of the assets; | ||
| changes in the future economic benefit of the assets; and/or | ||
| changes in any historical or future profitability measurements and other external market conditions or factors that may be present. |
We have assessed the current market conditions and have concluded, at the present time, that
no triggering events requiring an impairment analysis of long-lived assets have occurred in 2009.
We will continue to monitor for events or conditions that could change this assessment.
These critical accounting estimates may change as events occur, as additional information is
obtained and as our operating environment changes. Other than disclosed above, there have been no
material changes or developments in our evaluation of the accounting estimates and the underlying
assumptions or methodologies
that we believe to be Critical Accounting Policies and Estimates from those as disclosed in our
Annual Report on Form 10-K for the year ended December 31, 2008.
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New Accounting Pronouncements
In September 2006, new accounting principles were issued that define fair value, establish a
framework for measuring fair value under generally accepted accounting principles, and expand
disclosures about fair value measurements. The initial application of these new principles is
limited to financial assets and liabilities and non-financial assets and liabilities recognized at
fair value on a recurring basis. We adopted these principles on January 1, 2008. The adoption of
the new principles did not have any impact on our consolidated financial position, results of
operations and cash flows. On January 1, 2009, these new principles became effective on a
prospective basis for non-financial assets and liabilities in which companies do not measure fair
value on a recurring basis. The application of the new principles to our non-financial assets and
liabilities will primarily relate to assets acquired and liabilities assumed in a business
combination and asset impairments, including goodwill and long-lived assets. We do not expect this
application of the new principles to have a material impact on our consolidated financial position,
results of operations and cash flows.
In December 2007, new accounting principles were issued that change the requirements for an
acquirers recognition and measurement of the assets acquired and the liabilities assumed in a
business combination. These new principles are effective for annual periods beginning after
December 15, 2008, with prospective application for all business combinations entered into after
the date of adoption. We adopted these new principles on January 1, 2009. Due to the adoption of
these new principles during the first quarter of 2009, approximately $125,000 of transaction costs
were expensed that, prior to the issuance of these new principles, would have been capitalized.
The effect of this adoption for periods beyond the first quarter of 2009 will be dependent upon
acquisitions at that time and therefore is not currently estimable. We do not expect the
provisions of these new principles that modify the income statement recognition associated with
changes to deferred tax valuation allowances and tax uncertainties established in connection with
prior business combinations to have a material impact on our consolidated financial position,
results of operations and cash flows.
In May 2009, new accounting principles were issued that establish general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. These new principles are effective for
interim and annual periods ending after June 15, 2009 and set forth the period after the balance
sheet date during which we should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, the circumstances under which the we should
recognize events or transactions occurring after the balance sheet date in our financial statements
and the disclosures that we should make about events or transactions that occurred after the
balance sheet date. We adopted these new principles on June 30, 2009. The adoption of these new
principles did not have any impact on our consolidated financial position, results of operations
and cash flows.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in or incorporated by reference in this Quarterly Report, our
filings with the SEC, and our public releases, including, but not limited to, information regarding
the status and progress of our operating activities, the plans and objectives of our management,
assumptions regarding our future performance and plans, and any financial guidance provided therein
are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or
the Securities Act, and Section 21E of the Exchange Act. The words believe, may, will,
estimate, continues, anticipate, intend, budget, predict, project, expect and
similar expressions identify these forward-looking statements, although not all forward-looking
statements contain these identifying words. These forward-looking statements are made subject to
certain risks and uncertainties that could cause actual results to differ materially from those
stated. Risks and uncertainties that could cause or contribute to such differences include,
without limitation, those discussed in the section entitled Risk Factors included in our Annual
Report on Form 10-K for the year ended December 31, 2008 and our subsequent SEC filings.
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We largely base these forward-looking statements on our expectations and beliefs concerning
future events, which reflect estimates and assumptions made by our management. These estimates and
assumptions reflect our best judgment based on currently known market conditions and other factors
relating to our operations and business environment, all of which are difficult to predict and many
of which are beyond our control.
Although we believe our estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are beyond our control. Our
assumptions about future events may prove to be inaccurate. We caution you that the
forward-looking statements contained in this Quarterly Report are not guarantees of future
performance, and we cannot assure you that those statements will be realized or the forward-looking
events and circumstances will occur. Actual results may differ materially from those anticipated
or implied in the forward-looking statements due to the factors listed in the section entitled
Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2008 and
our subsequent SEC filings. All forward-looking statements speak only as of the date of this
report. We do not intend to publicly update or revise any forward-looking statements as a result
of new information, future events or otherwise, except as required by law. These cautionary
statements qualify all forward-looking statements attributable to us or persons acting on our
behalf.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk that losses may occur in the value of financial
instruments as a result of movements in interest rates, foreign currency exchange rates and
commodity prices.
We are exposed to some market risk due to the floating interest rate under our senior credit
facility and our Canadian revolving credit facility. As of September 30, 2009, our senior credit
facility and our Canadian revolving credit facility did not have an outstanding principal balance,
and therefore, we did not have any exposure to rising interest rates.
The foreign currency exchange rates related to our Canadian and Indian operations and our
unconsolidated affiliates in Mexico and Dubai also expose us to some market risk. However, the
changes in foreign currency in relation to the United States dollar impact less than 1% of our net
assets.
The functional currency for most of our international operations is the United States dollar.
We maintain the accounting records for all of our international subsidiaries in local currencies.
We translate the results of operations for foreign subsidiaries with functional currencies
other than the United States dollar using average exchange rates during the period. We translate
assets and liabilities of these foreign subsidiaries using the exchange rates in effect at the
balance sheet dates, and the resulting translation adjustments are included as Accumulated Other
Comprehensive Income, a component of stockholders equity. We recorded a $1.4 million adjustment
to our equity account for the nine months ended September 30, 2009 to reflect the net impact of the
change in foreign currency exchange rate related to our international operations.
For our non-U.S. subsidiaries where the functional currency is the United States dollar, we
translate our inventories, property, plant and equipment and other non-monetary assets, together
with their related elements of expense, at historical rates of exchange. We translate monetary
assets and liabilities at current exchange rates. We translate all other revenues and expenses at
average exchange rates. We recognize translation gains and losses for these subsidiaries in our
results of operations during the period incurred. We reflect the gain or loss related to
individual foreign currency transactions in results of operations when incurred. We recorded a
loss of approximately $40,000 during the nine months ended September 30, 2009.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that material
information required to be disclosed in our reports filed under the Securities Exchange Act of
1934, or Exchange Act, is recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission, or SEC, and that any material information
relating to us is recorded, processed, summarized and reported to our management including our
Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, as appropriate to allow
timely decisions regarding required disclosures. In designing and evaluating our disclosure
controls and procedures, our management recognizes that controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving desired control
objectives. In reaching a reasonable level of assurance, our management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
As required by Rule 13a-15(b) of the Exchange Act, our management carried out an evaluation,
with the participation of our principal executive officer (our CEO) and our principal financial
officer (our CFO), of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of
the period covered by this report. Based on those evaluations, our CEO and CFO have concluded that
our disclosure controls and procedures are effective in ensuring that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms,
and that such information is accumulated and communicated to our management, including our CEO and
CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal controls over financial reporting during the
quarter ended September 30, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
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PART II
Item 6. Exhibits
Exhibit Number | Identification of Exhibit | |||
3.1
|
| Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated December 31, 2001). | ||
3.2
|
| Certificate of Amendment to the Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2005). | ||
3.3
|
| Certificate of Amendment to the Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2006). | ||
3.4
|
| Certificate of Amendment to the Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2007). | ||
3.5
|
| Amended and Restated Bylaws of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated December 11, 2007). | ||
3.6
|
| Amendment to Amended and Restated Bylaws of T-3 Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated November 5, 2007). | ||
4.1
|
| Specimen Certificate of Common Stock, $.001 par value, of the Company (incorporated herein by reference to Exhibit 4.1 to the Companys 2001 Annual Report on Form 10-K). | ||
31.1*
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. | |||
31.2*
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. | |||
32.1**
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief Executive Officer). | |||
32.2**
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief Financial Officer). |
* | Filed herewith. | |
** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on the 3rd day of November 2009.
T-3 ENERGY SERVICES, INC. |
||||
By: | /s/ JAMES M. MITCHELL | |||
James M. Mitchell (Chief Financial | ||||
Officer and Senior Vice President) |
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INDEX TO EXHIBITS
Exhibit Number | Identification of Exhibit | |||
3.1
|
| Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated December 31, 2001). | ||
3.2
|
| Certificate of Amendment to the Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2005). | ||
3.3
|
| Certificate of Amendment to the Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2006). | ||
3.4
|
| Certificate of Amendment to the Certificate of Incorporation of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2007). | ||
3.5
|
| Amended and Restated Bylaws of T-3 Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated December 11, 2007). | ||
3.6
|
| Amendment to Amended and Restated Bylaws of T-3 Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated November 5, 2007). | ||
4.1
|
| Specimen Certificate of Common Stock, $.001 par value, of the Company (incorporated herein by reference to Exhibit 4.1 to the Companys 2001 Annual Report on Form 10-K). | ||
31.1*
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. | |||
31.2*
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. | |||
32.1**
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief Executive Officer). | |||
32.2**
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief Financial Officer). |
* | Filed herewith. | |
** | Furnished herewith. |