Boots & Coots Reports Strongest Year Ever
Boots & Coots International Well Control, Inc. reported net income attributable to common stockholders of $4.5 million, or $0.07 per diluted share, for the fourth quarter ended December 31, 2006, compared to net income of $1.2 million, or $0.04 per diluted share, for the same period in 2005.
Revenues for the fourth quarter of 2006 were $33.7 million compared to $5.9 million in the fourth quarter of 2005. The Company reported EBITDA (defined as earnings before interest, income taxes, depreciation and amortization; see the reconciliation and rationale for this non-GAAP financial measure below) of $8.9 million for the 2006 fourth quarter compared to $1.9 million for the 2005 fourth quarter. The 2006 fourth quarter includes the operating results for the hydraulic workover/snubbing business acquired effective as of March 1, 2006.
For the year ended December 31, 2006, the Company reported net income attributable to common stockholders of $11.8 million, or $0.21 per diluted share, compared to $1.9 million, or $0.06 per diluted share for 2005. Revenues for the year were $97.0 million compared to $29.5 million for 2005. EBITDA was $24.8 million in 2006 compared to $5.3 million for the prior year. Included in the 2006 operating results is ten months of results from the Company's acquired hydraulic workover/snubbing business. Boots & Coots recognized an effective tax rate of 34.4% in 2006 compared to 28.9% in 2005.
"2006 was a true milestone for Boots & Coots. In 2005, our response business accounted for more than 50% of our revenue mix. In 2006 it accounted for less than 22%, thanks to our acquired hydraulic workover/snubbing services and our growing Safeguard business," stated Jerry Winchester, President and Chief Executive Officer. "In 2006 we exceeded $100 million in revenues on a pro forma basis. Pro forma revenues were $105.6 million, 52% higher than 2005 pro forma revenues, with Well Intervention growing 58% and Response growing 30%.
"Growth in both segments reflects our strategy of gaining a geographic presence and then expanding that presence with additional service offerings. Our successes in Algeria and more recently in Libya are both great examples of this strategy, and we plan to use those as blueprints to expand our presence in other countries as well as here at home."
Business Segment Results
For the 2006 fourth quarter, the Well Intervention segment generated revenues of $22.5 million and EBITDA of $4.2 million compared to $3.5 million in revenues and $0.7 million in EBITDA in the 2005 fourth quarter, reflecting a revenue increase of 539% and an EBITDA increase of 520%. These increases were due primarily to the inclusion of results for the hydraulic well control business from and after March 1, 2006, the effective date of the acquisition, and quarter-over-quarter growth in the Company's Safeguard services of 106%. The hydraulic well control business contributed $15.8 million in revenues and $2.2 million in EBITDA in the fourth quarter of 2006. For the year, Well Intervention generated $76.7 million in revenues and $16.5 million in EBITDA, up 453% and 478%, respectively, in 2006 compared to revenues of $13.9 million and EBITDA of $2.8 million in 2005. The hydraulic well control business contributed $53.8 million in revenues and $13.0 million in EBITDA for the period from March 1, 2006 to December 31, 2006.
For the 2006 fourth quarter, the Response segment generated revenues of $11.2 million and EBITDA of $4.8 million compared to $2.4 million in revenues and $1.3 million in EBITDA in the 2005 fourth quarter. For the year ended 2006, the Response segment generated $20.4 million in revenues and $8.3 million in EBITDA compared to $15.7 million in revenues and EBITDA of $2.4 million for 2005. Margins improved due to reduced third party pass-through charges, favorable pricing and operating leverage gained on increased activity.
During the first quarter of 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants and directors; including employee stock options based on estimated fair values. For the quarter and year ended December 31, 2006, the Company incurred non-cash charges of $0.3 million, or $0.01 per diluted share, and $1.3 million, or $0.02 per diluted share, respectively, related to share based awards as compared to zero in both comparable periods in 2005.
First Quarter Update
The company expects revenues and net income in the first quarter of 2007 to be down from the fourth quarter of 2006. Response revenues will be significantly lower in the first quarter of 2007 and certain Well Intervention projects of customers in the Gulf of Mexico and Venezuela have been delayed. "The second quarter is historically a stronger quarter in the Gulf of Mexico so we expect that callout work will increase going forward," stated Mr. Winchester. "Based on our operating history, the apparent backlog in Venezuela and delays resulting from the change in operating control of fields, we expect those projects to resume in due course." Due to the cyclical nature of the Response business, as evidenced by the concentration of 2006 Response work in the last two quarters of the year, the company's Response revenues for the first quarter will approach the level of the first quarter of 2006.
Boots & Coots International Well Control, Inc., Houston, Texas, provides a suite of integrated pressure control services to onshore and offshore oil and gas exploration companies around the world. Its business segments are Well Intervention and Response.
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