Allis-Chalmers Energy announced results for the three and six months ended June 30, 2009. Allis-Chalmers reported a net loss for the second quarter of 2009 of $90,000, or $0.00 per diluted share, compared to net income of $10.6 million, or $0.30 per diluted share in the second quarter of 2008. Revenues for the second quarter of 2009 decreased 31.0% to $112.5 million compared to $163.1 million for the second quarter of 2008.
Results in the second quarter of 2009 include a pre-tax gain of $26.4 million on debt extinguishment associated with the repurchase of $74.8 million of senior notes and non-routine and restructuring charges totaling $8.6 million. These charges include a $3.2 million addition to the allowance for bad debts, $1.6 million in restructuring charges consisting of severance payments and the closing of certain yard locations, a $2.6 million non-cash loss on an asset disposition and inventory writedowns and $1.2 million of customer credits.
Allis-Chalmers reported a net loss for the first six months of 2009 of $2.7 million, or $0.08 per diluted share, compared to net income of $18.6 million, or $0.53 per diluted share for the first six months of 2008. Results for the first six months of 2009 include a pre-tax gain of $26.4 million from the extinguishment of debt and non-routine and restructuring charges totaling $10.6 million. The charges include a $3.6 million addition to the allowance for bad debts, $1.8 million in restructuring charges consisting of severance payments and the closing of certain yard locations, a $3.2 million non-cash loss on asset dispositions and inventory writedowns and $2.0 million of customer credits.
Adjusted EBITDA was $35.0 million for the second quarter of 2009, compared to $46.2 million for the second quarter of 2008. Adjusted EBITDA for the second quarter of 2009 would have been $17.2 million excluding the $26.4 million gain and the $8.6 million in non-routine and restructuring charges. For the first six months of 2009 Adjusted EBITDA was $64.5 million compared to $88.0 million for the first six months of 2008. Adjusted EBITDA would have been $48.7 million in the first six months of 2009 excluding the $26.4 million gain and the $10.6 million in non-routine and restructuring charges. EBITDA and Adjusted EBITDA are non-GAAP financial measures that are not necessarily comparable from one company to another and additional information and discussion regarding EBITDA and Adjusted EBITDA are provided later in this release.
In June 2009, as previously announced, Allis-Chalmers strengthened its balance sheet and improved its liquidity by raising approximately $125.6 million in gross equity proceeds through a back-stopped common stock rights offering and a new convertible perpetual preferred stock issue. Allis-Chalmers reduced outstanding debt by approximately $113.0 million at the end of the second quarter of 2009, including a $74.8 million reduction of its outstanding senior notes and all outstanding borrowings under the $90.0 million revolver, and increased cash on hand by approximately $40.0 million. Net debt, after cash on hand, was reduced to $439.4 million at the end of the second quarter of 2009 from $584.1 million at the end of the first quarter of 2009. Allis-Chalmers estimates that interest expense will decrease by approximately $8.6 million annually.
Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer, stated, "The worldwide economic downturn, the decrease in natural gas prices in the U.S., and the impact of the credit and liquidity squeeze on our customers resulted in the U.S. rig count dropping by 52% as of June 30, 2009 compared to June 30, 2008. The weak market environment has had a significant impact on our domestic operations resulting in a severe deterioration in both equipment utilization and pricing."
Mr. Hidayatallah also stated, "With operations in Argentina, Brazil and Bolivia, our Drilling and Completion segment has shown more stability and better visibility than the U.S. market, but rig utilization is down 12% to 15% and pricing has deteriorated by 5% to 10%. In this environment it has been difficult to recover increases in wages, fuel, labor and other costs resulting from very high inflationary trends in Argentina. The weakening of the Argentine peso has also impacted revenues. Finally, while our Brazilian operations have performed above expectations, we suffered the total loss of a rig from a blow-out. The rig was insured, but the insurance proceeds will be $1.9 million less than the book value of the rig."
To counter market conditions, Allis-Chalmers has taken the following steps:
Mr. Hidayatallah concluded, "In the first half of the year in an extremely difficult environment we internally generated $43 million of operating cash flow after interest, reduced our domestic workforce by over 50% and strengthened our balance sheet. At the end of the quarter, we had cash on hand of approximately $59 million. In the second half of 2009, we intend to enhance revenues with the redeployment of assets and the implementation of our new sales account management system. In 2010 we will endeavor to increase international revenues from 57% of total revenues to approximately 70% of total revenues as a strategic objective. We believe that this strategy will increase gross margins and operating profit and should enable us to be profitable on a net income basis in 2010."
Segment Results for Second Quarter 2009
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