News Column

Logan International Reports Second Quarter 2014 Financial Results

August 11, 2014

CALGARY, ALBERTA--(Marketwired - Aug. 11, 2014) - Logan International Inc. (TSX:LII) ("Logan" or the "Company") today reported the results for its second quarter and year-to-date period ended June 30, 2014. The financial reports include the post-acquisition operating results of the Sup-R-Jar product line, which was acquired in April 2013.

Recent highlights include:

-- The backlog of fishing and stroking tool orders grew to greater than $25 million at quarter from approximately $21.5 million at the beginning of the quarter. -- Reorganization of the rental segment's operations, which include the Xciter and Sup-R-Jar drilling tools and fishing jars, into a single operating unit was completed. -- Completion of the re-alignment of entire downhole tool segment supply chain under centralized management and the addition of a Vice President - Completions who will manage all completion products and services.



Logan recorded revenue of $42.6 million in this year's second quarter and $52.6 million in the prior year's second quarter. For the three month period ended June 30, 2014, Logan earned $2.8 million, $.08 per diluted share, as compared to $4.8 million, $.14 per diluted share in the prior year quarter. Modified EBITDA declined in this year's second quarter to $8.7 million from $13.2 million in last year's second quarter. Management utilizes Modified EBITDA to evaluate its operating results because this measurement eliminates the revenue and cost effects of significant noncash and nonrecurring items.

For the quarter ended June 30, 2014, the downhole tool segment, which includes Logan Oil Tools, Logan Completion Systems, Kline Oilfield Equipment, Logan SuperAbrasives and Scope Production Developments, recorded revenue of $39.8 million as compared to $49.3 million for the quarter ended June 30, 2013. For the current year quarter, this segment generated EBITDA of $10.0 million as compared to $13.5 million for last year's second quarter. For the second quarter of 2014, the rental tool segment, which includes Xtend Energy Services and Logan Jar, recorded revenue of $2.8 million and EBITDA of approximately $202 thousand as compared to revenue of $3.3 million and EBITDA of $849 thousand in the prior year's second quarter.

Logan recorded revenue of $86.2 million in the six month period ended June 30, 2014 and $101.8 million in the six month period ended June 30, 2013. For the current year-to-date period, Logan earned $5.7 million, $.17 per diluted share, as compared to $10.0 million, $.30 per diluted share, in the prior year period. Modified EBITDA for the current year-to-date period decreased to $18.0 million from $25.4 million in the prior year-to-date period.

The downhole tool segment recorded revenue of $80.2 million and EBITDA of $20.0 million in the six month period ended June 30, 2014. This segment recorded revenue of $93.6 million and EBITDA $24.4 million in the corresponding period in 2013. The rental tool segment recorded revenue of $6.0 million and EBITDA of $982 thousand in the current year-to-date period as compared to revenue of $8.2 million and EBITDA of $3.7 million in the prior year-to-date period.

David MacNeill, President and Chief Executive Officer, commented, "Our quarterly financial performance fell below last year's performance and also below our internal expectations as both revenue and EBITDA in each of our segments trailed last year's second quarter results. Our second quarter revenue was negatively impacted by a decline of $6.1 million in sales of completion tools and services to customers in China and Mexico. Sales to our Chinese customers are generated by a limited number of large orders which are received sporadically throughout the year and, as a result, can affect quarterly comparisons. Changes in the operations of the Mexican national oil company resulted in delays in drilling programs which, in turn, delayed sales of our completion products and services. Sales of fishing and stroking tools in this year's second quarter trailed last year's sales by $2.8 million and resulted mostly from a large sale of stroking tools in 2013. The decline in EBITDA in both periods is directly related to the decreased revenue. Our rental segment also reported weaker operating results in the quarter. Even though this segment's revenues declined in this year's quarter from last year's second quarter, we actually increased U.S. rental revenue from the first quarter, which gives us confidence that the expansion of our market beyond South Texas will provide increased revenues and more consistent returns."

Looking forward, Mr. MacNeill added, "While our year-to-date financial results have not met our expectations, we maintain our belief that the second half performance will improve. We expect the downhole tool segment's operations will recover in the second half due to the strength of its backlog and order flow, the recovery from spring breakup in our Canadian operations, increased sales of completion products and services into Mexico and China and increased sales of bearings. We also expect improvement in our rental segment's operations in the U.S. w here we have regained momentum by expanding further into the West Texas and the Rocky Mountain markets, in Canada as operations will rebound after the effects of the Spring breakup and in Latin America where we have a received interest from a long-time fishing tool customer."

Logan manufactures and sells a comprehensive line of quality fishing and intervention tools, including retrieving, surface, stroking and remedial tools for a variety of well workover, intervention, drilling, and completion activities (Logan Oil Tools, Inc.); manufactures and sells hard surface products including high-performance polycrystalline diamond compact (PDC) cutters and bearings (Logan SuperAbrasives); manufactures and sells packers, bridge plugs, and other completion products (Kline Oilfield Equipment, Inc.); provides proprietary multi-zonal completion technology and conventional completion production products and services (Logan Completion Systems Inc.); provides proprietary and patented products and services that are focused on production optimization in sand-laden heavy oil wells (Scope Production Development Ltd.); and provides proprietary tools that enhance the effectiveness of horizontal drilling (Xtend Energy Services Inc. and Logan Jar, LLC). Common shares of Logan are traded on the Toronto Stock Exchange (TSX) under the ticker symbol "LII".

Selected Consolidated Financial Information (in thousands of US dollars, except per share data) Three month periods ended Six month periods ended June 30, June 30, ---------------------------- -------------------------- 2014 2013 2014 2013 -------------- ------------ ------------ ------------ Revenue $ 42,568$ 52,602$ 86,212$ 101,796 Net earnings for the period 2,759 4,809 5,660 10,047 Earnings per share: Basic $ 0.08$ 0.14$ 0.17$ 0.30 Diluted $ 0.08$ 0.14$ 0.17$ 0.30 EBITDA (1) $ 8,239$ 12,148$ 17,079$ 23,918 Modified EBITDA (1) $ 8,690$ 13,244$ 18,011$ 25,383 June 30, December 31, 2014 2013 ------------ ------------ Working Capital $ 41,691$ 82,399 Total Assets $ 285,268$ 283,559 Debt (2) $ 53,373$ 57,788 Shareholders' Equity $ 197,548$ 191,144



Note: Effective April 17, 2013, the Company, through its wholly-owned subsidiaries Logan Oil Tools, Inc. and Logan Jar, LLC, purchased certain assets and operations related to the Sup-R-Jar drilling jar product line. Accordingly, the Company has recognized two and a half months of the Sup-R-Jar product line's operating results in the condensed interim consolidated financial statements for the three month and six month periods ending June 30, 2013.

(1) Non-IFRS Measurements: The MD&A presents: (a) EBITDA as earnings before net finance cost, income taxes, and depreciation and amortization ("EBITDA"), and (b) Modified EBITDA as EBITDA before acquisition accounting adjustments, transaction fees, share-based compensation and severance costs ("Modified EBITDA"). Neither of these measurements should be considered an alternative to, or more meaningful than, "net earnings for the period" or "cash flow from operating activities" as determined in accordance with IFRS as an indicator of the Company's financial performance. EBITDA and Modified EBITDA do not have standardized definitions as prescribed by IFRS; therefore, the Company's presentation of these measurements may not conform to similar presentations by other companies. Management calculates EBITDA and Modified EBITDA each period and evaluates the Company's operating performance based on these measurements. Management believes that Modified EBITDA, which eliminates significant non-cash or non-recurring items of revenue or cost, more accurately presents the results of the Company's ongoing operations and its ability to generate the cash required to fund or finance future growth, acquisitions and capital investments. A reconciliation of EBITDA and Modified EBITDA with net earnings for each period follows. Three month periods ended Six month periods ended June 30, June 30, ---------------------------------------------------- 2014 2013 2014 2013 ---------------------------------------------------- Net earnings for the period $ 2,759$ 4,809$ 5,660$ 10,047 Addbacks: Depreciation and amortization 3,449 3,411 6,698 6,202 Finance cost, net 322 1,582 1,645 2,832 Income tax expense 1,709 2,346 3,076 4,837 ---------------------------------------------------- EBITDA 8,239 12,148 17,079 23,918 Adjustments: Acquisition accounting adjustments - 612 188 612 Transaction fees 39 198 55 290 Severance costs 24 162 164 162 Share-based compensation payments 388 124 525 401 ---------------------------------------------------- Modified EBITDA $ 8,690$ 13,244$ 18,011$ 25,383 ---------------------------------------------------- ----------------------------------------------------



EBITDA and Modified EBITDA are provided as measures of the Company's operating performance without regard to financing decisions, share-based compensation payments, age and cost of equipment used and income tax impacts, all of which are factors that are not controlled at the operating management level. The acquisition accounting adjustments reverse the effect of the increase or step-up in cost basis of inventories and subsequently sold fixed assets acquired in business combinations. The transaction fees include the professional and other fees incurred in connection with acquisitions in 2012 and 2013. Share-based compensation relates to expense recognized from the granting of stock appreciation rights, stock options and restricted share units.

(2) Includes bank and other borrowed debt and capital leases.



Reconciliation of EBITDA by Segment

Three months ended June 30, Three months ended June 30, 2014 2013 ------------------------------ ----------------------------- Downhole Rental Downhole Rental Tool Tool Corporate Tool Tool Corporate -------- ------- --------- -------- ------- --------- Revenue $ 39,807$ 2,761 $ - $ 49,272$ 3,330 $ - Earnings (loss) from operations $ 7,732 $ (899)$ (2,043)$ 10,928$ 35$ (2,226) Depreciation and amortization 2,299 1,101 49 2,548 814 49 -------- ------- --------- -------- ------- --------- EBITDA $ 10,031$ 202 $ (1,994)$ 13,476$ 849$ (2,177) -------- ------- --------- -------- ------- --------- -------- ------- --------- -------- ------- --------- Six months ended June 30, Six months ended June 30, 2014 2013 ----------------------------- ---------------------------- Downhole Rental Downhole Rental Tool Tool Corporate Tool Tool Corporate -------- ------- --------- -------- ------- --------- Revenue $ 80,202$ 6,010 $ - $ 93,590$ 8,206$ - Earnings (loss) from operations $ 15,423 $ (1,075)$ (3,967)$ 19,534$ 2,404$ (4,222) Depreciation and amortization 4,543 2,057 98 4,860 1,246 96 -------- -------- ---------- -------- ------- ---------- EBITDA $ 19,966$ 982$ (3,869)$ 24,394$ 3,650$ (4,126) -------- -------- ---------- -------- ------- ---------- -------- -------- ---------- -------- ------- ----------



Forward-Looking Statements

This press release contains forward-looking statements. These statements relate to future events or future performance of Logan. When used in this press release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "propose", "expect", "potential", "continue", and similar expressions, are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect Logan's current views with respect to certain events, including the previously announced strategic review process and fourth quarter operating results, and are subject to certain risks, uncertainties and assumptions. Although Logan believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Many factors could cause Logan's actual results, performance, or achievements to materially differ from those described in this press release. Readers are referred to Logan's Annual Information Form filed on www.sedar.com, which identifies significant risk factors that could cause actual results to differ from those contained in the forward-looking statements. Should one or more risks or uncertainties materialize or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this press release. The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These statements speak only as of the date of this press release. Logan does not intend and does not assume any obligation to update these forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described herein in any jurisdiction. For more information about Logan International Inc., please visit our website at www.loganinternationalinc.com.

FOR FURTHER INFORMATION PLEASE CONTACT: David MacNeill Chief Executive Officer Logan International Inc. 281-617-5300 Houston Larry Keister Chief Financial Officer Logan International Inc. 832-386-2534 Houston Source: Logan International Inc.


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