0001022705-13-000036.txt : 20130506 0001022705-13-000036.hdr.sgml : 20130506 20130506151558 ACCESSION NUMBER: 0001022705-13-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20130506 DATE AS OF CHANGE: 20130506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESCO CORP CENTRAL INDEX KEY: 0001022705 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 980053204 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-34090 FILM NUMBER: 13815810 BUSINESS ADDRESS: STREET 1: 3993 W. SAM HOUSTON PARKWAY N. STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77043 BUSINESS PHONE: 713-359-7000 MAIL ADDRESS: STREET 1: 3993 W. SAM HOUSTON PARKWAY N. STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77043 FORMER COMPANY: FORMER CONFORMED NAME: Tesco CORP DATE OF NAME CHANGE: 20061229 FORMER COMPANY: FORMER CONFORMED NAME: TESCO CORP DATE OF NAME CHANGE: 19960911 10-Q 1 teso10qq12013.htm 10-Q TESO.10Q.Q1.2013

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2013
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: 001-34090

Tesco Corporation
(Exact name of registrant as specified in its charter)

Alberta
76-0419312
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
3993 West Sam Houston Parkway North
Suite 100
Houston, Texas
77043-1221
(Address of Principal Executive Offices)
(Zip Code)
713-359-7000
(Registrant’s telephone number, including area code)
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   x     No   ¨
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   x   No   ¨
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 definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer   o
Accelerated Filer   x
Non-Accelerated Filer   o
Smaller Reporting Company   ¨
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨     No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Number of shares of Common Stock outstanding as of April 30, 2013:   38,948,932



TABLE OF CONTENTS
 
 




Below is a list of defined terms that are used throughout this document:

TESCO’s Casing Drive System
 
 = CDS™ or CDS
TESCO’s Multiple Control Line Running System
 
 = MCLRS™ or MCLRS





A list of our trademarks and the countries in which they are registered is presented below:

Trademark
 
Country of Registration
TESCO®
 
United States, Canada
Casing Drive System™
 
United States, Canada
CDS™
 
United States, Canada
Multiple Control Line Running System™
 
United States, Canada
MCLRS™
 
United States, Canada

When we refer to “TESCO”, “we”, “us”, “our”, “ours”, or “the Company”, we are describing Tesco Corporation and our subsidiaries.
 



Caution Regarding Forward-Looking Information; Risk Factors
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Canadian and United States securities laws, including the United States Private Securities Litigation Reform Act of 1995.  From time to time, our public filings, press releases, and other communications (such as conference calls and presentations) will contain forward-looking statements.  Forward-looking information is often, but not always, identified by the use of words such as “anticipate,” “believe,” “expect,” “plan,” “intend,” “forecast,” “target,” “project,” “may,” “will,” “should,” “could,” “estimate,” “predict,” or similar words suggesting future outcomes or language suggesting an outlook.  Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements with respect to expectations of our prospects, future revenue, earnings, activities, and technical results.
 
Forward-looking statements and information are based on current beliefs as well as assumptions made by, and information currently available to, us concerning anticipated financial performance, business prospects, strategies, and regulatory developments.  Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.  The forward-looking statements in this Quarterly Report on Form 10-Q are made as of the date they were issued and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
 
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that outcomes implied by forward-looking statements will not be achieved.  We caution readers not to place undue reliance on these forward-looking statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates, and intentions expressed in such forward-looking statements.
 
These risks and uncertainties include, but are not limited to, the impact of: changes in oil and natural gas prices; worldwide and domestic economic conditions on drilling activity and demand for and pricing of our products and services; other risks inherent in the drilling services industry (e.g. operational risks, potential delays or changes in customers’ exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to levels of rental activities, uncertainty of estimates and projections of costs and expenses, risks in conducting foreign operations, the consolidation of our customers, and intense competition in our industry); and risks associated with our intellectual property and with the performance of our technology.  These risks and uncertainties may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.  When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.
 
Copies of our Canadian public filings are available at www.tescocorp.com and on SEDAR at www.sedar.com.  Our U.S. public filings are available at www.tescocorp.com and on EDGAR at www.sec.gov.
 
Please see Part I, Item 1A—"Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2012 (“2012 Annual Report on Form 10-K”) and Part II, Item 1A—"Risk Factors" of this Quarterly Report on Form 10-Q for further discussion regarding our exposure to risks.  Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such factors, nor to assess the impact such factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements.  Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.





PART I—FINANCIAL INFORMATION

Item 1.     Financial Statements.

 TESCO CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
 
 
March 31,
2013
 
December 31,
2012
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
25,176

 
$
22,014

Accounts receivable trade, net of allowance for doubtful accounts of $3,864 and $2,878 as of March 31, 2013 and December 31, 2012, respectively
124,718

 
130,769

Inventories, net
126,072

 
124,506

Income taxes recoverable
5,621

 
4,228

Deferred income taxes
4,343

 
4,367

Prepaid and other current assets
43,964

 
40,331

Total current assets
329,894

 
326,215

Property, plant and equipment, net
208,580

 
209,933

Goodwill
32,732

 
32,732

Deferred income taxes
11,675

 
11,792

Intangible and other assets, net
6,046

 
6,438

Total assets
$
588,927

 
$
587,110

Liabilities and Shareholders’ Equity
 

 
 

Current liabilities
 

 
 

Current portion of long term debt
$
100

 
$
119

Accounts payable
37,477

 
43,603

Deferred revenue
10,882

 
10,650

Warranty reserves
3,569

 
3,719

Income taxes payable
5,405

 
6,894

Accrued and other current liabilities
40,884

 
41,572

Total current liabilities
98,317

 
106,557

Long term debt
103

 
142

Other liabilities
2,402

 
2,416

Deferred income taxes
8,034

 
8,487

Total liabilities
108,856

 
117,602

Commitments and contingencies (Note 11)

 

Shareholders’ equity
 

 
 

Common shares; no par value; unlimited shares authorized; 38,949 and 38,928 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
215,187

 
213,460

Retained earnings
229,383

 
220,547

Accumulated comprehensive income
35,501

 
35,501

Total shareholders’ equity
480,071

 
469,508

Total liabilities and shareholders’ equity
$
588,927

 
$
587,110

 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 

1


TESCO CORPORATION
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share information)
 
 
Three Months Ended March 31,
 
2013
 
2012
Revenue
 
 
 
Products
$
48,592

 
$
68,941

Services
78,503

 
83,480

 
127,095

 
152,421

Operating expenses
 
 
 
Cost of sales and services
 
 
 
Products
38,188

 
52,310

Services
63,883

 
67,485

 
102,071

 
119,795

Selling, general and administrative
12,747

 
11,063

Gain on sale of Casing Drilling
(1,484
)
 

Research and engineering
2,029

 
2,542

Total operating expenses
115,363

 
133,400

Operating income
11,732

 
19,021

Other expense (income)
 
 
 
Interest expense
(470
)
 
(358
)
Interest income
(23
)
 
(31
)
Foreign exchange loss
429

 
280

Other expense (income)
(827
)
 
(1,332
)
Total other expense
(891
)
 
(1,441
)
Income before income taxes
12,623

 
20,462

Income tax provision
3,787

 
6,043

Net income
$
8,836

 
$
14,419

Earnings per share:
 
 
 
Basic
$
0.23

 
$
0.37

Diluted
$
0.22

 
$
0.37

Weighted average number of shares:
 
 
 
Basic
38,932

 
38,583

Diluted
39,430

 
39,066


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


2



TESCO CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
 
Three Months Ended March 31,
 
2013
 
2012
Operating Activities
 
 
 
Net income
$
8,836

 
$
14,419

Adjustments to reconcile net income to net cash provided by (used for) operating activities:
 
 
 
Depreciation and amortization
10,029

 
10,780

Stock compensation expense
1,650

 
727

Bad debt expense
1,070

 
369

Deferred income taxes
(314
)
 
2,659

Amortization of financial items
76

 
46

Gain on sale of operating assets
(3,071
)
 
(5,310
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable trade, net
4,992

 
(9,225
)
Inventories
(1,676
)
 
(16,017
)
Prepaid and other current assets
(3,186
)
 
2,722

Accounts payable and accrued liabilities
(6,453
)
 
(9,167
)
Income taxes recoverable
(2,882
)
 
(266
)
Other noncurrent assets and liabilities, net
(1,067
)
 
260

Net cash provided by (used for) operating activities
8,004

 
(8,003
)
Investing Activities
 
 
 
Additions to property, plant and equipment
(9,010
)
 
(17,866
)
Proceeds on sale of operating assets
1,859

 
820

Proceeds on sale of Casing Drilling, net of transaction costs
2,208

 

Other, net
38

 
73

Net cash used for investing activities
(4,905
)
 
(16,973
)
Financing Activities
 
 
 
Issuances of debt

 
26,000

Repayments of debt
(58
)
 
(6,325
)
Proceeds from exercise of stock options
121

 
123

Net cash provided by financing activities
63

 
19,798

Change in cash and cash equivalents
3,162

 
(5,178
)
Net cash and cash equivalents, beginning of period
22,014

 
23,069

Net cash and cash equivalents, end of period
$
25,176

 
$
17,891

Supplemental cash flow information
 
 
 
Cash payments for interest
$
121

 
$
88

Cash payments for income taxes
7,567

 
3,620

Cash received for income tax refunds
374

 
385

Property, plant and equipment accrued in accounts payable
861

 
967


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


3



TESCO CORPORATION
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(in thousands)


 
Common stock shares
 
Common shares
 
Retained earnings
 
Accumulated comprehensive income
 
Total
 
For the three months ended March 31, 2013
 
 
 
 
 
 
 
 
 
Balances at January 1, 2013
38,928

 
$
213,460

 
$
220,547

 
$
35,501

 
$
469,508

Net income

 

 
8,836

 

 
8,836

Stock compensation related activity
21

 
1,727

 

 

 
1,727

Balances at March 31, 2013
38,949

 
$
215,187

 
$
229,383

 
$
35,501

 
$
480,071

 
 
 
 
 
 
 
 
 
 
 
For the three months ended March 31, 2012
 
 
 
 
 
 
 
 
 
Balances at January 1, 2012
38,569

 
$
206,573

 
$
170,733

 
$
35,501

 
$
412,807

Net income

 

 
14,419

 

 
14,419

Stock compensation related activity
27

 
884

 

 

 
884

Balances at March 31, 2012
38,596

 
$
207,457

 
$
185,152

 
$
35,501

 
$
428,110

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


4


TESCO CORPORATION
 
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1—Nature of Operations and Basis of Preparation
 
Nature of Operations

We are a global leader in the design, manufacture, and service delivery of technology-based solutions for the upstream energy industry.  We seek to change the way wells are drilled by delivering safer and more efficient solutions that add real value by reducing the costs of drilling for, and producing, oil and natural gas.  Our product and service offerings consist mainly of equipment sales and services to drilling contractors and oil and natural gas operating companies throughout the world.

Basis of Presentation
 
We prepared this Quarterly Report on Form 10-Q pursuant to instructions for quarterly reporting required to be filed with the Securities and Exchange Commission (“SEC”).  Because this is an interim period filing presented using a condensed format, it does not include all information and footnotes normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).  You should read this report along with our Annual Report on Form 10-K for the year ended December 31, 2012, which contains a summary of our significant accounting policies and other disclosures.  The condensed consolidated financial statements as of March 31, 2013 and for the quarters ended March 31, 2013 and 2012 are unaudited.  We derived the unaudited condensed consolidated balance sheet as of December 31, 2012 from the audited consolidated balance sheet filed in our 2012 Annual Report on Form 10-K.  In our opinion, we have made adjustments, all of which were normal recurring adjustments unless otherwise disclosed herein, that we believe are necessary for a fair statement of the balance sheets, results of operations, and cash flows, as applicable.
 
These unaudited condensed consolidated financial statements include the accounts of all consolidated subsidiaries after the elimination of all significant intercompany accounts and transactions.

Fair Value of Financial Instruments
 
At March 31, 2013, the carrying amount of cash and cash equivalents, accounts receivable trade, restricted cash, non-trade receivables, accounts payable, and accrued liabilities approximated their fair value due to their short maturities. At March 31, 2013, the carrying amount of our long term debt approximated its fair value.  The fair value of our long term debt is determined using observable inputs and is based on current market interest rates for debt issued with similar maturities by companies with risk profiles similar to ours (Level 2).

Subsequent Events

We conducted our subsequent events review through the date on which these unaudited condensed consolidated financial statements were filed with the SEC.

Note 2—Summary of Significant Accounting Policies

Significant Accounting Policies

There have been no material changes to our accounting policies, as described in the notes to our audited consolidated financial statements included in our 2012 Annual Report on Form 10-K.

Recent Accounting Pronouncements

Each reporting period we consider all newly issued but not yet adopted accounting and reporting guidance applicable to our operations and the preparation of our consolidated financial statements. We do not believe that any issued accounting and reporting guidance not yet adopted by us will have a material impact on our unaudited condensed consolidated financial statements.






5



Note 3—Sale of Casing Drilling

On June 4, 2012, the Company completed the sale of substantially all of the assets of the Casing Drilling segment to Schlumberger Oilfield Holdings Ltd. and Schlumberger Technology Corporation (together, the "Schlumberger Group") for a total cash consideration of approximately $46.6 million, including a working capital purchase price adjustment. During the three months ended March 31, 2013, the Company recognized a pre-tax gain of approximately $1.5 million primarily from the working capital purchase price adjustment, in addition to the $12.3 million pre-tax gain recognized in 2012, which increased the total pre-tax gain from the sale to $13.8 million, net of transaction costs. The table below sets forth the details contributing to the gain on sale (in thousands):

Total cash consideration
$
46,624

Fixed assets, net
(11,999
)
Inventories, net
(10,839
)
Accounts receivable, net
(8,316
)
Transaction costs
(1,633
)
Gain on sale of Casing Drilling
$
13,837


At March 31, 2013, the Company had a remaining balance of $3.9 million related to the sale, which will be released from an escrow account when certain terms and conditions are satisfied by the Company.

Note 4—Details of Certain Accounts

At March 31, 2013 and December 31, 2012, prepaid and other current assets consisted of the following (in thousands):

 
March 31,
2013
 
December 31,
2012
Prepaid taxes other than income taxes
$
12,177

 
$
9,645

Deposits
5,030

 
3,948

Prepaid insurance
3,617

 
4,893

Other prepaid expenses
4,153

 
4,730

Restricted cash
6,915

 
6,953

Deferred job costs
3,176

 
2,969

Non-trade receivables
8,896

 
7,193

 
$
43,964

 
$
40,331

 
At March 31, 2013 and December 31, 2012, accrued and other current liabilities consisted of the following (in thousands):

 
March 31,
2013
 
December 31,
2012
Accrued payroll and benefits
$
13,513

 
$
15,520

Accrued taxes other than income taxes
11,373

 
10,809

Other current liabilities
15,998

 
15,243

 
$
40,884

 
$
41,572




6


Note 5—Inventories

At March 31, 2013 and December 31, 2012, inventories, net of reserves for excess and obsolete inventories of $1.3 million and $1.3 million, respectively, by major classification were as follows (in thousands):

 
March 31,
2013
 
December 31,
2012
Raw materials
$
64,176

 
$
68,347

Work in progress
10,543

 
4,029

Finished goods
51,353

 
52,130

 
$
126,072

 
$
124,506


Note 6—Property, plant and equipment

At March 31, 2013 and December 31, 2012, property, plant, and equipment, at cost, by major category were as follows (in thousands):

 
March 31,
2013
 
December 31,
2012
Land, buildings and leaseholds
$
26,345

 
$
26,273

Drilling equipment
323,713

 
317,450

Manufacturing equipment
10,674

 
10,110

Office equipment and other
31,370

 
31,086

Capital work in progress
10,192

 
13,509

 
402,294

 
398,428

Less: Accumulated depreciation
(193,714
)
 
(188,495
)
 
$
208,580

 
$
209,933


The net book value of used top drive rental equipment sold included in cost of sales and services on our unaudited condensed consolidated statements of income was $0.1 million for the three months ended March 31, 2013. Two used top drives were sold from our rental fleet during the three months ended March 31, 2013.

Depreciation and amortization expense for the three months ended March 31, 2013 and 2012 are included on our unaudited condensed consolidated statements of income as follows (in thousands):
 
 
Three Months Ended March 31,
 
2013
 
2012
Cost of sales and services
$
9,396

 
$
10,265

Selling, general and administrative expense 
633

 
515

 
$
10,029

 
$
10,780


Sale of Operating Assets

When top drive units from our rental fleet are sold, the sales proceeds are included in revenue and the net book value of the equipment sold is included in cost of sales and services.  Proceeds from the sale of used top drives are included in proceeds from the sale of operating assets and the difference between revenue and the cost of sales and services is included in gain on sale of operating assets in the accompanying unaudited condensed consolidated statement of cash flows.



7


Note 7—Warranties

Changes in our warranty accrual for the three months ended March 31, 2013 were as follows (in thousands):
 
March 31, 2013
Balance as of January 1, 2013
$
3,719

Charged to expense, net
1,325

Deductions
(1,475
)
Balance as of March 31, 2013
$
3,569



Note 8—Earnings per Share

Weighted average shares

The following table reconciles basic and diluted weighted average shares (in thousands):

 
Three Months Ended March 31,
 
2013
 
2012
Basic weighted average number of shares outstanding 
38,932

 
38,583

Dilutive effect of stock-based compensation
498

 
483

Diluted weighted average number of shares outstanding
39,430

 
39,066

Anti-dilutive options excluded from calculation due to exercise prices
1,430

 
654


Note 9—Income Taxes
 
Tesco Corporation is an Alberta, Canada corporation.  We conduct business and are taxed on profits earned in a number of jurisdictions around the world.  Income taxes have been recorded based on the laws and rates in effect in the countries in which operations are conducted or in which we are considered a resident for income tax purposes.

Our income tax provision for the three months ended March 31, 2013 and 2012 was as follows (in thousands):

 
Three Months Ended March 31,
 
2013
 
2012
Current tax provision
$
4,101

 
$
3,384

Deferred tax provision
(314
)
 
2,659

Income tax provision
$
3,787

 
$
6,043

 
Our effective tax rate, which is income tax expense as a percentage of pre-tax earnings, was 30% for the three months ended March 31, 2013 and the same period in 2012.

At December 31, 2012, we had an accrual for uncertain tax positions of $2.2 million.  There was no change to this accrual during the first quarter of 2013, leaving a balance of $2.2 million at March 31, 2013. The accrual for uncertain tax positions is included in accrued and other current liabilities or other liabilities in our consolidated balance sheet based on whether we anticipate the uncertainties to be resolved within the next 12 months. At March 31, 2013, $1.0 million is included in accrued and other current liabilities, and $1.2 million is included in other liabilities.  The resolution of these uncertainties should not have a material impact on our effective tax rate.
 
Certain state and foreign tax filings remain open to examination.  We believe that any assessment on these filings will not have a material impact on our financial position, results of operations, or cash flows.  We believe that appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.  However, audit outcomes and the timing of audit

8


settlements are subject to significant uncertainty.  Therefore, additional provisions on tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Note 10—Long term debt

Long term debt consists of the following (in thousands):
 
 
March 31, 2013
 
December 31, 2012
Capital leases
203

 
261

Current portion of long term debt
(100
)
 
(119
)
Non-current portion of long term debt
$
103

 
$
142

 
As part of our acquisition of Premiere Casing Services - Egypt S.A.E ("Premiere") in 2011, we assumed $7.4 million of outstanding debt at the acquisition date of October 16, 2011. During 2012, we paid off a significant amount of the outstanding balances related to Premiere's capital leases and all of the balances related to the notes payable. At March 31, 2013 the outstanding balance of Premiere's capital leases was $0.2 million.
 
At March 31, 2013, we had a credit agreement which was entered into on April 27, 2012, to provide a revolving line of credit of $125 million, including up to $20 million of swing line loans (collectively, the “Revolver”). The credit facility has a term of five years and all outstanding borrowings on the Revolver are due and payable on April 27, 2017.  The credit facility bears interest at a margin above LIBOR, federal funds rate, or the prime rate for U.S. dollar loans as determined by JPMorgan Chase Bank, N.A. in New York.  We are required to pay a commitment fee on available, but unused, amounts of the credit facility of 0.375-0.500 percent per annum and a letter of credit fee of 1.00-2.00 percent per annum on outstanding face amounts of letters of credit issued under the credit facility. Amounts available under the Revolver are reduced by letters of credit issued under our credit facility, not to exceed $50 million in the aggregate.  Amounts available under the swing line loans may also be reduced by letters of credit or by means of a credit to a general deposit account of the applicable borrower.  The availability of future borrowings may also be limited in order to maintain certain financial ratios required under the covenants.  The credit facility contains covenants that we consider usual and customary for an agreement of this type, including a leverage ratio, a minimum net worth, and limitations on allowable amounts for the disposal of obsolete assets and annual capital expenditures, and a fixed charge coverage ratio.  The credit facility prohibits incurring any additional indebtedness outside the existing credit facility in excess of $50 million, paying cash dividends to shareholders, and contains other restrictions, which are standard to the industry.  All of our direct and indirect material subsidiaries in the United States, Canada, Argentina, Mexico, and Indonesia as well as one of our Cyprus subsidiaries are guarantors of any borrowings under the credit facility.  

Under the Revolver at March 31, 2013, we had no outstanding borrowings, $4.7 million in letters of credit outstanding and $120.3 million in available borrowing capacity. We were in compliance with our bank covenants at March 31, 2013.


9



Note 11—Commitments and Contingencies
 
Legal contingencies

In the normal course of our business, we are subject to legal proceedings brought by or against us and our subsidiaries.  None of these proceedings involves a claim for damages exceeding ten percent of our current assets on a consolidated basis. The estimates below represent our best estimates based on consultation with internal and external legal counsel.  There can be no assurance as to the eventual outcome or the amount of loss we may suffer as a result of these proceedings.

VARCO Litigation: Varco I/P, Inc. (“Varco”) filed suit against us in April 2005 in the U.S. District Court for the Western District of Louisiana, alleging that our CDS infringes certain of Varco’s U.S. patents.  Varco seeks monetary damages and an injunction against further infringement.  We filed a countersuit against Varco in June 2005 in the U.S. District Court for the Southern District of Texas, Houston Division seeking invalidation of the Varco patents in question.  In July 2006, the Louisiana case was transferred to the federal district court in Houston, and as a result, the issues raised by Varco have been consolidated into a single proceeding in which we are the plaintiff.  We also filed a request with the U.S. Patent and Trademark Office (“USPTO”) for reexamination of the patents on which Varco’s claim of infringement is based.  The USPTO accepted the Varco patents for reexamination, and the district court stayed the patent litigation pending the outcome of the USPTO reexamination.  In May 2009, the USPTO issued a final action rejecting all of the Varco patent claims that we had contested.  Varco has appealed this decision with the USPTO and that reexamination appeal is pending. The outcome and amount of any future financial impacts from this litigation are indeterminable at this time.

Weatherford Litigation: Weatherford International, Inc. and Weatherford/Lamb Inc. (together, “Weatherford”) filed suit against us in the U.S. District Court for the Eastern District of Texas, Marshall Division in December 2007 (the “Marshall Suit”), alleging that various of our technologies infringe 11 different patents held by Weatherford.  Weatherford sought monetary damages and an injunction against further infringement.  Our technologies referred to in the claim included the CDS, the Casing Drilling system and method, a float valve, and the locking mechanism for the controls of the tubular handling system.  We filed a general denial seeking a judicial determination that we did not infringe the patents in question and/or that the patents are invalid.

In August 2008, we filed suit against several competitors in the U.S. District Court for the Southern District of Texas – Houston Division, including Weatherford (the “Houston Suit”).  The Houston Suit claims infringement of two of our patents related to our CDS.  On October 26, 2010, we entered into a settlement with Weatherford (the “Settlement”) dismissing both the Marshall Suit and the Houston Suit (as it relates to Weatherford) with prejudice.  Among other provisions, the Settlement contains the following terms:

Non-exclusive irrevocable worldwide and royalty free cross licenses with respect to all the patents asserted by Weatherford in the Marshall Case and by us in the Houston Case, as well as certain other U.S. and foreign equivalents and counterparts; and
Weatherford has agreed to purchase for five years 67% of its worldwide top drive requirements from us, as long as we can meet production requirements, and to designate us as a preferred provider of after-market sales and service for top drives.  The prices we charge Weatherford will be equal to or lower than the prices we charge to any other customer of similar volume of purchases and/or services.

We entered into a Final Settlement and License Agreement (the "Settlement Agreement") with Weatherford on January 11, 2011, effective as of October 26, 2010.  As an additional condition of the Settlement Agreement, neither we nor Weatherford will pursue any cause of action that might adversely affect the validity or enforceability of each other's patents as listed in the exhibits to the Settlement Agreement, including any causes of action that may arise from the requests for review (“patent re-examinations”) we and Weatherford filed with the USPTO. However, the patent re-examinations already initiated continue with only the respective patent owner corresponding with the USPTO. Ongoing re-examination procedures include the patents owned by us and asserted in the Houston Suit. An oral hearing with the Board of Patent Appeals and Interferences (“BPAI”) at the USPTO occurred August 1, 2012. On November 27, 2012, the BPAI issued a decision in which all of the claims asserted in the Houston Suit were found to be valid in view of the prior art of record in the re-examination proceedings.

On November 11, 2010, we won a jury verdict against National Oilwell Varco, L.P. ("NOV"), Frank's Casing Crew and Rental Tools, Inc. ("Frank's") and Offshore Energy Services, Inc. ("OES") for infringing our U.S. Patent Nos. 7,140,443 and 7,377,324.  In that verdict, the jury found that NOV's accused product, the CRT 350, infringes all valid patent claims in the asserted patents, and that NOV contributorily infringed all valid patent claims in the asserted patents.  The jury also found that Frank's accused products,

10


the (i) SuperTAWG, (ii) FA-1, and (iii) CRT 350, and OES's accused products, the CRT 350, infringe all valid patent claims in the asserted patents.  Damages were stipulated by the parties and the verdict is subject to entry of judgment and appeal.

On December 6, 2012, the District Court ruled on summary judgment that all of the asserted patent claims were obvious in view of prior art based on pre-trial evidence. This ruling overturns the favorable jury verdict. We filed a Notice of Appeal on December 21, 2012 seeking to reverse the District Court's ruling. At a procedural hearing on April 2, 2013, the District Court informed the parties that it did not intend for the December 6th Order to be final.  The District Court sent a letter to the Court of Appeals for the Federal Circuit on April 12, 2013 to confirm the District Court has jurisdiction “to proceed to set a schedule on discovery, briefing, and a bench trial on inequitable conduct.”

Tax Disputes: We have been previously advised by the Mexican tax authorities that they believe significant expenses incurred by our Mexican operations from 1996 through 2002 are not deductible for Mexican tax purposes.  Between 2002 and 2008, formal reassessments disallowing these deductions were issued for each of these years, all of which we appealed to the Mexican court system.  We have obtained final court rulings deciding all years in dispute in our favor, except for (i) 1996, as discussed below, and (ii) 2001 and 2002, both of which are currently before the Mexican Tax Court.  The outcomes of such appeals are uncertain.  We continue to believe that the basis for these reassessments was incorrect, and that the ultimate resolution of those outstanding matters will likely not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

In May 2002, we paid a deposit of $3.3 million to the Mexican tax authorities in order to appeal the reassessment for 1996.  In 2007, we requested and received a refund of approximately $3.7 million (the original deposit amount of $3.3 million plus $0.4 million in interest).  With the return of the $3.3 million deposit, the Mexican tax authorities issued a resolution indicating that we were owed an additional $3.4 million in interest and inflation adjustments but this amount had been retained by the tax authorities to satisfy a second reassessment for 1996.  We believed the second reassessment was invalid, and appealed it to the Mexican Tax Court.  In 2009, the Mexican Tax Court issued a decision accepting our arguments in part, which was subject to further appeal.

In May 2011, we received a refund of approximately $3.8 million (the remaining $3.4 million noted above, plus $0.4 million of additional interest and inflation adjustments) and recorded $2.4 million in interest income, $0.6 million in other income, partially offset by $0.4 million of related interest expense.  The remaining $1.2 million is included in other liabilities pending the ultimate resolution of this issue.

In July 2006, we received a claim for withholding tax, penalties and interest related to payments over the periods from 2000 to 2004 in a foreign jurisdiction.  We disagreed with this claim and litigated this matter.  During 2006, we accrued an estimated pre-tax exposure of $3.8 million and continued to accrue interest for this matter. In April 2012, we received final determination for the 2000 and 2002 tax years and have reversed $1.9 million of the accrual ($1.3 million to other income and a $0.6 million reduction of interest expense). In January 2013, we received final determination for the portion of the claim related to this accrual and have reversed $2.8 million of the accrual ($1.8 million to other income and a $1.0 million reduction of interest expense). At March 31, 2013, we have no accrual remaining for this claim.

In August 2008, we received a claim in Mexico for $1.1 million in fines and penalties related to the exportation of certain temporarily imported equipment that remained in Mexico beyond the authorized time limit for its return.  We disagree with this claim and are currently litigating the matter.  In December 2009, we received a decision from the Mexican Tax Court in our favor, which is subject to further appeal.  The outcome of this litigation is uncertain. No accrual has been recorded for this claim.
 
Other Contingencies
 
We are contingently liable under letters of credit and similar instruments that we enter into in connection with the importation of equipment to foreign countries and to secure our performance on certain contracts.  At March 31, 2013 and December 31, 2012, our total exposure under outstanding letters of credit was $8.1 million and $8.7 million, respectively.
 
Note 12—Segment Information
 
Business Segments
 
Prior to the sale of the Casing Drilling business during the second quarter of 2012, our four business segments were: Top Drive, Tubular Services, Casing Drilling, and Research and Engineering. On June 4, 2012, the Company completed the sale of substantially all of the assets of the Casing Drilling segment, which consisted of the proprietary Casing Drilling technology. Our Top Drive segment is comprised of top drive sales, top drive rentals, and after-market sales and service.  Our Tubular Services segment includes both our proprietary and conventional tubular services.  Our Research and Engineering segment is comprised

11


of our internal research and development activities related to our proprietary tubular services and top drive model development, as well as the Casing Drilling technology prior to the sale.

We measure the results of our business segments using, among other measures, each segment’s operating income, which includes certain corporate overhead allocations.  Overhead costs include field administration and operations support.  At a business segment level, we incur costs directly and indirectly associated with revenue.  Direct costs include expenditures specifically incurred for the generation of revenue, such as personnel costs on location or transportation, maintenance and repair, and depreciation of our revenue-generating equipment.

Certain sales and marketing activities, financing activities, corporate general and administrative expenses, other (income) expense, and income taxes are not allocated to our business segments.

Goodwill is allocated to the business segment to which it specifically relates.  Our goodwill has been allocated to the Tubular Services segment.
 
Significant financial information relating to our business segments is presented below (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2013
 
Top
Drive
 
Tubular
Services
 
Casing Drilling
 
Research &
Engineering
 
Corporate and
Other
 
Total
Revenue
$
75,569

 
$
51,095

 
$
431

 
$

 
$

 
$
127,095

Depreciation and amortization
2,807

 
6,109

 

 
24

 
1,089

 
10,029

Operating income (loss)
14,959

 
7,427

 
1,877

 
(2,029
)
 
(10,502
)
 
11,732

Other expense
 

 
 

 
 

 
 

 
 

 
(891
)
Income before income taxes
 

 
 

 
 

 
 

 
 

 
$
12,623


 
Three Months Ended March 31, 2012
 
Top
Drive
 
Tubular
Services
 
Casing Drilling
 
Research &
Engineering
 
Corporate and
Other
 
Total
Revenue
$
101,816

 
$
43,471

 
$
7,134

 
$

 
$

 
$
152,421

Depreciation and amortization
2,913

 
5,818

 
1,083

 
20

 
946

 
10,780

Operating income (loss)
24,893

 
4,942

 
(853
)
 
(2,542
)
 
(7,419
)
 
19,021

Other expense
 

 
 

 
 

 
 

 
 

 
(1,441
)
Income before income taxes
 

 
 

 
 

 
 

 
 

 
$
20,462



Geographic Areas
 
We attribute revenue to geographic regions based on the location of the customer.  Generally, for service activities, this will be the region in which the service activity occurs.  For equipment sales, this will be the region in which the sale transaction is complete and title transfers.  Our revenue by geographic area for the three months ended March 31, 2013 and 2012 was as follows (in thousands):


12


 
Three Months Ended March 31,
 
2013
 
2012
Canada
$
38,601

 
$
56,534

United States
33,783

 
38,423

South America
15,153

 
15,081

Mexico
12,399

 
12,116

Asia Pacific
12,564

 
11,138

Europe, Africa and Middle East
10,000

 
7,773

Russia
4,595

 
11,356

Total
$
127,095

 
$
152,421


The physical location of our net property, plant and equipment by geographic area as of March 31, 2013 and December 31, 2012 was as follows (in thousands):

 
Top Drive
 
Tubular Services
 
Overhead, Corporate and Other
 
March 31,
2013
United States
$
19,882

 
$
16,446

 
$
14,415

 
$
50,743

Mexico
34,057

 
7,911

 
163

 
42,131

South America
9,161

 
8,822

 
841

 
18,824

Asia Pacific
7,786

 
20,474

 
148

 
28,408

Russia
18,643

 
696

 
28

 
19,367

Europe, Africa and Middle East
4,492

 
27,415

 
4,839

 
36,746

Canada
7,281

 
3,549

 
1,531

 
12,361

Total
$
101,302

 
$
85,313

 
$
21,965

 
$
208,580



 
Top Drive
 
Tubular Services
 
Overhead, Corporate and Other
 
December 31,
2012
United States
$
18,731

 
$
16,975

 
$
13,316

 
$
49,022

Mexico
34,431

 
8,611

 
368

 
43,410

South America
9,146

 
9,703

 
248

 
19,097

Asia Pacific
7,902

 
20,619

 
69

 
28,590

Russia
18,005

 
2,128

 
29

 
20,162

Europe, Africa and Middle East
3,716

 
28,918

 
4,955

 
37,589

Canada
8,122

 
3,677

 
264

 
12,063

Total
$
100,053

 
$
90,631

 
$
19,249

 
$
209,933



13


Item 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q.  This discussion contains forward-looking statements.  Please see “Caution Regarding Forward-Looking Information; Risk Factors” above and “Risk Factors” in Part II, Item IA below and in our 2012 Annual Report on Form 10-K, for a discussion of the uncertainties, risks, and assumptions associated with these statements.

Overview and Outlook

We are a global leader in the design, manufacture and service delivery of technology based solutions for the upstream energy industry.  We seek to change the way wells are drilled by delivering safer and more efficient solutions that add real value by reducing the costs of drilling for and producing oil and natural gas.
 
Prior to the sale of the Casing Drilling business during the second quarter of 2012, our business segments were:

Top Drives – top drive sales, top drive rentals, and after-market sales and services;
Tubular Services – proprietary and conventional tubular services;
Casing Drilling – proprietary Casing Drilling technology; and
Research and Engineering – internal research and development activities related to our proprietary tubular services and top drive model development, as well as the Casing Drilling technology prior to the sale.

On June 4, 2012, we completed the sale of substantially all of the assets of our Casing Drilling segment to the Schlumberger Group. For a detailed discussion of this matter, see Part I, Item 1—"Financial Statements", Note 3—Sale of Casing Drilling in this Quarterly Report on Form 10-Q.

Business Environment

One of the key indicators of our business is the number of active drilling rigs.  During the first quarter of 2013, North America continued to experience a downturn in rig activity. Europe has been experiencing uncertainty since 2012 over the outcome of the European Union's ("EU") financial support programs for EU member states experiencing financial troubles. The financial troubles of EU member states have created uncertainty and make any projection in Europe difficult. Additionally, certain countries in Latin America experienced a decline in rig activity due to various geopolitical and economic reasons. Current global macro economic conditions make any projections difficult. Below is a table that shows average rig count by region for the three months ended March 31, 2013 and 2012.
 
 
Three Months Average Rig Count(1)
 
Increase / (Decrease)
 
March 31,
 
 
2013
 
2012
 
2012 to 2013
U.S.
1,758

 
1,991

 
(233
)
(12
)%
Canada
536

 
592

 
(56
)
(9
)%
Latin America (includes Mexico)
426

 
432

 
(6
)
(1
)%
Middle East (excludes Iran, Iraq and Sudan)
355

 
311

 
44

14
 %
Asia Pacific (excludes China onshore)
245

 
250

 
(5
)
(2
)%
Europe (excludes Russia)
134

 
112

 
22

20
 %
Africa
114

 
83

 
31

37
 %
Worldwide
3,568

 
3,771

 
(203
)
(5
)%

(1)  Source: Baker Hughes Incorporated worldwide rig count; averages are monthly.

Summary of the Quarter Ended March 31, 2013 and Operational Performance

During the first quarter of 2013, our Top Drive segment had 24 top drive units sold compared to 39 during the same period in 2012.  Our Tubular Services segment revenue and operating income improved significantly in the first quarter of 2013 as compared to the first quarter of 2012. Our automated tubular services offering continues to gain market acceptance, and we remain

14


committed to growing this segment as we believe that every rig with a top drive will eventually convert to running casing with an automated system, such as our CDS™ system.  We also invested in new and enhanced product and service offerings in our Research and Engineering segment.  

 Outlook for 2013

The current outlook for the global economy varies widely, but we believe that most indicators point towards a continued slow recovery during the remainder of 2013. Current global macro-economic conditions make any projections difficult and uncertain; however, in each of our revenue generating segments, we anticipate moderately improved activity for the remainder of 2013, as follows:

Top Drive - Based upon existing drilling and bidding levels and the size of our product sale backlog, we expect our top drive order rate and rental activity to remain steady for the remainder of 2013. In North America, we continue to experience downward pressure in bidding activity.  Our Top Drive sales backlog was 20 units at March 31, 2013, compared to 57 units at March 31, 2012 and 28 units at December 31, 2012.  Our customers have maintained their focus on lowering project costs, which continues to put downward pressure on our sales prices on select product offerings.  We expect our international top drive sales and rental activity and after-market sales and services to hold steady for the remainder of 2013.
 
Tubular Services - We expect our CDS™ automated and conventional casing running business to strengthen in our international markets for the remainder of 2013.  We will continue to expand our automated casing service offerings, particularly in the major unconventional shale regions in North America and select international locations. In addition, we expect drilling activity in the U.S. Gulf of Mexico to gradually increase for the remainder of 2013, which should increase demand for our MCLRS proprietary services.


15



Operating Results

Below is a summary of our operating results for the three months ended March 31, 2013 and 2012 (in thousands, except percentages):

 
Three Months Ended March 31,
 
Increase/(Decrease)
 
2013
 
2012
 
2012 to 2013
Segment revenue
 
 
 
 
 
 
Top Drive
75,569

 
101,816

 
(26,247
)
(26)%
Tubular Services
51,095

 
43,471

 
7,624

18%
Casing Drilling
431

 
7,134

 
(6,703
)
(94)%
Consolidated revenue
127,095

 
152,421

 
(25,326
)
(17)%
Segment operating income (loss)
 
 
 
 
 
 
Top Drive
14,959

 
24,893

 
(9,934
)
(40)%
Tubular Services
7,427

 
4,942

 
2,485

50%
Casing Drilling
1,877

 
(853
)
 
2,730

320%
Research & engineering
(2,029
)
 
(2,542
)
 
513

20%
Corporate and other
(10,502
)
 
(7,419
)
 
(3,083
)
(42)%
Consolidated operating income
11,732

 
19,021

 
(7,289
)
(38)%
Other expense (income)
(891
)
 
(1,441
)
 
550

38
%
Income tax provision
3,787

 
6,043

 
(2,256
)
(37)%
Net income
8,836

 
14,419

 
(5,583
)
(39)%
 




























16


Top Drive Segment

Our Top Drive business segment sells equipment and provides services to drilling contractors and oil and natural gas operating companies throughout the world.  We primarily manufacture top drives that are used in drilling operations to rotate the drill string while suspended from the derrick above the rig floor.  We also provide top drive rental services on a day-rate basis for land and offshore drilling rigs, and we provide after-market sales and support for our customers.  Below is a summary of our Top Drive operating results and metrics for the three months ended March 31, 2013 and 2012 (in thousands, except percentages, units, days, and rate):
 
 
Three Months Ended March 31,
 
Increase/(Decrease)
 
2013
 
2012
 
2012 to 2013
Top Drive revenue
 
 
 
 
 
 
Sales
$
32,768

 
$
50,400

 
$
(17,632
)
(35)%
Rental services
29,736

 
34,646

 
(4,910
)
(14)%
After-market sales and services
13,065

 
16,770

 
(3,705
)
(22)%
 
$
75,569

 
$
101,816

 
$
(26,247
)
(26)%
Top Drive operating income
$
14,959

 
$
24,893

 
$
(9,934
)
(40)%
Number of top drive sales:
 
 
 
 
 
 
New
22

 
35

 
(13
)
(37)%
Used or consignment
2

 
4

 
(2
)
(50)%
 
24

 
39

 
(15
)
(38)%
End of period number of top drives in rental fleet:
136

 
130

 
6

5%
Rental operating days(a)
5,827

 
6,987

 
(1,160
)
(17)%
Average daily operating rate
$
5,103

 
$
4,959

 
$
144

3%
__________________________________
(a)  Defined as a day that a unit in our rental fleet is under contract and operating; does not include stand-by days.

Top Drive operating results were largely driven by oil and natural gas drilling activity and new rig build activity. The average active rig count decreased by 5% in the first quarter of 2013 from the same period in 2012.

Top Drive sales revenue — The decrease in revenue for the three months ended March 31, 2013 compared to the same period in 2012 was due to fewer units sold as a result of decreased demand, both domestically and internationally.

The selling price per unit varies significantly depending on the model, whether the unit was previously operated in our rental fleet and whether a power unit was included in the sale.  Revenue related to the sale of used or consignment top drive units was $1.7 million and $7.0 million for the three months ended March 31, 2013 and 2012, respectively.

Top Drive rental revenue — The decrease in revenue for the three months ended March 31, 2013 compared to the same period in 2012 was due to decreased operating days as a result of lower rig count in North America.

Top Drive after-market sales and services revenue — The decrease in revenue for the three months ended March 31, 2013 as compared to the same period in 2012 was due to decreased demand in North America.

Top Drive operating income — The decrease in operating income for the three months ended March 31, 2013 as compared to the same period in 2012 was due to decreases in sales, rental and after-market sales and services revenue discussed above. During the first quarter of 2012, our quality control processes found casting anomalies in the gearbox housing of our new ESI top drive model and subsequently determined that the casting of the gearbox housing did not meet TESCO's standards. We recorded warranty expenses of $3.9 million during the first quarter of 2012 specifically associated with this ESI gearbox housing issue.




17


Tubular Services Segment

Our Tubular Services business segment includes both automated and conventional services, which are typically offered as a “call out” service on a well-by-well basis.  Our automated service offerings, in particular the CDS™, provide a safer and more automated method for running casing and, if required, reaming the casing into the hole, as compared to traditional methods.  Additionally, our automated Tubular Service business includes the installation services of deep water smart well completion equipment using our MCLRS, a proprietary and patented technology that improves the quality of the installation of high-end well completions.  Our conventional Tubular Service business provides equipment and personnel for the installation of tubing and casing, including power tongs, pick-up/lay-down units, torque monitoring services, and connection testing services for new well construction and in work-over and re-entry operations.  Below is a summary of our Tubular Services operating results and metrics for the three months ended March 31, 2013 and 2012 (in thousands, except percentages and number of jobs):
 
 
Three Months Ended March 31,
 
Increase/(Decrease)
 
2013
 
2012
 
2012 to 2013
Tubular Services revenue
 
 
 
 
 
 
Automated
$
40,175

 
$
32,588

 
$
7,587

23%
Conventional
10,920

 
10,883

 
37

—%
 
$
51,095

 
$
43,471

 
$
7,624

18%
Tubular Services operating income
$
7,427

 
$
4,942

 
$
2,485

50%
Number of automated jobs
956

 
859

 
97

11%
 
The increase in Tubular Services revenue for the three months ended March 31, 2013 compared to the same period in 2012 was due to increased demand in the Asia Pacific region, North America, and Latin America for automated offerings, and the Middle East for conventional offerings. A significant amount of current U.S. drilling activity is in shale formations that require directional and horizontal drilling techniques, which we believe are good applications for our automated service offerings. In addition, increased domestic and international demand for our tubular services, both automated and conventional, has resulted in new jobs at more favorable pricing terms. During the three months ended March 31, 2013, we recorded $1.7 million of revenue from our MCLRS™ offerings, compared to $0.9 million during the same period in 2012. The Tubular Services automated revenue during the three months ended March 31, 2013 and 2012 also included $2.8 million and $1.8 million, respectively, of revenue for CDS™ equipment sales.

The increase in Tubular Services operating income for the three months ended March 31, 2013 as compared to the same period in 2012 was due to higher revenue discussed above, including higher MCLRS™ and CDS™ equipment sales revenue, which provide higher operating margins. 

Casing Drilling Segment

On June 4, 2012, we completed the sale of substantially all of the assets of our Casing Drilling segment to the Schlumberger Group. The Casing Drilling business was based on the proprietary Casing Drilling technology, which used patented equipment and processes to allow an oil or gas well to be drilled using standard well casing pipe.  

Below is a summary of the operating results of the segment prior to the sale for the three months ended March 31, 2013 and 2012 (in thousands, except percentages):
 
 
Three Months Ended March 31,
 
Increase/(Decrease)
 
2013
 
2012
 
2012 to 2013
Casing Drilling revenue
$
431

 
$
7,134

 
$
(6,703
)
(94)%
Casing Drilling operating income (loss)
$
1,877

 
$
(853
)
 
$
2,730

320%
  

18


Casing Drilling operating income for the three months ended March 31, 2013 was primarily attributed to a working capital adjustment gain of approximately $1.5 million from the sale. For a detailed discussion of this matter, see Part I, Item 1—"Financial Statements", Note 3—Sale of Casing Drilling in this Quarterly Report on Form 10-Q.
 
Research and Engineering Segment

Our Research and Engineering segment is comprised of our internal research and development activities related to our automated Tubular Services and top drive model development, as well as the Casing Drilling technology prior to the sale.  Below is a summary of our research and engineering expense for the three months ended March 31, 2013 and 2012 (in thousands, except percentages):

 
Three Months Ended March 31,
 
Increase/(Decrease)
 
2013
 
2012
 
2012 to 2013
Research and engineering expense
$
2,029

 
$
2,542

 
$
(513
)
(20)%
 
Research and engineering expenses decreased during the three months ended March 31, 2013 as compared to the same periods in 2012 due to the termination of Casing Drilling research and engineering after the sale of this business on June 4, 2012. We continue to invest in the development, commercialization, and enhancements of our proprietary technologies relating to our Top Drive and Tubular Services segments.

Corporate and Other Segment

Corporate and other expenses primarily consist of the corporate level general and administrative expenses and certain selling and marketing expenses.  Below is a summary of our corporate and other expenses for the three months ended March 31, 2013 and 2012 (in thousands, except percentages):
 
 
Three Months Ended March 31,
 
Increase / (Decrease)
 
2013
 
2012
 
2012 to 2013
Corporate and other expenses
$
10,502

 
$
7,419

 
$
3,083

42%
Corporate and other expenses as a % of revenue
8%
 
5%
 
3 pts

Corporate and other expenses were higher during the three months ended March 31, 2013, as compared to the same period in 2012 due primarily to increased short term and long term incentive compensation and payroll and benefit expense from increased headcount for operations support personnel.

Other Expense (Income)

Below is a summary of our other expense (income) for the three months ended March 31, 2013 and 2012 (in thousands, except percentages):
 
 
Three Months Ended March 31,
 
Increase/(Decrease)
 
2013
 
2012
 
2012 to 2013
Other expense (income)
 
 
 
 
 
 
Interest expense
$
(470
)
 
$
(358
)
 
$
(112
)
(31
)%
Interest income
(23
)
 
(31
)
 
8

26
 %
Foreign exchange loss (gain)
429

 
280

 
149

53
 %
Other expense (income)
(827
)
 
(1,332
)
 
505

38
 %
Total other expense (income)
$
(891
)
 
$
(1,441
)
 
$
550

38
 %

19



In April 2012, we received a favorable determination on a legacy withholding tax issue in a foreign jurisdiction. The impact of this was recognized in the first quarter of 2012, when we reversed $1.9 million of accruals previously made for this issue (consisting of $1.3 million to other income and a $0.6 million reduction of interest expense). For a detailed discussion of this matter, see Part I, Item 1—"Financial Statements", Note 11—Commitments and Contingencies in this Quarterly Report on Form 10-Q.

Foreign exchange losses increased during the three months ended March 31, 2013 as compared to the same periods in 2012 due primarily to the devaluation of the Venezuelan Bolivar Fuerte in February 2013 as well as fluctuations in the valuation of the U.S. dollar compared to other currencies we transact in around the world, including the Argentine peso, Mexican peso, and Russian ruble, among others.
 
  Income Tax Provision
 
 
Three Months Ended March 31,
 
Increase / (Decrease)
 
2013
 
2012
 
Effective income tax rate
30%
 
30%
 
 
We are an Alberta, Canada corporation.  We conduct business and are taxed on profits earned in a number of jurisdictions around the world. Our income tax rate is based on the laws and rates in effect in the countries in which our operations are conducted or in which we are considered a resident for income tax purposes.  Our effective tax rate, which is income tax expense as a percentage of pre-tax earnings, did not change for the three months ended March 31, 2013 compared to the same period in 2012.

 Liquidity and Capital Resources

We rely on our cash and access to credit to fund our operations, growth initiatives and acquisitions.  Our primary sources of liquidity are cash flows generated from our operations, available cash and cash equivalents, and available borrowings under our revolving credit facility.  We use these sources of liquidity to fund our working capital requirements, capital expenditures, strategic investments and acquisitions.  For 2013, we forecast capital expenditures to be between $30 million and $40 million based on expected demand for our products and services. We expect to be able to fund our activities for 2013 with cash flows generated from our operations, available cash and cash equivalents, and available borrowings under our revolving credit facility.

As of March 31, 2013, we had no outstanding borrowings under our revolving credit facility, and we had availability to borrow $120.3 million under our revolving credit facility.  The availability of current borrowings is, and future borrowings may be, limited in order to maintain certain financial ratios required by restrictive covenants in our credit facility. We were in compliance with our bank covenants at March 31, 2013.  For further discussion on our credit facility, see Part I, Item 1—“Financial Statements”, Note 10 of this Quarterly Report on Form 10-Q.
 
Our net cash position at March 31, 2013 and December 31, 2012 was as follows (in thousands):
 
March 31,
2013
 
December 31,
2012
Cash
$
25,176

 
$
22,014

Current portion of long term debt
(100
)
 
(119
)
Long term debt
(103
)
 
(142
)
Net cash
$
24,973

 
$
21,753


We report our net cash position because we regularly review it as a measure of our performance. However, the measure presented in this Quarterly Report on Form 10-Q may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the measurement we use.

Cash Flows

Our cash flows fluctuate with the level of spending by oil and natural gas companies for drilling activities.  Certain sources and uses of cash, such as the level of discretionary capital expenditures and the issuance and repayment of debt, are within our

20


control and are adjusted as necessary based on market conditions.  The following is a discussion of our cash flows for the three months ended March 31, 2013 and 2012.

Operating Activities – Net cash provided by operating activities is our primary source of capital and liquidity.  Net cash provided by operating activities was $8.0 million for the three months ended March 31, 2013 compared to net cash used of $8.0 million for the same period in 2012.  The increase in net cash provided by operating activities was due primarily cash inlays from decreasing accounts receivable and decreased cash outlay for inventory purchases.

Investing Activities – Net cash used by investing activities was $4.9 million during the three months ended March 31, 2013 compared to $17.0 million used during the same period of 2012.  During the three months ended March 31, 2013 and 2012, we used $9.0 million and $17.9 million of cash, respectively, for capital expenditures, and sales of operating assets provided $1.9 million and $0.8 million of cash, respectively. Additionally for the three months ended March 31, 2013, we received $1.6 million of cash from the sale of Casing Drilling segment to the Schlumberger Group.

Financing Activities – Net cash provided by financing activities was $0.1 million during the three months ended March 31, 2013 compared to $19.8 million for the same period in 2012.  During the three months ended March 31, 2012, we borrowed $26.0 million from our revolving credit facility and used $6.3 million of cash to repay our debt.  

Manufacturing Purchase Commitments

Our manufacturing purchase commitments, which represent executed purchase orders that have been submitted to the respective vendors, have increased from $34.9 million as of December 31, 2012 to $38.2 million as of March 31, 2013.  This increase of $3.3 million, or 9%, is driven by the anticipated demand for our CDS™ equipment and after-market part sales.

Off-Balance Sheet Arrangements

As of March 31, 2013, we have no off-balance sheet arrangements other than the manufacturing purchase commitments and letters of credit described above, and future interest payments on the aggregate unused commitments under our revolving credit facility and lease commitments as described in Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2012 Annual Report on Form 10-K.

Critical Accounting Estimates and Policies
 
Our accounting policies are described in the notes to our audited consolidated financial statements included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2012 Annual Report on Form 10−K.  We prepare our unaudited condensed consolidated financial statements in conformity with U.S. GAAP.  Our results of operations and financial condition, as reflected in our unaudited condensed consolidated financial statements and related notes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions and other factors that could affect the ongoing viability of our business and customers.  We believe that the most critical accounting policies in this regard are those described in our 2012 Annual Report on Form 10−K.  While these issues require us to make judgments that are subjective, they are generally based on a significant amount of historical data and current market data.  There have been no material changes or developments in authoritative accounting pronouncements or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be critical accounting policies and estimates as disclosed in our 2012 Annual Report on Form 10−K.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
 
See Part I, Item 7A —“Quantitative and Qualitative Disclosures About Market Risk” in our 2012 Annual Report on Form 10-K for a detailed discussion of the risk factors affecting us. There have been no material changes to the market risk described in Part I, Item 7A —"Quantitative and Qualitative Disclosures About Market Risk" disclosed in our 2012 Annual Report on Form 10-K.

Item 4.    Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the SEC reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time period specified by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. As of March 31, 2013, our Chief Executive Officer and Chief Financial Officer participated with management in evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2013, our disclosure controls and procedures were effective at the reasonable assurance level.

21



Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2013, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22


PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

In the normal course of our business, we are subject to legal proceedings brought by or against us and our subsidiaries.  None of these proceedings involves a claim for damages exceeding ten percent of our current assets on a consolidated basis.  See Part I, Item 1—“Financial Statements”, Note 11 of this Quarterly Report on Form 10-Q for a summary of certain ongoing legal proceedings. Such information is incorporated into this Part II, Item 1—"Legal Proceedings" by reference.

On December 26, 2012, we received a request by the staff of the United States Securities and Exchange Commission ("SEC") that the Company take steps to preserve and retain five categories of documents relating to commercial agents who perform services for the corporate group in a foreign jurisdiction, the Company's general use of commercial agents in that jurisdiction, and compliance with the Foreign Corrupt Practices Act. This request stated that it "should not be construed as an indication by the Commission, or its staff, that any violations of law have occurred; nor should it be considered an adverse reflection upon any person, entity, or security." We have, under the advice and through independent external legal counsel, cooperated with and have provided the SEC staff with specific information which it has requested. External legal counsel for the Company has been advised by the SEC staff that no formal order of investigation has been issued. The outcome of the SEC's review and any future financial impact resulting from this matter are indeterminable at this time.

Item 1A. Risk Factors.

See Part I, Item 1A—"Risk Factors" in our 2012 Annual Report on Form 10-K for a detailed discussion of the risk factors affecting us.  There have been no material changes to the risk factors described in Part I, Item 1A—"Risk Factors" disclosed in our 2012 Annual Report on Form 10-K.
 
 Item 6.    Exhibits.
 
The Exhibit Index set forth below is incorporated herein by reference.

23



SIGNATURE
 
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.
 


 
TESCO CORPORATION
 
 
 
 
 
By:
/s/    JULIO M. QUINTANA        
 
 
Julio M. Quintana,
President and Chief Executive Officer
Date:
May 6, 2013
 
 
 
 
 
TESCO CORPORATION
 
 
 
 
 
By:
/s/    ROBERT L. KAYL        
 
 
Robert L. Kayl,
Senior Vice President, Chief Financial Officer and Principal Accounting Officer
Date:
May 6, 2013
 


24



EXHIBIT INDEX

 
 
 
Exhibit No.
 
Description
3.1*
 
Articles of Amalgamation of Tesco Corporation, dated December 1, 1993 (incorporated by reference to Exhibit 4.1 to Tesco Corporation's Registration Statement on Form S-8 (File No. 333-139610) filed with the SEC on December 22, 2006)
 
 
 
3.2*
 
Amended and Restated By-laws of Tesco Corporation (incorporated by reference to Exhibit 3.1 to Tesco Corporation's Current Report on Form 8-K filed with the SEC on May 22, 2007)
 
 
 
31.1
 
Rule 13a-14(a)/15d-14(a) Certification, executed by Julio M. Quintana, President and Chief Executive Officer of Tesco Corporation
 
 
 
31.2
 
Rule 13a-14(a)/15d-14(a) Certification, executed by Robert L. Kayl, Senior Vice President and Chief Financial Officer of Tesco Corporation
 
 
 
32
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Julio M. Quintana, President and Chief Executive Officer of Tesco Corporation and Robert L. Kayl, Senior Vice President and Chief Financial Officer of Tesco Corporation
 
 
 
101.INS**
 
XBRL Instance Document
 
 
 
101.SCH**
 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase
 
 
 
101.LAB**
 
XBRL Taxonomy Extension Label Linkbase
 
 
 
101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase


*
Incorporated by reference to the indicated filing
**
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.


25
EX-31.1 2 exh311ceocertq12013.htm CERTIFICATION OF CEO Exh 31.1 CEO Cert (Q1 2013)



Exhibit 31.1
Certification of the Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Julio M. Quintana, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Tesco Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 
 
 
Date: May 6, 2013
/s/ Julio M. Quintana
 
Julio M. Quintana
 
President and Chief Executive Officer




EX-31.2 3 exh312cfocertq12013.htm CERTIFICATION OF CFO Exh 31.2 CFO Cert (Q1 2013)


Exhibit 31.2
Certification of the Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert L. Kayl, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Tesco Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

 
 
Date: May 6, 2013
/s/ Robert L. Kayl
 
Robert L. Kayl
Senior Vice President and Chief Financial Officer




EX-32 4 exh32sec906certq12013.htm 906 CERTIFICATION Exh. 32 Sec 906 Cert (Q1 2013)


EXHIBIT 32
Section 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Tesco Corporation (the “Corporation”), does hereby certify that the Quarterly Report of the Corporation on Form 10-Q for the quarter ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
 
Date: May 6, 2013
/s/ Julio M. Quintana
 
Julio M. Quintana
President and Chief Executive Officer
 
 
Date: May 6, 2013
/s/ Robert L. Kayl
 
Robert L. Kayl
Sr. Vice President and Chief Financial Officer

The foregoing certifications shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Corporation specifically incorporates it by reference.

A signed original of this written statement required by Section 906 has been provided to the Corporation, and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.


    






EX-101.INS 5 teso-20130331.xml XBRL INSTANCE DOCUMENT 0001022705 us-gaap:OtherIncomeMember teso:ReassessmentAppealMexicanTaxCourtMember 2002-05-01 2002-05-31 0001022705 teso:ReassessmentAppealMexicanTaxCourtMember 2002-05-01 2002-05-31 0001022705 teso:ForeignWithholdingTaxClaimMember 2006-01-01 2006-12-31 0001022705 teso:LegalSuitUsDistrictCourtForEasternDistrictOfTexasMarshallDivisionMember 2007-12-01 2007-12-31 0001022705 teso:ReassessmentAppealMexicanTaxCourtMember 2007-01-01 2007-12-31 0001022705 2008-08-01 2008-08-31 0001022705 teso:ExportationClaimMexicanTaxCourtMember 2008-08-01 2008-08-31 0001022705 teso:LegalSuitUsDistrictCourtForSouthernDistrictOfTexasMember 2010-10-25 2010-10-26 0001022705 teso:OtherAccruedLiabilitiesMember teso:ReassessmentAppealMexicanTaxCourtMember 2011-05-01 2011-05-31 0001022705 us-gaap:InterestExpenseMember teso:ReassessmentAppealMexicanTaxCourtMember 2011-05-01 2011-05-31 0001022705 us-gaap:InterestIncomeMember teso:ReassessmentAppealMexicanTaxCourtMember 2011-05-01 2011-05-31 0001022705 us-gaap:OtherIncomeMember teso:ReassessmentAppealMexicanTaxCourtMember 2011-05-01 2011-05-31 0001022705 teso:ReassessmentAppealMexicanTaxCourtMember 2011-05-01 2011-05-31 0001022705 2012-01-01 2012-03-31 0001022705 us-gaap:StockOptionsMember 2012-01-01 2012-03-31 0001022705 teso:CasingDrillingMember 2012-01-01 2012-03-31 0001022705 teso:ResearchEngineeringMember 2012-01-01 2012-03-31 0001022705 teso:TopDriveMember 2012-01-01 2012-03-31 0001022705 teso:TubularServicesMember 2012-01-01 2012-03-31 0001022705 us-gaap:CorporateAndOtherMember 2012-01-01 2012-03-31 0001022705 us-gaap:CommonStockMember 2012-01-01 2012-03-31 0001022705 us-gaap:RetainedEarningsMember 2012-01-01 2012-03-31 0001022705 country:CA 2012-01-01 2012-03-31 0001022705 country:MX 2012-01-01 2012-03-31 0001022705 country:US 2012-01-01 2012-03-31 0001022705 teso:AsiaPacificMember 2012-01-01 2012-03-31 0001022705 teso:EuropeAfricaAndMiddleEastMember 2012-01-01 2012-03-31 0001022705 teso:RussiaMember 2012-01-01 2012-03-31 0001022705 teso:SouthAmericaMember 2012-01-01 2012-03-31 0001022705 2012-04-01 2012-06-30 0001022705 us-gaap:RevolvingCreditFacilityMember 2012-04-26 2012-04-27 0001022705 us-gaap:RevolvingCreditFacilityMember us-gaap:MaximumMember 2012-04-26 2012-04-27 0001022705 us-gaap:RevolvingCreditFacilityMember us-gaap:MinimumMember 2012-04-26 2012-04-27 0001022705 us-gaap:InterestExpenseMember teso:ForeignWithholdingTaxClaimMember 2012-04-01 2012-04-30 0001022705 us-gaap:OtherIncomeMember teso:ForeignWithholdingTaxClaimMember 2012-04-01 2012-04-30 0001022705 teso:ForeignWithholdingTaxClaimMember 2012-04-01 2012-04-30 0001022705 teso:CasingDrillingMember 2012-06-03 2012-06-04 0001022705 2012-01-01 2012-12-31 0001022705 teso:CasingDrillingMember 2012-01-01 2012-12-31 0001022705 2013-01-01 2013-03-31 0001022705 us-gaap:InterestExpenseMember us-gaap:ForeignCountryMember teso:ForeignWithholdingTaxClaimMember 2013-01-01 2013-01-31 0001022705 us-gaap:OtherIncomeMember us-gaap:ForeignCountryMember teso:ForeignWithholdingTaxClaimMember 2013-01-01 2013-01-31 0001022705 us-gaap:ForeignCountryMember teso:ForeignWithholdingTaxClaimMember 2013-01-01 2013-01-31 0001022705 teso:CasingDrillingMember 2012-06-05 2013-03-31 0001022705 us-gaap:StockOptionsMember 2013-01-01 2013-03-31 0001022705 teso:CasingDrillingMember 2013-01-01 2013-03-31 0001022705 teso:CasingDrillingMember 2013-01-01 2013-03-31 0001022705 teso:ResearchEngineeringMember 2013-01-01 2013-03-31 0001022705 teso:TopDriveMember 2013-01-01 2013-03-31 0001022705 teso:TubularServicesMember 2013-01-01 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember 2013-01-01 2013-03-31 0001022705 us-gaap:CommonStockMember 2013-01-01 2013-03-31 0001022705 us-gaap:RetainedEarningsMember 2013-01-01 2013-03-31 0001022705 country:CA 2013-01-01 2013-03-31 0001022705 country:MX 2013-01-01 2013-03-31 0001022705 country:US 2013-01-01 2013-03-31 0001022705 teso:AsiaPacificMember 2013-01-01 2013-03-31 0001022705 teso:EuropeAfricaAndMiddleEastMember 2013-01-01 2013-03-31 0001022705 teso:RussiaMember 2013-01-01 2013-03-31 0001022705 teso:SouthAmericaMember 2013-01-01 2013-03-31 0001022705 2011-12-31 0001022705 teso:PremiereMember 2011-10-16 0001022705 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2011-12-31 0001022705 us-gaap:CommonStockMember 2011-12-31 0001022705 us-gaap:RetainedEarningsMember 2011-12-31 0001022705 2012-03-31 0001022705 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2012-03-31 0001022705 us-gaap:CommonStockMember 2012-03-31 0001022705 us-gaap:RetainedEarningsMember 2012-03-31 0001022705 us-gaap:RevolvingCreditFacilityMember 2012-04-27 0001022705 teso:CasingDrillingMember 2012-06-04 0001022705 2012-12-31 0001022705 us-gaap:CapitalLeaseObligationsMember 2012-12-31 0001022705 teso:DrillingEquipmentMember 2012-12-31 0001022705 teso:LandBuildingsAndLeaseholdsMember 2012-12-31 0001022705 teso:ManufacturingEquipmentMember 2012-12-31 0001022705 teso:OfficeEquipmentAndOtherMember 2012-12-31 0001022705 us-gaap:AssetUnderConstructionMember 2012-12-31 0001022705 teso:TopDriveMember 2012-12-31 0001022705 teso:TopDriveMember country:CA 2012-12-31 0001022705 teso:TopDriveMember country:MX 2012-12-31 0001022705 teso:TopDriveMember country:US 2012-12-31 0001022705 teso:TopDriveMember teso:AsiaPacificMember 2012-12-31 0001022705 teso:TopDriveMember teso:EuropeAfricaAndMiddleEastMember 2012-12-31 0001022705 teso:TopDriveMember teso:RussiaMember 2012-12-31 0001022705 teso:TopDriveMember teso:SouthAmericaMember 2012-12-31 0001022705 teso:TubularServicesMember 2012-12-31 0001022705 teso:TubularServicesMember country:CA 2012-12-31 0001022705 teso:TubularServicesMember country:MX 2012-12-31 0001022705 teso:TubularServicesMember country:US 2012-12-31 0001022705 teso:TubularServicesMember teso:AsiaPacificMember 2012-12-31 0001022705 teso:TubularServicesMember teso:EuropeAfricaAndMiddleEastMember 2012-12-31 0001022705 teso:TubularServicesMember teso:RussiaMember 2012-12-31 0001022705 teso:TubularServicesMember teso:SouthAmericaMember 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember country:CA 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember country:MX 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember country:US 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember teso:AsiaPacificMember 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember teso:EuropeAfricaAndMiddleEastMember 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember teso:RussiaMember 2012-12-31 0001022705 us-gaap:CorporateAndOtherMember teso:SouthAmericaMember 2012-12-31 0001022705 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2012-12-31 0001022705 us-gaap:CommonStockMember 2012-12-31 0001022705 us-gaap:RetainedEarningsMember 2012-12-31 0001022705 country:CA 2012-12-31 0001022705 country:MX 2012-12-31 0001022705 country:US 2012-12-31 0001022705 teso:AsiaPacificMember 2012-12-31 0001022705 teso:EuropeAfricaAndMiddleEastMember 2012-12-31 0001022705 teso:RussiaMember 2012-12-31 0001022705 teso:SouthAmericaMember 2012-12-31 0001022705 2013-03-31 0001022705 2013-04-30 0001022705 teso:AccruedAndOtherCurrentLiabilitiesMember 2013-03-31 0001022705 us-gaap:OtherLiabilitiesMember 2013-03-31 0001022705 teso:PremiereMember us-gaap:CapitalLeaseObligationsMember 2013-03-31 0001022705 teso:CasingDrillingMember 2013-03-31 0001022705 teso:ForeignWithholdingTaxClaimMember 2013-03-31 0001022705 us-gaap:CapitalLeaseObligationsMember 2013-03-31 0001022705 us-gaap:RevolvingCreditFacilityMember 2013-03-31 0001022705 teso:DrillingEquipmentMember 2013-03-31 0001022705 teso:LandBuildingsAndLeaseholdsMember 2013-03-31 0001022705 teso:ManufacturingEquipmentMember 2013-03-31 0001022705 teso:OfficeEquipmentAndOtherMember 2013-03-31 0001022705 us-gaap:AssetUnderConstructionMember 2013-03-31 0001022705 teso:TopDriveMember 2013-03-31 0001022705 teso:TopDriveMember country:CA 2013-03-31 0001022705 teso:TopDriveMember country:MX 2013-03-31 0001022705 teso:TopDriveMember country:US 2013-03-31 0001022705 teso:TopDriveMember teso:AsiaPacificMember 2013-03-31 0001022705 teso:TopDriveMember teso:EuropeAfricaAndMiddleEastMember 2013-03-31 0001022705 teso:TopDriveMember teso:RussiaMember 2013-03-31 0001022705 teso:TopDriveMember teso:SouthAmericaMember 2013-03-31 0001022705 teso:TubularServicesMember 2013-03-31 0001022705 teso:TubularServicesMember country:CA 2013-03-31 0001022705 teso:TubularServicesMember country:MX 2013-03-31 0001022705 teso:TubularServicesMember country:US 2013-03-31 0001022705 teso:TubularServicesMember teso:AsiaPacificMember 2013-03-31 0001022705 teso:TubularServicesMember teso:EuropeAfricaAndMiddleEastMember 2013-03-31 0001022705 teso:TubularServicesMember teso:RussiaMember 2013-03-31 0001022705 teso:TubularServicesMember teso:SouthAmericaMember 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember country:CA 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember country:MX 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember country:US 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember teso:AsiaPacificMember 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember teso:EuropeAfricaAndMiddleEastMember 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember teso:RussiaMember 2013-03-31 0001022705 us-gaap:CorporateAndOtherMember teso:SouthAmericaMember 2013-03-31 0001022705 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2013-03-31 0001022705 us-gaap:CommonStockMember 2013-03-31 0001022705 us-gaap:RetainedEarningsMember 2013-03-31 0001022705 country:CA 2013-03-31 0001022705 country:MX 2013-03-31 0001022705 country:US 2013-03-31 0001022705 teso:AsiaPacificMember 2013-03-31 0001022705 teso:EuropeAfricaAndMiddleEastMember 2013-03-31 0001022705 teso:RussiaMember 2013-03-31 0001022705 teso:SouthAmericaMember 2013-03-31 xbrli:pure teso:patent teso:segment xbrli:shares teso:top_drive iso4217:USD iso4217:USD xbrli:shares 37477000 43603000 130769000 124718000 5405000 6894000 41572000 40884000 193714000 188495000 35501000 35501000 3864000 2878000 46000 76000 654000 1430000 587110000 588927000 329894000 326215000 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Basis of Presentation</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We prepared this Quarterly Report on Form 10-Q pursuant to instructions for quarterly reporting required to be filed with the Securities and Exchange Commission (&#8220;SEC&#8221;).&#160;&#160;Because this is an interim period filing presented using a condensed format, it does not include all information and footnotes normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (&#8220;U.S. GAAP&#8221;). &#160;You should read this report along with our Annual Report on Form 10-K for the year ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;">, which contains a summary of our significant accounting policies and other disclosures.&#160;&#160;The condensed consolidated financial statements as of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> and for the quarters ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">2012</font><font style="font-family:inherit;font-size:10pt;"> are unaudited.&#160;&#160;We derived the unaudited condensed consolidated balance sheet as of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;"> from the audited consolidated balance sheet filed in our </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">2012</font><font style="font-family:inherit;font-size:10pt;"> Annual Report on Form 10-K.&#160;&#160;In our opinion, we have made adjustments, all of which were normal recurring adjustments unless otherwise disclosed herein, that we believe are necessary for a fair statement of the balance sheets, results of operations, and cash flows, as applicable.</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">These unaudited condensed consolidated financial statements include the accounts of all consolidated subsidiaries after the elimination of all significant intercompany accounts and transactions.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></div> 861000 967000 22014000 25176000 17891000 23069000 -5178000 3162000 0 0 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Commitments and Contingencies</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Legal contingencies</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In the normal course of our business, we are subject to legal proceedings brought by or against us and our subsidiaries.&#160;&#160;None of these proceedings involves a claim for damages exceeding </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">ten percent</font><font style="font-family:inherit;font-size:10pt;"> of our current assets on a consolidated basis. The estimates below represent our best estimates based on consultation with internal and external legal counsel.&#160;&#160;There can be no assurance as to the eventual outcome or the amount of loss we may suffer as a result of these proceedings.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;text-decoration:underline;">VARCO Litigation</font><font style="font-family:inherit;font-size:10pt;">: Varco I/P, Inc. (&#8220;Varco&#8221;) filed suit against us in April 2005 in the U.S. District Court for the Western District of Louisiana, alleging that our CDS infringes certain of Varco&#8217;s U.S. patents.&#160;&#160;Varco seeks monetary damages and an injunction against further infringement.&#160;&#160;We filed a countersuit against Varco in June 2005 in the U.S. District Court for the Southern District of Texas, Houston Division seeking invalidation of the Varco patents in question.&#160;&#160;In July 2006, the Louisiana case was transferred to the federal district court in Houston, and as a result, the issues raised by Varco have been consolidated into a single proceeding in which we are the plaintiff.&#160;&#160;We also filed a request with the U.S. Patent and Trademark Office (&#8220;USPTO&#8221;) for reexamination of the patents on which Varco&#8217;s claim of infringement is based.&#160;&#160;The USPTO accepted the Varco patents for reexamination, and the district court stayed the patent litigation pending the outcome of the USPTO reexamination.&#160;&#160;In May 2009, the USPTO issued a final action rejecting all of the Varco patent claims that we had contested.&#160;&#160;Varco has appealed this decision with the USPTO and that reexamination appeal is pending.&#160;The outcome and amount of any future financial impacts from this litigation are indeterminable at this time.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;text-decoration:underline;">Weatherford Litigation</font><font style="font-family:inherit;font-size:10pt;">: Weatherford International, Inc. and Weatherford/Lamb Inc. (together, &#8220;Weatherford&#8221;) filed suit against us in the U.S. District Court for the Eastern District of Texas, Marshall Division in December 2007 (the &#8220;Marshall Suit&#8221;), alleging that various of our technologies infringe </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">11</font><font style="font-family:inherit;font-size:10pt;"> different patents held by Weatherford.&#160;&#160;Weatherford sought monetary damages and an injunction against further infringement.&#160;&#160;Our technologies referred to in the claim included the CDS, the Casing Drilling system and method, a float valve, and the locking mechanism for the controls of the tubular handling system.&#160;&#160;We filed a general denial seeking a judicial determination that we did not infringe the patents in question and/or that the patents are invalid.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In August 2008, we filed suit against several competitors in the U.S. District Court for the Southern District of Texas &#8211; Houston Division, including Weatherford (the &#8220;Houston Suit&#8221;).&#160;&#160;The Houston Suit claims infringement of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">two</font><font style="font-family:inherit;font-size:10pt;"> of our patents related to our CDS.&#160;&#160;On October&#160;26, 2010, we entered into a settlement with Weatherford (the &#8220;Settlement&#8221;) dismissing both the Marshall Suit and the Houston Suit (as it relates to Weatherford) with prejudice.&#160;&#160;Among other provisions, the Settlement contains the following terms:</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><table cellpadding="0" cellspacing="0" style="padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Non-exclusive irrevocable worldwide and royalty free cross licenses with respect to all the patents asserted by Weatherford in the Marshall Case and by us in the Houston Case, as well as certain other U.S. and foreign equivalents and counterparts; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Weatherford has agreed to purchase for </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">five years</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">67%</font><font style="font-family:inherit;font-size:10pt;"> of its worldwide top drive requirements from us, as long as we can meet production requirements, and to designate us as a preferred provider of after-market sales and service for top drives.&#160; The prices we charge Weatherford will be equal to or lower than the prices we charge to any other customer of similar volume of purchases and/or services.</font></div></td></tr></table><div style="line-height:120%;padding-left:4px;text-align:justify;padding-left:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We entered into a Final Settlement and License Agreement (the "Settlement Agreement") with Weatherford on January&#160;11, 2011, effective as of October&#160;26, 2010.&#160;&#160;As an additional condition of the Settlement Agreement, neither we nor Weatherford will pursue any cause of action that might adversely affect the validity or enforceability of each other's patents as listed in the exhibits to the Settlement Agreement, including any causes of action that may arise from the requests for review (&#8220;patent re-examinations&#8221;) we and Weatherford filed with the USPTO. However, the patent re-examinations already initiated continue with only the respective patent owner corresponding with the USPTO. Ongoing re-examination procedures include the patents owned by us and asserted in the Houston Suit. An oral hearing with the Board of Patent Appeals and Interferences (&#8220;BPAI&#8221;) at the USPTO occurred August&#160;1, 2012. On November 27, 2012, the BPAI issued a decision in which all of the claims asserted in the Houston Suit were found to be valid in view of the prior art of record in the re-examination proceedings. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On November&#160;11, 2010, we won a jury verdict against National Oilwell Varco, L.P. ("NOV"), Frank's Casing Crew and Rental Tools, Inc. ("Frank's") and Offshore Energy Services, Inc. ("OES") for infringing our U.S. Patent Nos. 7,140,443 and 7,377,324.&#160;&#160;In that verdict, the jury found that NOV's accused product, the CRT 350, infringes all valid patent claims in the asserted patents, and that NOV contributorily infringed all valid patent claims in the asserted patents.&#160;&#160;The jury also found that Frank's accused products, the (i) SuperTAWG, (ii) FA-1, and (iii) CRT 350, and OES's accused products, the CRT 350, infringe all valid patent claims in the asserted patents.&#160;&#160;Damages were stipulated by the parties and the verdict is subject to entry of judgment and appeal.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On December 6, 2012, the District Court ruled on summary judgment that all of the asserted patent claims were obvious in view of prior art based on pre-trial evidence. This ruling overturns the favorable jury verdict. We filed a Notice of Appeal on December 21, 2012 seeking to reverse the District Court's ruling. At a procedural hearing on April 2, 2013, the District Court informed the parties that it did not intend for the December 6th Order to be final.&#160; The District Court sent a letter to the Court of Appeals for the Federal Circuit on April 12, 2013 to confirm the District Court has jurisdiction &#8220;to proceed to set a schedule on discovery, briefing, and a bench trial on inequitable conduct.&#8221;</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;text-decoration:underline;">Tax Disputes</font><font style="font-family:inherit;font-size:10pt;">: We have been previously advised by the Mexican tax authorities that they believe significant expenses incurred by our Mexican operations from 1996 through 2002 are not deductible for Mexican tax purposes.&#160;&#160;Between 2002 and 2008, formal reassessments disallowing these deductions were issued for each of these years, all of which we appealed to the Mexican court system.&#160;&#160;We have obtained final court rulings deciding all years in dispute in our favor, except for (i) 1996, as discussed below, and (ii) 2001 and 2002, both of which are currently before the Mexican Tax Court.&#160;&#160;The outcomes of such appeals are uncertain.&#160;&#160;We continue to believe that the basis for these reassessments was incorrect, and that the ultimate resolution of those outstanding matters will likely not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In May 2002, we paid a deposit of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.3 million</font><font style="font-family:inherit;font-size:10pt;"> to the Mexican tax authorities in order to appeal the reassessment for 1996.&#160;&#160;In 2007, we requested and received a refund of approximately </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.7 million</font><font style="font-family:inherit;font-size:10pt;"> (the original deposit amount of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.3 million</font><font style="font-family:inherit;font-size:10pt;"> plus </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$0.4 million</font><font style="font-family:inherit;font-size:10pt;"> in interest).&#160;&#160;With the return of the </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.3 million</font><font style="font-family:inherit;font-size:10pt;"> deposit, the Mexican tax authorities issued a resolution indicating that we were owed an additional </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.4 million</font><font style="font-family:inherit;font-size:10pt;"> in interest and inflation adjustments but this amount had been retained by the tax authorities to satisfy a second reassessment for 1996.&#160;&#160;We believed the second reassessment was invalid, and appealed it to the Mexican Tax Court.&#160;&#160;In 2009, the Mexican Tax Court issued a decision accepting our arguments in part, which was subject to further appeal.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In May 2011, we received a refund of approximately </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.8 million</font><font style="font-family:inherit;font-size:10pt;"> (the remaining </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.4 million</font><font style="font-family:inherit;font-size:10pt;"> noted above, plus </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$0.4 million</font><font style="font-family:inherit;font-size:10pt;"> of additional interest and inflation adjustments) and recorded </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$2.4 million</font><font style="font-family:inherit;font-size:10pt;"> in interest income, </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$0.6 million</font><font style="font-family:inherit;font-size:10pt;"> in other income, partially offset by </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$0.4 million</font><font style="font-family:inherit;font-size:10pt;"> of related interest expense.&#160;&#160;The remaining </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.2 million</font><font style="font-family:inherit;font-size:10pt;"> is included in other liabilities pending the ultimate resolution of this issue.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In July 2006, we received a claim for withholding tax, penalties and interest related to payments over the periods from 2000 to 2004 in a foreign jurisdiction.&#160;&#160;We disagreed with this claim and litigated this matter.&#160;&#160;During 2006, we accrued an estimated pre-tax exposure of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.8 million</font><font style="font-family:inherit;font-size:10pt;"> and continued to accrue interest for this matter. In April 2012, we received final determination for the 2000 and 2002 tax years and have reversed </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.9 million</font><font style="font-family:inherit;font-size:10pt;"> of the accrual (</font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.3 million</font><font style="font-family:inherit;font-size:10pt;"> to other income and a </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$0.6 million</font><font style="font-family:inherit;font-size:10pt;"> reduction of interest expense). In January 2013, we received final determination for the portion of the claim related to this accrual and have reversed </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$2.8 million</font><font style="font-family:inherit;font-size:10pt;"> of the accrual (</font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.8 million</font><font style="font-family:inherit;font-size:10pt;"> to other income and a </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.0 million</font><font style="font-family:inherit;font-size:10pt;"> reduction of interest expense). At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, we have </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">no</font><font style="font-family:inherit;font-size:10pt;"> accrual remaining for this claim.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In August 2008, we received a claim in Mexico for </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.1 million</font><font style="font-family:inherit;font-size:10pt;"> in fines and penalties related to the exportation of certain temporarily imported equipment that remained in Mexico beyond the authorized time limit for its return.&#160;&#160;We disagree with this claim and are currently litigating the matter.&#160;&#160;In December 2009, we received a decision from the Mexican Tax Court in our favor, which is subject to further appeal.&#160;&#160;The outcome of this litigation is uncertain. No accrual has been recorded for this claim.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Other Contingencies</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We are contingently liable under letters of credit and similar instruments that we enter into in connection with the importation of equipment to foreign countries and to secure our performance on certain contracts.&#160;&#160;At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;">, our total exposure under outstanding letters of credit was </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$8.1 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$8.7 million</font><font style="font-family:inherit;font-size:10pt;">, respectively.</font></div></div> 0 0 38949000 38928000 38745000 38569000 38569000 38949000 38928000 38596000 213460000 215187000 102071000 119795000 10265000 9396000 38188000 52310000 67485000 63883000 4101000 3384000 120300000 -314000 2659000 10882000 10650000 4367000 4343000 8487000 8034000 10780000 10029000 10780000 20000 946000 1083000 5818000 2913000 2807000 6109000 0 24000 1089000 0 1484000 1500000 13800000 12300000 13837000 8316000 10839000 11999000 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Sale of Casing Drilling</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">June&#160;4, 2012</font><font style="font-family:inherit;font-size:10pt;">, the Company completed the sale of substantially all of the assets of the Casing Drilling segment to Schlumberger Oilfield Holdings Ltd. and Schlumberger Technology Corporation (together, the "Schlumberger Group") for a total cash consideration of approximately </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$46.6 million</font><font style="font-family:inherit;font-size:10pt;">, including a working capital purchase price adjustment. During the three months ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, the Company recognized a pre-tax gain of approximately </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.5 million</font><font style="font-family:inherit;font-size:10pt;"> primarily from the working capital purchase price adjustment, in addition to the </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$12.3 million</font><font style="font-family:inherit;font-size:10pt;"> pre-tax gain recognized in 2012, which increased the total pre-tax gain from the sale to </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$13.8 million</font><font style="font-family:inherit;font-size:10pt;">, net of transaction costs. The table below sets forth the details contributing to the gain on sale (in thousands):</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:center;font-size:10pt;"><div style="padding-left:0px;text-indent:0px;line-height:normal;padding-top:10px;"><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman;font-size:10pt;margin-left:auto;margin-right:auto;width:100%;border-collapse:collapse;text-align:left;"><tr><td colspan="4" rowspan="1"></td></tr><tr><td width="87%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="11%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Total cash consideration</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">46,624</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Fixed assets, net</font></div></td><td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(11,999</font></div></td><td style="vertical-align:bottom;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Inventories, net</font></div></td><td colspan="2" style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(10,839</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Accounts receivable, net</font></div></td><td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(8,316</font></div></td><td style="vertical-align:bottom;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Transaction costs</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(1,633</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Gain on sale of Casing Drilling</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">13,837</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr></table></div><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, the Company had a remaining balance of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$3.9 million</font><font style="font-family:inherit;font-size:10pt;"> related to the sale, which will be released from an escrow account when certain terms and conditions are satisfied by the Company.</font></div></div> 0.23 0.37 0.22 0.37 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Earnings per Share</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Weighted average shares</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The following table reconciles basic and diluted weighted average shares (in thousands):</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><div style="padding-left:0px;text-indent:0px;line-height:normal;padding-top:10px;"><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman;font-size:10pt;width:100%;border-collapse:collapse;text-align:left;"><tr><td colspan="6" rowspan="1"></td></tr><tr><td width="77%" rowspan="1" colspan="1"></td><td width="10%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="10%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="5" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Three Months Ended March 31,</font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">2013</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">2012</font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Basic weighted average number of shares outstanding&#160;</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">38,932</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">38,583</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Dilutive effect of stock-based compensation</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">498</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">483</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Diluted weighted average number of shares outstanding</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">39,430</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">39,066</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Anti-dilutive options excluded from calculation due to exercise prices</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">1,430</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">654</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr></table></div><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></div> 0.30 0.30 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Fair Value of Financial Instruments</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, the carrying amount of cash and cash equivalents, accounts receivable trade, restricted cash, non-trade receivables, accounts payable, and accrued liabilities approximated their fair value due to their short maturities. At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, the carrying amount of our long term debt approximated its fair value. &#160;The fair value of our long term debt is determined using observable inputs and is based on current market interest rates for debt issued with similar maturities by companies with risk profiles similar to ours (Level 2).</font></div></div> -429000 -280000 3071000 5310000 32732000 32732000 20462000 12623000 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Income Taxes</font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Tesco Corporation is an Alberta, Canada corporation.&#160;&#160;We conduct business and are taxed on profits earned in a number of jurisdictions around the world.&#160;&#160;Income taxes have been recorded based on the laws and rates in effect in the countries in which operations are conducted or in which we are considered a resident for income tax purposes.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our income tax provision for the </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">three</font><font style="font-family:inherit;font-size:10pt;"> months ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">2012</font><font style="font-family:inherit;font-size:10pt;"> was as follows (in thousands):</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><div style="padding-left:0px;text-indent:0px;line-height:normal;padding-top:10px;"><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman;font-size:10pt;width:100%;border-collapse:collapse;text-align:left;"><tr><td colspan="8" rowspan="1"></td></tr><tr><td width="79%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="8%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="8%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="7" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Three Months Ended March 31,</font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="3" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">2013</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="3" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">2012</font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Current tax provision</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">4,101</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">3,384</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Deferred tax provision</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(314</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">2,659</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Income tax provision</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">3,787</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">6,043</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr></table></div><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our effective tax rate, which is income tax expense as a percentage of pre-tax earnings, was </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">30%</font><font style="font-family:inherit;font-size:10pt;"> for the </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">three</font><font style="font-family:inherit;font-size:10pt;"> months ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> and the same period in </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">2012</font><font style="font-family:inherit;font-size:10pt;">.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;">, we had an accrual for uncertain tax positions of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$2.2 million</font><font style="font-family:inherit;font-size:10pt;">.&#160;&#160;There was </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">no</font><font style="font-family:inherit;font-size:10pt;"> change to this accrual during the first quarter of 2013, leaving a balance of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$2.2 million</font><font style="font-family:inherit;font-size:10pt;"> at </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">. The accrual for uncertain tax positions is included in accrued and other current liabilities or other liabilities in our consolidated balance sheet based on whether we anticipate the uncertainties to be resolved within the next 12 months. At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.0 million</font><font style="font-family:inherit;font-size:10pt;"> is included in accrued and other current liabilities, and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.2 million</font><font style="font-family:inherit;font-size:10pt;"> is included in other liabilities. &#160;The resolution of these uncertainties should not have a material impact on our effective tax rate.</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Certain state and foreign tax filings remain open to examination.&#160;&#160;We believe&#160;that any&#160;assessment on these filings will not have a material impact on our financial position, results of operations, or cash flows.&#160;&#160;We believe that appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.&#160;&#160;However, audit outcomes and the timing of audit settlements are subject to significant uncertainty.&#160;&#160;Therefore, additional provisions on tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.</font></div></div> 0 6043000 3787000 7567000 3620000 5621000 4228000 -9167000 -6453000 9225000 -4992000 -266000 -2882000 1676000 16017000 1067000 -260000 -2722000 3186000 498000 483000 -470000 -358000 88000 121000 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Inventories</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;">, inventories, net of reserves for excess and obsolete inventories of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.3 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$1.3 million</font><font style="font-family:inherit;font-size:10pt;">, respectively, by major classification were as follows (in thousands):</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><div style="padding-left:0px;text-indent:0px;line-height:normal;padding-top:10px;"><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman;font-size:10pt;width:100%;border-collapse:collapse;text-align:left;"><tr><td colspan="8" rowspan="1"></td></tr><tr><td width="71%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="12%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="12%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="3" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">March&#160;31, <br clear="none"/>2013</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="3" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">December&#160;31, <br clear="none"/>2012</font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Raw materials</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">64,176</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">68,347</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Work in progress</font></div></td><td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">10,543</font></div></td><td style="vertical-align:bottom;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">4,029</font></div></td><td style="vertical-align:bottom;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Finished goods</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">51,353</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">52,130</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-top:2px;padding-bottom:2px;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">126,072</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;border-top:2px solid #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">124,506</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr></table></div></div></div> 51353000 52130000 126072000 124506000 64176000 68347000 1300000 1300000 4029000 10543000 23000 31000 4700000 108856000 117602000 588927000 587110000 98317000 106557000 1000000 1200000 2200000 2200000 0 125000000 0.005 0.00375 200000 261000 203000 103000 142000 119000 100000 <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Long term debt</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Long term debt consists of the following (in thousands):</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;font-size:10pt;"><div style="padding-left:0px;text-indent:0px;line-height:normal;padding-top:10px;"><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman;font-size:10pt;width:100%;border-collapse:collapse;text-align:left;"><tr><td colspan="8" rowspan="1"></td></tr><tr><td width="73%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="11%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td><td width="11%" rowspan="1" colspan="1"></td><td width="1%" rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="3" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">March&#160;31, 2013</font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="3" style="vertical-align:bottom;border-bottom:2px solid #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1"><div style="text-align:center;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">December&#160;31, 2012</font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Capital leases</font></div></td><td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">203</font></div></td><td style="vertical-align:bottom;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">261</font></div></td><td style="vertical-align:bottom;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr><tr><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Current portion of long term debt</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(100</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td><td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td colspan="2" style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">(119</font></div></td><td style="vertical-align:bottom;border-bottom:2px solid #000000;background-color:#cceeff;padding-right:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">)</font></div></td></tr><tr><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Non-current portion of long term debt</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">103</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td><td style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;" rowspan="1" colspan="1"><div style="overflow:hidden;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-left:2px;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">$</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;padding-top:2px;padding-bottom:2px;" rowspan="1" colspan="1"><div style="text-align:right;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">142</font></div></td><td style="vertical-align:bottom;border-bottom:3px double #000000;" rowspan="1" colspan="1"><div style="text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></td></tr></table></div><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">As part of our acquisition of Premiere Casing Services - Egypt S.A.E ("Premiere") in 2011, we assumed </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$7.4 million</font><font style="font-family:inherit;font-size:10pt;"> of outstanding debt at the acquisition date of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">October&#160;16, 2011</font><font style="font-family:inherit;font-size:10pt;">. During </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">2012</font><font style="font-family:inherit;font-size:10pt;">, we paid off a significant amount of the outstanding balances related to Premiere's capital leases and all of the balances related to the notes payable. At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;"> the outstanding balance of Premiere's capital leases was </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$0.2 million</font><font style="font-family:inherit;font-size:10pt;">.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, we had a credit agreement which was entered into on </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">April&#160;27, 2012</font><font style="font-family:inherit;font-size:10pt;">, to provide a revolving line of credit of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$125 million</font><font style="font-family:inherit;font-size:10pt;">, including up to </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$20 million</font><font style="font-family:inherit;font-size:10pt;"> of swing line loans (collectively, the &#8220;Revolver&#8221;). The credit facility has a term of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">five years</font><font style="font-family:inherit;font-size:10pt;"> and all outstanding borrowings on the Revolver are due and payable on </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">April&#160;27, 2017</font><font style="font-family:inherit;font-size:10pt;">.&#160;&#160;The credit facility bears interest at a margin above LIBOR, federal funds rate, or the prime rate for U.S. dollar loans as determined by JPMorgan Chase Bank, N.A. in New York.&#160;&#160;We are required to pay a commitment fee on available, but unused, amounts of the credit facility of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">0.375</font><font style="font-family:inherit;font-size:10pt;">-</font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">0.500 percent</font><font style="font-family:inherit;font-size:10pt;"> per annum and a letter of credit fee of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">1.00</font><font style="font-family:inherit;font-size:10pt;">-</font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">2.00 percent</font><font style="font-family:inherit;font-size:10pt;"> per annum on outstanding face amounts of letters of credit issued under the credit facility. Amounts available under the Revolver are reduced by letters of credit issued under our credit facility, not to exceed </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$50 million</font><font style="font-family:inherit;font-size:10pt;"> in the aggregate.&#160;&#160;Amounts available under the swing line loans may also be reduced by letters of credit or by means of a credit to a general deposit account of the applicable borrower.&#160;&#160;The availability of future borrowings may also be limited in order to maintain certain financial ratios required under the covenants.&#160; The credit facility contains covenants that we consider usual and customary for an agreement of this type, including a leverage ratio, a minimum net worth, and limitations on allowable amounts for the disposal of obsolete assets and annual capital expenditures, and a fixed charge coverage ratio.&#160;&#160;The credit facility prohibits incurring any additional indebtedness outside the existing credit facility in excess of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$50 million</font><font style="font-family:inherit;font-size:10pt;">, paying cash dividends to shareholders, and contains other restrictions, which are standard to the industry.&#160; All of our direct and indirect material subsidiaries in the United States, Canada, Argentina, Mexico, and Indonesia as well as one of our Cyprus subsidiaries are guarantors of any borrowings under the credit facility.&#160;&#160;</font></div><div style="line-height:120%;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Under the Revolver at </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">, we had </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">no</font><font style="font-family:inherit;font-size:10pt;"> outstanding borrowings, </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$4.7 million</font><font style="font-family:inherit;font-size:10pt;"> in letters of credit outstanding and </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$120.3 million</font><font style="font-family:inherit;font-size:10pt;"> in available borrowing capacity. We were in compliance with our bank covenants at </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">March&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">.</font></div></div> 0 3800000 19798000 63000 -4905000 -16973000 8004000 -8003