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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q (Mark One)[X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period ended March 31, 2004 [  ]
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from ___________ to ___________ Commission file number: 000-19580 T-3 ENERGY SERVICES, INC.  Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
    
    76-0697390
(IRS Employer
Identification No.)
 13111 Northwest Freeway, Suite 500, Houston, Texas
(Address of Principal Executive Offices)
    
    77040
(Zip Code)
 (Registrants telephone number, including area code): (713) 996-4110 Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [  ] No[X] At May 12, 2004, the registrant had 10,581,986 shares of common stock
outstanding. 1




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TABLE OF CONTENTS FORM 10-Q Item
    
    
    
    PagePART I1. Financial StatementsConsolidated Balance Sheets as of March 31, 2004 and December 31, 2003
    
    
    1Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003
    
    
    2Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003
    
    
    3Notes to Consolidated Financial Statements
    
    
    42. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    83. Quantitative and Qualitative Disclosures about Market Risks
    
    
    174. Controls and Procedures
    
    
    17PART II1. Legal Proceedings
    
    
    182. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    183. Defaults Upon Senior Securities
    
    
    184. Submission of Matters to a Vote of Security Holders
    
    
    185. Other Information
    
    
    186. Exhibits and Reports on Form 8-K
    
    
    18Certification of CEO pursuant to Rule 13a-14aCertification of CFO pursuant to Rule 13a-14aCertification pursuant to Section 906Certification pursuant to Section 906
  i




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T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
(in thousands except for share amounts)
 March 31,
    
    December 31,2004
    
    2003(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    154
    
    
    $
    19Restricted cash
    
    
    201
    
    
    
    102Accounts receivable  trade, net
    
    
    17,363
    
    
    
    20,098Inventories
    
    
    15,513
    
    
    
    14,155Notes receivable, current portion
    
    
    1,404
    
    
    
    1,462Deferred income taxes
    
    
    3,297
    
    
    
    2,613Current assets of discontinued operations
    
    
    
    
    
    
    8,202Prepaids and other current assets
    
    
    4,085
    
    
    
    4,159Total current assets
    
    
    42,017
    
    
    
    50,810Property and equipment, net
    
    
    22,223
    
    
    
    22,950Notes receivable, less current portion
    
    
    360
    
    
    
    370Goodwill, net
    
    
    68,713
    
    
    
    68,726Other intangible assets, net
    
    
    1,775
    
    
    
    2,228Other assets
    
    
    447
    
    
    
    453Total assets
    
    $
    135,535
    
    
    $
    145,537LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable  trade
    
    $
    9,040
    
    
    $
    8,186Accrued expenses and other
    
    
    5,895
    
    
    
    6,615Current liabilities of discontinued operations
    
    
    
    
    
    
    1,047Current maturities of long-term debt
    
    
    1,240
    
    
    
    10,093Total current liabilities
    
    
    16,175
    
    
    
    25,941Long-term debt, less current maturities
    
    
    12,069
    
    
    
    14,263Other long-term liabilities
    
    
    166
    
    
    
    177Deferred income taxes
    
    
    4,293
    
    
    
    2,790Commitments and contingenciesStockholders equity:Preferred stock, $.001 par value, 25,000,000 shares
authorized, no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 50,000,000 shares authorized,
10,581,986 shares issued and outstanding at March 31, 2004
and December 31, 2003
    
    
    11
    
    
    
    11Warrants, 517,862 issued and outstanding at
March 31, 2004 and December 31, 2003
    
    
    853
    
    
    
    853Additional paid-in capital
    
    
    122,956
    
    
    
    122,954Retained deficit
    
    
    (20,988
    )
    
    
    (21,452
    )Total stockholders equity
    
    
    102,832
    
    
    
    102,366Total liabilities and stockholders equity
    
    $
    135,535
    
    
    $
    145,537
 The accompanying notes are an integral part of these consolidated financial statements. 1




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T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands except per share amounts)
 Three Months EndedMarch 31,2004
    
    2003Revenues:Products
    
    $
    19,502
    
    
    $
    20,837Services
    
    
    6,702
    
    
    
    9,29426,204
    
    
    
    30,131Cost of revenues:Products
    
    
    14,260
    
    
    
    15,042Services
    
    
    4,242
    
    
    
    6,54318,502
    
    
    
    21,585Gross profit
    
    
    7,702
    
    
    
    8,546Operating expenses
    
    
    6,187
    
    
    
    6,534Income from operations
    
    
    1,515
    
    
    
    2,012Interest expense
    
    
    778
    
    
    
    774Interest income
    
    
    14
    
    
    
    56Write-down of acquired note receivable
    
    
    
    
    
    
    1,703Other (income) expense, net
    
    
    40
    
    
    
    (11
    )Income (loss) from continuing operations before provision (benefit)
for income taxes
    
    
    711
    
    
    
    (398
    )Provision (benefit) for income taxes
    
    
    277
    
    
    
    (70
    )Income (loss) from continuing operations
    
    
    434
    
    
    
    (328
    )Income from discontinued operations, net of tax
    
    
    29
    
    
    
    8Net income (loss)
    
    $
    463
    
    
    $
    (320
    )Basic earnings (loss) per common share:Continuing operations
    
    $
    .04
    
    
    $
    (.03
    )Discontinued operations
    
    $
    
    
    
    $
    Net income (loss) per common share
    
    $
    .04
    
    
    $
    (.03
    )Diluted earnings (loss) per common share:Continuing operations
    
    $
    .04
    
    
    $
    (.03
    )Discontinued operations
    
    $
    
    
    
    $
    Net income (loss) per common share
    
    $
    .04
    
    
    $
    (.03
    )Weighted average common shares outstanding:Basic
    
    
    10,582
    
    
    
    10,582Diluted
    
    
    10,592
    
    
    
    10,582
 The accompanying notes are an integral part of these consolidated financial statements. 2




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T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Three Months EndedMarch 31,2004
    
    2003Cash flows from operating activities:Net income (loss)
    
    $
    463
    
    
    $
    (320
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Income from discontinued operations, net of tax.
    
    
    (29
    )
    
    
    (8
    )Bad debt expense
    
    
    134
    
    
    
    80Depreciation and amortization
    
    
    796
    
    
    
    898Amortization of deferred loan costs
    
    
    413
    
    
    
    222Write-down of acquired note receivable
    
    
    
    
    
    
    1,703Deferred taxes
    
    
    819
    
    
    
    (541
    )Amortization of stock compensation
    
    
    2
    
    
    
    5Changes in assets and liabilities:Accounts receivable  trade
    
    
    2,601
    
    
    
    709Inventories, net
    
    
    (1,358
    )
    
    
    7Prepaids and other current assets
    
    
    87
    
    
    
    878Notes receivable
    
    
    68
    
    
    
    54Other assets
    
    
    6
    
    
    
    89Accounts payable  trade
    
    
    854
    
    
    
    (3,346
    )Accrued expenses and other
    
    
    (729
    )
    
    
    98Net cash provided by operating activities
    
    
    4,127
    
    
    
    528Cash flows from investing activities:Purchases of property and equipment
    
    
    (234
    )
    
    
    (430
    )Proceeds from sales of property and equipment
    
    
    204
    
    
    
    24Net cash used in investing activities
    
    
    (30
    )
    
    
    (406
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    1,199
    
    
    
    859Payments on long-term debt
    
    
    (12,246
    )
    
    
    (868
    )Debt financing costs
    
    
    
    
    
    
    (112
    )Net cash used in financing activities
    
    
    (11,047
    )
    
    
    (121
    )Net cash provided by (used in) discontinued operations
    
    
    7,184
    
    
    
    (578
    )Net increase in restricted cash
    
    
    (99
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    135
    
    
    
    (577
    )Cash and cash equivalents, beginning of year
    
    
    19
    
    
    
    857Cash and cash equivalents, end of period
    
    $
    154
    
    
    $
    280
 The accompanying notes are an integral part of these consolidated financial statements. 3




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T-3 ENERGY SERVICES, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for fair presentation have
been included. These financial statements include the accounts of T-3 Energy
Services, Inc., and subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Operating results for the
three months ended March 31, 2004, are not necessarily indicative of the
results that may be expected for the year ended December 31, 2004. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2003. Certain reclassifications were made to previously reported
amounts in the consolidated financial statements and notes to make them
consistent with the current presentation format. Stock-Based Compensation At March 31, 2004, the Company had a stock option plan, which is described
more fully in the Companys 2003 Annual Report on Form 10-K. The Company
accounts for that plan under the recognition and measurement principles of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under
those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect
on net income and earnings per common share if the Company had applied the fair
value recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation to stock-based employee plans (dollars in thousands, except per
share data): Three Months EndedMarch 31,2004
    
    2003Net income (loss), as reported
    
    $
    463
    
    
    $
    (320
    )Total stock-based employee compensation
expense determined under fair value
method for all awards, net of related tax
effects
    
    
    (70
    )
    
    
    (80
    )Net income (loss), as adjusted
    
    
    393
    
    
    $
    (400
    )Basic EPS:As reported
    
    $
    0.04
    
    
    $
    (0.03
    )As adjusted
    
    $
    0.04
    
    
    $
    (0.04
    )Diluted EPS:As reported
    
    $
    0.04
    
    
    $
    (0.03
    )As adjusted
    
    $
    0.04
    
    
    $
    (0.04
    )
 For the purpose of estimating the fair value disclosures above, the fair
value of each stock option has been estimated on the grant date with a
Black-Scholes option pricing model. The following assumptions for 2004 and
2003 were computed on a weighted average basis: risk-free interest rate of
4.12% and 3.76%, respectively, expected volatility of 42.44% and 43.60%,
respectively, expected life of 4 years for each period and no expected
dividends. The effects of applying SFAS No. 123 may not be indicative of
future amounts since additional future awards are anticipated and the
estimation of values involves subjective assumptions that may vary materially
as a result of actual events. 4




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Write-down of Acquired Note Receivable Prior to the merger of the Company and Industrial Holdings, Inc. (IHI),
IHI sold a subsidiary, Beaird Industries Inc. (Beaird), to an entity
controlled by Don Carlin and Robert Cone, and IHI received a $3.5 million
promissory note from the former subsidiary as the purchase price. Mr. Carlin
is a former director, and Mr. Cone is a former executive officer and director
of the Company. During the first quarter of 2003, the Company was informed by
Beaird of its inability to make timely interest payments and that efforts to
restructure its debt obligations had to date been unsuccessful. Accordingly,
the Company wrote-down approximately 50% of the note, because management
believed that the notes net realizable value was approximately $1.7 million.
In the fourth quarter of 2003, the Company learned that efforts to refinance
Beaird had failed, and management determined that the note was uncollectible
and wrote-off the remaining balance of the note. The first quarter of 2003
write-down amount appears in the 2003 Statement of Operations under the caption
Write-down of acquired note receivable. 2. BUSINESS DISPOSITIONS: During the fourth quarter of 2003, the Company committed to a formal plan
to sell certain non-core assets within its Products segment. The sale of these
assets was consummated in February 2004. The Company received $7.4 million in
cash at closing that was immediately used to pay down its term loan under its
senior credit facility. The assets sold comprised substantially all of the
assets of LSS  Lone Star  Houston Inc., Bolt Manufacturing Co., Inc. (d/b/a
Walker Bolt Manufacturing Company) and WHIR Acquisition, Inc. (d/b/a Ameritech
Manufacturing) (collectively, the Businesses). The Businesses primarily
manufacture and distribute a broad line of standard and metric fasteners, in
addition to manufacturing specialty fasteners and parts in small quantities for
the commercial and aerospace industries, as well as the military. At December
31, 2003, these assets constituted a business and thus were held for sale.
Accordingly, the Businesses results of operations for 2004 and 2003 have been
reported as discontinued operations. See Note 2 to the Companys consolidated
financials statements included in the Companys Annual Report on Form 10-K for
the year ended December 31, 2003 for additional information. Net revenues from discontinued operations for the three months ended March
31, 2004 and 2003 were $3.4 million and $5.7 million, respectively. For the
same periods, income before provision for income taxes was $0.05 million and
$0.01 million, respectively. 3. INVENTORIES Inventories consist of the following (dollars in thousands): March 31,
    
    December 31,2004
    
    2003Raw materials
    
    $
    3,150
    
    
    $
    2,967Work in process
    
    
    2,817
    
    
    
    2,325Finished goods and component parts
    
    
    9,546
    
    
    
    8,863$
    15,513
    
    
    $
    14,155
 4. NEWLY ISSUED ACCOUNTING STANDARDS In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN
46). FIN 46 requires unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse the risks and rewards of ownership among their owners and other
parties involved. The provisions of FIN 46 are applicable immediately to all
variable interest entities created after January 31, 2003 and require certain
disclosures for all variable interest entities. In December 2003, the FASB
published a revision to FIN 46 (FIN 46R) to clarify some of the provisions of
the interpretation and to defer the effective date of implementation for
certain entities created before January 31, 2003. Under the guidance of FIN
46R, entities that do not have interests in structures 5




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that are commonly referred to as special purpose entities (SPEs) are required
to apply the provisions of the interpretation in financial statements for
periods ending after March 14, 2004. The adoption of the provisions applicable
to SPEs and all other variable interests obtained after January 31, 2003 did
not have an impact on the Companys consolidated financial statements. As of
March 31, 2004, the Company had no variable interest entities and there was no
effect on its consolidated balance sheet, statement of operations, and cash
flows. 5. EARNINGS (LOSS) PER SHARE Basic net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per common share is the same as
basic but includes dilutive stock options and warrants using the treasury stock
method. The following table reconciles the numerators and denominators of the
basic and diluted per common share computations for net income (loss) for the
three months ended March 31, 2004 and 2003, as follows (in thousands except per
share data): Three Months EndedMarch 31,2004
    
    2003Numerator:Income (loss) from continuing operations
    
    $
    434
    
    
    $
    (328
    )Income from discontinued operations
    
    
    29
    
    
    
    8Net income (loss)
    
    $
    463
    
    
    $
    (320
    )Denominator:Weighted average common shares outstanding  basic
    
    
    10,582
    
    
    
    10,582Shares for dilutive stock options
    
    
    10
    
    
    
    Weighted average common shares outstanding and
Assumed conversions  diluted
    
    
    10,592
    
    
    
    10,582Basic earnings (loss) per common share:Continuing operations
    
    $
    0.04
    
    
    $
    (0.03
    )Discontinued operations
    
    
    
    
    
    
    Net income (loss) per common share
    
    $
    0.04
    
    
    $
    (0.03
    )Diluted earnings (loss) per common share:Continuing operations
    
    $
    0.04
    
    
    $
    (0.03
    )Discontinued operations
    
    
    
    
    
    
    Net income (loss) per common share
    
    $
    0.04
    
    
    $
    (0.03
    )
 For the three months ended March 31, 2004, there were 584,379 options and
517,862 warrants that were not included in the computation of diluted earnings
per share because their inclusion would have been anti-dilutive. For the three
months ended March 31, 2003, there were 620,213 options and 517,862 warrants
that were not included in the computation of diluted earnings per share because
their inclusion would have been anti-dilutive. The Companys Class B, C and D
warrants totaling 2,971,217 warrants expired on January 14, 2003. 6. REPORTABLE SEGMENTS: The Companys determination of reportable segments considers the strategic
operating units under which the Company sells various types of products and
services to various customers. The accounting policies of the segments are the same as those of the
Company. The Company evaluates performance based on income from operations
excluding certain corporate costs not allocated to the segments. Inter-segment
revenues are not material. Substantially all revenues are from domestic
sources and all assets are held in the United States. Segment information for
the three months ended March 31, 2004 and 2003 is as follows: 6




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(dollars in thousands)PressureControl
    
    Products
    
    Distribution
    
    Corporate
    
    ConsolidatedThree months ended March 31:2004Revenues
    
    $
    15,916
    
    
    $
    2,254
    
    
    $
    8,034
    
    
    $
    
    
    
    $
    26,204Depreciation and amortization
    
    
    452
    
    
    
    94
    
    
    
    69
    
    
    
    181
    
    
    
    796Income (loss) from operations
    
    
    2,635
    
    
    
    45
    
    
    
    142
    
    
    
    (1,307
    )
    
    
    1,515Capital expenditures
    
    
    111
    
    
    
    18
    
    
    
    8
    
    
    
    97
    
    
    
    2342003Revenues
    
    $
    17,105
    
    
    $
    3,260
    
    
    $
    9,766
    
    
    $
    
    
    
    $
    30,131Depreciation and amortization
    
    
    546
    
    
    
    98
    
    
    
    86
    
    
    
    168
    
    
    
    898Income (loss) from operations
    
    
    2,799
    
    
    
    110
    
    
    
    531
    
    
    
    (1,428
    )
    
    
    2,012Capital expenditures
    
    
    133
    
    
    
    37
    
    
    
    74
    
    
    
    186
    
    
    
    430
 7




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion of our historical results of operations and
financial condition for the three months ended March 31, 2004 and 2003 should
be read in conjunction with the consolidated financial statements and related
notes included elsewhere in this Form 10-Q and our financial statements and
related managements discussion and analysis of financial condition and results
of operations for the year ended December 31, 2003 included in our Annual
Report on Form 10-K. We operate in three segments. Our Pressure Control segment manufactures,
remanufactures and repairs high pressure, severe service products, including
valves, chokes, actuators, blowout preventers, manifolds and wellhead
equipment. Our Products segment remanufactures and repairs pumps, electric
motors and generators, fabricates equipment and components for use in the
exploration and production of oil and gas, provides specialty machining for the
repair and remanufacture of natural gas and diesel engines, and applies
specialty machining and custom coatings to customers products used primarily
in the oil and gas industry. Our Distribution segment engages in the specialty
distribution of pipes, valves, stud bolts, gaskets and other ancillary
products. Our products and services are sold primarily to customers in the
upstream and downstream oil and gas industry located in the Texas and Louisiana
Gulf Coast region. The following table sets forth certain statistics that are reflective of
recent historical market conditions: WTI
    
    Henry Hub
    
    United States
    
    Gulf of MexicoQuarter Ended:
    
    Oil (1)
    
    Gas (2)
    
    Rig Count (3)
    
    Rig Count (4)December 31, 2002
    
    $
    27.83
    
    
    $
    4.33
    
    
    
    847
    
    
    
    108March 31, 2003
    
    $
    34.10
    
    
    $
    5.91
    
    
    
    901
    
    
    
    104June 30, 2003
    
    $
    28.98
    
    
    $
    5.74
    
    
    
    1,028
    
    
    
    104September 30, 2003
    
    $
    30.21
    
    
    $
    4.89
    
    
    
    1,088
    
    
    
    105December 31, 2003
    
    $
    31.18
    
    
    $
    5.45
    
    
    
    1,109
    
    
    
    102March 31, 2004
    
    $
    34.77
    
    
    $
    5.72
    
    
    
    1,121
    
    
    
    95
   (1)
    
    Source: Average price per barrel for the quarter calculated by us using
daily data published by the United States Department of Energy on its website,
www.eia.doe.gov.(2)
    
    Source: Average price per MM/BTU for the quarter calculated by us using
daily data published on www.oilnergy.com.(3)
    
    Source: Average United States Rig Count for the quarter calculated by us
using weekly data published by Baker Hughes Incorporated.(4)
    
    Source: Average Gulf of Mexico Rig Count for the quarter calculated by us
using weekly data published by Baker Hughes Incorporated.   8




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The level of revenue improvement for us in the future will continue to be
heavily dependent upon the timing and strength of the recovery in the Gulf of
Mexico market and our gains in market share outside the Gulf of Mexico. The
extent of any recovery in these markets is not predictable. As illustrated in
the table above, the market price of oil and gas alone is not an indicator of a
recovery in these markets. Many external factors, including world economic and
political conditions, quotas established by OPEC (Organization of Petroleum
Exporting Countries) and weather conditions, will influence the recovery and
continued strength of the industry. Based on our assessment of external
factors and our current levels of inquiry and quotation, we believe that
continuing price and general uncertainty in the Gulf of Mexico market will
cause near-term activity levels to remain flat for the first half of 2004. We expect that we will be able to maintain our market share in the Gulf of
Mexico and high-pressure gas markets. Because of the volatility of those
markets, key aspects of our strategy to build stockholder value include
expanding into international markets through agency agreements or acquisitions;
acquiring products and services that complement our existing products and
services in the manufacturing and aftermarket service arenas; emphasizing
inter-company coordination through bundled products and services, combined
sales efforts and inter-company purchases; and completing strategic add-on
acquisitions. By diversifying our revenue base to lessen our dependence on the
Gulf of Mexico market, and expanding our products and services offered to both
the domestic and international onshore drilling and production markets, we will
seek to enhance our revenues and profitability. We have recently increased our
Pressure Control segments engineering and technical sales staff to improve our
ability to service our customers and plan to introduce new high quality
pressure equipment in both the domestic and international onshore and offshore
oil and gas markets in the second half of 2004. We will seek to increase
market penetration and revenue increases beyond 2004 from these new products
and service abilities. Critical Accounting Policies and Estimates The preparation of our financial statements requires us to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Our estimation process generally relates to
potential bad debts, obsolete and slow moving inventory, and the valuation of
long-lived and intangible assets. Our estimates are based on historical
experience and on our future expectations that we believe to be reasonable
under the circumstances. The combination of these factors results in the
amounts shown as carrying values of assets and liabilities in the financial
statements and accompanying notes. Actual results could differ from our current
estimates and those differences may be material. These estimates may change as new events occur, as additional information
is obtained and as our operating environment changes. There have been no
material changes or developments in our evaluation of the accounting estimates
and the underlying assumptions or methodologies that we believe to be Critical
Accounting Policies and Estimates as disclosed in our Annual Report on Form
10-K for the year ending December 31, 2003. 9




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##### Table of Contents



Results of Operations The following table sets forth certain operating statement data for each
of our segments for each of the periods presented (in thousands): Three Months EndedMarch 31,2004
    
    2003Revenues:Pressure Control
    
    $
    15,916
    
    
    $
    17,105Products
    
    
    2,254
    
    
    
    3,260Distribution
    
    
    8,034
    
    
    
    9,76626,204
    
    
    
    30,131Cost of revenues:Pressure Control
    
    
    10,850
    
    
    
    11,688Products
    
    
    1,757
    
    
    
    2,762Distribution
    
    
    5,895
    
    
    
    7,13518,502
    
    
    
    21,585Gross profit:Pressure Control
    
    
    5,066
    
    
    
    5,417Products
    
    
    497
    
    
    
    498Distribution
    
    
    2,139
    
    
    
    2,6317,702
    
    
    
    8,546Operating expenses:Pressure Control
    
    
    2,431
    
    
    
    2,618Products
    
    
    452
    
    
    
    388Distribution
    
    
    1,997
    
    
    
    2,100Corporate
    
    
    1,307
    
    
    
    1,4286,187
    
    
    
    6,534Income (loss) from operations:Pressure Control
    
    
    2,635
    
    
    
    2,799Products
    
    
    45
    
    
    
    110Distribution
    
    
    142
    
    
    
    531Corporate
    
    
    (1,307
    )
    
    
    (1,428
    )$
    1,515
    
    
    $
    2,012
 Three Months ended March 31, 2004 Compared with Three Months ended March 31,
2003 Revenues.On a consolidated basis, revenues decreased $3.9 million, or
13%, in 2004 compared to 2003. Although United States drilling activity
increased from period to period while oil and natural gas prices remained
relatively constant, the continued softness in the Gulf of Mexico rig count,
increased pricing pressure in all our segments and increased competition in our
distribution and products segments were the major causes of the decline in our
revenues. Additionally, 2003 included larger project revenues in our
Distribution segment that were not present in 2004. This decrease was
partially offset by increased revenues in some of our Pressure Control products
and services resulting from an improved United States onshore rig count. Revenues for the Pressure Control segment decreased $1.2 million, or 7%,
in 2004 compared to 2003. The decrease was primarily attributable to the
continued softness in the Gulf of Mexico drilling rig activity and continued
pricing pressure for our products and services. This decrease was partially
offset by increased revenues resulting from an improved United States onshore
rig count. Revenues for the Products segment decreased $1.0 million, or 31%, in 2004
compared to 2003. This 10




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decrease was primarily attributable to increased competition, continued pricing
pressure for our products and services and lower revenues attributable to our
electrical motor products and services. Revenues for the Distribution segment decreased $1.7 million, or 18%, in
2004 compared to 2003 due to increased competition and continued pricing
pressure. Additionally, 2003 included larger projects that were not present in
2004. Cost of Revenues.On a consolidated basis, cost of revenues decreased $3.1
million, or 14%, in 2004 compared to 2003 as a result of the decrease in
revenues described above. Gross profit as a percentage of revenues was 29% in
2004 compared to 28% in 2003. Gross profit margin was slightly higher on a
consolidated basis in 2004 because of cost reduction strategies, primarily
lower self-insured medical costs. This increase was partially offset by
margin declines attributable to continued pricing pressure and fixed costs that
did not decrease proportionally. Cost of revenues for the Pressure Control segment decreased $0.8 million,
or 7%, in 2004 compared to 2003. The decrease is primarily a result of the
decrease in revenues described above. Gross profit as a percentage of revenues
was 32% in 2004 and 2003. The stability in the gross profit as a percentage of
revenues was due to lower self-insured medical costs offset by continued
pricing pressure. Cost of revenues for the Products segment decreased $1.0 million, or 36%,
in 2004 compared to 2003. Gross profit as a percentage of revenues was 22% in
2004 compared to 15% in 2003. Gross profit margin increased primarily as a
result of increased industrial coating and pump repair services, coupled with
lower self-insured medical costs. Cost of revenues for the Distribution segment decreased $1.2 million, or
17%, in 2004 compared to 2003, primarily due to the decrease in revenues in
2004. Gross profit as a percentage of revenues was 27% in 2004 and 2003. Operating expenses.On a consolidated basis, operating expenses decreased
$0.3 million, or 5%, in 2004 compared to 2003. Operating expenses as a
percentage of revenues was 24% in 2004 compared to 22% in 2003. Although
operating expenses decreased due to cost reduction strategies, including lower
self-insured medical costs, operating expenses as a percentage of revenues
increased primarily because as revenues decreased, fixed operating expenses did
not decrease proportionally. Operating expenses for the Pressure Control segment decreased $0.2
million, or 7%, in 2004 compared to 2003. This decrease was attributable to
cost reduction strategies, including lower self-insured medical costs.
Operating expenses as a percentage of revenues were 15% in 2004 and 2003. Operating expenses for the Products segment increased $0.06 million, or
16%, in 2004 compared to 2003. As a percentage of revenues, operating expenses
increased from 12% in 2003 to 20% in 2004, primarily because as revenues
decreased, fixed operating expenses did not decrease proportionally. Operating expenses for the Distribution segment decreased $0.1 million, or
5%, in 2004 compared to 2003. As a percentage of revenues, operating expenses
increased from 22% in 2003 to 25% in 2004, primarily because as revenues
decreased, fixed operating expenses did not decrease proportionally. Operating expenses for the Corporate operations decreased $0.1 million, or
8%, in 2004 compared to 2003. This was primarily attributable to cost reduction
strategies. Interest Income.Interest income was generated from seller notes
receivable that arose in conjunction with the sale by Industrial Holdings, Inc.
of several business units in 2001. Write-down of Acquired Note Receivable.In the first quarter of 2003, we
wrote down a note receivable that was acquired in conjunction with the disposal
by Industrial Holdings, Inc. of Beaird Industries, Inc. (Beaird) prior to the
completion of its merger with us. During the first quarter of 2003, we were
informed by Beaird of its inability to make timely payments and that its
ongoing refinancing efforts to date had been unsuccessful. A 11




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reserve of approximately 50% of the note was recorded because we believed at
that time that the notes net realizable value was approximately $1.7 million
at March 31, 2003. This note was fully written off in the fourth quarter of
2003 because of Beairds failed refinancing efforts and the unlikelihood of any
future collections. Income Taxes.Income tax expense (benefit) for 2004 was $0.3 million as
compared to ($0.07) million in 2003. The effective tax rate was 39% in 2004
and was caused by the effect of non-deductible expenses and state income taxes,
net of the Federal benefit provided. The tax benefit in 2003 was offset by the
provision for state taxes and non-deductible expenses that significantly
reduced the tax benefit. Included within the net tax benefit of ($0.07)
million in 2003 was a ($0.5) million deferred tax benefit arising from the
write-down of a note receivable, which is not deductible until realized. Income (Loss) from Continuing Operations.On a consolidated basis, net
income (loss) was $0.5 million in 2004 compared with ($0.3) million in 2003 as
a result of the foregoing factors. Discontinued operations.During the fourth quarter of 2003, we committed
to a formal plan to sell certain non-core assets within our Products segment.
The sale of these assets was consummated in February 2004. These assets were
held for sale and accordingly, their results of operations were reported in
discontinued operations. Liquidity and Capital Resources At March 31, 2004, we had working capital of $25.8 million, current
maturities of long-term debt of $1.2 million, long-term debt of $12.1 million
and stockholders equity of $102.8 million. Historically, our principal
liquidity requirements and uses of cash have been for debt service, capital
expenditures, working capital and acquisition financing, and our principal
sources of liquidity and cash have been from cash flows from operations,
borrowings under long-term debt arrangements and issuances of equity
securities. We have historically financed acquisitions through bank borrowings,
sales of equity (primarily to First Reserve) and internally generated funds. Net Cash Provided by Operating Activities.For the three months ended
March 31, 2004, net cash provided by operating activities was $4.1 million
compared to $0.5 million provided in the same period in 2003. Cash provided by
operations increased in 2004 as compared to 2003 because of lower payments on
accounts payable, greater collections of accounts and notes receivable and
lower payments of self-insured medical costs, partially offset by increases in
certain inventories to take advantage of favorable raw material pricing. Net Cash Used in Investing Activities.Principal uses of cash are for
capital expenditures and acquisitions. Investing activities used cash of $0.03
million in the three months ended March 31, 2004 compared to $0.4 million in
the same period in 2003. For the three months ended March 31, 2004 and 2003, we
made capital expenditures of approximately $0.2 million and $0.4 million,
respectively. Net Cash Used in Financing Activities.Sources of cash from financing
activities include borrowings under credit facilities and sales of equity
securities. Financing activities used net cash of $11.0 million in the three
months ended March 31, 2004 compared to $0.1 million used in the same period in
2003. During 2004, we had borrowings of $1.2 million under our long-term debt
credit facilities compared to $0.9 million during 2003. During 2004, we made
principal payments of $12.2 million on our long-term debt, exclusive of our
revolving credit facility, compared to $0.9 million in 2003. Net Cash Provided by (Used In) Discontinued Operations.For the three
months ended March 31, 2004, net cash provided by discontinued operations was
$7.2 million compared to $0.6 million used in the same period in 2003. Cash
was provided by discontinued operations in 2004 primarily because of our
receipt of $7.4 million in cash upon the sale of assets of these operations in
February 2004. Principal Debt Instruments.As of March 31, 2004, we had an aggregate of
$13.3 million borrowed under our senior credit facility and debt instruments
entered into or assumed in connection with acquisitions, as well as other bank
financings. As of March 31, 2004, as a result of the funded debt-to-EBITDA
ratio covenant, as defined in the credit agreement for our senior credit
facility, our availability under our revolving credit facility was limited to
$11.8 million. 12




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On December 17, 2001, we entered into a senior credit facility with Wells
Fargo, N.A. and General Electric Capital Corporation maturing December 17,
2004. Concurrently, we entered into a $12.0 million subordinated term loan
with Wells Fargo Energy Capital, Inc. maturing December 17, 2005. The senior
credit facility includes a revolving credit facility of the lesser of a defined
borrowing base (based upon 85% of eligible accounts receivable and 50% of
eligible inventory) or $25.0 million, a term loan of $16.5 million and an
optional facility for up to an additional $30.0 million in the form of a
revolving credit commitment for future acquisitions based upon specific
criteria. The senior credit facilitys term loan is payable in equal quarterly
installments of $0.8 million. The applicable interest rate of the senior
credit facility is governed by our trailing-twelve-month funded debt-to-EBITDA
ratio and ranges from prime plus 1.25% or LIBOR plus 2.25% to prime plus 2.00%
or LIBOR plus 3.00%. At March 31, 2004, the senior credit facility bore
interest at prime plus 1.75%, with interest payable quarterly. We are required
to prepay the senior credit facility under certain circumstances with the net
cash proceeds of asset sales, insurance proceeds, equity issuances and
institutional debt, and if, and for so long as, our funded debt-to-EBITDA ratio
for the previous fiscal year is 2.25 to 1 or greater, with 50% of excess cash
flow as determined under the senior credit agreement. In connection with the
sale of certain assets of the Products segment in February 2004 (see Note 2 to
our 2003 consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2003 for additional information), we
used the net proceeds to pay down the term loan included in the senior credit
facility. The remaining balance of the loan was concurrently paid off with
other funds. The senior credit facility provides, among other covenants and
restrictions, that we comply with certain financial covenants, including a
limitation on capital expenditures, a minimum fixed charge coverage ratio,
minimum consolidated tangible net worth and a maximum funded debt-to-EBITDA
ratio. As of March 31, 2004, we were in compliance with the covenants under
the senior credit facility. The senior credit facility is collateralized by
substantially all of our assets. The subordinated term loan bears interest at a fixed rate of 9.50% with
interest payable quarterly. The principal balance is due in full on December
17, 2005. The effective interest rate, including amortization of loan costs,
is 11.02%. The subordinated term loan provides, among other restrictions, that
we maintain a minimum fixed charge coverage ratio and a maximum funded
debt-to-EBITDA ratio. Under the terms of our senior credit facility, we are
not currently permitted to make principal payments on the subordinated term
loan. As of March 31, 2004, we were in compliance with the covenants under the
subordinated term loan. The subordinated term loan is collateralized by a
second lien on substantially all of our assets. We believe that cash generated from operations and amounts available under
our senior credit facility and from other sources of debt will be sufficient to
fund existing operations, working capital needs, capital expenditure
requirements and financing obligations. We also believe any significant
increase in capital expenditures caused by any need to increase manufacturing
capacity can be funded from operations or through debt financing. We intend to pursue additional acquisition candidates, but the timing,
size or success of any acquisition effort and the related potential capital
commitments cannot be predicted. We expect to fund future cash acquisitions
primarily with cash flow from operations and borrowings, including the
unborrowed portion of our senior credit facility or new debt issuances, but may
also issue additional equity either directly or in connection with an
acquisition. However, acquisition funds may not be available at terms
acceptable to us. A summary of our outstanding contractual obligations and other commercial
commitments at March 31, 2004 is as follows (in thousands): Payments Due by PeriodContractual Obligations
    
    Total
    
    Less than 1 Year
    
    1-3 Years
    
    4-5 Years
    
    After 5 YearsLong-term debt
    
    $
    13,309
    
    
    $
    1,240
    
    
    $
    12,069
    
    
    $
    
    
    
    $
    Operating leases
    
    
    4,514
    
    
    
    1,248
    
    
    
    1,781
    
    
    
    1,049
    
    
    
    436Total contractual obligations
    
    $
    17,823
    
    
    $
    2,488
    
    
    $
    13,850
    
    
    $
    1,049
    
    
    $
    436
 13




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##### Table of Contents



Forward-Looking Information and Risk Factors Certain information in this Quarterly Report on Form 10-Q includes
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can
identify these forward-looking statements by the words expects, projects,
believes, anticipates, intends, plans, budgets, predicts,
estimates and similar expressions. We have based the forward-looking statements relating to our operations on
our current expectations, and estimates and projections about us and about the
industries in which we operate in general. These statements are not guarantees
of future performance and involve risks, uncertainties and assumptions. In
addition, many of these forward-looking statements are based on assumptions
about future events that may prove to be inaccurate. Actual outcomes and
results may differ materially from what we have expressed or forecast in the
forward-looking statements. Because we depend on the oil and gas industry, a decline in oil and gas prices
or a decrease in industry activity will negatively impact our profits. We are, and will continue to be, dependent upon the oil and gas industry
and the level of oil and gas exploration and production. The level of
exploration and production depends upon the prevailing view of future product
prices. Many factors affect the supply and demand for oil and gas and therefore
influence product prices, including:  
    
    the level of production from known reserves;
    
    weather conditions;
    
    the actions of the Organization of Petroleum Exporting Countries;
    
    political instability in the Middle East and elsewhere;
    
    the level of oil and gas inventories;
    
    the cost of producing oil and gas;
    
    the level of drilling activity;
    
    worldwide economic activity; and
    
    governmental regulation. If there is a significant reduction in the demand for drilling services,
cash flows of drilling contractors or production companies or drilling or well
servicing rig utilization rates, then demand for our products will decline. The oilfield service industry in which we operate is highly competitive, which
may result in a loss of market share or a decrease in revenue or profit
margins. The oilfield service industry in which we operate is highly competitive.
Many of our competitors have greater financial and other resources than we do.
Each of our operating units is subject to competition from a number of
similarly sized or larger businesses. Factors that affect competition include
price, quality and customer service. Strong competition may result in a loss of
market share and a decrease in revenue and profit margins. Our success will be
affected by our ability to lower our cost structure. Our forward-looking
statements assume we will be successful in reducing our cost structure and
adapting to the changing environment. 14




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##### Table of Contents



Availability of a skilled workforce could affect our projected results. The workforce and labor supply in the oilfield service industry is aging
and diminishing such that there is an increasing shortage of available skilled
labor. Our forward-looking statements assume we will be able to maintain a
skilled workforce. Our long-term growth depends upon technological innovation and
commercialization. Our ability to deliver our long-term growth strategy depends in part on
the commercialization of new technology. A central aspect of our growth
strategy is to innovate our products and services, to obtain technologically
advanced products through internal research and development and/or
acquisitions, and to expand internationally. The key to our success will be our
ability to commercialize the technology that we have acquired and demonstrate
the enhanced value our technology brings to our customers operations. Our
forward-looking statements have assumed successful commercialization of, and
above-average growth from, these new products and services. The cyclical nature of or a prolonged downturn in our industry could affect the
carrying value of our goodwill. During 2003, we had goodwill impairments related to continuing and
discontinued operations totaling $26.4 million. As of March 31, 2004, we had
approximately $69.0 million of goodwill after the aforementioned impairments.
Our estimates of the value of our goodwill could be reduced in the future as a
result of various factors, some of which are beyond our control. Any reduction
in the value of our businesses may result in further impairment charges and
therefore adversely affect our results. Uninsured judgments or a rise in insurance premiums could adversely impact our
results. Although we maintain insurance to cover potential claims and losses, we
could become subject to a judgment for which we are not adequately insured.
Additionally, the terrorist attacks that occurred in the U.S., as well as other
factors, have generally increased the cost of insurance for companies,
including ours. Significant increases in the cost of insurance and more
restrictive coverage may adversely impact our results of operations. Uninsured claims and litigation could adversely impact our results. In the ordinary course of business, we become the subject of various
claims and litigation. We maintain insurance to cover many of our potential
losses and we are subject to various self-retentions and deductibles with
respect to our insurance. Although we are subject to various ongoing items of
litigation, we do not believe any of the items of litigation we are currently
subject to will result in any material uninsured losses. However, it is
possible an unexpected judgment could be rendered against us in cases in which
we could be uninsured and beyond the amounts we currently have reserved or
anticipate incurring. Our insurance coverage may be inadequate to cover certain contingent
liabilities. Our business exposes us to possible claims for personal injury or death
resulting from the use of our products. We carry comprehensive insurance,
subject to deductibles, at levels we believe are sufficient to cover existing
and future claims. However, we could be subject to a claim or liability that
exceeds our insurance coverage. In addition, we may not be able to maintain
adequate insurance coverage at rates we believe are reasonable. Our operations are subject to regulation by federal, state and local
governmental authorities that may limit our ability to operate our business. Our business is affected by governmental regulations relating to our
industry segments in general, as well as environmental and safety regulations
that have specific application to our business. While we are not aware of any
proposed or pending legislation, future legislation may have an adverse effect
on our business, financial condition, results of operations or prospects. 15




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##### Table of Contents



We are subject to various federal, state and local environmental laws,
including those governing air emissions, water discharges and the storage,
handling, disposal and remediation of petroleum and hazardous substances. We
have in the past and will likely in the future incur expenditures to ensure
compliance with environmental laws. Due to the possibility of unanticipated
factual or regulatory developments, the amount and timing of future
environmental expenditures could vary substantially from those currently
anticipated. Moreover, certain of our facilities have been in operation for
many years and, over that time, we and other predecessor operators have
generated and disposed of wastes that are or may be considered hazardous.
Accordingly, although we have undertaken considerable efforts to comply with
applicable laws, it is possible that environmental requirements or facts not
currently known to us will require unanticipated efforts and expenditures that
cannot be currently quantified. Three of our directors may have conflicts of interest because they are also
directors or officers of First Reserve Corporation. The resolution of these
conflicts of interest may not be in our or our stockholders best interests. Three of our directors, Mark E. Baldwin, Joseph R. Edwards and Ben A.
Guill, are also current officers or employees of First Reserve Corporation,
which controls the general partner of First Reserve Fund VIII, L.P. This may
create conflicts of interest because these directors have responsibilities to
First Reserve Fund VIII and its owners. Their duties as directors or officers
of First Reserve Corporation may conflict with their duties as directors of the
Company regarding business dealings between First Reserve Corporation and the
Company and other matters. The resolution of these conflicts may not always be
in our or our stockholders best interests. We will renounce any interest in specified business opportunities, and First
Reserve Fund VIII and its director designees on our board of directors
generally will have no obligation to offer us those opportunities. First Reserve Fund VIII has investments in other oilfield service
companies that compete with the Company, and First Reserve Corporation and its
affiliates, other than T-3, may invest in other such companies in the future.
We refer to First Reserve Corporation, its other affiliates and its portfolio
companies as the First Reserve group. Our certificate of incorporation
provides that, so long as First Reserve Corporation and its affiliates continue
to own at least 20% of the Companys common stock, we renounce any interest in
specified business opportunities. Our certificate of incorporation also
provides that if an opportunity in the oilfield services industry is presented
to a person who is a member of the First Reserve group, including any
individual who also serves as First Reserve Fund VIIIs director designee of
the Company:  
    
    no member of the First Reserve group or any of those individuals
will have any obligation to communicate or offer the opportunity to the
Company; and
    
    such entity or individual may pursue the opportunity as that entity
or individual sees fit, unless:  
    
    it was presented to a member of the First Reserve group in that
persons capacity as a director or officer of T-3; or
    
    the opportunity was identified solely through the disclosure of
information by or on behalf of T-3. These provisions of our certificate of incorporation may be amended only by an
affirmative vote of holders of at least 80% of its outstanding common stock.
As a result of these charter provisions, our future competitive position and
growth potential could be adversely affected. 16




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Market risk generally represents the risk that losses may occur in the
value of financial instruments as a result of movements in interest rates,
foreign currency exchange rates and commodity prices. We are exposed to some market risk due to the floating interest rate under
our revolving credit facility and certain of our term debt. As of March 31,
2004, our revolving credit facility had a principal balance of $1.2 million
with an interest rate that floats with prime or LIBOR. A 1.0% increase in
interest rates could result in a $0.01 million annual increase in interest
expense on the existing principal balances. 
 ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, our management carried
out an evaluation, with the participation of our principal executive officer
(the CEO) and our principal financial officer (the Corporate Controller),
of the effectiveness of our disclosure controls and procedures pursuant to Rule
13a-15 of the Securities and Exchange Act of 1934. Based on those evaluations,
the CEO and Corporate Controller believe:  i.
    
    that our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports that we
file or submit under the Securities and Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms, and that such information is
accumulated and communicated to our management, including the CEO and
Corporate Controller, as appropriate to allow timely decisions
regarding required disclosure; andii.
    
    that our disclosure controls and procedures are effective. Changes in Internal Controls Over Financial Reporting There have been no significant changes in our internal controls over
financial reporting during the period covered by this report that has
materially affected, or are reasonably likely to materially affect, our control
over financial reporting. 17




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##### Table of Contents



PART II 
 Item 1. Legal Proceedings The Company is involved in various claims and litigation arising in the
ordinary course of business. While there are uncertainties inherent in the
ultimate outcome of such matters and it is impossible to currently determine
the ultimate costs that may be incurred, the Company believes the resolution of
such uncertainties and the incurrence of such costs should not have a material
adverse effect on its consolidated financial condition or results of
operations. 
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities None 
 Item 3. Defaults Upon Senior Securities None 
 Item 4. Submission of Matters to a Vote of Security Holders None 
 Item 5. Other Information None 
 Item 6. Exhibits and Reports on Form 8-K  a.
    
    Exhibits Exhibit Number
    
    Identification of Exhibit31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
or Rule 15d-14(a), promulgated under the Securities Exchange Act of
1934, as amended31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
or Rule 15d-14(a), promulgated under the Securities Exchange Act of
1934, as amended32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief Executive
Officer)32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief Financial
Officer)
  b.
    
    Reports on Form 8-KOn March 9, 2004, the Company filed a Current Report on Form 8-K
disclosing the sale of certain assets of its Products segment.On March 9, 2004, the Company filed a Current Report on Form 8-K
disclosing the election of the Companys president, Gus D. Halas, as
Chairman of the Board of Directors.On March 30, 2004, the Company filed a Current Report on Form 8-K
disclosing the special charge in December 2003 for the impairment of
goodwill in its Products segment. 18




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SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 12th day of May
2004. T-3 ENERGY SERVICES, INC.By:
    /s/ MICHAEL T. MINOMichael T. Mino (CorporateController and Vice President) 19




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INDEX TO EXHIBITS ExhibitNumber
    
    Identification of Exhibit31.1*
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended31.2*
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended32.1*
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief
Executive Officer)32.2*
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 (Chief
Financial Officer)
   *
    
    Filed herewith.