Hydril Announces Third Quarter 2003 Earnings
HOUSTON, Oct. 28 /PRNewswire-FirstCall/ -- Hydril today reported earnings for
the quarter ended September 30, 2003 of $0.34 per diluted share, compared to
$0.27 in the second quarter, and up from $0.30 for the prior-year quarter. The
current quarter included a research and experimentation income tax credit which,
net of expenses, increased earnings by $0.15 per share.
On a sequential basis, revenue of $50.2 million was down 8%, operating income of
$6.2 million was down 36%, and net income of $7.7 million, which includes the
tax credit, was up 25%. Compared to the third quarter of 2002, revenue was down
19%, operating income was down 51%, and net income, which includes the tax
credit, was up 11%.
Premium Connection Segment Revenue for Hydril's premium connection segment decreased 11% sequentially to
$24.8 million and operating income decreased 25% to $5.4 million. The decline
in revenue and operating income was due to lower demand in both our North
American and international markets which resulted in reduced plant utilization.
In the U.S., while the deep formation rig count increased sequentially, this
increase was not reflected in improved demand from our distributors as
de-stocking continued throughout the quarter. In our international markets, the
downturn was deeper than originally expected, particularly in markets impacted
by political and civil unrest.
Near the end of the third quarter, customer inquiries and orders increased for
both our domestic and international markets. The recent bookings trend, and our
expectation that the U.S. deep formation rig count will continue gradual
improvement through year-end, should drive our premium connection revenue and
operating income up in the fourth quarter to a range similar to our second
quarter of this year.
Pressure Control Segment Revenue for Hydril's pressure control segment decreased 4% sequentially to $25.4
million and operating income decreased 23% to $4.5 million. The decline in
revenue was primarily due to lower capital equipment sales, resulting from
customer initiated changes that shifted revenue expected in the third quarter
into the fourth quarter. The operating income decline resulted from both lower
capital equipment revenue and lower-margin projects, compared to higher margins
on some specific capital equipment projects in the second quarter.
The combination of good commodity prices and a gradually increasing rig count
should continue to support strong aftermarket sales. Consequently, we expect
our pressure control fourth quarter revenue and operating income to be slightly
better than the third quarter.
Other During the quarter we completed a research and experimentation tax credit study
and as a result recorded a $3.7 million credit to our income tax provision. The
$.4 million cost of the study is included in our corporate SG&A expense. The
credit covered qualified research and experimentation spending for the ten-year
period of 1992 through 2001.
Business Drivers As more fully described on our website at http://www.hydril.com/ on the
"Business Drivers" page, our principal business drivers are: (1) the U.S. rig
count for rigs drilling at targets deeper than 15,000 feet, (2) the U.S. deepwater rig count, measured as rigs under contract, drilling in greater than
1,500 feet of water, (3) the worldwide offshore rig count, and (4) the total
U.S. rig count.
Conference Call Hydril's conference call to discuss third quarter financial results is scheduled
for Wednesday, October 29, 2003 at 10:30 a.m. EST, (9:30 a.m. CST). For further
information on the call or the webcast, please visit the company's website at
http://www.hydril.com/ or see the company's press release announcing the
earnings conference call dated October 14, 2003.
To the extent not provided in the call, reconciliations of any non-GAAP
financial measures discussed in the call will be available on the Investor
Relations page of Hydril's website.
Hydril, headquartered in Houston, Texas, is engaged worldwide in engineering,
manufacturing and marketing premium connection and pressure control products
used for oil and gas drilling and production.
Forward-Looking Statements This press release contains forward-looking statements concerning expected
fourth quarter results. These statements relate to future events and the
company's future financial performance, including the company's business
strategy, and involve known and unknown risks and uncertainties. These risks,
uncertainties and assumptions, many of which are more fully described in Hydril
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003
filed with the Securities and Exchange Commission, include, but are not limited
to, the impact of changes in oil and natural gas prices and worldwide and
domestic economic conditions on drilling activity and demand for and pricing of
Hydril's products, the impact of geo-political and other events affecting
international markets and trade, Hydril's ability to remain on the leading edge
of technology in its products and maintain and increase its market share, the
impact of international and domestic trade laws, the loss of or change to
distribution methods of premium connections in the U.S. and Canada, overcapacity
in the pressure control industry, and high fixed costs that could affect the
pricing of Hydril's products. These factors may cause Hydril's or the
industry's actual results, levels of activity, performance or achievements to be
materially different from those expressed or implied by the forward-looking
statements.
HYDRIL COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts) Three Months Ended Nine Months Ended
September 30, September 30,
(unaudited) (unaudited) (unaudited) (unaudited)
2003 2002 2003 2002
Revenue
Premium Connection $ 24,836 $ 32,816 $ 84,338 $ 96,417
Pressure Control
Aftermarket 14,424 13,348 42,046 38,598
Capital Equipment 10,983 15,969 35,748 49,241
Subtotal Pressure
Control 25,407 29,317 77,794 87,839 Total Revenue 50,243 62,133 162,132 184,256 Total Gross Profit 18,799 23,627 62,708 68,348
Gross Margin 37% 38% 39% 37% Selling, General, and
Admin. Expenses 12,632 11,090 36,525 34,269 Operating Income (Loss)
Premium Connection 5,444 9,926 20,880 27,366
Pressure Control 4,471 5,372 15,535 15,693
Corporate Administration (3,748) (2,761) (10,232) (8,980)
Total Operating Income 6,167 12,537 26,183 34,079
Operating Margin 12% 20% 16% 18% Interest Expense --- (2,035) (1,101) (4,269)
Interest Income 126 328 602 1,158
Other Income/(Expense) (106) (71) (74) (141) Income Before Income Taxes 6,187 10,759 25,610 30,827
Provision (Benefit) for
Income Taxes (1,539) 3,820 5,258 10,944
Net Income $ 7,726 $ 6,939 $ 20,352 $ 19,883 Net Income Per Share:
Basic $ 0.34 $ 0.31 $ 0.90 $ 0.89
Diluted $ 0.34 $ 0.30 $ 0.89 $ 0.87 Weighted Average Shares
Outstanding:
Basic 22,765,373 22,423,891 22,680,760 22,381,720
Diluted 23,043,844 22,910,796 22,985,192 22,834,778 Depreciation
Premium Connection $ 1,853 $ 1,679 $ 5,444 $ 4,902
Pressure Control 695 632 2,057 1,725
Corporate Administration 440 444 1,301 1,305
Total Depreciation 2,988 2,755 8,802 7,932 Capital Expenditures 1,443 3,596 5,358 15,240 Pressure Control Backlog
Capital Equipment $ 17,046 $ 40,506
HYDRIL COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands) September 30, December 31,
2003 2002
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 43,333 $ 61,590
Investments 10,426 7,899
Total receivables 40,000 40,618
Total inventories 37,991 41,484
Other current assets 13,982 13,015
Total current assets 145,732 164,606 LONG-TERM ASSETS:
Property, net 104,869 107,031
Other long-term assets 7,000 6,571
Total long-term assets 111,869 113,602
TOTAL $257,601 $278,208
CURRENT LIABILITIES:
Accounts payable $ 13,007 $ 13,723
Accrued liabilities and other
current liabilities 20,758 30,400
Current portion of long-term
debt and capital leases --- 30,000
Total current liabilities 33,765 74,123 LONG-TERM LIABILITIES:
Post retirement, pension
benefits and other 13,258 16,948
Total long-term liabilities 13,258 16,948 STOCKHOLDERS' EQUITY:
Total stockholders' equity 210,578 187,137
TOTAL $257,601 $278,208
DATASOURCE: Hydril Company CONTACT: Sue Nutt, Investor Relations of Hydril Company, +1-281-985-3493 Web site: http://www.hydril.com/
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