Tuboscope Announces 1998 Fourth Quarter and Full Year Results; $0.08 Per Share Dilutive for Q4, versus $0.34 Per Share in Q4 1997.HOUSTON--(BUSINESS WIRE)--Feb. 2, 1999--Tuboscope Inc. (NYSE NYSE See: New York Stock Exchange :TBI TBI 1. Thyroxine-binding index 2. Total body irradiation ) announced that for its fourth quarter ended Dec. 31, 1998 earnings were $0.08 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, down sharply from the $0.34 per diluted share reported in the fourth quarter of 1997. Tuboscope's results reflect weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. demand for its products and services brought on by low oil
prices throughout much of 1998. Average West Texas Intermediate crude
prices fell 41 percent from the fourth quarter of 1997 to the fourth
quarter of 1998. As a result, activity levels, as measured by numbers of
drilling rigs working, declined by 33 percent in the U.S., 55 percent in
Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , and 15 percent internationally through the same periods.
1998 Results Despite difficult industry conditions, Tuboscope posted an 8 percent overall increase in revenue, to a record $567.7 million in 1998. Net income was $41.9 million or $0.89 per diluted share in 1998, compared to $53.1 million or $1.14 per diluted share in 1997. Strong results through the first half of the year in most product lines, continued high demand for coiled tubing Coiled tubing refers to metal piping, normally 1" to 2" in diameter, used for interventions in oil and gas wells, which comes spooled on a large drum. The main benefits over wireline are the ability to pump chemicals through the coil and the ability to push it into hole rather than and pressure control products throughout the year, and the impact of several acquisitions all contributed to the increase in sales. However, sales declined sharply through the second half of the year as activity levels fell. Gross profit before goodwill amortization in 1998 declined to 28.4 percent of sales, to $161.0 million, from 32.0 percent of sales in 1997. The drop was due to lower levels of activity in the Company's service operations and reduced pricing in most markets. Earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. ("EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ") declined 8 percent to $116.1 million or 20.4 percent of sales, and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. declined 14 percent to $87.1 million or 15.3 percent of sales. Tuboscope completed its fiscal year 1998 with $8.7 million in cash, $250.7 million in debt, and $339.1 million in shareholders equity. Capital expenditures were $39.8 million for the year. Fourth Quarter Results Net income was $3.6 million in the quarter ended Dec. 31, 1998, or $0.08 per diluted common share, compared to $16.5 million in the prior year quarter, or $0.34 per common share. Revenue for the quarter was $124.2 million, down 18 percent from the fourth quarter of 1997. Gross profit before goodwill amortization declined 40 percent to $29.1 million, or 23.4 percent of sales. EBITDA fell 49 percent to $18.7 million, and operating profit declined 63 percent over the fourth quarter 1997 results. The drop in fourth quarter activity levels combined with price erosion contributed to the significant margin contraction contraction, in physics contraction, in physics: see expansion. contraction, in grammar contraction, in writing: see abbreviation. contraction - reduction . Tubular tubular /tu·bu·lar/ (too´bu-lar) 1. shaped like a tube. 2. of or pertaining to a tubule. tubular 1. pertaining to renal tubules. 2. pertaining to fallopian tube. Services sales declined 29 percent from the fourth quarter of 1997, slightly less than the overall decline in active worldwide drilling and workover rigs for the same periods. Revenues fell from $66.4 million to $47.1 million, due to sharply lower demand for oilfield tubular goods and lower prices, particularly in the Company's inspection operations. Strong fourth quarter mill sales and three small acquisitions in tubular services were offset by the deteriorated market conditions. Likewise, Solids Control Products & Services revenue fell 29 percent, from $47.8 million in the fourth quarter of 1997 to $34.2 million in the fourth quarter of 1998. Declining drilling activity and reduced pricing, particularly in Canada, the Gulf Coast and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , led to the decrease, offsetting the impact of acquisitions. Coiled Tubing & Pressure Control Products sales grew 40 percent from the prior year quarter, to $30.2 million from $21.6 million. Strong demand for coiled tubing technologies, market acceptance of new cementing and pressure pumping products, growth in pressure control product lines, and several acquisitions all contributed to the increase. Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. for the group was $39.1 million at Dec. 31, 1998, down approximately 7 percent from year end 1997 levels. Pipeline & Other Industrial Services revenue fell 23 percent from the fourth quarter of 1997, to $12.8 million, due mostly to the loss of an industrial inspection contract in Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. . Pipeline
inspection declined slightly as activity increases in Latin America in
the fourth quarter of 1998 did not fully offset declines in the Far East
and in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. .
Resizing While Positioning for the Future "We are in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of an extremely difficult oil and gas market," remarked Tuboscope President and Chief Executive Officer John F. Lauletta. "Activity levels continue to decline as our customers reduce spending. Accordingly, we have reduced our workforce by 22 percent, consolidated numerous facilities, and we will continue to adjust as necessary to reduce costs. In addition, we have cut our capital expenditures by 50 percent from 1998 levels, and we remain focused on cash flow." Nevertheless, Lauletta emphasized that Tuboscope will continue to build on its leading positions, "by executing selective acquisitions, to further consolidate for more efficiency, and by adding value-enhancing technologies to our offering of products and services." In the fourth quarter of 1998, Tuboscope acquired North Sea-based Weston Weston, town (1990 pop. 10,200), Middlesex co., E Mass., W of Boston; settled c.1642, set off from Watertown and inc. 1713. The town is mainly residential. Regis College, the Weston College Geophysical Observatory, and many 18th-century buildings are there. Oilfield Engineering. Weston brought Tuboscope a large coiled tubing unit rebuilding and servicing business, as well as new cryogenic cryogenic /cry·o·gen·ic/ (-jen´ik) producing low temperatures. cry·o·gen·ic adj. 1. Relating to or producing low temperatures. 2. and nitrogen technologies. Lauletta also announced two recent strategic initiatives. First, Tuboscope acquired certain operating assets Operating Assets Another term for working capital. of Manufacturas Rowi, C.A. ("Rowica") in Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. in January January: see month. 1999. Rowica is the third largest solids control operation in Venezuela, and its acquisition strengthens Tuboscope's own leading solids control position there. Additionally, Rowica is the leading provider of wellhead well·head n. 1. The source of a well or stream. 2. A principal source; a fountainhead. 3. The structure built over a well. wellhead Noun 1. and blowout preventer A blowout preventer (BOP) is a large valve that encases an oil well at surface. During drilling or well interventions, the valve may be closed if overpressure from an oil reservoir causes formation fluids such as oil and natural gas to back up within the wellbore and assembly and testing services in Venezuela. Terms of the acquisition were not released. Additionally, Lauletta announced that Tuboscope has entered into an alliance agreement with Energy Environmental LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a Gulf Coast provider of oilfield drilling waste transportation, treating, and disposal services. "Our new relationship with Energy Environmental expands the range of drill cuttings Drill cuttings typically refer to any solids removed from a wellbore while drilling. The term specifically refers to shale cuttings generated when drilling petroleum wells, and is usually removed by circulating the drilling fluid over shale shakers. disposal services that Tuboscope can effectively offer its Gulf Coast Solids Control customers," noted Lauletta. "Tuboscope can handle drill solids needs from the flowline to final disposal." Tuboscope is the world's leading supplier of oilfield internal tubular coating and tubular inspection services; oilfield solids control equipment and services; and coiled tubing and pressure control equipment to the petroleum industry. Additionally, it provides in-service in-service In-service training adjective Referring to any form of on-the-job training noun In-service training of an employee inspection of pipelines; manufactures high pressure fiberglass fiberglass, thread made from glass. It is made by forcing molten glass through a kind of sieve, thereby spinning it into threads. Fiberglass is strong, durable, and impervious to many caustics and to extreme temperatures. tubulars; sells and leases advanced in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. inspection equipment to makers of oil country tubular goods; and provides quality assurance and inspection services to a diverse range of industries. Tuboscope is headquartered in Houston, and services markets in 49 countries. The foregoing contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements are those that do not state historical facts and are inherently subject to risk and uncertainties. The forward-looking statements contained herein are based on current expectations and entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary various risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, among others, the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the oilfield services industry, risks associated with the Company's significant foreign operations, compliance with environmental laws, risks associated with growth through acquisitions and other factors discussed in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 1997, under the caption "Factors Affecting Future Operating Results".
TUBOSCOPE INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1998 1997
------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 8,735 $ 12,593
Accounts receivable, net 123,480 144,067
Inventory, net 86,776 78,317
Deferred income taxes 760 984
Prepaid expenses and other 10,717 11,755
-------- --------
Total current assets 230,468 247,716
-------- --------
Property and equipment:
Property and equipment, costs 338,595 287,633
Accumulated depreciation and
amortization (96,769) (77,072)
-------- --------
Net property and equipment 241,826 210,561
Identified intangibles, net 22,916 23,315
Goodwill, net 213,816 202,301
Other assets, net 3,146 2,274
======== ========
Total assets $712,172 $686,167
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $29,914 $43,350
Accrued liabilities 50,719 76,596
Income taxes payable 4,430 15,902
Current portion of long-term debt and
short-term borrowings 31,306 30,574
-------- --------
Total current liabilities 116,369 166,422
Long-term debt 219,438 187,803
Pension liabilities 9,688 8,916
Deferred taxes payable 26,270 22,239
Other liabilities 1,333 754
-------- --------
Total liabilities 373,098 386,134
------------------ ------------------
Common stockholders' equity:
Common stock, $.01 par value,
60,000,000 shares authorized,
44,091,310
Shares issued and 42,666,610 outstanding
(44,235,591 at Dec. 31, 1997) 455 442
Paid-in capital 309,691 294,402
Retained earnings 52,100 10,155
Cumulative translation adjustment (7,842) (4,966)
Less: Treasury stock at cost
(1,424,700 shares) (15,330) --
-------- --------
Total common stockholders' equity 339,074 300,033
======== ========
Total liabilities and equity $712,172 $686,167
======== ========
TUBOSCOPE INC.
QUARTERLY INCOME STATEMENT
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
1998 1997 1998 1997
------ ------ ------ ------
(in thousands, except share and per share data)
Revenue:
Tubular Services $47,103 $66,362 $222,750 $224,957
Solids Control
Products & Services 34,172 47,812 169,340 155,433
Coiled Tubing &
Pressure Control
Products 30,206 21,568 121,409 83,414
Pipeline & Other
Industrial Services 12,758 16,582 54,202 61,427
-------- -------- -------- --------
Total Revenue 124,239 152,324 567,701 525,231
Total Gross Profit
(before Goodwill
Amortization) 29,105 48,131 161,000 168,261
Total Gross Profit
Percent 23.4% 31.6% 28.4% 32.0%
Goodwill Amortization 1,831 1,543 6,647 5,281
Selling, General and
Administration 16,156 16,771 67,272 62,055
-------- -------- -------- --------
Operating Profit 11,118 29,817 87,081 100,925
Interest Expense 4,712 3,758 18,122 14,456
Other Expense 664 (8) 1,848 1,520
-------- -------- -------- --------
Income Before Taxes 5,742 26,067 67,111 84,949
Income Tax Provision 2,153 9,546 25,166 31,845
-------- -------- -------- --------
Net Income $3,589 $16,521 $41,945 $53,104
======== ======== ======== ========
Earnings Per Common
Share:
Basic Earnings Per
Common Share $0.08 $0.37 $0.94 $1.22
======== ======== ======== ========
Dilutive Earnings Per
Common Share $0.08 $0.34 $0.89 $1.14
======== ======== ======== ========
Weighted average
number of common
shares outstanding 44,894,973 48,297,190 46,912,536 46,946,432
========== ========== ========== ==========
Depreciation and
Amortization $8,265 $7,205 $30,851 $26,110
======== ======== ======== ========
EBITDA $18,719 $37,030 $116,084 $125,515
======== ======== ======== ========
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