Core Lab Reports EPS of $1.25 for Q4 2009, Ex-Items; Annual FCF of $7.06 per Share Sets Record; ROIC Leads Industry Peer Group; Company Increases Dividend 20% and Proposes Stock Split
AMSTERDAM, -- Core Laboratories N.V. (NYSE: CLB) reported fourth quarter 2009 earnings per diluted share (EPS) of $1.25, excluding $0.13 EPS related to devaluation of assets in Venezuela and other foreign currency exchange losses and $0.12 due to a change in Mexico's tax laws. Fourth quarter 2009 net income was $23,617,000, and revenue totaled $181,599,000, a sequential quarterly increase of 8% and a decrease of less than 10% from the year-earlier quarter. Operating income, excluding the effects of devaluation of assets in Venezuela and other foreign currency exchange losses was $47,198,000, yielding operating margins, defined as operating income divided by revenue, of 26%. Free cash flow (FCF), defined as cash from operations minus capital expenditures, was $29,700,000 for the fourth quarter of 2009.
As reported last quarter, the Company has established an internal performance target of achieving, every quarter, a return on invested capital (ROIC) in the top decile of the 31 companies listed as its Bloomberg Peers. Based on Bloomberg's calculations for the third quarter of 2009, which is the latest comparable data available, Core's ROIC was the highest of the oilfield services Peer Group and more than three times its average. For the fourth quarter of 2009, Core's Reservoir Description operations, which focus on international crude-oil-related projects, posted sequentially higher quarterly revenue but modestly lower year-over-year quarterly revenue and operating income. Large-scale core analysis and reservoir fluids projects continued in the deepwater areas offshore West Africa and Brazil, as well as in the offshore and onshore areas in the Middle East and Asia Pacific. Production Enhancement operations, with more exposure to North American markets, posted an excellent quarter, with sequential quarterly increases in revenue, operating income, and operating margins. The Company's HERO™ line of perforating systems continued to increase market penetration, and Core's fracture diagnostics technology is becoming an important component for successful multistage well stimulations and completions. Reservoir Management operations, internationally focused like Reservoir Description operations, reported fourth quarter 2009 revenues, operating income, and operating margins that were higher than similar third quarter 2009 totals. Reservoir Management continues to benefit from increased interest in large, integrated petrophysical, sedimentological, mineralogical, and geochemical datasets from prospective pre-salt and post-salt reservoirs and crude oils along both South Atlantic offshore margins. For all operations in 2009, Core reported revenue of $695,539,000, down 11% from 2008, and net income of $113,604,000. The Company reported 2009 diluted EPS of $4.87, down from $5.48 in 2008. Excluding the impact of the devaluation in Venezuela, other foreign exchange gains, a settlement of a contingent liability, and the change in effective tax rate, Core's full year 2009 adjusted diluted EPS was $4.95. Free cash flow for the year totaled a record $164,584,000, or $7.06 per diluted share, an increase of over 32%, or $40,300,000, over 2008 levels. On 14 January 2010, Core's Board of Supervisory Directors (the "Board") approved a 20% increase to the next quarterly dividend scheduled for distribution the first quarter of 2010. In addition, on 10 February 2010, the Board approved a 2-for-1 stock split of Core's issued common shares, pending shareholder approval of the proposal and all relevant amendments to the Company's articles of association at the upcoming Annual Shareholder Meeting scheduled for 13 May 2010. The Board's resolution approving the stock split projects a record date for the stock split of 30 June 2010 and a payment date on or about 7 July 2010. Segment Highlights Core Laboratories reports results under three operating segments: Reservoir Description, Production Enhancement, and Reservoir Management. Reservoir Description Reservoir Description operations reported quarterly revenue of $107,457,000, up 6% over third quarter 2009 totals, but down 1% from fourth quarter 2008 totals. Year-over-year quarterly operating income, excluding the effects of devaluation of assets in Venezuela and other foreign currency exchange losses decreased 4% to $25,958,000, while margins were 24%. Because of the Company's multiyear de-emphasis on Venezuelan operations, the total impact of the recent devaluation of the bolivar was only about $2,700,000, of which $2,400,000 was related to Reservoir Description operations. Core intends to further downsize Venezuelan operations. Reservoir Description results were underpinned by large-scale core analysis and reservoir fluids phase-behavior projects, along with crude oil testing, inspection, distillation, fractionation, and characterization studies that continued in key international markets. Especially active were both pre-salt and post-salt reservoir and crude oil studies in the deepwater offshore West Africa and eastern Brazil. Middle East projects of note continued for several Iraqi fields, as did studies of reservoir rocks and fluids from Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Results from these studies will be used to maintain or boost current production capacities. Production Enhancement Production Enhancement operations posted fourth quarter 2009 revenue of $61,140,000 and operating income of $17,706,000, yielding margins of 29%. Fourth quarter revenue, operating income, and margins all increased from third quarter 2009 levels primarily because of increased market penetration by the Company's HERO™ High Efficiency Reservoir Optimization line of perforating systems, increased demand for Core's proprietary and patented fracture diagnostics technology, and increased activity in North America. Core's HERO™, SuperHERO™, and SuperHERO Plus+™ perforating systems now make up over 60% of all systems manufactured and sold by the Company. The superior perforating technology results in higher initial hydrocarbon flow rates and enhanced ultimate hydrocarbon recovery from the reservoir. Moreover, HERO technology is proving to be effective not only in North American tight-gas sand and gas-shale reservoirs, but also in carbonate and conventional clastic reservoirs in the Middle East and Asia Pacific. Core's SpectraChem® Plus+ fracture diagnostics technology is proving to be important to successful multistage well stimulation and completion programs. SpectraChem® Plus+ datasets enable operators to determine which horizontal stage or stages have not been effectively stimulated in wells containing up to 30 frac stages. In addition, laboratory-based cation exchange analysis datasets can be used to help determine whether frac stages have contaminated fresh water aquifers, a subject currently under industry debate. Reservoir Management Reservoir Management operations posted fourth quarter 2009 revenue, operating income, and operating margins that were sequentially higher than similar totals from the third quarter of 2009. Revenue reached $13,002,000, and operating income was $4,160,000, yielding operating margins of 32%. Reservoir Management has completed, or continues to work on, eleven large-scale regional pre-salt and post-salt reservoir and crude oil studies for both offshore South Atlantic margins. These studies evaluate the pre-salt and post-salt reservoir potential and the geochemistry of crude oil sourced from pre-salt lacustrine carbonates and shales and post-salt marine-deposited shales. Core currently has plans to add more regional studies on both South Atlantic margins in response to increasing oil company requests. Return On Invested Capital As reported in the third quarter of 2009, the Company has established an internal performance target of achieving an ROIC, every quarter, in the top decile of the 31 companies listed as its Bloomberg Peers. The Company believes that ROIC is a leading performance metric used by shareholders in determining the relative investment value of publicly traded companies. Further, the Company believes its shareholders will benefit if it consistently performs at the highest ROIC levels among its Bloomberg Peers. According to financial information from Bloomberg, Core Laboratories' third quarter 2009 ROIC was the highest of any of the oilfield service companies listed and was more than three times the Peer Group average. Several other Peer companies failed to post ROIC that exceeded their weighted average cost of capital, thereby destroying capital and shareholder value. Third quarter 2009 results were the most recent available from Bloomberg for the entire oilfield sector. Peer companies listed by Bloomberg include Halliburton, Dril-Quip, Superior Energy Services, Schlumberger, Tidewater, Carbo Ceramics, Oil States International, Baker Hughes, BJ Services and Key Energy Services, among others. Core will compare oilfield services sector returns for the fourth quarter 2009 in its first quarter 2010 earnings release. Free Cash Flow, Share Count, Share Repurchase Program, Cash, and Quarterly Dividend For the fourth quarter of 2009, Core generated approximately $37,000,000 in cash from operations and had $7,300,000 in capital expenditures, yielding a free cash flow of almost $29,700,000. Free cash flow for 2009 reached approximately $164,600,000, or $7.06 per diluted share, both all-time highs for any full year of cash generation. Core's 2009 average outstanding diluted share count of 23,328,000 is one of the lowest in over a decade. Due to continued increases in the Company's share price, Core increased its GAAP-reported diluted share count during the fourth quarter as a result of its outstanding Senior Exchangeable Notes (the "Notes"), of which $239 million remain outstanding. Core's average share price for the quarter was approximately $109.00, which exceeded the Notes' conversion strike price of $93.00. Therefore, a proportionate number of shares was added to the GAAP diluted share total for future settlement of the Notes, which mature in 2011. Core added approximately 385,000 shares to its diluted share count, which will be more than offset by the approximately 687,000 shares purchased during the first quarter of 2010 under the Company's Share Repurchase Program. No new shares were actually issued by Core in the quarter, and the actual issuance of any new shares related to the Notes will not occur until the Notes' settlement. Year-end cash balances reached $181,000,000, or $7.65 per diluted share, the highest quarter-ending level ever reported by Core. In addition, indebtedness, net of cash, was reduced to $58,000,000 from the year-ago total of $203,000,000, a decrease of $145,000,000, or nearly 72%. Net debt-to-capitalization at year end was less than 9%. On 24 November 2009, the Company continued its quarterly cash dividend of $0.10 per share. Dutch withholding tax was deducted from the dividend at a rate of 15%. On 14 January 2010, the Company's Board approved a 20% increase to the next quarterly dividend scheduled for distribution the first quarter of 2010. The Board is confident that the Company's free cash generation is more than adequate to support the quarterly dividend increase to $0.12 per diluted share. Proposed Stock Split On 10 February 2010, Core's Board approved a 2-for-1 stock split of Core's issued common shares, pending shareholder approval of the proposal and all relevant amendments to the Company's articles of association at the upcoming Annual Shareholder Meeting scheduled for 13 May 2010. The Board's resolution approving the stock split projects a record date for the stock split of 30 June 2010, payable on or about 7 July 2010. The stock split will be effected by the issuance of one common share for each common share held. After the stock split, if approved by the shareholders, Core will have approximately 47,000,000 diluted shares outstanding. Core believes this action will eventually lead to increased trading volume of CLB shares, while increasing share liquidity. Currently, the Company trades an average of approximately 210,000 shares per day on the NYSE. Q1 2010 Earnings Guidance For the first quarter of 2010, Core expects revenue of approximately $180,000,000 and EPS between $1.20 and $1.25. The midpoint of this guidance would result in operating margins of approximately 26%. In general, the Company believes that activities, workflows, and operating margins outside North America will increase 5% to 10% in 2010 and that North American activity levels will increase in response to moderately increasing natural gas prices. In addition, the North American rig count is increasing. This first quarter 2010 guidance excludes any gains or losses that may originate from the repurchase of outstanding debt, any effects of foreign currency translations, and assumes an effective tax rate of approximately 31% to 32%. In addition, first quarter 2010 EPS guidance does not consider shares that may be repurchased by the Company or shares that may be added to the share count relative to amounts outstanding on Core's Senior Exchangeable Notes. The Company is unable at this time to provide 2010 full-year guidance with a high degree of confidence. Adjustment to Senior Exchangeable Notes Exchange Rate The dividends described herein will result in an adjustment to the Exchange Rate on our Senior Exchangeable Notes. The new exchange rate will be 10.8120 per $1,000 principal amount of the outstanding notes and is effective 26 January 2010. The Company has scheduled a conference call to discuss this quarter's earnings announcement. The call will begin at 7:30 a.m. CST on Thursday, 11 February 2010. To listen to the call, please go to Core's website at www.corelab.com.
Core Laboratories N.V. (www.corelab.com) is a leading provider of proprietary and patented reservoir description, production enhancement, and reservoir management services used to optimize petroleum reservoir performance. The Company has over 70 offices in more than 50 countries and is located in every major oil-producing province in the world.
This release includes forward-looking statements regarding the future revenues, profitability, business strategies and developments of the Company made in reliance upon the safe harbor provisions of Federal securities law. The Company's outlook is subject to various important cautionary factors, including risks and uncertainties related to the oil and natural gas industry, business conditions, international markets, international political climates and other factors as more fully described in the Company's 2008 Form 10-K filed on 20 February 2009, and in other securities filings. These important factors could cause the Company's actual results to differ materially from those described in these forward-looking statements. Such statements are based on current expectations of the Company's performance and are subject to a variety of factors, some of which are not under the control of the Company. Because the information herein is based solely on data currently available, and because it is subject to change as a result of changes in conditions over which the Company has no control or influence, such forward-looking statements should not be viewed as assurance regarding the Company's future performance. The Company undertakes no obligation to publicly update any forward looking statement to reflect events or circumstances that may arise after the date of this press release.
CORE LABORATORIES N.V. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
-------- -------- -------- --------
REVENUES $181,599 $201,188 $695,539 $780,836
OPERATING EXPENSES:
Costs of services
and sales 120,565 130,194 457,769 514,782
General and
administrative
expenses 7,777 9,341 30,372 31,646
Depreciation and
amortization 6,181 5,696 23,818 21,773
Other expense
(income), net 2,800 3,542 (3,202) 5,580
----- ----- ------ -----
OPERATING INCOME 44,276 52,415 186,782 207,055
Gain on repurchase of
senior exchangeable
notes - 2,829 - 2,829
Interest expense 3,988 4,235 15,523 21,610
----- ----- ------ ------
INCOME BEFORE INCOME TAX
EXPENSE 40,288 51,009 171,259 188,274
Income tax expense 16,511 15,732 57,164 56,766
------ ------ ------ ------
NET INCOME 23,777 35,277 114,095 131,508
NET INCOME ATTRIBUTABLE
TO NON-CONTROLLING
INTEREST 160 59 491 342
--- --- --- ---
NET INCOME ATTRIBUTABLE
TO CORE LABORATORIES
N.V. $23,617 $35,218 $113,604 $131,166
======= ======= ======== ========
Diluted Earnings
Per Share: $1.00 $1.51 $4.87 $5.48
===== ===== ===== =====
WEIGHTED AVERAGE
DILUTED COMMON
SHARES OUTSTANDING 23,677 23,289 23,328 23,944
====== ====== ====== ======
SEGMENT INFORMATION:
Revenues:
Reservoir Description $107,457 $108,730 $414,934 $435,425
Production Enhancement 61,140 75,439 230,652 293,017
Reservoir Management 13,002 17,019 49,953 52,394
------ ------ ------ ------
Total $181,599 $201,188 $695,539 $780,836
======== ======== ======== ========
Operating income (loss):
Reservoir Description $23,415 $24,175 $106,421 $101,783
Production Enhancement 17,706 21,266 65,076 93,025
Reservoir Management 4,160 5,946 14,620 16,224
----- ----- ------ ------
Subtotal 45,281 51,387 186,117 211,032
Corporate and other (1,005) 1,028 665 (3,977)
------ ----- --- ------
Total $44,276 $52,415 $186,782 $207,055
======= ======= ======== ========
CORE LABORATORIES N.V. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(Unaudited)
ASSETS: 31 December 2009 31 December 2008
---------------- ----------------
Cash and Cash Equivalents $181,045 $36,138
Accounts Receivable, net 133,758 144,293
Inventories, net 32,184 34,838
Other Current Assets 43,550 20,376
------ ------
Total Current Assets 390,537 235,645
Property, Plant and Equipment, net 98,784 103,463
Intangibles, Goodwill and Other Long
Term Assets, net 168,845 182,427
------- -------
Total Assets $658,166 $521,535
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts Payable $33,009 $41,588
Other Current Liabilities 73,399 54,102
------ ------
Total Current Liabilities 106,408 95,690
Long-Term Debt and Lease Obligations 209,112 194,568
Other Long-Term Liabilities 60,888 42,992
Shareholders' Equity 281,758 188,285
------- -------
Total Liabilities and Shareholders'
Equity $658,166 $521,535
======== ========
CORE LABORATORIES N.V. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(amounts in thousands)
(Unaudited)
Twelve Months Ended
31 December 2009
----------------
CASH FLOWS FROM OPERATING ACTIVITIES $181,873
CASH FLOWS FROM INVESTING ACTIVITIES (18,540)
CASH FLOWS FROM FINANCING ACTIVITIES (18,426)
-------
NET CHANGE IN CASH AND CASH EQUIVALENTS 144,907
CASH AND CASH EQUIVALENTS, beginning of period 36,138
------
CASH AND CASH EQUIVALENTS, end of period $181,045
========
Non-GAAP Information
Management believes that the exclusion of certain income and expenses
enables it to evaluate more effectively the Company's operations period-
over-period and to identify operating trends that could otherwise be
masked by the excluded items. For this reason, we used certain non-GAAP
measures that exclude these items; we felt that presentation provides the
public a clearer comparison with the numbers reported in prior periods.
Reconciliation of Operating Income
(amounts in thousands)
Three Months Ended 31 December 2009
(Unaudited)
Reservoir
Description Consolidated
----------- ------------
Operating income $23,415 $44,276
Devaluation related to
Venezuela and other foreign
exchange losses 2,543 2,922
----- -----
Operating income excluding
specific items $25,958 $47,198
======= =======
Three Months Ended 31 December 2008
Reservoir
Description
-----------
Operating income $24,175
Foreign currency loss 2,975
-----
Operating income excluding
specific items $27,150
=======
Reconciliation of Earnings Per Diluted Share
(Unaudited)
Three Months Ended Twelve Months Ended
31 December 2009 31 December 2009
---------------- ----------------
Earnings per diluted share $1.00 $4.87
Devaluation related to Venezuela 0.12 0.12
Other foreign exchange (gains)
losses (net of tax) 0.01 (0.05)
Gain on settlement of a
contingent liability - (0.11)
Mexico tax rate adjustment 0.12 0.12
---- ----
Earnings per diluted share
excluding specific items $1.25 $4.95
===== =====
Computation of Cash per Diluted Share
(amounts in thousands, except per share data)
(Unaudited)
31 December 2009
----------------
Cash and cash equivalents $181,045
========
Weighted average diluted common shares 23,677
======
Cash per diluted share $7.65
=====
Free Cash Flow
Core uses the non-GAAP measure of free cash flow and free cash flow per
diluted share to evaluate its cash flows and results of operations. Free
cash flow and free cash flow per diluted share are important measurements
because it represents the cash from operations, in excess of capital
expenditures, available to operate the business and fund non-discretionary
obligations. Free cash flow and free cash flow per diluted share are not
measures of operating performance under GAAP, and should not be considered
in isolation nor construed as an alternative to operating income, net
income, earnings per share, or cash flows from operating, investing, or
financing activities, each as determined in accordance with GAAP. You
should also not consider free cash flow and free cash flow per diluted
share as a measure of liquidity. Moreover, since free cash flow and free
cash flow per diluted share are not measures determined in accordance with
GAAP and thus are susceptible to varying interpretations and calculations,
free cash flow and free cash flow per diluted share as presented may not
be comparable to similarly titled measures presented by other companies.
Computation of Free Cash Flow
(amounts in thousands, except per share data)
(Unaudited)
Three Months Twelve Months Twelve Months
Ended Ended Ended
31 December 31 December 31 December
2009 2009 2008
------------ ------------ -------------
Net cash provided by
operating activities $36,959 $181,873 $155,207
Less: capital expenditures (7,295) (17,289) (30,950)
------ ------- -------
Free cash flow $29,664 $164,584 $124,257
======= ======== ========
Weighted average diluted
common shares 23,677 23,328 23,944
====== ====== ======
Free cash flow per
diluted share $1.25 $7.06 $5.19
====== ===== =====
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