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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
------------------------
FORM 10-K
(Mark One)
[X]X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 19972000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________________ to __________________________
Commission File Number 0-26710001-14273
CORE LABORATORIES N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE NETHERLANDS NOT APPLICABLE(Exact name of Registrant as specified in its charter)
The Netherlands Not Applicable
(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
incorporation or organization)
HERENGRACHTHerengracht 424
1017 BZ AMSTERDAM
THE NETHERLANDS NOT APPLICABLEAmsterdam
The Netherlands Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (31-20)420-3191
Securities registered pursuant to Section 12(b) of the Act:
NONETitle of each class Name of exchange on which registered
------------------- ------------------------------------
Common Shares, NLG 0.03 New York Stock Exchange
Par Value Per Share
Securities registered pursuant to Section 12(g) of the Act: TITLE OF EACH CLASS
Common Shares, NLG. 03 Par Value Per ShareNone
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___X
-----
As of March 16, 1998,6, 2001, the number of common shares outstanding was 24,768,921.32,302,657.
At that date, the aggregate market value of common shares held by non-affiliates
of the registrant was approximately $402,813,098.$739,685,001.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART OFPart of 10-K
- --------
1. Proxy statement to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 with respect to the 19982001 annual meeting of shareholders.
PART III
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CORE LABORATORIES N.V.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 19972000
TABLE OF CONTENTS
PAGE
Page
PART I ----
Item 1. Business................................................................................... 1
Item 2. Properties................................................................................. 6
Item 3. Legal Proceedings ......................................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ....................................... 6
PART II
Item 5. Market for the Common Shares and Related Shareholder Matters .............................. 7
Item 6. Selected Financial Data ................................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ................................ 15
Item 8. Financial Statements and Supplementary Data................................................ 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 15
PART III
Item 10. Directors and Executive Officers of the Registrant......................................... 16
Item 11. Executive Compensation..................................................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 16
Item 13. Certain Relationships and Related Transactions............................................. 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 17
i
PART I
Item 1. Business.............................
Item 2. Properties...........................
Item 3. Legal Proceedings....................
Item 4. Submission of Matters to a Vote of
Security Holders.....................
PART II
Item 5. Market for the Common Shares and
Related Shareholder Matters..........
Item 6. Selected Financial Data..............
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations...........................
Item 8. Financial Statements and
Supplementary Data...................
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.................
PART III
Item 10. Directors and Executive Officers of
the Registrant.......................
Item 11. Executive Compensation...............
Item 12. Security Ownership of Certain
Beneficial Owners and Management.....
Item 13. Certain Relationships and Related
Transactions.........................
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K....
PART I
ITEM 1. BUSINESS
GENERALBusiness
General
Core Laboratories N.V. ("Core Laboratories", "we", "our" or the "Company""us") was
established in 1936 and is one of the world's leading providers of proprietary
and patented reservoir description, production enhancement and reservoir
management services for optimizingto the oil and gas industry. These services are directed
toward enabling our clients to improve reservoir performance and maximizing
hydrocarbon recovery from new and existing fields. The Company's customers
include major, national, and independentincrease oil
and gas producers. In addition, the
Company manufactures and sells petroleum reservoir rock and fluid analysis
instrumentation and other integrated systems which complements its services
operations. Core Laboratories currently operatesrecovery from their producing fields. We have over 70 facilitiesoffices in overmore
than 50 countries and hashave approximately 3,4003,900 employees.
RECENT DEVELOPMENTS
SCOTT PICKFORD ACQUISITION
On March 1, 1997, the Company acquired the outstanding shares of Scott Pickford
plc and its subsidiaries ("Scott Pickford") for approximately $14.9 million.
Scott Pickford, a London-based company, provides petroleum reservoir management,
geoscience, geophysical and engineering services to its customers by utilizing
petrophysical and phase behavior data sets measured by Core Laboratories. Scott
Pickford specializes in large field studies and equity determinations primarily
in the North Sea.
SAYBOLT ACQUISITION
On May 12, 1997, the Company consummated the acquisition of all the outstanding
shares of Saybolt International B.V. and its subsidiaries ("Saybolt"), a
privately held Netherlands company, for $67 million in cash and the assumption
of $5 million of net debt. Saybolt operates in over 50 countries and is an
international leader in providing analytical and field services to characterize
properties of crude oil and petroleum products for the oil industry. These
services complement phase behavior data sets measured on reservoir fluids by
Core Laboratories. Saybolt has an existing presence in the former Soviet Union
which provides the operating experience and base from which Core Laboratories
can offer reservoir description, production enhancement and reservoir management
services.
TWO-FOR-ONE STOCK SPLIT
On October 22, 1997, the Company declared a two-for-one split of its common
shares payable on December 19, 1997, to shareholders of record as of the close
of business on December 1, 1997. All agreements concerning stock options and
other commitments payable in the Company's common shares provide for the
issuance of additional shares in the event of a declaration of a stock split. An
amount equal to the par value of the common shares issued was transferred from
additional paid-in capital to the common share account. All references to number
of shares, except shares authorized, and per share information have been
restated to reflect the stock split.
PUBLIC OFFERING
On November 20, 1997, the Company successfully completed a public offering in
which it sold 2,800,000 of its common shares and received net proceeds of $47.2
million. In addition, the underwriter's overallotment was exercised for 164,862
common shares in December 1997 and resulted in additional net proceeds of $2.8
million.
STIM-LAB MERGER
On December 29, 1997, the Company completed the acquisition of all of the
outstanding shares of Stim-Lab, Inc. ("Stim-Lab"), a privately held Company
based in Duncan, Oklahoma. Stim-Lab is a world leader in hydraulic fracturing
and well stimulation technologies. The merger was accounted for as a pooling of
interests and the Company issued approximately 459,000 common shares in exchange
for all of the outstanding shares of Stim-Lab. Stim-Lab's results of operations
for the year ended December 31, 1997 have been combined with that of the
Company's. Consolidated financial statements for prior years were not restated
due to immateriality.
BUSINESS STRATEGY
The Company'sBusiness Strategy
Our business strategy is to continue the expansion of its operations
throughto provide advanced technologies
that improve reservoir performance by (i) continuedcontinuing the development of
proprietary hydrocarbon production
enhancement technologies services and products through client-driven research and development, (ii)
expandedexpanding the services and product linesproducts offered throughout the
Company'sour global infrastucture,network of
offices and (iii) acquisition ofacquiring complementary businesses that add key technologies
or market presence and enhance existing products and services.
DEVELOPMENT OF NEW TECHNOLOGIES, SERVICES AND PRODUCTS
The Company'sDevelopment of New Technologies, Services and Products
We conduct research and development strategy is designed to maintain and
enhance its market leadership position in its principal businesses by
emphasizing the development of technology, services and products to meet the needs of itsour customers
who are continually seeking new technologies to lower their costs of finding,
developing and producing oil and refining hydrocarbons. The Company's strategy
reflects the trend towards increased utilization of advanced technologies to
enhance the efficiency of development drilling, reduce the costs associated with
production of known reserves, maximize the efficiency of secondary and tertiary
recovery techniques, and reduce finding and development costs for new reserves.gas. While the aggregate number of wells being
drilled per year has remained
relatively constant in recent years,fluctuated relative to market conditions, oil and gas
producers have increased expenditures on high-technology services that better describedwhich improve
their understanding of the reservoir,
assists them in enhancing production, and improves the management of their
reservoirs.reservoir. They are also spending more on advanced
reservoir rocktechnologies to increase production of oil and fluid
analysis that assist in the development of more complete and comprehensive
analyses of reservoir characteristics and hydrocarbon fluids. The Company
intendsgas from their producing fields.
We intend to continue to concentrate itsconcentrating our efforts on technologies that enhance
development and production efficiencies, as opposed to the more volatile
exploration sectorefficiencies.
International Expansion of the oilServices and gas industry.
INTERNATIONAL EXPANSION OF SERVICES AND PRODUCTSProducts
Another component of the Company'sour business strategy is to broaden the spectrum
of services and products offered to itsour clients internationally. This goal is
expectedon a global basis. We plan to
be accomplished through the integrationuse our worldwide network of theoffices to offer many of our new services and
products that have been developed internally or obtained through acquisitions
into manyacquisitions.
This allows us to enhance our revenues through efficient utilization of the Company's over 70 offices located in more than 50 different
countries. Management believes this integration will expand the related markets
served by ProTechnics Company (a December 31, 1996 acquisition), Scott
Pickford, Saybolt, Stim-Lab and otherour
worldwide network.
Acquisitions
We continually review potential future acquisitions.
ACQUISITIONS
The Company continually reviews potential acquisitions in existing or related
business areas to add key technologies,
enhance market presence or complement existing businesses. The Company'sOur recent
acquisitions reflect the Company'sour desire to broaden the services offeredwe offer to itsour clients.
IMPACT OF BUSINESS STRATEGY
The Company believesSeveral recent acquisitions are summarized as follows:
o In December 2000, we acquired Core Petrophysics, Inc. ("CPI"). CPI
is a technology leader engaged in the petrophysical
characterization of partially consolidated and unconsolidated
reservoirs which make up the majority of deepwater reservoirs
around the world.
o In June 2000, we acquired Production Enhancement Corporation
("PENCOR"). PENCOR provides fluid phase behavior services used to
characterize crude oils, natural gases and other reservoir fluids.
o In January 2000, we acquired TomoSeis Corporation ("TomoSeis").
TomoSeis provides detailed reservoir imaging services that are a
component of timelapse (4D) seismic and reservoir monitoring
programs.
1
More information relating to acquisitions is included in Note 3 of the
implementation of these strategies has contributedNotes to the significant increase in income before interest expense, income tax and an
extraordinary item to $28.4 million for the year ended December 31, 1997, from
$12.8 million for the year ended December 31, 1996.
OPERATIONS
The Company derives itsConsolidated Financial Statements.
Operations
We derive our revenues from services and sales to customers primarily
in one industry segment, the oil and gas industry.
SERVICES
The Company providesOur reservoir optimization technologies are interrelated and are
organized into three related services for optimizing reservoir performance
and maximizing hydrocarbon recovery from new and existing fields.complementary segments. Disclosure relating to the results
of these business segments is included in Note 12 of the Notes to Consolidated
Financial Statements.
o RESERVOIR DESCRIPTION SERVICES:Reservoir Description: Encompasses the petrophysical
characterizationscharacterization of
petroleum reservoir rock, fluid and gas samples. We provide
analytical and field services to characterize properties of crude
oil and petroleum products to the phase behavior
relationships ofoil and gas industry.
o Production Enhancement: Includes products and services relating to
reservoir fluidswell completions, perforations, stimulations and
gases.
o PRODUCTION ENHANCEMENT SERVICES: Includes field applications of
proprietary technologiesproduction. We provide integrated services to maximizeevaluate the efficiency and
effectiveness of well completions and stimulations.to develop solutions aimed
at increasing the effectiveness of enhanced oil recovery projects.
o RESERVOIR MANAGEMENT SERVICES:Reservoir Management: Combines and integrates data setsinformation from
reservoir description and production enhancement services to
maximize daily
hydrocarbonincrease production and improve recovery from a well or field.
Typically, rock and fluids samples are collected from wells drilled into known
or potential petroleum reservoirs and sent to the Company for analyses. These
analyses accurately measure the petrophysical properties of the rocks and
pressure-volume-temperature relationships of the reservoir fluids to help
determine the commercial viability of the hydrocarbon accumulation and to
develop a production program that maximizes ultimate hydrocarbon recovery. The
data also are used to calibrate and validate wireline logs that may be used to
estimate certain properties of the reservoir. Without measured calibration data,
wireline log estimates can produce erroneous values, which could lead to
incorrect decisions regarding the development or abandonment of hydrocarbon
accumulations.
The data generated by the Company's analyses are used during all stages of the
well cycle from exploration to primary and secondary production and decisions
concerning the abandonment of a property. Recent advances in drilling and coring
technologies have significantly reduced the cost of retrieving core samples from
reservoirs and the Company expects these developments to lead to increased use
of reservoir data obtained from rock core sample analyses. The data generated by
the Company's analyses also provides information that is used to improve the
processing and interpretation of 2-D and 3-D seismic programs and management
believes such data will be used as a component of reservoir production
management based on emerging 4-D seismic technologies. Oil and gas producers
have been increasing expenditures for analytical services to reduce their risks
in developing and producing oil and gas reservoirs and to lower their costs of
finding, developing and producing oil and gas.
The most basic analyses of rock properties provided by the Company measure
porosity and permeability, which determine the storage and flow capacities of
potentialfrom our
clients' reservoirs.
In addition to basic measurements, which are made at
surface conditions, the Company is increasingly providing technologically
advanced analyses of reservoir rock and fluids involving the simulation of the
reservoir's actual subsurface conditions. The Company also performs advanced
analyses of reservoir fluids at varying pressure and temperature conditions to
determine their physical and chemical properties at various points during the
producing life of a field.
As a result of the December 31, 1996 merger with ProTechnics Company
("ProTechnics"), the Company provides production enhancementWe offer our services used to
design and measure the effectiveness of well completion and stimulation programs
and to maximize the hydrocarbon yields of enhanced recovery projects. The
services offered are field extensions of the laboratory studies of reservoir
rocks and fluids conducted by Core Laboratories.
The Company is one of the leading providers of services that measure the
effectiveness of well stimulations and completions via their proprietary
ZeroWash and SpectraScan technologies. The Company is also the leader in
determining the efficiencies of enhanced recovery projects through field tracer
surveys. The Company is currently developing electromagnetic wireless
communication tools that can be used to monitor various bottom hole well
conditions during completion or production operations, as well as measurement
while drilling systems. The Company has won Special Meritorious Engineering
Awards for its innovative technologies in three of the past four years at the
annual Offshore Technology Conference. The Company employs these new
technologies to complement laboratory services associated with the prevention of
formation damage, phase behavior relationships of downhole reservoir fluids, and
better design of water or miscible floods for enhanced recovery projects.
With the recent acquisition of Scott Pickford, the Company has expanded into
reservoir management services providing solutions from designing the well
completion, stimulation or enhanced recovery project to measuring the
performance in the field. Demand for these services has been increasing,
especially internationally, as oil and gas companies put more emphasis on
producing incremental amounts of hydrocarbons from established fields.
The Company also provides analytical testing of petroleum products, including
octane testing and the analysis of crude oil, natural gas, lubricants, greases
and other petroleum products and chemicals. The Company's services operations
serve a diverse customer base including oil and gas exploration and production
companies; petroleum refineries and processors; and engineering and consulting
firms.
The Company adheres to the strict quality standards that are demanded by various
in-house and proprietary procedures, as well as standards established by the
American Society of Testing and Materials, which are used in a variety of
petroleum services analyses. Management believes the Company demonstrates its
commitment to quality by providing resources, money, time and education to
maintain its reputation as a high-quality provider of high-technology analytical
and consulting services.
Ongoing research and development are an important part of the Company's services
operations. The Company has in the past committed significant resources to
research and development and anticipates that it will continue to do so in the
future. Over the years, the Company has made a number of technological advances,
including the development of key technologies utilized in the Company's
operations. Substantially all of the new technologies have resulted from
requests and guidance from the Company's clients, especially major oil
companies.
Services are offered worldwide through the Company's technologyour global network of over
70 sales, services and operating facilities located in over 50 countries.offices.
Services accounted for approximately 86%77%, 76%82% and 71%88% of the Company's totalour revenues from
continuing operations for the years ended December 31, 1997, 19962000, 1999 and 1995,1998,
respectively.
SALES
Core Laboratories manufactures and sells petroleum reservoir rock and fluid
analysis instrumentation and other integrated systems which complements its
services operation. The Company designs and manufacturesWe manufacture products primarily in three facilities for distribution
on a wide range of
laboratory instrumentation and equipment for reservoir rock and fluids analyses,
including a majority of the proprietary equipment used in the Company's services
facilities. The sale of the Company's proprietary equipment to non-competing
customers has generated additional revenues for its services operation by
maintaining and enhancing customer relations and generating demand for
complementary services.
The Company also provides integrated octane measurement systems and process
analyzer systems that are used for the measurement, analysis and monitoring of
various process streams. The full range of products and services includes
on-line process and laboratory equipment, engineering services, and education
programs to refineries throughout the world.
The Company currently offers its products worldwide through 6 manufacturing
facilities. Sales revenueglobal basis. Product sales accounted for approximately 14%23%, 24%18% and 29%12% of
the
Company's totalour revenues from continuing operations for the years ended December 31, 1997, 19962000,
1999 and 1995,1998, respectively.
The sales backlog at December 31, 19972000 was approximately $12.8$6.0 million,
compared with $9.6$4.7 million at December 31, 1996.
MARKETING AND SALES1999. Sources of raw material are
readily available and our sales backlog should be filled in 2001.
Reservoir Description
Most commercial oil and gas fields consist of porous and permeable
reservoir rocks that contain natural gas, crude oil and water. Due to the
density differences of the fluids, natural gas typically caps the field and
overlies an oil layer, which overlies the water. We provide services that
characterize the porous reservoir rock and all three reservoir fluids.
We analyze samples of reservoir rocks for their porosity, which
determines reservoir storage capacity, and for their permeability, which defines
the ability of the fluids to flow through the rock. These measurements are used
to determine how much oil and gas are present in a reservoir and the rates at
which the oil and gas can be produced. We also use our proprietary technologies
to correlate the reservoir description data to wireline logs and seismic data.
These data sets are also used to determine the different acoustic velocities of
reservoir rocks containing water, oil and natural gas. These velocity
measurements are used in conjunction with our in-reservoir seismic monitoring
services.
2
Production Enhancement
The Company marketsdata we produce to describe a reservoir system is used to enhance
oil and sells itsgas production so that it will exceed the average oilfield recovery
factor which is approximately 40%. Two production-enhancement methods commonly
used are (1) hydraulic fracturing of the reservoir rock to improve flow and (2)
flooding the field with water, carbon dioxide or hydrocarbon gases to force more
oil and gas to the wellbore. Our technologies play a key role in the success of
both methods.
The hydraulic fracturing of a producing formation is achieved by
pumping a proppant material in a gel slurry into the reservoir zone at extremely
high pressures. This forces fractures to open in the rock and "props" the
fractures open so that reservoir fluids can flow to the production wellbore.
Our data on rock type and strength are critical for determining the
proper design of the hydraulic fracturing job. In addition, our testing
indicates whether the gel slurry is compatible with the reservoir fluids so that
damage does not occur to the porous rock network. Our proprietary ZeroWash(TM)
tracer technology is also used to determine that the proppant material was
properly placed in the fracture to ensure effective flow and increased recovery.
Many oilfields today are hydraulically fractured and flooded to
maximize oil and gas recovery. We conduct dynamic flow tests of the reservoir
fluids through the reservoir rock, at actual reservoir pressure and temperature,
to realistically simulate the actual flooding of a producing zone. We use
patented technologies, such as our Saturation Monitoring by the Attenuation of
X-rays (SMAX(TM)), to help design the enhanced recovery project. After a field
flood is initiated, we are often involved in monitoring the progress of the
flood to ensure the maximum amount of incremental production.
We are also an industry leader in high-performance perforating and
completion systems engineered to maximize well productivity by reducing,
eliminating or overcoming formation damage during the completion of oil and gas
wells. Among the numerous technologies we offer is the Completion Profiler(TM).
The Completion Profiler(TM) is a unique completion system we developed to
determine flow rates from reservoir zones after they have been hydraulically
fractured. This provides our clients with information in virtually real time.
Patent applications covering the technology have been filed in the United States
and in certain foreign jurisdictions.
Reservoir Management
Reservoir description and production enhancement information, when
applied across an entire oilfield, is used to maximize daily production and the
ultimate total recovery from the reservoir. We are involved in numerous
large-scale reservoir management projects, applying proprietary and
state-of-the-art techniques from the earliest phases of a field development
program until the last economic barrel of oil is recovered.
These projects are of increasing importance to oil companies as the
incremental barrel is often the lowest cost and most profitable barrel in the
reservoir. Producing incremental barrels increases our clients' cash flows which
may create future opportunities for us. We believe that increased cash flows
from incremental production will result in increased capital expenditures,
ultimately leading to future opportunities for us.
We acquired the patents for our exclusively licensed coherence cube
processing technique. This seismic data processing method enables us to better
image our clients' reservoirs from their existing 3D seismic data.
3
Marketing and Sales
We market and sell our services and products through a combination of
print advertising, technical seminars, trade shows and sales personnel and
representatives.
Print advertising is placed on a regular basis in trade and technical magazines
targeted to the Company'sthat target our customers. Direct sales and marketing are carried out by the Company's integratedour
sales force, technical experts and operating managers, and enhancedas well as by sales
representatives and distributors in various markets where the Company doeswe do not have
offices.
RESEARCH AND DEVELOPMENTResearch and Development
The market for the Company'sour products and services is characterized by changing
technology.technology and frequent product introduction. As a result, the Company'sour success is
dependent upon itsour ability to develop or acquire new products and services on a
cost-effective basis and to introduce them into the marketplace in a timely
manner. Core Laboratories
intendsWe view the cost to acquire many of our technologies to be, in essence,
expenditures to gain the benefit of the acquired company's research and
development projects. Research and development expenditures are charged to
expense as incurred. We intend to continue committing substantial financial
resources and effort to the development of new products and services. PATENTS AND TRADEMARKS
The Company believes itsOver the
years, we have made a number of technological advances, including the
development of key technologies utilized in our operations. Substantially all of
the new technologies have resulted from requests and guidance from our clients,
especially major oil companies. Additional disclosure relating to research and
development is included in Note 2 of the Notes to Consolidated Financial
Statements.
Patents and Trademarks
We believe our patents, trademarks and other intellectual property
rights are an important factor in maintaining itsour technological advantage.advantage,
although no one patent is considered essential to our success. Typically, the Companywe
will seek to protect itsour intellectual technology in all jurisdictions where the Company believeswe
believe the cost of such protection is warranted. INTERNATIONAL OPERATIONS
Core Laboratories operatesWhile we have patented some of
our key technologies, we do not patent all of our proprietary technology even
where regarded as patentable. In addition to patents, in many instances we
protect our trade secrets through confidentiality agreements with our employees
and our customers.
International Operations
[CHART]
We operate facilities in overmore than 50 countries. The Company'sOur non-U.S.
operations accounted for approximately 57%60%, 36%56% and 40%54% of the
Company'sour revenues from
continuing operations during the years ended December 31, 1997, 19962000, 1999 and 1995,1998,
respectively. The Company'sIn addition, some of our revenues in the U.S. are generated by
projects located outside the U.S. Our business is subject to various risks
beyond itsour control, such asincluding:
o instability of foreign economies and governments,governments;
o currency fluctuations, overlap of differentfluctuations;
o potential income tax structures,liabilities in multiple jurisdictions; and
o changes in laws and policies affecting trade and investment.
Any of such factors may cause facilities in some countries to become
unprofitable, possibly resulting in the closing of such facilities. The Company attemptsWe attempt
to limit itsour exposure to foreign currency fluctuations by limiting the amount in
which itsour foreign contracts are denominated in a currency other than the U.S.
dollarsdollar to an amount generally equal to the expenses expected to be incurred in
such foreign currency. The Company hasWe have not historically engaged in and doesdo not currently
intend to engage in any significant hedging or
4
currency trading transactions designed to mitigatecompensate for adverse currency
fluctuations. ENVIRONMENTAL REGULATION
The Company'sMore information on international operations use many chemicals and gases, therefore,is included in Note
12 of the Company isNotes to Consolidated Financial Statements.
Environmental Regulation
We are subject to a variety of federal, state, local and foreign laws andgovernmental regulations relatedrelating to the
use, storage, discharge and disposal of such chemicals and gases used in our
analytical and other emissions and wastes.manufacturing processes. Consistent with the Company'sour quality assurance
and control principles, the Company haswe have established proactive environmental policies
with respect to the handling and disposal of such chemicals, gases, emissions
and waste materials from its operations. The Company hasmaterials. We have engaged outside consultants to audit itsour
environmental activities and hashave implemented health and safety education and
training programs. The Company hasWe have not suffered material environmental claims in the
past. Management believesWe believe that the
Company'sour operations are currently in compliance with applicable
environmental laws and regulations, and that continued compliance with existing
requirements will not have a material adverse effect on the Company. However, publicour financial position
or results of operations. Public interest in the protection of the environment,
however, has increased dramatically in recent years
and the Company anticipatesyears. We anticipate that the
trend oftoward more expansive and stricter environmental laws and regulations will
continue, the occurrence of which may result in increasedrequire us to increase capital
expenditures or operating expenses by the Company.
COMPETITIONexpenses.
Competition
The businesses in which the Company engageswe engage are highly competitive. SeveralSome of the Company'sour
competitors are divisions or subsidiaries of companies that are larger and have
greater financial and other resources than the Company.we have. While no one company
competes with the Companyus in all of itsour product and service lines, the Company faces significantwe face competition in
these lines, primarily from independent, regional companies. The Company competesWe compete in
different product and service lines to various degrees on the basis of price,
technical performance, availability, quality and technical support. The Company'sOur ability
to compete successfully depends on elements both within and outside of itsour
control, including successful and timely development of new products and
services, performance and quality, customer service, pricing, industry trends
and general economic trends.
EMPLOYEESReliance on the Oil and Gas Industry
Our business and operations are substantially dependent upon the
condition of the global oil and gas industry. Future downturns in the oil and
gas industry, or in the oilfield services business, may have a material adverse
effect on our financial position or results of operations.
The oil and gas industry is highly cyclical and has been subject to
significant economic downturns at various times as a result of numerous factors
affecting the supply of and demand for oil and natural gas, including the level
of capital expenditures of the oil and gas industry; the level of drilling
activity; the level of production activity; market prices of oil and gas;
worldwide economic conditions; interest rates and the cost of capital;
environmental regulations; tax policies; political requirements of national
governments; coordination by the Organization of Petroleum Exporting Countries
("OPEC"); cost of producing oil and natural gas; and technological advances.
Employees
As of December 31, 1997, the Company2000, we had approximately 3,4003,900 employees. The
Company doesWe do
not have any material collective bargaining agreements and considersconsider relations
with itsour employees to be good.
ITEM5
Item 2. PROPERTIESProperties
Currently, Core Laboratories haswe have over 70 facilitiesoffices (totaling more than one million
square feet) in more than 50 countries
which contain over 1 million square feet.countries. In these locations, the Companywe typically leases thelease
our office facilities. The Company serves itsWe serve our worldwide customers through 6six advanced
technology centers ("ATC's") which are located in Dallas,Houston, Texas; Calgary,
Canada; Jakarta, Indonesia; Kuala Lumpur, Malaysia;Rotterdam, The Netherlands; Aberdeen, United Kingdom;Scotland; and
Maracaibo, Venezuela. ITEMThe ATC's are supported by over 50 regional specialty
centers located throughout the global energy producing provinces. Our facilities
are adequately utilized for current operations and should accommodate future
growth.
Item 3. LEGAL PROCEEDINGS
In the latter part of 1996, prior to its acquisition by the Company, Saybolt,
Inc., an indirect subsidiary of the parent, Saybolt International B.V., was
informed that the Environmental Protection Agency ("EPA") and the U.S.
Department of Justice ("DOJ") had commenced a criminal investigation into
certain practices at three of Saybolt's U.S. laboratories. The investigation has
focused on instances in which Saybolt employees in New Jersey, Massachusetts and
Connecticut may have failed to report accurate RFG test results to customers and
the EPA. The Company is cooperating with this investigation and, in addition,
has begun its own internal review of the matter. If the EPA and/or the DOJ
conclude that Saybolt was in noncompliance with any of the applicable rules and
regulations, the Company may be subject to fines, civil or criminal proceedings,
sanctions and/or the revocation of its licenses and/or authorization to perform
certain services governed by the EPA, customs or other agencies, or to continue
to conduct business in certain areas.
The U.S. Attorney's Offices for Massachusetts and New Jersey and the DOJLegal Proceedings
We are
conducting a criminal investigation as to whether Saybolt committed violations
of U.S. laws regulating international business actions of U.S. persons. On
January 29, 1998 the U.S. Attorney's Office for the District of Massachusetts
announced that the former president of Saybolt, Inc. had been arrested and
charged with violating the Foreign Corrupt Practices Act and the Travel Act. The
criminal complaint alleged that such person participated in arranging the
payment of $50,000 to Panamanian officials in 1995 in an effort to obtain a
lease and certain tax benefits from the Panamanian government for Saybolt de
Panama S.A.
The alleged violation occurred more than a year before the Company's acquisition
of Saybolt in May 1997 and was discovered during the EPA investigation of
Saybolt.
Representatives of the Company and their attorneys in the two above described
matters have held discussion with officials at the U.S. Attorney's Offices for
Massachusetts, Connecticut and New Jersey and the DOJ in an attempt to resolve
all disputes concerning Saybolt. As a result of these discussions. The Copmany
believes that the amount required to resolve these issues will not exceed $5.0
million. The Company believes that it has indemnify rights against the former
shareholders of Saybolt to cover contingencies and breaches of provisions of the
agreement entered into at the same time of the acquisition of Saybolt. While no
assuarance can be made as to the ultimate outcome of these matters, the Company
does not believe that such matters will have a material
adverse effect on the financial condition of the Company.
The Company may from time to time be subject to legal proceedings and claims whichthat
arise in the ordinary course of its business. Management believesWe believe that the outcome of thesecurrent
legal actions will not have a material adverse effect upon theour consolidated
financial position or future results or operations of the Company.
ITEMoperations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSSubmission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 1997.2000.
6
PART II
ITEMItem 5. MARKET FOR THE COMMON SHARES AND RELATED SHAREHOLDER MATTERS
PRICE RANGE OF COMMON SHARES
The Company'sMarket for the Common Shares and Related Shareholder Matters
Price Range of Common Shares
Our common shares trade and are quoted on Nasdaq National Marketthe New York Stock Exchange ("Nasdaq"NYSE") under
the symbol CRLBF."CLB". The following table shows for the periods
indicated therange of high and low sales prices per share of the common
shares as reported by Nasdaq, restated to reflect the two-for-one stock split.
HIGH LOWNYSE are set in the following table for the periods
indicated.
2000 High Low
---- ---
1997------- --------
First Quarter........................... 11 Quarter........................................... 29 1/8 18 3/8
Second Quarter.......................... 13 1/Quarter.......................................... 31 3/8 23
Third Quarter........................................... 29 3/4 15 11/16
8 3/Fourth Quarter.......................................... 28 9/16
Third Quarter........................... 18 7/16
12
Fourth Quarter.......................... 221999
----
First Quarter........................................... 26 1/4 16 1/2
Second Quarter.......................................... 18 5/8 11 3/4
Third Quarter........................................... 21 7/8 13 3/4
1996
First Quarter........................... 614 1/2 4 7/8
Second Quarter.......................... 8 5 7/8
Third Quarter........................... 8 1/4 6 3/16
Fourth Quarter.......................... 8 5/8 7 5/8Quarter.......................................... 22 3/4 16 3/4
On March 27, 19986, 2001, the closing price, as quoted by Nasdaq,the NYSE, was $24 1/4$23.95
per share. As of March 16, 1998,6, 2001, there were 24,768,92132,302,657 common shares outstanding held by
approximately 107250 record holders and approximately 3,59310,688 beneficial holders.
DIVIDEND POLICY
The Company hasDividend Policy
We have never paid cash dividends on itsour common shares and currently hashave no
plans to pay dividends on the common shares. The Company expectsWe expect that itwe will retain all
available earnings generated by itsour operations for the development and growth of
itsour business. Any future determination as to the payment of dividends will be
made inat the discretion of the Company'sour Supervisory Board of
Directors and will depend upon the Company'sour
operating results, financial condition, capital requirements, general business
conditions and such other factors as the Supervisory Board deemsthey deem relevant. Because the Company iswe are a
holding company that conducts substantially all of itsour operations through
subsidiaries, theour ability of the Company to pay cash dividends on the common shares is
dependent upon the ability of itsour subsidiaries to pay cash dividends or
otherwise distribute or advance funds to the Companyus and on the terms and conditions of
itsour existing and future credit arrangements as may exist from time
to time.arrangements. See "Liquidity and Capital
Resources" included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."Operations".
Recent Issuance of Unregistered Securities
In connection with our 2000 acquisitions, we issued approximately
1,023,000 common shares, with an estimated value of $19.4 million. Disclosure
related to recent issuances of common shares is included in Note 3 of the Notes
to Consolidated Financial Statements. With respect to the shares issued in each
acquisition, we relied on exemption from registration under Section 4(2) of the
Securities Act of 1933.
7
ITEMItem 6. SELECTED FINANCIAL DATASelected Financial Data
The following table sets forth selected historical consolidated
financial data for the periods indicated. We have restated all prior periods to
reflect the pooling-of-interests acquisitions of TomoSeis, PENCOR and CPI in
2000. Results from our environmental testing assets are included in all periods
through September 30, 1999. These assets were sold effective September 30, 1999.
The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Company'sour consolidated financial statements included elsewhere herein:statements.
YEAR ENDED DECEMBERYears Ended December 31,
------------------------------------------------------------------------------------
2000 (1) 1999 (1),(3) 1998 (1),(2) 1997 (1),(4) 1996 1995 1994 1993
-------------- ---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)(1),(4)
------------- ------------- ------------- ------------- -------------
Financial Statement Data: (in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
SERVICES AND SALES......................Revenues................................. $ 214,851336,098 $ 105,368322,757 $ 87,593317,118 $ 25,910251,250 $ 5,441
OPERATING EXPENSES:
Costs of services and sales........ 170,671 84,643 71,786 22,099 4,385
General and administrative
expenses......................... 5,974 3,559 2,719 666 390
Depreciation and amortization...... 10,822 4,600 3,262 986 210
Transaction costs associated with
merger........................... -- 355 -- -- --
Other income, net.................. (1,056) (603) (130) (81) (202)
-------------- ---------- ---------- --------- ---------
INCOME BEFORE INTEREST EXPENSE, INCOME
TAX, AND EXTRAORDINARY ITEM........... 28,440 12,814 9,956 2,240 658
INTEREST EXPENSE........................ 6,384 1,418 3,000 1,066 101
-------------- ---------- ---------- --------- ---------
INCOME BEFORE INCOME TAX AND
EXTRAORDINARY ITEM.................... 22,056 11,396 6,956 1,174 557
INCOME TAX EXPENSE...................... 6,617 3,719 2,174 412 179
-------------- ---------- ---------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM........ 15,439 7,677 4,782 762 378
EXTRAORDINARY ITEM, net of tax benefit
of $400............................... -- -- (911) -- --
-------------- ---------- ---------- --------- ---------
NET INCOME.............................. 15,439 7,677 3,871 762 378
LESS -- Net income applicable to
preferred loan stock.................. -- -- (334) (113) --
-------------- ---------- ---------- --------- ---------
NET INCOME APPLICABLE TO COMMON
SHARES................................ $ 15,439 $ 7,677 $ 3,537 $ 649 $ 378
============== ========== ========== ========= =========
BASIC PER SHARE DATA:
Basic income before extraordinary
item............................. $ 0.66 $ 0.36 $ 0.26 $ 0.12 $ 0.20
Extraordinary item................. -- -- (0.05) -- --
-------------- ---------- ---------- --------- ---------
Basic net income................... $ 0.66 $ 0.36 $ 0.21 $ 0.12 $ 0.20
============== ========== ========== ========= =========
Weighted average basic common
shares outstanding............... 23,255,641 21,184,500 17,164,550 5,388,790 1,871,694
============== ========== ========== ========= =========
DILUTED PER SHARE DATA:
Diluted income before extraordinary
item............................. $ 0.65 $ 0.36 $ 0.26 $ 0.12 $ 0.20
Extraordinary item................. -- -- (0.05) -- --
-------------- ---------- ---------- --------- ---------
Diluted net income................. $ 0.65 $ 0.36 $ 0.21 $ 0.12 $ 0.20
============== ========== ========== ========= =========
Weighted average diluted common
shares outstanding............... 23,936,325 21,381,804 17,270,578 5,388,790 1,871,694
============== ========== ========== ========= =========
DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- ---------- ---------- --------- ---------
(IN THOUSANDS)
BALANCE SHEET DATA:124,469
Income from continuing operations........ 19,152 2,380 21,193 17,800 6,932
Working capital..................... $ 55,573 $ 25,205 $ 24,459 $ 15,325 $ 372capital.......................... 123,708 93,667 62,001 52,965 21,523
Total assets....................... 238,016 79,691 71,379 59,877 2,944assets............................. 410,604 373,183 367,874 266,705 101,275
Long-term debt, including current
maturities....................... 73,698 16,024 16,269 31,865 219maturities............................ 82,647 86,771 91,503 77,737 19,839
Shareholders' equity............... 114,113 47,411 39,665 13,652 1,712equity..................... 251,858 212,317 203,379 120,258 51,900
Per Share Data:
Income from continuing operations:
Basic................................. $ 0.60 $ 0.08 $ 0.74 $ 0.71 $ 0.30
Diluted............................... $ 0.58 $ 0.07 $ 0.71 $ 0.69 $ 0.30
Weighted average common shares outstanding:
Basic................................. 31,790 30,874 28,654 25,098 23,026
Diluted............................... 32,941 31,868 29,680 25,802 23,224
Other Data:
Diluted earnings per share from
continuing operations
excluding goodwill amortization... $ 0.71 $ 0.20 $ 0.82 $ 0.75 $ 0.31
Restructuring and other charges.......... $ -- $ 17,706 $ -- $ -- $ 355
Current Ratio............................ 3.4:1 2.8:1 1.9:1 1.9:1 1.7:1
Debt to Capitalization Ratio............. 24% 27% 30% 37% 25%
1) See Note 3 of the Notes to Consolidated Financial Statements for a
discussion of acquisitions made in 2000, 1999 and 1998.
2) See Note 4 of the Notes to Consolidated Financial Statements for
information relating to the sale of the packaged analyzer business line in
1998.
3) In 1999, we recorded $17.7 million in restructuring, write-offs and other
charges as discussed in Note 13 of the Notes to Consolidated Financial
Statements.
4) Periods prior to 1997 do not include the financial position or operational
results of the purchase acquisitions of Scott Pickford plc (March 1997) and
Saybolt International B.V. (May 1997).
[CHART] [CHART] [CHART]
8
ITEMItem 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain matters discussed herein may containManagement's Discussion and Analysis of Financial Condition and Results
of Operations
General
This discussion 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. We have based the forward-looking statements relating to
our operations on our current expectations, estimates and projections. We
caution you that these statements are not guarantees of future performance and
involve risks and uncertainties that we cannot predict. In addition, we have
based many of these forward-looking statements on assumptions about future
events that may prove to be inaccurate. Accordingly, our actual outcomes and
results may differ materially from what we have expressed or forecast in the
forward-looking statements. Our operations are subject to risks and uncertainties. Such risks and uncertainties include,various risk factors
including, but
are not limited to, the following: the continued expansion of services is
dependent upon the Company'sto:
o our ability to continue to develop or acquire new and useful
technology;technology.
o the improvementrealization of margins is subject to the risk that anticipated synergies of existing and recentlyfrom acquired businesses
and future acquisitions will not be realized; the Company'sacquisitions.
o our dependence on one industry
segment,the oil and gas;gas industry, and the impact of
commodity prices on the expenditure levels of our customers.
o competition in our markets.
o the risks and uncertainties attendant to adverse industry,
political, economic and financial market conditions, including
stock prices, government regulations, interest rates and credit
availability;availability.
Oil and competitiongas prices rebounded strongly in 1999 from the lows experienced
in 1998. This recovery continued throughout 2000. Capital spending for
exploration and production for many of our customers is influenced by
expectations of the supply and demand and prices of oil and gas. With higher oil
and gas prices, our customers often increase their capital budgets which will
generally increase the level of spending for our products and services. However,
while our revenues increased year over year, this increase was not proportional
to the increased activity levels expected from the higher oil and gas prices.
Also, as a result of the consolidation in the Company's markets. Should
one or moreoil and gas industry, some of these risks or uncertainties materializeour
customers have used and should anymay continue to use their global presence and market
influence to seek economies of the
underlying assumptions prove incorrect, actual results of currentscale and future
operations may vary materially from those anticipated.
The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere herein.
BUSINESS DEVELOPMENT
The Companypricing concessions.
Business
Core Laboratories was established in 1936 and is one ofcurrently traded on
the New York Stock Exchange.
We provide our products and services to the world's leading providers
of proprietarymajor, national and
patented reservoir description, production enhancementindependent oil companies. Our specialty services and management services for optimizing reservoir performanceproducts are designed to
improve oil and maximizing
hydrocarbongas recovery from new and existing fields. The Company's customers
include major, nationalfields through the following
business segments:
o Reservoir Description: Encompasses the characterization of
petroleum reservoir rock, fluid and independentgas samples. We provide
analytical and field services to characterize properties of crude
oil and petroleum products to the oil and gas producers. In addition,industry.
o Production Enhancement: Includes products and services relating to
reservoir well completions, perforations, stimulations and
production. We provide integrated services to evaluate the
Company manufactureseffectiveness of well completions and sells petroleumto develop solutions aimed
at increasing the effectiveness of enhanced oil recovery projects.
9
o Reservoir Management: Combines and integrates information from
reservoir rockdescription and fluid analysis
instrumentationproduction enhancement services to
increase production and other integrated systems.
The Company's business strategy isimprove recovery of oil and gas from our
clients' reservoirs.
We plan to continue the expansion of itsour operations through (i)
continuedcontinuing the development of proprietary hydrocarbon production
enhancement technologies services and products through client-driven
research and development, (ii) expandedexpanding the services and product linesproducts offered
throughout the
Company'sour global infrastructure,network of offices and (iii) acquisition ofacquiring complementary
businesses that add key technologies or market presence and enhance existing
products and services.
The Company's research and development efforts recently have been directed
towards development of Wireless Electromagnetic Telemetry ("EM Telemetry"). EM
Telemetry allows the recording of bottomhole pressure and temperature data and
the transmission of that dataWe continued to the surface in real-time. Usage of EM Telemetry
allows actual pressure (which is often significantly different than calculated
pressure) to be measured. EM Telemetry has applications not only in conducting
hydraulic fracturing and acid treatments, but also for daily maintenance of
optimum production efficiency.
The Company'sdemonstrate success with our acquisition strategy, is to continue to seekas
illustrated by our most recent acquisitions of complementary businesses that add key technologies, expand market presenceTomoSeis, PENCOR and enhanceCPI. We have
also pursued the Company's existing products and services. Thissale of assets not critical to our growth strategy is
exemplified by the 1996 mergerdivesting
ourselves of ProTechnics and the 1997 acquisitionssubstantially all of Scott
Pickford, Saybolt, and Stim-Lab (the "Acquired Businesses").
On November 20, 1997, the Company successfully completed a public offeringour environmental testing assets in which it sold 2,800,000 of its common shares and received net proceeds of $47.2
million.1999. In
addition, the underwriter's overallotment was exercisedwe believe that we have positioned ourselves for 164,862
common sharesincreased
profitability by consolidating redundant facilities and reducing excess
personnel.
Results of Operations
Revenues and Income from Continuing Operations
(Dollars in December 1997 and resultedMillions)
[CHART]
Service revenues in additional net proceeds of $2.8
million. The total net proceeds of $50.02000 were $258.7 million, were usedwhich compares to repay $43.9$246.8
million in debt1999, and $254.4 million in 1998. This excludes revenues of $17.9
million and $25.4 million in 1999 and 1998, respectively, attributable to our
environmental testing assets, which were disposed of in the remainderthird quarter of
1999. The increase in service revenues in 2000 indicates a recovery from the
depressed market conditions in 1998 and 1999. These increases were primarily
derived from an increase in activity levels in North America for our development
and production enhancement projects.
Costs of services in 2000 were $206.4 million, a decrease of $8.4
million as compared to 1999 and a decrease of $16.2 million as compared to 1998.
Costs of services expressed as a percentage of service revenue were 80%, 81% and
80% in 2000, 1999 and 1998, respectively. During 1999, we took actions to reduce
our cost structure, including personnel reductions and office consolidations,
which contributed to an improvement in our service margins.
Sales revenues in 2000 were $77.4 million, which compares to $58.1
million in 1999, and $37.3 million in 1998, an increase of 33% and 108%,
respectively. This increase was retained for working capital.
RESULTS OF OPERATIONS
The following table sets forth certain percentage relationships basedprimarily driven by increased spending by our
customers on the Company's consolidated revenue for the periods indicated. The table reflects the
merger of Stim-Lab for all of 1997 (accounted for as poolings of interests) asadvanced technologies provided by Owen Oil Tools ("Owen"),
which provides well as the results of the acquisitions of Scott Pickford beginning March 1,
1997completion and Saybolt beginning May 1, 1997 (both accounted for as purchases).
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Services............................. 86.0% 76.4% 71.3%
Sales................................ 14.0 23.6 28.7
--------- --------- ---------
100.0 100.0 100.0
Operating expenses:stimulation technologies.
Costs of services............... 77.6* 80.6* 81.7*
Costs of sales.................. 91.0* 79.6* 82.7*
General and administrative
expenses...................... 2.8 3.4 3.1
Depreciation and amortization... 5.0 4.4 3.7
Transaction costs associated
with merger................... -- .3 --
Other income, net............... (.5) (.6) (.1)
--------- --------- ---------
Income before interest expense,
income tax, and extraordinary
item............................... 13.2 12.2 11.4
Interest expense..................... 3.0 1.4 3.4
--------- --------- ---------
Income before income tax and
extraordinary item................. 10.2 10.8 8.0
Income tax expense................... 3.0 3.5 2.5
--------- --------- ---------
Income before extraordinary item..... 7.2% 7.3% 5.5%
========= ========= =========
* Percentage based on applicable segment revenue, and not total revenue.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Total revenue for 1997 was $214.9sales in 2000 were $62.3 million, an increase of 103.9% from $105.4$13.9 million
in the prior year. Revenue gains of 129.6% were realized by the
Company's services operations for 1997and $35.4 million as compared to 1996. Services revenue
primarily increased as a result of increased demand for reservoir description,
production enhancement,1999 and reservoir management services, and the inclusion of
revenues from the Acquired Businesses.1998, respectively. Costs of services as a percentage of services revenue decreased compared to
prior year due to improved cost savings and operating efficiencies.
Costs of sales
expressed as a percentage of sales revenue for the year ended 1997
increasedrevenues were 80%, 83% and 72% in 2000, 1999
and 1998, respectively. The increase in cost of sales in 2000 and 1999 as
compared to a year ago1998 was primarily due to the costs associated with the 33% and 108%
increase in related sales of lower margin products.during these time periods.
10
General and administrative expenses increased $2.4are comprised of corporate
management and centralized administrative services which benefit our operating
subsidiaries. Although general and administrative expenses are generally more
fixed in nature, we did experience an increase which was largely attributable to
training and conversion costs for an upgraded accounting system and growth in
the number of people necessary to support increases in the scope of our
operations. The increase in general and administrative expenses was $1.2 million
in 19972000 as compared to $6.01999, which reflected an increase of $3.9 million as
a result of increased personnel cost attributablecompared to the Company's
growth. The Company's ongoing program to maintain tight controls over expenses
has resulted in maintaining general1998. General and administrative expenses as a percentage of
sales under 4%. As a percentage of revenue, general and administrative
expenses declined to 2.8%revenues remained below 5% for 1997 as compared to 3.4% for 1996.all periods.
Depreciation and amortization expense for 1997 increased to $10.8 million
compared to $4.6 million in 1996 primarily due to capital expenditures for new
equipment and the inclusion of depreciation and amortization from the Acquired
Businesses.
Interest expense increased $5.0 million in 19972000 decreased slightly as
compared to 1996.1999 and 1998. Although we had $32.8 million of capital expenditures
in 2000, the additional depreciation expense from these assets was more than
offset by the effect of asset retirements, the sale of the assets of our
environmental testing operations and the effect of assets which had become fully
depreciated.
Amortization of goodwill in 2000 and 1999 was $4.1 million in each
year, an increase from the $3.0 million in 1998. The increase iswas primarily due
to the addition of goodwill attributable to 1998 acquisitions accounted for as
purchases.
In the first quarter of 1999, we recorded write-offs and other charges
totaling $10.7 million. This amount included $4.4 million of asset write-offs,
$2.6 million related to facility closures and personnel reductions, and $3.7
million associated with the termination of the proposed acquisition of
GeoScience Corp. The asset write-offs consisted primarily of uncollectible
accounts receivable in the former Soviet Union and other Eastern Hemisphere
locations, due to economic instability in the region, as well as adjustments to
net realizable value of certain inventory and other current asset amounts. The
facility closures consisted primarily of the shutdown of our environmental
testing laboratory in Edison, New Jersey, the Saybolt Western Hemisphere
administrative office and a substantial reduction in our Venezuelan work force.
These actions, which affected a total of 47 employees, were substantially
complete as of April 30, 1999. The termination settlement included the
forgiveness of $3.0 million in working capital advances made by Core
Laboratories to GeoScience Corp.
In the fourth quarter of 1999, we recorded a $7.0 million charge to
cover the cost of exiting redundant facilities and restructuring certain of our
operations. This charge affected each of our operating segments as follows:
Reservoir Description - $2.8 million; Production Enhancement - $1.9 million;
Reservoir Management - $2.3 million. We combined personnel and equipment from
eight facilities into one Houston facility but no operations were discontinued
and we do not expect this facility consolidation to negatively affect our future
revenues. The move was completed in the second quarter of 2000. Related charges
included severance for approximately 100 field and administrative employees, the
accrual of future lease obligations and facility restoration costs and the
write-off of redundant fixed assets and leasehold improvements. Substantially
all of these employees were terminated as of June 30, 2000. Cash required for
the costs incurred through December 31, 2000 of $3.8 million, excluding asset
write-offs, was
11
funded from operating activities. We anticipate that the remaining costs will
also be funded through cash from operating activities. This charge is summarized
in the following table:
Restructuring Charges
(Dollars in Thousands)
Asset
Lease Write-
Obligations Severance Restoration offs(a) Other Total
----------- --------- ----------- ------- ------- -------
Total restructuring charges............. $ 2,983 $ 879 $ 786 $ 2,080 $ 308 $ 7,036
Less: Costs incurred through
December 31, 1999.............. 515 445 28 2,080 124 3,192
------- ------- ------- ------- ------- -------
Accrual remaining at December 31, 1999.. 2,468 434 758 - 184 3,844
Less: Costs incurred through
December 31, 2000.............. 1,440 434 655 - 184 2,713
------- ------- ------- ------- ------- -------
Accrual remaining....................... $ 1,028 $ - $ 103 $ - $ - $ 1,131
======= ======= ======= ======= ======= =======
(a) The fixed assets and leasehold improvements related to the Houston
consolidation were disposed of by the end of June 2000. The write-off
approximates the carrying amount as these assets were abandoned or sold for
salvage value. Depreciation expense was reduced by approximately $490 in 2000,
and will be reduced by $333 in 2001 and $342 thereafter. Also included in this
amount were $915 of working capital write-offs related to the restructuring of
foreign operations. The asset write-offs attributable to each segment were as
follows: Reservoir Description - $1,176; Production Enhancement - $346;
Reservoir Management - $558.
As discussed above, our results of operations in 1999 were adversely
affected by lower activity and spending levels in the industry. The actions we
took in 1999, including those which resulted in the restructuring charges, were
intended to lower our fixed operating costs and provide other operating
benefits, including improved communications and customer service. We did not
change our restructuring plan or revise our original estimates after the initial
charge was recognized.
Interest expense for 2000 was $8.2 million, a decrease of approximately
$0.3 million as compared to 1999, after increasing $1.4 million compared to
1998. The decrease in 2000 was primarily attributable to the reduction of debt
during the year. The increase from 1998 was due in part to additional borrowings
used to financeand debt assumed in connection with acquisitions, together with an increase in
interest rates, both from rising market interest rates and higher rates
associated with the Scott
Pickford and Saybolt acquisitions.
Senior Notes.
The Company'sdecrease in the effective income tax rate was 30.0%to 30% in 2000 from 35%
in 1999 and 32.6%31% in 1997 and 1996,
respectively. The Company's tax rate is less1998 reflects the increase in international earnings taxed at
rates lower than the statutory rate of 35.0% in The Netherlands statutory rate.
In 1998, we sold the majority of the net assets of our packaged
analyzer business line for approximately $4.1 million in cash, resulting in a
loss on sale of $1.3 million. Goodwill specifically related to this business
line of approximately $2.6 million was also written off, as was $1.0 million of
work-in-process inventory which was subsequently abandoned. These amounts are
included in the loss on disposition of discontinued operations. The losses from
this business line of $0.2 million in 1998 have been reported separately as
discontinued operations in the Consolidated Statements of Operations.
12
Segment Analysis
Our operations are managed primarily duein three complementary segments.
Segment Information
Revenues
---------------------------------------------------------------------------------------
For the Years Ended December 31, 2000 1999 1998
---------------------------------------------------------------------------------------
(Dollars in Thousands)
Reservoir Description....................... $ 190,726 $ 200,584 $ 205,718
Production Enhancement...................... 94,341 65,342 46,037
Reservoir Management........................ 51,031 56,831 65,363
---------------------------------------------------------------------------------------
Total Revenues......................... $ 336,098 $ 322,757 $ 317,118
=======================================================================================
Income (loss) before interest, taxes and
unusual charges
---------------------------------------------------------------------------------------
For the Years Ended December 31, 2000 1999 (a) 1998
---------------------------------------------------------------------------------------
(Dollars in Thousands)
Reservoir Description....................... $ 23,411 $ 22,095 $ 26,746
Production Enhancement...................... 14,665 11,339 8,217
Reservoir Management........................ (2,764) (3,417) 2,398
Corporate and other......................... 279 (108) 260
---------------------------------------------------------------------------------------
Income before interest, taxes and
unusual charges.................... $ 35,591 $ 29,909 $ 37,621
=======================================================================================
(a) The above segment amounts exclude unusual charges totaling $17,706
in 1999. The unusual charges, which are comprised of write-offs,
restructuring charges and other charges in the first quarter and fourth
quarter of 1999, were allocated to lower tax rateseach segment as follows: Reservoir
Description - $8,397; Production Enhancement - $2,854; Reservoir
Management - $2,759 and export sales benefits in
countries whereCorporate and other - $3,696 which consists of
costs related to the Company operated through subsidiaries, and is partially
offset by state and provincial taxes.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total revenuetermination of the proposed GeoScience acquisition
Reservoir Description
Reservoir Description revenues for 1996 was $105.42000 were $190.7 million, an
increase of 20.3% from $87.6
million in the prior year. Revenue gains of 28.9% were realized by the Company's
services operations for 19964% compared to 1995. Services revenue1999 revenues and 6% compared to 1998 revenues after
excluding the revenues attributable to our environmental testing assets, which
were sold in 1999. When revenues attributable to our environmental testing
assets are included in 1999 and 1998, this segment's revenues decreased by 5%
and 7%, respectively.
Income before interest, taxes and unusual charges in 2000 increased
$1.3 million as compared to 1999 and decreased $3.3 million as compared to 1998.
Our margins in this segment came under pressure in 1999 as our clients reduced
spending in response to lower oil and gas prices.
13
Production Enhancement
Production Enhancement revenues for 2000 were $94.3 million, an
increase of 44% compared to 1999 revenues and 105% compared to 1998 revenues.
Income before interest, taxes and unusual charges in 2000 was $14.7 million,
which was an increase of 29% and 78% as compared to 1999 and 1998, respectively.
The increases in revenues and income result primarily increased as a result of (i)from increased demand for
reservoir corewell completion and fluids
analysis, (ii) increased demandstimulation technologies provided by ProTechnics and Owen.
Reservoir Management
Reservoir Management revenues for tracing and logging services and (iii)
additional revenue from acquisitions.
Costs2000 were $51.0 million, a decrease
of services and sales as a percentage of services and sales revenue for
1996 improved slightly10% compared to 1999 revenues and 22% compared to 1998 revenues. Due to the
decline in revenues and lower margins, we experienced a year ago due to improved cost savings and
efficiencies.
General and administrative expenses increased $0.8loss of $2.8 million in
1996 to $3.6
million. The increase was primarily attributable to costs associated with
becomingthis segment in 2000, versus a publicly traded company and increased personnel costs due to growth.
The Company's ongoing program to maintain tight controls over expenses has
resulted in maintaining general and administrative expenses as a percentageloss of sales under 4%. As a percentage of net sales, general and administrative
expenses were 3.4% and 3.1% for 1996 and 1995, respectively.
Depreciation and amortization expense for 1996 increased to $4.6 million
compared to $3.3$3.4 million in 1995 primarily due1999 and earnings of $2.4
million in 1998. Of all our operations, this segment was affected to capitalthe
greatest extent by the industry downturn in 1999 and virtually flat
international spending by our clients in 2000. Demand for our seismic related
services was weak throughout 1999 and 2000 across most regions. Part of this
loss can be attributed to expenditures we made for research and development and
marketing of new equipmentreservoir optimization technologies. We have taken and will
continue to take actions, when appropriate, to control our costs and generate
additional service revenues in order to improve our results in this segment.
Liquidity and Capital Resources
We have historically financed our activities through cash flows from
operations, bank credit facilities, equity financing and the inclusionissuance of depreciationdebt.
During the year ended December 31, 2000, cash flows from operating
activities were $7.3 million, an increase of $2.1 million and amortization from acquisitions.
Transaction costs totaling $0.4 million associated with the ProTechnics merger,
which was accounted for as a pooling of interests, were expensed in the fourth
quarter of 1996 and primarily consist of legal, accounting and investment
banking fees.
Other income for 1996 increased $0.5 million from 1995 due to remuneration of
$0.3$1.3 million from
the State of California for property taken through rights of
eminent domaincorresponding periods in connection with road construction1999 and exchange gains on
transactions denominated in foreign currencies.
Interest expense decreased 52.7% to $1.4 million in 1996 compared to $3.0
million in 1995, due to a repayment of debt from the net proceeds of the initial
public offering in September 1995.
The Company's effective income tax rate was 32.6% and 31.3% in 1996 and 1995,1998, respectively. The Company's tax rate is less than the statutory rate of 35.0% in
The Netherlands, primarily due to lower tax rates and export sales benefits in
countries where the Company operated through subsidiaries, and is partially
offset by state and provincial taxes.
LIQUIDITY AND CAPITAL RESOURCES
On May 12, 1997, the Company entered into an Unsecured Credit Facility, which
was used to finance the acquisitions of Scott Pickford and Saybolt, as well as
refinance a previous credit facility. The Unsecured Credit Facility provides for
(i) a term loan of $55 million, (ii) a term loan denominated in British pounds
having a U.S. dollar equivalency of $15 million, (iii) a committed revolving
debt facility of $50 million and (iv) a Netherlands guilder denominated
revolving debt facility with a U.S. dollar equivalency of $5 million. Loans
under the Unsecured Credit Facility will generally bear interest from LIBOR plus
0.75% to a maximum of LIBOR plus 1.75%. The term loans require quarterly
principal payments beginning March 31, 1999 with the final principal payment due
June 30, 2002. The revolving debt facilities require interest payments only,
until maturity on June 30, 2002. The terms of the Unsecured Credit Facility
require the Company to meet certain financial covenants, including certain
minimum equity and cash flow tests. Management believes that the Company is in
compliance with all such covenants contained in its credit agreements.
As part of the purchase of Scott Pickford, the Company issued unsecured loan
notes as an alternative to the cash consideration paid for the outstanding
shares of Scott Pickford. The loan notes bear interest payable semi-annually, at
the rate of LIBOR less 1.0% per annum. Holders of the loan notes have the right
to redeem the loan notes at par on each interest payment date. Unless previously
redeemed or purchased, the loan notes will be redeemed at par on June 30, 2002.
Core Laboratories has generally funded its activities from cash flow from
operations, although the Company financed substantially all of the purchase
price for the acquisitions of Scott Pickford and Saybolt and issued
approximately 459,000 common shares to consummate the Stim-Lab merger. The
Company used existing cash and borrowed approximately $107.0 million under the
Unsecured Credit Facility to fund (i) $67.0 million paid in connection with
Saybolt Acquisition, and (ii) to retire approximately $31.1 million of its
existing indebtedness. The Company used the net proceeds of approximately $50.0
million from the public offering to repay $43.9 million in debt and the
remaining $6.1 million was retained for working capital. Of the $43.9 million of
debt repayment, $42.2 million was repaid in December 1997 and $1.7 million was
repaid in January 1998. At December 31, 1997, the Company2000,
we had working capital of $55.6$123.7 million (of which
$10.5 million was cash and short-term investments) and a current ratio of 2.3 to
1.0 compared to working capital of $25.2$93.7
million (of which $2.9 million was cash
and short-term investments) and a current ratio of 2.5 to 1.0 at December 31, 1996. The Company is1999 and $62.0 million at December 31, 1998. We are a
Netherlands holding company that conductsand we conduct substantially all of itsour operations
through subsidiaries. Consequently, the Company'sour cash flow is wholly dependent upon the ability
of itsour subsidiaries to pay cash dividends or otherwise distribute or advance
funds to us.
Our financing activities provided $15.1 million in 2000, an increase of
$19.8 million compared to 1999 and $3.5 million compared to 1998. Our investing
activities used $28.4 million in 2000 after having provided $9.6 million in 1999
and using $22.8 million in 1998. The significant financing and investing
activities in 2000 were as follows:
o During the Company. Allsecond quarter of 2000 we completed a public offering
in which certain shareholders sold 4,644,988 of their common
shares. In connection with the Company's
material subsidiaries are guarantors or co-borrowers underoffering, the Unsecured Credit
Facility.
The Company expectsunderwriters
exercised their over-allotment option and purchased 696,748 common
shares from us which resulted in net proceeds of $17.2 million.
These funds were used principally to reduce indebtedness and fund
anycapital expenditures.
o Indebtedness and capital leases were reduced by a total of $5.9
million.
o We incurred capital expenditures from continuing operations of
$32.8 million which included cash outlays for the facility
consolidation in Houston.
14
Our ability to maintain and grow our operating income and cash flow is
dependent upon continued capital spending. We believe our future acquisitions primarily through a
combination of working capital, cash flow from
operations, bank borrowings
(including the Unsecured Credit Facility),supplemented by our borrowing capacity and issuances of additional
equity.
Although the Unsecured Credit Facility imposes certain limitations on the
incurrence of additional indebtedness, in general the Company willequity should be permittedsufficient to assume, among other things, indebtedness of acquired businesses, subject to
compliance with the financial covenants of the Unsecured Credit Facility.
The Company anticipates that its cash flow from operations will provide cash in
excess of the Company's normalfund debt requirements, capital expenditures,
working capital needs and planned capital
expenditures for property, plant and equipment. Capital expenditures for 1997
were $15.3 million and for 1996 totaled $6.3 million.future acquisitions.
Due to the relatively low levelsinflationary rates in 2000, 1999 and 1998, the impact of
inflation experienced in 1995, 1996 and
1997, inflation has not had a significant effect on the Company'sour results of operations was insignificant.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk, which is the potential loss arising from
adverse changes in recent periods.
OTHER MATTERS
YEAR 2000 CONVERSION
Management believes conversionmarket prices and rates. We do not enter, or intend to a year 2000 compliant environment willenter,
into derivative financial instruments for trading or speculative purposes. We do
not present a material consideration for the Company's current operations. The
Company is currently engaged in a comprehensive projectbelieve that our exposure to upgrade its computer
software systems to programsmarket risks, which are year 2000 compliant.primarily related to
interest rate changes and fluctuations in foreign exchange rates, are material.
During 1999, we issued fixed rate Senior Notes denominated in U.S. dollars. The
Company does not
anticipate that total future costs associatedproceeds were used to pay off variable rate term loans. This significantly
reduced our exposure to market risk. This section should be read in conjunction
with potential year 2000
compliance issues will have a material adverse impact on its consolidated
financial position.
ITEM"Note 5 - Long-Term Debt" and "Note 9 - Concentration of Credit Risk" of
the Notes to Consolidated Financial Statements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial Statements and Supplementary Data
For the financial statements and supplementary data required by this
Item 8, see index to consolidated financial statementsConsolidated Financial Statements and schedulesSchedules at Item 14.
ITEMItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSUREChanges in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
15
PART III
Part III (Items 10 through 13) is omitted becausewill be incorporated by reference
pursuant to Regulation 14A under the Securities Exchange Act of 1934. The
Registrant expects to file a definitive proxy statement with the Securities
and Exchange Commission within 120 days after the close of the year ended
December 31, 1997, a definitive proxy statement pursuant to
Regulation 14A under the Securities Exchange Act of 1934. If for any reason such
a statement is not filed within such a period, this Report will be appropriately
amended.2000.
16
PART IV
ITEMItem 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORMExhibits, Financial Statement Schedules and Reports on Form 8-K
(A) FINANCIAL STATEMENTS(a) Financial Statements
The following reports, financial statements and schedules are filed
herewith on the pages indicated:
PAGEPage
----
CORE LABORATORIES N.V. AND
SUBSIDIARIES (THE "COMPANY"):
ReportsReport of Independent Public Accountants........................Accountants............................20
Consolidated Balance Sheets as of December 31, 19972000 and 1996.........1999........21
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 19962000, 1999 and 1995................1998.................................22
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1997, 19962000, 1999 and 1995...............................1998.............23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 19962000, 1999 and 1995................1998.................................24
Notes to Consolidated Financial Statements.........................
FINANCIAL STATEMENT SCHEDULESStatements..........................25
Financial Statement Schedules
All schedules have been omitted because they are not applicable, not
required under the instructions, or the information requested is set forth in
the consolidated financial statements or related notes hereto.
(B) REPORTS ON FORM(b) Reports on Form 8-K
None.No reports on Form 8-K were filed during the quarter ended
December 31, 2000.
17
(C) EXHIBITS(c) Exhibits
The following exhibits are incorporated by reference to the filing
indicated or are filed herewith.
INCORPORATED BY
REFERENCE FROM THE
EXHIBIT NO. EXHIBIT TITLE FOLLOWING DOCUMENTSIncorporated by
Reference from the
Exhibit No. Exhibit Title Following Documents
- ------------------------ ------------------------------------------------------------------- ------------------------------------------- ------------- ------------------
3.1 -- Articles of Association of the Company, as amended (including Form F-1, September 20, 1995
English translation)
4.1 -- Form of certificate representing Common Shares Form F-1, September 20, 1995Filed Herewith
10.1 -- Core Laboratories N.V. 1995 Long-Term Incentive Plan (as amended and Proxy Statement dated May 2,
and
restated effective as of May 29, 1997). 1997 for Annual Meeting of
Shareholders
10.2 -- Core Laboratories N.V. 1995 Nonemployee Director Stock Option Plan Proxy Statement dated May 2,
(as amended and restated effective as of May 29, 1997). 1997 for Annual Meeting of
Shareholders
10.3 -- Form of Registration Rights Agreement to be entered into by the Form 10-Q, November 10, 1995
Company and certain of its shareholders, dated September 15, 1995.1995
10.4 -- Purchase and Sale Agreement between Core Holdings B.V. and Western Form F-1, September 20, 1995
Atlas International, Inc., Western Atlas International Nigeria Ltd.,
Western Atlas de Venezuela, C.A., Western Atlas Canada Ltd. and Core
Laboratories Australia Pty. Ltd. dated as of September 30, 1994
10.5 -- Non-competition Agreement between Western Atlas International, Inc. Form F-1, September 20, 1995
and Core Holdings B.V. dated as of September 30, 1994
10.6 -- Form of Indemnification Agreement to be entered into by the Company Form F-1, September 20, 1995
and certain of its directors and officers
10.710.6 -- Indemnification Agreements, each dated as of October 20, 1995, Form 10-Q, November 10, 1995
between the Company and each of its directors and executive officers
10.8 -- Stock Purchase Agreement among Core Laboratories N.V., Saybolt Form 8-K, May 12, 1997
International B.V. and the shareholders of Saybolt International
B.V., dated as of April 16, 1997
10.910.7 -- Amended and Restated Credit Agreement among Core Laboratories N.V., Form S-3, November 20, 1997
and
Core Laboratories, Inc., Core Laboratories (U.K.) Limited, Bankers
Trust Company, NationsBank, N.A. and the bank groupBank Group, dated as of
July 18, 1997
10.10 -- Escrow Agreement among Core Laboratories N.V., each of the For 8-K, May 12, 1997
shareholders of Saybolt International B.V. and Chase Manhattan Bank
dated as of May 12, 1997
10.1110.8 -- Core Laboratories Supplemental Executive Retirement Plan effective Filed HerewithForm 10-K, March 31, 1998
as of January 1, 1998
10.9 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
David Michael Demshur dated as of August 18, 1998
10.10 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Richard Lucas Bergmark dated as of August 18, 1998
10.11 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Monty Lee Davis dated as of August 18, 1998
10.12 -- Form of Employment Agreement between Core Laboratories N.V. and John Form 10-K, March 31, 1999
David Denson dated as of August 18, 1998
10.13 -- Core Laboratories Supplemental Executive Retirement Plan for John D. Form 10-Q, November 15, 1999
Denson effective January 1, 1999
10.14 -- Core Laboratories Supplemental Executive Retirement Plan for Monty Form 10-Q, November 15, 1999
L. Davis effective January 1, 1999
10.15 -- Amendment to Core Laboratories Supplemental Executive Retirement Form 10-Q, November 15, 1999
Plan filed January 1, 1998, effective July 29, 1999
10.16 -- Amendment to Amended and Restated Credit Agreement among Core Form 10-Q, November 15, 1999
Laboratories N.V., Core Laboratories, Inc., Core Laboratories (U.K.)
Limited, Bankers Trust Company, Bank of America, N.A. and the Bank
Group, dated as of July 22, 1999
10.17 -- Note and Guarantee Agreement by Core Laboratories, Inc. for Form 10-Q, November 15, 1999
Guaranteed Senior Notes, Series A, and Guaranteed Senior Notes,
Series B, dated as of July 22, 1999
10.18 -- First Amendment to Core Laboratories N.V. 1995 Long-Term Incentive Filed Herewith
Plan (As Amended and Restated Effective as of May 29, 1997)
10.19 -- Second Amendment to Core Laboratories N.V. Nonemployee Director Filed Herewith
Stock Option Plan (As Amended and Restated Effective as of
May 29, 1997)
21.1 -- Subsidiaries of the Registrant Filed Herewith
23.1 -- Consent of Arthur Andersen LLP Filed Herewith
23.2 -- Consent of Grant Thornton LLP Filed Herewith
27.0 -- Financial Data Schedule Filed Herewith18
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTIONPursuant to the requirements of Section 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OFor 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.the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CORE LABORATORIES N.V.
BY: CORE LABORATORIES INTERNATIONALBy: Core Laboratories International B.V.
DATE: MARCH 31, 1998 BY:Date: March 15, 2001 By: /s/JACOBUS SCHOUTEN
JACOBUS SCHOUTEN
SUPERVISORY DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF--------------------------------
Jacobus Schouten
Supervisory Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES INDICATED, ON THE 31ST DAY OF MARCH, 1998.this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on the 15th day of March, 2001.
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------------------Signature Title
--------- -----
/s/DAVID M. DEMSHUR President, Chief Executive Officer
- -------------------------------------------------------------- and Supervisory Director DAVID(Principal
David M. DEMSHUR (PrincipalDemshur Executive Officer and Authorized
Representative in the United States)
/s/JOSEPH R. PERNA Senior Vice President and Supervisory
JOSEPH R. PERNA Director
/s/RICHARD L. BERGMARK Executive Vice President, Treasurer and
- -------------------------------------------------------------- Supervisory Director
Richard L. Bergmark
/s/ RANDALL D. KEYS Chief Financial Officer Treasurer and
RICHARD L. BERGMARK Supervisory Director (Principal
- -------------------------------------------------------------- Financial and Accounting Officer)
Randall D. Keys
/s/ BOB G. AGNEW Supervisory Director
- --------------------------------------------------------------
Bob G. Agnew
/s/ JOSEPH R. PERNA Supervisory Director
- --------------------------------------------------------------
Joseph R. Perna
/s/ TIMOTHY J. PROBERT Supervisory Director
- --------------------------------------------------------------
Timothy J. Probert
/s/ JACOBUS SCHOUTEN Supervisory Director
- --------------------------------------------------------------
Jacobus Schouten
/s/ STEPHEN D. WEINROTH Supervisory Director
STEPHEN- --------------------------------------------------------------
Stephen D. WEINROTHWeinroth
/s/JAMES A. READ RENE R. JOYCE Supervisory Director
JAMES A. READ- --------------------------------------------------------------
Rene R. Joyce
/s/JACOBUS SCHOUTEN D. JOHN OGREN Supervisory Director
JACOBUS SCHOUTEN- --------------------------------------------------------------
D. John Ogren
/s/TIMOTHY J. PROBERT ALEXANDER VRIESENDORP Supervisory Director
TIMOTHY J. PROBERT
/s/BOB G. AGNEW Supervisory Director
BOB G. AGNEW- --------------------------------------------------------------
Alexander Vriesendorp
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To theThe Supervisory Board of Directors and Shareholders of
Core Laboratories N.V.:
We have audited the accompanying consolidated balance sheets of Core
Laboratories N.V. (a Netherlands corporation) and subsidiaries (the Company) as of
December 31, 19972000 and 1996,1999, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997.2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We did not audit the 1995 consolidated financial
statements of ProTechnics Company and subsidiaries, a company acquired during
1996 in a transaction accounted for as a pooling of interests, as discussed in
Note 3. Such statements are included in the 1995 consolidated financial
statements of Core Laboratories N.V. and reflect total assets of 8 percent and
total revenues of 9 percent in 1995 of the consolidated totals. The consolidated
financial statements of ProTechnics Company and subsidiaries were audited by
other auditors whose report has been furnished to us and our opinion, insofar as
it relates to amounts included for ProTechnics Company and subsidiaries for
1995, is based solely upon the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted auditing
standards.in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Core Laboratories
N.V. and subsidiaries as of December 31, 19972000 and 1996,1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997,2000, in conformity with generally acceptedthe accounting principles as appliedgenerally
accepted in the United States of America.States.
ARTHUR ANDERSEN LLP
Houston, Texas
February 25, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ProTechnics Company and Subsidiaries
We have audited the consolidated balance sheets of ProTechnics Company (a Nevada
corporation) and Subsidiaries as of March 31, 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years then ended (not presented separately herein). These financial
statements are the responsibility of ProTechnics Company's management. Our
responsibiity is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatment. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ProTechnics
Company and Subsidiaries as of March 31, 1996, and the consolidated results of
their operations and their consolidated cash flows for each of the two years
then ended in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Houston, Texas
July 19, 19968, 2001
20
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
DECEMBERDecember 31, 1997 AND 1996
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
1997 1996
---------- ---------
ASSETS
CURRENT ASSETS:
Cash2000 and cash equivalents.......... $ 10,510 $ 2,935
Accounts receivable, less allowance
for doubtful accounts of $6,455
and $919 in 1997 and 1996,
respectively..................... 67,537 27,993
Inventories........................ 12,473 9,472
Prepaid expenses and other......... 5,771 1,223
Deferred income tax asset.......... 1,380 927
---------- ---------
Total current assets........ 97,671 42,550
PROPERTY, PLANT AND EQUIPMENT:
Land............................... 3,024 1,370
Buildings and leasehold
improvements....................... 22,260 11,402
Machinery and equipment............ 39,888 19,853
Construction in process............ 4,512 3,189
---------- ---------
69,684 35,814
Less -- accumulated depreciation... (16,130) (8,109)
---------- ---------
53,554 27,705
INTANGIBLES AND GOODWILL, net of
accumulated amortization of $2,263
and $506 in 1997 and 1996,
respectively....................... 82,809 8,417
LONG-TERM INVESTMENT................. 1,188 250
NON-CURRENT DEFERRED INCOME TAX
ASSET................................ 594 245
OTHER LONG-TERM ASSETS............... 2,200 524
---------- ---------
Total assets................ $ 238,016 $ 79,6911999
(In thousands, except share data)
ASSETS 2000 1999
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 12,918 $ 18,983
Accounts receivable, less allowance for doubtful accounts of $9,067 and $9,850
in 2000 and 1999, respectively.......................................... 110,915 84,941
Inventories ................................................................ 34,067 24,768
Prepaid expenses and other.................................................. 7,053 10,341
Deferred tax asset.......................................................... 10,265 6,429
---------- ----------
Total current assets ................................................... 175,218 145,462
PROPERTY, PLANT AND EQUIPMENT, net............................................... 83,338 70,985
INTANGIBLES AND GOODWILL, net.................................................... 147,918 151,098
OTHER LONG-TERM ASSETS........................................................... 4,130 5,638
---------- ----------
Total assets ........................................................... $ 410,604 $ 373,183
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ....................................... $ 632 $ 1,796
Current lease obligations................................................... 247 1,372
Accounts payable............................................................ 25,186 19,774
Accrued payroll and related costs .......................................... 6,979 8,320
Taxes other than payroll and income......................................... 4,743 4,050
Unearned revenues........................................................... 3,842 3,902
Income tax payable ......................................................... 5,365 3,268
Other accrued expenses ..................................................... 4,516 9,313
---------- ----------
Total current liabilities .............................................. 51,510 51,795
LONG-TERM DEBT .................................................................. 82,015 84,975
DEFERRED COMPENSATION............................................................ 3,642 3,036
DEFERRED TAX LIABILITY .......................................................... 7,486 4,561
LONG-TERM LEASE OBLIGATIONS...................................................... 35 660
OTHER LONG-TERM LIABILITIES...................................................... 12,170 14,549
COMMITMENTS AND CONTINGENCIES (NOTE 11)
MINORITY INTEREST................................................................ 1,888 1,290
SHAREHOLDERS' EQUITY:
Preference shares, NLG 0.03 par value; 3,000,000 shares authorized, none issued
or outstanding.......................................................... -- --
Common shares, NLG 0.03 par value; 100,000,000 shares authorized, 32,208,364 and
31,203,956 issued and outstanding at 2000 and 1999, respectively........ 534 521
Additional paid-in capital ................................................. 182,695 162,319
Retained earnings........................................................... 68,629 49,477
---------- ----------
Total shareholders' equity.............................................. 251,858 212,317
---------- ----------
Total liabilities and shareholders' equity......................... $ 410,604 $ 373,183
========== ==========
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt............................. $ 3,077 $ 4,430
Short-term debt.................... 427 --
Accounts payable................... 14,152 5,909
Accrued payroll and related
costs.............................. 8,073 3,141
Taxes other than payroll and
income............................. 2,178 668
Unearned revenue................... 2,257 30
Income taxes payable............... 3,788 1,008
Deferred income tax liability...... 1,946 604
Other accrued expenses............. 6,200 1,555
---------- ---------
Total current liabilities... 42,098 17,345
LONG-TERM DEBT....................... 70,621 11,594
DEFERRED COMPENSATION................ 2,385 373
NON-CURRENT DEFERRED INCOME TAX
LIABILITY............................ 2,570 1,970
MINORITY INTEREST.................... 1,212 212
LONG-TERM LEASE OBLIGATION........... 156 --
OTHER LONG-TERM LIABILITIES.......... 4,861 786
COMMITMENTS AND CONTINGENCIES (Note
10)
SHAREHOLDERS' EQUITY:
Preference shares, NLG .03 par
value; 3,000,000 shares
authorized, none issued or
outstanding...................... -- --
Common shares, NLG .03 par value;
30,000,000 shares authorized,
24,703,621 and 21,185,276 issued
and outstanding at 1997 and 1996,
respectively..................... 426 186
Additional paid-in capital......... 86,823 35,500
Retained earnings.................. 26,864 11,725
---------- ---------
Total shareholders'
equity........................ 114,113 47,411
---------- ---------
Total liabilities and
shareholders' equity.... $ 238,016 $ 79,691
========== =========
The accompanying notes are an integral part of these consolidated
financial statements.
21
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBERFor the Years Ended December 31, 1997, 1996 AND 1995
(THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1997 1996 1995
--------- --------- ---------
SERVICES............................. $ 184,839 $ 80,503 $ 62,478
SALES................................ 30,012 24,865 25,115
--------- --------- ---------
214,851 105,368 87,593
OPERATING EXPENSES:
Costs of services............... 143,364 64,853 51,018
Costs of sales.................. 27,307 19,790 20,768
General2000, 1999 and administrative
expenses....................... 5,974 3,559 2,719
Depreciation1998
(In thousands, except share and amortization... 10,822 4,600 3,262
Transaction costs associated
with merger.................... -- 355 --
Other income, net............... (1,056) (603) (130)
--------- --------- ---------
INCOME BEFORE INTEREST EXPENSE,
INCOME TAX, AND EXTRAORDINARY
ITEM............................... 28,440 12,814 9,956
INTEREST EXPENSE..................... 6,384 1,418 3,000
--------- --------- ---------
INCOME BEFORE INCOME TAX AND
EXTRAORDINARY ITEM................. 22,056 11,396 6,956
INCOME TAX EXPENSE................... 6,617 3,719 2,174
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM..... 15,439 7,677 4,782
EXTRAORDINARY ITEM, net of tax
benefit of $400.................... -- -- (911)
--------- --------- ---------
NET INCOME........................... 15,439 7,677 3,871
LESS -- Net income applicable to
preferred loan stock............... -- -- (334)
--------- --------- ---------
NET INCOME APPLICABLE TO COMMON
SHARES............................. $ 15,439 $ 7,677 $ 3,537
========= ========= =========
BASIC PER SHARE DATA:
Basic income before
extraordinary item............. $ .66 $ .36 $ .26
Extraordinary item.............. -- -- (.05)
--------- --------- ---------
Basic net income................ $ .66 $ .36 $ .21
========= ========= =========
Weighted average basic common
shares outstanding............. 23,255,641 21,184,500 17,164,550
========= ========= =========
DILUTED PER SHARE DATA:
Diluted income before
extraordinary item............. $ .65 $ .36 $ .26
Extraordinary item.............. -- -- (.05)
--------- --------- ---------
Diluted net income.............. $ .65 $ .36 $ .21
========= ========= =========
Weighted average diluted common
shares outstanding............. 23,936,325 21,381,804 17,270,578
========= ========= =========per share data)
2000 1999 1998
---- ---- ----
SERVICES ..................................................... $ 258,684 $ 264,691 $ 279,840
SALES......................................................... 77,414 58,066 37,278
----------- ----------- ------------
336,098 322,757 317,118
OPERATING EXPENSES:
Costs of services ....................................... 206,403 214,850 222,578
Costs of sales........................................... 62,252 48,373 26,845
General and administrative expenses ..................... 13,540 12,301 8,447
Depreciation and amortization............................ 15,111 15,939 16,378
Goodwill amortization.................................... 4,107 4,127 3,013
Write-offs and other charges............................. -- 10,670 --
Restructuring charges.................................... -- 7,036 --
Other (income) expense, net.............................. (906) (2,742) 2,236
----------- ------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INTEREST EXPENSE AND INCOME TAX.......................... 35,591 12,203 37,621
INTEREST EXPENSE ............................................. 8,231 8,557 6,800
----------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX .............................................. 27,360 3,646 30,821
INCOME TAX EXPENSE ........................................... 8,208 1,266 9,628
----------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS............................. 19,152 2,380 21,193
LOSS FROM DISCONTINUED OPERATIONS, net of
income tax benefit of $93............................... -- -- (217)
LOSS ON SALE OF DISCONTINUED
OPERATIONS, net of income tax benefit of $1,446.......... -- -- (3,374)
----------- ----------- ------------
NET INCOME ................................................... $ 19,152 $ 2,380 $ 17,602
=========== =========== ============
PER SHARE DATA:
Income from continuing operations........................ $ 0.60 $ 0.08 $ 0.74
Loss from discontinued operations........................ -- -- (0.01)
Loss on sale of discontinued operations.................. -- -- (0.12)
----------- ----------- ------------
Basic earnings per share................................. $ 0.60 $ 0.08 $ 0.61
=========== =========== ============
WEIGHTED AVERAGE BASIC COMMON
SHARES OUTSTANDING.................................... 31,789,889 30,874,315 28,653,977
=========== =========== ===========
Income from continuing operations........................ $ 0.58 $ 0.07 $ 0.71
Loss from discontinued operations........................ -- -- (0.01)
Loss on sale of discontinued operations.................. -- -- (0.11)
----------- ----------- -----------
Diluted earnings per share............................... $ 0.58 $ 0.07 $ 0.59
=========== =========== ============
WEIGHTED AVERAGE DILUTED COMMON
SHARES OUTSTANDING.................................... 32,941,433 31,867,547 29,679,895
=========== =========== ============
The accompanying notes are an integral part of these consolidated
financial statements.
22
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBERFor the Years Ended December 31, 1997, 1996, AND 1995
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)2000, 1999 and 1998
(In thousands, except share data)
Common Shares
--------------------- Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
------------ ------- --------- --------- ----------
COMMON SHARES
PREFERRED ------------------ ADDITIONAL
LOAN NUMBER OF PAID-IN RETAINED
STOCK SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- --------- ------ ---------- -------- ---------
BALANCE, December 31, 1994.............. 7,500 15,444,176 268 5,078 806 13,6521997 (as previously reported)........ 25,589,180 $ 439 $ 90,180 $ 24,868 $ 115,487
ADJUSTMENT FOR POOLINGS OF INTEREST............... ........ 956,365 12 317 4,442 4,771
------------ ------- --------- --------- ------ ----------
-------- ---------
INITIAL PUBLIC OFFERING................. -- 5,600,000 102 29,924 -- 30,026
PREFERRED LOAN STOCK DIVIDEND........... -- -- -- -- (447) (447)
REDEMPTION OF PREFERRED LOAN STOCK...... (7,500) -- -- -- -- (7,500)
EQUITY TRANSACTIONS OF POOLED COMPANY... -- 113,288 2 61 -- 63
NET INCOME.............................. -- -- -- -- 3,871 3,871
--------- --------- ------ ---------- -------- ---------RESTATED BALANCE, December 31, 1995.............. -- 21,157,464 372 35,063 4,230 39,6651997........................ 26,545,545 451 90,497 29,310 120,258
------------ ------- --------- --------- ------ ---------- -------- ---------
STOCK OPTIONS EXERCISED................. -- 1,000 -- 6 -- 6
EQUITY TRANSACTIONS OF POOLED COMPANY... -- 26,812 -- 245 (259) (14)
ADJUSTMENT FOR CHANGE IN FISCAL YEAR OF
POOLED COMPANY........................ -- -- -- -- 77 77
NET INCOME.............................. -- -- -- -- 7,677 7,677
--------- --------- ------ ---------- -------- ---------
BALANCE, December 31, 1996.............. -- 21,185,276 372 35,314 11,725 47,411
--------- --------- ------ ---------- -------- ---------
ADJUSTMENT FOR POOLING OF INTEREST......INTEREST......................... 330,362 5 2,214 185 2,404
SHARES ISSUED FOR 1998
PURCHASE ACQUISITIONS................................. 3,389,845 51 61,298 -- 482,541 8 1,311 (300) 1,019
PUBLIC OFFERING......................... -- 2,964,862 45 49,960 -- 50,00561,349
STOCK OPTIONS EXERCISED.................EXERCISED.................................... 357,280 6 1,760 -- 70,942 1 238 -- 2391,766
NET INCOME..............................INCOME................................................. -- -- -- -- 15,439 15,43917,602 17,602
------------ ------- --------- --------- ------ ---------- -------- ---------
BALANCE, December 31, 1997..............1998................................. 30,623,032 513 155,769 47,097 203,379
------------ ------- --------- --------- ----------
SHARES ISSUED FOR 1999
PURCHASE ACQUISITIONS................................. 284,524 4 4,558 -- 4,562
STOCK OPTIONS EXERCISED.................................... 296,400 4 1,992 -- 1,996
NET INCOME................................................. -- -- -- 2,380 2,380
------------ ------- --------- --------- ----------
BALANCE, December 31, 1999................................. 31,203,956 521 162,319 49,477 212,317
------------ ------- --------- --------- ----------
EXERCISE OF OVER-ALLOTMENT OPTION.......................... 696,748 9 17,239 -- 17,248
STOCK OPTIONS EXERCISED.................................... 307,660 4 3,137 -- 3,141
NET INCOME................................................. -- -- -- 19,152 19,152
------------ ------- --------- --------- ----------
BALANCE, December 31, 2000................................. 32,208,364 $ -- 24,703,621 $426 $86,823 $26,864534 $ 114,113182,695 $ 68,629 $ 251,858
============ ======= ========= ========= ================
The accompanying notes are an integral part of these consolidated
financial statements.
23
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 19,152 $ 2,380 $ 17,602
Loss from discontinued operations........................ -- -- 217
Adjustments to reconcile to net cash
provided by (used in) operating activities--
Depreciation and amortization.......................... 15,111 15,939 16,378
Goodwill amortization.................................. 4,107 4,127 3,013
(Gain) loss on sale of fixed assets.................... (627) (777) 67
Loss on sale of discontinued operations................ -- -- 3,374
Changes in assets and liabilities:
(Increase) decrease in accounts receivable........... (24,332) 1,667 3,004
Increase in inventories.............................. (9,299) (12,014) (2,595)
(Increase) decrease in prepaid expenses and other.... 3,296 10 (3,337)
Increase in net deferred tax asset................... (911) (1,345) (8,415)
Increase (decrease) in accounts payable.............. 4,629 (978) (9,952)
Decrease in accrued liabilities...................... (4,116) (3,873) (238)
Increase (decrease) in other long-term liabilities... (2,661) 1,054 (13,837)
Other ............................................... 2,918 (1,037) 544
---------- --------- ---------
Net cash provided by continuing operations........... 7,267 5,153 5,825
Net cash provided by discontinued operations......... -- -- 111
---------- --------- ---------
Net cash provided by operating activities ......... 7,267 5,153 5,936
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of continuing operations............ (32,845) (19,545) (31,783)
Acquisitions, net of cash acquired....................... -- 3,945 --
Proceeds from sale of assets ............................ 4,135 25,322 4,906
Proceeds from sale of discontinued operations............ -- -- 4,114
Other ................................................... 299 (172) --
---------- --------- ---------
Net cash provided by (used in) investing activities.... (28,411) 9,550 (22,763)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from over-allotment option.................. 17,248 -- --
Repayment of debt ....................................... (4,124) (106,820) (16,950)
Borrowings under debt facilities......................... -- 102,304 25,798
Capital lease obligations, net........................... (1,750) (666) 797
Stock options exercised.................................. 3,141 1,996 1,766
Debt issuance costs...................................... -- (1,206) --
Other.................................................... 564 (284) 121
---------- --------- ---------
Net cash provided by (used in) financing activities.... 15,079 (4,676) 11,532
---------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS....................... (6,065) 10,027 (5,295)
CASH AND CASH EQUIVALENTS, beginning of period................ 18,983 8,956 14,251
---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period...................... $ 12,918 $ 18,983 $ 8,956
========== ================= =========
The accompanying notes are an integral part of these consolidated
financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(THOUSANDS OF DOLLARS)
1997 1996 1995
---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................... $ 15,439 $ 7,677 $ 3,871
Adjustments to reconcile net income
to net cash provided by operating
activities --
Depreciation and amortization.... 11,037 4,600 3,479
Adjustment for change in fiscal
year of pooled company.......... -- 77 --
Extraordinary item, net of tax
benefit of $400................. -- -- 911
(Gain) loss on sale of fixed
assets........................... (149) (9) 12
Changes in assets and
liabilities --
Increase in accounts
receivable...................... (14,443) (2,107) (1,791)
(Increase) decrease in
inventories..................... (1,348) (913) 943
(Increase) decrease in prepaid
expenses and other............ (102) 242 (283)
Increase (decrease) in accounts
payable......................... (8,741) (854) 2,391
Increase in accrued payroll.... 3,889 42 504
Increase in accrued income
taxes payable................... 2,780 296 560
Increase (decrease) in other
accrued expenses................ (12,095) (700) (3,431)
Other.......................... 1,790 482 (119)
---------- --------- ---------
Net cash provided by
operating activities.......... (1,943) 8,833 7,047
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............... (15,303) (6,283) (3,183)
Proceeds from sale of fixed
assets............................. 550 28 1,597
Acquisition of Saybolt, net........ (63,364) -- --
Acquisition of Scott Pickford,
net................................ (13,975) -- --
Acquisition of Gulf States
Analytical, Inc.................... -- (4,310) --
Return on investment in China
Corelab Ltd. ...................... -- 150 --
Acquisition of Pastech Inc., net... -- -- (5,017)
Acquisition of PACE Incorporated... -- -- (2,830)
Acquisition of Core Laboratories
division, net...................... -- -- (1,778)
Proceeds from maturities of
investment securities.............. -- -- 499
Other.............................. -- -- 12
---------- --------- ---------
Net cash used in investing
activities....................... (92,092) (10,415) (10,700)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from public
offerings.......................... 50,005 -- 30,026
Proceeds from common shares and
preferred loan stock issuances... -- -- 63
Payments on long-term debt......... (93,732) (10,145) (31,789)
Borrowings under long-term debt.... 146,891 9,900 15,740
Retirement of preferred loan
stock.............................. -- -- (7,500)
Prepayment penalty on long-term
debt............................... -- -- (140)
Decrease in short-term debt........ (181) (190) (599)
Dividends on preferred loan
stock.............................. -- -- (447)
Other.............................. (1,373) 12 (21)
---------- --------- ---------
Net cash provided by (used in)
financing activities............... 101,610 (423) 5,333
---------- --------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS........................ 7,575 (2,005) 1,680
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 2,935 4,940 3,260
---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 10,510 $ 2,935 $ 4,940
========== ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.24
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 19972000
1. DESCRIPTION OF BUSINESS
Core Laboratories N.V., a Netherlands corporation, and its wholly owned
subsidiaries (the "Company"("Core Laboratories", "we", "our" or "us") derives its revenues from customers primarily fromis one industry segment,of the world's
leading providers of proprietary and patented reservoir description, production
enhancement and reservoir management services. These services enable our clients
to improve reservoir performance and increase oil and gas industry,recovery from their
producing fields. We provide our services to the world's major, national and
conducts its worldwideindependent oil companies. We currently operate over 70 offices in more than 50
countries.
Our business through two closely
related operations: Servicesunits have been aggregated into three complementary
segments which provide products and Sales.
SERVICES
The Company provides three related services for optimizingimproving reservoir performance
and maximizing hydrocarbonincreasing oil and gas recovery from new and existing fields.
o RESERVOIR DESCRIPTION SERVICES:Reservoir Description: Encompasses the petrophysical
characterizationscharacterization of
petroleum reservoir rock, fluid and gas samples. We provide
analytical and field services to characterize properties of crude
oil and petroleum products to the phase behavior
relationships ofoil and gas industry.
o Production Enhancement: Includes products and services relating to
reservoir fluidswell completions, perforations, stimulations and
gases.
o PRODUCTION ENHANCEMENT SERVICES: Includes field applications of
proprietary technologiesproduction. We provide integrated services to maximizeevaluate the efficiency and
effectiveness of well completions and stimulations.to develop solutions aimed
at increasing the effectiveness of enhanced oil recovery projects.
o RESERVOIR MANAGEMENT SERVICES:Reservoir Management: Combines and integrates data setsinformation from
reservoir description and production enhancement services to
maximize daily
hydrocarbonincrease production and improve recovery of oil and gas from a well or field.
SALES
The Company's sales operation manufactures and sells petroleum reservoir rock
and fluid analysis instrumentation and other integrated systems which complement
its services operation.our
clients' reservoirs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATIONPrinciples of Consolidation
The accompanying consolidated financial statements include the accounts
of the
CompanyCore Laboratories and have been prepared in accordance with United States
("U.S.") generally accepted accounting principles.principles ("GAAP"). All significant
intercompany transactions and balances have been eliminated. The equity method
of accounting is used for all investments in which the Company haswe have less than a majority
interest except for
one joint venture interest where the cost method of accounting is applied as the
Company doesand we do not exercise significant influence or control. In addition, aA minority interest liability has been
recorded in the accompanyingto reflect outside ownership attributable to consolidated financial statements for those subsidiaries
in which the Company has minority
investments. Certain 1996 items have been reclassified to conform with the 1997
presentation.
USE OF ESTIMATESthat are less than 100% owned.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principlesGAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS25
Cash includesand Cash Equivalents
Cash and cash equivalents include cash in banks and all highly liquid
debt instruments with an original maturity of three months or less when
purchased.
INVENTORIES
Inventories
are primarily itemsInventories consist of manufactured goods, materials and supplies used
for sales or services provided to customers. Inventories are stated at the lower
of average or standard cost (includes direct material, labor and overhead) or
estimated net realizable value.
PROPERTY, PLANT AND EQUIPMENTvalue, and are reflected net of valuation reserves of
$1,196,000 and $1,258,000 in 2000 and 1999, respectively. Inventories consisted
of the following (in thousands):
2000 1999
---------- ----------
Finished goods..................... $ 27,651 $ 17,128
Parts and materials................ 4,126 6,661
Work in process.................... 2,290 979
---------- ----------
Total................ $ 34,067 $ 24,768
========== ==========
Property, Plant and Equipment
Investments in property, plant and equipment are stated at cost.
Allowances for depreciation and amortization are calculated using the
straight-line method based on the estimated useful lives of the related assets
as follows:
Buildings............................... 10-40Buildings ............................................. 10 - 40 years
Machinery and equipment................. 3-10equipment ............................... 3 - 10 years
Accelerated depreciation methodsThe components of property, plant and equipment are used for tax purposes.as follows (in
thousands):
2000 1999
---------- ----------
Land $ 2,622 $ 2,855
Building and leasehold improvements....................... 27,370 20,010
Machinery and equipment................................... 92,553 79,360
Construction in process................................... 5,770 8,858
---------- ----------
128,315 111,083
Less - accumulated depreciation...................... (44,977) (40,098)
---------- ----------
$ 83,338 $ 70,985
========== ==========
Expenditures for repairs and maintenance are charged to expense as
incurred and major renewals and bettermentsimprovements are capitalized. Cost and
accumulated depreciation applicable to assets retired or sold are removed from
the accounts, and any resulting gain or loss is included in the statementConsolidated
Statement of operations. The CompanyOperations. We incurred $2,383,000, $1,385,000approximately $3,118,000, $3,232,000 and
$1,596,000 of$3,169,000 in repair and maintenance expenseexpenses for the years ended December 31,
1997, 19962000, 1999 and 1995,1998, respectively.
INTANGIBLES AND GOODWILLAccounting for the Impairment of Long-Lived Assets
We account for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". SFAS No. 121 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. The statement sets forth guidance as to when
to recognize an impairment of long-
26
lived assets, including goodwill, and how to
measure such an impairment. We periodically assess the recoverability of our
long-lived assets. The measurement of possible impairment is based primarily on
the ability to recover the balance of the related asset from expected future
operating cash flows on an undiscounted basis.
Intangibles and goodwill are amortized using the straight-line method over their
estimated useful lives, which range from 5 to 40 years.Goodwill
Intangibles include patents, trademarks, service marks and trade names.
Goodwill represents the excess of purchase price over the fair value of the net
assets acquired forin acquisitions accounted for as purchases. The Company continually evaluates
whether subsequent events or circumstances have occurred that indicate the
remaining useful life of intangiblesIntangibles and
goodwill may warrant revision or that
the remaining balance of intangibles and goodwill may not be recoverable by
determining whether the carrying amount of the intangible assets can be
recovered through projected undiscounted future cash flowsare charged to expense in equal amounts over the remaining
amortization period. Management believestheir estimated useful
lives. We believe that there have been no events or circumstances that warrant
revision to the remaining useful lifelives or which affect the recoverability of
intangibles and goodwill. LONG-TERM INVESTMENT
A long-term investmentThe components of $1,188,000intangibles and goodwill are as
follows:
Original
Life
in Years 2000 1999
--------- ------------ ------------
(in thousands)
Acquired trade secrets........................... 5 $ 125 $ 48
Acquired patents, trademarks and trade names..... 10-20 3,686 1,867
Acquired trade name.............................. 40 4,614 4,614
------------ ------------
Total intangibles....................... 8,425 6,529
------------ ------------
Goodwill......................................... 5-10 2,506 2,404
Goodwill......................................... 20 3,736 4,517
Goodwill......................................... 40 147,784 147,770
------------ ------------
Total goodwill.......................... 154,026 154,691
------------ ------------
Total intangibles and goodwill.......... 162,451 161,220
Less - accumulated amortization.................. 14,533 10,122
------------ ------------
Net intangibles and goodwill............ $ 147,918 $ 151,098
============ ============
Long-Term Investments
Long-term investments of $615,000 and $1,695,000 at December 31, 1997 represents the
Company's2000
and 1999, respectively, are included in other long-term assets and represent our
investment in unconsolidated affiliated companies in which they hold less than a
majority interest.companies. These investments are
accounted for using the equity method of accounting.
INCOME TAXESIncome Taxes
Income tax expense includes income taxes of The Netherlands, United States ("U.S."), and
other foreign countries andas well as local, state and provincial income taxes. The Company
accounts for income taxes in accordance with the Financial Accounting Standards
Board's Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." This accounting standard requires companies toWe
recognize deferred tax assets or liabilities for the differences between the
financial statement carrying amount and tax basesbasis of existing assets and liabilities
using presently enacted tax rates.
REVENUE RECOGNITIONrates at the end of the period.
Revenue Recognition
Revenues are primarily recognized as services are completed and provided or as delivery of
product occurs. All advance client payments are classified as unearned revenues
until services are completed or products are shipped.
FOREIGN CURRENCIES
The Company's27
Foreign Currencies
Our functional currency is the U.S. dollar. Accordingly, foreign
entities translateremeasure monetary assets and liabilities to U.S. dollars at year-end
exchange rates, while non-monetary items are translatedremeasured at historical rates.
IncomeRevenues and expense
accountsexpenses are translatedremeasured at the average rates
in effect during the year,applicable month-end rate, except
for depreciation, amortization and cost of sales, which are translatedremeasured at
historical rates. Due to immateriality,Remeasurement gains and losses resulting
from the translation of foreign financial statements and from foreign currency
transactions are included in other income
and expense in the Consolidated Statements of Operations.
RESEARCH AND DEVELOPMENTResearch and Development
While we have acquired many of our new technologies, we incur expenses
relating to our ongoing research and development program. We view the cost to
acquire many of our technologies to be, in essence, expenditures to gain the
benefit of the acquired company's research and development projects. Research
and development expenditures are charged to expense as incurred. CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments that potentially subjectWe incurred
approximately $5,012,000, $1,949,000 and $2,150,000 in research and development
expenses for the Company to concentrations of
credit risk are primarily trade accounts receivable. The Company derives its
worldwide revenues from servicesyears ended December 31, 2000, 1999 and sales to customers primarily1998, respectively.
Earnings Per Share
We present earnings per share in the oil and
gas industry. The Company maintains an allowance for losses based upon the
expected collectibility of all trade accounts receivable. The carrying values of
cash, trade accounts receivable and accounts payable approximate their fair
market values due to the short-term maturities of these instruments. Management
believes that the carrying amount of long-term debt approximates fair value as
the majority of the borrowings bear interest at floating market interest rates.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issuedaccordance with SFAS No. 128,
"Earnings Per Share,"per Share" which establishes standards for computing
and presenting earnings per share. This standard, effective for fiscal year
1997, replaces the presentation and calculation of primary earnings per share,
as prescribed by Accounting Principles Board ("APB") No. 15, with a
presentation and calculation of basic earnings per share. In addition, this
standard requires dual presentation of both basic and diluted
earnings per share on the Consolidated Statement of Operations. Basic earnings
per common share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share is determined by assuming thatreflects the net additional shares which
would be issued if all dilutive stock options outstanding were exercised.
The following table summarizes the calculation of weighted average
common shares outstanding used in the computation of earnings per share:
2000 1999 1998
-------------- -------------- --------------
Weighted average basic common
shares outstanding.................................. 31,789,889 30,874,315 28,653,977
Effect of dilutive stock options....................... 1,151,544 993,232 1,025,918
-------------- -------------- --------------
Weighted average diluted common
shares outstanding.................................. 32,941,433 31,867,547 29,679,895
============== ============== ==============
Recent Pronouncements
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued and was subsequently amended by SFAS No. 137,
which delayed its effective date. As a result, SFAS No. 133 will be effective
for fiscal years beginning after June 15, 2000, and establishes accounting and
reporting standards for derivative instruments (including certain derivative
instruments embedded in other contracts). We do not enter into derivative
instruments or buy and sell commodities. Accordingly, adoption of SFAS No. 133
did not have been
converted usingan impact on our financial position or operational results.
In December 1999, the average price forSecurities and Exchange Commission ("SEC"),
issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements", which provides guidance related to revenue recognition based on
interpretations and practices followed by the period.SEC. SAB 101 requires companies to
report any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion 20, "Accounting Changes". The implementation of the SEC's guidance
did not result in a change to our revenue recognition policy.
28
The Emerging Issues Task Force ("EITF") issued EITF 00-10 which gave
further guidance on revenue recognition. EITF 00-10 required that revenue be
recognized on all amounts billed to a customer in a sale transaction related to
shipping and handling. As a result of the application of this guidance in
December 2000, we recognized shipping charges as revenues and an increase to
cost of sales. Prior period financial statements reflect this change, which was
less than 1% of revenues.
Reclassifications
Certain prior year amounts have been restated in accordance withreclassified to conform to the
requirements of the pronouncement.current year presentation.
3. ACQUISITIONS
1997 ACQUISITIONS2000 Acquisitions
On December 29, 1997, the Company completed the acquisition of20, 2000, we acquired all of the outstanding shares of Stim-Lab,Core
Petrophysics, Inc. ("Stim-Lab"CPI"), a privately held Companycompany based in Duncan, Oklahoma. Stim-LabHouston, Texas.
CPI is engaged in the petrophysical characterization of partially consolidated
and unconsolidated reservoirs which make up the majority of deepwater reservoirs
around the world. We issued approximately 516,000 shares in a world leader in hydraulic fracturing
and well stimulation technologies.share-for-share
exchange. The mergertransaction was accounted for asusing the pooling-of-interests
method of accounting. Accordingly, our consolidated financial statements have
been restated for all periods prior to the date of acquisition to include the
financial position and results of operations of CPI.
On June 20, 2000, we acquired all of the outstanding shares of
Production Enhancement Corporation ("PENCOR"), a pooling of
interestsprivately held company based in
Broussard, Louisiana. PENCOR provides fluid phase behavior services used to
characterize crude oils, natural gases and the Companyother reservoir fluids. We issued
approximately 459,000 common275,000 shares in exchange for all of the outstanding shares of
Stim-Lab. Stim-Lab'sPENCOR and assumed approximately $2.5 million in debt. The transaction was
accounted for using the pooling-of-interests method of accounting. Accordingly,
our consolidated financial statements have been restated for all periods prior
to the date of acquisition to include the financial position and results of
operations of PENCOR.
On January 12, 2000, we acquired all of the outstanding shares of
TomoSeis Corporation ("TomoSeis"), a privately held company based in Houston,
Texas. TomoSeis provides detailed reservoir imaging services that are a
component of timelapse (4D) seismic and reservoir monitoring programs. We issued
approximately 232,000 shares and assumed outstanding stock options exercisable
for approximately 396,000 of our common shares. Proceeds from the exercise of
these stock options would be approximately $2.1 million. The transaction was
accounted for using the pooling-of-interests method of accounting. Accordingly,
our consolidated financial statements have been restated for all periods prior
to the date of acquisition to include the financial position and results of
operations of TomoSeis.
1999 Acquisitions
On August 2, 1999, we acquired all of the outstanding shares of
Reservoirs, Inc. ("Reservoirs"), a privately held company based in Texas.
Reservoirs provides reservoir description services to the oil industry and is a
recognized leader in the geology and petrophysics of deepwater reservoirs. We
issued approximately 252,000 shares in a transaction that was accounted for
using the purchase method of accounting. The transaction resulted in an
allocation of approximately $4.1 million to goodwill, which is being amortized
over a 20-year period.
29
On July 1, 1999, we acquired all of the outstanding shares of
Coherence Technology Company, Inc. ("CTC"), a privately held company based in
Texas. CTC provides specialized seismic data processing and interpretation
services and is exclusively licensed by BP Amoco to provide its patented
Coherence Cube data processing technology to the worldwide petroleum industry.
We issued approximately 171,000 shares in a transaction which was accounted for
as a pooling-of-interests. As part of the transaction, we assumed approximately
$1.0 million in CTC bank debt and also issued approximately 135,000 shares to a
second lender as debt repayment. Our consolidated financial statements have been
restated for all prior periods to include the financial position and results of
operations of CTC.
On January 7, 1999, we acquired receivables and certain fixed assets
from Isotag Specialist, Inc. ("Isotag"), and its related company, Fred Calaway
and Co. Both companies were privately held and based in Texas. Isotag provides
production enhancement and related services. We issued approximately 33,000
shares for the assets of Isotag and accounted for the transaction using the
purchase method of accounting. The transaction resulted in an allocation of
approximately $0.4 million to goodwill, which is being amortized over a 20-year
period.
1998 Acquisitions
On December 30, 1998, we acquired all of the outstanding shares of
Thru-Tubing Technology, Inc. ("Thru-Tubing"), a privately held company based in
Louisiana. Thru-Tubing manufactures downhole remedial products which complement
our well completion and stimulation technologies. We issued approximately
195,000 shares in exchange for all of the outstanding shares of Thru-Tubing and
accounted for the transaction using the pooling-of-interests method of
accounting. Thru-Tubing's results of operations for the year ended December 31,
1997 have been combined with that of1998 are included in the Company's. Consolidatedconsolidated financial statements. Our consolidated
financial statements for periods prior yearsto 1998 were not restated for this
acquisition due to immateriality.
On May 12, 1997, the Company consummated the acquisitionWe acquired all of all the outstanding shares of SayboltThe Andrews Group
International, B.V.Inc. and its subsidiariesA.G.I. Mexicana S.A. de C.V. in December 1998
(collectively referred to as the "Andrews Group"). The Andrews Group provides
specialized seismic data processing and interpretation services, as well as
other geophysical, geological and engineering services. We issued approximately
715,000 shares in exchange for all of the outstanding shares of the Andrews
Group and accounted for the transaction using the pooling-of-interests method of
accounting. Our consolidated financial statements have been restated for all
periods prior to the date acquired to include the financial position and results
of operations of the Andrews Group.
On October 28, 1998, we acquired all of the outstanding shares of
Integra Geoservices, Inc. ("Saybolt"Integra"), a privately held Netherlands company for $67 millionbased in cash and the assumption
of $5 million of net debt. Saybolt operates in over 50 countries and is an
international leader in providing analytical and fieldCanada.
Integra provides specialized geophysical seismic processing services used to
characterize propertiesand describe petroleum reservoirs. We issued approximately 86,000
shares in exchange for all of crude oilthe outstanding shares of Integra and petroleum productsaccounted
for the oil industry. The
transaction was accounted for underusing the purchase method whichof accounting. The transaction
resulted in the
recordingan allocation of approximately $64.0$2.8 million ofto goodwill, which is
being amortized over a 40-year period.
FinancingOn August 31, 1998, we acquired all of the remaining shares of Jaex
S.A. de C.V. ("Jaex"), a privately held company based in Mexico, that were not
previously acquired through our acquisition of Owen Oil Tools, Inc. ("Owen"). We
previously owned 50.00098% of Jaex. Jaex provides well completion and
stimulation technologies to the petroleum industry. We issued approximately
765,000 shares in exchange for the transaction was provided throughremaining interest of Jaex and accounted for
the Unsecured Credit Facility (see Note 5). Saybolt's results of operations are
included with those of the Company beginning on May 1, 1997. The purchase price
allocations have been completed on a preliminary basis, thus as additional
information concerning the value of the assets
acquired and liabilities assumed becomes known additional adjustments will be
made to the purchase price allocation included in the accompanying financial
statements.
On March 1, 1997, the Company acquired the outstanding shares of Scott Pickford
plc and its subsidiaries ("Scott Pickford") for approximately $14.9 million.
Scott Pickford, a London-based company, provides petroleum reservoir management,
geoscience, geophysical and engineering services to its customers by utilizing
petrophysical and phase behavior data sets measured by Core Laboratories. Scott
Pickford specializes in large field studies and equity determinations primarily
in the North Sea. The acquisition was financed through borrowings, accounted for using the purchase method of accounting andaccounting. The transaction
resulted in the recordingan allocation of approximately $12.2$8.2 million ofto goodwill, which is
being amortized over a 40-year period.
Scott Pickford's results of operations are included with thoseOn July 31, 1998, we acquired all of the Company beginning March 1, 1997.
1996 ACQUISITIONS
On December 31, 1996, the Companyoutstanding shares of PETRAK
Group S.A. ("Petrak"), a privately held company based in Switzerland. Petrak
specializes in characterizing reservoir fluids and their derivatives. We issued
approximately 2.2 million common263,000 shares in exchange for the outstanding stock of ProTechnics and subsidiaries
("Protechnics"). In addition, outstanding employee stock options to purchase
ProTechnics common shares were converted into options to purchase approximately
174,000 shares of the Company's common shares. The acquisition has been
accounted for as a pooling of interests and, accordingly, the Company's
consolidated financial statements have been restated to include the consolidated
financial statements of ProTechnics (which were adjusted to conform to the
Company's accounting policies) for all periods prior to the acquisition.
ProTechnics had a March 31 fiscal year end and, accordingly, the ProTechnics
statements of operations for the year ended March 31, 1996 has been combined
with the Company's statements of operations for the calendar year ended December
31, 1995. In order to conform ProTechnics year end to the Company's calendar
year end, the consolidated statement of operations for fiscal 1996 includes
three months for ProTechnics which are also included in the consolidated
statement of operations for the fiscal year ended December 31, 1995.
Accordingly, an adjustment has been made in fiscal 1996 to retained earnings for
the duplication of net loss of $77,000 for such three month period.
ProTechnics' historical consolidated financial statements have been adjusted to
conform to the accounting policies and practices of the Company. These
adjustments primarily related to conforming ProTechnics' accounting policies for
the capitalization of inventory, property, plant and equipment, and other assets
to those of the Company. The effect of these conforming adjustments increased
ProTechnics' net loss by $177,000 and $27,000 in the years ended March 31, 1996
and 1995, respectively.
In connection with the acquisition, $0.4 million of transaction costs ($0.2
million after tax, or $0.02 per share) were incurred and have been charged to
expense in 1996. The cost and expenses consisted primarily of legal, accounting
and investment banking fees.
On January 5, 1996, the Company acquired substantially all of the assetsoutstanding shares of
Gulf
States Analytical, Inc. for approximately $4.3 million in cash. The transaction
was recorded using the purchase method of accounting. Financing30
Petrak and accounted for the transaction was provided through the Company's credit agreement.
1995 ACQUISITIONS
On December 22, 1995, the Company acquired substantially all the assets of four
analytical testing laboratories from PACE Incorporated for approximately $2.8
million in cash. The transaction was recorded using the purchase method of
accounting. The Company borrowed $2.5 million under its credit agreement to
complete the acquisition.
On July 19, 1995, the Company acquired all of the outstanding common shares of
Pastech, Inc. for approximately $5.3 million in cash. The Company borrowed $5.0
million under its revolving credit facility to complete this acquisition.
Subsequently, the Company used a portion of the proceeds from its initial public
offering to repay the debt. The transaction was recorded using the purchase
method of accounting, which resulted in the recordingan allocation of approximately $2.9$3.9
million ofto goodwill, which is being amortized over a 20-year40-year period.
On June 30, 1998, we acquired all of the outstanding shares of Owen, a
privately held company based in Texas. Owen and its subsidiaries provide well
completion and stimulation technologies to the petroleum industry. We issued
approximately 2,277,000 shares in exchange for all of the outstanding shares of
Owen and accounted for the transaction using the purchase method of accounting.
The transaction resulted in an allocation of approximately $41.5 million to
goodwill, which is being amortized over a 40-year period.
The following unaudited information presents the results of operations
on a pro forma basis as though the public offering,1998 acquisitions of Scott Pickford and Saybolt,
andaccounted for using the
merger of Stim-Lab allpurchase method occurred on January 1, 1996. Information1998. The following is presented for
informational purposes only and may not be indicative of actual operating
results that would have been achieved. All amounts are in thousands, except per
share data.
YEAR ENDED DECEMBER
31,
---------------------
1997 1996
---------- ---------
(UNAUDITED)
Revenues................................ $ 230,128 $ 199,402
Income before extraordinary item........ $ 16,849 $ 9,234
Basic income per share before
extraordinary item.................... $ .72 $ .38
Diluted income per share before
extraordinary item.................... $ .70 $ .38
1998
-----------
(Unaudited)
Revenues........................................................... $ 348,195
Income from continuing operations.................................. $ 24,726
Net income......................................................... $ 21,135
Basic earnings per share from continuing operations................ $ 0.86
Diluted earnings per share from continuing operations.............. $ 0.83
4. INVENTORIES
Inventories consistedDISCONTINUED OPERATIONS
In early 1998, we concluded that our packaged analyzer line of business
was no longer strategic and made a decision to discontinue this product line.
Subsequently, on April 8, 1998, we sold the majority of the following at December 31, 1997 and 1996net assets of our
packaged analyzer business line for approximately $4.1 million in cash,
resulting in a loss on sale of $1.3 million. Goodwill specifically related to
this business line of approximately $2.6 million was also written off, as was
$1.0 million of work-in-process inventory which was subsequently abandoned.
These amounts are included in the loss on disposition of discontinued
operations.
The results of the packaged analyzer business line have been reported
separately as discontinued operations in the Consolidated Statements of
Operations. Consolidated financial statements prior to 1998 have also been
restated to present the packaged analyzer business line as discontinued
operations.
The loss on the disposition of the packaged analyzer business line is
summarized below (in thousands):
1997 1996
---------- ---------
Parts and materials..................... $ 4,558 $ 4,011
Work in process......................... 7,915 5,461
---------- ---------
Total.............................. $ 12,473 $ 9,472
1998
----------
Write-down of work in process.................................................. $ 988
Write-off of goodwill related to the packaged analyzer business line........... 2,563
Loss on sale of packaged analyzer business line................................ 1,269
----------
Loss on disposition of discontinued operations............................ 4,820
Income tax benefit............................................................. 1,446
----------
Loss on disposition of discontinued operations, net of tax................ $ 3,374
==========
=========
31
5. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 is summarized in the following table (in thousands):
1997 1996
--------- ---------
Unsecured Credit Facility with a bank
group:
$70,000 term loan facility......... $ 70,000 $ --
$55,000 revolving debt facility.... -- --
Loan notes.............................. 1,165 --
Unsecured credit facility with a bank
group:
$14,000 term loan facility......... -- 9,375
$15,000 guidance facility.......... -- 5,440
Other indebtedness...................... 2,533 1,209
--------- ---------
Total debt.................... 73,698 16,024
Less -- current maturities.............. 3,077 4,430
--------- ---------
Total long-term debt.......... $ 70,621 $ 11,594
========= =========
On May 12, 1997, the Company
2000 1999
---------- ----------
Credit Facility with a bank group:
$100,000 revolving debt facilities................................. $ 7,000 $ 7,000
Senior notes............................................................ 75,000 75,000
Other indebtedness...................................................... 647 4,771
---------- ----------
Total debt..................................................... 82,647 86,771
Less - current maturities............................................... 632 1,796
---------- ----------
Total long-term debt........................................... $ 82,015 $ 84,975
========== ==========
In July 1999, we entered into an Unsecureda $100 million Credit Facility which
was
used to finance the acquisition of Scott Pickford and Saybolt, as well as
refinance a previous credit facility. The Unsecured Credit Facility provides for (i) a term loan of $55 million, (ii) a term
loan denominated in British pounds having a U.S. dollar equivalency of $15
million, (iii) a committed revolving debt facility of $50$95 million and (iv)(ii) a
Netherlands guilder denominated revolving debt facility with U.S. dollar
equivalency of $5 million. At December 31, 1997,2000, approximately $55.0$93 million was
available for borrowing under the revolving creditdebt facility. Loans under the
Unsecured Credit Facility will generally bear interest from LIBOR plus 0.75%1.25% to a maximum of LIBOR plus
1.75%. The term loans require quarterly principal
payments beginning Marchaverage interest rate in effect at December 31, 1999 with2000 was 7.97% and
the final principal payment due June 30,
2002.average for 2000 was 8.13%. The revolving debt facilities require interest
payments only, until maturity onin June 30, 2002.2004.
In July 1999, we issued $75 million in Senior Notes which bear an
average interest rate of 8.16% and require annual principal payments beginning
in July 2005 and continuing through July 2011.
The terms of the Unsecured Credit Facility willand Senior Notes require the Companyus to meet
certain financial covenants, including certain minimum equity and cash flow
tests. Management believesWe believe that the Company iswe are in compliance with all such covenants contained in
itsour credit agreements. As partAll of the purchase of Scott Pickford, the Company issued unsecured loan
notes as an alternative to the cash consideration paid for the outstanding
shares of Scott Pickford. The loan notes bear interest payable semi-annually, at
the rate of LIBOR less 1.0% per annum. Holders of the loan notes have the right
to redeem the loan notes at par on each interest payment date. Unless previously
redeemedour material subsidiaries are guarantors or
purchased, the loan notes will be redeemed at par on June 30, 2002.co-borrowers under both credit agreements.
Scheduled maturities of long-term debt over the next five years are: $3,077,000
in 1998, $14,100,000 in 1999, $21,109,000 in 2000, $21,119,000 in 2001,
$14,129,000 in 2002(in thousands):
2001...................................... $ 632
2002...................................... 15
2003...................................... --
2004...................................... 7,000
2005 and $164,000 thereafter.thereafter....................... 75,000
---------
Total................................ $ 82,647
=========
Total cash payments for interest was $5,273,000, $1,343,400,were $6,922,000, $4,918,000 and
$3,067,500$6,090,000 for 1997, 1996,2000, 1999 and 1995,1998, respectively.
On November 20, 1997, the Company successfully completed a public offering in
which it sold 2,800,000 of its common shares and received net proceeds of $47.2
million. In addition, the underwriter's overallotment was exercised for 164,862
common shares in December 1997 and resulted in additional net proceeds of $2.8
million. The total net proceeds of $50.0 million were used to repay $43.9
million in debt and the remainder was retained for working capital.32
6. INCOME TAXES
The components of income from continuing operations before income taxtaxes
for 2000, 1999 and extraordinary item for 1997,
1996, and 19951998 are as follows (in thousands):
1997 1996 1995
--------- --------- ---------
United States........................... $ 7,248 $ 4,589 $ 3,246
Other countries......................... 14,808 6,807 3,710
--------- --------- ---------
Income before income tax and
extraordinary item................ $ 22,056 $ 11,396 $ 6,956
========= ========= =========
2000 1999 1998
---------- ---------- ----------
United States............................................ $ (3,546) $ (14,159) $ 9,344
Other countries.......................................... 30,906 17,805 21,477
---------- ---------- ----------
Income from continuing operations
before income tax........................... $ 27,360 $ 3,646 $ 30,821
========== ========== ==========
The components of income tax expense (benefit) for 1997, 1996,2000, 1999 and 1995,1998
are as follows (in thousands):
1997 1996 1995
--------- --------- ---------
Current --
United States federal................. $ 2,279 $ 1,135 $ 1,155
Other countries....................... 2,660 1,245 596
State and provincial.................. 619 125 244
--------- --------- ---------
Total Current................. $ 5,558 $ 2,505 $ 1,995
--------- --------- ---------
Deferred --
United States federal................. $ (99) $ 88 $ (58)
Other countries....................... 1,158 1,126 237
--------- --------- ---------
Total deferred................ 1,059 1,214 179
--------- --------- ---------
Income tax expense............ $ 6,617 $ 3,719 $ 2,174
========= ========= =========
2000 1999 1998
---------- ---------- ----------
Current:
United States....................................... $ 198 $ (2,259) $ 3,411
Other countries..................................... 9,051 4,662 5,978
State and provincial................................ 202 296 241
---------- ---------- ----------
Total current.................................. 9,451 2,699 9,630
---------- ---------- ----------
Deferred:
United States....................................... (1,166) (2,428) (53)
Other countries..................................... 174 1,454 51
State and provincial................................ (251) (459) --
---------- ---------- ----------
Total deferred................................. (1,243) (1,433) (2)
---------- ---------- ----------
Income tax expense............................. $ 8,208 $ 1,266 $ 9,628
========== ========== ==========
The difference between income tax computed using The Netherlands
statutory income tax rate of 35% and the
Company's estimatedour income tax rateexpense as reported in the
accompanying consolidated
statementsConsolidated Statements of operationsOperations for 1997, 1996,2000, 1999 and 19951998 are
as follows:
1997 1996 1995
--------- --------- ---------
The Netherlands income tax rate......... 35% 35% 35%
Subsidiary rates lower than The
Netherlands............................. (9) (4) (4)
Foreign sales corporation benefits...... (1) (2) (1)
Research and development credits........ -- -- (1)
Change in valuation allowance........... 2 3 1
State and provincial income taxes....... 3 1 3
Other................................... -- -- (2)
--------- --------- ---------
Effective tax rate...................... 30% 33% 31%
========= ========= =========follows (in thousands):
2000 1999 1998
---------- ---------- ----------
Tax at The Netherlands income tax rate................... $ 9,576 $ 1,276 $ 10,787
International earnings taxed at rates lower than
The Netherlands statutory rate..................... (4,728) (2,987) (2,730)
Foreign sales corporation benefits....................... (18) -- (89)
Goodwill amortization and other
non-deductible expenses............................ 2,646 2,361 1,402
Change in valuation allowance............................ 781 779 17
State and provincial taxes............................... (49) (163) 241
---------- ---------- ----------
Income tax expense............................... $ 8,208 $ 1,266 $ 9,628
========== ========== ==========
33
Deferred tax assets and liabilities result from various temporary
differences between the financial statement carrying amount and the tax basis of
existing assets and liabilities. Deferred tax assets and liabilities as of
December 31, 19972000 and 1996,1999, respectively, are summarized as follows (in
thousands):
1997 1996
--------- ---------
2000 1999
---------- ----------
Deferred tax assets:
Net operating loss carryforward.................................... $ 11,591 $ 7,015
Receivables........................................................ 546 506
Inventories........................................................ 126 126
Other.............................................................. 545 545
---------- ----------
Total deferred tax assets..................................... 12,808 8,192
Valuation allowance................................................ (2,543) (1,763)
---------- ----------
Net deferred tax asset........................................ 10,265 6,429
---------- ----------
Deferred tax liabilities:
Intangibles........................................................ (1,490) (1,490)
Property, plant and equipment...................................... (768) (740)
Other.............................................................. (5,228) (2,331)
---------- ----------
Total deferred tax liabilities................................ (7,486) (4,561)
---------- ----------
Total net deferred tax asset ................................. $ 2,779 $ 1,868
========== ==========
At December 31, 2000, we had net operating loss carryforwards for
income tax assets --
Reserves and other liabilities..... $ 916 $ 610
Carryforwards...................... 1,561 906
Allowance for receivables.......... 285 146
Inventories........................ 78 58
Other........................... 101 147
--------- ---------
2,941 1,867
--------- ---------
Deferredpurposes in various tax liabilities --
Intangibles.......................... (1,085) (742)
Property, plant and equipment........ (1,291) (1,118)
Receivables.......................... (1,735) (638)
Other................................ (405) (197)
--------- ---------
(4,516) (2,695)
Valuation allowance.................. (967) (574)
--------- ---------
Net deferred tax liability......... $ (2,542) $ (1,402)
========= =========
Thejurisdictions. Of those carryforwards that
are subject to expiration, they will expire, if unused, over the years 2001
through 2019. We provide a valuation allowance increased due to the uncertainty of
realization of net operating loss carryforwards in certain foreign tax
jurisdictions. The Company's
net deferred tax liability is set forth in the consolidated balance sheet as of
December 31, 1997 and 1996, respectively, and is calculated as follows (in
thousands):
1997 1996
--------- ---------
Current deferred tax asset........... $ 1,380 $ 927
Non-current deferred tax asset....... 594 245
Current deferred tax liability....... (1,946) (604)
Non-current deferred tax liability... (2,570) (1,970)
--------- ---------
Net deferred tax liability.... $ (2,542) $ (1,402)
========= =========
Cash payments forof income tax,taxes, net of refunds, were $2,150,000, $2,169,000$3,368,000,
$4,413,000 and $1,462,000$8,410,000 in 1997, 19962000, 1999 and 19951998, respectively.
7. CAPITAL STOCK
PREFERRED LOAN STOCK
In September 1995, the Company redeemed in full its six percent nonvoting,
nonconvertible $7,500,000 preferred loan stock. The redemption was funded using
a portion of the proceeds from the initial public offering.
REDEEMABLE CUMULATIVE PREFERENCE SHARES
In September 1995, the Company retired the authorized but unissued redeemable
cumulative preference shares with a par value of NLG .02 ($0.01) per share.
PREFERENCE SHARES
In August 1995, the Company authorized 3,000,000 preference shares with a par
value of NLG .03 ($0.02) no per share preference shares have been issued by the
Company.
COMMON SHARES
In August 1995, the Company increased its authorized common shares to
30,000,000, effected a 200-for-three stock split, and reduced the par value of
its common stock from NLG 2 ($1.15) per share to NLG .03 ($0.02) per share.
Accordingly, the accompanying consolidated financial statements have been
restated to reflect this stock split for all periods presented.
In September 1995, the Company completed its initial public offering of
5,600,000 common shares and received proceeds of approximately $30.0 million,
net of expenses. The Company used such proceeds to redeem in full its $7.5
million preferred loan stock outstanding and to repay outstanding indebtedness.
In connection with this repayment of indebtedness, the Company incurred an
extraordinary loss of $1.3 million ($.9 million net of taxes) during the quarter
ended September 30, 1995, for the write-off of deferred debt costs and a
repayment penalty incurred on the debt retired.
In December 1996, the Company issued approximately 2,200,000 common shares in
exchange for the outstanding shares of ProTechnics.
On October 22, 1997, the Company declared a two-for-one split of its common
shares payable on December 19, 1997, to shareholders of record as of the close
of business on December 1, 1997. All agreements concerning stock options and
other commitments payable in the Company's common shares provide for
the issuance of additional shares in the event of a declaration of a stock
split. An amount equal to the par value of the common shares issued was
transferred from additional paid-in capital to the common share account. All
references to number of shares, except shares authorized, and to per share
information have been restated to reflect the stock split.
In November 1997, the Company successfully completed a public offering in which
it sold 2,964,862 of its common shares (including the exercise of the
underwriter's overallotment of 164,862 common shares) and received net proceeds
of $50.0 million. The Company used the net proceeds to paydown $43.9 million in
existing debt and retained $6.1 million for working capital.
In December 1997, the Company issued approximately 459,000 common shares in
exchange for the outstanding shares of Stim-Lab.
The following table summarizes the calculation of weighted average common shares
outstanding for purposes of the computation of earnings per share:
YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
------------ --------- ---------
Weighted average basic common shares
outstanding........................... 23,255,641 21,184,500 17,164,550
Dilutive Stock Options.................. 680,684 197,304 106,028
------------ --------- ---------
Weighted average diluted common shares
outstanding........................... 23,936,325 21,381,804 17,270,578
============ ========= =========
8. STOCK OPTIONS
EMPLOYEE STOCK PLANS
TheWe have two main stock option plans; the 1995 Long-Term Incentive Plan
(the "Plan") and the 1995 Nonemployee Director Stock Option Plan (the
"Nonemployee Director Plan"). We also assumed stock options outstanding for
three of our acquisitions: CTC, Reservoirs and TomoSeis. See Note 3 for more
information on these acquisitions.
Employee Stock Option Plan
The maximum number of shares under the Plan was initially limited to
1,300,000 common shares but was amended and restated effective as of May 29, 1997
and May 2000 to authorize an additional 1,600,000 common shares
resulting in a maximum aggregate of 2,900,0004,100,000 common shares for grant to
eligible employees. Options granted pursuant to the Plan are exercisable for a
period of 10 years and will vest in equal installments over four years, so long
as the option holder remains an employee of the Company as of the date of
exercise.years. The exercise
price of options granted under the Plan equalsis the market price of the common shares onvalue at the date of
grant.
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The
1995 Nonemployee Director Stock Option Plan
(the "NonemployeeThe maximum number of shares under the Nonemployee Director Plan"),Plan was
initially limited to 100,000 common shares but was amended and restated
effective as of May 29, 1997 and May 2000 to authorize an additional 100,000 common shares for a maximum aggregate of 200,000600,000 common
shares for grant to eligible Directors of the Company.Core Laboratories. Pursuant to the
Nonemployee Director Plan, beginning in 1996, 10,000 options wereare granted to each
eligible Director and 20,000 wereare granted to the Chairmanchairman on the day after thean annual shareholders'
meeting.basis. The
options are exercisable for a period of 10 years and will vest on the day before the
next annual shareholders meeting following the date of grant. The exercise price
of options granted under the Plan equalsplan is the market price of the common
shares onvalue at the date of grant.
PROTECHNICS STOCK OPTION PLAN
In connection with the merger of ProTechnics, certain outstanding employee stock
options to purchase ProTechnics common shares were converted into options to
purchase 173,760 shares of the Company's common shares. Pursuant to the
ProTechnics stock option plans, such options remain exercisable for a period of
5 years from the original grant date. Future grants to ProTechnics' employees
will be made under the Plan.34
Information regarding the Company'sour stock optionoptions issued pursuant to our plans areis
summarized below:
Weighted
Range of Average
Options: Shares Excercise Price Exercise Price
- ---------------------------------------------- ---------- --------------- --------------
WEIGHTED
NONEMPLOYEE PROTECHNICS AVERAGE
DIRECTOR STOCK OPTION EXERCISE
OPTIONS: THE PLAN PLAN PLAN TOTAL PRICEBalance at December 31,1997................... 1,416,818 $1.28 - ------------------------------------- -------- ----------- ------------ ------- --------
Outstanding$17.88 $6.09
Options granted............................... 698,004 11.63 - 24.38 18.10
Options exercised............................. (294,612) 1.28 - 17.88 5.73
Options canceled.............................. (114,000) 6.00 - 24.38 14.51
----------
Balance at December 31, 1995..... 555,000 8,000 173,760 736,760 5.09
======== =========== ============ ======= ========
Granted at $6.25 per share........... -- 8,000 -- 8,000 6.25
Granted at $6.00 per share........... 8,000 -- -- 8,0001998.................. 1,706,210 1.28 - 24.38 11.39
----------
Options granted............................... 722,300 6.00 Granted at $7.88 per share........... 8,000 -- -- 8,000 7.88
Less --
Exercised at $6.00 per share.... 1,000 -- -- 1,000- 19.06 13.15
Options assumed through acquisitions.......... 70,406 0.01 - 61.19 8.76
Options exercised............................. (290,703) 2.75 - 13.06 6.52
Options canceled.............................. (60,056) 6.00 Canceled........................ 50,000 -- -- 50,000 6.00
-------- ----------- ------------ ------- --------
Outstanding- 61.19 14.60
----------
Balance at December 31, 1996..... 520,000 16,000 173,760 709,760 $ 5.08
======== =========== ============ ======= ========
Granted at $8.38 per share........... 779,000 -- -- 779,000 8.38
Granted at $11.25 per share.......... 30,000 -- -- 30,000 11.25
Granted at $17.88 per share.......... 4,000 -- -- 4,000 17.88
Granted at $17.50 per share.......... 2,000 -- -- 2,000 17.50
Less --
Exercised at $6.00 per share.... 27,000 -- -- 27,0001999.................. 2,148,157 0.01 - 61.19 12.54
----------
Options granted............................... 763,000 19.38 - 28.44 19.46
Options assumed through acquisitions.......... 395,541 0.01 - 11.97 5.36
Options exercised............................. (305,660) 0.01 - 18.38 8.41
Options canceled.............................. (186,078) 6.00 Exercised at $1.28 per share.... -- -- 33,954 33,954 1.28
Exercised at $2.75 per share.... -- -- 7,988 7,988 2.75
Canceled........................ 37,000 -- -- 37,000 8.38
-------- ----------- ------------ ------- --------
Outstanding- 61.19 11.70
----------
Balance at December 31, 1997..... 1,271,000 16,000 131,818 1,418,818 6.09
======== =========== ============ ======= ========
Exercisable at December 31, 1997..... 228,500 16,000 131,818 376,318
======== =========== ============ =======
Available for grant at December 31,
1997............................... 1,601,000 184,000 none 1,785,000
======== =========== ============ =======2000.................. 2,814,960 $0.01 - $61.19 $13.79
==========
The exercise prices of options outstanding at December 31, 1997 and 1996, ranged
from $1.28 to $17.88 per share and from $1.28 to $7.88 per share, respectively.
The weighted average contractual life remaining on outstanding sharestock
options was 8.3eight years at December 31, 1997.
The Company applies2000.
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation", we apply APB Opinion 25, Accounting"Accounting for Stock Issued to
Employees,Employees", and related Interpretationsinterpretations in accounting for itsour stock-based
compensation plans. APB Opinion 25 does not require compensation costs to be
recorded on options which have exercise prices at least equal to the market
price of the stock on the date of grant. Accordingly, nowe have not recognized
compensation cost has been
recognized for the Company'sour stock-based plans. Had compensation cost for the
Company'sour
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the optional method
ofprescribed by SFAS No. 123, "Accounting for Stock-Based Compensation", the Company'sour net income (loss) and net income (loss) per
share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share data):
1997 1996
--------- ---------
Net income:
As reported..................... $ 15,439 $ 7,677
Proforma........................ $ 14,571 $ 7,268
Basic net income per share:
As reported..................... $ .66 $ .36
Proforma........................ $ .63 $ .34
Diluted net income per share:
As reported..................... $ .65 $ .36
Proforma........................ $ .61 $ .34
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
Net income (loss):
As reported.......................................... $ 19,152 $ 2,380 $ 17,602
Pro forma............................................ $ 10,768 $ (5,473) $ 12,738
Basic net income (loss) per share:
As reported.......................................... $ 0.60 $ 0.08 $ 0.61
Pro forma............................................ $ 0.34 $ (0.18) $ 0.44
Diluted net income (loss) per share:
As reported.......................................... $ 0.58 $ 0.07 $ 0.59
Pro forma............................................ $ 0.33 $ (0.17) $ 0.43
35
The weighted average fair value of options granted in 19972000, 1999 and
19961998 of $7.08$13.36, $8.86 and $4.00,$8.39, respectively, was estimated using the
Black-Scholes option-pricing model with the following assumptions:
risk-free
2000 1999 1998
-------- -------- --------
Risk free interest rate................................... 5.0% 5.8% 6.7%
Expected volatility....................................... 66% 70% 69%
Expected lives (in years)................................. 8 9 9
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short-term maturities of
these instruments. We believe that the carrying amount of long-term debt,
excluding senior notes, approximates fair value as the majority of these
borrowings bear interest at floating market interest rates. The estimated fair
value of the $75,000,000 senior notes was approximately $79,569,000 at December
31, 2000, determined using long-term rates in effect on that date. These
estimates are not necessarily indicative of 5.6%the amounts that could be realized
in 1997a current market transaction.
9. CONCENTRATION OF CREDIT RISK
We derive our worldwide revenues from customers primarily in the oil
and 6.7%gas industry. This industry concentration has the potential to impact our
overall exposure to credit risk, either positively or negatively, in 1996, no dividendsthat our
customers could be affected by similar changes in 1997economic, industry or other
conditions. However, we believe that the credit risk posed by this industry
concentration is offset by the creditworthiness of our customer base. Our
portfolio of accounts receivable is comprised primarily of major international
corporate entities, government organizations and 1996; expected volatility of 39 percent in 1997
and 35 percent in 1996; and expected option lives of 10 years for the options
granted in 1997 and 1996. Because the SFAS No. 123 method of accounting has not
been applied to options granted prior to January 1, 1995, the resulting pro
forma compensation cost may not be representative of that expected in future
years.
9.independent producers with
stable payment experience.
10. RETIREMENT AND OTHER BENEFIT PLANS
The Company has eightDuring 2000, we maintained three defined contribution plans (the
"Plans") for the benefit of all qualifiedeligible employees in the United States, Canada and
the United Kingdom. One of our acquisitions, PENCOR, maintained defined
contribution plans prior to the date of acquisition. In accordance with the
specificterms of each plan, the Company matcheswe match the required portion of employee contributions up
to specified limits and under certain plans, the
Companywe may contribute a portion of the net profits of the Companymake discretionary
contributions annually in accordance with the Plans. For the years ended 1997, 19962000,
1999 and 1995 the Company1998 we expensed $2,251,000, $1,430,000,$2,079,000, $1,601,000 and $1,190,000$2,988,000 respectively,
for its matching and profit-sharingdiscretionary contributions to the Plans.
The Company providesWe provide a retirement benefit to substantially all of itsour Dutch
employees equal to 1.75% of each employee's final pay for each year of service,
subject to a maximum of 70%. Funding for this benefit is in the form of premiums
paid to an insurance company based upon each employee's age and current salary.
Salary increases require higher premiums, which are paid over future years and
are reflected, at their net present value, as a provision for pension
backservicein other long-term liabilities.
Employees are 100% vested at all times. In the event an employee leaves the company, the Company isCore
Laboratories, we are required to immediately pay the backservice pension liability to the
insurance company. The insurance company has assumed substantially all risk
associated with the plan.
The CompanyWe also operatesoperated a defined benefit plan for a portion of itsour U.S.
employees; such planemployees which was suspended on December 31, 1997. The benefits paidunder the plan
are based on years of service and the employee's final average earnings. Pension
costsWe
expect this plan to be settled in 1997 were $217,763. The Company recognized a curtailment gain of
approximately $1.4 million related to the plan's suspension.2001.
36
The components of net pension costs (income) in 1997income related to the defined benefit
plan are as follows:
Service cost-benefits earned during
the period........................... $ 450,120
Interest cost on projected
obligation........................... 571,456
Actual return on assets.............. (1,118,868)
Net amortization and accrual......... 315,055
----------
Net pension costs (income)........... $ 217,763
==========
2000 1999 1998
------------ ------------ ------------
Service cost-benefits earned during the period........... $ 173,193 $ 144,082 $ 164,780
Interest cost on projected obligation.................... 527,362 512,090 503,820
Actual return on assets.................................. (816,831) (771,819) (721,630)
Net amortization and accrual............................. (56,443) -- --
------------ ------------ ------------
Net pension income.................................. $ (172,719) $ (115,647) $ (53,030)
============ ============ ============
Actuarial assumptions used for this calculation are as follows:
Discount rate........................ 7.5%
Rate of return....................... 8.0%
Rate of compensation increase........ 5.0%
In July 1997, the Company
2000 1999 1998
------------ ------------ ------------
Discount rate............................................ 8.00% 8.00% 6.75%
Rate of return........................................... N/A 8.00% 8.00%
Rate of compensation increase............................ N/A N/A N/A
We have established deferred compensation contracts for certain
officers. The plan's benefits under these contracts are fully vested and benefits are
paid when the participants attain their 65th year65 years of age. The charge to expense for
officer deferred compensation in 19972000, 1999 and 1998 was approximately $238,000.$450,000,
$385,000 and $307,000 respectively. Life insurance policies with cash surrender
value werevalues have been purchased for the purpose of funding the officer deferred
compensation contracts.
The Company also maintains deferred compensation contracts with certain key
employees. Vesting is based upon age and years of service. Life insurance
contracts with cash surrender value have been purchased which fund these
agreements. The charge to expense for the key employee deferred compensation
contracts in 1997 was approximately $83,000.
10.11. COMMITMENTS AND CONTINGENCIES
In the latter part of 1996, prior to its acquisition by the Company, Saybolt,
Inc., an indirect subsidiary of the parent, Saybolt International B.V., was
informed that the Environmental Protection Agency ("EPA") and the U.S.
Department of Justice ("DOJ") had commenced a
criminal investigation into certain practices at three of Saybolt's U.S.
laboratories. The investigation has focused on instances in which Saybolt
employees in New Jersey, Massachusetts and Connecticut may have failed to report
accurate RFG results to customers and the EPA. The Company is cooperating with
this investigation and, in addition, has begun its own internal review of the
matter. If the EPA and/or the DOJ conclude that Saybolt was in noncompliance
with any of the applicable rules and regulations, the Company may be subjected
to fines, civil or criminal proceedings, sanctions and/or the revocation of its
licenses and/or authorization to perform certain services governed by the EPA,
customers or other agencies, or to continue to conduct business in certain
areas.
The U.S. Attorney's Offices for Massachusetts and New Jersey and the DOJ are
conducting a criminal investigation as to whether Saybolt committed violations
of U.S. laws regulating international business actions of U.S. persons. On
January 29, 1998 the U.S. Attorney's Office for the District of Massachusetts
announced that the former president of Saybolt, Inc. had been arrested and
charged with violating the Foreign Corrupt Practices Act and the Travel Act. The
criminal complaint alleged that such person participated in arranging the
payment of $50,000 to Panamanian officials in 1995 in an effort to obtain a
lease and certain tax benefits from the Panamanian government for Saybolt de
Panama S.A. The alleged violation occurred more than a year before the Company's
acquisition of Saybolt in May 1997 and was discovered during the EPA
investigation of Saybolt.
Representatives of the Company and their attorneys in the two above described
matters have held discussion with officials at the U.S. Attorney's Offices for
Massachusetts, Connecticut and New Jersey and the DOJ in an attempt to resolve
all disputes concerning Saybolt. As a result of these discussions, The Company
believes that the amount required to resolve these issues will not exceed $5.0
million. The Company believes that it has indemnity rights against the former
shareholders of Saybolt to cover contingencies and breaches of provisions of the
agreement entered into at the same time of the acquisition of Saybolt. While no
assuarance can be made as to the ultimate outcomeof these matters, the Company
does not believe that such matters will have a material
adverse effect on the financial condition of the Company.
The CompanyWe may from time to time be subject to legal proceedings and claims
whichthat arise in the ordinary course of its business. Management believesWe believe that the outcome of
thesecurrent legal actions will not have a material adverse effect upon theour
consolidated financial position or future results or operations of the Company.operations.
As security for bids and performance on certain contracts, the Company waswe were
contingently liable at December 31, 1997,2000, in the amount of approximately $1.3$2.4
million under standby letters of credit and bank guarantees. We do not believe
it is practicable to estimate the fair value of these financial instruments and
do not expect any material losses from their resolution since performance is not
likely to be required.
Minimum rental commitments under non-cancelable operating and capital
leases as of December 31, 1997,2000, consist of the following (in thousands):
Year ended December 3131-- Operating Capital
------------ ------------
2001................................. $ 5,623 $ 247
2002................................. 4,110 14
2003................................. 2,738 11
2004................................. 2,332 8
2005................................. 2,143 2
Thereafter........................... 7,170 --
1998............................------------ ------------
$ 5,729
1999............................ 3,184
2000............................ 1,796
2001............................ 788
2002............................ 583
Thereafter...................... 655
---------24,116 $ 12,735
=========282
============ ============
Operating lease commitments relate principally to equipment and office
space. Rental expense for operating leases, including amounts for short-term
leases with nominal future rental commitments, was approximately $5,749,000, $3,721,000$6,629,000,
$3,798,000 and $2,835,000$5,983,000 for 1997, 19962000, 1999 and 1995,1998, respectively.
37
12. SEGMENT REPORTING
We manage our business segments separately due to the different
technologies each segment utilizes and requires (see Note 1). Results of these
segments are presented below using the same accounting policies as used to
prepare the Consolidated Balance Sheet and Statement of Operations. We evaluate
performance based on income or loss from operations before income tax, interest
and other non-operating income (expense). Summarized financial information
concerning our segments is shown in the following tables (in thousands):
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
REVENUES:
Reservoir Description........................................ $ 190,726 $ 200,584 $ 205,718
Production Enhancement....................................... 94,341 65,342 46,037
Reservoir Management......................................... 51,031 56,831 65,363
------------ ------------ ------------
Consolidated........................................... $ 336,098 $ 322,757 $ 317,118
============ ============ ============
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
INCOME (LOSS) BEFORE INTEREST
AND TAXES:
Reservoir Description 1...................................... $ 23,411 $ 13,698 $ 26,746
Production Enhancement 1..................................... 14,665 8,485 8,217
Reservoir Management 1....................................... (2,764) (6,176) 2,398
Corporate and other 1,2...................................... 279 (3,804) 260
------------ ------------ ------------
Consolidated........................................... $ 35,591 $ 12,203 $ 37,621
============ ============ ============
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
DEPRECIATION AND AMORTIZATION:
Reservoir Description........................................ $ 8,759 $ 9,673 $ 10,302
Production Enhancement ...................................... 1,922 1,642 1,213
Reservoir Management ........................................ 2,422 3,663 3,935
Corporate and other.......................................... 2,008 961 928
------------ ------------ ------------
Consolidated........................................... $ 15,111 $ 15,939 $ 16,378
============ ============ ============
38
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
GOODWILL AMORTIZATION:
Reservoir Description........................................ $ 2,341 $ 2,325 $ 2,066
Production Enhancement....................................... 1,289 1,306 609
Reservoir Management......................................... 477 496 338
------------ ------------ ------------
Consolidated........................................... $ 4,107 $ 4,127 $ 3,013
============ ============ ============
As of December 31,
2000 1999 1998
------------ ------------ ------------
ASSETS:
Reservoir Description........................................ $ 118,313 $ 133,421 $ 139,299
Production Enhancement....................................... 77,726 56,022 45,412
Reservoir Management......................................... 38,448 31,586 35,440
------------ ------------ ------------
Total Business Segments................................ 234,487 221,029 220,151
------------ ------------ ------------
Corporate and other 2........................................ 171,185 181,909 166,965
Intersegment Eliminations.................................... 4,932 (29,755) (19,242)
------------ ------------ ------------
Consolidated........................................... $ 410,604 $ 373,183 $ 367,874
============ ============ ============
1) The Company has entered into various capital leases which provideincome (loss) before interest and taxes for future
minimum lease payments over the next five yearseach segment in
1999 have been reduced by restructuring, write-offs and other
charges. The amounts attributable to each segment were as follows:
$427,000 in 1998,
$118,000 in 1999, $25,000 in 2000,Reservoir Description - $8,397; Production Enhancement - $2,854;
Reservoir Management - $2,759. Corporate and $13,000 in 2001.
11. INDUSTRY SEGMENTS AND INTERNATIONAL OPERATIONS
The Company derives itsother includes $3,696
of merger termination costs related to the proposed GeoScience
acquisition. See Note 13 for additional information.
2) "Corporate and Other" represents those items that are not directly
related to a particular segment.
We are a Netherlands company and we derive our revenues from services
and sales to customers primarily in one industry segment, the oil and gas
industry. The following is a summary of
the Company's United States and other foreign operations for 1997, 1996, and
1995, (in thousands):
YEAR ENDED
--------------------------------
1997 1996 1995
---------- --------- ---------
Revenues --
United States...................... $ 92,697 $ 67,644 $ 52,521
Other countries.................... 122,154 37,724 35,072
---------- --------- ---------
$ 214,851 $ 105,368 $ 87,593
========== ========= =========
Operating income --
United States...................... $ 9,522 $ 5,024 $ 6,382
Other countries.................... 17,862 7,187 3,444
---------- --------- ---------
$ 27,384 $ 12,211 $ 9,826
========== ========= =========
Identifiable assets --
United States...................... $ 60,511 $ 46,140 $ 43,174
Other countries.................... 177,505 33,551 28,205
---------- --------- ---------
$ 238,016 $ 79,691 $ 71,379
========== ========= =========
Operating income includes sales and services, costs of sales and services,
general and administrative expenses, depreciation and amortization. United
States revenues include $11.4 million, $11.9 million and $13.3 million in 1997,
1996 and 1995 respectively, exported to various international markets.
No single customer accountsaccounted for 10 percent or more of consolidated
revenues forin any of the periods presented. The following is a summary of our U.S.
and foreign operations for 2000, 1999 and 1998 (in thousands):
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues from unaffiliated customers:
United States........................................... $ 135,781 $ 142,681 $ 146,850
Other countries......................................... 200,317 180,076 170,268
------------ ------------ ------------
Total.............................................. $ 336,098 $ 322,757 $ 317,118
============ ============ ============
Income (loss) before interest and taxes:
United States........................................... $ 12,328 $ (6,616) $ 13,382
Other countries......................................... 23,263 18,819 24,239
------------ ------------ ------------
Total.............................................. $ 35,591 $ 12,203 $ 37,621
============ ============ ============
Identifiable assets:
United States........................................... $ 129,766 $ 138,451 $ 166,341
Other countries......................................... 280,838 234,732 201,533
------------ ------------ ------------
Total.............................................. $ 410,604 $ 373,183 $ 367,874
============ ============ ============
Operating income includes income from continuing operations before
interest expense and income taxes. U.S. revenues derived from exports were $45.5
million, $34.7 million and $12.7 million in 2000, 1999 and 1998, respectively.
39
12.13. WRITE-OFFS AND RESTRUCTURING CHARGES
Write-offs and Other Charges
In the first quarter of 1999, we recorded write-offs and other charges
totaling $10.7 million. This amount included $4.4 million of asset write-offs,
$2.6 million related to facility closures and personnel reductions, and $3.7
million associated with the termination of the proposed acquisition of
GeoScience Corp. The asset write-offs consisted primarily of uncollectible
accounts receivable in the former Soviet Union and other Eastern Hemisphere
locations, due to economic instability in the region, as well as adjustments to
net realizable value of certain inventory and other current asset amounts. The
facility closures consisted primarily of the shutdown of our environmental
testing laboratory in Edison, New Jersey, the Saybolt Western Hemisphere
administrative office and a substantial reduction in our Venezuelan work force.
These actions, which affected a total of 47 employees, were substantially
complete as of April 30, 1999. The termination settlement included the
forgiveness of $3.0 million in working capital advances made by Core
Laboratories to GeoScience Corp.
Restructuring Charges
In the fourth quarter of 1999, we recorded a $7.0 million charge to
cover the cost of exiting redundant facilities and restructuring certain of our
operations. This charge affected each of our operating segments as follows:
Reservoir Description - $2.8 million; Production Enhancement - $1.9 million;
Reservoir Management - $2.3 million. We combined personnel and equipment from
eight facilities into one Houston facility. No operations were discontinued. The
move was completed in the second quarter of 2000. Related charges include
severance for approximately 100 field and administrative employees, the accrual
of future lease obligations and facility restoration costs and the write-off of
redundant fixed assets and leasehold improvements. Substantially all of these
employees were terminated as of June 30, 2000. Cash required for the costs
incurred through December 31, 2000 of $3.8 million, excluding asset write-offs,
was funded from operating activities. We anticipate that the remaining costs
will also be funded through cash from operating activities. This charge is
summarized in the following table:
Restructuring Charges
(Dollars in Thousands)
Asset
Lease Write-
Obligations Severance Restoration offs(a) Other Total
----------- --------- ----------- ------- ------- -------
Total restructuring charges............. $ 2,983 $ 879 $ 786 $ 2,080 $ 308 $ 7,036
Less: Costs incurred through
December 31, 1999.............. 515 445 28 2,080 124 3,192
------- ------- ------- ------- ------- -------
Accrual remaining at December 31, 1999.. 2,468 434 758 - 184 3,844
Less: Costs incurred through
December 31, 2000.............. 1,440 434 655 - 184 2,713
------- ------- ------- ------- ------- -------
Accrual remaining....................... $ 1,028 $ - $ 103 $ - $ - $ 1,131
======= ======= ======= ======= ======= =======
(a) The fixed assets and leasehold improvements related to the Houston
consolidation were disposed of by the end of June 2000. The write-off
approximates the carrying amount as these assets were abandoned or sold for
salvage value. Depreciation expense was reduced by approximately $490 in 2000,
and will be reduced by $333 in 2001 and $342 thereafter. Also included in this
amount were $915 of working capital write-offs related to the restructuring of
foreign operations. The asset write-offs attributable to each segment were as
follows: Reservoir Description - $1,176; Production Enhancement - $346;
Reservoir Management - $558.
14. DISPOSITION OF ASSETS
We sold substantially all of our U.S. environmental testing and certain
other assets to Severn Trent Laboratories, Inc., a Delaware corporation, on
September 30, 1999. Consideration received from the sale was approximately
$19.7 million.
40
15. UNAUDITED SELECTED QUARTERLY RESULTS OF OPERATIONS
Summarized quarterly financial data for the four quarters ended
December 31, 19972000 and 19961999 is as follows (in thousands, except share and per
share data).:
QUARTER ENDED
----------------------------------------------------------
12/31/97 9/30/97 6/30/97 3/31/97
------------- ------------- ------------- -------------Three months ended December 31, September 30, June 30, March 31,
2000 2000 2000 2000
-------------- -------------- -------------- --------------
Service and sales revenue...............revenues........................ $ 68,45197,630 $ 63,45787,355 $ 54,91178,879 $ 28,032
Operating expenses...................... 58,048 54,779 48,705 24,879
Interest expense........................ 2,226 2,403 1,459 296
------------- ------------- ------------- -------------72,234
Cost of services and sales........................ 76,852 69,154 63,795 58,854
Other operating expenses.......................... 8,394 7,914 8,051 7,493
-------------- -------------- -------------- --------------
Income before interest expense and
income tax and
extraordinary item....................tax...................................... 12,384 10,287 7,033 5,887
-------------- -------------- -------------- --------------
Interest expense.................................. 2,120 2,072 1,989 2,050
-------------- -------------- -------------- --------------
Income from continuing operations
before income tax............................... $ 8,17710,264 $ 6,2758,215 $ 4,7475,044 $ 2,857
============= ============= ============= =============
Net income applicable to common
shares................................3,837
============== ============== ============== ==============
Income from continuing operations................. $ 5,6147,185 $ 4,4215,750 $ 3,3543,531 $ 2,050
============= ============= ============= =============2,686
============== ============== ============== ==============
Per share data:
Basic earnings per share...........share from
continuing operations.......................... $ .240.22 $ .200.18 $ .150.11 $ .09
============= ============= ============= =============0.09
============== ============== ============== ==============
Weighted average basic common shares
outstanding...................... 23,329,382 21,719,046 21,677,382 21,656,882
============= ============= ============= =============outstanding.................................... 32,203,386 32,187,720 31,489,478 31,247,546
============== ============== ============== ==============
Diluted earnings per share.........share from
continuing operations.......................... $ .230.22 $ .200.17 $ .150.11 $ .09
============= ============= ============= =============0.08
============== ============== ============== ==============
Weighted average diluted common
share and
common share equivalents......... 24,232,951 22,467,989 22,157,392 21,990,168
============= ============= ============= =============
QUARTER ENDED
----------------------------------------------
12/31/96 9/30/96 6/30/96 3/31/96
---------- ---------- ---------- ----------shares outstanding............................. 33,283,074 33,127,937 32,991,413 32,652,538
============== ============== ============== ==============
Three months ended December 31, September 30, June 30, March 31,
1999 1999 1999 1999 (a)
-------------- -------------- -------------- --------------
Service and sales revenue...............revenues........................ $ 28,48590,446 $ 25,46082,356 $ 25,94479,165 $ 25,479
Operating expenses...................... 25,116 21,940 22,772 22,72670,790
Cost of services and sales........................ 71,213 63,966 66,811 61,233
Write-offs and other charges...................... -- -- -- 10,670
Restructuring charges............................. 7,036 -- -- --
Other operating expenses.......................... 6,468 8,654 7,018 7,485
-------------- -------------- -------------- --------------
Income (loss) before interest expense and
income tax...................................... 5,729 9,736 5,336 (8,598)
-------------- -------------- -------------- --------------
Interest expense........................ 314 351 348 405
---------- ---------- ---------- ----------expense.................................. 2,264 2,393 2,048 1,852
-------------- -------------- -------------- --------------
Income (loss) from continuing operations
before income tax and
extraordinary item....................tax............................... $ 3,0553,465 $ 3,1697,343 $ 2,8243,288 $ 2,348
========== ========== ========== ==========
Net income applicable to common
shares................................(10,450)
============== ============== ============== ==============
Income (loss) from continuing operations.......... $ 2,0562,245 $ 2,1424,972 $ 1,8972,183 $ 1,582
========== ========== ========== ==========(7,020)
============== ============== ============== ==============
Per share data:
Basic earnings (loss) per share...........share from
continuing operations.......................... $ .100.07 $ .100.16 $ .090.07 $ .07
========== ========== ========== ==========(0.23)
============== ============== ============== ==============
Weighted average basic common shares
outstanding...................... 21,185,168 21,183,876 21,157,064 21,157,064
========== ========== ========== ==========outstanding.................................... 31,142,804 30,916,824 30,744,116 30,686,075
============== ============== ============== ==============
Diluted earnings (loss) per share.........share from
continuing operations.......................... $ .100.07 $ .100.16 $ .090.07 $ .07
========== ========== ========== ==========(0.23)
============== ============== ============== ==============
Weighted average ofdiluted common
shares outstanding............................. 32,203,194 32,003,097 31,584,263 30,686,075
============== ============== ============== ==============
(a) The effect of dilutive stock options totaling 937,871 equivalent
common shares was not included in the computation of weighted average
diluted common shares because the impact of these options was anti-
dilutive as a result of our net loss for the three months ended
March 31, 1999.
41
INDEX TO EXHIBITS
Incorporated by
Reference from the
Exhibit No. Exhibit Title Following Documents
- ----------- ------------- ------------------
3.1 -- Articles of Association of the Company, as amended (including Form F-1, September 20, 1995
English translation)
4.1 -- Form of certificate representing Common Shares Filed Herewith
10.1 -- Core Laboratories N.V. 1995 Long-Term Incentive Plan (as amended and common share equivalents
outstanding...................... 21,448,070 21,401,094 21,349,134 21,265,474
========== ========== ========== ==========Proxy Statement dated May 2,
restated effective as of May 29, 1997) 1997 for Annual Meeting of
Shareholders
10.2 -- Core Laboratories N.V. 1995 Nonemployee Director Stock Option Plan Proxy Statement dated May 2,
(as amended and restated effective as of May 29, 1997) 1997 for Annual Meeting of
Shareholders
10.3 -- Form of Registration Rights Agreement to be entered into by the Form 10-Q, November 10, 1995
Company and certain of its shareholders, dated September 15, 1995
10.4 -- Purchase and Sale Agreement between Core Holdings B.V. and Western Form F-1, September 20, 1995
Atlas International, Inc., Western Atlas International Nigeria Ltd.,
Western Atlas de Venezuela, C.A., Western Atlas Canada Ltd. and Core
Laboratories Australia Pty. Ltd. dated as of September 30, 1994
10.5 -- Form of Indemnification Agreement to be entered into by the Company Form F-1, September 20, 1995
and certain of its directors and officers
10.6 -- Indemnification Agreements, each dated as of October 20, 1995, Form 10-Q, November 10, 1995
between the Company and each of its directors and executive officers
10.7 -- Amended and Restated Credit Agreement among Core Laboratories N.V., Form S-3, November 20, 1997
Core Laboratories, Inc., Core Laboratories (U.K.) Limited, Bankers
Trust Company, NationsBank, N.A. and the Bank Group, dated as of
July 18, 1997
10.8 -- Core Laboratories Supplemental Executive Retirement Plan effective Form 10-K, March 31, 1998
as of January 1, 1998
10.9 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
David Michael Demshur dated as of August 18, 1998
10.10 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Richard Lucas Bergmark dated as of August 18, 1998
10.11 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Monty Lee Davis dated as of August 18, 1998
10.12 -- Form of Employment Agreement between Core Laboratories N.V. and John Form 10-K, March 31, 1999
David Denson dated as of August 18, 1998
10.13 -- Core Laboratories Supplemental Executive Retirement Plan for John D. Form 10-Q, November 15, 1999
Denson effective January 1, 1999
10.14 -- Core Laboratories Supplemental Executive Retirement Plan for Monty Form 10-Q, November 15, 1999
L. Davis effective January 1, 1999
10.15 -- Amendment to Core Laboratories Supplemental Executive Retirement Form 10-Q, November 15, 1999
Plan filed January 1, 1998, effective July 29, 1999
10.16 -- Amendment to Amended and Restated Credit Agreement among Core Form 10-Q, November 15, 1999
Laboratories N.V., Core Laboratories, Inc., Core Laboratories (U.K.)
Limited, Bankers Trust Company, Bank of America, N.A. and the Bank
Group, dated as of July 22, 1999
10.17 -- Note and Guarantee Agreement by Core Laboratories, Inc. for Form 10-Q, November 15, 1999
Guaranteed Senior Notes, Series A, and Guaranteed Senior Notes,
Series B, dated as of July 22, 1999
10.18 -- First Amendment to Core Laboratories N.V. 1995 Long-Term Incentive Filed Herewith
Stock Option Plan (As Amended and Restated Effective as of
May 29, 1997)
10.19 -- Second Amendment to Core Laboratories N.V. Nonemployee Director Filed Herewith
Plan (As Amended and Restated Effective as of May 29, 1997)
21.1 -- Subsidiaries of the Registrant Filed Herewith
23.1 -- Consent of Arthur Andersen LLP Filed Herewith