UNITED STATES | ||||
SECURITIES AND EXCHANGE COMMISSION | ||||
Washington, D.C. 20549 | ||||
FORM 10-Q | ||||
(Mark One) | ||||
X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |||
SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended September 30, 2006 | ||||
OR | ||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||||
SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from ________________ to ______________ | ||||
Commission File Number: 001-14273 | ||||
CORE LABORATORIES N.V. | ||||
(Exact name of registrant as specified in its charter) | ||||
The Netherlands | Not Applicable | |||
(State of other jurisdiction of | (I.R.S. Employer Identification No.) | |||
incorporation or organization) | ||||
Herengracht 424 | ||||
1017 BZ Amsterdam | ||||
The Netherlands | Not Applicable | |||
(Address of principal executive offices) | (Zip Code) | |||
(31-20) 420-3191 | ||||
(Registrant's telephone number, including area code) | ||||
None | ||||
(Former name, former address and former fiscal year, if changed since last report) | ||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] | ||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ X ] Accelerated filer [ ] Non-accelerated filer [ ] | ||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ] | ||||
The number of common shares of the Registrant, par value EUR 0.04 per share, outstanding at October 25, 2006 was 25,089,386. |
CORE LABORATORIES N.V. | ||
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2006 | ||
INDEX | ||
Page | ||
PART I - FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | |
Consolidated Balance Sheets at September 30, 2006 (Unaudited) and December 31, 2005 | 1 | |
Consolidated Statements of Operations (Unaudited) for the Three Months Ended | ||
September 30, 2006 and 2005 | 2 | |
Consolidated Statements of Operations (Unaudited) for the Nine Months Ended | ||
September 30, 2006 and 2005 | 3 | |
| ||
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended | ||
September 30, 2006 and 2005 | 4 | |
Notes to (Unaudited) Consolidated Interim Financial Statements | 5 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and | |
Results of Operations | 15 | |
Item 3. | 22 | |
Item 4. | 22 | |
PART II - OTHER INFORMATION | ||
Item 1. | 23 | |
Item 2. | 23 | |
Item 5. | 23 | |
Item 6. | 24 | |
25 | ||
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30, | December 31, | |||||
2006 | 2005 | |||||
ASSETS | (Unaudited) | |||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ 12,456 | $ 13,743 | ||||
Accounts receivable, net of allowance for doubtful accounts of $4,760 and | ||||||
$4,526 at 2006 and 2005, respectively | 111,062 | 99,129 | ||||
Inventories, net | 31,772 | 29,104 | ||||
Prepaid expenses and other current assets | 14,266 | 11,269 | ||||
TOTAL CURRENT ASSETS | 169,556 | 153,245 | ||||
PROPERTY, PLANT AND EQUIPMENT, net | 87,482 | 81,342 | ||||
INTANGIBLES, net | 6,566 | 6,720 | ||||
GOODWILL | 132,618 | 132,618 | ||||
DEFERRED TAX ASSET | 14,665 | 11,452 | ||||
OTHER ASSETS | 9,983 | 9,224 | ||||
TOTAL ASSETS | $ 420,870 | $ 394,601 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Current maturities of long-term debt and capital lease obligations | $ 181 | $ 2,544 | ||||
Accounts payable | 30,769 | 32,557 | ||||
Accrued payroll and related costs | 25,401 | 17,371 | ||||
Taxes other than payroll and income | 6,919 | 5,660 | ||||
Income taxes payable | 8,485 | - | ||||
Unearned revenues | 5,567 | 3,233 | ||||
Other accrued expenses | 9,189 | 7,391 | ||||
Current liabilities of discontinued operations | - | 800 | ||||
TOTAL CURRENT LIABILITIES | 86,511 | 69,556 | ||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS | 107,002 | 86,104 | ||||
DEFERRED COMPENSATION | 9,586 | 7,585 | ||||
OTHER LONG-TERM LIABILITIES | 25,859 | 16,034 | ||||
COMMITMENTS AND CONTINGENCIES | ||||||
MINORITY INTEREST | 1,477 | 1,065 | ||||
SHAREHOLDERS' EQUITY: | ||||||
Preference shares, EUR 0.04 par value in 2006 and EUR 0.01 par value in 2005; | ||||||
3,000,000 shares authorized, none issued or outstanding | - | - | ||||
Common shares, EUR 0.04 par value in 2006 and EUR 0.01 par value in 2005; | ||||||
100,000,000 shares authorized, 25,527,327 issued and 25,089,385 outstanding at 2006 | ||||||
and 26,797,354 issued and 25,774,339 outstanding at 2005 | 1,446 |
| 474 | |||
Additional paid-in capital | 18,249 | 103,832 | ||||
Deferred compensation | - | (940) | ||||
Retained earnings | 198,937 | 141,448 | ||||
Treasury shares (at cost), 437,942 at 2006 and 1,023,015 at 2005 | (28,197) | (30,557) | ||||
TOTAL SHAREHOLDERS' EQUITY | 190,435 | 214,257 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 420,870 | $ 394,601 |
The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended September 30, | ||||
2006 | 2005 | |||
(Unaudited) | ||||
REVENUES: | ||||
Services | $ 109,950 | $ 90,328 | ||
Product Sales | 35,576 | 29,856 | ||
145,526 | 120,184 | |||
OPERATING EXPENSES: | ||||
Cost of services | 74,240 | 69,737 | ||
Cost of sales | 26,282 | 23,027 | ||
General and administrative expenses | 6,250 | 10,873 | ||
Depreciation | 4,423 | 3,922 | ||
Amortization | 94 | 124 | ||
Other (income), net | 447 | (1,636) | ||
OPERATING INCOME | 33,790 | 14,137 | ||
Interest expense | 1,930 | 1,923 | ||
Income before income tax expense | 31,860 | 12,214 | ||
Income tax expense | 9,476 | 4,724 | ||
NET INCOME | $ 22,384 | $ 7,490 | ||
EARNINGS PER SHARE INFORMATION: | ||||
Basic earnings per share | $ 0.88 | $ 0.29 | ||
Diluted earnings per share | $ 0.83 | $ 0.27 | ||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||
Basic | 25,304 | 26,108 | ||
Diluted | 26,951 | 28,121 | ||
The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Nine Months Ended September 30, | ||||
2006 | 2005 | |||
(Unaudited) | ||||
REVENUES: | ||||
Services | $ 315,423 | $ 272,309 | ||
Product Sales | 107,455 | 82,211 | ||
422,878 | 354,520 | |||
OPERATING EXPENSES: | ||||
Cost of services | 221,768 | 207,780 | ||
Cost of sales | 79,097 | 65,568 | ||
General and administrative expenses | 25,458 | 26,180 | ||
Depreciation | 12,473 | 11,976 | ||
Amortization | 256 | 364 | ||
| Other (income), net | (2,969) | (1,678) | |
OPERATING INCOME | 86,795 | 44,330 | ||
Interest expense | 4,785 | 6,034 | ||
Income before income tax expense | 82,010 | 38,296 | ||
Income tax expense | 24,521 | 11,834 | ||
NET INCOME | $ 57,489 | $ 26,462 | ||
EARNINGS PER SHARE INFORMATION: | ||||
Basic earnings per share | $ 2.25 | $ 1.01 | ||
Diluted earnings per share | $ 2.11 | $ 0.95 | ||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||
Basic | 25,551 | 26,095 | ||
Diluted | 27,304 | 27,996 | ||
The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30, | |||||
2006 | 2005 | ||||
(Unaudited) | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ 57,489 | $ 26,462 | |||
Adjustments to reconcile income to net cash provided by operating activities: | |||||
Net provision for doubtful accounts | 577 | 891 | |||
Inventory obsolescence | 1,553 | 2,276 | |||
Equity in loss (income) of affiliates | 53 | (44) | |||
Minority interest | 151 | (159) | |||
Stock-based compensation | 3,611 | 12,135 | |||
Depreciation and amortization | 12,729 | 12,340 | |||
Debt issuance costs amortization | 86 | 228 | |||
Gain on sale of assets | (782) | (518) | |||
Gain on involuntary sale of fixed asset | - | (875) | |||
Gain on insurance recovery | (492) | (534) | |||
Increase in value of life insurance policies | (132) | (91) | |||
Deferred income taxes | (5,792) | 651 | |||
Changes in assets and liabilities, net of effect of dispositions: | |||||
Accounts receivable | (13,765) | (3,411) | |||
Inventories | (5,770) | (3,099) | |||
Prepaid expenses and other current assets | (584) | 2,064 | |||
Other assets | (42) | 26 | |||
Accounts payable | (1,237) | (1,625) | |||
Accrued expenses | 21,514 | 3,514 | |||
Other long-term liabilities | 10,911 | 5,552 | |||
Net cash provided by operating activities | 80,078 | 55,783 | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Capital expenditures | (16,347) | (12,291) | |||
Patents and other intangibles | (103) | (103) | |||
Proceeds from sale of assets | 2,222 | 3,422 | |||
Premiums on life insurance | (753) | (475) | |||
Net cash used in investing activities | (14,981) | (9,447) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Repayment of debt | (23,439) | (31,762) | |||
Proceeds from debt borrowings | 42,000 | 9,000 | |||
Capital lease obligations | (24) | (182) | |||
Stock options exercised | 13,859 | 7,012 | |||
Excess tax benefits from stock-based payments | 5,671 | - | |||
Debt issuance costs | - | (314) | |||
Repurchase of common shares | (104,451) | (27,012) | |||
Net cash used in financing activities | (66,384) | (43,258) | |||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (1,287) | 3,078 | |||
CASH AND CASH EQUIVALENTS, beginning of period | 13,743 | 16,030 | |||
CASH AND CASH EQUIVALENTS, end of period | $ 12,456 | $ 19,108 | |||
Non-cash investing and financing activities: | |||||
Change in par value of common stock | $ 977 | $ - | |||
Financial capital expenditures | $ 2,350 | $ 18 | |||
Common stock issued pursuant to share-based compensation arrangements | $ - | $ 9,104 | |||
The accompanying notes are an integral part of these consolidated financial statements. |
CORE LABORATORIES N.V.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts of Core Laboratories N.V. and its subsidiaries and have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America ("U.S.") for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements.
Core Laboratories N.V. uses the equity method of accounting for all investments in which it has less than a majority interest and over which it does not exercise control. Minority interest has been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in these financial statements. Furthermore, the operating results presented for the nine months ended September 30, 2006 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2006.
Core Laboratories N.V.'s balance sheet information for the year ended December 31, 2005 was derived from the 2005 audited consolidated financial statements but does not include all disclosures in accordance with GAAP. Certain reclassifications have been made to year 2005 amounts in order to present these results on a comparable basis with amounts for year 2006.
References to "Core Lab", "we", "our", and similar phrases are used throughout this Quarterly Report on Form 10-Q and relate collectively to Core Laboratories N.V. and its consolidated affiliates.
These financial statements should be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2005.
2. INVENTORIES
Inventories consist of the following (in thousands):
September 30, | December 31, | |||
2006 | 2005 | |||
(Unaudited) | ||||
Finished goods | $ 25,914 | $ 22,896 | ||
Parts and materials | 7,812 | 7,381 | ||
Work in progress | 1,019 | 1,183 | ||
Total inventories | 34,745 | 31,460 | ||
Less - valuation reserves | 2,973 | 2,356 | ||
Inventories, net | $ 31,772 | $ 29,104 |
We include freight costs incurred for shipping inventory to customers in the Cost of Sales line of the Consolidated Statement of Operations.
3. GOODWILL AND INTANGIBLES
We account for intangible assets with indefinite lives, including goodwill, in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which requires us to evaluate these assets for impairment annually, or more frequently if an indication of impairment has occurred. Based upon our most recent evaluation, management determined that goodwill was not impaired. We amortize intangible assets with a defined term on a straight-line basis over their respective useful lives. There were no significant changes related to our intangible assets for the nine months ended September 30, 2006. The composition of goodwill by business segment at September 30, 2006 is consistent with the amounts disclosed in our Annual Report on Form 10-K as of December 31, 2005.
4. DEBT AND CAPITAL LEASE OBLIGATIONS
Debt is summarized in the following table (in thousands):
September 30, | December 31, | |||
2006 | 2005 | |||
(Unaudited) | ||||
Credit Facility | $ 107,000 | $ 86,000 | ||
Capital lease obligations | 11 | 36 | ||
Other indebtedness | 172 | 2,612 | ||
Total debt and capital leases obligations | 107,183 | 88,648 | ||
Less - short-term debt included in other indebtedness | 72 | 2,412 | ||
Less - current maturities of long-term debt and capital lease obligations | 109 | 132 | ||
Long-term debt and capital lease obligations | $ 107,002 | $ 86,104 |
We maintain a revolving credit facility ("Credit Facility") allowing for an aggregate borrowing capacity of $125.0 million. The maturity date of the Credit Facility is December 20, 2010. As amended, this agreement provides an option to increase the commitment under the Credit Facility to $175.0 million, if certain conditions are met. Our available borrowing capacity was reduced by outstanding letters of credit and performance guarantees and bonds totaling $6.3 million at September 30, 2006 related to certain projects in progress. Available capacity under the Credit Facility was $11.7 million as of September 30, 2006. The Credit Facility requires interest payments to be made based on the interest period selected. At September 30, 2006, the weighted average interest rate of amounts outstanding under the Credit Facility was 6.08%, and the weighted average interest rate for the nine months ended September 30, 2006 under this facility was 5.93%.
5. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We provide a noncontributory defined benefit pension plan covering substantially all of our Dutch employees based on years of service and final pay or career average pay, depending on when the employee began participating. Employees are immediately vested in the benefits earned. We fund the future obligations of this plan by purchasing investment contracts from a large national insurance company. We make annual premium payments, based upon each employee's age and current salary, to the insurance company.
The following table summarizes the components of net periodic pension cost under this plan for the three and nine months ended September 30, 2006 and 2005 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2006 | 2005 | 2006 | 2005 | ||||
(Unaudited) | (Unaudited) | ||||||
Service cost | $ 295 | $ 166 | $ 905 | $ 523 | |||
Interest cost | 221 | 195 | 678 | 613 | |||
Expected return on plan assets | (214) | (221) | (657) | (695) | |||
Unrecognized pension asset | (20) | (21) | (62) | (71) | |||
Unrecognized pension obligation | 54 | - | 167 | - | |||
Net periodic pension cost | $ 336 | $ 119 | $ 1,031 | $ 370 |
During the nine months ended September 30, 2006, we contributed approximately $1.2 million, as determined by the insurance company, to fund the estimated 2006 premiums on investment contracts held by the plan.
6. COMMITMENTS AND CONTINGENCIES
Executive Employment Agreements
In 1998, we entered into employment agreements with our four senior executive officers that provided for severance benefits. The present value of the long-term liability for the benefits due upon severing the employment of these employees is approximately $2.2 million at September 30, 2006.
Legal Proceedings
From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of business. We believe that the resolution of all litigation currently pending or threatened against it or any of its subsidiaries should not have a material adverse effect on its consolidated financial condition, results of operations or liquidity; however, because of the inherent uncertainty of litigation, we cannot provide assurance that the resolution of any particular claim or proceeding to which it or any of its subsidiaries is a party will not have a material adverse effect on its consolidated results of operations or liquidity for the period in which that resolution occurs.
7. SHAREHOLDERS' EQUITY
During the three and nine months ended September 30, 2006, we repurchased 414,842 of our common shares for $26.8 million, at an average price of $64.68 per share, and 1,891,924 of our common shares for $104.5 million, at an average price of $55.21 per share. In January 2006, 42,015 shares valued at $1.8 million, or $42.98 per share, and in May 2006, 195,467 shares valued at $12.4 million, or $63.60 per share, were acquired pursuant to the terms of a stock-based compensation plan, in settlement by the participants of personal tax burdens that may result from the issuance of common shares under this arrangement.
For the three and nine months ended September 30, 2006, we issued 100,068 and 942,570 of our common shares, associated with stock option exercises for which we received proceeds of approximately $1.6 million and $13.9 million.
At our Annual Shareholders' Meeting on June 28, 2006 (the "Meeting"), our shareholders approved the cancellation of all of the 2,476,997 treasury shares we had repurchased up to the date of the Meeting. These 2,476,997 treasury shares were cancelled in June 2006 at historical cost, totaling $106.8 million, or $43.12 per share, resulting in a decrease in treasury shares at cost and a corresponding decrease in additional paid-in-capital and common stock. Our shareholders also approved the extension of the authority of our Management Board to repurchase up to 10% of the Company's outstanding share capital up through December 28, 2007. At September 30, 2006, we had the authority to repurchase up to 2,104,184 additional shares under our stock repurchase program.
8. EARNINGS PER SHARE
We compute basic earnings per common share by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common shares include additional shares in the weighted average share calculations associated with the incremental effect of dilutive employee stock options, restricted stock awards and contingently issuable shares, as determined using the treasury stock method. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2006 | 2005 | 2006 | 2005 | ||||
(Unaudited) | (Unaudited) | ||||||
Weighted average basic common shares outstanding | 25,304 | 26,108 | 25,551 | 26,095 | |||
Effect of dilutive securities: | |||||||
Stock options(1) | 1,421 | 1,540 | 1,498 | 1,515 | |||
Contingent shares | 159 | 245 | 146 | 256 | |||
Restricted stock and other | 67 | 228 | 109 | 130 | |||
Weighted average diluted common and potential common shares outstanding | 26,951 | 28,121 | 27,304 | 27,996 |
______________________
(1) The effect of anti-dilutive shares associated with these securities has been excluded from the diluted weighted average share calculations at September 30, 2006 and 2005. If these shares had been included, the impact would have been a decrease in weighted average shares outstanding of 0 shares for the three and nine months ended September 30, 2006, respectively and 1 and 6 shares for the three and nine months ended September 30, 2005, respectively.
9. STOCK-BASED COMPENSATION
We have granted stock options and restricted stock awards under two stock option plans: the 1995 Long-Term Incentive Plan (the "Plan") and the 2006 Nonemployee Director Stock Incentive Plan (the "Director Plan"). Restricted shares issued under the Plan include the Executive Restricted Share Matching Program ("ESMP"), the Performance Share Award Program ("PSAP") and the Restricted Share Award Program ("RSAP").
Effective January 1, 2006, we adopted Statement of Financial Accounting Standard No. 123R, "Share-Based Payment" ("SFAS 123R") SFAS 123R using the modified prospective transition method. Under that transition method, compensation expense that we recognized for the three and nine months ended September 30, 2006 included: (a) compensation expense for all stock-based payments granted prior to, but not yet vested as of, January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, "Accounting for Stock-Based Compensation", and (b) compensation expense for all stock-based payments granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. Results from prior periods have not been restated. This statement requires compensation costs related to share-based payments, including stock options, to be recognized in the Consolidated Statement of Operations based on their fair values. The expense is recognized over the requisite service period of the award. We previously recognized expense for stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations ("APB 25"). Accordingly, compensation expense was recognized for the excess, if any, of the stock price on the grant date over the option exercise price. No compensation expense was recorded under APB 25 for awards granted under our employee stock option plan as all options issued had exercise prices at least equal to the fair value of the stock on the grant date. The pro forma effects upon net income and earnings per share for stock options are disclosed below per SFAS Statement No. 123, "Accounting for Stock-Based Compensation."
As a result of adopting SFAS 123R, we included approximately $1.0 million and $3.6 million of stock-based compensation expense in the Consolidated Statements of Operations for the three and nine month period ended September 30, 2006, respectively. The effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS 123R to stock-based employee compensation in the prior year comparable period is as follows (in thousands):
Three Months Ended | Nine Months Ended | ||
September 30, 2005 | September 30, 2005 | ||
(Unaudited) | |||
Net income (loss) as reported: | $ 7,490 | $ 26,462 | |
Add: stock-based compensation expense included in reported income, net of tax |
|
| |
Less: stock-based compensation expense determined under fair value method, net of tax |
|
| |
Pro forma income (loss) | $ 7,081 | $ 25,289 | |
Basic earnings (loss) per share: | |||
As reported | $ 0.29 | $ 1.01 | |
Pro forma | $ 0.27 | $ 0.97 | |
Diluted earnings (loss) per share: | |||
As reported | $ 0.27 | $ 0.95 | |
Pro forma | $ 0.25 | $ 0.90 |
Prior to the adoption of SFAS 123R, we presented deferred compensation as a separate component of shareholders' equity. In accordance with provisions of SFAS 123R, on January 1, 2006 we reclassified the balance in deferred compensation to Additional Paid-In Capital on our Consolidated Balance Sheet.
Prior to the adoption of SFAS 123R, we presented all tax benefits for deductions resulting from the exercise of stock options as operating cash flows in our Consolidated Statement of Cash Flows. SFAS 123R requires the cash flows resulting from the tax benefits for tax deductions in excess of the compensation expense recorded for those options to be classified as financing cash flows.
For the three and nine months ended September 30, 2006, stock-based compensation expense recognized in the income statement is as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||
2006 | 2006 | ||
(Unaudited) | |||
Cost of sales and services | $ 331 | $ 1,140 | |
General and administrative | 710 | 2,460 | |
Total stock-based compensation expense | $ 1,041 | $ 3,600 |
Stock Options
The Plan, as amended, provided for a maximum of 5,400,000 common shares to be granted to eligible employees. Awards under this plan are provided to encourage stock ownership by corporate and divisional management, as we believe that widespread common share ownership by key employees is an important means of encouraging superior performance and retaining employees. Stock options that have been granted under this plan have historically been granted at market value on the date of grant, are exercisable for a period of 10 years and vest in equal installments over four years. Common share options were, and restricted stock award grants are, considered annually based on competitive multiples of base salary. Senior executives typically have a higher multiple and, as such, have a greater portion of their total compensation linked to our long-term success. In determining the appropriate grant multiples, we target the market median among publicly held oilfield service companies of similar size. At September 30 , 2006, approximately 77,700 shares were available for future issuance under the Plan. No stock options have been granted during 2006 under the Plan.
On June 28, 2006, the 1995 Nonemployee Director Stock Option Plan, which provides common shares for grant to our eligible Supervisory Directors, was amended, restated and renamed as the 2006 Nonemployee Director Stock Incentive Plan. The primary change effected by the 2006 amendment was to eliminate the automatic, formula grant of stock options under the Director Plan and to replace that formula approach with the discretionary right of the Supervisory Board to grant stock options, restricted shares, or any combination thereof. Under the Director Plan, each nonemployee Supervisory Director is generally granted 2,000 performance restricted shares (4,000 shares if such nonemployee Supervisory Director is the Chairman) that will vest at the end of a three-year measurement period subject to our performance as measured against certain predetermined metrics each year generally on the first date in the calendar year set by the Supervisory Board for the issuance of equity-based awards to more than 10 employees un der our Plan. Only nonemployee Supervisory Directors are eligible for these equity-based awards. As of September 30, 2006, approximately 80,000 shares were available for issuance under the Director Plan. Although restricted shares have been granted in 2006 in accordance with the above, no stock options have been granted during 2006 under the Director Plan.
In December 2005, we accelerated the vesting of all outstanding unvested options. Prior to the modification, there were 322,072 stock options that were unvested, which represented less than 12% of the total stock options that were outstanding. The options were vested in anticipation of the adoption of SFAS No. 123R as the Option Subcommittee determined that the administrative costs of applying the provisions of SFAS No. 123R to the few remaining unvested options far exceeded the benefit of allowing these options to vest as originally scheduled under the plans. As a result of the modification, we determined that the increase in the intrinsic value of the unvested options over the original grant price was approximately $7.9 million. Due to the accelerated vesting, we recorded $0.1 million in non-cash compensation charge which is related to the excess of the intrinsic value over the fair market value of the our stock on the acceleration date of those options that would have been forfeited or expired unexer cised had the vesting not been accelerated. In determining the forfeiture rates of the stock options, we reviewed the unvested options' original life, time remaining to vest and whether these options were held by our officers and directors. The compensation charge is adjusted in future period financial results as actual forfeitures are realized. For the nine months ended September 30, 2006, there were no material changes in actual forfeitures from estimates.
The following table presents the change in outstanding stock options issued under the Plan and the Director Plan for the nine months ended September 30, 2006:
Options Outstanding | Range of Exercise Prices | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||
Balance as of December 31, 2005 | 2,735,159 | $ 0.01 - 61.19 | $ 13.48 | $ 50.32 | |||
Options granted | - | - | - | - | |||
Options exercised | (942,570) | 8.38 - 61.19 | 14.70 | 49.10 | |||
Options canceled | (62,746) | 8.40 - 23.00 | 16.10 | 47.70 | |||
Balance as of September 30, 2006 | 1,729,843 | $ 0.01 - 25.00 | $ 12.72 | $ 51.08 | |||
Exercisable | 1,729,843 | $ 0.01 - 25.00 | $ 12.72 | $ 51.08 |
The aggregate intrinsic value in the table represents the total pretax intrinsic value (the difference between our closing stock price on the last trading day of the quarter and the exercise price) that would have been received by the option holders had all option holders exercised their options on September 30, 2006.
For the three and nine months ended September 30, 2006, cash received from the exercise of stock options was $1.6 million and $13.9 million, respectively.
The following table summarizes stock options outstanding and exercisable as of September 30, 2006 by exercise price range:
Options Outstanding/ Exercisable | Weighted Average Remaining Life | Weighted Average Exercise Price | |||
Range of Exercise Prices: | |||||
$0.01 | 41,465 | 3.3 | $ 0.01 | ||
$7.09 to $11.15 | 838,896 | 6.2 | 9.48 | ||
$13.06 to $16.10 | 521,238 | 4.5 | 14.89 | ||
$18.38 to $23.00 | 324,244 | 3.5 | 19.05 | ||
$25.00 | 4,000 | 9.2 | 25.00 | ||
1,729,843 | 5.1 | $ 12.72 |
Executive Restricted Share Matching Program
The ESMP was implemented in June 2002 to encourage personal investment in our common stock by our executive officers. Under the program, we matched on a one-for-one basis each share that an executive purchased on the open market or held in his deferred compensation, 401(k) or other retirement account as of June 1, 2002, up to a maximum of 50,000 shares per participant.
Pursuant to the ESMP, on June 1, 2005, we issued an additional 76,200 restricted shares (the "Restricted Gross-Up Shares") in the aggregate to the participants to reimburse them for tax liabilities resulting from the vesting of the original grant in June 2005 of 132,853 restricted shares under the ESMP and their eventual vesting in the Restricted Gross-Up Shares. In order to vest in the Restricted Gross-Up Shares, a participant generally must remain in our employment until June 1, 2007, and maintain continuous ownership until such date of (a) the equivalent number of shares the participant initially purchased in order to receive the original restricted matching share award plus (b) a number of the shares received in the restricted matching share award (which number of shares is generally equal to all of the shares included in the restricted matching share award less a percentage of such shares surrendered by the participant to pay applicable taxes upon their vesting). A participant may become vested in s ome or all of the Restricted Gross-Up Shares prior to June 1, 2007, in the event of a change in control or the termination of the participant's employment by reason of death, disability, an involuntary termination without cause, or after attaining the age of 60 and completing 10 years of employment with us.
Upon adoption of SFAS 123R, the Restricted Gross-Up Shares were classified as an equity award as a result of the service condition. Historically, we had accounted for the Restricted Gross Up Shares under APB 25 as a variable award and remeasured it at each balance sheet date. Effective January 1, 2006, the fair value of the Restricted Gross Up Shares is fixed at the original grant-date fair value with compensation recorded over the vesting period based on the estimated number of shares that management believes will ultimately vest. During the nine months ended September 30, 2006, we recorded approximately $0.7 million of compensation expense for the Restricted Gross-Up Shares. As of September 30, 2006, approximately 33% of the Restricted Gross-Up Shares remain unvested, assuming that all the awards will ultimately vest, resulting in approximately $0.7 million of compensation expense to be recognized through the ultimate vesting date of June 1, 2007.
Performance Share Award Program
Awards Under the Plan
Under the PSAP, certain executives were awarded rights to receive a pre-determined number of common shares if certain performance targets are met, as defined in the applicable agreements for the respective three-year performance period. Rights relating to an aggregate of 125,000 shares ("Tranche 2"), 120,000 shares ("Tranche 3"), and 120,000 shares ("Tranche 4") were issued with respect to the performance periods ending on December 31, 2005, 2006, and 2007, respectively. Unless there is a change in control, as defined in the PSAP, none of these awards will vest if the specified performance targets are not met as of the last day of the respective performance periods.
To meet the performance targets under Tranche 2, our common shares had to perform as well as or better than the 50th percentile of the return earned by the common stock of the companies comprising the Philadelphia Oil Services Sector Index ("OSX") for the applicable performance period. If our common shares performed as well as or better than the 50th percentile but below the 75th percentile of the companies comprising the OSX, then the number of rights eligible to vest would have been interpolated between 20% and 100% of the shares granted. If our common shares performed as well as or better than the 75th percentile of the companies comprising the OSX, then 100% of the rights would have been eligible to vest.
The performance targets for Tranche 3 are similar to those for Tranche 2 for rights relating to 60,000 shares. Rights related to the other 60,000 shares granted under Tranche 3 will be eligible to vest if our calculated return on equity ("ROE"), as defined in the PSAP, equals or exceeds a pre-determined target return on equity of 18%. Pursuant to the agreement, return on equity is calculated by dividing earnings before interest and income tax for the performance period by ending shareholders' equity for the performance period. Unless there is a change in control, none of these 60,000 shares will be issued if our return on equity does not equal or exceed 12% for the three-year performance period ending December 31, 2006. If our return on equity for the performance period equals 12%, then 20% of the shares will be issued, and if our return on equity equals or exceeds 18%, then 100% of the shares will be issued. If our return on equity for the performance period is greater than 12% but less than 18%, t hen the number of shares to be issued would be interpolated based on the terms of the agreement. If a change in control occurs prior to the last day of the performance period and while the executive officer is employed by us, then all of the executive officer's performance shares will vest as of the date of the change in control.
The performance target for Tranche 4, for which the performance period began on January 1, 2005 and ends on December 31, 2007, is based on a calculated ROE similar to the terms for Tranche 3 discussed above, except that the pre-determined target ROE is 24%. Unless there is a change in control, none of these 120,000 shares will be issued if our ROE is less than 20% for the three-year performance period. If our ROE for the performance period equals 20%, then 50% of the shares will be issued, and if our ROE for the performance period equals or exceeds 24%, then 100% of the shares will be issued. If our ROE for the performance period is greater than 20% but less than 24%, then the number of shares to be issued would be interpolated based on the terms of the agreement.
Awards Under the Director Plan
On September 15, 2006, we issued rights relating to an aggregate of 12,000 shares under the Director Plan to our non employee Supervisory Directors for which the performance period began on September 15, 2006 and ends on September 15, 2009, ("Director Tranche 1"). The performance target for Director Tranche 1 is based on a calculated ROE, as defined in the Director Tranche 1 agreement, that equals or exceeds the pre-determined target ROE of 35%. Unless there is a change in control, none of these 12,000 shares will be issued if our ROE is less than 28% for the three-year performance period. If our ROE for the performance period equals 28%, then 20% of the shares will be issued, and if our ROE for the performance period equals or exceeds 35%, then 100% of the shares will be issued. If our ROE for the performance period is greater than 28% but less than 35%, then the number of shares to be issued would be interpolated based on the terms of the agreement. This arrangement is an equity award under SFAS 123 R that will require us to recognize compensation expense totaling $0.8 million over a three-year period that began on September 15, 2006.
Upon adoption of SFAS 123R, all of the PSAP shares were classified as equity awards. The performance targets for Tranche 2 and half of Tranche 3 associated with the OSX are considered to be a market condition, while the performance targets for the other half of Tranche 3 and all of Tranche 4 are considered to be a performance condition. Historically, we had accounted for these instruments under APB 25 as variable awards and remeasured them at each balance sheet date. Effective January 1, 2006, the fair value of the awards are fixed at the original grant-date fair value with compensation recorded over the vesting period based on the estimated number of awards that management believes will ultimately vest.
In January 2006, the Options Subcommittee of our Board of Supervisory Directors determined that the performance target criteria had been met relating to an aggregate of 125,000 shares under Tranche 2 and we issued these 125,000 common shares on January 17, 2006. The intrinsic value of the award was approximately $5.4 million, which had been recorded as stock-based compensation through December 31, 2005. Simultaneously, we repurchased 42,015 of these common shares from the participants at the closing market price on that day to settle personal tax liabilities which may result from the issuance of these shares, as permitted by the agreement. We recorded these repurchased shares as treasury stock with an aggregate cost of $1.8 million, at $42.98 per share. Accordingly, at September 30, 2006, there remains outstanding rights with respect to 120,000 shares under Tranche 3, rights with respect to 118,000 shares under Tranche 4, and rights with respect to 12,000 shares under Director Tranche 1, which may vest at December 31, 2006, December 31, 2007, and September 15, 2009, respectively. The total compensation related to the nonvested portion of Tranche 3, Tranche 4 and Director Tranche 1 is approximately $0.2 million, $1.1 million and $0.8 million, respectively. The weighted average period over which this compensation will be recognized is 15 months. We included $0.2 million of compensation expense for each of Tranche 3 and Tranche 4 and $11,000 of compensation expense for Director Tranche 1 in our results of operations for the three months ended September 30, 2006.
For diluted weighted average shares outstanding, based on our common stock's performance relative to the OSX and our ROE, using the treasury stock method, we calculated 159,129 and 146,114 contingently issuable PSAP shares for the three and nine month period ending September 30, 2006, respectively. See Note 8, Earnings Per Share.
Restricted Share Award Program
The Options Subcommittee of our Board of Supervisory Directors has previously approved the RSAP to continue to attract and retain the best employees, and to better align employee interests with those of our shareholders. Under this arrangement, in 2005, we granted to key employees an aggregate of 142,600 restricted shares of our common stock under the RSAP at a grant date fair value of $26.80. This arrangement is a fixed award which would have required us to recognize compensation expense totaling $3.8 million over a seven-year vesting period that began on January 1, 2005. This award also contained two performance accelerators either of which, if satisfied, or if certain other events occured as specified in the related agreements, may have required earlier recognition of this expense. The first performance accelerator required that our average closing stock price attain a level equal to or above $28 per share over a period of 20 consecutive trading days ending within the period beginning on the 21st tra ding day after April 1, 2006 and ending on April 1, 2008. The second performance accelerator required the average closing stock price to attain a level equal to or above $32 per share over a period of 20 consecutive trading days ending within the period beginning on the first trading day after April 1, 2008 and ending April 1, 2010. Upon adoption of SFAS 123R, the RSAP was classified as an equity award. The RSAP was originally recorded at the grant-date fair value and was being amortized over the expected life of the award. On May 1, 2006 the first performance accelerator was met and 139,400 shares vested with approximately $0.2 million and $0.9 million of compensation expense being recorded for the three and nine months ended September 30, 2006, respectively. Simultaneously, we repurchased 38,748 of these common shares from the participants at the closing market price on that day to settle personal tax liabilities which may result from the vesting of these shares, as permitted by the agreement. We rec orded these repurchased shares as treasury stock with an aggregate cost of $2.4 million, or $63.20 per share.
In May 2006, the Options Subcommittee of the Board of Supervisory Directors approved a grant of 163,500 restricted shares to key employees under the RSAP program. These shares vest in the amount of 1/6th of each grant on each of the six annual anniversaries following the date of grant; provided, however, that full vesting will occur if an employee's employment is terminated by reason of death or disability or if an employee continues in our employment until the date upon which a change of control occurs. Similar to the grant discussed previously, this arrangement is an equity award under SFAS 123R that will require us to recognize compensation expense totaling $8.3 million over a six-year vesting period that began on May 15, 2006. We recorded compensation expense totaling $0.4 million and $0.6 million under this arrangement for the three and nine months ended September 30, 2006. The estimate of future compensation expense includes a 2% forfeiture rate which was derived from historical actual forfeitures by employees that have typically been granted such awards adjusted for management's expectations of future forfeitures.
Nonvested restricted stock awards as of September 30, 2006 and changes during the nine months ended September 30, 2006 were as follows:
Number of Shares | Weighted Average Grant Date Fair Value | ||
Nonvested at December 31, 2005 | 502,400 | $ 21.08 | |
Granted | 175,500 | 57.83 | |
Vested | 264,400 | 19.58 | |
Forfeited | 4,800 | 57.36 | |
Nonvested at September 30, 2006 | 408,700 | $ 37.41 |
We have not issued shares out of treasury stock upon the exercise of options or lapsing of vesting restrictions on restricted stock.
10. OTHER (INCOME)
The components of other (income), net, were as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2006 | 2005 | 2006 | 2005 | ||||
(Unaudited) | (Unaudited) | ||||||
Minority interest | $ 77 | $ (263) | $ 151 | $ (159) | |||
Loss (gain) on sale of assets | (76) | (614) | (782) | (518) | |||
Foreign exchange (gain) loss | 430 | (142) | (1,032) | 1,428 | |||
Interest income | (54) | (238) | (161) | (371) | |||
Gain on involuntary sale of asset | - | - | - | (875) | |||
Gain on insurance recovery | - | - | (492) | (534) | |||
Other | 70 | (379) | (653) | (649) | |||
Total other (income), net | $ 447 | $ (1,636) | $(2,969) | $(1,678) |
During the first quarter of 2005, a building at our manufacturing plant in Godley, Texas, was damaged by fire, resulting in the loss of the building, some inventory, as well as other business equipment and supplies. The final settlement was reached in the first quarter of 2006, which resulted in a gain of $0.5 million in excess of the gain recorded in 2005.
Foreign exchange (gains) losses by currency are summarized in the following table (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2006 | 2005 | 2006 | 2005 | ||||
(Unaudited) | (Unaudited) | ||||||
British Pound | $ 5 | $ 53 | $ (48) | $ 204 | |||
Canadian Dollar | 44 | (288) | (336) | (79) | |||
Euro | (16) | (38) | (270) | 282 | |||
Russian Ruble | 172 | (29) | (290) | 181 | |||
Venezuelan Bolivar | 6 | 32 | 21 | 399 | |||
Other currencies | 219 | 128 | (109) | 441 | |||
Total (gain) loss | $ 430 | $ (142) | $ (1,032) | $ 1,428 |
11. SEGMENT REPORTING
Our business units have been aggregated into three complementary segments, which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields.
* | Reservoir Description: Encompasses the characterization 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 oil and gas industry. |
* | Production Enhancement: Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects. |
* | Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs. |
Segment Analysis
We manage each of our business segments separately to reflect the different services and technologies provided and required by each segment. We use the same accounting policies to account for our business segments as those used to prepare our Consolidated Balance Sheets and Consolidated Statements of Operations. We evaluate the performance of our business segments on the basis of operating income.
Summarized financial information related to our business segments is shown in the following tables (in thousands):
(Unaudited) | Reservoir Description | Production Enhancement | Reservoir Management | Corporate & Other1 | Consolidated | ||||||
Three Months Ended September 30, 2006 | |||||||||||
Revenues from unaffiliated customers | $ 81,090 | $ 55,113 | $ 9,323 | $ - | $ 145,526 | ||||||
Inter-segment revenues | 24 | 194 | 21 | (239) | - | ||||||
Segment operating income | 17,646 | 13,841 | 2,086 | 217 | 33,790 | ||||||
Total assets | 210,604 | 159,276 | 16,387 | 34,603 | 420,870 | ||||||
Capital expenditures | 3,929 | 1,247 | 81 | 3,582 | 8,839 | ||||||
Depreciation and amortization | 2,306 | 1,231 | 119 | 861 | 4,517 | ||||||
Three Months Ended September 30, 2005 | |||||||||||
Revenues from unaffiliated customers | 69,189 | 44,611 | 6,384 | - | 120,184 | ||||||
Inter-segment revenues | 190 | (178) | - | (12) | - | ||||||
Segment operating income (loss) | 9,495 | 7,642 | 953 | (3,953) | 14,137 | ||||||
Total assets | 201,128 | 150,555 | 15,044 | 29,313 | 396,040 | ||||||
Capital expenditures | 1,892 | 1,413 | 155 | 231 | 3,691 | ||||||
Depreciation and amortization | 2,294 | 1,051 | 120 | 581 | 4,046 | ||||||
Nine Months Ended September 30, 2006 | |||||||||||
Revenues from unaffiliated customers | 232,436 | 162,826 | 27,616 | - | 422,878 | ||||||
Inter-segment revenues | 263 | 526 | 27 | (816) | - | ||||||
Segment operating income (loss) | 41,098 | 39,434 | 6,658 | (395) | 86,795 | ||||||
Total assets | 210,604 | 159,276 | 16,387 | 34,603 | 420,870 | ||||||
Capital expenditures | 10,319 | 4,165 | 408 | 3,805 | 18,697 | ||||||
Depreciation and amortization | 6,785 | 3,631 | 341 | 1,972 | 12,729 | ||||||
Nine Months Ended September 30, 2005 | |||||||||||
Revenues from unaffiliated customers | 208,307 | 127,809 | 18,404 | - | 354,520 | ||||||
Inter-segment revenues | 428 | 97 | 82 | (607) | - | ||||||
Segment operating income (loss) | 24,606 | 20,929 | 2,764 | (3,969) | 44,330 | ||||||
Total assets | 201,128 | 150,555 | 15,044 | 29,313 | 396,040 | ||||||
Capital expenditures | 5,369 | 5,439 | 432 | 1,051 | 12,291 | ||||||
Depreciation and amortization | 7,371 | 2,953 | 364 | 1,652 | 12,340 | ||||||
(1) "Corporate & Other" represents those items that are not directly related to a particular segment and eliminations. |
12. RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 158 ("FAS 158"), Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, An Amendment of FASB Statements No. 87, 88, 106, and 132(R), which addresses the funding status of our defined benefit postretirement plans and may require us to recognize a net liability or asset on our balance sheet starting as of December 31, 2006. FAS 158 will become effective for financial statements issued for fiscal years ending after December 15, 2006. We will adopt this standard as of December 31, 2006. We are currently evaluating the impact of adopting FAS 158 on our financial statements however we do not expect this pronouncement to have a material impact on our financial position and results of operations.
In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that we recognize in our financial statements, the impact of a tax position, if that position is more likely than not to be sustainable on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to our 2007 fiscal year opening retained earnings. We will adopt this standard the first quarter of 2007. We are currently evaluating the impact of adopting FIN 48 on our financial statements.
13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Core Laboratories L.P., a wholly-owned subsidiary of Core Laboratories N.V., is offering $250 million of convertible debt securities which will be fully and unconditionally guaranteed by Core Laboratories N.V.
The following condensed consolidating financial information is included so that separate financial statements of Core Laboratories L.P. are not required to be filed with the U.S. Securities and Exchange Commission. The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.
The following condensed consolidating financial information presents: condensed consolidating balance sheets as of September 30, 2006 and December 31, 2005, statements of income for three and nine month periods ended September 30, 2006 and 2005 and the consolidating statements of cash flows for the nine-month periods ended September 30, 2006 and 2005 of (a) Core Laboratories N.V., parent/guarantor, (b) Core Laboratories L.P., issuer of public debt securities guaranteed by Core Laboratories N.V. and (c) the non-guarantor subsidiaries, (d) consolidating adjustments necessary to consolidate Core Laboratories N.V. and its subsidiaries and (e) Core Laboratories N.V. on a consolidated basis.
Condensed Consolidating Balance Sheets
September 30, 2006 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ 916 | $ (799) | $ 12,339 | $ - | $ 12,456 | ||||||
Accounts receivable, net | 266 | 19,400 | 91,396 | - | 111,062 | ||||||
Inventories, net | - | 1,908 | 29,864 | - | 31,772 | ||||||
Prepaid expenses and other current assets | 1,189 | 1,785 | 11,292 | - | 14,266 | ||||||
TOTAL CURRENT ASSETS | 2,371 | 22,294 | 144,891 | - | 169,556 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net | - | 21,133 | 66,349 | - | 87,482 | ||||||
GOODWILL AND INTANGIBLES, net | 46,985 | 2,016 | 90,183 | - | 139,184 | ||||||
INTERCOMPANY RECEIVABLES | 6,815 | 123,051 | 427,196 | (557,062) | - | ||||||
INVESTMENT IN AFFILIATES | 394,663 | - | 500,385 | (894,088) | 960 | ||||||
DEFERRED TAX ASSET | 18,228 | 977 | 8,236 | (12,776) | 14,665 | ||||||
OTHER ASSETS | 3,218 | 2,844 | 2,961 | - | 9,023 | ||||||
TOTAL ASSETS | $ 472,280 | $ 172,315 | $ 1,240,201 | $ (1,463,926) | $ 420,870 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Current maturities of long-term debt and capital lease obligations | $ 73 | $ 100 | $ 8 | $ - | $ 181 | ||||||
Accounts payable | 64 | 4,831 | 25,874 | - | 30,769 | ||||||
Other accrued expenses | 2,822 | 15,006 | 37,733 | - | 55,561 | ||||||
TOTAL CURRENT LIABILITIES | 2,959 | 19,937 | 63,615 | - | 86,511 | ||||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS | 20,000 | 87,000 | 2 | - | 107,002 | ||||||
DEFERRED COMPENSATION | 5,318 | 4,032 | 236 | - | 9,586 | ||||||
DEFERRED TAX LIABILITY | - | 1,143 | 11,633 | (12,776) | - | ||||||
OTHER LONG-TERM LIABILITIES | 10,676 | 8,389 | 6,794 | - | 25,859 | ||||||
INTERCOMPANY PAYABLES | 242,892 | 41,781 | 272,389 | (557,062) | - | ||||||
MINORITY INTEREST | - | - | 1,477 | - | 1,477 | ||||||
TOTAL SHAREHOLDERS' EQUITY | 190,435 | 10,033 | 884,055 | (894,088) | 190,435 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 472,280 | $ 172,315 | $ 1,240,201 | $ (1,463,926) | $ 420,870 |
Condensed Consolidating Balance Sheets
December 31, 2005 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ 1,352 | $ (243) | $ 12,634 | $ - | $ 13,743 | ||||||
Accounts receivable, net | 707 | 17,148 | 81,274 | - | 99,129 | ||||||
Inventories, net | - | 1,336 | 27,768 | - | 29,104 | ||||||
Prepaid expenses and other current assets | 427 | 1,682 | 9,160 | - | 11,269 | ||||||
TOTAL CURRENT ASSETS | 2,486 | 19,923 | 130,836 | - | 153,245 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net | 219 | 21,766 | 59,357 | - | 81,342 | ||||||
GOODWILL AND INTANGIBLES, net | 46,986 | 2,117 | 90,235 | - | 139,338 | ||||||
INTERCOMPANY RECEIVABLES | 10,752 | 68,955 | 323,781 | (403,488) | - | ||||||
INVESTMENT IN AFFILIATES | 289,653 | - | 526,586 | (815,098) | 1,141 | ||||||
DEFERRED TAX ASSET | 18,228 | 5,645 | 664 | (13,085) | 11,452 | ||||||
OTHER ASSETS | 3,026 | 2,421 | 2,636 | - | 8,083 | ||||||
TOTAL ASSETS | $ 371,350 | $ 120,827 | $ 1,134,095 | $ (1,231,671) | $ 394,601 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Current maturities of long-term debt and capital lease obligations | $ 2,412 | $ 100 | $ 32 | $ - | $ 2,544 | ||||||
Accounts payable | 743 | 5,841 | 25,973 | - | 32,557 | ||||||
Other accrued expenses | 2,928 | 10,942 | 19,785 | - | 33,655 | ||||||
Current liabilities of discontinued operations | - | - | 800 | - | 800 | ||||||
TOTAL CURRENT LIABILITIES | 6,083 | 16,883 | 46,590 | - | 69,556 | ||||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS | 17,000 | 69,100 | 4 | - | 86,104 | ||||||
DEFERRED COMPENSATION | 4,844 | 2,598 | 143 | - | 7,585 | ||||||
DEFERRED TAX LIABILITY | - | - | 13,085 | (13,085) | - | ||||||
OTHER LONG-TERM LIABILITIES | 8,475 | 4,742 | 2,817 | - | 16,034 | ||||||
INTERCOMPANY PAYABLES | 120,691 | 27,887 | 254,910 | (403,488) | - - | ||||||
MINORITY INTEREST | - | - | 1,065 | - | 1,065 | ||||||
TOTAL SHAREHOLDERS' EQUITY | 214,257 | (383) | 815,481 | (815,098) | 214,257 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 371,350 | $ 120,827 | $ 1,134,095 | $ (1,231,671) | $ 394,601 |
Condensed Consolidating Statements of Operations
Three Months Ended September 30, 2006 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
REVENUES | |||||||||||
Operating revenues | $ - | $ 28,301 | $ 117,225 | $ - | $ 145,526 | ||||||
Intercompany revenues | - | 3,985 | 27,983 | (31,968) | - | ||||||
Earnings from consolidated affiliates | 24,266 | - | (3) | (24,263) | - | ||||||
Total revenues | 24,266 | 32,286 | 145,205 | (56,231) | 145,526 | ||||||
OPERATING EXPENSES | |||||||||||
Operating costs | 348 | 17,561 | 92,600 | (9,987) | 100,522 | ||||||
General and administrative expenses | 1,042 | 5,244 | 11 | (47) | 6,250 | ||||||
Depreciation and amortization | 5 | 1,346 | 3,166 | - | 4,517 | ||||||
Other expense (income), net | (1,158) | 1,593 | 21,650 | (21,638) | 447 | ||||||
OPERATING INCOME | 24,029 | 6,542 | 27,778 | (24,559) | 33,790 | ||||||
Interest expense | 220 | 1,701 | 9 | - | 1,930 | ||||||
Income before income tax expense | 23,809 | 4,841 | 27,769 | (24,559) | 31,860 | ||||||
Income tax expense | 1,425 | 1,875 | 6,176 | - | 9,476 | ||||||
NET INCOME | $ 22,384 | $ 2,966 | $ 21,593 | $ (24,559) | $ 22,384 |
Condensed Consolidating Statements of Operations
Three Months Ended September 30, 2005 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
REVENUES | |||||||||||
Operating revenues | $ - | $ 20,474 | $ 99,710 | $ - | $ 120,184 | ||||||
Intercompany revenues | - | 2,222 | 22,103 | (24,325) | - | ||||||
Earnings from consolidated affiliates | 12,706 | - | 14,441 | (27,147) | - | ||||||
Total revenues | 12,706 | 22,696 | 136,254 | (51,472) | 120,184 | ||||||
OPERATING EXPENSES | |||||||||||
Operating costs | - | 15,232 | 84,406 | (6,874) | 92,764 | ||||||
General and administrative expenses | 5,702 | 5,167 | 4 | - | 10,873 | ||||||
Depreciation and amortization | 35 | 1,910 | 2,101 | - | 4,046 | ||||||
Other expense (income), net | (119) | 246 | 15,670 | (17,433) | (1,636) | ||||||
OPERATING INCOME | 7,088 | 141 | 34,073 | (27,165) | 14,137 | ||||||
Interest expense | 279 | 1,610 | 52 | (18) | 1,923 | ||||||
Income before income tax expense | 6,809 | (1,469) | 34,021 | (27,147) | 12,214 | ||||||
Income tax expense (benefit) | (681) | (229) | 5,634 | - | 4,724 | ||||||
NET INCOME | $ 7,490 | $ (1,240) | $ 28,387 | $ (27,147) | $ 7,490 |
Condensed Consolidating Statements of Operations
Nine Months Ended September 30, 2006 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
REVENUES | |||||||||||
Operating revenues | $ - | $ 80,932 | $ 341,946 | $ - | $ 422,878 | ||||||
Intercompany revenues | - | 10,506 | 80,925 | (91,431) | - - | ||||||
Earnings from consolidated affiliates | 65,845 | - | 12,849 | (78,694) | - | ||||||
Total revenues | 65,845 | 91,438 | 435,720 | (170,125) | 422,878 | ||||||
OPERATING EXPENSES | |||||||||||
Operating costs | 503 | 50,816 | 278,689 | (29,143) | 300,865 | ||||||
General and administrative expenses | 6,145 | 19,345 | 15 | (47) | 25,458 | ||||||
Depreciation and amortization | 21 | 3,979 | 8,729 | - | 12,729 | ||||||
Other expense (income), net | (1,342) | 3,683 | 56,635 | (61,945) | (2,969) | ||||||
OPERATING INCOME | 60,518 | 13,615 | 91,652 | (78,990) | 86,795 | ||||||
Interest expense | 612 | 4,145 | 28 | - | 4,785 | ||||||
Income before income tax expense | 59,906 | 9,470 | 91,624 | (78,990) | 82,010 | ||||||
Income tax expense (benefit) | 2,417 | (946) | 23,050 | - | 24,521 | ||||||
NET INCOME | $ 57,489 | $ 10,416 | $ 68,574 | $ (78,990) | $ 57,489 |
Condensed Consolidating Statements of Operations
Nine Months Ended September 30, 2005 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
REVENUES | |||||||||||
Operating revenues | $ - | $ 64,460 | $ 290,060 | $ - | $ 354,520 | ||||||
Intercompany revenues | - | 6,055 | 64,543 | (70,598) | - | ||||||
Earnings from consolidated affiliates | 32,306 | - | 35,097 | (67,403) | - | ||||||
Total revenues | 32,306 | 70,515 | 389,700 | (138,001) | 354,520 | ||||||
OPERATING EXPENSES | |||||||||||
Operating costs | - | 44,716 | 248,633 | (20,001) | 273,348 | ||||||
General and administrative expenses | 7,132 | 19,037 | 11 | - | 26,180 | ||||||
Depreciation and amortization | 105 | 4,396 | 7,839 | - | 12,340 | ||||||
Other expense (income), net | (1,259) | 2,146 | 47,999 | (50,564) | (1,678) | ||||||
OPERATING INCOME | 26,328 | 220 | 85,218 | (67,436) | 44,330 | ||||||
Interest expense | 780 | 5,179 | 108 | (33) | 6,034 | ||||||
Income before income tax expense | 25,548 | (4,959) | 85,110 | (67,403) | 38,296 | ||||||
Income tax expense (benefit) | (914) | (865) | 13,613 | - | 11,834 | ||||||
NET INCOME | $ 26,462 | $ (4,094) | $ 71,497 | $ (67,403) | $ 26,462 |
Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2006 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
Net cash provided by (used in) operating activities: | $ 83,824 | $ (14,895) | $ 11,149 | $ - | $ 80,078 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | - | ||||||||||
Capital expenditures | - | (3,092) | (13,255) | - | (16,347) | ||||||
Patents and other intangibles | - | (36) | (67) | - | (103) | ||||||
Proceeds from sale of assets | - | 320 | 1,902 | - | 2,222 | ||||||
Premiums on life insurance | - | (753) | - | - | (753) | ||||||
Net cash used in investing activities: | - | (3,561) | (11,420) | - | (14,981) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Repayment of debt | (7,339) | (16,100) | - | - | (23,439) | ||||||
Proceeds from debt borrowings | 8,000 | 34,000 | - | - | 42,000 | ||||||
Capital lease obligations | - | - | (24) | - | (24) | ||||||
Stock options exercised | 13,859 | - | - | - | 13,859 | ||||||
Repurchase of common shares | (104,451) | - | - | - | (104,451) | ||||||
Excess tax benefits from stock-based payments | 5,671 | - | - | - | 5,671 | ||||||
Net cash (used in) provided by financing activities: | (84,260) | 17,900 | (24) | - | (66,384) | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (436) | (556) | (295) | - | (1,287) | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 1,352 | (243) | 12,634 | - | 13,743 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ 916 | $ (799) | $ 12,339 | $ - | $ 12,456 |
Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2005 | |||||||||||
Core | Other | ||||||||||
(In thousands) | Laboratories N.V. | Core | Subsidiaries | ||||||||
(Parent/ | Laboratories L.P. | (Non- | Consolidating | Consolidated | |||||||
Guarantor) | (Issuer) | Guarantors) | Adjustments | Total | |||||||
Net cash provided by (used in) operating activities: | $ 25,836 | $ 31,496 | $ (1,549) | $ - | $ 55,783 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Capital expenditures | - | (12,291) | - | - | (12,291) | ||||||
Patents and other intangibles | - | (4) | (99) | - | (103) | ||||||
Proceeds from sale of assets | - | 1,155 | 2,267 | - | 3,422 | ||||||
Premiums on life insurance | - | - | (475) | - | (475) | ||||||
Net cash (used in) provided by investing activities: | - | (11,140) | 1,693 | - | (9,447) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Repayment of debt | (4,035) | (27,661) | (66) | - | (31,762) | ||||||
Proceeds from debt borrowings | - | 9,000 | - | - | 9,000 | ||||||
Debt issuance costs | - | (314) | - | - | (314) | ||||||
Capital lease obligations | - | - | (182) | - | (182) | ||||||
Stock options exercised | 7,012 | - | - | - | 7,012 | ||||||
Repurchase of common shares | (27,012) | - | - | - | (27,012) | ||||||
Net cash used in financing activities: | (24,035) | (18,975) | (248) | - | (43,258) | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 1,801 | 1,381 | (104) | - | 3,078 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 848 | (121) | 15,303 | - | 16,030 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ 2,649 | $ 1,260 | $ 15,199 | $ - | $ 19,108 |
Exhibit No. | Exhibit Title | Incorporated by reference from the following documents | |
10.1* | Form of Director Performance Share Award Restricted Share Agreement (ROE Based) |
| |
31.1 | - | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2 | - | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32.1 | - | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
32.2 | - | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
* | Management contract or compensatory plan or arrangement |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Core Laboratories N.V., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CORE LABORATORIES N.V. | |||
By: | Core Laboratories International B.V., its | ||
Managing Director | |||
Dated: | October 26, 2006 | By: | /s/ Richard L. Bergmark |
Richard L. Bergmark | |||
Chief Financial Officer | |||
Duly Authorized Officer and | |||
Principal Financial Officer |
Certification
Exhibit 31.1
I, David M. Demshur, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and | |
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. |
Date: October 26, 2006 | By: | /s/ David M. Demshur |
David M. Demshur | ||
Chief Executive Officer |
Certification
Exhibit 31.2
I, Richard L. Bergmark, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and | |
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. |
Date: October 26, 2006 | By: | /s/ Richard L. Bergmark |
Richard L. Bergmark | ||
Chief Financial Officer |
Exhibit 32.1
Certification of
Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, David M. Demshur, Chief Executive Officer of Core Laboratories N.V. (the "Company"), hereby certify that the accompanying report on Form 10-Q for the quarter ended September 30, 2006, filed by the Company with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, (the "Report").
I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 26, 2006 | /s/ David M. Demshur |
Name: David M. Demshur | |
Title: Chief Executive Officer | |
Exhibit 32.2
Certification of
Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Richard L. Bergmark, Chief Financial Officer of Core Laboratories N.V. (the "Company"), hereby certify that the accompanying report on Form 10-Q for the quarter ended September 30, 2006, filed by the Company with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, (the "Report").
I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 26, 2006 | /s/ Richard L. Bergmark |
Name: Richard L. Bergmark | |
Title: Chief Financial Officer | |