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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 June 30, 2001
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 or 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)
Registrant's telephone number, including area code: (31-20)420-3191
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
-------- ------
The number of common shares of the Registrant, par value NLG 0.03 per
share, outstanding at August 3, 2001 was 33,165,216.
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CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED June 30, 2001
INDEX
Page
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at June 30, 2001 and December 31, 2000.......................... 1
Consolidated Statements of Operations for the Three Months Ended
June 30, 2001 and 2000................................................................. 2
Consolidated Statements of Operations for the Six Months Ended
June 30, 2001 and 2000................................................................. 3
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2001 and 2000................................................................. 4
Notes to Consolidated Financial Statements ................................................. 5
Item 2-- Management's Discussion and Analysis of Financial Condition and Results of
Operations ........................................................................ 10
Item 3-- Quantitative & Qualitative Disclosures of Market Risk.................................. 13
Part II -- Other Information
Item 1-- Legal Proceedings...................................................................... 14
Item 2-- Changes in Securities.................................................................. 14
Item 3-- Defaults Upon Senior Securities........................................................ 14
Item 4-- Submission of Matters to a Vote of Security Holders ................................... 14
Item 5-- Other Information...................................................................... 15
Item 6-- Exhibits and Reports on Form 8-K....................................................... 15
Signature ....................................................................................... 16
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
2001 2000
---------- ----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 15,161 $ 12,519
Accounts receivable, less allowance for doubtful accounts of
$8,902 and $9,080 in 2001 and 2000, respectively............................ 108,082 113,214
Inventories ................................................................ 37,923 33,514
Prepaid expenses and other.................................................. 12,675 7,085
Deferred tax asset.......................................................... 7,933 10,220
---------- ----------
Total current assets............................................................. 181,774 176,552
PROPERTY, PLANT AND EQUIPMENT, net............................................... 89,754 84,556
INTANGIBLES AND GOODWILL, net.................................................... 146,874 148,027
OTHER LONG-TERM ASSETS........................................................... 3,494 4,166
---------- ----------
Total assets..................................................... $ 421,896 $ 413,301
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................................ $ 658 $ 733
Current lease obligations................................................... 76 247
Accounts payable............................................................ 20,526 25,931
Other accrued expenses...................................................... 25,725 28,355
---------- ----------
Total current liabilities........................................................ 46,985 55,266
LONG-TERM DEBT .................................................................. 84,052 83,005
LONG-TERM LEASE OBLIGATIONS...................................................... 29 35
OTHER LONG-TERM LIABILITIES...................................................... 21,317 23,298
MINORITY INTEREST................................................................ 848 632
SHAREHOLDERS' EQUITY:
Preference shares, NLG 0.03 par value; 3,000,000 shares authorized,
no shares issued or outstanding......................................... -- --
Common shares, NLG 0.03 par value; 100,000,000 shares authorized,
33,157,416 and 32,814,018 issued and outstanding
at June 30, 2001 and December 31, 2000, respectively.................... 545 541
Additional paid-in capital.................................................. 186,542 182,847
Retained earnings........................................................... 81,578 67,677
---------- ----------
Total shareholders' equity.............................................. 268,665 251,065
---------- ----------
Total liabilities and shareholders' equity....................................... $ 421,896 $ 413,301
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
1
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended
----------------------------
June 30,
2001 2000
---------- ------------
(Unaudited)
SERVICES......................................................................... $ 74,110 $ 65,892
SALES............................................................................ 17,150 14,351
----------- ------------
91,260 80,243
OPERATING EXPENSES:
Cost of services............................................................ 56,881 52,772
Cost of sales............................................................... 13,017 12,010
General and administrative expenses ........................................ 3,984 3,383
Depreciation and amortization............................................... 4,569 3,573
Goodwill amortization....................................................... 1,033 1,027
Other income, net........................................................... (982) 136
-------------- ------------
78,502 72,901
INCOME BEFORE INTEREST
EXPENSE AND INCOME TAX EXPENSE.............................................. 12,758 7,342
INTEREST EXPENSE................................................................. 1,943 2,011
------------- -------------
INCOME BEFORE INCOME TAX EXPENSE................................................. 10,815 5,331
INCOME TAX EXPENSE............................................................... 3,028 1,534
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NET INCOME....................................................................... $ 7,787 $ 3,797
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PER SHARE INFORMATION:
BASIC EARNINGS PER SHARE.................................................... $ 0.24 $ 0.12
============= =============
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING........................................................... 33,044,424 32,085,620
============= =============
DILUTED EARNINGS PER SHARE.................................................. $ 0.23 $ 0.11
============= =============
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING........................................................... 34,192,362 33,587,555
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
2
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Six Months Ended
June 30,
----------------------------
2001 2000
---------- -----------
(Unaudited)
SERVICES......................................................................... $ 147,635 $ 125,930
SALES............................................................................ 34,971 27,111
----------- ------------
182,606 153,041
OPERATING EXPENSES:
Cost of services............................................................ 113,305 103,382
Cost of sales............................................................... 28,093 20,958
General and administrative expenses ........................................ 7,543 6,686
Depreciation and amortization............................................... 8,953 7,327
Goodwill amortization....................................................... 2,066 2,054
Other income, net........................................................... (582) (436)
-------------- ------------
159,378 139,971
INCOME BEFORE INTEREST
EXPENSE AND INCOME TAX EXPENSE.............................................. 23,228 13,070
INTEREST EXPENSE................................................................. 3,921 4,076
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INCOME BEFORE INCOME TAX EXPENSE................................................. 19,307 8,994
INCOME TAX EXPENSE............................................................... 5,406 2,685
------------- -------------
NET INCOME....................................................................... $ 13,901 $ 6,309
============= =============
PER SHARE INFORMATION:
BASIC EARNINGS PER SHARE.................................................... $ 0.42 $ 0.20
============= =============
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING........................................................... 32,965,168 31,964,626
============= =============
DILUTED EARNINGS PER SHARE.................................................. $ 0.41 $ 0.19
============= =============
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING........................................................... 34,123,653 33,290,686
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
3
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
June 30,
---------------------------
2001 2000
---------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 13,901 $ 6,309
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................................... 11,019 9,381
Gain on sale of fixed assets............................................ (38) (494)
Changes in assets and liabilities:
Decrease in accounts receivable......................................... 5,179 500
Increase in inventories................................................. (4,409) (10,867)
(Increase)/Decrease in prepaid expenses................................. (5,590) 440
Increase/(Decrease) in accounts payable................................. (5,469) 1,540
Increase/(Decrease) in other accrued expenses........................... 952 (4,995)
Decrease in net deferred tax asset...................................... 129 815
Decrease in other long-term liabilities................................. (273) (2)
Other................................................................... (2,692) (2,512)
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Net cash provided by operating activities.......................... 12,709 115
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (13,781) (18,617)
Proceeds from sale of fixed assets.......................................... 79 1,498
Other ...................................................................... 15 276
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Net cash used in investing activities................................... (13,687) (16,843)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt.................................................. (4,100) (12,393)
Borrowings under long-term debt............................................. 5,070 11,049
Capital lease obligation, net............................................... (161) (671)
Net proceeds from exercise of over-allotment................................ - 17,340
Exercise of stock options................................................... 2,576 2,055
Other....................................................................... 235 (98)
----------- ------------
Net cash provided by financing activities............................... 3,620 17,282
----------- ------------
NET CHANGE IN CASH............................................................... 2,642 554
CASH, beginning of period........................................................ 12,519 18,845
----------- ------------
CASH, end of period.............................................................. $ 15,161 $ 19,399
=========== ============
The accompanying notes are an integral part of these
consolidated financial statements.
4
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the
accounts of Core Laboratories and have been prepared in accordance with United
States ("U.S.") generally accepted accounting principles ("GAAP") for interim
financial information using the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. Balance sheet information as of December 31, 2000 was
derived from the 2000 annual audited financial statements. 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
Form 10-K for the year ended December 31, 2000.
Recent Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB")
issued two statements, SFAS 141, "Business Combinations", and SFAS 142,
"Goodwill and Other Intangible Assets", that amend Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations", and supersede APB Opinion No.
17, "Intangible Assets." The two statements modify the method of accounting for
business combinations entered into after June 30, 2001 and address the
accounting for intangible assets. Goodwill resulting from a business combination
after June 30, 2001 would be recognized as an asset but not amortized while
goodwill existing at June 30, 2001 will be amortized through December 31, 2001.
Beginning January 1, 2002, we will no longer amortize goodwill but will test for
impairment annually or more frequently if circumstances indicate a potential
impairment. While we don't expect an impairment to arise, we are evaluating the
impact of the new accounting standards on existing goodwill and other intangible
assets. Goodwill amortization for the three and six month periods ended June 30,
2001 was $1,033,000 and $2,066,000, respectively, which had an earnings per
diluted share impact of $0.03 and $0.06 for the respective periods.
2. ACQUISITIONS
On May 22, 2001, we acquired all of the outstanding shares of PROMORE
Engineering Inc. ("PROMORE"), a privately held company based in Canada. PROMORE
provides innovative solutions for production optimization and monitoring of
reservoir environments. We issued approximately 606,000 shares in exchange for
all of the outstanding shares of PROMORE. 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 PROMORE.
5
3. INVENTORIES
Inventories consist primarily 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 (including direct material, labor and
overhead) or estimated net realizable value and are reflected net of valuation
reserves of $1,196,000 and $1,376,000 at June 30, 2001 and December 31, 2000,
respectively. Inventories consisted of the following (in thousands):
June 30, December 31,
2001 2000
---------- ----------
(Unaudited)
Finished goods.................................. $ 29,307 $ 27,145
Parts and materials............................. 5,051 4,126
Work in process................................. 3,565 2,243
---------- ----------
Total........................... $ 37,923 $ 33,514
========== ==========
4. INTANGIBLES AND GOODWILL
Intangibles include patents, trademarks, service marks and trade names.
Goodwill represents the excess of purchase price over the value of the net
assets acquired in acquisitions accounted for as purchases. Intangibles and
goodwill are charged to expense in equal amounts over their estimated useful
lives. We believe that there have been no events or circumstances that warrant
revision to the remaining useful lives or which affect the recoverability of
intangibles and goodwill. The components of intangibles and goodwill are as
follows (in thousands):
Original
Life June 30, December 31,
in Years 2001 2000
--------- ------------ ------------
(Unaudited)
(in thousands)
Acquired trade secrets........................... 5 $ 165 $ 125
Acquired patents, trademarks and trade names..... 10-20 4,539 3,686
Acquired trade name.............................. 40 4,614 4,614
------------ ------------
Total intangibles....................... 9,318 8,425
------------ ------------
Goodwill......................................... 5-10 2,616 2,639
Goodwill......................................... 20 3,736 3,736
Goodwill......................................... 40 148,099 147,784
------------ ------------
Total goodwill.......................... 154,451 154,159
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Total intangibles and goodwill..... 163,769 162,584
Less - accumulated amortization.................. 16,895 14,557
------------ ------------
Net intangibles and goodwill.. $ 146,874 $ 148,027
============ ============
6
5. LONG-TERM DEBT
Long-term debt is summarized in the following table (in thousands):
June 30, December 31,
2001 2000
----------------- -----------------
(Unaudited)
Credit Facility with a bank group:
$100,000 revolving debt facilities................... $ 9,000 $ 7,000
Senior Notes..................... 75,000 75,000
Other indebtedness.................................... 710 1,738
----------------- -----------------
Total debt................................... 84,710 83,738
Less - current maturities............................. 658 733
----------------- -----------------
Total long-term debt......................... $ 84,052 $ 83,005
================= =================
In July 1999, we entered into a $100 million Credit Facility which provides
for (i) a committed revolving debt facility of $95 million and (ii) a
Netherlands guilder denominated revolving debt facility with U.S. dollar
equivalency of $5 million. At June 30, 2001, approximately $91 million was
available for borrowing under the revolving debt facility. Loans under the
Credit Facility bear interest at rates which range from LIBOR plus 1.25% to a
maximum of LIBOR plus 1.75%. The interest rate in effect at June 30, 2001 was
5.23% and the average for 2001 was 6.5%. The revolving debt facilities require
interest payments only, until maturity in June 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 Credit Facility and Senior Notes require us to meet
certain financial covenants, including certain minimum equity and cash flow
tests. We believe that we are in compliance with all such covenants contained in
our credit agreements. All of our material subsidiaries are guarantors or
co-borrowers under both credit agreements.
6. 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.
o 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.
o 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.
7
o 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 our business segments separately due to the different
technologies each segment utilizes and requires. Results of these segments are
presented below using the same accounting policies as used to prepare the
Consolidated Balance Sheets and Statements 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 table (in thousands):
Three months ended June 30, Six months ended June 30,
----------------------------------------------------------
2001 2000 2001 2000
----------------------------------------------------------
(Unaudited)
Revenues:
Reservoir Description........................... $ 52,730 $ 46,749 $ 101,449 $ 91,718
Production Enhancement.......................... 25,556 20,341 51,762 39,095
Reservoir Management............................ 12,974 13,153 29,395 22,228
---------- ---------- ---------- ----------
Consolidated.............................. $ 91,260 $ 80,243 $ 182,606 $ 153,041
========== ========== ========== ==========
Income (Loss) Before Interest and Taxes:
Reservoir Description........................... $ 8,197 $ 5,410 $ 14,269 $ 8,794
Production Enhancement.......................... 4,875 2,401 8,703 6,775
Reservoir Management............................ (314) (519) 305 (2,463)
Corporate and Other (a)......................... - 50 (49) (36)
---------- ---------- ---------- ----------
Consolidated.............................. $ 12,758 $ 7,342 $ 23,228 $ 13,070
========== ========== ========== ==========
a) "Corporate and Other" represents those items that are not directly
related to a particular segment.
7. SUBSEQUENT EVENT
On August 1, 2001, we purchased from Tesco Corporation ("Tesco") their Gris
Gun business for approximately $12.7 million. Gris Gun supplies wellbore
perforating gun systems and other related completion products primarily to the
Canadian market. This transaction will be accounted for using the purchase
method of accounting.
8
8. EARNINGS PER SHARE
We present earnings per share in accordance with SFAS No. 128, "Earnings
per Share" which 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 share outstanding during the period. Diluted
earnings per share reflects 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:
Three months ended June 30, Six months ended June 30,
-------------------------------- --------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
Weighted average basic common
shares outstanding....................... 33,044,424 32,085,620 32,965,168 31,964,626
Effect of dilutive stock options (a)........ 1,147,938 1,501,935 1,158,485 1,326,060
-------------- -------------- -------------- --------------
Weighted average diluted
common shares outstanding................ 34,192,362 33,587,555 34,123,653 33,290,686
============== ============== ============== ==============
a) Options totaling 41,801 and 6,676 equivalent common shares for the three
months ended June 30, 2001 and 2000, and 41,801 and 6,676 for the six months
ended for the same period, respectively were not included because the impact of
these options was anti-dilutive.
9
CORE LABORATORIES N.V.
MANAGEMENT'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 various risk and other
factors including, but not limited to:
o our ability to continue to develop or acquire new and useful technology.
o the realization of anticipated synergies from acquired businesses and
future acquisitions.
o our dependence on the oil and 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.
Core Laboratories 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 to the oil and gas industry. These
services are directed toward enabling our clients to improve reservoir
performance and increase oil and gas recovery from their producing fields. We
have over 70 offices in more than 50 countries and have approximately 4,000
employees.
Results of Operations
Service revenues for the second quarter of 2001 increased $8.2 million, or
13% over the same period last year. Service revenues for the six month period
ended June 30, 2001 increased $21.7 million, 17% over the same period last year.
Cost of services expressed as a percentage of service revenue were 77% and
80% in the second quarter of 2001 and the same period last year, respectively.
For the six month periods ended, the cost of services expressed as a percentage
of service revenue were 77% and 82%, respectively.
Sales revenues increased $2.8 million to $17.2 million in the second
quarter of 2001 from $14.4 million in the second quarter of 2000, a 20%
increase. Sales revenue for the six month period ended June 30, 2001 increased
$7.9 million to $35.0 million from $27.1 million in the same period in 2000, a
29% increase.
10
Cost of sales in the second quarter of 2001 were 76% of sales revenue as
compared to 84% the same period last year. For the six month period ended June
30, 2001 cost of sales was 80% as compared to 77% from the prior year.
General and administrative expenses are comprised of corporate management
and centralized administrative services which benefit our operating
subsidiaries. Although general and administrative expenses are generally more
fixed in nature as a percentage of revenues, we did experience an increase of
$0.6 million and $0.9 million for the three and six month periods ended June 30,
2001, respectively, as compared to the corresponding periods in 2000. These
increases were largely attributable to growth in the number of people necessary
to support increases in the scope of our operations. General and administrative
expenses as a percentage of revenues remained below 5% for both periods.
Depreciation and amortization expense for the second quarter of 2001
increased $1.0 million and $1.6 million for the three and six month periods
ended June 30, 2001 as compared to the corresponding periods in 2000. This
increase was due to additional capital investments, which include the new
Houston facility.
The effective income tax rate decreased to 28% for the three and six month
periods ended June 30, 2001 from 29% and 30% in the corresponding periods in
2000. This rate change reflects the increase in international earnings taxed at
rates lower than The Netherlands statutory rate.
Segment Analysis
(Dollars in Thousands)
Three months ended June 30, Six months ended June 30,
----------------------------------------------------------
2001 2000 2001 2000
----------------------------------------------------------
(Unaudited)
Revenues:
Reservoir Description........................... $ 52,730 $ 46,749 $ 101,449 $ 91,718
Production Enhancement.......................... 25,556 20,341 51,762 39,095
Reservoir Management............................ 12,974 13,153 29,395 22,228
---------- ---------- ---------- ----------
Consolidated.............................. $ 91,260 $ 80,243 $ 182,606 $ 153,041
========== ========== ========== ==========
Income (Loss) Before Interest and Taxes:
Reservoir Description........................... $ 8,197 $ 5,410 $ 14,269 $ 8,794
Production Enhancement.......................... 4,875 2,401 8,703 6,775
Reservoir Management............................ (314) (519) 305 (2,463)
Corporate and Other (a)......................... - 50 (49) (36)
---------- ---------- ---------- ----------
Consolidated.............................. $ 12,758 $ 7,342 $ 23,228 $ 13,070
========== ========== ========== ==========
a) "Corporate and Other" represents those items that are not directly
related to a particular segment.
Reservoir Description
Revenues for the Reservoir Description segment were $52.7 million for the
second quarter of 2001 compared to $46.7 million in the second quarter of 2000.
Revenues for the six month period ended June 30, 2001 were $101.4 million
compared to $91.7 million in the same period last year. These increases were due
to additional activity in the Gulf of Mexico and the former Soviet Union as well
as synergies realized from recent acquisitions.
11
Income before interest and taxes increased by $2.8 million in the second
quarter of 2001 and $5.5 million in the six month period ended June 30, 2001,
compared to the same periods in 2000 due to higher revenues and improved margins
of our petroleum service unit.
Production Enhancement
Revenues from the Production Enhancement segment were $25.6 million in
the second quarter of 2001 compared to $20.3 million in the same period in the
prior year, an increase of 26%. For the six month period ended June 30, 2001,
revenues increased $12.7 million to $51.8 million, an increase of 32%. These
increases were due to the strong North American gas market and an increase in
the overall workload. Earnings before interest and taxes in the second quarter
of 2001 were up 103% to $4.9 million and 28% to $8.7 million for the six month
period ended June 30, 2001 compared to the same periods in 2000.
Reservoir Management
Revenues from the Reservoir Management segment in the second quarter of
2001 were relatively consistent with the second quarter of 2000 while revenues
for the six month period ended June 30, 2001 increased $7.2 million compared to
the same period in 2000. The increase in the six month period is due in part to
projects initiated in South America and the Far East. Our continuing efforts to
reduce our cost structure resulted in consistent earnings before interest and
taxes in the second quarter of 2001 compared to the second quarter of 2000.
Earnings before interest and taxes for the six month period ended June 30, 2001
were $0.3 million compared to a loss of $2.5 million in the same period in 2000.
Liquidity and Capital Resources
We have historically financed our activities through cash flows from
operations, bank credit facilities, equity financing and the issuance of debt.
During the six month period ending June 30, 2001, cash flows from operating
activities were $12.7 million, an increase of $12.6 million from the same period
in 2000. At June 30, 2001, we had working capital of $134.8 million and a
current ratio of 3.9 to 1.0, compared to working capital of $121.3 million and a
current ratio of 3.2 to 1.0 at December 31, 2000. We are a Netherlands holding
company and we conduct substantially all of our operations through subsidiaries.
Consequently, our cash flow is dependent upon the ability of our subsidiaries to
pay cash dividends or otherwise distribute or advance funds to us.
Our financing activities provided $3.6 million in the six month period
ending June 30, 2001, and $17.3 million in the same period in 2000 due largely
to the net proceeds received from the exercise of the underwriters'
over-allotment option associated with the equity offering in the prior year.
Our investing activities used $13.7 million in the six month period ending
June 30, 2001 compared to $16.8 million in the same period in 2000.
Our ability to maintain and grow our operating income and cash flows is
dependent upon continued investing activities. We believe our future cash flows
from operations, supplemented by our borrowing capacity and issuances of
additional equity should be sufficient to fund debt requirements, capital
expenditures, working capital and future acquisitions.
12
CORE LABORATORIES N.V.
QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
We are exposed to market risk, which is the potential loss arising from
adverse changes in market prices and rates. We do not enter, or intend to enter,
into derivative financial instruments for hedging or speculative purposes. We do
not believe that our exposure to market risks, which are 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
proceeds 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 "Note 5 - Long-Term Debt" of the Notes to Consolidated Financial
Statements.
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CORE LABORATORIES N.V.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time subject to legal proceedings and claims that arise
in the ordinary course of business. We believe that the outcome of current legal
actions will not have a material adverse effect upon our consolidated financial
position or results of operations.
Item 2. Changes in Securities.
In connection with our 2001 acquisitions, we issued approximately 606,000
common shares. Disclosure related to recent issuances of common shares is
included in Note 2 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.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
Stockholders voting at the Annual Meeting on May 31, 2001, and by proxy,
elected nine members (each, a "Supervisory Director") to the Board of
Supervisory Directors of the Company (the "Supervisory Board"), consisting of
(i) David M. Demshur; (ii) Rene R. Joyce (iii) Timothy J. Probert; (iv) Jacobus
Schouten, as Class I Supervisory Directors, (i) Bob G. Agnew; (ii) D. John
Ogren; (iii) Joseph R. Perna, as Class II Supervisory Directors and (i) Richard
L. Bergmark; (ii) Alexander Vriesendorp, to serve until the annual meeting of
shareholders in 2004, 2003 and 2002, respectively, and until their successors
shall have been duly elected and qualified.
The vote tabulation for the individual Supervisory Directors was as follows:
Director Shares for Shares Withheld
--------------------- ---------- ---------------
David M. Demshur 21,247,360 35,632
Rene R. Joyce 21,247,360 35,632
Timothy J. Probert 21,247,360 35,632
Jacobus Schouten 21,247,360 35,632
Bob G. Agnew 21,247,360 35,632
D. John Ogren 21,247,360 35,632
Joseph R. Perna 21,247,160 35,832
Richard L. Bergmark 21,115,174 167,818
Alexander Vriesendorp 21,247,360 35,632
Shareholders also confirmed the Dutch Statutory Annual Accounts for
the year ended December 31, 2000. The proposal was approved by 21,239,224 votes
for, 14,383 votes against, with 29,385 abstentions.
Shareholders approved the extension of the authority of the
Management Board of the Company to repurchase up to 10% of the outstanding share
capital of the Company until November 30, 2002, at a price not more than $200
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per share. The proposal was approved by 20,100,495 votes in favor, 12,210 votes
against with 1,170,287 abstentions.
Shareholders approved the extension of the authority of the
Supervisory Board to issue and/or to grant rights (including options to
purchase) on common and/or preferred shares of the Company until May 30, 2004.
The proposal was approved by 19,257,468 votes in favor, 838,566 votes against,
with 1,186,958 abstentions.
Shareholders approved the extension of the authority of the
Supervisory Board to limit or to exclude the preemptive right of holders of
common shares of the Company until May 30, 2006. The proposal was approved by
19,180,228 votes in favor, 907,871 votes against, with 1,194,893 abstentions.
Shareholders ratified and approved the appointment of Arthur
Andersen LLP as the Company's independent public auditor for the fiscal year
ending December 31, 2001. The proposal was approved by 21,112,192 votes in
favor, 155,425 votes against, with 15,375 abstentions.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
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SIGNATURE
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.
Dated: August 10,2001 By: /s/ Richard L. Bergmark
-------------------------------------
Richard L. Bergmark
Chief Financial Officer
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