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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 September 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 November 6, 2001 was 33,375,228.
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<page>
CORE LABORATORIES N.V.
INDEX
Page
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at September 30, 2001 and December 31, 2000................... 1
Consolidated Statements of Operations for the Three Months ended
September 30, 2001 and 2000.......................................................... 2
Consolidated Statements of Operations for the Nine Months ended
September 30, 2001 and 2000.......................................................... 3
Consolidated Statements of Cash Flows for the Nine Months ended
September 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................................ 14
Part II -- Other Information
Item 1-- Legal Proceedings.................................................................... 15
Item 2-- Changes in Securities................................................................ 15
Item 3-- Defaults Upon Senior Securities...................................................... 15
Item 4-- Submission of Matters to a Vote of Security Holders ................................. 15
Item 5-- Other Information.................................................................... 15
Item 6-- Exhibits and Reports on Form 8-K..................................................... 15
Signature ..................................................................................... 16
ii
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
2001 2000
----------- ----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 13,308 $ 12,519
Accounts receivable, less allowance for doubtful accounts of
$8,469 and $9,080 in 2001 and 2000, respectively............................ 113,508 113,214
Inventories ................................................................ 45,330 33,514
Prepaid expenses and other.................................................. 11,294 7,085
Deferred tax asset.......................................................... 7,941 10,220
----------- ------------
Total current assets............................................................. 191,381 176,552
PROPERTY, PLANT AND EQUIPMENT, net............................................... 95,462 84,556
INTANGIBLES AND GOODWILL, net.................................................... 151,844 148,027
OTHER LONG-TERM ASSETS........................................................... 3,661 4,166
----------- -----------
Total assets..................................................... $ 442,348 $ 413,301
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................................ $ 669 $ 733
Current lease obligations................................................... 51 247
Accounts payable............................................................ 17,275 25,931
Other accrued expenses...................................................... 27,098 28,355
----------- -----------
Total current liabilities........................................................ 45,093 55,266
LONG-TERM DEBT .................................................................. 97,688 83,005
LONG-TERM LEASE OBLIGATIONS...................................................... 26 35
OTHER LONG-TERM LIABILITIES...................................................... 20,845 23,298
MINORITY INTEREST................................................................ 831 632
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,
33,175,071 and 32,814,018 issued and outstanding
at September 30, 2001 and December 31, 2000, respectively............... 545 541
Additional paid-in capital.................................................. 186,686 182,847
Retained earnings........................................................... 90,634 67,677
----------- -----------
Total shareholders' equity.............................................. 277,865 251,065
----------- -----------
Total liabilities and shareholders' equity....................................... $ 442,348 $ 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
September 30,
---------------------------
2001 2000
----------- -----------
(Unaudited)
SERVICES......................................................................... $ 77,321 $ 70,115
SALES............................................................................ 19,776 18,335
----------- -----------
97,097 88,450
OPERATING EXPENSES:
Cost of services............................................................ 57,107 55,078
Cost of sales............................................................... 15,337 15,203
General and administrative expenses ........................................ 4,259 3,442
Depreciation and amortization............................................... 4,808 3,853
Goodwill amortization....................................................... 1,062 1,046
Other income, net........................................................... (55) (430)
----------- -----------
82,518 78,192
NCOME BEFORE INTEREST
EXPENSE AND INCOME TAX EXPENSE.............................................. 14,579 10,258
INTEREST EXPENSE................................................................. 2,000 2,095
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE................................................. 12,579 8,163
INCOME TAX EXPENSE............................................................... 3,522 2,382
----------- -----------
NET INCOME....................................................................... $ 9,057 $ 5,781
=========== ===========
PER SHARE INFORMATION:
BASIC EARNINGS PER SHARE.................................................... $ 0.27 $ 0.18
=========== ===========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING........................................................... 33,165,470 32,783,862
=========== ===========
DILUTED EARNINGS PER SHARE.................................................. $ 0.27 $ 0.17
=========== ===========
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING........................................................... 33,795,537 33,724,079
=========== ===========
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)
Nine Months ended
September 30,
---------------------------
2001 2000
----------- -----------
(Unaudited)
SERVICES......................................................................... $ 224,956 $ 196,045
SALES............................................................................ 54,747 45,446
----------- -----------
279,703 241,491
OPERATING EXPENSES:
Cost of services............................................................ 170,413 158,460
Cost of sales............................................................... 43,429 36,161
General and administrative expenses ........................................ 11,803 10,128
Depreciation and amortization............................................... 13,761 11,180
Goodwill amortization....................................................... 3,128 3,100
Other income, net........................................................... (637) (866)
----------- -----------
241,897 218,163
INCOME BEFORE INTEREST
EXPENSE AND INCOME TAX EXPENSE.............................................. 37,806 23,328
INTEREST EXPENSE................................................................. 5,921 6,171
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE................................................. 31,885 17,157
INCOME TAX EXPENSE............................................................... 8,928 5,067
----------- -----------
NET INCOME....................................................................... $ 22,957 $ 12,090
=========== ===========
PER SHARE INFORMATION:
BASIC EARNINGS PER SHARE.................................................... $ 0.69 $ 0.37
=========== ===========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING........................................................... 33,032,668 32,247,155
=========== ===========
DILUTED EARNINGS PER SHARE.................................................. $ 0.68 $ 0.36
=========== ===========
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING........................................................... 34,005,908 33,442,389
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
3
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months ended
September 30,
---------------------------
2001 2000
----------- -----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 22,957 $ 12,090
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................................... 16,889 14,280
Gain on sale of fixed assets............................................ (148) (495)
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable.............................. 124 (9,855)
Increase in inventories................................................. (6,411) (11,661)
(Increase)/Decrease in prepaid expenses................................. (4,084) 162
Increase/(Decrease) in accounts payable................................. (8,720) 785
Decrease in other accrued expenses...................................... (1,810) (8,744)
(Increase)/Decrease in net deferred tax asset........................... (29) 1,085
Increase/(Decrease) in other long-term liabilities...................... (69) 203
Other................................................................... (1,962) 2,022
----------- -----------
Net cash provided by operating activities.......................... 16,737 (128)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (20,817) (25,880)
Acquisitions, net of cash acquired.......................................... (12,735) --
Proceeds from sale of fixed assets.......................................... 201 2,211
Other ...................................................................... (90) 508
----------- -----------
Net cash used in investing activities................................... (33,441) (23,161)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt.................................................. (6,124) (19,550)
Borrowings under long-term debt............................................. 20,716 21,316
Capital lease obligation, net............................................... (203) (1,491)
Net proceeds from exercise of over-allotment................................ - 17,303
Exercise of stock options................................................... 2,720 2,523
Other....................................................................... 384 (559)
----------- -----------
Net cash provided by financing activities............................... 17,493 19,542
----------- -----------
NET CHANGE IN CASH............................................................... 789 (3,747)
CASH, beginning of period........................................................ 12,519 18,845
----------- -----------
CASH, end of period.............................................................. $ 13,308 $ 15,098
=========== ===========
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 nine month period ended September 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 do not 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 nine month periods ended September 30,
2001 was $1,062,000 and $3,128,000, respectively, which had an earnings per
diluted share impact of $0.03 and $0.09 for the respective periods.
2. ACQUISITIONS
On August 1, 2001, we acquired all of the assets of Tesco Corporation's
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. The transaction was accounted for using the purchase method of
accounting and resulted in an increase in goodwill of approximately $5.9
million.
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
5
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.
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 $2,305,000 and $1,376,000 at September 30, 2001 and December 31,
2000, respectively. Inventories consisted of the following (in thousands):
September 30, December 31,
2001 2000
---------- ----------
(Unaudited)
Finished goods.................................. $ 34,132 $ 27,145
Parts and materials............................. 6,562 4,126
Work in process................................. 4,636 2,243
---------- ----------
Total........................... $ 45,330 $ 33,514
========== ==========
6
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 acquired prior to July 1, 2001 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. Additional information
relating to intangibles and goodwill is included in Note 1. The components of
intangibles and goodwill are as follows (in thousands):
Original
Life September 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 2,882 2,639
Goodwill......................................... 20 3,736 3,736
Goodwill......................................... 40 148,099 147,784
Goodwill......................................... N/A 5,905 --
------------ ------------
Total goodwill.......................... 160,622 154,159
------------ ------------
Total intangibles and goodwill..... 169,940 162,584
Less - accumulated amortization.................. 18,096 14,557
------------ ------------
Net intangibles and goodwill.. $ 151,844 $ 148,027
============ ============
5. LONG-TERM DEBT
Long-term debt is summarized in the following table (in thousands):
September 30, December 31,
2001 2000
----------- ------------
(Unaudited)
Credit Facility with a bank group:
$100,000 revolving debt facilities................... $ 22,000 $ 7,000
Senior Notes..................... 75,000 75,000
Other indebtedness.................................... 1,357 1,738
----------- ------------
Total debt................................... 98,357 83,738
Less - current maturities............................. 669 733
----------- ------------
Total long-term debt......................... $ 97,688 $ 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 September 30, 2001, approximately $78 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%.
7
The interest rate in effect at September 30, 2001
was 4.25% and the average for 2001 was 5.75%. 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.
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.
8
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 September 30, Nine months ended September 30,
----------------------------------------------------------
2001 2000 2001 2000
----------------------------------------------------------
(Unaudited)
Revenues:
Reservoir Description........................... $ 56,368 $ 48,159 $ 157,817 $ 139,871
Production Enhancement.......................... 27,781 27,457 79,543 66,557
Reservoir Management............................ 12,948 12,834 42,343 35,063
---------- ---------- ---------- ----------
Consolidated.............................. $ 97,097 $ 88,450 $ 279,703 $ 241,491
========== ========== ========== ==========
Income (Loss) Before Interest and Taxes:
Reservoir Description........................... $ 10,459 $ 5,845 $ 24,728 $ 14,654
Production Enhancement.......................... 5,136 4,400 13,839 11,175
Reservoir Management............................ (993) 34 (688) (2,428)
Corporate and Other (a)......................... (23) (21) (73) (73)
---------- ---------- ---------- ----------
Consolidated.............................. $ 14,579 $ 10,258 $ 37,806 $ 23,328
========== ========== ========== ==========
a) "Corporate and Other" represents those items that are not directly
related to a particular segment.
7. 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 September 30, Nine months ended September 30,
-------------------------------- --------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
Weighted average basic common
shares outstanding....................... 33,165,470 32,783,862 33,032,668 32,247,155
Effect of dilutive stock options (a)........ 630,067 940,217 973,240 1,195,234
-------------- -------------- -------------- --------------
Weighted average diluted
common shares outstanding................ 33,795,537 33,724,079 34,005,908 33,442,389
============== ============== ============== ==============
a) Options totaling 1,071,551 and 9,676 equivalent common shares for the three
months ended September 30, 2001 and 2000, and 51,801 and 61,676 for the nine
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 4,350
employees.
Results of Operations
Service revenues for the third quarter of 2001 increased $7.2 million, or
10% over the same period last year. Service revenues for the nine month period
ended September 30, 2001 increased $28.9 million, or 15% over the same period
last year.
Cost of services expressed as a percentage of service revenue was 74% and
79% in the third quarter of 2001 and the same period last year, respectively.
For the nine month periods ended, the cost of services expressed as a percentage
of service revenue were 76% and 81%, respectively.
Sales revenues increased $1.4 million to $19.8 million in the third quarter
of 2001 from $18.3 million in the third quarter of 2000, an 8% increase. Sales
revenue for the nine month period ended September 30, 2001 increased $9.3
million to $54.7 million from $45.4 million in the same period in 2000, a 21%
increase.
Cost of sales in the third quarter of 2001 were 78% of sales revenue as
10
compared to 83% in the same period last year. For the nine month period ended
September 30, 2001 cost of sales was 79% as compared to 80% 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
$0.8 million and $1.7 million for the three and nine month periods ended
September 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 third quarter of 2001
increased $1.0 million and $2.6 million for the three and nine month periods
ended September 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 nine month
periods ended September 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 September 30, Nine months ended September 30,
----------------------------------------------------------
2001 2000 2001 2000
----------------------------------------------------------
(Unaudited)
Revenues:
Reservoir Description........................... $ 56,368 $ 48,159 $ 157,817 $ 139,871
Production Enhancement.......................... 27,781 27,457 79,543 66,557
Reservoir Management............................ 12,948 12,834 42,343 35,063
---------- ---------- ---------- ----------
Consolidated.............................. $ 97,097 $ 88,450 $ 279,703 $ 241,491
========== ========== ========== ==========
Income (Loss) Before Interest and Taxes:
Reservoir Description........................... $ 10,459 $ 5,845 $ 24,728 $ 14,654
Production Enhancement.......................... 5,136 4,400 13,839 11,175
Reservoir Management............................ (993) 34 (688) (2,428)
Corporate and Other (a)......................... (23) (21) (73) (73)
---------- ---------- ---------- ----------
Consolidated.............................. $ 14,579 $ 10,258 $ 37,806 $ 23,328
========== ========== ========== ==========
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 $56.4 million for the
third quarter of 2001 compared to $48.2 million in the third quarter of 2000.
Revenues for the nine month period ended September 30, 2001 were $157.8 million
compared to $139.9 million in the same period last year. These increases were
due in part to increased demand from international field development projects
11
greater utilization of our higher technology services as well as synergies
realized from recent acquisitions.
Income before interest and taxes increased by $4.6 million in the third
quarter of 2001 and $10.1 million in the nine month period ended September 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 $27.8 million in
the third quarter of 2001 compared to $27.5 million in the same period in the
prior year. For the nine month period ended September 30, 2001, revenues
increased $13.0 million to $79.5 million, an increase of 20%. These increases
were due to the active North American natural gas market and an increase in the
overall workload. We have also realized increased levels of market acceptance
for our Completion Profiler(TM) and PackScan(TM) technologies. Earnings before
interest and taxes in the third quarter of 2001 were up 17% to $5.1 million and
24% to $13.8 million for the nine month period ended September 30, 2001 compared
to the same periods in 2000.
Reservoir Management
Revenues from the Reservoir Management segment in the third quarter of
2001 were relatively consistent with the third quarter of 2000 while revenues
for the nine month period ended September 30, 2001 increased $7.3 million
compared to the same period in 2000. The increase in the nine month period was
due in part to projects initiated in South America and the Far East. Our
continuing efforts to reduce our cost structure in this segment resulted in a
restructuring of the seismic and engineering field study groups. Expenses
related to staff reductions and the restructuring contributed to the loss before
interest and taxes for the third quarter of 2001 of $1.0 million compared to
minimal earnings in the same period in 2000. The loss before interest and taxes
for the nine month period ended September 30, 2001 were $0.7 million compared to
a loss of $2.4 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 nine month period ending September 30, 2001, cash flows from
operating activities were $16.7 million, an increase of $16.9 million from the
same period in 2000. At September 30, 2001, we had working capital of $146.3
million and a current ratio of 4.2 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 $17.5 million in the nine month period
ending September 30, 2001, and $19.5 million in the same period in 2000. Our
investing activities used $33.4 million in the nine month period ending
September 30, 2001 compared to $23.2 million in the same period in 2000.
The major financing and investing activities in these periods were as follows:
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o In July 2001, we borrowed approximately $13.0 million to finance the
acquisition of Gris Gun.
o In June 2000, we received net proceeds of approximately $17.3 million from
the exercise of the underwriters' over-allotment option associated with the
equity offering. These proceeds were used principally to reduce
indebtedness and fund capital expenditures.
o Capital expenditures were $20.8 million for the nine month period ending
September 30, 2001, and $25.9 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.
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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.
None
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: November 14, 2001 By: /s/ Richard L. Bergmark
-------------------------------------
Richard L. Bergmark
Chief Financial Officer
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