EX-99.1 2 dex991.txt PRESS RELEASE EXHIBIT 99.1 Varco Announces First Quarter Earnings High Activity Doubles Net Income HOUSTON & ORANGE, Calif.--(BUSINESS WIRE)--April 24, 2001--Varco International Inc. (NYSE:VRC - news) today announced that net income for the first quarter --- ---- ended March 31, 2001, totaled $19.1 million, or $.20 per fully diluted share, on $274.2 million of revenue. This compares to $8.8 million or $.09 per fully diluted share, on $203.8 million of revenue in the first quarter 2000. Operating profit rose to $36.6 million, or 13.4 percent of revenue, up from $18.6 million, or 9.1 percent of revenue, in the prior year quarter. Revenues rose 35 percent over the prior year quarter as a result of higher activity levels driven by strong commodity prices, the impact of strategic acquisitions, and improved pricing in some product lines. Varco's Tubular Services business generated $89.0 million in sales in the first quarter, up 62 percent from the prior year period, on strength throughout North America, recovery in many Eastern Hemisphere markets, and the benefit of a late 2000 acquisition. Operating profits more than doubled, rising from $7.2 million last year to $18.4 million in the first quarter of 2001. Operating leverage (increase in operating profit divided by increase in revenue) of 33 percent resulted in operating margins rising from 13.1 percent of revenue to 20.6 percent of revenue in the first quarter. Sequentially, revenue increased 27 percent with operating leverage of 30 percent. Drilling Services revenue was $76.6 million in the first quarter, up 28 percent from the prior period, due to strong performances in the U.S., Latin America, and Eastern Hemisphere Solids Control businesses, along with increased demand for the Company's instrumentation services in North America. Operating profit rose to $17.7 million, or 23.2 percent of revenue, compared to $9.9 million, or 16.5 percent of revenue, last year. Year-on-year operating leverage was 47 percent. Coiled Tubing & Wireline Products revenues more than doubled from the prior year quarter, rising to $41.1 million, due to strong demand for the Company's coiled tubing technologies and the acquisition of Quality Tubing, which closed in the first quarter 2001. Operating margins rose from 11.3 percent of revenue last year to 22.0 percent of revenue in the first quarter, with operating leverage of 29 percent. Backlog of $55.7 million represents an increase of 132 percent versus the prior year. Drilling Equipment Sales revenue was $67.5 million in the first quarter, down slightly from the prior year period revenue of $72.2 million, due to delays in the delivery of certain orders and parts. Incoming orders totaled $114.1 million in the quarter, and backlog increased to $136.4 million, more than double the prior year backlog of $59.6 million and up 55 percent from the previous quarter level. Included in the quarter's new orders is the second harsh environment jack-up drilling rig for Maersk. Operating margins declined to 4.9 percent, due mostly to lower revenue levels and the incurring of additional engineering and manufacturing expenses in anticipation of higher upcoming activity associated with the high backlog. George Boyadjieff, chairman and CEO of Varco, commented, "We are very pleased with the excellent performance and incremental profits posted by the Tubular Services, Drilling Services, and Coiled Tubing and Wireline Products lines, and are upbeat about the performance improvement we expect shortly in Varco's Drilling Equipment business, due to high activity levels, the increase in capital equipment orders and resulting high backlog.'' Boyadjieff noted that the Company continued its pursuit of attractive strategic acquisition opportunities with the acquisition of four operations during the first quarter. Varco completed the quarter with $19.6 million in cash and $205.4 million in debt. Capital expenditures were $13.2 million in the quarter. Varco International Inc., with dual headquarters in Orange, Calif., and Houston is the world's leading manufacturer and supplier of innovative drilling equipment and rig instrumentation, oilfield tubular inspections and internal coating techniques, solids control systems and services, and coiled tubing and pressure control equipment for both land and offshore drilling operations. The foregoing contains 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. The forward-looking statements are those that do not state historical facts and are inherently subject to risk and uncertainties. The forward-looking statements contained herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, among others, general economic, financial and business conditions, the potential inability to complete the note offering due to internal or external factors and other factors discussed in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2000, under the caption "Factors Affecting Future Operating Results." VARCO INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS
March 31, Dec. 31, 2001 2000 ----------- ----------- ASSETS (In thousands) Current assets: Cash and cash equivalents $ 19,570 $ 12,176 Accounts receivable, net 280,910 269,393 Inventory, net 176,390 152,350 Other current assets 25,914 21,787 ----------- ----------- Total current assets 502,784 455,706 ----------- ----------- Property and equipment, net 370,763 343,673 Identified intangibles, net 26,436 26,062 Goodwill, net 288,110 238,641 Other assets, net 10,569 12,900 ----------- ----------- Total assets $ 1,198,662 $ 1,076,982 =========== =========== LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 86,001 $ 66,182 Accrued liabilities 85,158 91,423 Income taxes payable 14,117 4,376 Current portion of long-term debt 99,005 30,347 ----------- ----------- Total current liabilities 284,281 192,328 Long-term debt 106,362 106,160 Other liabilities 47,781 46,511 ----------- ----------- Total liabilities 438,424 344,999 ----------- ----------- Common stockholders' equity: Common stock, $.01 par value, 200,000,000 shares authorized, 97,028,817 shares issued and 95,604,117 shares outstanding at March 31, 2001 (96,245,849 shares issued and 94,821,149 outstanding at Dec. 31, 2000) 970 962 Paid in capital 509,171 498,692 Retained earnings 283,707 264,580 Accumulated other comprehensive loss (18,280) (16,921) Less: treasury stock at cost (1,424,700 shares) (15,330) (15,330) ----------- ----------- Total common stockholders' equity 760,238 731,983 ----------- ----------- Total liabilities and equity $ 1,198,662 $ 1,076,982 =========== ===========
VARCO INTERNATIONAL INC. QUARTERLY INCOME STATEMENT (Unaudited)
Three Months Ended March 31, 2001 2000 ----------- ----------- Revenue: Drilling Equipment Sales $ 67,538 $ 72,166 Tubular Services 88,968 54,976 Drilling Services 76,638 59,998 Coiled Tubing & Wireline Products 41,069 16,635 ----------- ----------- Total Revenue 274,213 203,775 Total Gross Profit (before Goodwill Amt) 80,983 58,842 Total Gross Profit Percent 29.5% 28.9% Goodwill Amortization 2,460 2,133 Selling, General and Administration 31,987 30,399 Research and engineering 9,892 7,708 ----------- ----------- Operating Profit 36,644 18,602 Interest Expense 3,789 4,816 Other Expense (Income) 976 (810) ----------- ----------- Income Before Taxes 31,879 14,596 Income Tax Provision 12,752 5,828 ----------- ----------- Net Income $ 19,127 $ 8,768 =========== =========== Earnings Per Common Share: Basic Earnings Per Common Share $0.20 $0.10 =========== =========== Dilutive Earnings Per Common Share $0.20 $0.09 =========== =========== Weighted average number of common shares outstanding: Basic 95,338,404 91,260,067 =========== =========== Dilutive 96,613,309 94,352,000 =========== =========== Other: EBITDA $ 51,075 $ 34,232 =========== =========== Dilutive Earnings Per Share Before Goodwill Amortization $0.22 $0.12 =========== ===========
VARCO INTERNATIONAL INC. OPERATING PROFIT -- SUPPLEMENTAL SCHEDULE (Unaudited)
Three Months Ended March 31, 2001 2000 -------- -------- Revenue: Drilling Equipment Sales $ 67,538 $ 72,166 Tubular Services 88,968 54,976 Drilling Services 76,638 59,998 Coiled Tubing & Wireline Products 41,069 16,635 -------- -------- Total Revenue 274,213 203,775 Operating Profit: Drilling Equipment Sales 3,304 8,498 Tubular Services 18,353 7,216 Drilling Services 17,742 9,895 Coiled Tubing & Wireline Products 9,053 1,886 Other Unallocated (11,808) (8,893) Operating Profit 36,644 18,602 Operating Profit %: Drilling Equipment Sales 4.9% 11.8% Tubular Services 20.6% 13.1% Drilling Services 23.2% 16.5% Coiled Tubing & Wireline Products 22.0% 11.3% Other Unallocated -- -- Operating Profit 13.4% 9.1%