10-Q 1 0001.txt FORM 10-Q FOR DECEMBER 31, 2000 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2000 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 1-10570 BJ SERVICES COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 63-0084140 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS 77092 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (713) 462-4239 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 [ ] There were 82,126,145 shares of the registrant's common stock, $.10 par value, outstanding as of February 9, 2001. BJ SERVICES COMPANY INDEX PART I - FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Condensed Statement of Operations (Unaudited) - Three months ended December 31, 2000 and 1999 3 Consolidated Condensed Statement of Financial Position - December 31, 2000 (Unaudited) and September 30, 2000 4 Consolidated Statement of Stockholders' Equity (Unaudited) - Three months ended December 31, 2000 5 Consolidated Condensed Statement of Cash Flows (Unaudited) - Three months ended December 31, 2000 and 1999 6 Notes to Unaudited Consolidated Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II - OTHER INFORMATION 17 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BJ SERVICES COMPANY CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED DECEMBER 31, 2000 1999 ------ ------ Revenue $489,678 $354,820 Operating expenses: Cost of sales and services 347,319 281,452 Research and engineering 7,893 6,043 Marketing 14,131 12,736 General and administrative 15,900 13,698 Goodwill amortization 3,374 3,369 -------- -------- Total operating expenses 388,617 317,298 -------- -------- Operating income 101,061 37,522 Interest expense (4,044) (6,969) Interest income 403 86 Other income (expense) - net (1,264) (549) -------- -------- Income before income taxes 96,156 30,090 Income tax expense 32,693 9,628 -------- -------- Net income $ 63,463 $ 20,462 ======== ======== Earnings per share: Basic $.77 $.27 Diluted $.76 $.25 Weighted average shares outstanding: Basic 82,050 74,692 Diluted 83,937 82,647 SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 3 BJ SERVICES COMPANY CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION (IN THOUSANDS) DECEMBER 31, SEPTEMBER 30, 2000 2000 ------------ ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 7,883 $ 6,472 Receivables - net 387,932 348,106 Inventories: Products 59,692 57,988 Work in process 2,526 1,408 Parts 56,953 53,399 ---------- ---------- Total inventories 119,171 112,795 Deferred income taxes 13,206 15,632 Other current assets 25,764 23,373 ---------- ---------- Total current assets 553,956 506,378 Property - net 584,585 585,394 Deferred income taxes 176,823 199,795 Goodwill - net 472,861 476,237 Other assets 15,483 17,429 ---------- ---------- $1,803,708 $1,785,233 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 148,989 $ 147,581 Short-term borrowings and current portion of long-term debt 56,338 34,100 Accrued employee compensation and benefits 41,877 48,536 Income and other taxes 28,784 22,771 Accrued insurance 12,111 11,557 Other accrued liabilities 83,026 72,546 ---------- ---------- Total current liabilities 371,125 337,091 Long-term debt 134,314 141,981 Deferred income taxes 8,515 7,966 Other long-term liabilities 128,863 128,424 Stockholders' equity 1,160,891 1,169,771 ---------- ---------- $1,803,708 $1,785,233 ========== ========== SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 4 BJ SERVICES COMPANY CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
ACCUMULATED CAPITAL OTHER COMMON IN EXCESS TREASURY UNEARNED RETAINED COMPREHENSIVE STOCK OF PAR STOCK COMPENSATION EARNINGS INCOME TOTAL ------ ---------- ---------- ------------- --------- ------------- --------- (in thousands) Balance, September 30, 2000 $8,688 $948,859 $(165,154) $(3,433) $376,270 $4,541 $1,169,771 Comprehensive income: Net income 63,463 Other comprehensive income, net of tax: Cumulative translation adjustments 102 Comprehensive income 63,565 Reissuance of treasury stock for: Stock options 8,105 (5,726) 2,379 Stock purchase plan 8,052 (2,727) 5,325 Stock performance awards (1,816) 1,258 558 Treasury stock purchased (81,019) (81,019) Recognition of unearned compensation 870 870 Revaluation of stock performance awards 677 (677) Stock performance grant 4,141 (4,141) ------ -------- --------- ------------ -------- ------ ---------- Balance, December 31, 2000 $8,688 $951,861 $(228,758) $(7,381) $431,838 $4,643 $1,160,891 ====== ======== ========= ============ ======== ======= ==========
SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 5 BJ SERVICES COMPANY CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) THREE MONTHS ENDED DECEMBER 31, 2000 1999 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 63,463 $ 20,462 Adjustments to reconcile net income to cash provided by operating activities: Minority interest 1,599 761 Amortization of unearned compensation 870 840 Depreciation and amortization 25,500 26,482 Deferred income taxes 24,760 6,648 Changes in: Receivables (39,826) (24,246) Inventories (6,376) (2,956) Accounts payable 1,408 (657) Other current assets and liabilities 9,184 (12,678) Other - net 941 (6,228) -------- --------- Net cash provided by operating activities 81,523 8,428 CASH FLOWS FROM INVESTING ACTIVITIES: Property additions (28,069) (13,745) Proceeds from disposal of assets 6,701 121,021 -------- --------- Net cash provided by (used for) investing activities (21,368) 107,276 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (repayment of) borrowings - net 14,571 (267,597) Proceeds from issuance of stock 7,704 151,682 Purchase of treasury stock (81,019) -------- --------- Net cash used for financing activities (58,744) (115,915) Increase (decrease) in cash and cash equivalents 1,411 (211) Cash and cash equivalents at beginning of period 6,472 3,924 -------- --------- Cash and cash equivalents at end of period $ 7,883 $ 3,713 ======== ========= SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 6 BJ SERVICES COMPANY NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1 GENERAL In the opinion of management, the unaudited consolidated condensed financial statements for BJ Services Company (the "Company") include all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial position and statement of stockholders' equity as of December 31, 2000, and the results of operations and cash flows for each of the three-month periods ended December 31, 2000 and 1999. The consolidated condensed statement of financial position at September 30, 2000 is derived from the September 30, 2000 audited consolidated financial statements. Although management believes the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations and the cash flows for the three-month period ended December 31, 2000 are not necessarily indicative of the results to be expected for the full year. NOTE 2 EARNINGS PER SHARE ("EPS") Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares outstanding during each period and the assumed exercise of dilutive stock options and warrants less the number of treasury shares assumed to be purchased with the exercise proceeds using the average market price of the Company's common stock for each of the periods presented. The following table presents information necessary to calculate earnings per share for the periods presented (in thousands except per share amounts): THREE MONTHS ENDED DECEMBER 31, 2000 1999 ------- ------- Net income $63,463 $20,462 Weighted-average common shares outstanding 82,050 74,692 ------- ------- Basic earnings per share $ .77 $ .27 ======= ======= Weighted-average common and dilutive potential common shares outstanding: Weighted-average common shares outstanding 82,050 74,692 Assumed exercise of stock options 1,887 2,436 Assumed exercise of warrants 5,519 ------- ------- 83,937 82,647 ------- ------- Diluted earnings per share $ .76 $ .25 ======= ======= 7 NOTE 3 SEGMENT INFORMATION The Company has three business segments: U.S./Mexico Pressure Pumping, International Pressure Pumping and Other Oilfield Services. The U.S./Mexico Pressure Pumping Services segment includes cementing services and stimulation services (consisting of fracturing, acidizing, sand control, nitrogen, coiled tubing and downhole tools services) which are provided throughout the United States and Mexico. The International Pressure Pumping Services segment also includes cementing and stimulation services which are provided to over 40 countries in the major international oil and natural gas producing areas of Latin America, Europe, Africa, Southeast Asia, Canada and the Middle East. The Other Oilfield Services segment consists of specialty chemicals, tubular services, and process and pipeline services, both throughout the U.S. and internationally. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Company's annual financial statement footnotes. The Company evaluates the performance of its operating segments based on operating income excluding goodwill amortization and unusual charges. Intersegment sales and transfers are not significant. Summarized financial information concerning the Company's segments is shown in the following table. The "Corporate" column includes corporate general and administrative expenses and goodwill amortization. BUSINESS SEGMENTS
U.S./MEXICO INTERNATIONAL OTHER PRESSURE PRESSURE OILFIELD PUMPING PUMPING SERVICES CORPORATE TOTAL ----------- ------------- -------- --------- ----- (in thousands) THREE MONTHS ENDED DECEMBER 31, 2000 Revenues $253,914 $187,763 $ 47,909 $ 92 $ 489,678 Operating income (loss) 75,912 28,659 6,204 (9,714) 101,061 Identifiable assets 369,669 593,604 118,708 721,727 1,803,708 THREE MONTHS ENDED DECEMBER 31, 1999 Revenues $166,588 $145,410 $ 42,646 $ 176 $ 354,820 Operating income (loss) 29,128 13,614 4,051 (9,271) 37,522 Identifiable assets 316,171 590,185 121,400 756,808 1,784,564
8
THREE MONTHS ENDED THREE MONTHS ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------ ------------------ (in thousands) Total operating profit for reportable segments $101,061 $37,522 Interest expense - net (3,641) (6,883) Other income (expense) - net (1,264) (549) -------- ------- Income before income taxes $ 96,156 $30,090 ======== =======
NOTE 4 COMPREHENSIVE INCOME The components of comprehensive net income, net of tax, are as follows (in thousands): THREE MONTHS ENDED DECEMBER 31, ------------------ 2000 1999 ------- ------- Net income attributable to common stockholders $63,463 $20,462 Change in cumulative translation adjustment 102 (325) ------- ------- Comprehensive net income $63,565 $20,137 ======= ======= NOTE 5 NEW ACCOUNTING STANDARDS Effective October 1, 2000, the Company adopted Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended. SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. This statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The adoption of SFAS 133 did not have a material impact on the Company's financial position or results of operations for the three months ended December 31, 2000. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's operations are primarily driven by the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of workover activity worldwide. Drilling activity, in turn, is largely dependent on the price of oil and natural gas. This situation often leads to volatility in the Company's revenues and profitability, especially in the United States and Canada, where the Company historically has generated in excess of 50% of its revenues. Due to "aging" oilfields and lower-cost sources of oil internationally, drilling activity in the United States has declined more than 75% from its peak in 1981. Record low drilling activity levels were experienced in 1986, 1992 and again in early 1999. Despite a recovery in the latter half of fiscal 1999, the U.S. average fiscal 1999 active rig count represented the lowest in history. The recovery in U.S. drilling continued throughout fiscal 2000 and into fiscal 2001 due to exceptionally strong oil and natural gas prices. For the three-month period ended December 31, 2000, the active U.S. rig count averaged 1,073 rigs, a 39% increase over the same period in fiscal 2000. This represents the highest average quarterly U.S. rig count since 1990. Drilling activity outside North America has historically been less volatile than domestic drilling activity and the downturn and recovery cycles tend to lag those of North America. While Canadian drilling activity began to recover during the latter part of fiscal 1999, activity in most of the other international regions has only recently begun to recover from 1999's record lows. During the first quarter of fiscal 2001, active international drilling rigs (excluding Canada) averaged 711 rigs, a 24% increase over the same quarter of fiscal 2000. The recovery in Canadian drilling activity continued into fiscal 2001 with active rigs averaging 375 rigs during the three-month period ending December 31, 2000, an 11% increase over the same period of the previous fiscal year. 10 RESULTS OF OPERATIONS The following table sets forth selected key operating statistics reflecting industry rig count and the Company's financial results:
Three Months Ended December 31, ------------------------------- 2000 1999 ------ ------ Rig Count: (1) U.S......................................................... 1,073 774 International............................................... 1,086 908 Revenue per rig (in thousands)................................. $226.8 $211.0 Revenue per employee (in thousands)............................ $ 52.0 $ 44.6 Percentage of gross profit to revenue (2)...................... 29.1% 20.7% Percentage of research and engineering expense to revenue...... 1.6% 1.7% Percentage of marketing expense to revenue..................... 2.9% 3.6% Percentage of general and administrative expense to revenue.... 3.2% 3.9%
________ (1) Industry estimate of drilling activity as measured by average active rigs. (2) Gross profit represents revenue less cost of sales and services. Revenue: The Company's revenue for the quarter ended December 31, 2000 was $489.7 million, an increase of 38% from the previous year's first fiscal quarter and the highest quarterly revenues in the Company's history. The record results were attributed to continued improvements in U.S. drilling activity and pricing, and increased international drilling activity. Management expects the Company's revenues in fiscal 2001 to increase by in excess of 15% over 2000, based on the current strength in the North American drilling market and continued improvements in international markets. Operating Income: For the quarter ended December 31, 2000, the Company's operating income was $101.1 million, compared to operating income of $37.5 million in the first quarter of fiscal 2000. The Company's gross profit margins for the quarter increased to 29.1% from 20.7% in the prior year's first fiscal quarter. The margin improvement was primarily a result of improved U.S. pricing, better equipment utilization, and labor and equipment efficiencies. These efficiencies are reflected in the increase in both revenue per rig and revenue per employee in the first quarter of fiscal 2001. Partially offsetting the improved margins were increases in research and engineering, marketing and general and administrative expenses totaling $5.4 million due primarily to higher accruals for incentive plans, which are based upon the Company's earnings and stock price. Each of these operating expenses, however, declined as a percentage of revenues. Other: Interest expense decreased by $2.9 million compared with the same three-month period of the previous year due to lower outstanding debt caused by the application of improved 11 free cash flow from operations and from the proceeds of the exercise of warrants in the previous fiscal year. During the quarter, the Company increased bank borrowings in order to repurchase 1.4 million shares at a cost totaling $81.0 million. Despite these share repurchases, interest expense is expected to continue to decrease in 2001 due to reduced outstanding borrowings as a result of expected continued strong cash flow from operations. Income Taxes: The Company's quarterly effective tax rate increased to 34% from 32% in prior year's first fiscal quarter primarily as a result of higher profitability in North America. U.S./Mexico Pressure Pumping Segment The Company's U.S./Mexico pressure pumping revenues for the three-month period ended December 31, 2000 were a record $253.9 million, a 52% increase over the same prior year period. The increase is primarily due to increased drilling activity and pricing. U.S. drilling activity increased by 39% to an average of 1,073 active rigs (79% of which were drilling for natural gas) during the quarter. This represents the highest average quarterly rig count since 1990. U.S. workover activity levels also increased, up 14%. Each of the Company's major U.S. service lines, including cementing, stimulation, coiled tubing and downhole tools, showed a revenue increase, and a revenue increase was achieved by most U.S. regions. The stronger activity levels also allowed the Company to capture most of its September 2000 price book increase of 14%. As a result of the price improvement and the expected continuation of strong drilling and workover activity levels, management believes that revenues generated by its U.S./Mexico pressure pumping operations during the remaining quarters of fiscal 2001 will continue to substantially exceed those in comparable periods of fiscal 2000. Operating income for the Company's U.S./Mexico pressure pumping operations was $75.9 million in the first quarter of fiscal 2001 compared to $29.1 million in the same period of fiscal 2000. The improvement was due primarily to improved pricing, better equipment utilization, and labor and equipment efficiencies. On a year-over-year basis, pricing improved approximately 19% as a result of price book increases implemented during November 1999 and again in September 2000. International Pressure Pumping Segment Revenue for the Company's international pressure pumping operations for the quarter ended December 31, 2000 was $187.8 million, an increase of 29% compared with the same period of the previous fiscal year. Each of the Company's international regions showed year over year revenue increases with the Russia/China region up 77%, Asia Pacific up 43%, Latin America up 40%, Middle East up 37%, Europe/Africa up 34% and Canada up 8%. As a result of new contracts and improving activity in selected locations, management expects each of its international regions to continue showing revenue increases throughout the remainder of fiscal 2001 compared to fiscal 2000. 12 As a result of the improved activity, operating income for the Company's international pressure pumping operations was $28.7 million in the first quarter of fiscal 2001 compared to $13.6 million in the same quarter of fiscal 2000. Other Services Segment Revenue for each of the Company's other service lines, which consist of specialty chemicals, tubular services and process and pipeline services, increased 12% in the first quarter of fiscal 2001 compared to the same period of the prior year due primarily to geographic expansions. Operating income for these service lines increased to $6.2 million (12.9% of revenue) in the three-month period ended December 31, 2000 compared to $4.1 million (9.5% of revenue) in the same period of fiscal 2000. Operating income margins in the Company's tubular service and process and pipeline service lines benefited most from the increased revenue as they were better able to cover their relatively high fixed cost base. Capital Resources and Liquidity Net cash provided from operating activities for the first quarter of fiscal 2001 was $81.5 million, an increase of $73.1 million from the comparable period of the prior year, due primarily to higher profitability and non-cash U.S. tax expense due to loss carryforwards. This was partially offset by increases in working capital, particularly accounts receivable and inventories, as a result of the rapid revenue growth in North America. Net cash used for investing activities in the first quarter of fiscal 2001 was $21.4 million, compared to net cash provided by investing activities in the first quarter of 2000 of $107.3 million. The prior year's net cash provided was due primarily to proceeds received from a transaction involving the transfer of certain pumping service equipment assets in the first quarter of fiscal 2000. Subsequent to the transfer of equipment, the Company received $120.0 million, which was used to repay outstanding bank debt. Excluding this prior year transaction, net cash used for 2001 investing activities increased by $8.6 million due mostly to increased capital spending. Projected capital expenditures for fiscal 2001 are expected to increase significantly from 2000 and are currently expected to be approximately $150 - 165 million. The 2001 capital program is expected to be used primarily for replacement and enhancement of U.S. fracturing equipment and stimulation expansion internationally. The actual amount of 2001 capital expenditures will be primarily dependent on the availability of external manufacturing capacity and is expected to be funded by cash flows from operating activities and available credit facilities. Management believes cash flows from operating activities and available lines of credit, if necessary, will be sufficient to fund projected capital expenditures. 13 Cash flows used for financing activities for the three months ended December 31, 2000 were $58.7 million, compared to cash flows used for financing activities in the first quarter of fiscal 2000 of $115.9 million. Financing activities in the first quarter of fiscal 2000 included a private placement of 4.0 million shares of common stock in October 1999 that generated proceeds of $144.0 million, which was used to pay down outstanding debt. During the first quarter of fiscal 2001, the Company purchased an additional 1.4 million shares of its common stock at a cost of $81.0 million. Management strives to maintain low cash balances while utilizing available credit facilities to meet the Company's capital needs. Any excess cash generated has historically been used to pay down outstanding borrowings or fund the Company's stock repurchase program. The Company has a committed, unsecured bank credit facility (the "Bank Credit Facility") which consists of a six-year term loan of approximately $39.1 million (currently drawn in Canadian dollars under a provision which is renewable annually at the option of the banks), which is repayable in 22 quarterly installments that began in March 1997, and a five year U.S. $225.0 million revolving facility available through June 2001. At December 31, 2000, borrowings outstanding under the Bank Credit Facility totaled $39.1 million, consisting solely of borrowings under the term loan. Principal reductions of term loans under the Bank Credit Facility are due in aggregate annual installments of $22.7 million and $16.4 million in the years ending September 30, 2001 and 2002, respectively. In addition to the committed facility, the Company had $150.4 million in various unsecured, discretionary lines of credit at December 31, 2000, which expire at various dates in 2001. There are no requirements for commitment fees or compensating balances in connection with these lines of credit. Interest on borrowings is based on prevailing market rates. At December 31, 2000, there was $27.0 million in outstanding borrowings under these lines of credit. The Company's total interest-bearing debt increased to 14.1% of its total capitalization at December 31, 2000, compared to 13.1% at September 30, 2000, due to borrowings to fund the repurchase of the Company's common stock during the first quarter of fiscal 2001. The Bank Credit Facility includes various customary covenants and other provisions including the maintenance of certain profitability and solvency ratios and restrictions on dividend payments under certain circumstances, none of which materially restrict the Company's activities. Management believes that the Bank Credit Facility, combined with other discretionary credit facilities and cash flows from operations, provides the Company with sufficient capital resources and liquidity to manage its routine operations, meet debt service obligations and fund projected capital expenditures. If the discretionary lines of credit are not renewed, or if borrowings under these lines of credit otherwise become unavailable, the Company expects to refinance this debt by arranging additional committed bank facilities or through other long-term borrowing alternatives. ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended. SFAS 133 establishes accounting and reporting standards for derivative instruments, including 14 certain derivative instruments embedded in other contracts and for hedging activities. This statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The adoption of SFAS 133 at the beginning of fiscal year 2001 did not have a material impact on the Company's financial position or results of operations. FORWARD LOOKING STATEMENTS This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 concerning, among other things, the Company's prospects, expected revenues, expenses and profits, developments and business strategies for its operations all of which are subject to certain risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "expect," "estimate," "project," "believe," "achievable" and similar terms and phrases. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to general economic and business conditions, conditions in the oil and natural gas industry, weather conditions that affect conditions in the oil and natural gas industry, the business opportunities that may be presented to and pursued by the Company, changes in law or regulations and other factors, many of which are beyond the control of the Company. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. 15 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The table below provides information about the Company's market sensitive financial instruments and constitutes a "forward-looking statement." The Company's major market risk exposure is changing interest rates, primarily in the United States and Canada. The Company's policy is to manage interest rates through use of a combination of fixed and floating rate debt. A portion of the Company's borrowings are denominated in foreign currencies which exposes the Company to market risk associated with exchange rate movements. When necessary, the Company enters into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. There was one foreign exchange contract outstanding at December 31, 2000 in the amount of $23.9 million. This contract was settled on January 2, 2001 with no gain or loss. All items described are non-trading and are stated in U.S. dollars.
Expected Maturity Dates Fair Value 2001 2002 2003 2004 Thereafter Total December 31, 2000 ---------- ---------- ------- ------- ---------- ----------- ----------------- (in thousands) SHORT TERM BORROWINGS Bank borrowings; US$ $ 3,964 $ 3,964 $ 3,964 denominated Average variable interest rate - 9.50% at December 31, 2000 Bank borrowings; Canadian $ $20,838 $ 20,838 $ 20,838 denominated Average variable interest rate - 6.45% at December 31, 2000 Bank borrowings; Deutsche $ 947 $ 947 $ 947 mark denominated Average variable interest rate - 5.32% at December 31, 2000 LONG TERM BORROWINGS Current term loan; Canadian $ $22,703 7,568 $ 30,271 $ 30,271 denominated Variable interest rate - 6.26% at December 31, 2000 Current Leases: US $ $ 318 $ 318 $ 318 denominated Variable interest rate - 6.18% at December 31, 2000 Non-current term loan; $8,829 $ 8,829 $ 8,829 Canadian $ denominated Variable interest rate - 6.26% at December 31, 2000 Non-current leases; US $ $ 523 350 $ 873 $ 873 denominated Variable interest rate - 6.18% at December 31, 2000 7% Series B Notes - US$ $124,612 $124,612 $124,125 denominated Fixed interest rate - 7%
16 PART II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None 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 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BJ Services Company (Registrant) Date: February 13, 2000 BY \s\ Margaret B. Shannon ---------------------------------- Margaret B. Shannon Vice President and General Counsel Date: February 13, 2000 BY \s\ Matthew D. Fitzgerald ---------------------------------- Matthew D. Fitzgerald Vice President and Controller and Chief Accounting Officer 18