HOUSTON, July 29, 2009 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported a net loss for the quarter ended June 30, 2009 of $63.5 million, or $1.28 per diluted share. The second quarter 2009 results included a non-cash, pre-tax charge of approximately $94.5 million, or $1.70 per diluted share after-tax, related to the interim goodwill impairment analysis which indicated an impairment of a portion of the Company's goodwill in its rental tool reporting unit. Excluding the non-cash impairment charge, the Company generated $21.0 million in net income, or $0.42 per diluted share, on $456.3 million of revenues and $60.2 million of Adjusted EBITDA in the second quarter of 2009 (EBITDA is defined as net income plus interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the goodwill impairment charges) compared to net income of $59.2 million, or $1.13 per diluted share, on $631.4 million of revenues and $120.4 million of EBITDA reported in the second quarter of 2008. (A)
"Our Offshore Products and Accommodations businesses generated over 80% of our segmental Adjusted EBITDA for the quarter," stated Cindy B. Taylor, Oil States' President and Chief Executive Officer. "The relative strength and stability of these contract-driven, oil levered businesses helped to partially offset what was a very difficult quarter for our North American, natural gas leveraged businesses."
Mrs. Taylor also stated, "Despite a difficult quarter in our North American operations, our balance sheet continued to strengthen. During the quarter, we paid down over $130 million on our revolving credit facility leaving Oil States with only $244 million in indebtedness at June 30, 2009. As a result, we had substantial liquidity at the end of the quarter with $56 million in cash and over $400 million of unused availability under our revolving facility. Our debt to capitalization ratio decreased from 27% at December 31, 2008 to 16% at June 30, 2009. With improving liquidity, we expect to capitalize on opportunities this downturn presents."
The Company recognized an effective tax rate benefit of 5.0% in the second quarter of 2009 compared to a tax rate expense of 33.8% in the second quarter of 2008. The tax benefit in the second quarter of 2009 was negatively impacted by a significant amount of the goodwill impairment charges which were non-deductible for tax purposes. Excluding the goodwill impairment, the effective tax rate for the second quarter of 2009 would have approximated 24.0%. The decrease in the effective tax rate from the prior year was largely the result of proportionately higher foreign sourced income which is taxed at lower statutory rates, coupled with domestic benefits derived from estimated tax losses.
For the first half of 2009, the Company reported revenues of $1.1 billion and EBITDA of $79.1 million which resulted in a $7.4 million net loss, or $0.15 per diluted share. Excluding the goodwill impairment charge, the Company reported $173.7 million of Adjusted EBITDA and $77.2 million of net income, or $1.56 per diluted share. The Company reported revenues of $1.2 billion and EBITDA of $246.2 million for the first half of 2008 which resulted in net income of $124.7 million, or $2.41 per diluted share.
BUSINESS SEGMENT RESULTS
(Unless otherwise noted, the following discussion compares the quarterly results from the second quarter of 2009 to the results from the second quarter of 2008. In order to present a more meaningful comparison of the Company's operating results, the second quarter 2009 results exclude the goodwill impairment charge.)
Well Site Services
Well Site Services generated revenues of $152.9 million and Adjusted EBITDA of $40.7 million in the second quarter of 2009, compared to $209.9 million and $70.4 million, respectively, in the second quarter of 2008, representing year-over-year decreases of 27% and 42%, respectively. The decrease in EBITDA was primarily due to declining revenues and margins in the rental tool and drilling businesses partially offset by improved year-over-year results from the Company's oil sands accommodations.
For the second quarter of 2009, the accommodations business reported revenues of $88.4 million and EBITDA of $34.8 million, compared to revenues and EBITDA of $80.9 million and $26.1 million, respectively, in the second quarter of 2008. Accommodations revenue and EBITDA increased 9% and 34%, respectively, primarily due to the significant increase in average available room capacity at the Company's four major oil sands lodges. EBITDA growth in accommodations was partially offset by a weaker Canadian dollar and reduced non-oil sands activity.
Excluding the $94.5 million goodwill impairment charge, rental tools generated $53.6 million of revenues and $5.7 million of Adjusted EBITDA in the second quarter of 2009 compared to revenue of $84.6 million and EBITDA of $25.2 million in the second quarter of 2008. Rental tool revenues decreased 37% year-over-year primarily due to the 50% year-over-year quarterly decline in the North American rig count. EBITDA declined by 77% due to the reduced revenues and decreased margins.
Drilling services generated revenues and EBITDA of $10.9 million and $0.2 million, respectively, in the second quarter of 2009 compared to $44.4 million of revenues and $19.1 million of EBITDA in the second quarter 2008. These year-over-year decreases in drilling services were primarily due to significantly lower utilization in each of the company's three primary drilling markets driven by a substantial reduction in drilling activity and substantial pricing pressures.
Offshore Products
In the second quarter of 2009, Offshore Products generated $122.5 million of revenues and $20.3 million in EBITDA compared to $139.9 million of revenues and $27.8 million in EBITDA in the second quarter of 2008. The 12% decrease in revenues and the 27% decrease in EBITDA year-over-year are primarily due to lower revenue contribution from higher margin drilling equipment and connector products, coupled with reduced cost absorption. In addition to the impact of lower revenues, the year-over-year decline in EBITDA included a $1.2 million foreign exchange loss primarily due to the weakening of the U.S. dollar against the pound sterling (compared to a loss of $0.3 million in the second quarter of 2008). Backlog totaled $302.8 million at June 30, 2009 compared to $317.8 million at March 31, 2009; however, net new orders received in the second quarter of 2009 increased to $107.8 million, up 29% from the $83.7 million of orders received in the first quarter of 2009.
Tubular Services
Tubular Services generated revenues and EBITDA of $180.9 million and $6.8 million, respectively, during the second quarter of 2009 compared to revenues of $281.6 million and EBITDA of $29.2 million in the second quarter of 2008. Tubular Services' OCTG shipments decreased 52% to 69,900 tons in the second quarter of 2009 from 146,200 tons in the second quarter of 2008 primarily due to the 50% year-over-year quarterly decrease in U.S. drilling activity coupled with the industry-wide excess inventory situation. These factors, in addition to more competitive pricing, negatively impacted gross margins in the second quarter of 2009 which decreased to 5.3% from 11.6% in the second quarter of 2008. Despite these difficult market conditions, the Company reduced its OCTG inventory significantly during the second quarter of 2009 to $296 million from $369 million at March 31, 2009.
Goodwill Impairment
In accordance with the interim impairment testing requirements of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," the Company concluded that at June 30, 2009 an indicator of potential impairment of goodwill existed at the rental tool reporting unit. Upon completing an assessment of the reporting unit valuation, the Company determined that the fair market value of the reporting unit was less than its carrying value. Based on the fair market value of the reporting unit, the Company concluded that a portion of the rental tool goodwill was impaired. The total goodwill impairment charge recognized in the second quarter of 2009 was $94.5 million before taxes and $84.5 million after-tax, or $1.70 per diluted share. This non-cash charge does not impact the Company's liquidity position, its debt covenants or the Company's cash flows.
Oil States International, Inc. is a diversified oilfield services company. With locations around the world, Oil States is a leading manufacturer of products for deepwater production facilities and subsea pipelines, and a leading supplier of a broad range of services to the oil and gas industry, including production-related rental tools, work force accommodations and logistics, oil country tubular goods distribution and land drilling services. Oil States is publicly traded on the New York Stock Exchange under the symbol OIS.
The Company will be hosting a conference call to discuss the results for the second quarter of 2009 on Thursday, July 30, 2009 at 11:00 am Eastern time. This call is being webcast and can be accessed at Oil States' web site at http://www.oilstatesintl.com. Participants may also join the conference call by dialing (800) 446-2782 and using the passcode of 24903227. A replay of the conference call will be available one hour after the completion of the call by dialing (888) 843-8996 and entering the passcode of 24903227.
The Oil States International, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6058
This press release contains and the associated conference call will contain forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included therein will be based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the oilfield service industry and other factors discussed within the "Business" section of the Form 10-K for the year ended December 31, 2008 filed by Oil States with the SEC on February 20, 2009 and within the Company's subsequent SEC filings.
Oil States International, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2009 2008(B) 2009 2008(B)
---------- ---------- ---------- ----------
Revenues $ 456,334 $ 631,364 $1,123,433 $1,232,611
Costs and expenses:
Cost of sales and
services 361,692 478,435 881,902 923,519
Selling, general
and administrative
expenses 33,768 35,976 68,413 68,083
Depreciation and
amortization
expense 28,647 25,689 56,670 48,417
Impairment of
goodwill 94,528 -- 94,528 --
Other operating
income 935 244 258 234
---------- ---------- ---------- ----------
Operating income/
(loss) (63,236) 91,020 21,662 192,358
Interest expense (3,856) (6,061) (8,101) (12,760)
Interest income 4 894 323 1,815
Equity in earnings
of unconsolidated
affiliates 475 1,242 934 2,737
Other income /
(expense) (59) 2,540 103 2,902
---------- ---------- ---------- ----------
Income /(loss)
before income
taxes (66,672) 89,635 14,921 187,052
Income tax provision 3,303 (30,338) (22,044) (62,085)
---------- ---------- ---------- ----------
Net income / (loss) (63,369) 59,297 (7,123) 124,967
Less: Net income
attributable to
noncontrolling
interest 117 89 235 230
---------- ---------- ---------- ----------
Net income / (loss)
attributable to
Oil States
International,
Inc ($ 63,486) $ 59,208 ($ 7,358) $ 124,737
========== ========== ========== ==========
Net income / (loss)
per share
Basic ($ 1.28) $ 1.19 ($ 0.15) $ 2.52
Diluted ($ 1.28) $ 1.13 ($ 0.15) $ 2.41
Weighted average
number of common
shares outstanding
Basic 49,581 49,633 49,549 49,527
Diluted 49,581 52,627 49,549 51,763
Oil States International, Inc.
Consolidated Balance Sheets
(in thousands)
June 30, March 31, Dec. 31,
2009 2009 2008(B)
---------- ---------- ----------
Assets
Current assets
Cash and cash equivalents $ 56,099 $ 40,340 $ 30,199
Accounts receivable, net 319,690 415,765 575,982
Inventories, net 502,999 575,195 612,488
Prepaid expenses and other
current assets 16,741 17,625 18,815
---------- ---------- ----------
Total current assets 895,529 1,048,925 1,237,484
Property, plant and
equipment, net 707,996 692,404 695,338
Goodwill, net 214,541 303,931 305,441
Investments in unconsolidated
affiliates 4,639 6,289 5,899
Other non-current assets 35,115 34,737 54,356
---------- ---------- ----------
Total assets $1,857,820 $2,086,286 $2,298,518
========== ========== ==========
Liabilities and stockholders'
equity
Current liabilities
Accounts payable and accrued
liabilities $ 158,858 $ 209,112 $ 371,789
Income taxes 8,691 16,994 52,546
Current portion of long-term
debt 4,940 4,940 4,943
Deferred revenue 113,457 116,265 105,640
Other current liabilities 916 687 1,587
---------- ---------- ----------
Total current liabilities 286,862 347,998 536,505
Long-term debt(C) 238,881 376,938 449,058
Deferred income taxes 54,185 67,223 64,780
Other noncurrent liabilities 12,700 12,077 12,634
---------- ---------- ----------
Total liabilities 592,628 804,236 1,062,977
Stockholders' equity
Common stock 529 527 526
Additional paid-in capital 459,104 456,105 453,733
Retained earnings 893,643 957,129 901,001
Accumulated other
comprehensive income/(loss) 3,446 (40,230) (28,409)
Treasury stock (92,313) (92,107) (91,831)
---------- ---------- ----------
Total stockholder's equity 1,264,409 1,281,424 1,235,020
Noncontrolling interest 783 626 521
---------- ---------- ----------
Total equity 1,265,192 1,282,050 1,235,541
---------- ---------- ----------
Total liabilities and equity $1,857,820 $2,086,286 $2,298,518
========== ========== ==========
Oil States International, Inc.
Segment Data - Excluding Impact of Goodwill Impairment Charges
(in thousands)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues
Accommodations $ 88,400 $ 80,880 $ 230,232 $ 227,137
Rental tools 53,629 84,576 125,354 167,069
Drilling and other 10,861 44,426 28,145 81,230
---------- ---------- ---------- ----------
Well site services 152,890 209,882 383,731 475,436
Offshore products 122,511 139,850 250,510 266,772
Tubular services 180,933 281,632 489,192 490,403
---------- ---------- ---------- ----------
Total revenues $ 456,334 $ 631,364 $1,123,433 $1,232,611
========== ========== ========== ==========
Adjusted EBITDA(A)
Accommodations $ 34,809 $ 26,066 $ 91,525 $ 86,972
Rental tools(D) 5,674 25,194 19,267 50,660
Drilling and other 171 19,096 3,158 30,316
---------- ---------- ---------- ----------
Well site
services(D) 40,654 70,356 113,950 167,948
Offshore products 20,267 27,776 44,204 51,906
Tubular services 6,777 29,220 30,443 39,344
Corporate and
eliminations (7,460) (6,950) (14,935) (13,014)
---------- ---------- ---------- ----------
Total Adjusted
EBITDA(D) $ 60,238 $ 120,402 $ 173,662 $ 246,184
========== ========== ========== ==========
Oil States International, Inc.
Segment Data - Including Impact of Goodwill Impairment Charges
(in thousands)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues
Accommodations $ 88,400 $ 80,880 $ 230,232 $ 227,137
Rental tools 53,629 84,576 125,354 167,069
Drilling and other 10,861 44,426 28,145 81,230
---------- ---------- ---------- ----------
Well site services 152,890 209,882 383,731 475,436
Offshore products 122,511 139,850 250,510 266,772
Tubular services 180,933 281,632 489,192 490,403
---------- ---------- ---------- ----------
Total revenues $ 456,334 $ 631,364 $1,123,433 $1,232,611
========== ========== ========== ==========
EBITDA(A)
Accommodations $ 34,809 $ 26,066 $ 91,525 $ 86,972
Rental tools(E) (88,854) 25,194 (75,261) 50,660
Drilling and other 171 19,096 3,158 30,316
---------- ---------- ---------- ----------
Well site
services(E) (53,874) 70,356 19,422 167,948
Offshore products 20,267 27,776 44,204 51,906
Tubular services 6,777 29,220 30,443 39,344
Corporate and
eliminations (7,460) (6,950) (14,935) (13,014)
---------- ---------- ---------- ----------
Total EBITDA(E) ($ 34,290) $ 120,402 $ 79,134 $ 246,184
========== ========== ========== ==========
Operating
income / (loss)
Accommodations $ 25,770 $ 17,257 $ 74,014 $ 70,065
Rental Tools(E) (98,612) 16,293 (94,967) 33,924
Drilling and other (6,313) 10,794 (9,808) 16,846
---------- ---------- ---------- ----------
Well site
services(E) (79,155) 44,344 (30,761) 120,835
Offshore products 17,548 24,936 38,734 46,383
Tubular services 5,967 28,751 28,878 38,272
Corporate and
eliminations (7,596) (7,011) (15,189) (13,132)
---------- ---------- ---------- ----------
Total operating
income/(loss)(E) ($ 63,236) $ 91,020 $ 21,662 $ 192,358
========== ========== ========== ==========
Oil States International, Inc.
Additional Quarterly Segment and Operating Data
(unaudited)
Three Months
Ended June 30,
----------------------
2009 2008
--------- ---------
Supplemental operating data
Land drilling operating statistics
Average rigs available 36 36
Utilization 21.3% 84.2%
Implied day rate
($ in thousands per day) $ 15.5 $ 16.3
Implied daily cash margin
($ in thousands per day) $ 1.3 $ 6.0
Offshore products backlog ($ in millions) $ 302.8 $ 385.8
Tubular services operating data
Shipments (tons in thousands) 69.9 146.2
Quarter end inventory ($ in thousands) $ 296,222 $ 227,182
(A) The term EBITDA consists of net income plus interest, taxes,
depreciation and amortization. EBITDA is not a measure of
financial performance under generally accepted accounting
principles. You should not consider it in isolation from or as a
substitute for net income or cash flow measures prepared in
accordance with generally accepted accounting principles or as a
measure of profitability or liquidity. Additionally, EBITDA may
not be comparable to other similarly titled measures of other
companies. The Company has included EBITDA as a supplemental
disclosure because its management believes that EBITDA provides
useful information regarding our ability to service debt and to
fund capital expenditures and provides investors a helpful
measure for comparing its operating performance with the
performance of other companies that have different financing and
capital structures or tax rates. The Company uses EBITDA to
compare and to monitor the performance of its business segments
to other comparable public companies and as a benchmark for the
award of incentive compensation under its annual incentive
compensation plan. The following table sets forth a
reconciliation of EBITDA to net income, which is the most
directly comparable measure of financial performance calculated
under generally accepted accounting principles:
Oil States International, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net income ($ 63,486) $ 59,208 ($ 7,358) $ 124,737
Income tax expense (3,303) 30,338 22,044 62,085
Depreciation and
amortization 28,647 25,689 56,670 48,417
Interest income (4) (894) (323) (1,815)
Interest expense 3,856 6,061 8,101 12,760
---------- ---------- ---------- ----------
EBITDA ($ 34,290) $ 120,402 $ 79,134 $ 246,184
Goodwill impairment 94,528 -- 94,528 --
---------- ---------- ---------- ----------
Adjusted EBITDA $ 60,238 $ 120,402 $ 173,662 $ 246,184
========== ========== ========== ==========
Rental Tools Adjusted
EBITDA Reconciliation
---------------------
Rental Tools EBITDA ($ 88,854) $ 25,194 ($ 75,261) $ 50,660
Goodwill impairment 94,528 -- 94,528 --
---------- ---------- ---------- ----------
Adjusted Rental
Tools EBITDA $ 5,674 $ 25,194 $ 19,267 $ 50,660
========== ========== ========== ==========
Adjusted EBITDA is calculated by excluding the goodwill
impairment charge from the second quarter results in order to
present a more meaningful comparison of the Company's operating
results.
(B) Adjusted to reflect the retrospective application of APB 14-1
accounting for existing convertible notes effective and adopted
on January 1, 2009.
(C) As of June 30, 2009, the Company had approximately $403.3 million
available under its revolving credit facility.
(D) Excludes goodwill impairment charge of $94.5 million, taken in
the quarter ended June 30, 2009.
(E) Includes goodwill impairment charge of $94.5 million, taken in
the quarter ended June 30, 2009.