Hydril (NASDAQ:HYDL)
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Hydril (Nasdaq:HYDL) reported earnings for the first quarter ended March
31, 2007 of $1.09 per diluted share, up 2% sequentially from $1.07
reported in the fourth quarter of 2006, and up 16% from $0.94 reported
for the first quarter of 2006. The first quarter 2007 results include
$0.06 per diluted share of after-tax merger related expense.
On a sequential basis, first quarter revenue of $135 million was up 4%,
while operating income of $35.2 million was down slightly, and net
income of $23.3 million was down 3%. Net income, excluding after-tax
merger related expenses of $1.4 million, was $24.7 million and up 3%
from the fourth quarter 2006. Compared to the first quarter of 2006,
revenue and operating income increased 18% and 7%, respectively, and net
income increased 3%.
Chris Seaver, Chairman, President and CEO, commented, “The
outlook remains strong for both of our segments, with international
premium connection demand continuing to grow and increasing demand for
deepwater pressure control equipment which we expect to mature into
purchase orders over the coming months. We remain focused on our
commitment to meeting the increasing demands of our customers.”
Merger Update
On February 12, 2007, Hydril announced an agreement and plan of merger
with Tenaris S.A. (NYSE:TS). On March 8, the United States Department of
Justice granted early termination of the antitrust notification waiting
period. The stockholder meeting to vote on the merger is scheduled for
May 2, 2007.
Premium Connection Segment
Sequentially, first quarter revenue for Hydril’s
premium connection segment was down slightly, while operating income
increased 3% to $25.9 million due to a favorable product mix. As a
result, operating margin improved to 37% from 36% in the prior quarter.
Pressure Control Segment
Sequentially, first quarter revenue for the pressure control segment
increased 10% to $65 million and operating income increased 7% to $17.2
million. Capital equipment revenue increased 23% to $43.4 million due to
progress made on offshore blowout prevention system projects and
aftermarket revenue decreased 9% to $21.9 million. Operating margin for
the first quarter was 26%, down from 27% for the fourth quarter 2006 due
to product mix.
The capital equipment backlog was $489 million at March 31, 2007, down
slightly from $508 million at December 31, 2006, and up from $233
million at March 31, 2006. Deliveries for this backlog are scheduled
into the second half of 2009.
Share Repurchase Program
During the first quarter the company repurchased approximately 512,000
shares of stock for $42 million and, since the beginning of the share
repurchase program in June 2006, the company has repurchased 3.1 million
shares of stock for $215 million.
Market Indicators
As more fully described on our website at www.hydril.com
in the “Investor Info”
tab under “Market Indicators”,
our principal indicators are: (1) the U.S. rig count for rigs drilling
at targets deeper than 15,000 feet, (2) Gulf of Mexico rigs under
contract, (3) the international rig count, (4) worldwide offshore rigs
under contract, and (5) the total U.S. land rig count.
Hydril, headquartered in Houston, Texas, is engaged worldwide in
designing, manufacturing and marketing premium connection and pressure
control products used for oil and gas drilling and production.
Forward-Looking Statements
This press release contains forward-looking statements concerning
expected future results. These statements relate to future events and
the company’s future financial performance,
including the company’s business strategy and
product development plans, and involve known and unknown risks,
uncertainties and assumptions. These risks, uncertainties and
assumptions, many of which are more fully described in Hydril Company’s
Annual Report on Form 10-K for the year-ended December 31, 2006 filed
with the Securities and Exchange Commission include but are not limited
to the impact of changes in oil and natural gas prices and worldwide and
domestic economic conditions on drilling activity and demand for and
pricing of Hydril’s products, the risks
associated with fixed-price contracts, the loss of distribution or
change to distribution methods or inventory practices for premium
connections in the U.S. and Canada, competition from steel mills,
limitations on the availability of pipe for threading, the impact of
imports of tubular goods and of international and domestic trade laws,
factors that could cause our results to vary significantly from quarter
to quarter, the consolidation of end-users, intense competition in our
industry, the risks associated with international operations, the
ability to attract and retain skilled labor, and Hydril’s
ability to successfully develop new technologies and products and
maintain and increase its market share. These factors may cause Hydril’s
or the industry’s actual results, levels of
activity, performance or achievements to be materially different from
those expressed or implied by the forward-looking statements.
HYDRIL COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months Ended
(unaudited)
March 31,
December 31,
March 31,
2007
2006
2006
Revenue
Premium Connection
$ 69,688
$ 70,226
$ 73,549
Pressure Control
Capital Equipment
43,402
35,201
19,722
Aftermarket
21,927
24,135
20,789
Subtotal Pressure Control
65,329
59,336
40,511
Total Revenue
135,017
129,562
114,060
Total Gross Profit
58,704
53,094
49,879
Gross Margin
43%
41%
44%
Selling, General, and Admin. Expenses
23,458
17,728
17,028
Operating Income (Loss)
Premium Connection
25,897
25,252
27,526
Pressure Control
17,240
16,098
10,373
Corporate
(7,891)
(5,984)
(5,048)
Total Operating Income
35,246
35,366
32,851
Operating Margin
26%
27%
29%
Income (loss) from Unconsolidated Entities
(39)
176
(45)
Interest Income
1,290
2,184
1,470
Other Income/(Expense)
213
9
(99)
Income Before Income Taxes
36,710
37,735
34,177
Provision for Income Taxes
13,395
13,793
11,508
Net Income
$ 23,315
$ 23,942
$ 22,669
Net Income Per Share:
Basic
$ 1.11
$ 1.08
$ 0.96
Diluted
$ 1.09
$ 1.07
$ 0.94
Weighted Average Shares Outstanding:
Basic
21,069
22,081
23,697
Diluted
21,426
22,406
24,121
Depreciation
Premium Connection
$ 2,498
$ 2,437
$ 2,257
Pressure Control
$ 978
935
810
Corporate
$ 403
414
506
Total Depreciation
3,879
3,786
3,573
Capital Expenditures
5,255
10,042
5,005
Pressure Control Backlog
Capital Equipment
$ 488,515
$ 508,418
$ 232,614
HYDRIL COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31,
December 31,
2007
2006
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents
$ 121,063
$ 105,473
Investments
4,674
8,209
Total receivables
110,544
128,295
Total inventories
124,757
96,786
Deferred tax asset
9,833
9,715
Other current assets
5,964
22,559
Total current assets
376,835
371,037
LONG-TERM ASSETS:
Property, net
124,840
123,235
Other long-term assets
18,396
15,759
Total long-term assets
143,236
138,994
TOTAL
$ 520,071
$ 510,031
CURRENT LIABILITIES:
Accounts payable
$ 55,488
$ 40,695
Accrued liabilities and other current liabilities
154,358
146,860
Total current liabilities
209,846
187,555
LONG-TERM LIABILITIES:
Deferred tax liability and other tax obligations
16,651
15,797
Post retirement, pension benefits and other
17,476
16,071
Total long-term liabilities
34,127
31,868
STOCKHOLDERS' EQUITY:
Total stockholders' equity
276,098
290,608
TOTAL
$ 520,071
$ 510,031