Hydril (NASDAQ:HYDL)
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Hydril (NASDAQ:HYDL) reported earnings for the fourth quarter ended
December 31, 2006 of $1.07 per diluted share, up 27% sequentially from
$0.84 reported in the third quarter of 2006, and up 22% from $0.88
reported for the fourth quarter of 2005.
On a sequential basis, fourth quarter revenue of $129.6 million
increased 10%, operating income of $35.4 million increased 27%, and net
income of $23.9 million increased 22%. Compared to the fourth quarter of
2005, revenue increased 14%, operating income increased 15%, and net
income increased 12%.
For the year-ended December 31, 2006, earnings per diluted share were
$3.88, up 27% when compared to $3.05 per diluted share in 2005. For the
year, revenue of $503 million was up 34% from the prior year, operating
income of $132.2 million was up 26%, and net income of $91.3 million was
up 25%.
Chris Seaver, Chairman, President and CEO, commented, “We
had a great quarter and Hydril’s financial
performance for 2006 improved for the third consecutive year. In
addition, each of the past three years was the best performance in over
twenty years. Our outlook continues to be strong, and we expect our 2007
financial performance to be better than 2006. We remain focused on
providing the best performing, most reliable technologies to drill the
most difficult wells, while supporting every customer with the level of
service that keeps them drilling.”
Premium Connection Segment
Sequentially, fourth quarter revenue for Hydril’s
premium connection segment increased 10% to $70.2 million, operating
income increased 35% to $25.3 million, and operating margin improved to
36% from 29%. The majority of the revenue increase was due to higher
activity in international markets, while North America revenue increased
slightly. The improvement in operating margin was the result of better
plant efficiencies due in part to higher threading volumes, and to
product mix.
Pressure Control Segment
Sequentially, fourth quarter revenue for the pressure control segment
increased 11% to $59.3 million and operating income increased 11% to
$16.1 million. Capital equipment revenue increased 8% to $35.2 million
and aftermarket revenue increased 16% sequentially to $24.1 million. The
increase in capital equipment revenue was principally the result of
progress made on offshore blowout prevention system projects.
During the fourth quarter, we received record capital equipment purchase
orders totaling $254 million. At the end of the quarter, the capital
equipment backlog reached $508 million, up from $289 million at
September 30, 2006, and up from $157 million at December 31, 2005.
Share Repurchase Program
During the fourth quarter, the company repurchased $73 million of stock
under the $150 million share repurchase program authorized by the Board
of Directors in early November 2006. For the year 2006, the company
repurchased a total of $173 million of stock which included a $100
million share repurchase program which was completed in the third
quarter.
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.
Conference Call
Hydril’s conference call to discuss fourth
quarter financial results is scheduled for Thursday, February 1, 2007 at
8:30. a.m. EST (7:30 a.m. CST; 5:30 a.m. PST) and will be accessible by
dialing 877-407-0782 (domestic) or 201-689-8567 (international). For
further information on the call or the webcast, please visit the company’s
website at www.hydril.com or see the
company’s press release announcing the
earnings conference call dated January 23, 2007.
To the extent not provided in the call, reconciliations of any non-GAAP
financial measures discussed in the call will be available on the
Investor Relations page of Hydril’s website.
Hydril, headquartered in Houston, Texas, is engaged worldwide in
engineering, 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
Quarterly Report on Form 10-Q for the quarter-ended September 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
Twelve Months Ended
(unaudited)
(unaudited)
Dec. 31,
Sept. 30,
Dec. 31,
Dec. 31,
2006
2006
2005
2006
2005
Revenue
Premium Connection
$ 70,226
$ 63,785
$ 73,130
$ 296,982
$ 246,470
Pressure Control
Capital Equipment
35,201
32,654
19,306
116,090
57,038
Aftermarket
24,135
20,873
20,890
89,976
73,216
Subtotal Pressure Control
59,336
53,527
40,196
206,066
130,254
Total Revenue
129,562
117,312
113,326
503,048
376,724
Total Gross Profit
53,094
45,408
46,407
203,292
163,563
Gross Margin
41%
39%
41%
40%
43%
Selling, General, and Admin. Expenses
17,728
17,658
15,722
71,080
58,607
Operating Income (Loss)
Premium Connection
25,252
18,691
23,784
100,053
85,054
Pressure Control
16,098
14,484
11,375
54,556
37,381
Corporate
(5,984)
(5,425)
(4,474)
(22,397)
(17,479)
Total Operating Income
35,366
27,750
30,685
132,212
104,956
Operating Margin
27%
24%
27%
26%
28%
Income (loss) from Unconsolidated Entities
176
(29)
-
133
-
Interest Income
2,184
2,222
1,337
7,767
3,900
Other Income/(Expense)
9
(81)
(341)
(241)
724
Income Before Income Taxes
37,735
29,862
31,681
139,871
109,580
Provision for Income Taxes
13,793
10,196
10,311
48,591
36,337
Net Income
$ 23,942
$ 19,666
$ 21,370
$ 91,280
$ 73,243
Net Income Per Share:
Basic
$ 1.08
$ 0.85
$ 0.90
$ 3.94
$ 3.12
Diluted
$ 1.07
$ 0.84
$ 0.88
$ 3.88
$ 3.05
Weighted Average Shares Outstanding:
Basic
22,081
23,180
23,631
23,169
23,501
Diluted
22,406
23,522
24,156
23,526
24,019
Depreciation
Premium Connection
$ 2,437
$ 2,444
$ 2,287
$ 9,510
$ 8,587
Pressure Control
$ 935
859
804
3,438
3,116
Corporate
$ 414
405
488
1,854
1,984
Total Depreciation
3,786
3,708
3,579
14,802
13,687
Capital Expenditures
10,042
7,828
6,454
32,195
17,144
Pressure Control Backlog
Capital Equipment
$ 508,418
$ 289,200
$ 156,718
HYDRIL COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
September 30,
December 31,
2006
2006
2005
(unaudited)
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents
$ 105,473
$ 179,742
$ 65,145
Investments
8,209
9,254
108,084
Total receivables
128,295
76,037
78,204
Total inventories
96,786
79,323
57,646
Deferred tax asset
9,715
9,792
11,390
Other current assets
22,559
4,969
3,669
Total current assets
371,037
359,117
324,138
LONG-TERM ASSETS:
Property, net
123,235
115,693
105,138
Other long-term assets
15,759
15,753
21,286
Total long-term assets
138,994
131,446
126,424
TOTAL
$ 510,031
$ 490,563
$ 450,562
CURRENT LIABILITIES:
Accounts payable
$ 40,695
$ 35,990
$ 23,443
Accrued liabilities and other current liabilities
146,860
89,226
39,934
Total current liabilities
187,555
125,216
63,377
LONG-TERM LIABILITIES:
Deferred tax liability and other tax obligations
15,797
12,158
12,143
Post retirement, pension benefits and other
15,297
15,320
14,207
Total long-term liabilities
31,094
27,478
26,350
Minority Interest
774
-
-
STOCKHOLDERS' EQUITY:
Total stockholders' equity
290,608
337,869
360,835
TOTAL
$ 510,031
$ 490,563
$ 450,562