Hydril (NASDAQ:HYDL)
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Hydril (Nasdaq:HYDL) reported earnings for the second
quarter ended June 30, 2006 of $1.04 per diluted share, up 11%
sequentially from $0.94 reported in the first quarter of 2006, and up
44% from $0.72 reported for the second quarter of 2005.
On a sequential basis, second quarter revenue of $142.1 million
increased 25%, operating income of $36.2 million was up 10%, and net
income of $25.0 million was up 10%. Compared to the second quarter of
2005, revenue increased 55%, operating income increased 45%, and net
income increased 45%.
Chris Seaver, President and CEO, commented, "The strong second
quarter results reflect the growing demand for our products and
services in worldwide markets. As a result of our continuing strong
cash flows from operations we have committed to expand our
manufacturing capabilities to meet our customers' needs and return
value to our shareholders through share repurchases, which we began in
the second quarter with purchases of $25 million."
Premium Connection Segment
Sequentially, second quarter revenue for Hydril's premium
connection segment increased 22% to $89.4 million, while operating
income increased 4% to $28.6 million, and operating margin decreased
to 32% from 37%. The majority of the increase in revenue resulted from
our successful efforts in the international markets to supply a larger
percentage of orders with pipe in addition to threaded connections. As
a result, the increase in low margin pass-through pipe reduced the
segment's operating margin for the quarter.
Pressure Control Segment
Second quarter revenue for the pressure control segment increased
30% sequentially to $52.7 million and operating income increased 31%
to $13.6 million. Capital equipment revenue increased 45% sequentially
to $28.5 million and aftermarket revenue increased 16% to $24.2
million. The increase in capital equipment revenue was primarily the
result of progress made on offshore blowout prevention system projects
and strong blowout preventer equipment shipments. Segment operating
margin for the second quarter was 26%, flat with the first quarter,
due to the increase in lower-margin capital equipment revenue.
The capital equipment backlog was $266 million at June 30, 2006,
up 14% from $233 million at March 31, 2006, and up from $47 million at
June 30, 2005.
Market Indicators
As more fully described on our website at www.hydril.com on the
"Market Indicators" page, our principal business drivers are: (1) the
U.S. rig count for rigs drilling at targets deeper than 15,000 feet,
(2) the number of Gulf of Mexico rigs under contract, (3) the
international rig count, (4) the worldwide offshore rigs under
contract, and (5) the total U.S. rig count.
Conference Call
Hydril's conference call to discuss second quarter financial
results is scheduled for Wednesday, July 26, 2006 at 8:30 a.m. EDT,
(7:30 a.m. CDT) and is accessible by dialing 888-889-5345 (domestic)
or 973-935-8516 (international) and referencing passcode # 7611130.
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 July 13, 2006.
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 March 31, 2006 filed with the Securities and Exchange
Commission, include but are not limited to competition from steel
mills, limitations on the availability of pipe for threading, the
impact of imports of tubular to goods and of international and
domestic trade laws, the loss of or change to distribution methods of
premium connections, the consolidation of end-users, the risks
associated with fixed-price contracts, 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 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.
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HYDRIL COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts)
--------------------------------------------------
-----------------------------------
Three Months Ended
(unaudited)
-----------------------------------
June 30, March 31, June 30,
2006 2006 2005
-----------------------------------
Revenue
Premium Connection $89,422 $73,549 $59,904
Pressure Control
Capital Equipment 28,513 19,722 11,714
Aftermarket 24,179 20,789 19,989
----------- ----------- -----------
Subtotal Pressure Control 52,692 40,511 31,703
Total Revenue 142,114 114,060 91,607
Total Gross Profit 54,911 49,879 40,465
Gross Margin 39% 44% 44%
Selling, General, and Admin.
Expenses 18,666 17,028 15,468
----------- ----------- -----------
Operating Income (Loss)
Premium Connection 28,584 27,526 19,891
Pressure Control 13,601 10,373 9,572
Corporate Administration (5,940) (5,048) (4,466)
----------- ----------- -----------
Total Operating Income 36,245 32,851 24,997
Operating Margin 26% 29% 27%
Loss from Unconsolidated Entites 31 (45) -
Interest Income 1,891 1,470 943
Other Income/(Expense) (70) (99) (146)
----------- ----------- -----------
Income Before Income Taxes 38,097 34,177 25,794
Provision for Income Taxes 13,094 11,508 8,545
----------- ----------- -----------
Net Income $25,003 $22,669 $17,249
Net Income Per Share:
Basic $1.05 $0.96 $0.74
Diluted $1.04 $0.94 $0.72
Weighted Average Shares
Outstanding:
Basic 23,734,236 23,697,639 23,455,850
Diluted 24,151,659 24,120,861 23,996,733
Depreciation
Premium Connection $2,372 $2,257 $2,160
Pressure Control 834 810 755
Corporate Administration 529 506 485
----------- ----------- -----------
Total Depreciation 3,735 3,573 3,400
Capital Expenditures 9,320 5,005 2,700
Pressure Control Backlog
Capital Equipment $266,357 $232,614 $47,305
-----------------------
Six Months Ended
(unaudited)
-----------------------
June 30,
2006 2005
-----------------------
Revenue
Premium Connection $162,971 $110,412
Pressure Control
Capital Equipment 48,235 23,780
Aftermarket 44,968 36,232
----------- -----------
Subtotal Pressure Control 93,203 60,012
Total Revenue 256,174 170,424
Total Gross Profit 104,790 75,872
Gross Margin 41% 45%
Selling, General, and Admin.
Expenses 35,694 28,776
----------- -----------
Operating Income (Loss)
Premium Connection 56,110 38,296
Pressure Control 23,974 17,378
Corporate Administration (10,988) (8,578)
----------- -----------
Total Operating Income 69,096 47,096
Operating Margin 27% 28%
Loss from Unconsolidated Entites (14) -
Interest Income 3,361 1,604
Other Income/(Expense) (169) (253)
----------- -----------
Income Before Income Taxes 72,274 48,447
Provision for Income Taxes 24,602 16,186
----------- -----------
Net Income $47,672 $32,261
Net Income Per Share:
Basic $2.01 $1.38
Diluted $1.98 $1.35
Weighted Average Shares
Outstanding:
Basic 23,716,039 23,408,931
Diluted 24,129,478 23,942,291
Depreciation
Premium Connection $4,629 $4,119
Pressure Control 1,644 1,515
Corporate Administration 1,035 1,006
----------- -----------
Total Depreciation 7,308 6,640
Capital Expenditures 14,325 6,764
HYDRIL COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
----------------------------------------------------------------------
June 30, December 31,
2006 2005
---- ----
(unaudited)
-------------------------
CURRENT ASSETS:
Cash and cash equivalents $187,055 $65,145
Investments 7,557 108,084
Total receivables 126,916 78,204
Total inventories 72,255 57,646
Deferred tax asset 12,330 11,390
Other current assets 4,781 3,669
------------ ------------
Total current assets 410,894 324,138
------------ ------------
LONG-TERM ASSETS:
Property, net 111,462 105,138
Other long-term assets 19,954 21,286
------------ ------------
Total long-term assets 131,416 126,424
------------ ------------
TOTAL $542,310 $450,562
============ ============
CURRENT LIABILITIES:
Accounts payable $43,003 $23,443
Accrued liabilities and other current
liabilities 79,384 39,934
------------ ------------
Total current liabilities 122,387 63,377
------------ ------------
LONG-TERM LIABILITIES:
Deferred tax liability and other tax
obligations 15,144 12,143
Post retirement, pension benefits and
other 15,040 14,207
------------ ------------
Total long-term liabilities 30,184 26,350
------------ ------------
STOCKHOLDERS' EQUITY:
Total stockholders' equity 389,739 360,835
------------ ------------
TOTAL $542,310 $450,562
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