HOUSTON, April 29, 2015 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the first quarter ended March 31, 2015 of $19.4 million, or $0.38 per diluted share, which included pre-tax charges of $2.1 million for severance and other downsizing initiatives, and a higher effective tax rate driven primarily by a $2.3 million deferred tax adjustment for certain non-deductible items. Excluding the first quarter 2015 significant charges and higher effective tax rate, net income would have been $23.1 million, or $0.45 per diluted share. These results compare to net income from continuing operations of $34.7 million, or $0.64 per diluted share, reported in the first quarter of 2014. Results for the first quarter of 2014 included pre-tax charges of $1.4 million, or $0.02 per diluted share, for transaction costs primarily incurred in connection with the May 30, 2014 spin-off of the accommodations segment into a stand-alone, publicly traded corporation, Civeo Corporation or Civeo.
During the first quarter of 2015, the Company generated revenues of $337.4 million and Adjusted EBITDA (A) of $68.9 million, which excluded $2.1 million of severance and other downsizing initiatives. These results compare to revenues of $405.2 million and Adjusted EBITDA (A) of $92.9 million, which excluded $1.4 million of transaction costs reported in the first quarter of 2014, representing year-over-year declines of 17% and 26%, respectively, primarily due to lower North American activity levels resulting from the significant decline in crude oil prices, the corresponding precipitous drop in the U.S. land drilling rig count and further declines due to certain customers who have elected to drill wells but not complete them.
Cindy B. Taylor, Oil States' President and Chief Executive Officer stated, "First quarter results for our business segments were negatively impacted by the precipitous drop in crude oil prices which have led to dramatic declines in North American land drilling and completion related activity. The activity declines have been further exacerbated by deferred well completions as our exploration and production customers strive to preserve cash flow in a weak commodity price environment, all of which are having a profoundly negative impact on pricing. In our offshore products segment, we achieved commendable results in light of the current environment. Bidding and quoting activity continued in our offshore products segment, albeit at a slower pace, and our first quarter book-to-bill ratio was a relatively strong 0.98x. Beginning in late 2014, and continuing through the current period, we have been proactively addressing our cost structure, controlling discretionary spending, negotiating price decreases with our vendors and maintaining strong liquidity levels to ensure Oil States remains well positioned to weather this downturn in the cycle and can be opportunistic when investment opportunities present themselves."
BUSINESS SEGMENT RESULTS
(Unless otherwise noted, the following discussion compares the quarterly results from continuing operations for the first quarters of 2015 and 2014, respectively. The historical results of operations of the accommodations segment through its respective transaction closing date has been reported as discontinued operations for all periods reported herein.)
Well Site Services
Well site services generated revenues of $141.8 million and EBITDA of $36.5 million in the first quarter of 2015 compared to revenues and EBITDA of $193.0 million and $63.1 million, respectively, in the first quarter of 2014. Segmental revenues and EBITDA decreased 27% and 42% year-over-year, respectively, primarily due to a 5% year-over-year decrease in the number of completion services jobs performed and a 15% year-over-year decrease in revenue per completion service job as a result of lower activity levels in the U.S. shale basins, coupled with pricing pressure. Lower utilization in the land drilling business, which averaged 44% during the first quarter of 2015 compared with 81% in the first quarter of 2014, also negatively impacted the segmental results. The well site services segment EBITDA included $1.1 million of severance and other downsizing initiatives undertaken in response to the significant activity declines.
Offshore Products
Offshore products generated revenues and EBITDA of $195.6 million and $42.6 million, respectively, in the first quarter of 2015 compared to revenues of $212.2 million and EBITDA of $43.1 million in the first quarter of 2014. Segmental revenues and EBITDA decreased 8% and 1% year-over-year, respectively, primarily due to lower contributions from subsea and drilling product sales and decreased backlog coming into 2015, partially offset by increased service revenues. EBITDA margins improved to 21.8% in the first quarter of 2015, compared to 20.3% realized in the first quarter of 2014. Bidding and quoting activity for the offshore products segment continued during the first quarter of 2015, albeit at a slower pace. Backlog in the offshore products segment at March 31, 2015 decreased 3% to $474 million from $490 million at December 31, 2014 due to delays in award timing and contract negotiations resulting from the significant decline in commodity prices beginning in the fourth quarter of 2014. Backlog totaled $578 million at March 31, 2014. One major project was booked during the first quarter of 2015, consisting of pipeline connectors for a subsea project offshore Brazil. The offshore products segment EBITDA included $1.0 million of severance costs primarily related to cost reduction initiatives made in response to industry activity declines.
Financial Condition
The Company invested $38.3 million in capital expenditures (Capex) during the first quarter of 2015, the majority of which was carryover from 2014. Capex spending primarily related to the addition of completion services equipment deployed to service the U.S. shale plays along with ongoing facility expansions in the offshore products segment.
In the first quarter of 2015, the Company acquired Montgomery Machine Company, Inc. (MMC) for $33.9 million, net of cash acquired. MMC combines machining and proprietary cladding technology and services to the manufacture of high-specification components for the offshore capital equipment industry on a global basis. The operations of MMC have been included in the Company's offshore products segment since the date of the acquisition.
During the first quarter of 2015, the Company repurchased 1.83 million shares, or approximately 3.5% of its shares outstanding, under its authorized share repurchase program at an average price of $42.78 per share. Amounts remaining available under the current share repurchase authorization total $71.5 million which is scheduled to expire on September 1, 2015.
As of March 31, 2015, there was $199.7 million outstanding under the Company's revolving credit facility. Total availability as of March 31, 2015 was $356.5 million (net of standby letters of credit totaling $43.8 million).
Income Taxes
The Company recognized an effective tax rate of 40.6% in the first quarter of 2015. This compares to an effective tax rate of 34.3% in the first quarter of 2014. The higher effective tax rate in the first quarter of 2015 was primarily due to a $2.3 million deferred tax adjustment for certain non-deductible items.
Conference Call Information
The call is scheduled for Thursday, April 30, 2015 at 11:00 am EDT, is being webcast and can be accessed from the Company's website at http://www.oilstatesintl.com. Participants may also join the conference call by dialing (866) 813-5647 in the United States or by dialing +1 847 619-6249 internationally and using the passcode of 39478006. A replay of the conference call will be available one and a half hours after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode of 39478006.
About Oil States
Oil States International, Inc. is an energy services company with a leading market position as a manufacturer of products for deepwater production facilities and certain drilling equipment, as well as a provider of completion services and land drilling services to the oil and gas industry. Oil States is publicly traded on the New York Stock Exchange under the symbol "OIS".
For more information on the Company, please visit Oil States International's website at http://www.oilstatesintl.com.
Forward Looking Statements
The foregoing contains 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 are 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 energy service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2014 filed by Oil States with the Securities and Exchange Commission on February 23, 2015.
| OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||
| (In Thousands, Except Per Share Amounts) | ||
| THREE MONTHS ENDED | ||
| MARCH 31, | ||
| 2015 | 2014 | |
| Revenues | $ 337,358 | $405,237 |
| Costs and expenses: | ||
| Cost of sales and services | 237,722 | 272,371 |
| Selling, general and administrative expenses | 35,605 | 41,409 |
| Depreciation and amortization expense | 32,579 | 30,787 |
| Other operating (income) expense | (2,308) | 1,404 |
| 303,598 | 345,971 | |
| Operating income | 33,760 | 59,266 |
| Interest expense | (1,708) | (8,046) |
| Interest income | 136 | 116 |
| Other income | 466 | 1,527 |
| Income from continuing operations before income taxes | 32,654 | 52,863 |
| Income tax provision | (13,252) | (18,142) |
| Net income from continuing operations | 19,402 | 34,721 |
| Net income from discontinued operations, net of tax | 166 | 36,795 |
| Net income | 19,568 | 71,516 |
| Less: Net income attributable to noncontrolling interest | -- | 12 |
| Net income attributable to Oil States International, Inc. | $ 19,568 | $ 71,504 |
| Net income attributable to Oil States International, Inc.: | ||
| Continuing operations | $ 19,402 | $ 34,709 |
| Discontinued operations | 166 | 36,795 |
| Net income attributable to Oil States International, Inc. | $ 19,568 | $ 71,504 |
| Basic net income per share attributable to Oil States International, Inc. common stockholders from: | ||
| Continuing operations | $ 0.38 | $ 0.65 |
| Discontinued operations | -- | 0.68 |
| Net income | $ 0.38 | $ 1.33 |
| Diluted net income per share attributable to Oil States International, Inc. common stockholders from: | ||
| Continuing operations | $ 0.38 | $ 0.64 |
| Discontinued operations | -- | 0.68 |
| Net income | $ 0.38 | $ 1.32 |
| Weighted average number of common shares outstanding: | ||
| Basic | 50,826 | 53,288 |
| Diluted | 50,936 | 53,588 |
| OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In Thousands) | ||
| MARCH 31, | DECEMBER 31, | |
| ASSETS | 2015 | 2014 |
| (UNAUDITED) | ||
| Current assets: | ||
| Cash and cash equivalents | $ 72,049 | $ 53,263 |
| Accounts receivable, net | 377,132 | 497,124 |
| Inventories, net | 237,862 | 232,490 |
| Prepaid expenses and other current assets | 39,226 | 43,789 |
| Total current assets | 726,269 | 826,666 |
| Property, plant, and equipment, net | 659,605 | 649,846 |
| Goodwill, net | 265,295 | 252,201 |
| Other intangible assets, net | 64,128 | 52,935 |
| Other noncurrent assets | 30,091 | 27,964 |
| Total assets | $ 1,745,388 | $ 1,809,612 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 79,519 | $ 108,949 |
| Accrued liabilities | 60,811 | 96,130 |
| Income taxes | 10,881 | 9,195 |
| Current portion of long-term debt and capitalized leases | 523 | 530 |
| Deferred revenue | 46,923 | 48,948 |
| Other current liabilities | 13,268 | 7,660 |
| Total current liabilities | 211,925 | 271,412 |
| Long-term debt and capitalized leases (1) | 205,740 | 146,835 |
| Deferred income taxes | 40,287 | 33,913 |
| Other noncurrent liabilities | 19,597 | 16,795 |
| Total liabilities | 477,549 | 468,955 |
| Stockholders' equity: | ||
| Oil States International, Inc. stockholders' equity: | ||
| Common stock, $.01 par value, 200,000,000 shares authorized, 61,490,615 shares and 60,940,734 shares issued, respectively, and 51,591,765 shares and 53,017,359 shares outstanding, respectively | 615 | 610 |
| Additional paid-in capital | 691,852 | 685,232 |
| Retained earnings | 1,170,834 | 1,151,266 |
| Accumulated other comprehensive loss | (36,642) | (22,100) |
| Common stock held in treasury at cost, 9,898,850 and 7,923,375 shares, respectively | (558,820) | (474,351) |
| Total Oil States International, Inc. stockholders' equity | 1,267,839 | 1,340,657 |
| Noncontrolling interest | -- | -- |
| Total stockholders' equity | 1,267,839 | 1,340,657 |
| Total liabilities and stockholders' equity | $ 1,745,388 | $ 1,809,612 |
| (1) As of March 31, 2015, the Company had approximately $356.5 million available under its revolving credit facility. | ||
| OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In Thousands) | ||
|
THREE MONTHS ENDED MARCH 31, |
||
| 2015 | 2014 | |
| Cash flows from operating activities: | ||
| Net income | $ 19,568 | $ 71,516 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Income from discontinued operations | (166) | (36,795) |
| Depreciation and amortization | 32,579 | 30,787 |
| Deferred income tax expense (benefit) | 5,923 | (6,261) |
| Tax impact of share-based payment arrangements | 40 | (1,660) |
| Provision for bad debt | (617) | 1,829 |
| Gain on disposals of assets | (313) | (1,242) |
| Non-cash compensation charge | 5,660 | 5,760 |
| Amortization of deferred financing costs | 195 | 823 |
| Other, net | (253) | (58) |
| Changes in operating assets and liabilities, net of effect from acquired businesses: | ||
| Accounts receivable | 117,900 | (9,195) |
| Inventories | (6,235) | (11,766) |
| Accounts payable and accrued liabilities | (65,124) | (25,199) |
| Taxes payable | 2,889 | 1,577 |
| Other operating assets and liabilities, net | 2,345 | 1,833 |
| Net cash flows provided by continuing operating activities | 114,391 | 21,949 |
| Net cash flows provided by discontinued operating activities | 260 | 83,362 |
| Net cash flows provided by operating activities | 114,651 | 105,311 |
| Cash flows from investing activities: | ||
| Capital expenditures | (38,282) | (39,901) |
| Acquisitions of businesses, net of cash acquired | (33,948) | -- |
| Proceeds from disposition of property, plant and equipment | 437 | 1,980 |
| Other, net | 193 | (386) |
| Net cash flows used in continuing investing activities | (71,600) | (38,307) |
| Net cash flows used in discontinued investing activities | -- | (63,295) |
| Net cash flows used in investing activities | (71,600) | (101,602) |
| Cash flows from financing activities: | ||
| Revolving credit borrowings, net | 59,030 | -- |
| Debt and capital lease repayments | (131) | (129) |
| Issuance of common stock from share-based payment arrangements | 1,008 | 3,346 |
| Purchase of treasury stock | (77,401) | (141,043) |
| Tax impact of share-based payment arrangements | (40) | 1,660 |
| Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock | (6,084) | (4,915) |
| Other, net | 1 | (1) |
| Net cash flows used in continuing financing activities | (23,617) | (141,082) |
| Net cash flows used in discontinued financing activities | -- | (1) |
| Net cash flows used in financing activities | (23,617) | (141,083) |
| Effect of exchange rate changes on cash | (648) | (7,059) |
| Net change in cash and cash equivalents | 18,786 | (144,433) |
| Cash and cash equivalents, beginning of period | 53,263 | 599,306 |
| Cash and cash equivalents, end of period | $ 72,049 | $ 454,873 |
| Oil States International, Inc. and Subsidiaries | ||
| Segment Data | ||
| (in thousands) | ||
| (unaudited) | ||
| Three Months Ended March 31, | ||
| 2015 | 2014 | |
| Revenues | ||
| Completion services | $118,111 | $146,461 |
| Drilling services | 23,678 | 46,564 |
| Well site services | 141,789 | 193,025 |
| Offshore products | 195,569 | 212,212 |
| Total revenues | $337,358 | $405,237 |
| EBITDA (A) | ||
| Completion services (1) | $32,341 | $50,123 |
| Drilling services | 4,186 | 12,966 |
| Well site services | 36,527 | 63,089 |
| Offshore products (1) | 42,634 | 43,136 |
| Corporate and eliminations (2) | (12,356) | (14,657) |
| Total EBITDA | $66,805 | $91,568 |
| Operating income / (loss) | ||
| Completion services (1) | $12,468 | $31,045 |
| Drilling services | (2,539) | 5,795 |
| Well site services | 9,929 | 36,840 |
| Offshore products (1) | 36,542 | 37,348 |
| Corporate and eliminations (2) | (12,711) | (14,922) |
| Total operating income | $33,760 | $59,266 |
| Oil States International, Inc. and Subsidiaries | ||
| Reconciliation of GAAP to Non-GAAP Financial Information | ||
| (in thousands) | ||
| (unaudited) | ||
| Three Months Ended March 31, | ||
| 2015 | 2014 | |
| Net income from continuing operations | $19,402 | $34,709 |
| Income tax provision | 13,252 | 18,142 |
| Depreciation and amortization | 32,579 | 30,787 |
| Interest income | (136) | (116) |
| Interest expense | 1,708 | 8,046 |
| EBITDA (A) | $66,805 | $91,568 |
| Adjustments to EBITDA (1, 2): | ||
| Non-recurring charges | 2,095 | 1,376 |
| Adjusted EBITDA (A) | $68,900 | $92,944 |
(1) Adjustments to EBITDA and operating income for the three months ended March 31, 2015 included severance and other related costs of $1.1 million related to the completion services business and $1.0 million related to the offshore products segment.
(2) Adjustments to EBITDA and operating loss for the three months ended March 31, 2014 included transaction costs of $1.4 million. These costs primarily related to activities associated with the spin-off of Civeo.
(A) The terms EBITDA and Adjusted EBITDA consist of net income from continuing operations plus interest, taxes, depreciation and amortization. EBITDA and Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA and Adjusted EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses EBITDA and Adjusted EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth a reconciliation of EBITDA and Adjusted EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.
| Oil States International, Inc. and Subsidiaries | ||
| Additional Quarterly Segment and Operating Data | ||
| (unaudited) | ||
| Three Months Ended March 31, | ||
| 2015 | 2014 | |
| Supplemental operating data: | ||
| Offshore products backlog ($ in millions) | $474.2 | $578.2 |
| Completion services job tickets | 12,011 | 12,699 |
| Average revenue per ticket ($ in thousands) | $9.8 | $11.5 |
| Land drilling operating statistics: | ||
| Average rigs available | 34 | 34 |
| Utilization | 44.1% | 80.6% |
| Implied day rate ($ in thousands per day) | $17.5 | $18.9 |
| Implied daily cash margin ($ in thousands per day) | $3.5 | $5.4 |