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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission File Number 001-14273
CORE LABORATORIES N.V.
(Exact name of Registrant as specified in its charter)
The Netherlands Not Applicable
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Herengracht 424
1017 BZ Amsterdam
The Netherlands Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (31-20)420-3191
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Shares, NLG 0.03 New York Stock Exchange
Par Value Per Share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
As of March 6, 2001, the number of common shares outstanding was 32,302,657.
At that date, the aggregate market value of common shares held by non-affiliates
of the registrant was approximately $739,685,001.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT Part of 10-K
- --------
1. Proxy statement to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 with respect to the 2001 annual meeting of shareholders.
PART III
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CORE LABORATORIES N.V.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS
Page
PART I ----
Item 1. Business................................................................................... 1
Item 2. Properties................................................................................. 6
Item 3. Legal Proceedings ......................................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ....................................... 6
PART II
Item 5. Market for the Common Shares and Related Shareholder Matters .............................. 7
Item 6. Selected Financial Data ................................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ................................ 15
Item 8. Financial Statements and Supplementary Data................................................ 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 15
PART III
Item 10. Directors and Executive Officers of the Registrant......................................... 16
Item 11. Executive Compensation..................................................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 16
Item 13. Certain Relationships and Related Transactions............................................. 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 17
i
PART I
Item 1. Business
General
Core Laboratories N.V. ("Core Laboratories", "we", "our" or "us") was
established in 1936 and is one of the world's leading providers of proprietary
and patented reservoir description, production enhancement and reservoir
management services to the oil and gas industry. These services are directed
toward enabling our clients to improve reservoir performance and increase oil
and gas recovery from their producing fields. We have over 70 offices in more
than 50 countries and have approximately 3,900 employees.
Business Strategy
Our business strategy is to continue to provide advanced technologies
that improve reservoir performance by (i) continuing the development of
proprietary technologies through client-driven research and development, (ii)
expanding the services and products offered throughout our global network of
offices and (iii) acquiring complementary businesses that add key technologies
or market presence and enhance existing products and services.
Development of New Technologies, Services and Products
We conduct research and development to meet the needs of our customers
who are continually seeking new technologies to lower their costs of finding,
developing and producing oil and gas. While the aggregate number of wells being
drilled per year has fluctuated relative to market conditions, oil and gas
producers have increased expenditures on high-technology services which improve
their understanding of the reservoir. They are also spending more on advanced
technologies to increase production of oil and gas from their producing fields.
We intend to continue concentrating our efforts on technologies that enhance
development and production efficiencies.
International Expansion of Services and Products
Another component of our business strategy is to broaden the spectrum
of services and products offered to our clients on a global basis. We plan to
use our worldwide network of offices to offer many of our new services and
products that have been developed internally or obtained through acquisitions.
This allows us to enhance our revenues through efficient utilization of our
worldwide network.
Acquisitions
We continually review potential acquisitions to add key technologies,
enhance market presence or complement existing businesses. Our recent
acquisitions reflect our desire to broaden the services we offer to our clients.
Several recent acquisitions are summarized as follows:
o In December 2000, we acquired Core Petrophysics, Inc. ("CPI"). CPI
is a technology leader engaged in the petrophysical
characterization of partially consolidated and unconsolidated
reservoirs which make up the majority of deepwater reservoirs
around the world.
o In June 2000, we acquired Production Enhancement Corporation
("PENCOR"). PENCOR provides fluid phase behavior services used to
characterize crude oils, natural gases and other reservoir fluids.
o In January 2000, we acquired TomoSeis Corporation ("TomoSeis").
TomoSeis provides detailed reservoir imaging services that are a
component of timelapse (4D) seismic and reservoir monitoring
programs.
1
More information relating to acquisitions is included in Note 3 of the
Notes to Consolidated Financial Statements.
Operations
We derive our revenues from services and sales to customers primarily
in the oil and gas industry.
Our reservoir optimization technologies are interrelated and are
organized into three complementary segments. Disclosure relating to the results
of these business segments is included in Note 12 of the Notes to Consolidated
Financial Statements.
o Reservoir Description: Encompasses the characterization of
petroleum reservoir rock, fluid and gas samples. We provide
analytical and field services to characterize properties of crude
oil and petroleum products to the oil and gas industry.
o Production Enhancement: Includes products and services relating to
reservoir well completions, perforations, stimulations and
production. We provide integrated services to evaluate the
effectiveness of well completions and to develop solutions aimed
at increasing the effectiveness of enhanced oil recovery projects.
o Reservoir Management: Combines and integrates information from
reservoir description and production enhancement services to
increase production and improve recovery of oil and gas from our
clients' reservoirs.
We offer our services worldwide through our global network of offices.
Services accounted for approximately 77%, 82% and 88% of our revenues from
continuing operations for the years ended December 31, 2000, 1999 and 1998,
respectively.
We manufacture products primarily in three facilities for distribution
on a global basis. Product sales accounted for approximately 23%, 18% and 12% of
our revenues from continuing operations for the years ended December 31, 2000,
1999 and 1998, respectively.
The sales backlog at December 31, 2000 was approximately $6.0 million,
compared with $4.7 million at December 31, 1999. Sources of raw material are
readily available and our sales backlog should be filled in 2001.
Reservoir Description
Most commercial oil and gas fields consist of porous and permeable
reservoir rocks that contain natural gas, crude oil and water. Due to the
density differences of the fluids, natural gas typically caps the field and
overlies an oil layer, which overlies the water. We provide services that
characterize the porous reservoir rock and all three reservoir fluids.
We analyze samples of reservoir rocks for their porosity, which
determines reservoir storage capacity, and for their permeability, which defines
the ability of the fluids to flow through the rock. These measurements are used
to determine how much oil and gas are present in a reservoir and the rates at
which the oil and gas can be produced. We also use our proprietary technologies
to correlate the reservoir description data to wireline logs and seismic data.
These data sets are also used to determine the different acoustic velocities of
reservoir rocks containing water, oil and natural gas. These velocity
measurements are used in conjunction with our in-reservoir seismic monitoring
services.
2
Production Enhancement
The data we produce to describe a reservoir system is used to enhance
oil and gas production so that it will exceed the average oilfield recovery
factor which is approximately 40%. Two production-enhancement methods commonly
used are (1) hydraulic fracturing of the reservoir rock to improve flow and (2)
flooding the field with water, carbon dioxide or hydrocarbon gases to force more
oil and gas to the wellbore. Our technologies play a key role in the success of
both methods.
The hydraulic fracturing of a producing formation is achieved by
pumping a proppant material in a gel slurry into the reservoir zone at extremely
high pressures. This forces fractures to open in the rock and "props" the
fractures open so that reservoir fluids can flow to the production wellbore.
Our data on rock type and strength are critical for determining the
proper design of the hydraulic fracturing job. In addition, our testing
indicates whether the gel slurry is compatible with the reservoir fluids so that
damage does not occur to the porous rock network. Our proprietary ZeroWash(TM)
tracer technology is also used to determine that the proppant material was
properly placed in the fracture to ensure effective flow and increased recovery.
Many oilfields today are hydraulically fractured and flooded to
maximize oil and gas recovery. We conduct dynamic flow tests of the reservoir
fluids through the reservoir rock, at actual reservoir pressure and temperature,
to realistically simulate the actual flooding of a producing zone. We use
patented technologies, such as our Saturation Monitoring by the Attenuation of
X-rays (SMAX(TM)), to help design the enhanced recovery project. After a field
flood is initiated, we are often involved in monitoring the progress of the
flood to ensure the maximum amount of incremental production.
We are also an industry leader in high-performance perforating and
completion systems engineered to maximize well productivity by reducing,
eliminating or overcoming formation damage during the completion of oil and gas
wells. Among the numerous technologies we offer is the Completion Profiler(TM).
The Completion Profiler(TM) is a unique completion system we developed to
determine flow rates from reservoir zones after they have been hydraulically
fractured. This provides our clients with information in virtually real time.
Patent applications covering the technology have been filed in the United States
and in certain foreign jurisdictions.
Reservoir Management
Reservoir description and production enhancement information, when
applied across an entire oilfield, is used to maximize daily production and the
ultimate total recovery from the reservoir. We are involved in numerous
large-scale reservoir management projects, applying proprietary and
state-of-the-art techniques from the earliest phases of a field development
program until the last economic barrel of oil is recovered.
These projects are of increasing importance to oil companies as the
incremental barrel is often the lowest cost and most profitable barrel in the
reservoir. Producing incremental barrels increases our clients' cash flows which
may create future opportunities for us. We believe that increased cash flows
from incremental production will result in increased capital expenditures,
ultimately leading to future opportunities for us.
We acquired the patents for our exclusively licensed coherence cube
processing technique. This seismic data processing method enables us to better
image our clients' reservoirs from their existing 3D seismic data.
3
Marketing and Sales
We market and sell our services and products through a combination of
print advertising, technical seminars, trade shows and sales representatives.
Print advertising is placed on a regular basis in trade and technical magazines
that target our customers. Direct sales and marketing are carried out by our
sales force, technical experts and operating managers, as well as by sales
representatives and distributors in various markets where we do not have
offices.
Research and Development
The market for our products and services is characterized by changing
technology and frequent product introduction. As a result, our success is
dependent upon our ability to develop or acquire new products and services on a
cost-effective basis and to introduce them into the marketplace in a timely
manner. We view the cost to acquire many of our technologies to be, in essence,
expenditures to gain the benefit of the acquired company's research and
development projects. Research and development expenditures are charged to
expense as incurred. We intend to continue committing substantial financial
resources and effort to the development of new products and services. Over the
years, we have made a number of technological advances, including the
development of key technologies utilized in our operations. Substantially all of
the new technologies have resulted from requests and guidance from our clients,
especially major oil companies. Additional disclosure relating to research and
development is included in Note 2 of the Notes to Consolidated Financial
Statements.
Patents and Trademarks
We believe our patents, trademarks and other intellectual property
rights are an important factor in maintaining our technological advantage,
although no one patent is considered essential to our success. Typically, we
will seek to protect our intellectual technology in all jurisdictions where we
believe the cost of such protection is warranted. While we have patented some of
our key technologies, we do not patent all of our proprietary technology even
where regarded as patentable. In addition to patents, in many instances we
protect our trade secrets through confidentiality agreements with our employees
and our customers.
International Operations
[CHART]
We operate facilities in more than 50 countries. Our non-U.S.
operations accounted for approximately 60%, 56% and 54% of our revenues from
continuing operations during the years ended December 31, 2000, 1999 and 1998,
respectively. In addition, some of our revenues in the U.S. are generated by
projects located outside the U.S. Our business is subject to various risks
beyond our control, including:
o instability of foreign economies and governments;
o currency fluctuations;
o potential income tax liabilities in multiple jurisdictions; and
o changes in laws and policies affecting trade and investment.
Any of such factors may cause facilities in some countries to become
unprofitable, possibly resulting in the closing of such facilities. We attempt
to limit our exposure to foreign currency fluctuations by limiting the amount in
which our foreign contracts are denominated in a currency other than the U.S.
dollar to an amount generally equal to the expenses expected to be incurred in
such foreign currency. We have not historically engaged in and do not currently
intend to engage in any significant hedging or
4
currency trading transactions designed to compensate for adverse currency
fluctuations. More information on international operations is included in Note
12 of the Notes to Consolidated Financial Statements.
Environmental Regulation
We are subject to a variety of governmental regulations relating to the
use, storage, discharge and disposal of chemicals and gases used in our
analytical and manufacturing processes. Consistent with our quality assurance
and control principles, we have established proactive environmental policies
with respect to the handling and disposal of such chemicals, gases, emissions
and waste materials. We have engaged outside consultants to audit our
environmental activities and have implemented health and safety education and
training programs. We have not suffered material environmental claims in the
past. We believe that our operations are currently in compliance with applicable
environmental laws and regulations, and that continued compliance with existing
requirements will not have a material adverse effect on our financial position
or results of operations. Public interest in the protection of the environment,
however, has increased dramatically in recent years. We anticipate that the
trend toward more expansive and stricter environmental laws and regulations will
continue, the occurrence of which may require us to increase capital
expenditures or operating expenses.
Competition
The businesses in which we engage are competitive. Some of our
competitors are divisions or subsidiaries of companies that are larger and have
greater financial and other resources than we have. While no one company
competes with us in all of our product and service lines, we face competition in
these lines, primarily from independent, regional companies. We compete in
different product and service lines to various degrees on the basis of price,
technical performance, availability, quality and technical support. Our ability
to compete successfully depends on elements both within and outside of our
control, including successful and timely development of new products and
services, performance and quality, customer service, pricing, industry trends
and general economic trends.
Reliance on the Oil and Gas Industry
Our business and operations are substantially dependent upon the
condition of the global oil and gas industry. Future downturns in the oil and
gas industry, or in the oilfield services business, may have a material adverse
effect on our financial position or results of operations.
The oil and gas industry is highly cyclical and has been subject to
significant economic downturns at various times as a result of numerous factors
affecting the supply of and demand for oil and natural gas, including the level
of capital expenditures of the oil and gas industry; the level of drilling
activity; the level of production activity; market prices of oil and gas;
worldwide economic conditions; interest rates and the cost of capital;
environmental regulations; tax policies; political requirements of national
governments; coordination by the Organization of Petroleum Exporting Countries
("OPEC"); cost of producing oil and natural gas; and technological advances.
Employees
As of December 31, 2000, we had approximately 3,900 employees. We do
not have any material collective bargaining agreements and consider relations
with our employees to be good.
5
Item 2. Properties
Currently, we have over 70 offices (totaling more than one million
square feet) in more than 50 countries. In these locations, we typically lease
our office facilities. We serve our worldwide customers through six advanced
technology centers ("ATC's") which are located in Houston, Texas; Calgary,
Canada; Jakarta, Indonesia; Rotterdam, The Netherlands; Aberdeen, Scotland; and
Maracaibo, Venezuela. The ATC's are supported by over 50 regional specialty
centers located throughout the global energy producing provinces. Our facilities
are adequately utilized for current operations and should accommodate future
growth.
Item 3. Legal Proceedings
We are from time to time subject to legal proceedings and claims that
arise in the ordinary course of business. We believe that the outcome of current
legal actions will not have a material adverse effect upon our consolidated
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the year ended December 31, 2000.
6
PART II
Item 5. Market for the Common Shares and Related Shareholder Matters
Price Range of Common Shares
Our common shares trade on the New York Stock Exchange ("NYSE") under
the symbol "CLB". The range of high and low sales prices per share of the common
shares as reported by the NYSE are set in the following table for the periods
indicated.
2000 High Low
---- ------- --------
First Quarter........................................... 29 1/8 18 3/8
Second Quarter.......................................... 31 3/8 23
Third Quarter........................................... 29 3/4 15 11/16
Fourth Quarter.......................................... 28 9/16 18 7/16
1999
----
First Quarter........................................... 26 1/4 16 1/2
Second Quarter.......................................... 18 5/8 11 3/4
Third Quarter........................................... 21 7/8 14 1/16
Fourth Quarter.......................................... 22 3/4 16 3/4
On March 6, 2001, the closing price, as quoted by the NYSE, was $23.95
per share. As of March 6, 2001, there were 32,302,657 common shares held by
approximately 250 record holders and approximately 10,688 beneficial holders.
Dividend Policy
We have never paid dividends on our common shares and currently have no
plans to pay dividends on the common shares. We expect that we will retain all
available earnings generated by our operations for the development and growth of
our business. Any future determination as to the payment of dividends will be
made at the discretion of our Supervisory Board and will depend upon our
operating results, financial condition, capital requirements, general business
conditions and such other factors as they deem relevant. Because we are a
holding company that conducts substantially all of our operations through
subsidiaries, our ability to pay cash dividends on the common shares is
dependent upon the ability of our subsidiaries to pay cash dividends or
otherwise distribute or advance funds to us and on the terms and conditions of
our existing and future credit arrangements. See "Liquidity and Capital
Resources" included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Recent Issuance of Unregistered Securities
In connection with our 2000 acquisitions, we issued approximately
1,023,000 common shares, with an estimated value of $19.4 million. Disclosure
related to recent issuances of common shares is included in Note 3 of the Notes
to Consolidated Financial Statements. With respect to the shares issued in each
acquisition, we relied on exemption from registration under Section 4(2) of the
Securities Act of 1933.
7
Item 6. Selected Financial Data
The following table sets forth selected historical consolidated
financial data for the periods indicated. We have restated all prior periods to
reflect the pooling-of-interests acquisitions of TomoSeis, PENCOR and CPI in
2000. Results from our environmental testing assets are included in all periods
through September 30, 1999. These assets were sold effective September 30, 1999.
The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements.
Years Ended December 31,
------------------------
2000 (1) 1999 (1),(3) 1998 (1),(2) 1997 (1),(4) 1996 (1),(4)
------------- ------------- ------------- ------------- -------------
Financial Statement Data: (in thousands, except per share data)
Revenues................................. $ 336,098 $ 322,757 $ 317,118 $ 251,250 $ 124,469
Income from continuing operations........ 19,152 2,380 21,193 17,800 6,932
Working capital.......................... 123,708 93,667 62,001 52,965 21,523
Total assets............................. 410,604 373,183 367,874 266,705 101,275
Long-term debt, including current
maturities............................ 82,647 86,771 91,503 77,737 19,839
Shareholders' equity..................... 251,858 212,317 203,379 120,258 51,900
Per Share Data:
Income from continuing operations:
Basic................................. $ 0.60 $ 0.08 $ 0.74 $ 0.71 $ 0.30
Diluted............................... $ 0.58 $ 0.07 $ 0.71 $ 0.69 $ 0.30
Weighted average common shares outstanding:
Basic................................. 31,790 30,874 28,654 25,098 23,026
Diluted............................... 32,941 31,868 29,680 25,802 23,224
Other Data:
Diluted earnings per share from
continuing operations
excluding goodwill amortization... $ 0.71 $ 0.20 $ 0.82 $ 0.75 $ 0.31
Restructuring and other charges.......... $ -- $ 17,706 $ -- $ -- $ 355
Current Ratio............................ 3.4:1 2.8:1 1.9:1 1.9:1 1.7:1
Debt to Capitalization Ratio............. 24% 27% 30% 37% 25%
1) See Note 3 of the Notes to Consolidated Financial Statements for a
discussion of acquisitions made in 2000, 1999 and 1998.
2) See Note 4 of the Notes to Consolidated Financial Statements for
information relating to the sale of the packaged analyzer business line in
1998.
3) In 1999, we recorded $17.7 million in restructuring, write-offs and other
charges as discussed in Note 13 of the Notes to Consolidated Financial
Statements.
4) Periods prior to 1997 do not include the financial position or operational
results of the purchase acquisitions of Scott Pickford plc (March 1997) and
Saybolt International B.V. (May 1997).
[CHART] [CHART] [CHART]
8
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
This discussion includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We have based the forward-looking statements relating to
our operations on our current expectations, estimates and projections. We
caution you that these statements are not guarantees of future performance and
involve risks and uncertainties that we cannot predict. In addition, we have
based many of these forward-looking statements on assumptions about future
events that may prove to be inaccurate. Accordingly, our actual outcomes and
results may differ materially from what we have expressed or forecast in the
forward-looking statements. Our operations are subject to various risk factors
including, but not limited to:
o our ability to continue to develop or acquire new and useful
technology.
o the realization of anticipated synergies from acquired businesses
and future acquisitions.
o our dependence on the oil and gas industry, and the impact of
commodity prices on the expenditure levels of our customers.
o competition in our markets.
o the risks and uncertainties attendant to adverse industry,
political, economic and financial market conditions, including
stock prices, government regulations, interest rates and credit
availability.
Oil and gas prices rebounded strongly in 1999 from the lows experienced
in 1998. This recovery continued throughout 2000. Capital spending for
exploration and production for many of our customers is influenced by
expectations of the supply and demand and prices of oil and gas. With higher oil
and gas prices, our customers often increase their capital budgets which will
generally increase the level of spending for our products and services. However,
while our revenues increased year over year, this increase was not proportional
to the increased activity levels expected from the higher oil and gas prices.
Also, as a result of the consolidation in the oil and gas industry, some of our
customers have used and may continue to use their global presence and market
influence to seek economies of scale and pricing concessions.
Business
Core Laboratories was established in 1936 and is currently traded on
the New York Stock Exchange.
We provide our products and services to the world's major, national and
independent oil companies. Our specialty services and products are designed to
improve oil and gas recovery from new and existing fields through the following
business segments:
o Reservoir Description: Encompasses the characterization of
petroleum reservoir rock, fluid and gas samples. We provide
analytical and field services to characterize properties of crude
oil and petroleum products to the oil and gas industry.
o Production Enhancement: Includes products and services relating to
reservoir well completions, perforations, stimulations and
production. We provide integrated services to evaluate the
effectiveness of well completions and to develop solutions aimed
at increasing the effectiveness of enhanced oil recovery projects.
9
o Reservoir Management: Combines and integrates information from
reservoir description and production enhancement services to
increase production and improve recovery of oil and gas from our
clients' reservoirs.
We plan to continue the expansion of our operations through (i)
continuing the development of proprietary technologies through client-driven
research and development, (ii) expanding the services and products offered
throughout our global network of offices and (iii) acquiring complementary
businesses that add key technologies or market presence and enhance existing
products and services.
We continued to demonstrate success with our acquisition strategy, as
illustrated by our most recent acquisitions of TomoSeis, PENCOR and CPI. We have
also pursued the sale of assets not critical to our growth strategy by divesting
ourselves of substantially all of our environmental testing assets in 1999. In
addition, we believe that we have positioned ourselves for increased
profitability by consolidating redundant facilities and reducing excess
personnel.
Results of Operations
Revenues and Income from Continuing Operations
(Dollars in Millions)
[CHART]
Service revenues in 2000 were $258.7 million, which compares to $246.8
million in 1999, and $254.4 million in 1998. This excludes revenues of $17.9
million and $25.4 million in 1999 and 1998, respectively, attributable to our
environmental testing assets, which were disposed of in the third quarter of
1999. The increase in service revenues in 2000 indicates a recovery from the
depressed market conditions in 1998 and 1999. These increases were primarily
derived from an increase in activity levels in North America for our development
and production enhancement projects.
Costs of services in 2000 were $206.4 million, a decrease of $8.4
million as compared to 1999 and a decrease of $16.2 million as compared to 1998.
Costs of services expressed as a percentage of service revenue were 80%, 81% and
80% in 2000, 1999 and 1998, respectively. During 1999, we took actions to reduce
our cost structure, including personnel reductions and office consolidations,
which contributed to an improvement in our service margins.
Sales revenues in 2000 were $77.4 million, which compares to $58.1
million in 1999, and $37.3 million in 1998, an increase of 33% and 108%,
respectively. This increase was primarily driven by increased spending by our
customers on the advanced technologies provided by Owen Oil Tools ("Owen"),
which provides well completion and stimulation technologies.
Costs of sales in 2000 were $62.3 million, an increase of $13.9 million
and $35.4 million as compared to 1999 and 1998, respectively. Costs of sales
expressed as a percentage of sales revenues were 80%, 83% and 72% in 2000, 1999
and 1998, respectively. The increase in cost of sales in 2000 and 1999 as
compared to 1998 was primarily due to the costs associated with the 33% and 108%
increase in related sales during these time periods.
10
General and administrative expenses are comprised of corporate
management and centralized administrative services which benefit our operating
subsidiaries. Although general and administrative expenses are generally more
fixed in nature, we did experience an increase which was largely attributable to
training and conversion costs for an upgraded accounting system and growth in
the number of people necessary to support increases in the scope of our
operations. The increase in general and administrative expenses was $1.2 million
in 2000 as compared to 1999, which reflected an increase of $3.9 million as
compared to 1998. General and administrative expenses as a percentage of
revenues remained below 5% for all periods.
Depreciation and amortization expense for 2000 decreased slightly as
compared to 1999 and 1998. Although we had $32.8 million of capital expenditures
in 2000, the additional depreciation expense from these assets was more than
offset by the effect of asset retirements, the sale of the assets of our
environmental testing operations and the effect of assets which had become fully
depreciated.
Amortization of goodwill in 2000 and 1999 was $4.1 million in each
year, an increase from the $3.0 million in 1998. The increase was primarily due
to the addition of goodwill attributable to 1998 acquisitions accounted for as
purchases.
In the first quarter of 1999, we recorded write-offs and other charges
totaling $10.7 million. This amount included $4.4 million of asset write-offs,
$2.6 million related to facility closures and personnel reductions, and $3.7
million associated with the termination of the proposed acquisition of
GeoScience Corp. The asset write-offs consisted primarily of uncollectible
accounts receivable in the former Soviet Union and other Eastern Hemisphere
locations, due to economic instability in the region, as well as adjustments to
net realizable value of certain inventory and other current asset amounts. The
facility closures consisted primarily of the shutdown of our environmental
testing laboratory in Edison, New Jersey, the Saybolt Western Hemisphere
administrative office and a substantial reduction in our Venezuelan work force.
These actions, which affected a total of 47 employees, were substantially
complete as of April 30, 1999. The termination settlement included the
forgiveness of $3.0 million in working capital advances made by Core
Laboratories to GeoScience Corp.
In the fourth quarter of 1999, we recorded a $7.0 million charge to
cover the cost of exiting redundant facilities and restructuring certain of our
operations. This charge affected each of our operating segments as follows:
Reservoir Description - $2.8 million; Production Enhancement - $1.9 million;
Reservoir Management - $2.3 million. We combined personnel and equipment from
eight facilities into one Houston facility but no operations were discontinued
and we do not expect this facility consolidation to negatively affect our future
revenues. The move was completed in the second quarter of 2000. Related charges
included severance for approximately 100 field and administrative employees, the
accrual of future lease obligations and facility restoration costs and the
write-off of redundant fixed assets and leasehold improvements. Substantially
all of these employees were terminated as of June 30, 2000. Cash required for
the costs incurred through December 31, 2000 of $3.8 million, excluding asset
write-offs, was
11
funded from operating activities. We anticipate that the remaining costs will
also be funded through cash from operating activities. This charge is summarized
in the following table:
Restructuring Charges
(Dollars in Thousands)
Asset
Lease Write-
Obligations Severance Restoration offs(a) Other Total
----------- --------- ----------- ------- ------- -------
Total restructuring charges............. $ 2,983 $ 879 $ 786 $ 2,080 $ 308 $ 7,036
Less: Costs incurred through
December 31, 1999.............. 515 445 28 2,080 124 3,192
------- ------- ------- ------- ------- -------
Accrual remaining at December 31, 1999.. 2,468 434 758 - 184 3,844
Less: Costs incurred through
December 31, 2000.............. 1,440 434 655 - 184 2,713
------- ------- ------- ------- ------- -------
Accrual remaining....................... $ 1,028 $ - $ 103 $ - $ - $ 1,131
======= ======= ======= ======= ======= =======
(a) The fixed assets and leasehold improvements related to the Houston
consolidation were disposed of by the end of June 2000. The write-off
approximates the carrying amount as these assets were abandoned or sold for
salvage value. Depreciation expense was reduced by approximately $490 in 2000,
and will be reduced by $333 in 2001 and $342 thereafter. Also included in this
amount were $915 of working capital write-offs related to the restructuring of
foreign operations. The asset write-offs attributable to each segment were as
follows: Reservoir Description - $1,176; Production Enhancement - $346;
Reservoir Management - $558.
As discussed above, our results of operations in 1999 were adversely
affected by lower activity and spending levels in the industry. The actions we
took in 1999, including those which resulted in the restructuring charges, were
intended to lower our fixed operating costs and provide other operating
benefits, including improved communications and customer service. We did not
change our restructuring plan or revise our original estimates after the initial
charge was recognized.
Interest expense for 2000 was $8.2 million, a decrease of approximately
$0.3 million as compared to 1999, after increasing $1.4 million compared to
1998. The decrease in 2000 was primarily attributable to the reduction of debt
during the year. The increase from 1998 was due in part to additional borrowings
and debt assumed in connection with acquisitions, together with an increase in
interest rates, both from rising market interest rates and higher rates
associated with the Senior Notes.
The decrease in the effective income tax rate to 30% in 2000 from 35%
in 1999 and 31% in 1998 reflects the increase in international earnings taxed at
rates lower than The Netherlands statutory rate.
In 1998, we sold the majority of the net assets of our packaged
analyzer business line for approximately $4.1 million in cash, resulting in a
loss on sale of $1.3 million. Goodwill specifically related to this business
line of approximately $2.6 million was also written off, as was $1.0 million of
work-in-process inventory which was subsequently abandoned. These amounts are
included in the loss on disposition of discontinued operations. The losses from
this business line of $0.2 million in 1998 have been reported separately as
discontinued operations in the Consolidated Statements of Operations.
12
Segment Analysis
Our operations are managed primarily in three complementary segments.
Segment Information
Revenues
---------------------------------------------------------------------------------------
For the Years Ended December 31, 2000 1999 1998
---------------------------------------------------------------------------------------
(Dollars in Thousands)
Reservoir Description....................... $ 190,726 $ 200,584 $ 205,718
Production Enhancement...................... 94,341 65,342 46,037
Reservoir Management........................ 51,031 56,831 65,363
---------------------------------------------------------------------------------------
Total Revenues......................... $ 336,098 $ 322,757 $ 317,118
=======================================================================================
Income (loss) before interest, taxes and
unusual charges
---------------------------------------------------------------------------------------
For the Years Ended December 31, 2000 1999 (a) 1998
---------------------------------------------------------------------------------------
(Dollars in Thousands)
Reservoir Description....................... $ 23,411 $ 22,095 $ 26,746
Production Enhancement...................... 14,665 11,339 8,217
Reservoir Management........................ (2,764) (3,417) 2,398
Corporate and other......................... 279 (108) 260
---------------------------------------------------------------------------------------
Income before interest, taxes and
unusual charges.................... $ 35,591 $ 29,909 $ 37,621
=======================================================================================
(a) The above segment amounts exclude unusual charges totaling $17,706
in 1999. The unusual charges, which are comprised of write-offs,
restructuring charges and other charges in the first quarter and fourth
quarter of 1999, were allocated to each segment as follows: Reservoir
Description - $8,397; Production Enhancement - $2,854; Reservoir
Management - $2,759 and Corporate and other - $3,696 which consists of
costs related to the termination of the proposed GeoScience acquisition
Reservoir Description
Reservoir Description revenues for 2000 were $190.7 million, an
increase of 4% compared to 1999 revenues and 6% compared to 1998 revenues after
excluding the revenues attributable to our environmental testing assets, which
were sold in 1999. When revenues attributable to our environmental testing
assets are included in 1999 and 1998, this segment's revenues decreased by 5%
and 7%, respectively.
Income before interest, taxes and unusual charges in 2000 increased
$1.3 million as compared to 1999 and decreased $3.3 million as compared to 1998.
Our margins in this segment came under pressure in 1999 as our clients reduced
spending in response to lower oil and gas prices.
13
Production Enhancement
Production Enhancement revenues for 2000 were $94.3 million, an
increase of 44% compared to 1999 revenues and 105% compared to 1998 revenues.
Income before interest, taxes and unusual charges in 2000 was $14.7 million,
which was an increase of 29% and 78% as compared to 1999 and 1998, respectively.
The increases in revenues and income result primarily from increased demand for
well completion and stimulation technologies provided by ProTechnics and Owen.
Reservoir Management
Reservoir Management revenues for 2000 were $51.0 million, a decrease
of 10% compared to 1999 revenues and 22% compared to 1998 revenues. Due to the
decline in revenues and lower margins, we experienced a loss of $2.8 million in
this segment in 2000, versus a loss of $3.4 million in 1999 and earnings of $2.4
million in 1998. Of all our operations, this segment was affected to the
greatest extent by the industry downturn in 1999 and virtually flat
international spending by our clients in 2000. Demand for our seismic related
services was weak throughout 1999 and 2000 across most regions. Part of this
loss can be attributed to expenditures we made for research and development and
marketing of new reservoir optimization technologies. We have taken and will
continue to take actions, when appropriate, to control our costs and generate
additional service revenues in order to improve our results in this segment.
Liquidity and Capital Resources
We have historically financed our activities through cash flows from
operations, bank credit facilities, equity financing and the issuance of debt.
During the year ended December 31, 2000, cash flows from operating
activities were $7.3 million, an increase of $2.1 million and $1.3 million from
the corresponding periods in 1999 and 1998, respectively. At December 31, 2000,
we had working capital of $123.7 million compared to working capital of $93.7
million at December 31, 1999 and $62.0 million at December 31, 1998. We are a
Netherlands holding company and we conduct substantially all of our operations
through subsidiaries. Consequently, our cash flow is dependent upon the ability
of our subsidiaries to pay cash dividends or otherwise distribute or advance
funds to us.
Our financing activities provided $15.1 million in 2000, an increase of
$19.8 million compared to 1999 and $3.5 million compared to 1998. Our investing
activities used $28.4 million in 2000 after having provided $9.6 million in 1999
and using $22.8 million in 1998. The significant financing and investing
activities in 2000 were as follows:
o During the second quarter of 2000 we completed a public offering
in which certain shareholders sold 4,644,988 of their common
shares. In connection with the offering, the underwriters
exercised their over-allotment option and purchased 696,748 common
shares from us which resulted in net proceeds of $17.2 million.
These funds were used principally to reduce indebtedness and fund
capital expenditures.
o Indebtedness and capital leases were reduced by a total of $5.9
million.
o We incurred capital expenditures from continuing operations of
$32.8 million which included cash outlays for the facility
consolidation in Houston.
14
Our ability to maintain and grow our operating income and cash flow is
dependent upon continued capital spending. We believe our future cash flow from
operations, supplemented by our borrowing capacity and issuances of additional
equity should be sufficient to fund debt requirements, capital expenditures,
working capital and future acquisitions.
Due to the low inflationary rates in 2000, 1999 and 1998, the impact of
inflation on our results of operations was insignificant.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk, which is the potential loss arising from
adverse changes in market prices and rates. We do not enter, or intend to enter,
into derivative financial instruments for trading or speculative purposes. We do
not believe that our exposure to market risks, which are primarily related to
interest rate changes and fluctuations in foreign exchange rates, are material.
During 1999, we issued fixed rate Senior Notes denominated in U.S. dollars. The
proceeds were used to pay off variable rate term loans. This significantly
reduced our exposure to market risk. This section should be read in conjunction
with "Note 5 - Long-Term Debt" and "Note 9 - Concentration of Credit Risk" of
the Notes to Consolidated Financial Statements.
Item 8. Financial Statements and Supplementary Data
For the financial statements and supplementary data required by this
Item 8, see index to Consolidated Financial Statements and Schedules at Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
15
PART III
Part III (Items 10 through 13) will be incorporated by reference
pursuant to Regulation 14A under the Securities Exchange Act of 1934. The
Registrant expects to file a definitive proxy statement with the Securities
and Exchange Commission within 120 days after the close of the year ended
December 31, 2000.
16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements
The following reports, financial statements and schedules are filed
herewith on the pages indicated:
Page
----
Report of Independent Public Accountants............................20
Consolidated Balance Sheets as of December 31, 2000 and 1999........21
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998.................................22
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 2000, 1999 and 1998.............23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998.................................24
Notes to Consolidated Financial Statements..........................25
Financial Statement Schedules
All schedules have been omitted because they are not applicable, not
required under the instructions, or the information requested is set forth in
the consolidated financial statements or related notes hereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 2000.
17
(c) Exhibits
The following exhibits are incorporated by reference to the filing
indicated or are filed herewith.
Incorporated by
Reference from the
Exhibit No. Exhibit Title Following Documents
- ----------- ------------- ------------------
3.1 -- Articles of Association of the Company, as amended (including Form F-1, September 20, 1995
English translation)
4.1 -- Form of certificate representing Common Shares Filed Herewith
10.1 -- Core Laboratories N.V. 1995 Long-Term Incentive Plan (as amended and Proxy Statement dated May 2,
restated effective as of May 29, 1997) 1997 for Annual Meeting of
Shareholders
10.2 -- Core Laboratories N.V. 1995 Nonemployee Director Stock Option Plan Proxy Statement dated May 2,
(as amended and restated effective as of May 29, 1997) 1997 for Annual Meeting of
Shareholders
10.3 -- Form of Registration Rights Agreement to be entered into by the Form 10-Q, November 10, 1995
Company and certain of its shareholders, dated September 15, 1995
10.4 -- Purchase and Sale Agreement between Core Holdings B.V. and Western Form F-1, September 20, 1995
Atlas International, Inc., Western Atlas International Nigeria Ltd.,
Western Atlas de Venezuela, C.A., Western Atlas Canada Ltd. and Core
Laboratories Australia Pty. Ltd. dated as of September 30, 1994
10.5 -- Form of Indemnification Agreement to be entered into by the Company Form F-1, September 20, 1995
and certain of its directors and officers
10.6 -- Indemnification Agreements, each dated as of October 20, 1995, Form 10-Q, November 10, 1995
between the Company and each of its directors and executive officers
10.7 -- Amended and Restated Credit Agreement among Core Laboratories N.V., Form S-3, November 20, 1997
Core Laboratories, Inc., Core Laboratories (U.K.) Limited, Bankers
Trust Company, NationsBank, N.A. and the Bank Group, dated as of
July 18, 1997
10.8 -- Core Laboratories Supplemental Executive Retirement Plan effective Form 10-K, March 31, 1998
as of January 1, 1998
10.9 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
David Michael Demshur dated as of August 18, 1998
10.10 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Richard Lucas Bergmark dated as of August 18, 1998
10.11 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Monty Lee Davis dated as of August 18, 1998
10.12 -- Form of Employment Agreement between Core Laboratories N.V. and John Form 10-K, March 31, 1999
David Denson dated as of August 18, 1998
10.13 -- Core Laboratories Supplemental Executive Retirement Plan for John D. Form 10-Q, November 15, 1999
Denson effective January 1, 1999
10.14 -- Core Laboratories Supplemental Executive Retirement Plan for Monty Form 10-Q, November 15, 1999
L. Davis effective January 1, 1999
10.15 -- Amendment to Core Laboratories Supplemental Executive Retirement Form 10-Q, November 15, 1999
Plan filed January 1, 1998, effective July 29, 1999
10.16 -- Amendment to Amended and Restated Credit Agreement among Core Form 10-Q, November 15, 1999
Laboratories N.V., Core Laboratories, Inc., Core Laboratories (U.K.)
Limited, Bankers Trust Company, Bank of America, N.A. and the Bank
Group, dated as of July 22, 1999
10.17 -- Note and Guarantee Agreement by Core Laboratories, Inc. for Form 10-Q, November 15, 1999
Guaranteed Senior Notes, Series A, and Guaranteed Senior Notes,
Series B, dated as of July 22, 1999
10.18 -- First Amendment to Core Laboratories N.V. 1995 Long-Term Incentive Filed Herewith
Plan (As Amended and Restated Effective as of May 29, 1997)
10.19 -- Second Amendment to Core Laboratories N.V. Nonemployee Director Filed Herewith
Stock Option Plan (As Amended and Restated Effective as of
May 29, 1997)
21.1 -- Subsidiaries of the Registrant Filed Herewith
23.1 -- Consent of Arthur Andersen LLP Filed Herewith
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CORE LABORATORIES N.V.
By: Core Laboratories International B.V.
Date: March 15, 2001 By: /s/ JACOBUS SCHOUTEN
--------------------------------
Jacobus Schouten
Supervisory Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on the 15th day of March, 2001.
Signature Title
--------- -----
/s/ DAVID M. DEMSHUR President, Chief Executive Officer
- -------------------------------------------------------------- and Supervisory Director (Principal
David M. Demshur Executive Officer and Authorized
Representative in the United States)
/s/ RICHARD L. BERGMARK Executive Vice President, Treasurer and
- -------------------------------------------------------------- Supervisory Director
Richard L. Bergmark
/s/ RANDALL D. KEYS Chief Financial Officer (Principal
- -------------------------------------------------------------- Financial and Accounting Officer)
Randall D. Keys
/s/ BOB G. AGNEW Supervisory Director
- --------------------------------------------------------------
Bob G. Agnew
/s/ JOSEPH R. PERNA Supervisory Director
- --------------------------------------------------------------
Joseph R. Perna
/s/ TIMOTHY J. PROBERT Supervisory Director
- --------------------------------------------------------------
Timothy J. Probert
/s/ JACOBUS SCHOUTEN Supervisory Director
- --------------------------------------------------------------
Jacobus Schouten
/s/ STEPHEN D. WEINROTH Supervisory Director
- --------------------------------------------------------------
Stephen D. Weinroth
/s/ RENE R. JOYCE Supervisory Director
- --------------------------------------------------------------
Rene R. Joyce
/s/ D. JOHN OGREN Supervisory Director
- --------------------------------------------------------------
D. John Ogren
/s/ ALEXANDER VRIESENDORP Supervisory Director
- --------------------------------------------------------------
Alexander Vriesendorp
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Supervisory Board of Directors and Shareholders of
Core Laboratories N.V.:
We have audited the accompanying consolidated balance sheets of Core
Laboratories N.V. (a Netherlands corporation) and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Core Laboratories
N.V. and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with the accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
March 8, 2001
20
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(In thousands, except share data)
ASSETS 2000 1999
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 12,918 $ 18,983
Accounts receivable, less allowance for doubtful accounts of $9,067 and $9,850
in 2000 and 1999, respectively.......................................... 110,915 84,941
Inventories ................................................................ 34,067 24,768
Prepaid expenses and other.................................................. 7,053 10,341
Deferred tax asset.......................................................... 10,265 6,429
---------- ----------
Total current assets ................................................... 175,218 145,462
PROPERTY, PLANT AND EQUIPMENT, net............................................... 83,338 70,985
INTANGIBLES AND GOODWILL, net.................................................... 147,918 151,098
OTHER LONG-TERM ASSETS........................................................... 4,130 5,638
---------- ----------
Total assets ........................................................... $ 410,604 $ 373,183
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ....................................... $ 632 $ 1,796
Current lease obligations................................................... 247 1,372
Accounts payable............................................................ 25,186 19,774
Accrued payroll and related costs .......................................... 6,979 8,320
Taxes other than payroll and income......................................... 4,743 4,050
Unearned revenues........................................................... 3,842 3,902
Income tax payable ......................................................... 5,365 3,268
Other accrued expenses ..................................................... 4,516 9,313
---------- ----------
Total current liabilities .............................................. 51,510 51,795
LONG-TERM DEBT .................................................................. 82,015 84,975
DEFERRED COMPENSATION............................................................ 3,642 3,036
DEFERRED TAX LIABILITY .......................................................... 7,486 4,561
LONG-TERM LEASE OBLIGATIONS...................................................... 35 660
OTHER LONG-TERM LIABILITIES...................................................... 12,170 14,549
COMMITMENTS AND CONTINGENCIES (NOTE 11)
MINORITY INTEREST................................................................ 1,888 1,290
SHAREHOLDERS' EQUITY:
Preference shares, NLG 0.03 par value; 3,000,000 shares authorized, none issued
or outstanding.......................................................... -- --
Common shares, NLG 0.03 par value; 100,000,000 shares authorized, 32,208,364 and
31,203,956 issued and outstanding at 2000 and 1999, respectively........ 534 521
Additional paid-in capital ................................................. 182,695 162,319
Retained earnings........................................................... 68,629 49,477
---------- ----------
Total shareholders' equity.............................................. 251,858 212,317
---------- ----------
Total liabilities and shareholders' equity......................... $ 410,604 $ 373,183
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
21
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000, 1999 and 1998
(In thousands, except share and per share data)
2000 1999 1998
---- ---- ----
SERVICES ..................................................... $ 258,684 $ 264,691 $ 279,840
SALES......................................................... 77,414 58,066 37,278
----------- ----------- ------------
336,098 322,757 317,118
OPERATING EXPENSES:
Costs of services ....................................... 206,403 214,850 222,578
Costs of sales........................................... 62,252 48,373 26,845
General and administrative expenses ..................... 13,540 12,301 8,447
Depreciation and amortization............................ 15,111 15,939 16,378
Goodwill amortization.................................... 4,107 4,127 3,013
Write-offs and other charges............................. -- 10,670 --
Restructuring charges.................................... -- 7,036 --
Other (income) expense, net.............................. (906) (2,742) 2,236
----------- ------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INTEREST EXPENSE AND INCOME TAX.......................... 35,591 12,203 37,621
INTEREST EXPENSE ............................................. 8,231 8,557 6,800
----------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX .............................................. 27,360 3,646 30,821
INCOME TAX EXPENSE ........................................... 8,208 1,266 9,628
----------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS............................. 19,152 2,380 21,193
LOSS FROM DISCONTINUED OPERATIONS, net of
income tax benefit of $93............................... -- -- (217)
LOSS ON SALE OF DISCONTINUED
OPERATIONS, net of income tax benefit of $1,446.......... -- -- (3,374)
----------- ----------- ------------
NET INCOME ................................................... $ 19,152 $ 2,380 $ 17,602
=========== =========== ============
PER SHARE DATA:
Income from continuing operations........................ $ 0.60 $ 0.08 $ 0.74
Loss from discontinued operations........................ -- -- (0.01)
Loss on sale of discontinued operations.................. -- -- (0.12)
----------- ----------- ------------
Basic earnings per share................................. $ 0.60 $ 0.08 $ 0.61
=========== =========== ============
WEIGHTED AVERAGE BASIC COMMON
SHARES OUTSTANDING.................................... 31,789,889 30,874,315 28,653,977
=========== =========== ===========
Income from continuing operations........................ $ 0.58 $ 0.07 $ 0.71
Loss from discontinued operations........................ -- -- (0.01)
Loss on sale of discontinued operations.................. -- -- (0.11)
----------- ----------- -----------
Diluted earnings per share............................... $ 0.58 $ 0.07 $ 0.59
=========== =========== ============
WEIGHTED AVERAGE DILUTED COMMON
SHARES OUTSTANDING.................................... 32,941,433 31,867,547 29,679,895
=========== =========== ============
The accompanying notes are an integral part of these consolidated
financial statements.
22
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2000, 1999 and 1998
(In thousands, except share data)
Common Shares
--------------------- Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
------------ ------- --------- --------- ----------
BALANCE, December 31, 1997 (as previously reported)........ 25,589,180 $ 439 $ 90,180 $ 24,868 $ 115,487
ADJUSTMENT FOR POOLINGS OF INTEREST............... ........ 956,365 12 317 4,442 4,771
------------ ------- --------- --------- ----------
RESTATED BALANCE, December 31, 1997........................ 26,545,545 451 90,497 29,310 120,258
------------ ------- --------- --------- ----------
ADJUSTMENT FOR POOLING OF INTEREST......................... 330,362 5 2,214 185 2,404
SHARES ISSUED FOR 1998
PURCHASE ACQUISITIONS................................. 3,389,845 51 61,298 -- 61,349
STOCK OPTIONS EXERCISED.................................... 357,280 6 1,760 -- 1,766
NET INCOME................................................. -- -- -- 17,602 17,602
------------ ------- --------- --------- ----------
BALANCE, December 31, 1998................................. 30,623,032 513 155,769 47,097 203,379
------------ ------- --------- --------- ----------
SHARES ISSUED FOR 1999
PURCHASE ACQUISITIONS................................. 284,524 4 4,558 -- 4,562
STOCK OPTIONS EXERCISED.................................... 296,400 4 1,992 -- 1,996
NET INCOME................................................. -- -- -- 2,380 2,380
------------ ------- --------- --------- ----------
BALANCE, December 31, 1999................................. 31,203,956 521 162,319 49,477 212,317
------------ ------- --------- --------- ----------
EXERCISE OF OVER-ALLOTMENT OPTION.......................... 696,748 9 17,239 -- 17,248
STOCK OPTIONS EXERCISED.................................... 307,660 4 3,137 -- 3,141
NET INCOME................................................. -- -- -- 19,152 19,152
------------ ------- --------- --------- ----------
BALANCE, December 31, 2000................................. 32,208,364 $ 534 $ 182,695 $ 68,629 $ 251,858
============ ======= ========= ========= ==========
The accompanying notes are an integral part of these consolidated
financial statements.
23
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 19,152 $ 2,380 $ 17,602
Loss from discontinued operations........................ -- -- 217
Adjustments to reconcile to net cash
provided by (used in) operating activities--
Depreciation and amortization.......................... 15,111 15,939 16,378
Goodwill amortization.................................. 4,107 4,127 3,013
(Gain) loss on sale of fixed assets.................... (627) (777) 67
Loss on sale of discontinued operations................ -- -- 3,374
Changes in assets and liabilities:
(Increase) decrease in accounts receivable........... (24,332) 1,667 3,004
Increase in inventories.............................. (9,299) (12,014) (2,595)
(Increase) decrease in prepaid expenses and other.... 3,296 10 (3,337)
Increase in net deferred tax asset................... (911) (1,345) (8,415)
Increase (decrease) in accounts payable.............. 4,629 (978) (9,952)
Decrease in accrued liabilities...................... (4,116) (3,873) (238)
Increase (decrease) in other long-term liabilities... (2,661) 1,054 (13,837)
Other ............................................... 2,918 (1,037) 544
---------- --------- ---------
Net cash provided by continuing operations........... 7,267 5,153 5,825
Net cash provided by discontinued operations......... -- -- 111
---------- --------- ---------
Net cash provided by operating activities ......... 7,267 5,153 5,936
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of continuing operations............ (32,845) (19,545) (31,783)
Acquisitions, net of cash acquired....................... -- 3,945 --
Proceeds from sale of assets ............................ 4,135 25,322 4,906
Proceeds from sale of discontinued operations............ -- -- 4,114
Other ................................................... 299 (172) --
---------- --------- ---------
Net cash provided by (used in) investing activities.... (28,411) 9,550 (22,763)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from over-allotment option.................. 17,248 -- --
Repayment of debt ....................................... (4,124) (106,820) (16,950)
Borrowings under debt facilities......................... -- 102,304 25,798
Capital lease obligations, net........................... (1,750) (666) 797
Stock options exercised.................................. 3,141 1,996 1,766
Debt issuance costs...................................... -- (1,206) --
Other.................................................... 564 (284) 121
---------- --------- ---------
Net cash provided by (used in) financing activities.... 15,079 (4,676) 11,532
---------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS....................... (6,065) 10,027 (5,295)
CASH AND CASH EQUIVALENTS, beginning of period................ 18,983 8,956 14,251
---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period...................... $ 12,918 $ 18,983 $ 8,956
========== ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
24
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. DESCRIPTION OF BUSINESS
Core Laboratories N.V., a Netherlands corporation, and its wholly owned
subsidiaries ("Core Laboratories", "we", "our" or "us") is one of the world's
leading providers of proprietary and patented reservoir description, production
enhancement and reservoir management services. These services enable our clients
to improve reservoir performance and increase oil and gas recovery from their
producing fields. We provide our services to the world's major, national and
independent oil companies. We currently operate over 70 offices in more than 50
countries.
Our business units have been aggregated into three complementary
segments which provide products and services for improving reservoir performance
and increasing oil and gas recovery from new and existing fields.
o Reservoir Description: Encompasses the characterization of
petroleum reservoir rock, fluid and gas samples. We provide
analytical and field services to characterize properties of crude
oil and petroleum products to the oil and gas industry.
o Production Enhancement: Includes products and services relating to
reservoir well completions, perforations, stimulations and
production. We provide integrated services to evaluate the
effectiveness of well completions and to develop solutions aimed
at increasing the effectiveness of enhanced oil recovery projects.
o Reservoir Management: Combines and integrates information from
reservoir description and production enhancement services to
increase production and improve recovery of oil and gas from our
clients' reservoirs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Core Laboratories and have been prepared in accordance with United States
("U.S.") generally accepted accounting principles ("GAAP"). All significant
intercompany transactions and balances have been eliminated. The equity method
of accounting is used for all investments in which we have less than a majority
interest and we do not exercise control. A minority interest liability has been
recorded to reflect outside ownership attributable to consolidated subsidiaries
that are less than 100% owned.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
25
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and all highly liquid
debt instruments with an original maturity of three months or less when
purchased.
Inventories
Inventories consist of manufactured goods, materials and supplies used
for sales or services provided to customers. Inventories are stated at the lower
of average or standard cost (includes direct material, labor and overhead) or
estimated net realizable value, and are reflected net of valuation reserves of
$1,196,000 and $1,258,000 in 2000 and 1999, respectively. Inventories consisted
of the following (in thousands):
2000 1999
---------- ----------
Finished goods..................... $ 27,651 $ 17,128
Parts and materials................ 4,126 6,661
Work in process.................... 2,290 979
---------- ----------
Total................ $ 34,067 $ 24,768
========== ==========
Property, Plant and Equipment
Investments in property, plant and equipment are stated at cost.
Allowances for depreciation and amortization are calculated using the
straight-line method based on the estimated useful lives of the related assets
as follows:
Buildings ............................................. 10 - 40 years
Machinery and equipment ............................... 3 - 10 years
The components of property, plant and equipment are as follows (in
thousands):
2000 1999
---------- ----------
Land $ 2,622 $ 2,855
Building and leasehold improvements....................... 27,370 20,010
Machinery and equipment................................... 92,553 79,360
Construction in process................................... 5,770 8,858
---------- ----------
128,315 111,083
Less - accumulated depreciation...................... (44,977) (40,098)
---------- ----------
$ 83,338 $ 70,985
========== ==========
Expenditures for repairs and maintenance are charged to expense as
incurred and major renewals and improvements are capitalized. Cost and
accumulated depreciation applicable to assets retired or sold are removed from
the accounts, and any resulting gain or loss is included in the Consolidated
Statement of Operations. We incurred approximately $3,118,000, $3,232,000 and
$3,169,000 in repair and maintenance expenses for the years ended December 31,
2000, 1999 and 1998, respectively.
Accounting for the Impairment of Long-Lived Assets
We account for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". SFAS No. 121 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. The statement sets forth guidance as to when
to recognize an impairment of long-
26
lived assets, including goodwill, and how to
measure such an impairment. We periodically assess the recoverability of our
long-lived assets. The measurement of possible impairment is based primarily on
the ability to recover the balance of the related asset from expected future
operating cash flows on an undiscounted basis.
Intangibles and Goodwill
Intangibles include patents, trademarks, service marks and trade names.
Goodwill represents the excess of purchase price over the value of the net
assets acquired in acquisitions accounted for as purchases. Intangibles and
goodwill are charged to expense in equal amounts over their estimated useful
lives. We believe that there have been no events or circumstances that warrant
revision to the remaining useful lives or which affect the recoverability of
intangibles and goodwill. The components of intangibles and goodwill are as
follows:
Original
Life
in Years 2000 1999
--------- ------------ ------------
(in thousands)
Acquired trade secrets........................... 5 $ 125 $ 48
Acquired patents, trademarks and trade names..... 10-20 3,686 1,867
Acquired trade name.............................. 40 4,614 4,614
------------ ------------
Total intangibles....................... 8,425 6,529
------------ ------------
Goodwill......................................... 5-10 2,506 2,404
Goodwill......................................... 20 3,736 4,517
Goodwill......................................... 40 147,784 147,770
------------ ------------
Total goodwill.......................... 154,026 154,691
------------ ------------
Total intangibles and goodwill.......... 162,451 161,220
Less - accumulated amortization.................. 14,533 10,122
------------ ------------
Net intangibles and goodwill............ $ 147,918 $ 151,098
============ ============
Long-Term Investments
Long-term investments of $615,000 and $1,695,000 at December 31, 2000
and 1999, respectively, are included in other long-term assets and represent our
investment in unconsolidated affiliated companies. These investments are
accounted for using the equity method of accounting.
Income Taxes
Income tax expense includes income taxes of The Netherlands, U.S. and
other foreign countries as well as local, state and provincial income taxes. We
recognize deferred tax assets or liabilities for the differences between the
financial statement carrying amount and tax basis of assets and liabilities
using tax rates at the end of the period.
Revenue Recognition
Revenues are recognized as services are completed or as delivery of
product occurs. All advance client payments are classified as unearned revenues
until services are completed or products are shipped.
27
Foreign Currencies
Our functional currency is the U.S. dollar. Accordingly, foreign
entities remeasure monetary assets and liabilities to U.S. dollars at year-end
exchange rates, while non-monetary items are remeasured at historical rates.
Revenues and expenses are remeasured at the applicable month-end rate, except
for depreciation, amortization and cost of sales, which are remeasured at
historical rates. Remeasurement gains and losses are included in other income
and expense in the Consolidated Statements of Operations.
Research and Development
While we have acquired many of our new technologies, we incur expenses
relating to our ongoing research and development program. We view the cost to
acquire many of our technologies to be, in essence, expenditures to gain the
benefit of the acquired company's research and development projects. Research
and development expenditures are charged to expense as incurred. We incurred
approximately $5,012,000, $1,949,000 and $2,150,000 in research and development
expenses for the years ended December 31, 2000, 1999 and 1998, respectively.
Earnings Per Share
We present earnings per share in accordance with SFAS No. 128,
"Earnings per Share" which requires dual presentation of both basic and diluted
earnings per share on the Consolidated Statement of Operations. Basic earnings
per common share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflects the net additional shares which
would be issued if all dilutive stock options outstanding were exercised.
The following table summarizes the calculation of weighted average
common shares outstanding used in the computation of earnings per share:
2000 1999 1998
-------------- -------------- --------------
Weighted average basic common
shares outstanding.................................. 31,789,889 30,874,315 28,653,977
Effect of dilutive stock options....................... 1,151,544 993,232 1,025,918
-------------- -------------- --------------
Weighted average diluted common
shares outstanding.................................. 32,941,433 31,867,547 29,679,895
============== ============== ==============
Recent Pronouncements
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued and was subsequently amended by SFAS No. 137,
which delayed its effective date. As a result, SFAS No. 133 will be effective
for fiscal years beginning after June 15, 2000, and establishes accounting and
reporting standards for derivative instruments (including certain derivative
instruments embedded in other contracts). We do not enter into derivative
instruments or buy and sell commodities. Accordingly, adoption of SFAS No. 133
did not have an impact on our financial position or operational results.
In December 1999, the Securities and Exchange Commission ("SEC"),
issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements", which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 requires companies to
report any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion 20, "Accounting Changes". The implementation of the SEC's guidance
did not result in a change to our revenue recognition policy.
28
The Emerging Issues Task Force ("EITF") issued EITF 00-10 which gave
further guidance on revenue recognition. EITF 00-10 required that revenue be
recognized on all amounts billed to a customer in a sale transaction related to
shipping and handling. As a result of the application of this guidance in
December 2000, we recognized shipping charges as revenues and an increase to
cost of sales. Prior period financial statements reflect this change, which was
less than 1% of revenues.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
3. ACQUISITIONS
2000 Acquisitions
On December 20, 2000, we acquired all of the outstanding shares of Core
Petrophysics, Inc. ("CPI"), a privately held company based in Houston, Texas.
CPI is engaged in the petrophysical characterization of partially consolidated
and unconsolidated reservoirs which make up the majority of deepwater reservoirs
around the world. We issued approximately 516,000 shares in a share-for-share
exchange. The transaction was accounted for using the pooling-of-interests
method of accounting. Accordingly, our consolidated financial statements have
been restated for all periods prior to the date of acquisition to include the
financial position and results of operations of CPI.
On June 20, 2000, we acquired all of the outstanding shares of
Production Enhancement Corporation ("PENCOR"), a privately held company based in
Broussard, Louisiana. PENCOR provides fluid phase behavior services used to
characterize crude oils, natural gases and other reservoir fluids. We issued
approximately 275,000 shares in exchange for all of the outstanding shares of
PENCOR and assumed approximately $2.5 million in debt. The transaction was
accounted for using the pooling-of-interests method of accounting. Accordingly,
our consolidated financial statements have been restated for all periods prior
to the date of acquisition to include the financial position and results of
operations of PENCOR.
On January 12, 2000, we acquired all of the outstanding shares of
TomoSeis Corporation ("TomoSeis"), a privately held company based in Houston,
Texas. TomoSeis provides detailed reservoir imaging services that are a
component of timelapse (4D) seismic and reservoir monitoring programs. We issued
approximately 232,000 shares and assumed outstanding stock options exercisable
for approximately 396,000 of our common shares. Proceeds from the exercise of
these stock options would be approximately $2.1 million. The transaction was
accounted for using the pooling-of-interests method of accounting. Accordingly,
our consolidated financial statements have been restated for all periods prior
to the date of acquisition to include the financial position and results of
operations of TomoSeis.
1999 Acquisitions
On August 2, 1999, we acquired all of the outstanding shares of
Reservoirs, Inc. ("Reservoirs"), a privately held company based in Texas.
Reservoirs provides reservoir description services to the oil industry and is a
recognized leader in the geology and petrophysics of deepwater reservoirs. We
issued approximately 252,000 shares in a transaction that was accounted for
using the purchase method of accounting. The transaction resulted in an
allocation of approximately $4.1 million to goodwill, which is being amortized
over a 20-year period.
29
On July 1, 1999, we acquired all of the outstanding shares of
Coherence Technology Company, Inc. ("CTC"), a privately held company based in
Texas. CTC provides specialized seismic data processing and interpretation
services and is exclusively licensed by BP Amoco to provide its patented
Coherence Cube data processing technology to the worldwide petroleum industry.
We issued approximately 171,000 shares in a transaction which was accounted for
as a pooling-of-interests. As part of the transaction, we assumed approximately
$1.0 million in CTC bank debt and also issued approximately 135,000 shares to a
second lender as debt repayment. Our consolidated financial statements have been
restated for all prior periods to include the financial position and results of
operations of CTC.
On January 7, 1999, we acquired receivables and certain fixed assets
from Isotag Specialist, Inc. ("Isotag"), and its related company, Fred Calaway
and Co. Both companies were privately held and based in Texas. Isotag provides
production enhancement and related services. We issued approximately 33,000
shares for the assets of Isotag and accounted for the transaction using the
purchase method of accounting. The transaction resulted in an allocation of
approximately $0.4 million to goodwill, which is being amortized over a 20-year
period.
1998 Acquisitions
On December 30, 1998, we acquired all of the outstanding shares of
Thru-Tubing Technology, Inc. ("Thru-Tubing"), a privately held company based in
Louisiana. Thru-Tubing manufactures downhole remedial products which complement
our well completion and stimulation technologies. We issued approximately
195,000 shares in exchange for all of the outstanding shares of Thru-Tubing and
accounted for the transaction using the pooling-of-interests method of
accounting. Thru-Tubing's results of operations for the year ended December 31,
1998 are included in the consolidated financial statements. Our consolidated
financial statements for periods prior to 1998 were not restated for this
acquisition due to immateriality.
We acquired all of the outstanding shares of The Andrews Group
International, Inc. and A.G.I. Mexicana S.A. de C.V. in December 1998
(collectively referred to as the "Andrews Group"). The Andrews Group provides
specialized seismic data processing and interpretation services, as well as
other geophysical, geological and engineering services. We issued approximately
715,000 shares in exchange for all of the outstanding shares of the Andrews
Group and accounted for the transaction using the pooling-of-interests method of
accounting. Our consolidated financial statements have been restated for all
periods prior to the date acquired to include the financial position and results
of operations of the Andrews Group.
On October 28, 1998, we acquired all of the outstanding shares of
Integra Geoservices, Inc. ("Integra"), a privately held company based in Canada.
Integra provides specialized geophysical seismic processing services used to
characterize and describe petroleum reservoirs. We issued approximately 86,000
shares in exchange for all of the outstanding shares of Integra and accounted
for the transaction using the purchase method of accounting. The transaction
resulted in an allocation of approximately $2.8 million to goodwill, which is
being amortized over a 40-year period.
On August 31, 1998, we acquired all of the remaining shares of Jaex
S.A. de C.V. ("Jaex"), a privately held company based in Mexico, that were not
previously acquired through our acquisition of Owen Oil Tools, Inc. ("Owen"). We
previously owned 50.00098% of Jaex. Jaex provides well completion and
stimulation technologies to the petroleum industry. We issued approximately
765,000 shares in exchange for the remaining interest of Jaex and accounted for
the acquisition using the purchase method of accounting. The transaction
resulted in an allocation of approximately $8.2 million to goodwill, which is
being amortized over a 40-year period.
On July 31, 1998, we acquired all of the outstanding shares of PETRAK
Group S.A. ("Petrak"), a privately held company based in Switzerland. Petrak
specializes in characterizing reservoir fluids and their derivatives. We issued
approximately 263,000 shares in exchange for all of the outstanding shares of
30
Petrak and accounted for the transaction using the purchase method of
accounting. The transaction resulted in an allocation of approximately $3.9
million to goodwill, which is being amortized over a 40-year period.
On June 30, 1998, we acquired all of the outstanding shares of Owen, a
privately held company based in Texas. Owen and its subsidiaries provide well
completion and stimulation technologies to the petroleum industry. We issued
approximately 2,277,000 shares in exchange for all of the outstanding shares of
Owen and accounted for the transaction using the purchase method of accounting.
The transaction resulted in an allocation of approximately $41.5 million to
goodwill, which is being amortized over a 40-year period.
The following unaudited information presents the results of operations
on a pro forma basis as though the 1998 acquisitions accounted for using the
purchase method occurred on January 1, 1998. The following is presented for
informational purposes only and may not be indicative of actual operating
results that would have been achieved. All amounts are in thousands, except per
share data.
1998
-----------
(Unaudited)
Revenues........................................................... $ 348,195
Income from continuing operations.................................. $ 24,726
Net income......................................................... $ 21,135
Basic earnings per share from continuing operations................ $ 0.86
Diluted earnings per share from continuing operations.............. $ 0.83
4. DISCONTINUED OPERATIONS
In early 1998, we concluded that our packaged analyzer line of business
was no longer strategic and made a decision to discontinue this product line.
Subsequently, on April 8, 1998, we sold the majority of the net assets of our
packaged analyzer business line for approximately $4.1 million in cash,
resulting in a loss on sale of $1.3 million. Goodwill specifically related to
this business line of approximately $2.6 million was also written off, as was
$1.0 million of work-in-process inventory which was subsequently abandoned.
These amounts are included in the loss on disposition of discontinued
operations.
The results of the packaged analyzer business line have been reported
separately as discontinued operations in the Consolidated Statements of
Operations. Consolidated financial statements prior to 1998 have also been
restated to present the packaged analyzer business line as discontinued
operations.
The loss on the disposition of the packaged analyzer business line is
summarized below (in thousands):
1998
----------
Write-down of work in process.................................................. $ 988
Write-off of goodwill related to the packaged analyzer business line........... 2,563
Loss on sale of packaged analyzer business line................................ 1,269
----------
Loss on disposition of discontinued operations............................ 4,820
Income tax benefit............................................................. 1,446
----------
Loss on disposition of discontinued operations, net of tax................ $ 3,374
==========
31
5. LONG-TERM DEBT
Long-term debt is summarized in the following table (in thousands):
2000 1999
---------- ----------
Credit Facility with a bank group:
$100,000 revolving debt facilities................................. $ 7,000 $ 7,000
Senior notes............................................................ 75,000 75,000
Other indebtedness...................................................... 647 4,771
---------- ----------
Total debt..................................................... 82,647 86,771
Less - current maturities............................................... 632 1,796
---------- ----------
Total long-term debt........................................... $ 82,015 $ 84,975
========== ==========
In July 1999, we entered into a $100 million Credit Facility which
provides for (i) a committed revolving debt facility of $95 million and (ii) a
Netherlands guilder denominated revolving debt facility with U.S. dollar
equivalency of $5 million. At December 31, 2000, approximately $93 million was
available for borrowing under the revolving debt facility. Loans under the
Credit Facility bear interest from LIBOR plus 1.25% to a maximum of LIBOR plus
1.75%. The average interest rate in effect at December 31, 2000 was 7.97% and
the average for 2000 was 8.13%. The revolving debt facilities require interest
payments only, until maturity in June 2004.
In July 1999, we issued $75 million in Senior Notes which bear an
average interest rate of 8.16% and require annual principal payments beginning
in July 2005 and continuing through July 2011.
The terms of the Credit Facility and Senior Notes require us to meet
certain financial covenants, including certain minimum equity and cash flow
tests. We believe that we are in compliance with all such covenants contained in
our credit agreements. All of our material subsidiaries are guarantors or
co-borrowers under both credit agreements.
Scheduled maturities of long-term debt (in thousands):
2001...................................... $ 632
2002...................................... 15
2003...................................... --
2004...................................... 7,000
2005 and thereafter....................... 75,000
---------
Total................................ $ 82,647
=========
Total cash payments for interest were $6,922,000, $4,918,000 and
$6,090,000 for 2000, 1999 and 1998, respectively.
32
6. INCOME TAXES
The components of income from continuing operations before income taxes
for 2000, 1999 and 1998 are as follows (in thousands):
2000 1999 1998
---------- ---------- ----------
United States............................................ $ (3,546) $ (14,159) $ 9,344
Other countries.......................................... 30,906 17,805 21,477
---------- ---------- ----------
Income from continuing operations
before income tax........................... $ 27,360 $ 3,646 $ 30,821
========== ========== ==========
The components of income tax expense (benefit) for 2000, 1999 and 1998
are as follows (in thousands):
2000 1999 1998
---------- ---------- ----------
Current:
United States....................................... $ 198 $ (2,259) $ 3,411
Other countries..................................... 9,051 4,662 5,978
State and provincial................................ 202 296 241
---------- ---------- ----------
Total current.................................. 9,451 2,699 9,630
---------- ---------- ----------
Deferred:
United States....................................... (1,166) (2,428) (53)
Other countries..................................... 174 1,454 51
State and provincial................................ (251) (459) --
---------- ---------- ----------
Total deferred................................. (1,243) (1,433) (2)
---------- ---------- ----------
Income tax expense............................. $ 8,208 $ 1,266 $ 9,628
========== ========== ==========
The difference between income tax computed using The Netherlands
statutory income tax rate of 35% and our income tax expense as reported in the
accompanying Consolidated Statements of Operations for 2000, 1999 and 1998 are
as follows (in thousands):
2000 1999 1998
---------- ---------- ----------
Tax at The Netherlands income tax rate................... $ 9,576 $ 1,276 $ 10,787
International earnings taxed at rates lower than
The Netherlands statutory rate..................... (4,728) (2,987) (2,730)
Foreign sales corporation benefits....................... (18) -- (89)
Goodwill amortization and other
non-deductible expenses............................ 2,646 2,361 1,402
Change in valuation allowance............................ 781 779 17
State and provincial taxes............................... (49) (163) 241
---------- ---------- ----------
Income tax expense............................... $ 8,208 $ 1,266 $ 9,628
========== ========== ==========
33
Deferred tax assets and liabilities result from various temporary
differences between the financial statement carrying amount and the tax basis of
existing assets and liabilities. Deferred tax assets and liabilities as of
December 31, 2000 and 1999, respectively, are summarized as follows (in
thousands):
2000 1999
---------- ----------
Deferred tax assets:
Net operating loss carryforward.................................... $ 11,591 $ 7,015
Receivables........................................................ 546 506
Inventories........................................................ 126 126
Other.............................................................. 545 545
---------- ----------
Total deferred tax assets..................................... 12,808 8,192
Valuation allowance................................................ (2,543) (1,763)
---------- ----------
Net deferred tax asset........................................ 10,265 6,429
---------- ----------
Deferred tax liabilities:
Intangibles........................................................ (1,490) (1,490)
Property, plant and equipment...................................... (768) (740)
Other.............................................................. (5,228) (2,331)
---------- ----------
Total deferred tax liabilities................................ (7,486) (4,561)
---------- ----------
Total net deferred tax asset ................................. $ 2,779 $ 1,868
========== ==========
At December 31, 2000, we had net operating loss carryforwards for
income tax purposes in various tax jurisdictions. Of those carryforwards that
are subject to expiration, they will expire, if unused, over the years 2001
through 2019. We provide a valuation allowance due to the uncertainty of
realization of net operating loss carryforwards in certain foreign tax
jurisdictions. Cash payments of income taxes, net of refunds, were $3,368,000,
$4,413,000 and $8,410,000 in 2000, 1999 and 1998, respectively.
7. STOCK OPTIONS
We have two main stock option plans; the 1995 Long-Term Incentive Plan
(the "Plan") and the 1995 Nonemployee Director Stock Option Plan (the
"Nonemployee Director Plan"). We also assumed stock options outstanding for
three of our acquisitions: CTC, Reservoirs and TomoSeis. See Note 3 for more
information on these acquisitions.
Employee Stock Option Plan
The maximum number of shares under the Plan was initially limited to
1,300,000 common shares but was amended and restated effective as of May 1997
and May 2000 to authorize an additional 4,100,000 common shares for grant to
eligible employees. Options granted pursuant to the Plan are exercisable for a
period of 10 years and vest in equal installments over four years. The exercise
price of options granted under the Plan is the market value at the date of
grant.
1995 Nonemployee Director Stock Option Plan
The maximum number of shares under the Nonemployee Director Plan was
initially limited to 100,000 common shares but was amended and restated
effective as of May 1997 and May 2000 to authorize an additional 600,000 common
shares for grant to eligible Directors of Core Laboratories. Pursuant to the
Nonemployee Director Plan, beginning in 1996, 10,000 options are granted to each
eligible Director and 20,000 are granted to the chairman on an annual basis. The
options are exercisable for a period of 10 years and vest on the day before the
next annual shareholders meeting following the date of grant. The exercise price
of options granted under the plan is the market value at the date of grant.
34
Information regarding our stock options issued pursuant to our plans is
summarized below:
Weighted
Range of Average
Options: Shares Excercise Price Exercise Price
- ---------------------------------------------- ---------- --------------- --------------
Balance at December 31,1997................... 1,416,818 $1.28 - $17.88 $6.09
Options granted............................... 698,004 11.63 - 24.38 18.10
Options exercised............................. (294,612) 1.28 - 17.88 5.73
Options canceled.............................. (114,000) 6.00 - 24.38 14.51
----------
Balance at December 31, 1998.................. 1,706,210 1.28 - 24.38 11.39
----------
Options granted............................... 722,300 6.00 - 19.06 13.15
Options assumed through acquisitions.......... 70,406 0.01 - 61.19 8.76
Options exercised............................. (290,703) 2.75 - 13.06 6.52
Options canceled.............................. (60,056) 6.00 - 61.19 14.60
----------
Balance at December 31, 1999.................. 2,148,157 0.01 - 61.19 12.54
----------
Options granted............................... 763,000 19.38 - 28.44 19.46
Options assumed through acquisitions.......... 395,541 0.01 - 11.97 5.36
Options exercised............................. (305,660) 0.01 - 18.38 8.41
Options canceled.............................. (186,078) 6.00 - 61.19 11.70
----------
Balance at December 31, 2000.................. 2,814,960 $0.01 - $61.19 $13.79
==========
The weighted average contractual life remaining on outstanding stock
options was eight years at December 31, 2000.
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation", we apply APB Opinion 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for our stock-based
compensation plans. APB Opinion 25 does not require compensation costs to be
recorded on options which have exercise prices at least equal to the market
price of the stock on the date of grant. Accordingly, we have not recognized
compensation cost for our stock-based plans. Had compensation cost for our
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the optional method
prescribed by SFAS No. 123, our net income (loss) and net income (loss) per
share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share data):
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
Net income (loss):
As reported.......................................... $ 19,152 $ 2,380 $ 17,602
Pro forma............................................ $ 10,768 $ (5,473) $ 12,738
Basic net income (loss) per share:
As reported.......................................... $ 0.60 $ 0.08 $ 0.61
Pro forma............................................ $ 0.34 $ (0.18) $ 0.44
Diluted net income (loss) per share:
As reported.......................................... $ 0.58 $ 0.07 $ 0.59
Pro forma............................................ $ 0.33 $ (0.17) $ 0.43
35
The weighted average fair value of options granted in 2000, 1999 and
1998 of $13.36, $8.86 and $8.39, respectively, was estimated using the
Black-Scholes option-pricing model with the following assumptions:
2000 1999 1998
-------- -------- --------
Risk free interest rate................................... 5.0% 5.8% 6.7%
Expected volatility....................................... 66% 70% 69%
Expected lives (in years)................................. 8 9 9
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short-term maturities of
these instruments. We believe that the carrying amount of long-term debt,
excluding senior notes, approximates fair value as the majority of these
borrowings bear interest at floating market interest rates. The estimated fair
value of the $75,000,000 senior notes was approximately $79,569,000 at December
31, 2000, determined using long-term rates in effect on that date. These
estimates are not necessarily indicative of the amounts that could be realized
in a current market transaction.
9. CONCENTRATION OF CREDIT RISK
We derive our worldwide revenues from customers primarily in the oil
and gas industry. This industry concentration has the potential to impact our
overall exposure to credit risk, either positively or negatively, in that our
customers could be affected by similar changes in economic, industry or other
conditions. However, we believe that the credit risk posed by this industry
concentration is offset by the creditworthiness of our customer base. Our
portfolio of accounts receivable is comprised primarily of major international
corporate entities, government organizations and independent producers with
stable payment experience.
10. RETIREMENT AND OTHER PLANS
During 2000, we maintained three defined contribution plans (the
"Plans") for the benefit of eligible employees in the United States, Canada and
the United Kingdom. One of our acquisitions, PENCOR, maintained defined
contribution plans prior to the date of acquisition. In accordance with the
terms of each plan, we match the required portion of employee contributions up
to specified limits and under certain plans, we may make discretionary
contributions annually in accordance with the Plans. For the years ended 2000,
1999 and 1998 we expensed $2,079,000, $1,601,000 and $2,988,000 respectively,
for its matching and discretionary contributions to the Plans.
We provide a retirement benefit to substantially all of our Dutch
employees equal to 1.75% of each employee's final pay for each year of service,
subject to a maximum of 70%. Funding for this benefit is in the form of premiums
paid to an insurance company based upon each employee's age and current salary.
Salary increases require higher premiums, which are paid over future years and
are reflected, at their net present value, in other long-term liabilities.
Employees are 100% vested at all times. In the event an employee leaves Core
Laboratories, we are required to pay the backservice pension liability to the
insurance company. The insurance company has assumed substantially all risk
associated with the plan.
We also operated a defined benefit plan for a portion of our U.S.
employees which was suspended on December 31, 1997. The benefits under the plan
are based on years of service and the employee's final average earnings. We
expect this plan to be settled in 2001.
36
The components of net pension income related to the defined benefit
plan are as follows:
2000 1999 1998
------------ ------------ ------------
Service cost-benefits earned during the period........... $ 173,193 $ 144,082 $ 164,780
Interest cost on projected obligation.................... 527,362 512,090 503,820
Actual return on assets.................................. (816,831) (771,819) (721,630)
Net amortization and accrual............................. (56,443) -- --
------------ ------------ ------------
Net pension income.................................. $ (172,719) $ (115,647) $ (53,030)
============ ============ ============
Actuarial assumptions used for this calculation are as follows:
2000 1999 1998
------------ ------------ ------------
Discount rate............................................ 8.00% 8.00% 6.75%
Rate of return........................................... N/A 8.00% 8.00%
Rate of compensation increase............................ N/A N/A N/A
We have established deferred compensation contracts for certain
officers. The benefits under these contracts are fully vested and benefits are
paid when the participants attain 65 years of age. The charge to expense for
officer deferred compensation in 2000, 1999 and 1998 was approximately $450,000,
$385,000 and $307,000 respectively. Life insurance policies with cash surrender
values have been purchased for the purpose of funding the officer deferred
compensation contracts.
11. COMMITMENTS AND CONTINGENCIES
We may from time to time be subject to legal proceedings and claims
that arise in the ordinary course of business. We believe that the outcome of
current legal actions will not have a material adverse effect upon our
consolidated financial position or results of operations.
As security for bids and performance on certain contracts, we were
contingently liable at December 31, 2000, in the amount of approximately $2.4
million under standby letters of credit and bank guarantees. We do not believe
it is practicable to estimate the fair value of these financial instruments and
do not expect any material losses from their resolution since performance is not
likely to be required.
Minimum rental commitments under non-cancelable operating and capital
leases as of December 31, 2000, consist of the following (in thousands):
Year ended December 31-- Operating Capital
------------ ------------
2001................................. $ 5,623 $ 247
2002................................. 4,110 14
2003................................. 2,738 11
2004................................. 2,332 8
2005................................. 2,143 2
Thereafter........................... 7,170 --
------------ ------------
$ 24,116 $ 282
============ ============
Operating lease commitments relate principally to equipment and office
space. Rental expense for operating leases, including amounts for short-term
leases with nominal future rental commitments, was approximately $6,629,000,
$3,798,000 and $5,983,000 for 2000, 1999 and 1998, respectively.
37
12. SEGMENT REPORTING
We manage our business segments separately due to the different
technologies each segment utilizes and requires (see Note 1). Results of these
segments are presented below using the same accounting policies as used to
prepare the Consolidated Balance Sheet and Statement of Operations. We evaluate
performance based on income or loss from operations before income tax, interest
and other non-operating income (expense). Summarized financial information
concerning our segments is shown in the following tables (in thousands):
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
REVENUES:
Reservoir Description........................................ $ 190,726 $ 200,584 $ 205,718
Production Enhancement....................................... 94,341 65,342 46,037
Reservoir Management......................................... 51,031 56,831 65,363
------------ ------------ ------------
Consolidated........................................... $ 336,098 $ 322,757 $ 317,118
============ ============ ============
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
INCOME (LOSS) BEFORE INTEREST
AND TAXES:
Reservoir Description 1...................................... $ 23,411 $ 13,698 $ 26,746
Production Enhancement 1..................................... 14,665 8,485 8,217
Reservoir Management 1....................................... (2,764) (6,176) 2,398
Corporate and other 1,2...................................... 279 (3,804) 260
------------ ------------ ------------
Consolidated........................................... $ 35,591 $ 12,203 $ 37,621
============ ============ ============
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
DEPRECIATION AND AMORTIZATION:
Reservoir Description........................................ $ 8,759 $ 9,673 $ 10,302
Production Enhancement ...................................... 1,922 1,642 1,213
Reservoir Management ........................................ 2,422 3,663 3,935
Corporate and other.......................................... 2,008 961 928
------------ ------------ ------------
Consolidated........................................... $ 15,111 $ 15,939 $ 16,378
============ ============ ============
38
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
GOODWILL AMORTIZATION:
Reservoir Description........................................ $ 2,341 $ 2,325 $ 2,066
Production Enhancement....................................... 1,289 1,306 609
Reservoir Management......................................... 477 496 338
------------ ------------ ------------
Consolidated........................................... $ 4,107 $ 4,127 $ 3,013
============ ============ ============
As of December 31,
2000 1999 1998
------------ ------------ ------------
ASSETS:
Reservoir Description........................................ $ 118,313 $ 133,421 $ 139,299
Production Enhancement....................................... 77,726 56,022 45,412
Reservoir Management......................................... 38,448 31,586 35,440
------------ ------------ ------------
Total Business Segments................................ 234,487 221,029 220,151
------------ ------------ ------------
Corporate and other 2........................................ 171,185 181,909 166,965
Intersegment Eliminations.................................... 4,932 (29,755) (19,242)
------------ ------------ ------------
Consolidated........................................... $ 410,604 $ 373,183 $ 367,874
============ ============ ============
1) The income (loss) before interest and taxes for each segment in
1999 have been reduced by restructuring, write-offs and other
charges. The amounts attributable to each segment were as follows:
Reservoir Description - $8,397; Production Enhancement - $2,854;
Reservoir Management - $2,759. Corporate and other includes $3,696
of merger termination costs related to the proposed GeoScience
acquisition. See Note 13 for additional information.
2) "Corporate and Other" represents those items that are not directly
related to a particular segment.
We are a Netherlands company and we derive our revenues from services
and sales to customers primarily in one industry segment, the oil and gas
industry. No single customer accounted for 10 percent or more of consolidated
revenues in any of the periods presented. The following is a summary of our U.S.
and foreign operations for 2000, 1999 and 1998 (in thousands):
Year Ended
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues from unaffiliated customers:
United States........................................... $ 135,781 $ 142,681 $ 146,850
Other countries......................................... 200,317 180,076 170,268
------------ ------------ ------------
Total.............................................. $ 336,098 $ 322,757 $ 317,118
============ ============ ============
Income (loss) before interest and taxes:
United States........................................... $ 12,328 $ (6,616) $ 13,382
Other countries......................................... 23,263 18,819 24,239
------------ ------------ ------------
Total.............................................. $ 35,591 $ 12,203 $ 37,621
============ ============ ============
Identifiable assets:
United States........................................... $ 129,766 $ 138,451 $ 166,341
Other countries......................................... 280,838 234,732 201,533
------------ ------------ ------------
Total.............................................. $ 410,604 $ 373,183 $ 367,874
============ ============ ============
Operating income includes income from continuing operations before
interest expense and income taxes. U.S. revenues derived from exports were $45.5
million, $34.7 million and $12.7 million in 2000, 1999 and 1998, respectively.
39
13. WRITE-OFFS AND RESTRUCTURING CHARGES
Write-offs and Other Charges
In the first quarter of 1999, we recorded write-offs and other charges
totaling $10.7 million. This amount included $4.4 million of asset write-offs,
$2.6 million related to facility closures and personnel reductions, and $3.7
million associated with the termination of the proposed acquisition of
GeoScience Corp. The asset write-offs consisted primarily of uncollectible
accounts receivable in the former Soviet Union and other Eastern Hemisphere
locations, due to economic instability in the region, as well as adjustments to
net realizable value of certain inventory and other current asset amounts. The
facility closures consisted primarily of the shutdown of our environmental
testing laboratory in Edison, New Jersey, the Saybolt Western Hemisphere
administrative office and a substantial reduction in our Venezuelan work force.
These actions, which affected a total of 47 employees, were substantially
complete as of April 30, 1999. The termination settlement included the
forgiveness of $3.0 million in working capital advances made by Core
Laboratories to GeoScience Corp.
Restructuring Charges
In the fourth quarter of 1999, we recorded a $7.0 million charge to
cover the cost of exiting redundant facilities and restructuring certain of our
operations. This charge affected each of our operating segments as follows:
Reservoir Description - $2.8 million; Production Enhancement - $1.9 million;
Reservoir Management - $2.3 million. We combined personnel and equipment from
eight facilities into one Houston facility. No operations were discontinued. The
move was completed in the second quarter of 2000. Related charges include
severance for approximately 100 field and administrative employees, the accrual
of future lease obligations and facility restoration costs and the write-off of
redundant fixed assets and leasehold improvements. Substantially all of these
employees were terminated as of June 30, 2000. Cash required for the costs
incurred through December 31, 2000 of $3.8 million, excluding asset write-offs,
was funded from operating activities. We anticipate that the remaining costs
will also be funded through cash from operating activities. This charge is
summarized in the following table:
Restructuring Charges
(Dollars in Thousands)
Asset
Lease Write-
Obligations Severance Restoration offs(a) Other Total
----------- --------- ----------- ------- ------- -------
Total restructuring charges............. $ 2,983 $ 879 $ 786 $ 2,080 $ 308 $ 7,036
Less: Costs incurred through
December 31, 1999.............. 515 445 28 2,080 124 3,192
------- ------- ------- ------- ------- -------
Accrual remaining at December 31, 1999.. 2,468 434 758 - 184 3,844
Less: Costs incurred through
December 31, 2000.............. 1,440 434 655 - 184 2,713
------- ------- ------- ------- ------- -------
Accrual remaining....................... $ 1,028 $ - $ 103 $ - $ - $ 1,131
======= ======= ======= ======= ======= =======
(a) The fixed assets and leasehold improvements related to the Houston
consolidation were disposed of by the end of June 2000. The write-off
approximates the carrying amount as these assets were abandoned or sold for
salvage value. Depreciation expense was reduced by approximately $490 in 2000,
and will be reduced by $333 in 2001 and $342 thereafter. Also included in this
amount were $915 of working capital write-offs related to the restructuring of
foreign operations. The asset write-offs attributable to each segment were as
follows: Reservoir Description - $1,176; Production Enhancement - $346;
Reservoir Management - $558.
14. DISPOSITION OF ASSETS
We sold substantially all of our U.S. environmental testing and certain
other assets to Severn Trent Laboratories, Inc., a Delaware corporation, on
September 30, 1999. Consideration received from the sale was approximately
$19.7 million.
40
15. UNAUDITED SELECTED QUARTERLY RESULTS OF OPERATIONS
Summarized quarterly financial data for the four quarters ended
December 31, 2000 and 1999 is as follows (in thousands, except share and per
share data):
Three months ended December 31, September 30, June 30, March 31,
2000 2000 2000 2000
-------------- -------------- -------------- --------------
Service and sales revenues........................ $ 97,630 $ 87,355 $ 78,879 $ 72,234
Cost of services and sales........................ 76,852 69,154 63,795 58,854
Other operating expenses.......................... 8,394 7,914 8,051 7,493
-------------- -------------- -------------- --------------
Income before interest expense and
income tax...................................... 12,384 10,287 7,033 5,887
-------------- -------------- -------------- --------------
Interest expense.................................. 2,120 2,072 1,989 2,050
-------------- -------------- -------------- --------------
Income from continuing operations
before income tax............................... $ 10,264 $ 8,215 $ 5,044 $ 3,837
============== ============== ============== ==============
Income from continuing operations................. $ 7,185 $ 5,750 $ 3,531 $ 2,686
============== ============== ============== ==============
Per share data:
Basic earnings per share from
continuing operations.......................... $ 0.22 $ 0.18 $ 0.11 $ 0.09
============== ============== ============== ==============
Weighted average basic common shares
outstanding.................................... 32,203,386 32,187,720 31,489,478 31,247,546
============== ============== ============== ==============
Diluted earnings per share from
continuing operations.......................... $ 0.22 $ 0.17 $ 0.11 $ 0.08
============== ============== ============== ==============
Weighted average diluted common
shares outstanding............................. 33,283,074 33,127,937 32,991,413 32,652,538
============== ============== ============== ==============
Three months ended December 31, September 30, June 30, March 31,
1999 1999 1999 1999 (a)
-------------- -------------- -------------- --------------
Service and sales revenues........................ $ 90,446 $ 82,356 $ 79,165 $ 70,790
Cost of services and sales........................ 71,213 63,966 66,811 61,233
Write-offs and other charges...................... -- -- -- 10,670
Restructuring charges............................. 7,036 -- -- --
Other operating expenses.......................... 6,468 8,654 7,018 7,485
-------------- -------------- -------------- --------------
Income (loss) before interest expense and
income tax...................................... 5,729 9,736 5,336 (8,598)
-------------- -------------- -------------- --------------
Interest expense.................................. 2,264 2,393 2,048 1,852
-------------- -------------- -------------- --------------
Income (loss) from continuing operations
before income tax............................... $ 3,465 $ 7,343 $ 3,288 $ (10,450)
============== ============== ============== ==============
Income (loss) from continuing operations.......... $ 2,245 $ 4,972 $ 2,183 $ (7,020)
============== ============== ============== ==============
Per share data:
Basic earnings (loss) per share from
continuing operations.......................... $ 0.07 $ 0.16 $ 0.07 $ (0.23)
============== ============== ============== ==============
Weighted average basic common shares
outstanding.................................... 31,142,804 30,916,824 30,744,116 30,686,075
============== ============== ============== ==============
Diluted earnings (loss) per share from
continuing operations.......................... $ 0.07 $ 0.16 $ 0.07 $ (0.23)
============== ============== ============== ==============
Weighted average diluted common
shares outstanding............................. 32,203,194 32,003,097 31,584,263 30,686,075
============== ============== ============== ==============
(a) The effect of dilutive stock options totaling 937,871 equivalent
common shares was not included in the computation of weighted average
diluted common shares because the impact of these options was anti-
dilutive as a result of our net loss for the three months ended
March 31, 1999.
41
INDEX TO EXHIBITS
Incorporated by
Reference from the
Exhibit No. Exhibit Title Following Documents
- ----------- ------------- ------------------
3.1 -- Articles of Association of the Company, as amended (including Form F-1, September 20, 1995
English translation)
4.1 -- Form of certificate representing Common Shares Filed Herewith
10.1 -- Core Laboratories N.V. 1995 Long-Term Incentive Plan (as amended and Proxy Statement dated May 2,
restated effective as of May 29, 1997) 1997 for Annual Meeting of
Shareholders
10.2 -- Core Laboratories N.V. 1995 Nonemployee Director Stock Option Plan Proxy Statement dated May 2,
(as amended and restated effective as of May 29, 1997) 1997 for Annual Meeting of
Shareholders
10.3 -- Form of Registration Rights Agreement to be entered into by the Form 10-Q, November 10, 1995
Company and certain of its shareholders, dated September 15, 1995
10.4 -- Purchase and Sale Agreement between Core Holdings B.V. and Western Form F-1, September 20, 1995
Atlas International, Inc., Western Atlas International Nigeria Ltd.,
Western Atlas de Venezuela, C.A., Western Atlas Canada Ltd. and Core
Laboratories Australia Pty. Ltd. dated as of September 30, 1994
10.5 -- Form of Indemnification Agreement to be entered into by the Company Form F-1, September 20, 1995
and certain of its directors and officers
10.6 -- Indemnification Agreements, each dated as of October 20, 1995, Form 10-Q, November 10, 1995
between the Company and each of its directors and executive officers
10.7 -- Amended and Restated Credit Agreement among Core Laboratories N.V., Form S-3, November 20, 1997
Core Laboratories, Inc., Core Laboratories (U.K.) Limited, Bankers
Trust Company, NationsBank, N.A. and the Bank Group, dated as of
July 18, 1997
10.8 -- Core Laboratories Supplemental Executive Retirement Plan effective Form 10-K, March 31, 1998
as of January 1, 1998
10.9 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
David Michael Demshur dated as of August 18, 1998
10.10 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Richard Lucas Bergmark dated as of August 18, 1998
10.11 -- Form of Employment Agreement between Core Laboratories N.V. and Form 10-K, March 31, 1999
Monty Lee Davis dated as of August 18, 1998
10.12 -- Form of Employment Agreement between Core Laboratories N.V. and John Form 10-K, March 31, 1999
David Denson dated as of August 18, 1998
10.13 -- Core Laboratories Supplemental Executive Retirement Plan for John D. Form 10-Q, November 15, 1999
Denson effective January 1, 1999
10.14 -- Core Laboratories Supplemental Executive Retirement Plan for Monty Form 10-Q, November 15, 1999
L. Davis effective January 1, 1999
10.15 -- Amendment to Core Laboratories Supplemental Executive Retirement Form 10-Q, November 15, 1999
Plan filed January 1, 1998, effective July 29, 1999
10.16 -- Amendment to Amended and Restated Credit Agreement among Core Form 10-Q, November 15, 1999
Laboratories N.V., Core Laboratories, Inc., Core Laboratories (U.K.)
Limited, Bankers Trust Company, Bank of America, N.A. and the Bank
Group, dated as of July 22, 1999
10.17 -- Note and Guarantee Agreement by Core Laboratories, Inc. for Form 10-Q, November 15, 1999
Guaranteed Senior Notes, Series A, and Guaranteed Senior Notes,
Series B, dated as of July 22, 1999
10.18 -- First Amendment to Core Laboratories N.V. 1995 Long-Term Incentive Filed Herewith
Stock Option Plan (As Amended and Restated Effective as of
May 29, 1997)
10.19 -- Second Amendment to Core Laboratories N.V. Nonemployee Director Filed Herewith
Plan (As Amended and Restated Effective as of May 29, 1997)
21.1 -- Subsidiaries of the Registrant Filed Herewith
23.1 -- Consent of Arthur Andersen LLP Filed Herewith