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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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 of other jurisdiction of (I.R.S. Employer
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
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 whether the registrant is an accelerated filer as
defined in Rule 12b-2 of the Exchange Act. Yes |X| No
The number of common shares of the Registrant, par value EUR 0.01 per
share, outstanding at May 14, 2003 was 31,628,410.
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CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003
INDEX
Page
Part I -- Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 2003 and December 31, 2002................ 1
Consolidated Statements of Operations for the Three Months Ended
March 31, 2003 and 2002............................................................ 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002............................................................ 3
Notes to Consolidated Financial Statements ........................................ 4
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................................... 10
Item 3 Quantitative and Qualitative Disclosures of Market Risk............................ 17
Item 3 Controls and Procedures............................................................ 18
Part II -- Other Information
Item 1 Legal Proceedings.................................................................. 21
Item 2 Changes in Securities.............................................................. 21
Item 3 Defaults Upon Senior Securities.................................................... 21
Item 4 Submission of Matters to a Vote of Security Holders ............................... 21
Item 5 Other Information.................................................................. 21
Item 6 Exhibits and Reports on Form 8-K................................................... 22
Signature ...................................................................... 23
Officer Certifications .......................................................... 24
ii
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31, December 31,
2003 2002
---------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 10,623 $ 14,876
Accounts receivable, less allowance for doubtful accounts of
$9,122 and $8,853 at 2003 and 2002, respectively........................ 98,902 100,602
Inventories, net............................................................ 33,952 34,532
Prepaid expenses and other current assets................................... 15,003 13,671
Deferred tax asset.......................................................... 10,596 11,992
---------- ----------
Total current assets............................................................. 169,076 175,673
PROPERTY, PLANT AND EQUIPMENT, net............................................... 95,194 95,452
INTANGIBLES, net................................................................. 8,808 8,913
GOODWILL ........................................................................ 133,446 133,446
OTHER ASSETS ................................................................... 7,335 7,669
---------- ----------
Total assets..................................................... $ 413,859 $ 421,153
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital lease obligations.......... $ 1,185 $ 1,145
Accounts payable............................................................ 25,153 25,407
Accrued payroll and related cost............................................ 10,182 9,662
Taxes other than payroll and income......................................... 1,736 3,224
Unearned revenues........................................................... 2,561 1,709
Accrued interest............................................................ 1,304 2,891
Other accrued expenses...................................................... 4,730 6,046
---------- ----------
Total current liabilities........................................................ 46,851 50,084
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS..................................... 92,022 88,035
DEFERRED COMPENSATION............................................................ 3,855 3,544
DEFERRED TAX LIABILITY........................................................... 13,972 14,461
OTHER LONG-TERM LIABILITIES...................................................... 6,082 6,539
MINORITY INTEREST................................................................ 626 344
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preference shares, EUR 0.01 par value; 3,000,000 shares authorized,
none issued or outstanding.............................................. -- --
Common shares, EUR 0.01 par value; 100,000,000 shares authorized,
33,277,110 issued and 31,625,910 outstanding at 2003 and
33,275,910 issued and 32,415,510 outstanding at 2002.................... 546 546
Additional paid-in capital.................................................. 187,365 187,364
Retained earnings........................................................... 80,404 79,247
Treasury shares (at cost), 1,651,200 and 860,400 at 2003
and 2002, respectively.................................................. (17,864) (9,011)
----------- -----------
Total shareholders' equity.............................................. 250,451 258,146
---------- ----------
Total liabilities and shareholders' equity......................... $ 413,859 $ 421,153
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
1
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Three Months Ended
March 31,
----------------------------
2003 2002
---------- ----------
(Unaudited)
REVENUES:
SERVICES.................................................................... $ 74,876 $ 69,178
SALES....................................................................... 18,084 15,105
---------- ----------
92,960 84,283
OPERATING EXPENSES:
Cost of services............................................................ 62,232 57,120
Cost of sales............................................................... 16,127 13,864
General and administrative expenses ........................................ 5,569 4,728
Depreciation and amortization............................................... 5,185 4,922
Other expense, net.......................................................... 619 1,270
---------- ----------
89,732 81,904
INCOME FROM OPERATIONS........................................................... 3,228 2,379
INTEREST EXPENSE................................................................. 1,643 1,976
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.................................... 1,585 403
INCOME TAX EXPENSE............................................................... 428 169
---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE........................................................ 1,157 234
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.............................. - (16,692)
---------- ----------
NET INCOME (LOSS)................................................................ $ 1,157 $ (16,458)
========== ==========
PER SHARE INFORMATION:
BASIC EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE.............................. $ 0.04 $ 0.01
---------- ----------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......................... $ - $ (0.50)
---------- ----------
BASIC EARNINGS (LOSS) PER SHARE............................................. $ 0.04 $ (0.49)
========== ==========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING.................................................... 32,085 33,210
========== ==========
DILUTED EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE.............................. $ 0.04 $ 0.01
---------- ----------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......................... $ - $ (0.50)
---------- ----------
DILUTED EARNINGS (LOSS) PER SHARE........................................... $ 0.04 $ (0.49)
========== ==========
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING.................................................... 32,520 33,210
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
2
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
----------------------------
2003 2002
---------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities................................... $ 5,299 $ 5,269
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (4,754) (4,013)
Proceeds from sale of fixed assets.......................................... 27 299
---------- ----------
Net cash used in investing activities................................... (4,727) (3,714)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt........................................................... (1,000) (5,014)
Proceeds from debt borrowings .............................................. 5,033 4,002
Capital lease obligation, net............................................... (6) (8)
Stock options exercised..................................................... 1 206
Repurchase of common shares................................................. (8,853) -
Other....................................................................... - (1)
---------- ----------
Net cash used in financing activities................................... (4,825) (815)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ (4,253) 740
CASH AND CASH EQUIVALENTS, beginning of period................................... 14,876 14,456
---------- ----------
CASH AND CASH EQUIVALENTS, end of period......................................... $ 10,623 $ 15,196
========== ==========
3
The accompanying notes are an integral part of these
consolidated financial statements.
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying unaudited consolidated financial statements include
the accounts of Core Laboratories and its subsidiaries and have been prepared in
accordance with United States of America ("U.S.") generally accepted accounting
principles ("GAAP") for interim financial information using the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial
statements. The equity method of accounting is used for all investments in which
we have less than a majority interest and do not exercise control. Minority
interest has been recorded to reflect outside ownership attributable to
consolidated subsidiaries that are less than 100% owned. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 2003
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. Balance sheet information as of December 31, 2002 was
derived from the 2002 annual audited consolidated financial statements. These
financial statements should be read in conjunction with the financial statements
and the summary of significant accounting policies and notes thereto included in
our Form 10-K for the year ended December 31, 2002.
Stock-Based Compensation
SFAS 123, "Accounting for Stock-Based Compensation", encourages, but
does not require, companies to record compensation cost for employee stock-based
compensation plans at fair value as determined by generally recognized option
pricing models such as the Black-Scholes or the Binomial model. We have adopted
the disclosure-only provisions of SFAS 123. We apply APB Opinion 25, "Accounting
for Stock Issued to Employees", which does not require compensation costs to be
recorded on options which have exercise prices at least equal to the market
value of the stock on the date of grant. Accordingly, we have not recognized
compensation cost for our stock-based plans. We have, however, included option
shares in the fully diluted shares outstanding calculation that is used to
determine fully diluted earnings per share.
4
If we had accounted for our stock-based compensation plans using the
fair value recognition provision of SFAS 123 and SFAS 148, our net income and
diluted earnings per share would have been reduced to the pro forma amounts as
follows (in thousands except per share data):
Three Months Ended
March 31,
--------------------------
2003 2002
---------- ----------
(Unaudited)
Net income (loss):
As reported............................ $ 1,157 $ (16,458)
Less: stock-based compensation
expense determined under fair
value method, net of tax........... (632) (1,022)
---------- ----------
Pro forma.............................. $ 525 $ (17,480)
========== ==========
Basic earnings (loss) per share:
As reported............................ $ 0.04 $ (0.49)
Pro forma.............................. $ 0.02 $ (0.53)
Diluted earnings (loss) per share:
As reported............................ $ 0.04 $ (0.49)
Pro forma.............................. $ 0.02 $ (0.53)
Recent Pronouncements
In November 2002 the FASB issued Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements, Including Guarantees of
Indebtedness of Others." FIN 45 requires that upon issuance of certain types of
guarantees, a guarantor recognize and account for the fair value of the
guarantee as a liability. FIN 45 contains exclusions to this requirement,
including the exclusion of a parent's guarantee of its subsidiaries' debt to a
third party. The initial recognition and measurement provisions of FIN 45 should
be applied on a prospective basis for guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of both interim and annual periods ending after December
31, 2002. The adoption of FIN 45 is not expected to have a material impact on
our consolidated financial position, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure". This Statement amends
SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative
methods of transition to SFAS No. 123's fair value method of accounting for
stock-based employee compensation. This statement also amends the disclosure
provision of SFAS No. 123 and APB No. 28, "Interim Financial Reporting", to
require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements, which we have adopted as of December 31, 2002. We do not
expect the remaining provisions of SFAS 148 to have a material adverse effect
upon our financial position or results of operations.
In January 2003 the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities," which addresses the consolidation of variable interest
entities ("VIEs") by business enterprises that are the primary beneficiaries. A
5
VIE is an entity that does not have sufficient equity investment at risk to
permit it to finance its activities without additional subordinated financial
support, or whose equity investors lack the characteristics of a controlling
financial interest. The primary beneficiary of a VIE is the enterprise that has
the majority of the risks or rewards associated with the VIE. The consolidation
requirements of FIN 46 apply immediately to VIEs created after January 31, 2003.
For VIEs created at an earlier date, the consolidation requirements apply in the
first fiscal year or interim period beginning after June 15, 2003. Certain
disclosure requirements apply in all financial statements issued after January
31, 2003, regardless of when the VIE was established. Based on current
information, we believe we have no material interests in VIEs that will require
disclosure or consolidation under FIN 46.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS 149 amends Statement
133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to Statement 133, (2) in connection
with other Board projects dealing with financial instruments, and (3) in
connection with implementation issues raised in relation to the application of
the definition of a derivative, in particular, the meaning of an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market factors,
the meaning of underlying, and the characteristics of a derivative that contains
financing components. SFAS 149 is not effective for contracts entered into or
modified after June 30. 2003. The adoption of SFAS 149 is not expected to have a
material impact on our consolidated financial position, results of operations or
cash flows.
2. 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 cost or estimated net realizable value, and are reflected net of
valuation reserves. The components of inventories are as follows (in thousands):
March 31, December 31,
2003 2002
---------- ----------
(Unaudited)
Finished goods.............................. $ 28,034 $ 25,954
Parts and materials......................... 4,212 5,486
Work in progress............................ 2,486 3,428
---------- ----------
Total inventories.................. 34,732 34,868
Less-- valuation reserves.............. 780 336
---------- ----------
Inventories, net............... $ 33,952 $ 34,532
========== ==========
6
3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt is summarized in the following table (in thousands):
March 31, December 31,
2003 2002
---------- ----------
(Unaudited)
Credit Facility $100,000 revolving debt facilities............... $ 17,000 $ 13,000
Senior notes..................................................... 75,000 75,000
Capital lease obligations........................................ 79 80
Other indebtedness............................................... 1,128 1,100
---------- ----------
Total debt and capital leases obligations................ 93,207 89,180
Less-- current maturities........................................ 1,185 1,145
---------- ----------
Long-term debt and capital lease obligations, net of
current maturities................................ $ 92,022 $ 88,035
========== ==========
In July 1999, we entered into a $100 million Credit Facility that
provides for (i) a committed revolving debt facility of $95 million and (ii) a
Euro denominated revolving debt facility with U.S. dollar equivalency of $5
million. At March 31, 2003, approximately $83.0 million was available for
borrowing under the revolving Credit Facility. The Credit Facility bears
interest from LIBOR plus 1.25% to a maximum of LIBOR plus 1.75% per annum. At
March 31, 2003 the weighted average interest rate was 3.11% and the average
interest rate in effect was 2.55%. For the year ended December 31, 2002 the
weighted average interest rate was 3.18% and the average interest rate in effect
was 2.95%. The revolving Credit Facility requires interest payments only, until
maturity in June 2004.
In July 1999, we issued $75 million in Senior Notes that bear an
average fixed 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, but not limited to, certain operational
and minimum equity and cash flow ratios. We believe that we are in compliance
with all such covenants contained in our credit agreements. All of our material
wholly owned subsidiaries are guarantors or co-borrowers under both credit
agreements.
4. SEGMENT REPORTING
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.
7
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.
Segment Analysis
We manage our business segments separately due to the different
services and technologies each segment provides and requires. Results of these
segments are presented below using the same accounting policies as used to
prepare the Consolidated Balance Sheets and Statements of Operations. We
evaluate performance based on income or loss from operations before income tax,
interest and other operating income (expense). Summarized financial information
concerning our segments is shown in the following tables (in thousands):
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Revenues (Unaudited)
Reservoir Description.......$ 68,378 $ 60,656
Production Enhancement...... 26,630 23,733
Reservoir Management........ 14,699 12,757
Intersegment Eliminations... (16,745) (12,863)
--------------- ----------------
Consolidated..............$ 92,960 $ 84,283
=============== ================
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Income (loss) before interest
and taxes
(Unaudited)
Reservoir Description....... $ 3,284 $ 3,714
Production Enhancement...... 1,605 554
Reservoir Management........ (1,450) (1,452)
Corporate and Other (1)..... (211) (437)
--------------- ----------------
Consolidated.............. $ 3,228 $ 2,379
=============== ================
1) "Corporate and Other" represents those items that are not directly
related to a particular segment.
8
5. EARNINGS PER SHARE
Basic earnings per common share amounts were computed by dividing net
income available to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflect the net
additional shares, based on the treasury stock method, 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 (in thousands):
Three Months
Ended March 31,
2003 2002
--------------------------
Weighted average basic common shares outstanding. 32,085 33,210
Effect of dilutive stock options (1)............. 435 -
---------- ----------
Weighted average diluted common shares outstanding 32,520 33,210
========== ==========
1) Options totaling 2,572,938 and 2,847,321 equivalent common shares were not
included in the computation of weighted average diluted common shares for the
three months ended March 31, 2003, and 2002, respectively, because the impact
of these options was anti-dilutive.
6. SUBSEQUENT EVENT
On April 30, 2003 the Company acquired the assets of GOEX from
Ensign-Bickford Company for approximately $10.0 million in cash consideration.
Core Laboratories purchased substantially all the operating assets of GOEX, a
privately held perforating charge manufacturer located in Fort Worth, Texas. The
operating assets consisted of certain machinery, inventory and guaranteed
receivables and included exclusive oilfield rights to market and sell detonation
cord manufactured by the parent company of GOEX.
9
CORE LABORATORIES N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Core Laboratories 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 4,400
employees.
Risk Factors
This discussion contains 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, concerning among other things, our expected revenues,
expenses and profit, our prospects, and business strategies and development, all
of which are subject to certain risks, uncertainties and assumptions. When used
in this document, words such as "anticipate" "believe", "expect", "plan",
"intend", "estimate", "project", "budget", "forecast", "will", "should",
"could", "may", "predict" and similar expressions are intended to identify
forward-looking statements. We based our statements on our current expectations,
estimates, historical trends, current conditions and other factors we believe
are appropriate under the circumstances. Such statements are subject to various
risks and uncertainties related to the oil and gas industry, business
conditions, international markets, international political climates and other
factors that are beyond our control. We caution you that these statements are
not guarantees of future performance. Accordingly, our actual outcomes and
results may differ materially from what we express or forecast in the
forward-looking statements. Should one or more of these risks or uncertainties
materialize, or should our underlying assumptions prove incorrect, our actual
results may vary materially from those expected, estimated or projected.
Industry risks
The oil and gas industry is highly cyclical and there are numerous
factors affecting the supply of and demand for oil and natural gas, which
include:
o market prices of oil and gas and expectations about future prices;
o cost of producing oil and natural gas;
o the level of drilling and production activity;
o mergers, consolidations and downsizing among our clients;
o coordination by OPEC;
o the impact of commodity prices on the expenditure levels of our
customers;
o financial condition of our client base and their ability to fund
capital expenditures;
o adverse weather conditions;
o civil unrest in oil producing countries; and
o level of consumption of oil, gas, and petrochemicals by consumers.
10
Business risks
Our results of operations could be adversely affected by risks and
uncertainties in the business environment in which we operate, including:
o competition in our markets;
o the realization of anticipated synergies from acquired businesses and
future acquisitions;
o our ability to continue to develop or acquire new and useful
technology; and
o interest rates and the cost of capital.
International risks
We conduct our business in over 50 countries and are subject to
political and economic instability and the laws and regulations in the countries
in which we operate. These include:
o global economic conditions;
o political actions and requirements of national governments including
trade restrictions, and embargos and expropriations of assets;
o potential income tax liabilities in multiple jurisdictions;
o civil unrest;
o acts of terrorism;
o fluctuations and changes in currency exchange rates;
o the impact of inflation; and
o current conditions in Venezuela and Iraq.
Economic downturn and political events that continue to unfold have
resulted in lower demand for our products and services. The war in Iraq and the
anticipated repercussions from terrorist groups that the U.S. government has
cautioned against have further heightened our exposure to international risks.
Our global economy is highly influenced by public confidence in the geopolitical
environment and the situation in the Middle East continues to be highly fluid;
therefore, we will continue to experience heightened international risks.
Other risks
Our client base could be impacted by events we cannot predict or we
could be impacted by a change in the conduct of business, transportation and
security measures. In addition we are subject to other risk factors such as the
impact of environmental regulations, litigation risks, as well as the dependence
on the oil and gas industry. Many of these risks are beyond our control. In
addition, future trends for pricing, margins, revenues and profitability remain
difficult to predict in the industries we serve and under current economic and
political conditions.
Off-Balance Sheet Arrangements
We hold investments in unconsolidated subsidiaries whose operations are
in-line with those of our core businesses. Our investment and operating
percentages in these entities are included in our consolidated financial
statements. These entities are not considered special purpose entities nor do we
have special off-balance sheet arrangements through these entities. They are not
consolidated due to the limited influence we have in making management
decisions. We do not expect our investments to have a material adverse effect on
our financial position or results of operations.
11
Results of Operations
The discussion of operating results at the consolidated level is
followed by a more detailed discussion of operating results by segment.
Our revenues are derived from services and product sales. Service
revenues in the first quarter of 2003 were $74.9 million as compared to $69.2
million for the same period last year. The increase was primarily due to
increased North American oilfield activities.
Cost of services expressed as a percentage of service revenue was
consistent at 83% in the first quarter of 2003 as compared to the corresponding
period in 2002. Cost of services in the first quarter of 2003 includes $1.2
million of expenses relating to the closure of our London based Reservoir
Management facility.
Sales revenues increased to $18.1 million in the first quarter of 2003
from $15.1 million in the first quarter of 2002, a 20% increase. This increase
was caused, in most part, to the increased drilling activity for natural gas in
the North American markets. This increase in activity levels has caused higher
demand for our well completion products.
Cost of sales in the first quarter of 2003 was 89% of sales revenue
indicating an improvement as compared to 92% in the corresponding period in 2002
due primarily to cost reduction efforts we have made.
General and administrative expenses are comprised of corporate
management and centralized administrative services that benefit our operating
subsidiaries. We experienced an increase of $0.8 million in the first quarter of
2003 as compared to the corresponding period in 2002. General and administrative
expenses remained unchanged at 6% of revenues in the first quarter of 2003 as
compared to the corresponding period in 2002.
Depreciation and amortization expense in the first quarter of 2003
increased $0.3 million as compared to the corresponding period in 2002. This
increase was due to additional capital investments that occurred in 2002.
Other expense in the first quarter of 2003 was $0.6 million compared to
other expense of $1.3 million in the corresponding period in 2002. Other expense
in 2003 consists primarily of foreign exchange losses of approximately $1.1
million offset by other income of approximately $0.5 million.
As a result of adoption of SFAS 142, in the first quarter of 2002, we
reflected impairment of goodwill of $16.7 million related to our Reservoir
Management segment. This impairment is reflected in the statement of operations
as a cumulative effect of a change in accounting principle.
The 2003 effective income tax rate decreased to 27% of income before
cumulative effect of change in accounting principle from the 2002 rate of 42%.
This decrease reflects an increase in international earnings taxed at rates
lower than the Netherlands statutory rate and a decrease in expenses that are
not deductible for income tax purposes.
12
Segment Analysis
(in Thousands)
Our operations are managed primarily in three complementary segments -
Reservoir Description, Production Enhancement and Reservoir Management.
Segment Information
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Revenues (Unaudited)
Reservoir Description.......$ 54,541 $ 49,479
Production Enhancement...... 26,529 23,402
Reservoir Management........ 11,890 11,402
--------------- ----------------
Consolidated..............$ 92,960 $ 84,283
=============== ================
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Income (loss) before interest
and taxes
(Unaudited)
Reservoir Description....... $ 3,284 $ 3,714
Production Enhancement...... 1,605 554
Reservoir Management........ (1,450) (1,452)
Corporate and Other (1)..... (211) (437)
--------------- ----------------
Consolidated.............. $ 3,228 $ 2,379
=============== ================
1) "Corporate and Other" represents those items that are not directly
related to a particular segment.
Reservoir Description
Revenues from the Reservoir Description segment increased $5.1 million
in the first quarter of 2003. Increased international demand for our existing
services and deepwater services, as well as improvements in North American
oilfield activity levels, bolstered revenue in this segment. Income before
interest and taxes decreased by $0.4 million creating operating margins of 6.0%
compared to 7.5% in the same period last year.
Production Enhancement
Revenues from the Production Enhancement segment were $26.5 million in
the first quarter of 2003 compared to $23.4 million in the same period in the
prior year, an increase of 13%, due to increased demand for our well completion
and stimulation technologies, primarily in North American markets. Income before
interest and taxes increased $1.1 million to $1.6 million. Operating margins
improved to 6.0% in the first quarter of 2003 compared to 2.4% in the same
period in the prior year.
13
Reservoir Management
Revenues from the Reservoir Management segment in the first quarter of
2003 were $11.9 million, an increase of $0.5 million compared to the same period
in the prior year. Included in the results of this segment was $1.2 million in
expenses relating to the closure of the London based facility. Excluding this
loss, the results of this segment improved as a result of our cost containment
objectives.
Liquidity and Capital Resources
General
We have historically financed our activities through cash on hand, cash
flows from operations, bank credit facilities, equity financing and the issuance
of debt.
Cash Flows
During the first quarter of 2003, cash flows from operating activities
were unchanged at $5.3 million from the same period in 2002. At March 31, 2003,
we had working capital of $122.2 million and a current ratio of 3.6 to 1.0,
compared to working capital of $125.6 million and a current ratio of 3.5 to 1.0
at December 31, 2002. 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 investing activities used $4.7 million in the first quarter of 2003
compared to using $3.7 million in the same period in 2002. We had $0.7 million
in additional capital expenditures in the first quarter of 2003 compared to the
same period in the prior year.
Our significant financing activities included repurchasing
approximately 791,000 shares for an aggregate purchase price of $8.9 million.
Our total borrowings were $5.0 million, while repayments were approximately $1.0
million.
We maintain financial flexibility through our $100 million Credit
Facility of which $83.0 million was available at March 31, 2003. In addition, we
have Senior Notes, which bear interest at an average interest rate of 8.16%. The
Senior Notes require semi-annual interest payments; interest payments on the
Credit Facility are made based on the interest period selected. The terms of the
Credit Facility and Senior Notes require us to meet certain financial and
operational covenants. We believe that we are in compliance with all such
covenants contained in our credit agreements at March 31, 2003. All of our
material wholly owned subsidiaries are guarantors or co-borrowers under both
credit agreements.
Our ability to maintain and grow our operating income and cash flows is
dependent upon continued investing activities. We believe our future cash flows
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.
14
Outlook
We have established internal earnings targets that are based on current
market conditions. Based on industry surveys, we anticipate North American
spending by our clients to increase slightly from 2002 levels in response to
increasing oilfield activity. However, we believe that the activity levels
outside of North America will remain constant compared to 2002 levels. We expect
to meet ongoing working capital and capital expenditure requirements from a
combination of cash on hand, cash flow from operations and available borrowings
under our revolving Credit Facility.
Recent Pronouncements
In November 2002 the FASB issued Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements, Including Guarantees of
Indebtedness of Others." FIN 45 requires that upon issuance of certain types of
guarantees, a guarantor recognize and account for the fair value of the
guarantee as a liability. FIN 45 contains exclusions to this requirement,
including the exclusion of a parent's guarantee of its subsidiaries' debt to a
third party. The initial recognition and measurement provisions of FIN 45 should
be applied on a prospective basis for guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of both interim and annual periods ending after December
31, 2002. The adoption of FIN 45 is not expected to have a material impact on
our consolidated financial position, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure". This Statement amends
SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative
methods of transition to SFAS No. 123's fair value method of accounting for
stock-based employee compensation. This statement also amends the disclosure
provision of SFAS No. 123 and APB No. 28, "Interim Financial Reporting", to
require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements, which we have adopted as of December 31, 2002. We do not
expect the remaining provisions of SFAS 148 to have a material adverse effect
upon our financial position or results of operations.
In January 2003 the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities," which addresses the consolidation of variable interest
entities ("VIEs") by business enterprises that are the primary beneficiaries. A
VIE is an entity that does not have sufficient equity investment at risk to
permit it to finance its activities without additional subordinated financial
support, or whose equity investors lack the characteristics of a controlling
financial interest. The primary beneficiary of a VIE is the enterprise that has
the majority of the risks or rewards associated with the VIE. The consolidation
requirements of FIN 46 apply immediately to VIEs created after January 31, 2003.
For VIEs created at an earlier date, the consolidation requirements apply in the
first fiscal year or interim period beginning after June 15, 2003. Certain
disclosure requirements apply in all financial statements issued after January
31, 2003, regardless of when the VIE was established. Based on current
information, we believe we have no material interests in VIEs that will require
disclosure or consolidation under FIN 46.
15
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS 149 amends Statement
133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to Statement 133, (2) in connection
with other Board projects dealing with financial instruments, and (3) in
connection with implementation issues raised in relation to the application of
the definition of a derivative, in particular, the meaning of an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market factors,
the meaning of underlying, and the characteristics of a derivative that contains
financing components. SFAS 149 is not effective for contracts entered into or
modified after June 30. 2003. The adoption of SFAS 149 is not expected to have a
material impact on our consolidated financial position, results of operations or
cash flows.
16
CORE LABORATORIES N.V.
QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
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
(i) interest rate changes and (ii) fluctuations in foreign currency exchange
rates, (although we have experienced losses from time-to-time) 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 that
significantly reduced our exposure to upward interest rate changes.
Interest Rate Risk
We are exposed to interest rate risk on our Credit Facility debt, which
carries a variable interest rate. At March 31, 2003, our variable rate debt
outstanding of $17.0 million approximated its fair value. A one percent change
in the interest rate would result in a change of approximately $170,000 in
interest expense on an annual basis. We attempt to balance the benefit of
variable rate debt that has inherent increased risk with fixed rate debt that
has less market risk.
Foreign Currency Risk
We operate in a number of international areas, which exposes us to
foreign currency exchange rate risk. We do not hold or issue forward exchange
contracts or other derivative instruments for speculative purposes. (A foreign
exchange contract is a foreign currency transaction, defined as an agreement to
exchange different currencies at a given date and at a specified rate.)
Credit Risk
Our financial instruments that potentially subject us to concentrations
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. Major banks or investment firms hold cash and cash equivalents such
as deposits and temporary cash investments. Our trade receivables are with a
variety of domestic, international and national oil and gas companies.
Management considers this credit risk to be limited due to the creditworthiness
and financial resources of these financial institutions and companies.
17
CONTROLS AND PROCEDURES
Quarterly Evaluation of the Company's Disclosure Controls and Internal
Controls
Within the 90 days prior to the date of this quarterly report on Form
10-Q, we evaluated the effectiveness of the design and operation of our
"disclosure controls and procedures" ("Disclosure Controls"), and our "internal
controls and procedures for financial reporting" ("Internal Controls"). This
evaluation (the "Controls Evaluation") was performed under the supervision and
with the participation of management, including our Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO").
CEO and CFO Certifications
Immediately following the Signatures section of this Quarterly Report
are the CEO and CFO certifications (the Rule 302 Certifications) required by
Section 302 of the Sarbanes-Oxley Act of 2002. This Controls and Procedures
section of the Quarterly Report includes the information concerning the Controls
Evaluation referred to in the Rule 302 Certifications and it should be read in
conjunction with the Rule 302 Certifications for a more complete understanding
of the topics presented.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley act of 2002 are included as exhibits filed
with this form 10-Q.
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act, such as
this Quarterly Report, is recorded, processed, summarized and reported within
the time periods specified in the U.S. Securities and Exchange Commission's (the
SEC) rules and forms. Disclosure Controls are also designed to ensure that such
information is accumulated and communicated to our management, including the CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.
Internal Controls are procedures designed to provide reasonable assurance that
(1) our transactions are properly authorized; (2) our assets are safeguarded
against unauthorized or improper use; and (3) our transactions are properly
recorded and reported, all to permit the preparation of our financial statements
in conformity with generally accepted accounting principles.
Limitations on the Effectiveness of Controls
Our management, including the CEO and CFO, does not expect that our
Disclosure Controls or our Internal Controls will prevent all error and all
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives
will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with policies or
procedures. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
18
Scope of the Controls Evaluation
The evaluation of our Disclosure Controls and our Internal Controls
included a review of the controls' objectives and design, the Company's
implementation of the controls and the effect of the controls on the information
generated for use in this Quarterly Report. In the course of the Controls
Evaluation, we sought to identify data errors, controls problems or acts of
fraud and confirm that appropriate corrective actions, including process
improvements, were being undertaken. This type of evaluation is performed on a
quarterly basis so that the conclusions of management, including the CEO and
CFO, concerning controls effectiveness can be reported in our Quarterly Reports
on Form 10-Q and Annual Report on Form 10-K. Our Internal Controls are also
evaluated by other personnel in our finance organization, as well as our
independent auditors who evaluate them in connection with determining their
auditing procedures related to their report on our annual financial statements
and not to provide assurance on our Internal Controls. The overall goals of
these various evaluation activities are to monitor our Disclosure Controls and
our Internal Controls, and to modify them as necessary. Our intent is to
maintain the Disclosure Controls and the Internal Controls as dynamic systems
that change as conditions warrant.
Among other matters, we sought in our evaluation to determine whether
there were any "significant deficiencies" or "material weaknesses" in our
Internal Controls, and whether we had identified any acts of fraud involving
personnel with a significant role in the our Internal Controls. In professional
auditing literature, "significant deficiencies" are referred to as "reportable
conditions," which are control issues that could have a significant adverse
effect on the ability to record, process, summarize and report financial data in
the financial statements. Auditing literature defines "material weakness" as a
particularly serious reportable condition where the internal control does not
reduce to a relatively low level the risk that misstatements caused by error or
fraud may occur in amounts that would be material in relation to the financial
statements and the risk that such misstatements would not be detected within a
timely period by employees in the normal course of performing their assigned
functions. We also sought to deal with other controls matters in the Controls
Evaluation, and in each case if a problem was identified, we considered what
revision, improvement and/or correction to make in accordance with our ongoing
procedures.
As described below under "Changes in Disclosure Controls and Internal
Controls", we have identified certain deficiencies in our controls and
procedures. However, we believe the corrective actions we have taken and the
additional procedures we have performed, as described below in more detail,
provide us with reasonable assurance that the identified control weaknesses have
not limited the effectiveness of our controls and procedures.
Changes in Disclosure Controls and Internal Controls
Management and the Audit Committee are aware of conditions relating
primarily to our operations primarily in Mexico and Venezuela that are
considered to be a "material weakness" and "reportable conditions" which were
identified in our Disclosure Controls and our Internal Controls review for the
19
year ended December 31, 2002. This review was performed under standards
established by the American Institute of Certified Public Accountants. In
particular, the aforementioned weaknesses in both our Disclosure Controls and
Internal Controls pertain to the following areas, (i) revenue cycle process,
including revenue recognition, calculation of deferred revenue and monitoring of
past due accounts, (ii) the process surrounding accurate reconciliation of
account balances and (iii) regular reconciliation of general ledger accounts to
supporting documentation. Management and the Audit Committee have taken actions
with respect to the material weaknesses and significant deficiencies, including
(1) the replacement of the head of an operating unit, the country manager, the
authorization to replace the country controller and the authorization to hire
five additional accounting personnel, (2) the expansion of our financial review
and internal control function by the authorization to hire two additional
professional internal auditors, (3) additional training (or re-training where
necessary) of our personnel worldwide, and (4) the acceleration of the
installation effort of our company-wide financial accounting system.
As part of our effort to have a common system of Internal Controls
applicable to our operations world-wide, in 2001, we began an implementation of
an enterprise-wide general ledger software system that included an Enterprise
Resource Planning (ERP) System for our manufacturing operations and budget and
planning modules, as well as new business processes and procedures to support
the software designed to provide us with a common set of Internal Controls in
those locations where the new system is implemented. These changes are the
result of our normal business process to evaluate and upgrade or replace our
systems software and related business processes to support our evolving
operational needs. At the end of 2001, approximately 52% of our business
activity (as expressed in terms of consolidated revenues) was on this software
system utilizing common business process and controls, primarily in the United
States. In 2002, we installed this software and common set of Internal Controls
for our operations in Canada, the United Kingdom, and Mexico. In April 2003, we
installed this software and common set of Internal Controls for our operations
in The Netherlands. Currently, including the new locations on our common system,
we have approximately 79% of our business activity on this software system
utilizing common business process and controls. Further, we expect to install
this same software system and related new business processes and procedures into
additional locations during 2003. We expect to install this software and common
set of Internal Controls for our operations in Venezuela, Australia, Thailand
and certain other locations in Europe. We expect to have, by the end of 2003,
approximately 84% of our business activity on this software system utilizing
common business process and controls. As this system is installed into these
locations in 2003, we will implement a common set of Internal Controls through
the new business processes and procedures.
Further, Management believes that the corrective actions, when taken,
will provide us with reasonable assurance that the identified issues will not
limit the effectiveness of our Disclosure Controls or Internal Controls.
Management believes that we have successfully implemented procedures addressing
the "material weakness" and "reportable conditions" in our controls.
Conclusions
Based upon the Controls Evaluation, our CEO and CFO have concluded
that, subject to the limitations and changes noted above, our Disclosure
Controls are effective to ensure that material information relating to Core
Laboratories and its consolidated subsidiaries is made known to management,
including the CEO and CFO, particularly during the period when our periodic
reports are being prepared, and that our Internal Controls are effective to
provide reasonable assurance that our financial statements are fairly presented
in conformity with generally accepted accounting principles.
20
CORE LABORATORIES N.V.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time subject to legal proceedings and claims
that arise in the ordinary course of business. Since April 2003, several
putative class action lawsuits have been filed against us and certain of
our officers in the United States District Court for the Southern District
of New York, alleging, among other things, that the defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. While none
of the defendants have been served yet with any of the lawsuits, we
understand that the complaints generally allege that the defendants
overstated the company's revenues and net income in 2002. The complaints
seek unspecified monetary damages. We intend to vigorously defend these
suits
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
21
Item 6. Exhibits and Reports on Form 8-K.
(a)
Incorporated by
Exhibit reference from the
No. Exhibit Title following documents
- ---------------------------------------------------------------------------------------------------------------------------
10.1 - Amendment to Core Laboratories N.V. 1995 Long-Term Incentive Plan (As Amended and Filed herewith
Restated Effective as of May 29, 1997)
10.2 - Amendment to Core Laboratories Supplement Executive Retirement Plan Filed herewith
10.3 - Amendment to Core Laboratories Supplement Executive Retirement Plan Filed herewith
10.4 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and David Demshur
10.5 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and Richard L. Bergmark
10.6 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and Monty L. Davis
10.7 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and John D. Denson
99(a) - Certification of CEO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Filed herewith
Section 906 of the Sarbanes-Oxley Act of 2002
99(b) - Certification of CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Filed herewith
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
During the quarter ended March 31, 2003, we filed Form 8-K,
reporting under Item 5 "Other Events". The report disclosed the press release
announcing the restatement of previously issued financial information for 2002
and the expected results of the fourth quarter of 2002.
22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Core Laboratories N.V., 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.
Dated: May 15, 2003 By: /s/ Richard L. Bergmark
-----------------------
Richard L. Bergmark
Chief Financial Officer
23
Certification
I, David M. Demshur, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and c) presented in this
quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
By: /s/ David M. Demshur
-----------------------
David M. Demshur
Chief Executive Officer
24
Certification
I, Richard L. Bergmark, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and c) presented in this
quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
By: /s/ Richard L. Bergmark
-----------------------
Richard L. Bergmark
Chief Financial Officer
25