For the year-ended December 31, 2004, earnings per diluted share was $1.98, up 78% when compared to $1.11 per diluted share in 2003. For the year, revenue of $285.4 million was up 35% from the prior year, operating income of $66.4 million was up 94%, and net income of $46.5 million was up 82%. The 2004 net income included $.09 per diluted share of income tax benefits related to tax projects completed during the year, compared to $.15 per diluted share of tax benefits for tax projects completed in 2003. These increases were primarily the result of strong demand for premium connections resulting in higher utilization of premium connections manufacturing capacity, and strong pressure control aftermarket sales, which lifted the company-wide operating margin to 23%.
Chris Seaver, President and CEO, commented, "Hydril enjoyed a rewarding year in 2004. Net income of $1.98 per share set a record for Hydril since its IPO in 2000. Growth in drilling activity around the globe and our earlier expansion of capacity in our premium connections business made this possible. Although the capital equipment sub-segment of our pressure control business was the only portion of our business with lower revenue in 2004 compared to 2003, we are seeing encouraging signs for 2005 and beyond. During the quarter, announcements continued from prominent drilling contractors of higher day-rates and longer-term contracts for deepwater rigs which usually precede the ordering of new capital equipment of the type we produce."
Premium Connection Segment
Fourth quarter revenue for Hydril's premium connection segment increased 9% sequentially to $58.4 million and operating income increased 12% to $20.5 million. These increases were driven by continued higher demand for our products in international markets, particularly Latin America, and by higher domestic demand as the result of increasing deep formation drilling.
Pressure Control Segment
Sequentially, fourth quarter revenue for the pressure control segment increased 12% to $28.1 million and operating income increased 15% to $6.3 million. Aftermarket revenue decreased 6% to $15.0 million, while capital equipment revenue increased 44% to $13.1 million. The increase in capital equipment revenue was primarily driven by better than expected non-project blowout preventer sales and a new project that began in the fourth quarter of 2004 which was recorded on a percentage-of-completion accounting basis. At the end of the quarter, capital equipment backlog stood at $14.6 million, down sequentially from $15.9 million, but up from $11.5 million as of December 31, 2003.
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