Financial Results (in millions, except per share amounts) 3 Months Ended 03/31/05 12/31/04 03/31/04 Revenue $795.9 $737.8 $647.1 Net Income $109.6 $95.0 (A) $73.3 Diluted Earnings $0.66 $0.58 (A) $0.45 Per Share (A) Includes $9.0 million profit before taxes recorded in other income for the recovery of misappropriated funds.
Sequentially, consolidated revenue for the quarter increased 8%, with U.S./Mexico Pressure Pumping Services up 4%, International Pressure Pumping Services up 16% and Other Oilfield Services up 5%. Compared to prior year's second quarter, consolidated revenue increased 23%, with U.S./Mexico Pressure Pumping Services increasing 31%, International Pressure Pumping Services increasing 14%, and Other Oilfield Services up 21%.
Operating income margins during the quarter were 20.2%, up from 17.6% reported in the previous quarter and up from 17.1% reported in last year's second quarter. Improved operating margins, sequentially and year over year, were the result of positive contributions from all business segments.
Capital spending was $77.7 million for the quarter. Year to date spending is $132.6 million, in line with planned 2005 capital spending of $290 million. The Company purchased $37.8 million of its common stock during the quarter at an average price of $48.83 per share and has authorization remaining to purchase up to $209.6 million in stock. Cash plus short term investments, as of March 31, 2005 was $653.9 million, which exceeded total debt by $152.0 million at March 31, 2005.
On March 25, 2005 the Company called for redemption of all of its outstanding Convertible Senior Notes due 2022. The redemption date was April 25, 2005 with an aggregate redemption price of $422.4 million. The redemption of the notes was funded with cash.
U.S./Mexico Pressure Pumping Services
U.S./Mexico Pressure Pumping Services revenue increased 4% sequentially, as a result of improved pricing and higher drilling activity in the U.S. The combined U.S. and Mexico average drilling rig count increased 3%. Operating income margins for U.S./Mexico improved to 30% from 29% reported in the previous quarter.
Compared to the second quarter of the prior year, revenue in U.S./Mexico increased 31%, on the strength of a 14% combined average drilling rig count increase for the U.S. and Mexico and improved pricing in the U.S. market. U.S./Mexico operating income margins were 25% in the prior year's quarter.
International Pressure Pumping Services
International Pressure Pumping Services revenue increased 16% sequentially primarily from a 24% revenue increase in Canada. International revenue excluding Canada was up 10% sequentially, on the strength of activity increases in the North Sea led by Norway and the U.K., slightly offset by a decrease in revenue from the Company's stimulation vessel in the North Sea. Russia also experienced improved revenue, due to increased fracturing activity. International Pressure Pumping Services operating margins were 16%, up from 13% reported in the previous quarter, primarily resulting from the sequential increase in Canadian activity.
Year over year, International Pressure Pumping Services revenue was up 14%. Canadian revenue improved 12%. International revenue excluding Canada was up 16% with each region showing improvement. North Sea revenue was up 36%, despite a 50% reduction in market activity for the Company's stimulation vessel. Revenue in the Middle East increased 24% primarily from increased activity in India and Bangladesh. Argentina and Russia also contributed to the increase in revenue. Operating margins for International Pressure Pumping Services remained flat year over year.
Other Oilfield Services
Revenue from the Company's Other Oilfield Services (completion fluids, completion tools, process and pipeline services, casing and tubular services and production chemical services) increased 5% sequentially. Operating income margins improved to 12% from 6% reported in the previous quarter. All services experienced increases in revenue sequentially, except Process and Pipeline Services which experienced a normal seasonal decline.
Compared to the second quarter of the prior year, revenue for these services increased 21%, with all service lines showing revenue improvement. Operating income margins of 12% for the quarter were higher than the 8% reported for the same quarter last year. Each of the service lines contributed to the improved operating income margins year over year.
CEO Stewart Comments
Chairman and CEO Bill Stewart commented, "Strong drilling activity in North America along with improving markets in the North Sea and Middle East contributed to record earnings for the quarter.
"We continue to remain optimistic that worldwide activity will remain strong. We have also planned for a normal spring breakup in Canada. As a result we are forecasting earnings for the June quarter in the range of $0.57 - 0.60 per diluted share. We now expect our 2005 fiscal year earnings to be in the range of $2.45 - 2.55 per diluted share."
The following table reflects the percentage change in the Company's consolidated revenue by geographic area for the March 2005 quarter compared to the December 2004 quarter (sequential) and the March 2004 quarter (year over year). The information presented is based on the Company's combined service and product line offering by geographic region.
Geographic Sequential Year Over Year U.S. 7 % 35 % Canada 24 % 14 % 10 % 29 % Latin America (includes Mexico) -8 % -6 % Europe/Africa 13 % 25 % Russia 19 % 31 % Middle East 8 % 27 % Asia Pacific -6 % -4 % 9 % 23 % Non-GAAP Financial Measures
A non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet, or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.
The Company anticipates utilizing a non-GAAP financial measure in today's earnings release conference call -- operating income incremental margin. Operating income incremental margin is computed by utilizing GAAP numbers. It is calculated by dividing the change in operating income by the change in revenue. Management believes incremental margins provide useful information to investors as a measure of earnings growth. The computation is posted on the Investors section of our website. Any unexpected disclosures of non-GAAP financial measures discussed on the call will be posted on our website as soon as possible after the disclosure.
The Company is scheduled to report second quarter fiscal 2005 earnings on Tuesday, April 26, 2005 and will hold a conference call following the earnings release. The call will take place at 9:00 a.m. Central Time, following the release of earnings scheduled for approximately 8:15 a.m. Central Time.
To participate in the conference call, please call 913/981-4912, 10 minutes prior to the conference call start time and give the conference code number 4524032. If you are unable to participate, the conference call will be available for playback three hours after conclusion of the conference call. The playback number is 719/457-0820 and the replay entry code is 4524032. Playback will be available for three days.
The conference call will also be available via real-time webcast at bjservices.com. Playback of the webcast will be available following the conference call.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended 3/31/05 3/31/04 3/31/05 3/31/04 (In thousands except per share data) Revenue $795,863 $647,060 $1,533,645 $1,247,859 Operating Expenses: Cost of sales and services 573,593 484,106 1,123,679 941,836 Research and engineering 13,083 11,828 25,545 22,333 Marketing 22,170 20,133 43,845 39,430 General and administrative 26,218 20,027 48,701 37,908 Loss on long-lived assets 392 550 1,330 928 Total operating expenses 635,456 536,644 1,243,100 1,042,435 Operating income 160,407 110,416 290,545 205,424 Interest expense (3,790) (4,144) (7,758) (8,346) Interest income 3,609 898 6,572 1,718 Other income/(expense), net (282) (100) 9,319 (596) Income before income taxes 159,944 107,070 298,678 198,200 Income taxes 50,390 33,806 94,091 63,424 Net income $109,554 $73,264 $204,587 $134,776 Earnings Per Share: Basic $0.68 $0.46 $1.26 $0.85 Diluted $0.66 $0.45 $1.24 $0.83 Weighted Average Shares Outstanding: Basic 162,300 159,474 162,358 159,165 Diluted 164,858 163,229 164,981 162,583 Supplemental Data: Depreciation and amortization $32,865 $31,268 $65,230 $61,962 Capital expenditures 77,668 45,280 132,607 83,401 Debt 501,918 508,443 Segment Data: U.S./Mexico Pressure Pumping Revenue 389,373 297,556 764,826 581,998 Operating Income 116,808 74,206 224,532 140,413 International Pressure Pumping Revenue 284,678 248,766 530,823 469,975 Operating Income 45,518 39,160 76,588 64,359 Other Oilfield Services Revenue 121,611 100,738 237,632 195,886 Operating Income 14,497 8,561 20,926 20,688 Corporate Revenue 201 297 364 538 Operating Loss (16,416) (11,511) (31,501) (20,036)
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