Veritas DGC Announces Third Fiscal Quarter Results

Veritas (NYSE: VTS) announced its financial results for the third fiscal quarter and nine months ended April 30, 2006. Revenue and earnings for the third fiscal quarter and nine months ended April 30, 2006 with the comparative amounts for the corresponding periods of the prior fiscal year were as follows:

Three Months Ended     Nine Months Ended
                                     April 30,             April 30,
                          ------------------------------------------

                             2006         2005      2006        2005
                          ------------------------------------------
                             (millions, except per share amounts)
Revenue                   $ 236.2      $ 175.5   $ 643.8     $ 497.3
Net income                   32.9         18.4      75.7        36.8
Diluted earnings per share   0.84         0.52      1.95        1.05

Veritas Chairman and CEO Thierry Pilenko commented, "I am pleased to report another excellent quarter for Veritas. Revenue grew 35% and operating margin was up 66% year-on-year as strong market conditions and increased exploration spending fueled growth across all of our product lines. Our commitment to a balanced multi-client / contract strategy delivered particularly strong results this quarter with data library sales up 86% year-on-year.

We are continuing to see increased interest around our enhanced subsurface illumination and reservoir delineation capabilities through innovative techniques such as wide-azimuth marine acquisition and advanced imaging technologies.

Looking forward, within the current global economic environment, we expect these robust seismic market conditions to extend well into 2007."

Revenue for the third quarter and nine months ended April 30 follows:

Three Months Ended        Nine Months Ended
                                  April 30,                April 30,
                        --------------------------------------------
                           2006        2005         2006        2005
                        --------------------------------------------
                                         (millions)
Multi-client:
 Land                   $  12.7     $  10.3      $  85.7     $  36.3
 Marine                    76.1        37.3        200.7       144.1
                        --------------------------------------------
  Subtotal                 88.8        47.6        286.4       180.4

Contract:
 Land                      75.2        57.0        156.4       134.0
 Marine                    72.2        70.9        201.0       182.9
                        --------------------------------------------
  Subtotal                147.4       127.9        357.4       316.9
                        --------------------------------------------
Total Revenue           $ 236.2     $ 175.5      $ 643.8     $ 497.3
                        --------------------------------------------
                        --------------------------------------------

Revenue by segment:
 North and South
  America (NASA)        $ 172.6     $ 111.0      $ 445.6     $ 318.5
 Europe, Africa, Middle
  East, and CIS (EAME)     31.2        30.6         99.7        95.5
 Asia Pacific (APAC)       27.4        29.4         83.9        71.5
 Veritas Hampson-Russell
  (VHR)                     5.0         4.5         14.6        11.8
                        --------------------------------------------
Total Revenue           $ 236.2     $ 175.5      $ 643.8     $ 497.3
                        --------------------------------------------
                        --------------------------------------------

Multi-client

Multi-client revenue in the third quarter of fiscal 2006 of $88.8 million increased $41.2 million, or 86%, compared to the prior year's third fiscal quarter. Increased revenues were driven by continued strengthening of interest in the Gulf of Mexico and especially strong marine data library sales in Brazil.

Contract

Contract revenue in the third quarter of fiscal 2006 of $147.4 million increased $19.5 million, or 15%, from the prior year's third fiscal quarter. While market conditions continue to improve and strengthen our business worldwide, we saw much of the increase in this fiscal quarter from land acquisition work in Canada and Alaska as well as increased processing revenue across all geographic divisions. Marine acquisition revenue remained strong considering the prior year third quarter results included a significant wide azimuth project in the Gulf of Mexico.

Operating Income

Operating income of $48.6 million increased $19.4 million, or 66%, compared to the prior year's third fiscal quarter primarily due to improved revenue and pricing in both our multi-client and contract business. The strongest areas were in land acquisition and processing work. Operating margin as a percent of revenue increased from 17% in the prior year's third fiscal quarter to 21% in the current year's third fiscal quarter.

General and administrative expenses of $11.1 million increased $2.5 million from the prior year's third fiscal quarter primarily due to share-based employee compensation expense resulting from the adoption of new accounting rules, severance costs and increased provision for performance-based incentive compensation.

Other Items

Interest expense increased by $0.9 million from the prior year's third fiscal quarter as a result of increases in the interest rate on the $155.0 million convertible debt. Interest income increased approximately $1.7 million compared to the prior year's third fiscal quarter due to higher interest rates and a higher cash balance.

Income Taxes

The Company's effective tax rate for the quarter ended April 30, 2006 was 33.2%, slightly lower than the 35% U.S. statutory rate. The Company currently expects the effective tax rate for the full year fiscal 2006 to be approximately 39%.

Backlog

The Company's backlog continued to be near record levels at $460 million on April 30, 2006, compared to our all time high of $474 million at January 31, 2006 and $234 million at April 30, 2005.

Balance Sheet

The Company ended the third quarter with approximately $378.2 million in cash compared to $249.4 at July 31, 2005. We also have $155.0 million in convertible debt, which remains classified as a current liability because the stock price has remained above the level that triggers the convertibility features of the debt.

Investment in the multi-client library, net of depreciation, was $25.6 million for the third fiscal quarter compared to $18.7 million in the prior year's third fiscal quarter. Our multi-client library balance was $272.2 million at April 30, 2006.

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