Varco Revenue Up 46%
Varco International Inc. announced that net income for its fourth fiscal quarter ended Dec. 31, 2001 was $27.2 million or $0.28 per fully diluted share, compared to $14.1 million or $0.15 per fully diluted share for the fourth quarter of 2000. Revenue and operating profit for the fourth quarter of 2001 were $362.2 million and $49.2 million, compared to revenues of $245.6 million and operating profit of $28.4 million for the fourth quarter of 2000.
Varco's net income for its fiscal year 2001 totaled $83.0 million, or $0.86 per fully diluted share, compared to $21.1 million or $0.22 per fully diluted share in 2000. Excluding certain unusual merger, transaction and litigation charges from both periods, net income was $93.7 million or $0.97 per fully diluted share in 2001, more than double 2000 net income of $43.5 million or $0.46 per fully diluted share. Revenue totaled $1,267.8 million in 2001, up 46 percent from $866.6 million in 2000. Operating profit, excluding certain charges, for the year was $174.6 million, compared to $87.5 million in the prior year.
Varco's fourth quarter revenues rose 47 percent over the prior year quarter as a result of higher demand for drilling, coiled tubing and wireline equipment, and the impact of strategic acquisitions, offset somewhat by lower drilling activity levels.
Drilling Equipment Sales revenue was $136.4 million in the fourth quarter, up 75 percent from the prior year period revenue of $78.1 million. The increase in revenue is due primarily to the shipment of a portion of a previously announced Maersk order and the delivery of 25 top drives, a company record. Operating profit was $17.1 million or 12.5 percent of revenue in the fourth quarter of 2001, compared to $9.6 million or 12.3 percent of revenue in the fourth quarter of 2000, an increase of 77 percent. Incoming orders totaled $113.7 million in the quarter. The year-end backlog was $251.5 million, a 171% increase from the prior year.
Tubular Services posted $86.5 million in sales in the fourth quarter, up 24 percent from the prior year period, due mostly to the contribution from the acquisition of two composite pipe manufacturing businesses. Strengthening drilling and workover activity in the eastern hemisphere generally offset declining activity levels in the western hemisphere. Operating profit was $14.7 million or 17.0 percent of revenue in the fourth quarter of 2001, up 16 percent from the prior year period operating profit of $12.7 million.
Drilling Services revenue was $76.0 million in the fourth quarter of 2001, up five percent from the prior period revenue of $72.7 million. Growth came from acquisitions of four drilling instrumentation businesses in 2001, which were offset partially by declines in demand due to a six percent decrease in drilling activity worldwide in 4Q2001 vs. 4Q2000, as measured by the Baker Hughes rig count. Operating profit for the fourth quarter of 2001 rose 27 percent to $16.2 million or 21.3 percent of revenue, compared to $12.8 million or 17.5 percent of revenue in the fourth quarter of 2000.
Coiled Tubing & Wireline Products revenues more than doubled from the prior year quarter, rising to $63.3 million, due to strong demand for the company's coiled tubing technologies and the acquisition of four businesses during the year. Operating profit was $12.6 million or 20.0 percent of revenue in the fourth quarter of 2001, nearly triple operating profit of $4.3 million in the fourth quarter last year. Order intake for the fourth quarter was $39.1 million, and year-end backlog of $55.9 million was nine percent lower than prior year backlog.
George Boyadjieff, chairman and CEO of Varco, commented, "I am very pleased with Varco's fourth quarter and year end 2001 results. Despite a softening market, we delivered our highest earnings of the year in the fourth quarter. Varco's Coiled Tubing and Wireline Products business had an extraordinary year and our Tubular and Drilling Services businesses also performed exceptionally well. We increased capital equipment backlog, executed 15 strategic acquisitions and closed the year with a strong balance sheet. Although market activity is declining, we are starting 2002 with a solid backlog and have reduced our cost structure. That will allow us to utilize our worldwide franchises and to continue our strategic growth."
Varco completed the quarter and year ended Dec. 31, 2001 with $265.1 million in net debt (debt less cash), equity of $828.3 million, and a net debt to total capitalization ratio of 24.2 percent. On Jan. 30, 2002 Varco completed a $125 million syndicated revolving credit facility led by Wells Fargo Bank, for working capital, acquisitions and general corporate purposes. Capital expenditures were $22.5 million in the quarter. The company completed two small acquisitions in the fourth quarter of 2001.