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, 1996
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 0-26710
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
The number of shares of common shares of the Registrant, par value NLG
.03 per share, outstanding at May 10, 1996 was 9,466,800.
<PAGE>
CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 ....................... 1
Consolidated Income Statements for the Three Months Ended
March 31, 1996 and 1995 ............................................................... 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1996 and 1995 .............................................................. 3
Notes to Consolidated Financial Statements ................................................ 4
Item 2-- Management's Discussion and Analysis of Financial Condition and Results of
Operations ........................................................................ 6
Part II -- Other Information
Item 1-- Legal Proceedings...................................................................... 9
Item 2--Changes in Securities................................................................... 9
Item 3-- Defaults Upon Senior Securities........................................................ 9
Item 4-- Submission of Matters to a Vote of Security Holders ................................... 9
Item 5--Other Information....................................................................... 10
Item 6-- Exhibits and Reports on Form 8-K ..................................................... 10
Signature ....................................................................................... 11
i
<PAGE>
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
1996 1995
---------- ---------
ASSETS (UNAUDITED) (AUDITED)
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 2,672 $ 4,326
Accounts receivable, net.................................................... 25,093 22,540
Inventories ................................................................ 7,118 8,135
Prepaid expenses and other ................................................ 1,183 1,039
Deferred tax assets ....................................................... 320 320
---------- ---------
Total current assets ........................................................... 36,386 36,360
PROPERTY, PLANT AND EQUIPMENT.................................................... 27,431 22,964
Less-- accumulated depreciation............................................. (3,868) (2,926)
---------- ----------
23,563 20,038
INTANGIBLES AND GOODWILL, net ................................................... 8,416 8,513
DEFERRED DEBT COST, net ......................................................... 49 35
LONG-TERM INVESTMENT ............................................................ 400 400
---------- ----------
Total assets .......................................................... $ 68,814 $ 65,346
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ....................................... $ 3,860 $ 2,500
Short-term debt............................................................. -- 190
Accounts payable............................................................ 3,018 5,430
Accrued payroll and related costs .......................................... 2,452 2,974
Accrued income taxes payable ............................................... 960 613
Other accrued expenses .................................................... 3,704 2,461
---------- ----------
Total current liabilities ...................................................... 13,994 14,168
LONG-TERM DEBT .................................................................. 13,850 11,875
DEFERRED TAX LIABILITIES ........................................................ 611 611
OTHER LONG-TERM LIABILITIES .................................................... 1,511 1,509
MINORITY INTEREST................................................................ 102 96
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preference shares, NLG .03 par value; 3,000,000 shares authorized,
no shares issued or outstanding......................................... - -
Common shares, NLG .03 par value; 30,000,000 shares authorized,
9,466,800 issued and outstanding........................................ 166 166
Additional paid-in capital.................................................. 32,360 32,360
Retained earnings........................................................... 6,220 4,561
---------- ----------
Total shareholders' equity.............................................. 38,746 37,087
---------- ----------
Total liabilities and shareholders' equity......................... $ 68,814 $ 65,346
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.
1
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CORE LABORATORIES N.V.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1996 1995
----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SERVICES ........................................................................ $ 16,496 $ 13,837
SALES............................................................................ 6,879 3,967
----------- ----------
23,375 17,804
OPERATING EXPENSES:
Costs of services .......................................................... 12,999 10,958
Costs of sales.............................................................. 5,676 3,274
General and administrative expenses ........................................ 930 726
Depreciation and amortization............................................... 1,039 689
Other income, net........................................................... (51) 13
----------- -----------
20,593 15,660
INCOME BEFORE INTEREST EXPENSE AND
INCOME TAX EXPENSE.......................................................... 2,782 2,144
INTEREST EXPENSE ................................................................ 342 802
------------ -----------
INCOME BEFORE INCOME TAX EXPENSE................................................. 2,440 1,342
INCOME TAX EXPENSE .............................................................. 781 409
----------- -----------
NET INCOME....................................................................... 1,659 933
LESS - Net income applicable to preferred loan stock............................. -- (112)
----------- -----------
NET INCOME APPLICABLE TO COMMON SHARES .......................................... $ 1,659 $ 821
=========== ===========
NET INCOME PER SHARE ............................................................ $ .18 $ .12
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING.............................................. 9,466,800 6,666,800
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.
2
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CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 1,659 $ 933
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................................ 942 629
Amortization............................................................ 100 114
Changes in assets and liabilities:
Decrease (increase) in accounts receivable.............................. (1,097) 3,592
Decrease in inventories................................................. 1,017 482
Increase in prepaid expenses and other.................................. (133) (114)
Decrease in accounts payable............................................ (2,733) (672)
Increase (decrease) in accrued payroll.................................. (642) 152
Increase (decrease) in accrued income taxes payable..................... 347 (259)
Increase (decrease) in other accrued expenses........................... 867 (1,266)
Other .................................................................. (24) (108)
----------- -----------
Net cash provided by operating activities ......................... 303 3,483
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (775) (299)
Acquisition of Gulf States Analytical, Inc. ................................ (4,310) --
Final payment for business acquired from Western Atlas
International, Inc........................................................ -- (1,778)
----------- -----------
Net cash used in investing activities................................... (5,085) (2,077)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt ................................................. (6,565) (1,310)
Borrowings under long-term debt ............................................ 9,900 --
Decrease in short-term debt................................................. (190) --
Other....................................................................... (17) --
----------- -----------
Net cash provided by financing activities............................... 3,128 (1,310)
----------- -----------
NET CHANGE IN CASH............................................................... (1,654) 96
CASH, beginning of period........................................................ 4,326 2,698
----------- -----------
CASH, end of period.............................................................. $ 2,672 $ 2,794
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.
3
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include the
accounts of Core Laboratories N.V. and its subsidiaries (the "Company"), and
have been prepared in accordance with United States generally accepted
accounting principles for interim financial information and with 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 generally accepted
accounting principles for complete financial statements. 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, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. Balance sheet information as of December 31, 1995, has
been derived from the 1995 annual audited financial statements. For further
information, reference is made to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K filed with the Securities
and Exchange Commission on March 20, 1996.
Net income per share is calculated by dividing net income available to
common shareholders by the weighted average number of common and common
equivalent shares outstanding during the applicable periods presented.
2. INVENTORIES
Inventories are primarily items held for sales or services provided to
customers. Inventories are stated at the lower of average cost (includes direct
material, labor and overhead) or estimated realizable value. A summary of
inventories is as follows (in thousands):
MARCH 31, DECEMBER 31,
1996 1995
------ ------
(UNAUDITED) (AUDITED)
Parts and materials ............. $1,406 $3,468
Work in process ................. 5,712 4,667
------ ------
Total .................. $7,118 $8,135
====== ======
4
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
3. LONG-TERM DEBT
Long-term debt at March 31, 1996 and December 31, 1995 is summarized in the
following table (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
---------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Unsecured Credit Agreement with a bank group:
$14,000 term loan facility.............................................. $ 11,250 $ 11,875
$7,500 revolving credit facility........................................ -- 2,500
$15,000 uncommitted guidance facility .................................. 6,460 --
---------- -----------
Total debt ........................................................ 17,710 14,375
Less-- current maturities............................................... 3,860 2,500
---------- -----------
Total long-term debt........................................... $ 13,850 $ 11,875
=========== ===========
</TABLE>
<PAGE>
CORE LABORATORIES N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Company's Form 10-K
filed with the Securities and Exchange Commission on March 20, 1996.
GENERAL
The Company is engaged in the business of (i) high-technology laboratory
services and (ii) the manufacture and sale of integrated octane measurement
equipment, process analyzer systems, and petroleum reservoir rock and fluids
analysis instrumentation. The Company is the worldwide leader (based on revenues
and laboratory procedures performed) in analyzing core samples from petroleum
reservoirs and in providing reservoir fluids analyses. The Company is also the
leading supplier of octane measurement systems for on-line process streams. Core
Laboratories currently operates 46 facilities in 16 countries and has
approximately 1,200 employees.
The Company continually reviews potential acquisition possibilities in
existing or related business areas to add key technologies, enhance market
presence or complement existing businesses. In January 1996, the Company
acquired substantially all of the assets of Gulf States Analytical, Inc., a
Houston-based environmental testing laboratory. This acquisition is expected to
broaden the services offered by the Company to its clients.
6
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain percentage relationships based on
the Company's income statements for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------
PERCENTAGE OF
TOTAL REVENUE
------------------------- % INCREASE
1996 1995 (DECREASE)
------- ------- ----------
<S> <C> <C> <C>
Services ....................................................... 70.6 77.7 19.2
Sales ......................................................... 29.4 22.3 73.4
------- --------
100.0 100.0 31.3
Operating expenses:
Cost of services .......................................... 55.6 61.5 18.6
Cost of sales ............................................ 24.3 18.4 73.4
General and administrative expenses........................ 4.0 4.1 28.1
Depreciation and amortization.............................. 4.4 3.9 50.8
Other income, net.......................................... (.2) .1 *
-------- -------
88.1 88.0 31.5
Income before interest expense and income tax expense........... 11.9 12.0 29.8
Interest expense................................................ 1.5 4.5 (57.4)
------- --------
Income before income tax expense................................ 10.4 7.5 81.8
Income tax expense.............................................. 3.3 2.3 91.0
------- --------
Net income...................................................... 7.1 5.2 77.8
======= ========
</TABLE>
* Percentage not meaningful.
Service revenue for three months ended March 31, 1996 increased 19.2% to
$16.5 million compared to the corresponding period of 1995. The increase in
service revenue primarily resulted from the acquisitions of four laboratories
from PACE, Incorporated ("PACE Labs") and Gulf States Analytical, Inc. ("GSAI").
Sales revenue for the three month period ended March 31, 1996 increased
73.4% or $2.9 million over the same period of the prior year. The increase was
primarily due to (i) additional revenue from the acquisition of Pastech, Inc.
("Pastech") and (ii) improved sales in the Company's Technology Products
operation.
Cost of services and sales as a percentage of services and sales revenue
for the quarter ended March 31, 1996 was unchanged at 79% and 83%, respectively,
compared to a year ago.
General and administrative expenses for the quarter ended March 31, 1996
increased $0.2 million compared to the corresponding period in 1995. The
increase was primarily due to costs associated with being a publicly traded
company and increased personnel costs due to growth.
Depreciation and amortization expense for the three month period ended
March 31, 1996 increased 50.8% compared to a year ago primarily due to the
acquisitions of Pastech, PACE Labs, and GSAI.
7
Interest expense for the quarter ended March 31, 1996 decreased 57.4%
compared to 1995. The decrease was primarily due to a reduction in debt after
the initial public offering of 2.8 million common shares in 1995.
The Company's effective income tax rate was approximately 32.0% for the
three months ended March 31, 1996 compared to 30.5% for three months ended March
31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements are for working capital, capital
expenditures and acquisitions. For the three month period ended March 31, 1996
the Company had operating cash flow of $0.3 million compared to $3.5 million for
the corresponding period in 1995. Management believes the Company's internal and
external sources of cash will provide the necessary funds with which to meet its
expected obligations.
In January 1996, the Company borrowed $3.1 million under the revolving
credit facility to partially fund the acquisition of GSAI. Subsequently, the
Company borrowed $6.8 million under the guidance facility and used the funds to
repay the outstanding $5.6 million drawn under the revolving credit facility.
Quarterly principal installments of $340,000 on the guidance facility are due
beginning March 31, 1996, with a final maturity on December 31, 2000.
<PAGE>
CORE LABORATORIES N.V.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is (or may from time to time be) a named defendant in lawsuits
and is (or may from time to time be) a party in governmental proceedings from
time to time arising in the ordinary course of business. While the outcome of
such lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not at this time expect these matters to have a
material adverse effect on the financial condition or results of operations of
the Company.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Stockholders voting at the Annual Meeting on April 26, 1996, and by proxy,
elected three incumbent Supervisory Directors to serve on the Company's Board of
Supervisory Directors until the 1999 annual meeting. The vote tabulation for the
individual Directors was:
DIRECTOR SHARES FOR SHARES WITHHELD
David M. Demshur 7,757,481 1,050
Bob G. Agnew 7,757,481 1,050
Timothy J. Probert 7,757,481 1,050
Voting stockholders also confirmed the Dutch Statutory Accounts for the
year ended December 31, 1995. The proposal was approved by 7,752,681 (99.9%)
votes for and 3,150 (0.04%) votes against with 2,700 (0.03%) abstentions.
Voting stockholders also approved the extension of the authority of the
Management Board to repurchase Common Shares of the Company until October 25,
1997. The proposal was approved by 6,943,183 (89.5%) votes for and 800 (0.01%)
votes against with 2,450 (0.03%) abstentions and 812,098 (10.5%) non-votes.
Voting stockholders also approved the extension of the authority of the
Supervisory Board to issue Common Preferred Shares under grant rights (including
options to purchase) on such shares until April 25, 2001. The proposal was
approved by 6,931,913 (89.3%) votes for and 7,370 (0.09%) votes against with
4,750 (0.06%) abstentions and 814,498 (10.5%) non-votes.
9
Voting stockholders also approved the extension of the authority of the
Supervisory Board to limit or exclude preemptive rights contained in the
Articles of Association of the Company until April 25, 2001. The proposal was
approved by 6,930,938 (89.3%) votes for and 5,620 (0.07%) votes against with
7,475 (1.0%) abstentions and 814,498 (10.5%) non-votes.
Voting stockholders also approved the appointment of Arthur Andersen LLP as
the Company's independent public auditors for the fiscal year ended December 31,
1996. The proposal was approved by 7,753,881 (99.9%) votes for and 1,150 (0.01%)
votes against with 3,500 (0.05%) abstentions.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
INCORPORATED BY
REFERENCE FROM THE
EXHIBIT NO. EXHIBIT TITLE FOLLOWING DOCUMENTS
27.1 Financial Data Schedule Filed Herewith
(b) Reports on Form 8-K.
None
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 14, 1996 By: /S/ RICHARD L. BERGMARK
Richard L. Bergmark
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Chief Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,672
<SECURITIES> 0
<RECEIVABLES> 25,860
<ALLOWANCES> 767
<INVENTORY> 7,118
<CURRENT-ASSETS> 36,386
<PP&E> 27,431
<DEPRECIATION> 3,868
<TOTAL-ASSETS> 68,814
<CURRENT-LIABILITIES> 13,994
<BONDS> 13,850
0
0
<COMMON> 166
<OTHER-SE> 38,580
<TOTAL-LIABILITY-AND-EQUITY> 68,814
<SALES> 23,375
<TOTAL-REVENUES> 23,375
<CGS> 18,675
<TOTAL-COSTS> 18,675
<OTHER-EXPENSES> 1,918
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 342
<INCOME-PRETAX> 2,440
<INCOME-TAX> 781
<INCOME-CONTINUING> 1,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,659
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
