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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, 1999
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 common shares of the Registrant, par value NLG 0.03 per
share, outstanding at May 7, 1999 was 29,413,784.
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CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at March 31, 1999 and December 31, 1998 ....................... 1
Consolidated Statements of Operations for the Three Months Ended
March 31, 1999 and 1998................................................................ 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1999 and 1998................................................................ 3
Notes to Consolidated Financial Statements ................................................ 4
Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations ........................................................................ 8
Part II -- Other Information
Item 1 -- Legal Proceedings..................................................................... 11
Item 2 -- Changes in Securities................................................................. 11
Item 3 -- Defaults Upon Senior Securities....................................................... 11
Item 4 -- Submission of Matters to a Vote of Security Holders .................................. 11
Item 5 -- Other Information..................................................................... 11
Item 6 -- Exhibits and Reports on Form 8-K .................................................... 13
Signature ........................................................................................... 14
</TABLE>
ii
<PAGE> 3
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 6,849 $ 8,166
Accounts receivable, net.................................................... 76,209 84,288
Inventories................................................................. 22,893 18,860
Prepaid expenses............................................................ 11,462 9,935
Deferred income tax asset................................................... 5,409 5,192
---------- -----------
Total current assets................................................... 122,822 126,441
PROPERTY, PLANT AND EQUIPMENT.................................................... 90,058 88,009
Less-- accumulated depreciation............................................. (21,350) (19,818)
---------- ------------
68,708 68,191
INTANGIBLES AND GOODWILL, net.................................................... 148,796 149,487
OTHER LONG-TERM ASSETS........................................................... 4,469 4,489
---------- ------------
Total assets............................................................ $ 344,795 $ 348,608
========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................................ $ 22,871 $ 18,355
Accounts payable............................................................ 16,707 18,528
Other current liabilities................................................... 22,825 24,338
---------- ------------
Total current liabilities.............................................. 62,403 61,221
LONG-TERM DEBT................................................................... 68,056 68,238
MINORITY INTEREST................................................................ 1,098 1,078
LONG-TERM LEASE OBLIGATIONS...................................................... 143 154
OTHER LONG-TERM LIABILITIES...................................................... 21,303 20,949
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preference shares, NLG 0.03 par value; 3,000,000 shares authorized,
no shares issued or outstanding......................................... -- --
Common shares, NLG 0.03 par value; 30,000,000 shares authorized,
29,414,284 and 29,298,419 issued and outstanding
at March 31, 1999 and December 31, 1998, respectively................... 497 496
Additional paid-in capital.................................................. 153,213 152,178
Retained earnings........................................................... 38,082 44,294
---------- ------------
Total shareholders' equity.............................................. 191,792 196,968
---------- ------------
Total liabilities and shareholders' equity............................. $ 344,795 $ 348,608
========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
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CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1999 1998
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SERVICES ......................................... $ 52,190 $ 58,283
SALES ............................................ 11,941 4,178
------------ ------------
64,131 62,461
OPERATING EXPENSES:
Costs of services ........................... 44,941 47,105
Costs of sales .............................. 9,482 3,427
General and administrative expenses ......... 2,747 1,882
Depreciation and amortization ............... 4,478 3,423
Non-recurring charges (Note 6) .............. 10,670 --
Other (income) expense, net ................. (497) (49)
------------ ------------
71,821 55,788
INCOME (LOSS) BEFORE INTEREST EXPENSE AND
INCOME TAX EXPENSE .......................... (7,690) 6,673
INTEREST EXPENSE ................................. 1,582 1,380
------------ ------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE .......... (9,272) 5,293
INCOME TAX EXPENSE (BENEFIT) ..................... (3,060) 1,588
------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS ......... (6,212) 3,705
LOSS FROM DISCONTINUED OPERATIONS ................ -- (217)
------------ ------------
NET INCOME (LOSS) ................................ $ (6,212) $ 3,488
============ ============
PER SHARE DATA:
Income (loss) from continuing operations .... $ (0.21) $ 0.15
Loss from discontinued operations ........... $ -- $ (0.01)
------------ ------------
Basic earnings (loss) per share ............ $ (0.21) $ 0.14
============ ============
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING ........................... 29,358,338 25,650,083
============ ============
Income (loss) from continuing operations .... $ (0.21) $ 0.14
Loss from discontinued operations ........... $ -- $ (0.01)
------------ ------------
Diluted earnings (loss) per share ........... $ (0.21) $ 0.13
============ ============
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING ........................... 30,049,601 26,514,596
============ ============
</TABLE>
The accompanying notes 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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................... $ (6,212) $ 3,488
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization ................................... 4,478 3,423
(Gain) loss on sale of fixed assets ............................. 9 (301)
Changes in assets and liabilities:
Decrease in accounts receivable ................................. 8,101 346
(Increase) decrease in inventories .............................. (596) 114
Increase in prepaid expenses .................................... (4,964) (2,676)
Decrease in accounts payable .................................... (1,821) (3,033)
Increase (decrease) in other accrued expenses ................... 3,502 (517)
Other ........................................................... (4,720) (2,605)
-------- --------
Net cash used in continuing operations ..................... (2,223) (1,761)
Net cash provided by discontinued operations ............... -- 217
-------- --------
Net cash used in operating activities ...................... (2,223) (1,544)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (5,583) (3,803)
Proceeds from sale of fixed assets .................................. 1,660 412
-------- --------
Net cash used in investing activities ........................... (3,923) (3,391)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt .......................................... (3,669) (1,729)
Borrowings under long-term debt ..................................... 8,003 --
Decrease in short-term debt ......................................... -- (44)
Exercise of stock options ........................................... 556 275
Other ............................................................... (61) (94)
-------- --------
Net cash provided by (used in) financing activities ............. 4,829 (1,592)
-------- --------
NET CHANGE IN CASH ...................................................... (1,317) (6,527)
CASH, beginning of period ................................................ 8,166 12,726
-------- --------
CASH, end of period ...................................................... $ 6,849 $ 6,199
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
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, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. Balance sheet information as of December 31, 1998, has
been taken from the 1998 annual audited financial statements. Certain 1998 items
have been reclassified to conform with the 1999 presentation. 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 31, 1999.
ACCOUNTING STANDARDS
The Company adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information" in 1998, which changes the way the Company
reports information about its operating segments. See Footnote 7 for additional
information.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999, and establishes accounting and reporting
standards for derivative instruments (including certain derivative instruments
embedded in other contracts). Adoption of SFAS No. 133 is not expected to have a
material effect on the Company's financial position or operational results.
2. ACQUISITIONS
On January 7, 1999, the Company acquired receivables and certain fixed
assets from Isotag Specialist, Inc. ("Isotag"), and its related company, Fred
Calaway and Co. Both companies are privately held and based in Texas. Isotag
provides production enhancement and related services. The Company issued
approximately 33,000 shares for the assets and is accounting for the transaction
using the purchase method of accounting.
On January 18, 1999 the Company entered into an agreement to acquire
GeoScience Corp. for approximately $197 million in cash and stock. On March 23,
1999 the Company agreed to terminate the agreement. As part of the termination,
the Company incurred charges of approximately $3.7
4
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million, including $3.0 million of working capital advances made by the Company
to GeoScience Corp.
3. 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):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Parts and materials....................... $ 16,614 $ 16,987
Work in process........................... 6,279 1,873
----------- ------------
Total ........................... $ 22,893 $ 18,860
=========== ============
</TABLE>
4. INTANGIBLES AND GOODWILL
Intangibles and goodwill are amortized using the straight-line method over
their estimated useful lives, which range from 5 to 40 years. Intangibles
include patents, trademarks, service marks and trade names. Goodwill represents
the excess purchase price over the fair market value of net assets acquired for
acquisitions accounted for as purchases. The Company continually evaluates
whether subsequent events or circumstances have occurred that indicate the
remaining useful life of intangibles and goodwill may warrant revision or that
the remaining balance of intangibles and goodwill may not be recoverable by
determining whether the carrying amount of the intangible assets can be
recovered through projected undiscounted future cash flows over the remaining
amortization period.
5. LONG-TERM DEBT
Long-term debt at March 31, 1999 and December 31, 1998 is summarized in the
following table (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Credit Facility with a bank group:
$70,154 term loan facility.............. $ 66,607 $ 70,154
$55,000 revolving debt facility......... 23,000 15,000
Loan Notes ............................... 1,073 1,073
Other indebtedness.......................... 247 366
----------- -----------
Total debt ........................ 90,927 86,593
Less-- current maturities............... 22,871 18,355
----------- -----------
Total long-term debt............... $ 68,056 $ 68,238
=========== ===========
</TABLE>
In May 1997, the Company entered into a Credit Facility which provides
for (i) a term loan of $55 million, (ii) a term loan denominated in British
pounds having a U.S. dollar equivalency of approximately $15
5
<PAGE> 8
million, (iii) a committed revolving debt facility of $50 million, and (iv) a
Netherlands guilder denominated revolving debt facility with U.S. dollar
equivalency of $5 million. At March 31, 1999, approximately $32 million was
available for borrowing under the revolving credit facility. Loans under the
Credit Facility will generally bear interest from LIBOR plus 0.75% to a maximum
of LIBOR plus 1.75%. The term loans require quarterly principal payments
beginning March 31, 1999, with the final payment due on June 30, 2002. The
revolving debt facilities require interest payments only, until maturity on June
30, 2002. The terms of the Credit Facility will require the Company to meet
certain financial covenants, including certain minimum equity and cash flow
tests. Management believes that the Company is in compliance with all such
covenants contained in its credit agreements. All of the Company's material
subsidiaries are guarantors or co-borrowers under the Credit Facility.
As part of the purchase of Scott Pickford plc in March 1997, the Company
issued unsecured loan notes as an alternative to the cash consideration paid for
the outstanding shares of Scott Pickford plc. The loan notes bear interest
payable semi-annually, at the rate of LIBOR less 1.0% per annum. Holders of the
loan notes have the right to redeem the loan notes at par on each interest
payment date. Unless previously redeemed or purchased, the loan notes will be
redeemed at par on June 30, 2002.
6. NON-RECURRING CHARGES
In the first quarter of 1999, the Company recorded certain non-recurring
charges of approximately $3.7 million relating to the termination of the
proposed GeoScience transaction. The Company also recorded non-recurring charges
related to asset write-downs, expenses for personnel reductions,
facility-related expenses and other charges, totaling approximately $6.9
million. These charges are included in "Non-recurring charges" in the
accompanying consolidated financial statements of operations.
7. SEGMENT REPORTING
The Company's business units have been aggregated into three reportable
segments which provide products and services used for optimizing reservoir
performance and maximizing hydrocarbon recovery from new and existing fields.
o Reservoir Description: Encompasses the petrophysical characterization of
petroleum reservoir rock and the phase behavior relationships of reservoir
fluids and gases.
o Production Enhancement: Includes field applications of proprietary
technologies to maximize the efficiency and effectiveness of well
completions, perforations, stimulations, and production.
o Reservoir Management: Combines and integrates data sets from reservoir
description and production enhancement services to maximize daily
hydrocarbon production and recovery from a well or field.
6
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SEGMENT EARNINGS
The Company's operations are managed primarily in three separate segments
due to the different technologies and marketing strategies each segment utilizes
and requires. Results of these segments are presented below using the same
accounting policies as used to prepare the Consolidated Balance Sheet and
Statement of Operations. The Company evaluates performance based on income or
loss from operations before income tax, interest, and other non-operating income
(expense). Summarized financial information concerning the Company's segments is
shown in the following table. Items included in "Corporate and Other" represent
those items that are insignificant or that are not directly related to a
particular segment, but benefit the Company as a whole.
<TABLE>
<CAPTION>
INCOME (LOSS) BEFORE
REVENUES TAXES AND INTEREST
THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Reservoir Description....................... $ 40,613 $ 43,772 $ (4,529) $ 5,401
Production Enhancement...................... 14,351 6,763 1,653 1,737
Reservoir Management........................ 7,870 10,677 812 (1,042)
-------------- -------------- -------------- --------------
Total Business Segments..................... 62,834 61,212 (2,064) 6,096
-------------- -------------- -------------- --------------
Corporate and Other......................... 1,297 1,249 (5,626) 577
Intersegment Eliminations................... -- -- -- --
-------------- -------------- -------------- --------------
Consolidated................................ $ 64,131 $ 62,461 $ (7,690) $ 6,673
============== ============== ============== ==============
</TABLE>
No single customer accounts for 10 percent or more of consolidated revenues
for any of the periods presented.
7
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CORE LABORATORIES N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Certain matters discussed herein may contain forward-looking statements
that are subject to risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the following: the continued expansion of
services is dependent upon the Company's ability to continue to develop or
acquire new and useful technology; the improvement of margins is subject to the
risk that anticipated synergies of existing and recently acquired businesses and
future acquisitions will not be realized; the Company's dependence on one
industry segment, oil and gas; the risks and uncertainties attendant to adverse
industry, economic, and financial market conditions, including stock prices,
interest rates and credit availability; and competition in the Company's
markets. Should one or more of these risks or uncertainties materialize and
should any of the underlying assumptions prove incorrect, actual results of
current and future operations may vary materially from those anticipated.
GENERAL
Core Laboratories N.V. was established in 1936 and is one of the world's
leading providers of proprietary and patented reservoir description, production
enhancement and reservoir management services for optimizing reservoir
performance and maximizing hydrocarbon recovery from new and existing fields.
The Company's customers include major, national, and independent oil and gas
producers. In addition, the Company manufactures and sells petroleum reservoir
rock and fluid analysis instrumentation and other integrated systems which
complement its services operations. Core Laboratories currently operates over 70
facilities in over 50 countries and has approximately 3,500 employees.
RECENT DEVELOPMENTS
ISOTAG ACQUISITION
On January 7, 1999, the Company acquired receivables and certain fixed
assets from Isotag Specialist, Inc., and its related company, Fred Calaway and
Co. Both companies are privately held and based in Texas. Isotag provides
production enhancement and related services. The Company issued approximately
33,000 shares for the assets and is accounting for the transaction using the
purchase method of accounting.
GEOSCIENCE ACQUISITION
On January 18, 1999 the Company entered into an agreement to acquire
GeoScience Corp. for approximately $197 million in cash and stock. On March 23,
1999 the Company agreed to terminate the agreement. As part of the termination,
the Company incurred charges of approximately $3.7 million, including $3.0
million of working capital advances made by the Company to
8
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GeoScience Corp. These charges are included in "Non-recurring charges" in the
accompanying consolidated statements of operations as discussed in Footnote 6.
NON-RECURRING CHARGE
In the first quarter of 1999, the Company recorded certain non-recurring
charges of approximately $3.7 million relating to the termination of the
proposed GeoScience Corp. transaction. The Company also recorded non-recurring
charges related to asset write-downs, expenses for personnel reductions,
facility-related expenses and other charges, totaling approximately $6.9
million. These charges are included in "Non-recurring charges" in the
accompanying consolidated financial statements of operations.
RESULTS OF OPERATIONS
The following table sets forth certain percentage relationships based on
the Company's consolidated income statements for the periods indicated:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL REVENUE
------------------
THREE MONTHS ENDED
MARCH 31
------------------
1999 1998
------- ------
<S> <C> <C>
Services ................................................ 81.4% 93.3%
Sales .................................................. 18.6 6.7
------- ------
100.0 100.0
Operating expenses:
Cost of services ........................................ 86.1* 80.8*
Cost of sales .......................................... 79.4* 82.0*
General and administrative expenses...................... 4.3 3.0
Depreciation and amortization............................ 7.0 5.5
Non-recurring charges.................................... 16.6 --
Other income, net........................................ (0.8) 0.1
Income (loss) from continuing operations before interest
expense and income tax expense........................ (12.0) 10.7
Interest expense......................................... 2.5 2.2
------- ------
Income (loss) from continuing operations before income
tax expense........................................... (14.5) 8.5
Income tax expense (benefit)............................. (4.8) 2.5
------- ------
Income (loss) from continuing operations (9.7)% 6.0%
======= ======
* Percentage based on applicable segment revenue, and not total revenue.
</TABLE>
Total revenue for the first quarter 1999 was $64.1 million, an increase
from $62.5 million in the same period last year. The increase was due to
increased demand for the Company's products and its recent acquisitions.
Cost of services as a percentage of services revenue for the quarter ended
March 31, 1999 increased compared to the corresponding quarter in 1998. The
increase is due to reduced global oil prices which resulted in a more
competitive industry and lower unit demand for the services provided.
9
<PAGE> 12
Cost of sales as a percentage of sales revenue for the quarter ended March
31, 1999 decreased compared to the corresponding quarter in 1998 due to an
increase in higher margin product sales.
General and administrative expenses for the quarter ended March 31, 1999
increased $0.9 million as compared to the corresponding period in 1998 as a
result of increased personnel costs attributable to the Company's growth.
Depreciation and amortization expense for the quarter ended March 31, 1999
increased to $4.5 million as compared to $3.4 million a year ago, primarily due
to the inclusion of depreciation and amortization from the Company's recent
acquisitions.
Non-recurring charges of $10.7 million were expensed in the quarter ended
March 31, 1999. The expenses were related to asset write-downs, personnel
reductions, and other expenses including those related to the termination of the
proposed GeoScience Corp. transaction.
Interest expense for the quarter ended March 31, 1999 increased $0.2
million as compared to 1998. The increase was primarily due to additional
borrowings used to refinance a portion of the debt of the recent acquisitions.
The Company's effective income tax rate was approximately 33.0% for the
three months ended March 31, 1999 as compared to 30.0% for three months ended
March 31, 1998. The increase is due to the higher average tax rates of the
jurisdictions in which the recent acquisitions operate.
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, 1999
the Company had operating cash flow of ($2.2) million as compared to ($1.5)
million for the corresponding period in 1998. Management believes the Company's
internal and external sources of cash will provide the necessary funds with
which to meet its expected obligations.
The Company expects to fund future acquisitions primarily through a
combination of working capital, cash flow from operations, bank borrowings
(including the Credit Facility), and issuances of additional equity. Although
the Credit Facility imposes certain limitations on the incurrence of additional
indebtedness, in general the Company will be permitted to assume, among other
things, indebtedness of acquired businesses, subject to compliance with the
financial covenants of the Credit Facility.
10
<PAGE> 13
CORE LABORATORIES N.V.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company may from time to time be subject to legal proceedings and
claims that arise in the ordinary course of its business. Management believes
that the outcome of these legal actions will not have a material adverse effect
upon the consolidated financial position or future 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.
None.
ITEM 5. OTHER INFORMATION.
YEAR 2000 CONVERSION
The Company's has numerous technology systems that are managed on a
decentralized basis. The Company's Year 2000 readiness efforts are therefore
being undertaken on a company wide basis but with centralized oversight. Each
facility is responsible for developing and implementing a plan to minimize the
risk of a significant negative impact on its operations.
The Company has identified four phases to achieve a state of readiness: (i)
identification, (ii) remediation, (iii) implementation and testing, and, (iv)
reassessment. As of December 31, 1998, the identification phase of assessing all
systems that could be affected by Year 2000 date sensitive software or embedded
technology was substantially complete. Remediation and/or implementation of
compliant systems is expected to be completed by the third quarter of 1999.
Reassessment will continue constantly throughout the process.
The Company has relationships with various third parties who must also be
Year 2000 ready. These third parties provide (or receive) resources and services
to (or from) the Company and include
11
<PAGE> 14
organizations with which the Company exchanges information. Third parties
include vendors of hardware, software and information services; providers of
infrastructure services such as voice and data communications; investors,
customers; manufacturing suppliers; distribution channels; non-consolidated
entities; and joint venture partners. Third parties differ from internal systems
in that the company exercises less, or no, control over Year 2000 readiness. The
Company has developed a plan to assess and attempt to mitigate the risks
associated with the potential failure of third parties to achieve Year 2000
readiness. This plan includes the following activities: (i) identify and clarify
third party dependencies; (ii) research and analyze Year 2000 readiness for
critical third parties; and (iii) test critical hardware and software products
and electronic interfaces. As of December 31, 1998, all phases of this process
were substantially complete, however, due to the various stages of third parties
Year 2000 readiness, the Company's testing activities will extend into 1999.
The Company has commenced contingency planning to reduce the risk of Year
2000 related business failures. The contingency plans, which address both
internal systems and third party relationships, include the following
activities: (i) evaluate the consequences of failure of business processes with
significant exposure to Year 2000 risk; (ii) determine the probability of a Year
2000 related failure for those processes that have a high consequence of
failure; (iii) develop an action plan to complete contingency plans for those
processes that rank high in both consequence and probability of failure; and
(iv) complete the applicable action plans. The Company has substantially
completed evaluation activities and is proceeding with the subsequent
activities. The Company expects to substantially complete all
contingency-planning activities by September 30, 1999.
Based on its plans to make internal systems ready for Year 2000, to deal
with third party relationships, and to develop contingency actions, the Company
believes that it will experience, at most, isolated and minor disruptions of
business processes following the turn of the century. Such disruptions are not
expected to have a material effect on the Company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the Company is not
able to predict a reasonable worst case scenario. If conversion of the Company's
internal systems is not completed on a timely basis (due to non-performance by
significant third-party vendors, lack of qualified personnel to perform the Year
2000 work, or other unforeseen circumstances in completing the Company's plans),
or if critical third parties fail to achieve Year 2000 readiness on a timely
basis, the Year 2000 issues could have a material adverse impact on the
Company's operations following the turn of the century.
As of March 31, 1999 the Company has incurred and expensed $0.2 million
(pretax) in 1999 related to Year 2000 readiness. The Company is in the process
of replacing certain systems at the majority of the Company's facilities that no
longer meet the Company's needs.
12
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE FROM THE
EXHIBIT NO. EXHIBIT TITLE FOLLOWING DOCUMENTS
----------- ------------- -------------------
<S> <C> <C>
27.1 Financial Data Schedule Filed Herewith
</TABLE>
(b) Reports on Form 8-K.
GEOSCIENCE ACQUISITION
On February 2, 1999 the Company filed Form 8-K reporting the January 18,
1999 agreement to acquire GeoScience Corp. for approximately $197 million in
cash and stock. On March 23, 1999 the Company agreed to terminate the agreement.
As part of the termination, the Company has incurred charges of approximately
$3.7 million, including $3.0 million of working capital advances previously made
by the Company to GeoScience.
13
<PAGE> 16
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 13, 1999 By: /s/ Richard L. Bergmark
---------------------------------------
Richard L. Bergmark
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Chief Accounting Officer)
14
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
27.1 Financial Data Schedule Filed Herewith
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,849
<SECURITIES> 0
<RECEIVABLES> 87,095
<ALLOWANCES> 10,886
<INVENTORY> 22,893
<CURRENT-ASSETS> 122,822
<PP&E> 90,058
<DEPRECIATION> 21,350
<TOTAL-ASSETS> 344,795
<CURRENT-LIABILITIES> 62,403
<BONDS> 0
0
0
<COMMON> 497
<OTHER-SE> 191,295
<TOTAL-LIABILITY-AND-EQUITY> 344,795
<SALES> 64,131
<TOTAL-REVENUES> 64,131
<CGS> 54,423
<TOTAL-COSTS> 71,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,582
<INCOME-PRETAX> (9,272)
<INCOME-TAX> (3,060)
<INCOME-CONTINUING> (6,212)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,212)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
