CORE LABORATORIES N V, 10-Q, 2000-05-15

CORE LABORATORIES N V
10-Q, 2000-05-15
OIL & GAS FIELD SERVICES, NEC

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<PAGE> 1

================================================================================

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, 2000

[ ] 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 Identification No.)
incorporation or organization)

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 9, 2000 was 30,585,341.

================================================================================

<PAGE> 2

CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000

INDEX

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Part I -- Financial Information

Item 1 -- Financial Statements

Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 ................. 1

Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 ........................................................ 2

Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 ........................................................ 3

Notes to Consolidated Financial Statements .......................................... 4

Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations .................................................................. 10

Item 3 -- Quantitative & Qualitative Disclosures of Market Risk ......................... 15

Part II -- Other Information

Item 1 -- Legal Proceedings ............................................................. 16

Item 2 -- Changes in Securities ......................................................... 16

Item 3 -- Defaults Upon Senior Securities ............................................... 16

Item 4 -- Submission of Matters to a Vote of Security Holders ........................... 16

Item 5 -- Other Information ............................................................. 16

Item 6 -- Exhibits and Reports on Form 8-K .............................................. 16

Signature .................................................................................... 17
</TABLE>

<PAGE> 3

CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------- --------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 13,441 $ 18,141
Accounts receivable, less allowance for doubtful accounts of
$9,506 and $9,825 in 2000 and 1999, respectively ................... 77,983 81,495
Inventories ............................................................ 30,921 24,524
Prepaid expenses and other ............................................. 11,766 10,399
Deferred tax asset ..................................................... 6,175 6,311
-------- --------
Total current assets ............................................... 140,286 140,870

PROPERTY, PLANT AND EQUIPMENT, net .......................................... 67,059 65,003

INTANGIBLES AND GOODWILL, net of accumulated amortization of
$10,808 and $9,737 in 2000 and 1999, respectively ...................... 149,612 150,683
OTHER LONG-TERM ASSETS ...................................................... 6,042 5,928
-------- --------
Total assets .................................................. $362,999 $362,484
-------- --------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ................................... $ 1,080 $ 1,325
Current lease obligations .............................................. 483 622
Accounts payable ....................................................... 18,606 18,400
Other accrued expenses ................................................. 29,653 27,582
-------- --------
Total current liabilities .......................................... 49,822 47,929

LONG-TERM DEBT .............................................................. 77,082 82,207
MINORITY INTEREST ........................................................... 1,404 1,290
LONG-TERM LEASE OBLIGATIONS ................................................. 296 660
OTHER LONG-TERM LIABILITIES ................................................. 20,880 21,068
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; 100,000,000 shares authorized,
30,524,866 and 30,411,616 issued and outstanding
at March 31, 2000 and December 31, 1999, respectively .............. 513 511
Additional paid-in capital ............................................. 163,059 162,042
Retained earnings ...................................................... 49,943 46,777
-------- --------
Total shareholders' equity ......................................... 213,515 209,330
-------- --------
Total liabilities and shareholders' equity .................... $362,999 $362,484
-------- --------
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE> 4

CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------ ------------
(UNAUDITED)

<S> <C> <C>
SERVICES ....................................... 53,296 55,278
SALES .......................................... 15,222 11,941
------------ ------------
68,518 67,219

OPERATING EXPENSES:
Cost of services .......................... 43,921 48,560
Cost of sales ............................. 11,122 9,482
General and administrative expenses ....... 3,303 2,747
Depreciation and amortization ............. 3,263 3,809
Goodwill amortization ..................... 1,007 933
Write-offs and other charges .............. -- 10,670
Other income, net ......................... (573) (495)
------------ ------------
62,043 75,706

INCOME (LOSS) BEFORE INTEREST
EXPENSE AND INCOME TAX EXPENSE ............ 6,475 (8,487)

INTEREST EXPENSE ............................... 1,952 1,688
------------ ------------

INCOME (LOSS) BEFORE INCOME

TAX EXPENSE ............................... 4,523 (10,175)

INCOME TAX EXPENSE (BENEFIT) ................... 1,357 (3,240)
------------ ------------

NET INCOME (LOSS) .............................. $ 3,166 $ (6,935)
------------ ------------

PER SHARE INFORMATION:

BASIC EARNINGS (LOSS) PER SHARE ........... $ 0.10 $ (0.23)
------------ ------------

WEIGHTED AVERAGE BASIC COMMON SHARES

OUTSTANDING ......................... 30,455,206 29,893,735
------------ ------------

DILUTED EARNINGS (LOSS) PER SHARE ......... $ 0.10 $ (0.23)
------------ ------------

WEIGHTED AVERAGE DILUTED COMMON SHARES

OUTSTANDING ......................... 31,552,060 29,893,735
------------ ------------
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE> 5

CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
-------- --------
(UNAUDITED)

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................... $ 3,166 $ (6,935)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization ............................... 4,270 4,742
(Gain) loss on sale of fixed assets ......................... (98) 9
Changes in assets and liabilities:
Decrease in accounts receivable ............................. 3,512 9,313
Increase in inventories ..................................... (6,397) (703)
Increase in prepaid expenses ................................ (615) (4,951)
Increase (decrease) in accounts payable ..................... 206 (1,739)
Increase (decrease) in other accrued expenses ............... 3,687 (2,477)
Decrease in net deferred tax asset .......................... 136 720
Increase (decrease) in other long-term liabilities .......... (188) 564
Other ....................................................... (764) (1,247)
-------- --------
Net cash provided by (used in) operating activities .... 6,915 (2,704)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................ (7,504) (5,660)
Proceeds from sale of fixed assets .............................. 750 1,660
Other ........................................................... (63) 94
-------- --------
Net cash used in investing activities ....................... (6,817) (3,906)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt ...................................... (5,324) (3,780)
Borrowings under long-term debt ................................. 72 9,252
Capital lease obligation, net ................................... (503) (1,092)
Exercise of stock options ....................................... 1,019 646
Other ........................................................... (62) 84
-------- --------
Net cash provided by (used in) financing activities ......... (4,798) 5,110
-------- --------
NET CHANGE IN CASH ................................................... (4,700) (1,500)
CASH, beginning of period ............................................ 18,141 8,166
-------- --------
CASH, end of period .................................................. $ 13,441 $ 6,666
-------- --------
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<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 the Company and have been prepared in accordance with United States
("U.S.") generally accepted accounting principles ("GAAP") for interim financial
information using 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 GAAP 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, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. Balance sheet information as of December 31, 1999 was
derived from the 1999 annual audited financial statements and has been restated
to reflect an acquisition accounted for as a pooling-of-interests (see Note 2).
These financial statements should be read in conjunction with the financial
statements and the summary of significant accounting policies and notes thereto
included in the Company's Form 10-K/A for the year ended December 31, 1999.

RECENT PRONOUNCEMENTS

In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities", was issued and
was subsequently amended by SFAS No. 137, which delayed its effective date. As a
result, SFAS No. 133 will be effective for fiscal years beginning after June 15,
2000, and establishes accounting and reporting standards for derivative
instruments (including certain derivative instruments embedded in other
contracts). The Company does not enter, or intend to enter, into derivative
instruments. Accordingly, adoption of SFAS No. 133 is not expected to have an
impact on the Company's financial position or operational results.

2. ACQUISITIONS

TOMOSEIS ACQUISITION

On January 12, 2000, the Company acquired all of the outstanding shares of
TomoSeis Corporation ("TomoSeis"), a private company based in Houston, Texas.
TomoSeis provides detailed reservoir imaging services that are a component of
timelapse (4D) seismic and reservoir monitoring programs. The Company issued
approximately 232,000 shares, with an estimated value of $3.8 million, and
assumed outstanding stock options exercisable for approximately 396,000 of the
Company's common shares. Proceeds from the exercise of these options would be
approximately $2.1 million. Upon vesting, the options are exercisable by the
holder upon payment of the exercise price. The transaction was accounted for
as a pooling-of-interests.

<PAGE> 7

3. INVENTORIES

Inventories consist primarily of materials and supplies used for sales or
services provided to customers. Inventories are stated at the lower of average
or standard cost (including direct material, labor and overhead) or estimated
net realizable value, if lower, and are reflected net of valuation reserves of
$1,385,000 and $1,258,000 at March 31, 2000 and December 31, 1999, respectively.
Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------- -------
(UNAUDITED)

<S> <C> <C>
Finished goods ........... $20,168 $17,051
Parts and materials ...... 6,808 6,494
Work in process .......... 3,945 979
------- -------
Total .... $30,921 $24,524
------- -------
</TABLE>

4. INTANGIBLES AND GOODWILL

Intangibles include patents, trademarks, service marks and trade names.
Goodwill represents the excess of purchase price over the fair market value of
the net assets acquired in acquisitions accounted for as purchases. Intangibles
and goodwill are amortized using the straight-line method over their estimated
useful lives. The Company believes that there have been no events or
circumstances that warrant revision to the remaining useful lives or which
affect the recoverability of intangibles and goodwill. The components of
intangibles and goodwill are as follows:

<TABLE>
<CAPTION>
ORIGINAL (IN THOUSANDS)
LIFE MARCH 31, DECEMBER 31,
IN YEARS 2000 1999
-------- --------- ---------
(UNAUDITED)

<S> <C> <C> <C>
Acquired trade secrets .......................... 5 $ 48 $ 48
Acquired patents, trademarks and trade names .... 10-20 1,590 1,590
Acquired trade name ............................. 40 4,614 4,614
Acquired source technology ...................... 15 277 277
----- --------- ---------
Total intangibles ...................... 6,529 6,529
----- --------- ---------
Goodwill ........................................ 5-10 1,604 1,604
Goodwill ........................................ 20 4,517 4,517
Goodwill ........................................ 40 147,770 147,770
----- --------- ---------
Total goodwill ......................... 153,891 153,891
----- --------- ---------
Total intangibles and goodwill ......... 160,420 160,420
Less - accumulated amortization ................. (10,808) (9,737)
----- --------- ---------
Net intangibles and goodwill ........... $ 149,612 $ 150,683
----- --------- ---------
</TABLE>

<PAGE> 8

5. LONG-TERM DEBT

Long-term debt is summarized in the following table (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------- -------
(UNAUDITED)

<S> <C> <C>
Senior Notes ......................... $75,000 $75,000
Credit Facility with a bank group .... 2,000 7,000
Loan notes ........................... 948 989
Other indebtedness ................... 214 543
------- -------
Total debt .................. 78,162 83,532
Less - current maturities ............ 1,080 1,325
------- -------
Total long-term debt ........ $77,082 $82,207
------- -------
</TABLE>

In July 1999, the Company entered into a $100 million Credit Facility which
provides for (i) a committed revolving debt facility of $95 million and (ii) a
Netherlands guilder denominated revolving debt facility with U.S. dollar
equivalency of $5 million. At March 31, 2000, approximately $98 million was
available for borrowing under the revolving debt facility. Loans under the
Credit Facility bear interest at rates which range from LIBOR plus 1.25% to a
maximum of LIBOR plus 1.75%. The interest rate in effect at March 31, 2000 was
7.47% and the average for 2000 has been 7.50%. The credit facility requires
interest payments only until maturity in June 2004.

In July 1999, the Company issued $75 million in Senior Notes which bear an
average interest rate of 8.16% and require annual principal payments beginning
in July 2005 and continuing through July 2011.

The terms of the Credit Facility and Senior Notes 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 both credit agreements.

6. WRITE-OFFS AND RESTRUCTURING CHARGES

WRITE-OFFS AND OTHER CHARGES

In the first quarter of 1999, the Company recorded write-offs and other
charges totaling $10.7 million. This amount included $4.4 million of asset
write-offs, $2.6 million related to facility closures and personnel reductions,
and $3.7 million associated with the termination of the proposed acquisition of
GeoScience Corp. The asset write-offs consisted primarily of uncollectible
accounts receivable in the former Soviet Union and other Eastern Hemisphere
locations, due to economic instability in the region, as well as adjustments to
net realizable value of certain inventory and other current asset amounts. The
facility closures consisted primarily of the shutdown of the Company's
environmental testing laboratory in Edison, New Jersey, the Saybolt Western
Hemisphere administrative office and a substantial reduction in the Company's
Venezuelan work force. These actions, which affected a total of 47 employees,
were substantially complete as of April 30, 1999. The termination settlement
included the forgiveness of $3.0 million in working capital advances made by the
Company to GeoScience Corp.

<PAGE> 9

RESTRUCTURING CHARGES

In the fourth quarter of 1999, the Company recorded a $7.0 million charge
to cover the cost of exiting redundant facilities and restructuring certain of
the Company's operations. This charge affected each of our operating segments as
follows: Reservoir Description - $5.6 million; Production Enhancement - $1.0
million; Reservoir Management - $0.4 million. The Company is combining personnel
and equipment from eight facilities into one Houston facility. No operations are
being discontinued. The move is anticipated to be complete in the second quarter
of 2000. Related charges include severance of approximately 100 field and
administrative employees, the accrual of future lease obligations and facility
restoration costs and the write-off of redundant fixed assets and leasehold
improvements. Approximately 70 of these employees had been terminated as of
March 31, 2000. The Company also reorganized its operations in Canada and
Mexico, consolidated certain service lines and is further centralizing its
operations in Latin America, Europe and the Asia-Pacific region.

RESTRUCTURING CHARGES

<TABLE>
<CAPTION>
Lease Asset
Obligations Severance Restoration Write-offs(a) Other Total
----------- --------- ----------- ------------- ------ ------

<S> <C> <C> <C> <C> <C> <C>
Total restructuring charges ............. $2,983 $ 879 $ 786 $2,080 $ 308 $7,036
Less: Costs incurred through
December 31, 1999 .............. 515 445 28 2,080 124 3,192
------ ------ ------ ------ ------ ------
Accrual remaining ....................... 2,468 434 758 -- 184 3,844
Less: Costs incurred for the quarter
ended March 31, 2000 ........... 32 100 421 -- 100 653
------ ------ ------ ------ ------ ------
Accrual remaining ....................... $2,436 $ 334 $ 337 $ -- $ 84 $3,191
------ ------ ------ ------ ------ ------
</TABLE>

(a) The fixed assets and leasehold improvements related to the Houston
consolidation are expected to be disposed of by the end of June 2000. The
write-off approximates the carrying amount as these assets no longer have
value and will be abandoned or sold for salvage value. Depreciation expense
will be reduced by $490 in 2000, $333 in 2001 and $342 thereafter. Also
included in this amount were $915 of working capital write-offs related to
the restructuring of foreign operations. The asset write-offs attributable
to each segment were as follows: Reservoir Description - $1,176; Production
Enhancement - $346; Reservoir Management - $558.

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 oil and gas recovery from new and existing fields.

o Reservoir Description: Encompasses the characterization of petroleum
reservoir rock, fluid and gas samples, including crude oil and
derivative products.

o Production Enhancement: Includes products and services relating to
reservoir well completions, perforations, stimulations and production.

o Reservoir Management: Combines and integrates information from
reservoir description and production enhancement services to increase
production and improve recovery of oil and gas from our clients'
reservoirs.

<PAGE> 10

SEGMENT ANALYSIS

The Company manages these segments separately due to the different
technologies each segment utilizes and requires. Results of these segments are
presented below using the same accounting policies as used to prepare the
Consolidated Balance Sheets and Statements 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 (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------- -------
REVENUES (UNAUDITED)
<S> <C> <C>
Reservoir Description ......................... $41,163 $41,910
Production Enhancement ........................ 18,843 14,351
Reservoir Management .......................... 8,512 10,958
------- -------
Consolidated ............................. $68,518 $67,219
------- -------
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------- -------
<S> <C> <C>
INCOME (LOSS) BEFORE INTEREST AND TAXES (UNAUDITED)
Reservoir Description ......................... $ 3,999 $(5,226)
Production Enhancement ........................ 4,218 825
Reservoir Management .......................... (1,750) (356)
Corporate and Other ........................... 8 (3,730)
------- -------
Consolidated ............................. $ 6,475 $(8,487)
------- -------
</TABLE>

The income (loss) before interest and taxes for each segment in 1999 have
been reduced by write-offs and other charges. The amounts attributable to
each segment were as follows: Reservoir Description - $5,589; Production
Enhancement - $956; Reservoir Management - $429. Corporate and other
includes $3,696 of merger termination costs related to the proposed
GeoScience acquisition. See Note 6 for additional information. "Corporate
and Other" represents those items that are not directly related to a
particular segment.

8. EARNINGS PER SHARE

The Company presents earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" which
requires dual presentation of both basic and diluted earnings per share on the
Consolidated Statement of Operations. Basic earnings per common share is
computed by dividing net income available to common stockholders by the weighted
average number of common share outstanding during the period. Diluted earnings
per share reflects the issuance of additional shares by assuming that all
dilutive stock options outstanding have been exercised.

<PAGE> 11

The following table summarizes the calculation of weighted average common
shares outstanding used in the computation of earnings per share:

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Weighted average basic common shares outstanding ...... 30,455,206 29,893,735
Effect of dilutive stock options(a) ................... 1,096,854 --
---------- ----------
Weighted average diluted common shares outstanding .... 31,552,060 29,893,735
---------- ----------
</TABLE>

(a) The effect of dilutive stock options totaling 979,336 equivalent common
shares was not included in the computation of weighted average diluted
common shares because the impact of these options was anti-dilutive as a
result of the Company's net loss for the three months ended March 31, 1999.

9. SUBSEQUENT EVENT

PROPOSED PRODUCTION ENHANCEMENT CORPORATION ACQUISITION

On April 13, 2000, the Company signed a letter of intent to acquire
Production Enhancement Corporation (PENCOR), a privately-held company based in
Broussard, Louisiana. PENCOR provides fluid phase behavior services used to
characterize crude oils, natural gases and other reservoir fluids for the
purpose of enhancing daily production and ultimate field recovery rates. The
Company expects to issue approximately 250,000 shares and assume approximately
$2.5 million in debt in a transaction which is expected to be accounted for as a
pooling-of-interests. Consummation of the transaction is subject to the
execution of definitive acquisition documents.

<PAGE> 12

CORE LABORATORIES N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

This discussion includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We have based the forward-looking statements relating to
our operations on our current expectations, estimates and projections. We
caution you that these statements are not guarantees of future performance and
involve risks and uncertainties that we cannot predict. In addition, we have
based many of these forward-looking statements on assumptions about future
events that may prove to be inaccurate. Accordingly, our actual outcomes and
results may differ materially from what we have expressed or forecast in the
forward-looking statements. The Company's operations are subject to various
risks and other factors including, but not limited to:

o the Company's ability to continue to develop or acquire new and useful
technology.

o the realization of anticipated synergies from acquired businesses and
future acquisitions.

o the Company's dependence on one industry, oil and gas, and the impact
of commodity prices on the expenditure levels of our customers.

o competition in the Company's markets.

o the risks and uncertainties attendant to adverse industry, political,
economic and financial market conditions, including stock prices,
government regulations, interest rates and credit availability.

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. These services are directed
toward enabling our clients to improve reservoir performance and increase oil
and gas recovery from their producing fields. We have over 70 offices in more
than 50 countries and have approximately 3,500 employees. We provide our
services to the world's major, national and independent oil companies.

RECENT DEVELOPMENTS

TOMOSEIS ACQUISITION

On January 12, 2000, the Company acquired all of the outstanding shares of
TomoSeis Corporation ("TomoSeis"), a private company based in Houston, Texas.
TomoSeis provides detailed reservoir imaging services that are a component of
time-lapse (4D) seismic and reservoir monitoring programs. The Company issued
approximately 232,000 shares, with an estimated value of $3.8 million, and
assumed stock options outstanding exercisable for approximately 396,000 of the
Company's common shares. Proceeds from the exercise of these options would be
approximately $2.1 million. Upon vesting, the options are exercisable by the
holder upon payment of the exercise price. The transaction was accounted for
as a pooling-of-interests.

PROPOSED PRODUCTION ENHANCEMENT CORPORATION ACQUISITION

On April 13, 2000, the Company signed a letter of intent to acquire
Production Enhancement Corporation (PENCOR), a privately-held company based in
Broussard, Louisiana. PENCOR provides

<PAGE> 13

fluid phase behavior services used to characterize crude oils, natural gases
and other reservoir fluids for the purpose of enhancing daily production and
ultimate field recovery rates. The Company expects to issue approximately
250,000 shares and assume approximately $2.5 million in debt in a transaction
which is expected to be accounted for as a pooling-of-interests. Consummation
of the transaction is subject to the execution of definitive acquisition
documents.

RESULTS OF OPERATIONS

Service revenues for the first quarter of 2000 decreased $2.0 million, or
4% from the same period last year. Included in the first quarter of 1999 were
$5.7 million of revenues attributable to our environmental testing assets which
were sold in 1999. Excluding these revenues, total service revenues increased
$3.7 million, or 11%, compared to the same period last year.

Cost of services expressed as a percentage of service revenue were 82% and
88% in the first quarter of 2000 and the same period last year, respectively.
The Company's restructuring plan of consolidating offices and reducing personnel
helped improve our service margins.

Sales revenues increased to $15.2 million in the first quarter of 2000 from
$11.9 million in the first quarter of 1999, a 28% increase. The increase was due
to higher demand for our well completion and stimulation technologies.

Cost of sales in the first quarter of 2000 decreased to 73% of sales
revenue as compared to 79% the same period last year. The improvement in
margins can be attributed to management's continuing efforts to reduce higher
than necessary fixed operating costs relative to the depressed industry
conditions which prevailed in the first quarter of 1999.

General and administrative expenses are comprised of corporate management
and centralized administrative services which benefit our operating
subsidiaries. General and administrative expenses for the three months ended
March 31, 2000 increased $0.6 million, or 20%, as compared to the corresponding
period in 1999. The increase was primarily a result of increased personnel
costs as the company added staff to provide additional services to its
operating subsidiaries. General and administrative expenses as a percentage of
revenues remained below 5% for both periods.

Depreciation and amortization expense for the first quarter of 2000
decreased $0.6 million as compared to the corresponding period in 1999. Although
we had $9.1 million of capital expenditures in the first quarter 2000, the
additional depreciation expense from these assets was more than offset by the
effect of the sale of our environmental testing assets and assets which had
become fully depreciated.

Amortization of goodwill in the first quarter of 2000 was $1.0 million as
compared to $0.9 million in the same period last year. The increase was due to
the inclusion of goodwill from acquisitions accounted for as purchases in 1999.

<PAGE> 14

substantial reduction in the Company's Venezuelan work force. These actions,
which affected a total of 47 employees, were substantially complete as of April
30, 1999. The termination settlement included the forgiveness of $3.0 million in
working capital advances made by the Company to GeoScience Corp.

In the fourth quarter of 1999, the Company recorded a $7.0 million charge
to cover the cost of exiting redundant facilities and restructuring certain of
the Company's operations. This charge affected each of our operating segments as
follows: Reservoir Description - $5.6 million; Production Enhancement - $1.0
million; Reservoir Management - $0.4 million. The Company is combining personnel
and equipment from eight facilities into one Houston facility. No operations are
being discontinued and the Company expects its revenue to be largely unaffected
by this facility consolidation. The move is anticipated to be complete in the
second quarter of 2000. Related charges include severance for approximately 100
field and administrative employees, the accrual of future lease obligations and
facility restoration costs and the write-off of redundant fixed assets and
leasehold improvements. Approximately 70 of these employees had been terminated
as of March 31, 2000. The Company also reorganized its operations in Canada and
Mexico, consolidated certain service lines and is further centralizing its
operations in Latin America, Europe and the Asia-Pacific region. Cash required
for the costs incurred through March 31, 2000 of $1.8 million, excluding asset
write-offs, was funded from operating activities. The Company anticipates that
the remaining costs will also be funded through cash from operating activities.
This charge is summarized in the following table (in thousands):

RESTRUCTURING CHARGES

<TABLE>
<CAPTION>
Lease Asset
Obligations Severance Restoration Write-offs(a) Other Total
----------- --------- ----------- ------------- ------ ------

During the first quarter of 2000, interest expense increased 16%, or $0.3
million, compared to the same period last year. The increase was primarily
attributable to an increase in interest rates, both from rising market interest
rates and higher rates associated with the Senior Notes.

The Company's effective income tax rate was approximately 30% for the three
months ended March 31, 2000 as compared to 32% for the three months ended March
31, 1999. The decrease was due to increased earnings from operations in tax
jurisdictions with lower marginal tax rates.

<PAGE> 15

SEGMENT ANALYSIS

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
-------- --------
REVENUES (UNAUDITED)

<S> <C> <C>
Reservoir Description .................. $ 41,163 $ 41,910
Production Enhancement ................. 18,843 14,351
Reservoir Management ................... 8,512 10,958
-------- --------
Consolidated ....................... $ 68,518 $ 67,219
======== ========

<CAPTION>
THREE MONTHS ENDED MARCH 31,
INCOME (LOSS) BEFORE INTEREST AND TAXES 2000 1999
AND UNUSUAL CHARGES -------- --------
(UNAUDITED)

<S> <C> <C>
Reservoir Description(a) ............... $ 3,999 $ 363
Production Enhancement(a) .............. 4,218 1,781
Reservoir Management(a) ................ (1,750) 73
Corporate and Other(a) ................. 8 (34)
-------- --------
Consolidated ........................... $ 6,475 $ 2,183
======== ========
</TABLE>

(a) The above segment results exclude unusual charges totaling $10,670 in
the first quarter 1999. The unusual charges attributable to each segment
were as follows: Reservoir Description - $5,589; Production Enhancement -
$956; Reservoir Management - $429. Corporate and other excludes $3,696 of
merger termination costs related to the proposed GeoScience acquisition.
"Corporate and Other" represents those items that are not directly related
to a particular segment.

RESERVOIR DESCRIPTION

Revenues from the Reservoir Description segment decreased $0.8 million in
the first quarter of 2000. Improved demand for our services in this segment
almost completely offset the loss of $5.7 million in revenues attributable to
our environmental testing assets which were included in the first quarter of
1999. These assets were subsequently sold in 1999.

Income before interest, taxes and unusual charges increased by $3.6 million
due to higher revenues and improved margins of our crude oil and petroleum
characterization services.

PRODUCTION ENHANCEMENT

Revenues from the Production Enhancement segment were $18.8 million in the
first quarter of 2000 compared to $14.4 million in the same period in the prior
year, an increase of 31%, due to increased demand for our well completion and
stimulation technologies. Margins improved considerably as this increased
demand caused earnings before interest, taxes and unusual charges to more than
double to $4.2 million compared to $1.8 million, a 137% increase.

<PAGE> 16

RESERVOIR MANAGEMENT

Revenues from the Reservoir Management segment in the first quarter of 2000
decreased $2.4 million while earnings before interest, taxes and unusual charges
decreased $1.8 million compared to the same period in the prior year. Demand for
seismic-related services has not rebounded in line with the upturn in the oil
and gas industry. Lower revenues in this segment resulted in a loss before
interest, taxes and unusual charges of $1.8 million compared to a small margin
$0.1 million in the first quarter of 1999. We have taken and will continue to
take appropriate actions to control our costs in order to improve our results in
this segment.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our activities through cash flows from
operations, bank credit facilities, equity financing and the issuance of debt.

During the three month period ended March 31, 2000, cash flows from
operating activities were $6.9 million, an increase of $9.6 million from the
corresponding period in 1999. At March 31, 2000, the Company had working capital
of $90.5 million (of which $13.4 million was cash and short-term investments)
and a current ratio of 2.8 to 1.0, compared to working capital of $92.9 million
(of which $18.1 million was cash and short-term investments) and a current ratio
of 2.9 to 1.0 at December 31, 1999. The Company is a Netherlands holding company
that conducts substantially all of its operations through subsidiaries.
Consequently, the Company's cash flow is dependent upon the ability of its
subsidiaries to pay cash dividends or otherwise distribute or advance funds to
the Company.

The Company's financing activities used $4.8 million in 2000, and provided
$5.1 million in 1999. The Company's investing activities used $6.8 million in
2000 and used $3.9 million in 1999.

The Company's ability to maintain and grow its operating income and cash
flows is dependent upon continued investing activities. We believe our future
cash flows from operations, supplemented by our borrowing capacity and issuances
of additional equity should be sufficient to fund debt requirements, capital
expenditures, working capital and future acquisitions.

YEAR 2000

The Company did not experience any significant disruptions in its
operations during the transition into the Year 2000. We have completed necessary
assessments, modifications or replacements and testing of systems critical for
the delivery of products and services and believe we have met out Year 2000
readiness objectives. We also prepared a contingency plan to mitigate potential
adverse effects which might have arisen from non-compliant systems or third
parties who have not adequately addressed the Year 2000 issue. Because of these
preparations, we did not experience any significant disruptions in our
operations. The amounts incurred and expensed for developing and carrying out
the overall Year 2000 plan totaled approximately $0.4 million. While the Company
did not experience any significant Year 2000 disruptions during the transition
into the Year 2000, we will continue to monitor our operations and systems and
address any date-related problems that may arise as the year progresses.

<PAGE> 17

CORE LABORATORIES N.V.
QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

The Company is exposed to market risk, which is the potential loss arising
from adverse changes in market prices and rates. The Company does not enter, or
intend to enter, into derivative financial instruments for trading or
speculative purposes. The Company's exposure to market risks, which are
primarily related to interest rate changes and fluctuations in foreign exchange
rates, are not considered to be material to the Company. During 1999, the
Company issued fixed rate Senior Notes denominated in U.S. dollars. The proceeds
were used to pay off variable rate term loans. This significantly reduced the
Company's exposure to market risk. This section should be read in conjunction
with "Note 5 - Long-Term Debt" of the Notes to Consolidated Financial
Statements.

<PAGE> 18

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 business. The Company believes that
the outcome of these legal actions will not have a material adverse effect upon
the consolidated financial position or results of operations of the Company.

ITEM 2. CHANGES IN SECURITIES.

Disclosure related to the recent issuance of common shares is included in
Note 2 of the Notes to Consolidated Financial Statements. With respect to the
shares issued, the Company relied on exemption from registration under Section 4
(2) of Regulation S of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

ITEM 5. OTHER INFORMATION.

On behalf of certain selling shareholders, the Company filed a
registration statement on Form S-3 to register the offering and sale of common
shares held by such selling shareholders. In connection with the filing of the
registration statement, the Company granted the underwriters an option to
purchase additional common shares solely to cover over-allotments of shares.

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

None

<PAGE> 19

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 15, 2000 By: /s/ Randall D. Keys
-------------------------------------
Randall D. Keys
Chief Financial Officer

<PAGE> 20

EXHIBIT INDEX

<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE FROM THE
EXHIBIT NO. EXHIBIT TITLE FOLLOWING DOCUMENTS
----------- ------------- -------------------

<S> <C> <C>
27.1 Financial Data Schedule Filed Herewith
</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 13,441
<SECURITIES> 0
<RECEIVABLES> 87,489
<ALLOWANCES> 9,506
<INVENTORY> 30,921
<CURRENT-ASSETS> 140,286
<PP&E> 104,724
<DEPRECIATION> 37,665
<TOTAL-ASSETS> 362,999
<CURRENT-LIABILITIES> 49,822
<BONDS> 0
0
0
<COMMON> 513
<OTHER-SE> 213,002
<TOTAL-LIABILITY-AND-EQUITY> 362,999
<SALES> 68,518
<TOTAL-REVENUES> 68,518
<CGS> 55,043
<TOTAL-COSTS> 62,043
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,952
<INCOME-PRETAX> 4,523
<INCOME-TAX> 1,357
<INCOME-CONTINUING> 3,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,166
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10

</TABLE>