<PAGE>
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 1-8158
VARCO INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
California 95-0472620
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
743 North Eckhoff Street, Orange, Ca 92668
(Address of principal executive offices)
(Zip code)
(714) 978-1900
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
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____
30,231,786
(Number of shares of Common Stock outstanding at March 31, 1996)
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Pursuant to General Instruction D to Form 10-Q, the Condensed Consolidated
Statements of Cash Flows, Condensed Consolidated Balance Sheets and Condensed
Consolidated Statements of Income of Varco International, Inc., (the "Company")
and its subsidiaries included in the registrant's First Quarter Report to
Shareholders for the three months ended March 31, 1996, filed as Exhibit 19
hereto are incorporated herein by reference. Such financial statements should
be read in light of the following:
ADJUSTMENTS. The financial statements contained in Exhibit 19 hereto
include all adjustments which in the opinion of management are of a normal
recurring nature, considered necessary to present fairly the results of
operations for the interim periods presented.
NET INCOME PER SHARE. Net income per share is based upon an average of
30,728,000 and 33,592,000 shares outstanding for the three months ended March
31, 1996, and 1995 respectively.
INVENTORIES. The Company estimates the components of inventory at March
31, 1996, and December 31, 1995, to be as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
--------------- ------------------
<S> <C> <C>
Raw Materials $ 6,310,000 $ 5,480,000
Work in Process 26,823,000 18,061,000
Finished Goods 63,097,000 61,052,000
LIFO Reserves (14,145,000) (13,761,000)
------------ ------------
$ 82,085,000 $ 70,832,000
============ ============
</TABLE>
FIXED ASSETS. Fixed assets are stated net of accumulated depreciation
of $62,484,000 at March 31, 1996, and $60,625,000 at December 31, 1995.
COMMON STOCK AND ADDITIONAL PAID-IN-CAPITAL. On March 31, 1996, the
Company's Common Stock account was $20,600,000 and Additional Paid-In-Capital
accounts were $104,491,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Pursuant to General Instruction D to Form 10-Q, Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the registrant's First Quarter Report to Shareholders for the three
months ended March 31, 1996, filed as Exhibit 19 hereto, is incorporated herein
by reference.
PART II-OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On March 24, 1995, the Company commenced a "Dutch Auction" type tender offer
(the "Tender Offer") to purchase up to 5,300,000 shares of its Common Stock at
a purchase price not greater than $8.00 per share nor less than $6.75 per
share. Pursuant to the Tender Offer, which terminated on April 21, 1995, the
Company purchased 3,150,560 shares of its Common Stock at a purchase price of
$8.00 per share.
In July 1992 the Company sold $50.0 million aggregate principal amount
of its 8.95% Senior Notes Due June 30, 1999 (the "Senior Notes") to a group
of ten institutional investors pursuant to a Note Agreement dated as of
July 1, 1992 (as amended, the "Note Agreement"). The principal of the Senior
Notes is payable in five equal annual installments of $10.0 million, the first
of which was made on June 30, 1995.
The Note Agreement prohibits any "Restricted Payment" subsequent to July
17, 1992 unless after giving effect thereto, (i) the aggregate amount of all
Restricted Payments subsequent to such date would not exceed $5,000,000 plus
the cumulative sum of 50% of the Company's consolidated net income (or minus
100% in the case of a deficit) subsequent to March 31, 1992 and (ii) the
Company could incur at least $1.00 of additional indebtedness under the Note
Agreement covenant limiting indebtedness. The term "Restricted Payment"
includes (a) any dividend (other than dividends payable in shares of capital
stock) or other distributions on any shares of capital stock of the Company;
(b) any purchase, redemption or other acquisition of any shares of the capital
stock of the Company or any rights or options to purchase or acquire such
shares; and ( c) any "Restricted Investment", which is generally defined as any
investment other than an investment in a subsidiary of the Company or an
investment in certain designated government or rated securities. In addition,
the Company may purchase, redeem or otherwise acquire shares of its capital
stock or make Restricted Investments from the net cash proceeds of the
substantially concurrent sales of shares of capital stock or from the sale of
securities convertible into such shares upon conversion.
Pursuant to a waiver and amendment dated as of March 8, 1995, the holders
of the Senior Notes (1) waived compliance with the limitations on Restricted
Payments discussed above, (2) agreed that the amount expended in the Tender
Offer would not constitute a Restricted Payment, and (3) amended certain
covenants to take into account the effect of the consummation of the Tender
Offer on certain financial ratios.
On February 25, 1993 the Company entered into an unsecured revolving credit
agreement with Citicorp USA, Inc. and Citibank, N.A. (as amended, the "Credit
Agreement"). Effective as of March 17, 1995 the Credit Agreement was amended to
(1) extend the maturity date from March 31, 1996 to October 31, 1998; (2)
increase the total maximum facility from $20.0 to $35.0 million, consisting of a
loan facility of $25.0 million in and a letter of credit facility of $10.0
million; and (3) to amend certain convenants to permit the Tender Offer and to
take into account the effect of the consummation of the Tender Offer on certain
financial rations.
Under the terms of the Credit Agreement, the amount available for the
payment of dividends on, and repurchases of, Common Stock is limited to 25% of
the Company's consolidated net income arising after January 1, 1992, computed on
a cumulative basis. In addition, pursuant to the December 31, 1995 amendment
to the Credit Agreement discussed above, the Company may repurchase at any time
prior to December 31, 1996 shares of its Common Stock for an aggregate cost not
exceeding $50.0 million, including shares purchased pursuant to the Tender
Offer. The Company may also purchase or otherwise acquire shares of Common
Stock from the proceeds of othe substantially concurrent sale of shares of
Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re computation of per share earnings for the three
months ended March 31, 1996 and 1995.
19 Varco International, Inc. First Quarter Report to Shareholders, Three
Months Ended March 31, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARCO INTERNATIONAL, INC.
DATE: APRIL 25, 1996 BY: /s/ RICHARD A. KERTSON
----------------------
VICE PRESIDENT-FINANCE
AND CHIEF FINANCIAL OFFICER
DATE: APRIL 25, 1996 BY: /s/ DONALD L. STICHLER
----------------------
CONTROLLER-TREASURER
<PAGE>
EXHIBIT INDEX
11 Statement re computation of per share earnings for the three months ended
March 31, 1996 and 1995.
19 Varco International, Inc. First Quarter Report to Shareholders, Three Months
Ended March 31, 1996.
27 Financial Data Schedule.
<PAGE>
EXHIBIT 11
VARCO INTERNATIONAL, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31 1995
------------------
<S> <C>
A. CALCULATION OF ADJUSTED EARNINGS
Net Income After Tax $2,913,000
</TABLE>
<TABLE>
<CAPTION>
Total Number Average Number Stock Option Shares Used
Number of of Shares after of Shares Equivalent To Calculate
Days Weighing Outstanding Shares EPS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. CALCULATION OF AVERAGE SHARES OUTSTANDING
Common Stock Outstanding from time-to-time during:
Three Months Ended March 31, 1995 90 3,002,305,918 33,358,955 233,045 33,592,000
</TABLE>
C. CALCULATION OF EARNINGS PER SHARE
Income Per Share = Net Income After Tax
------------------------
Total Shares Outstanding
Income Per Share =
Three Months Ended March 31, 1995 2,913,000 = $0.09
----------
33,592,000
<PAGE>
EXHIBIT 11
VARCO INTERNATIONAL, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31 1996
------------------
<S> <C>
A. CALCULATION OF ADJUSTED EARNINGS
Net Income After Tax $3,028,000
</TABLE>
<TABLE>
<CAPTION>
Total Number Average Number Stock Option Shares Used
Number of of Shares after of Shares Equivalent To Calculate
Days Weighing Outstanding Shares EPS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. CALCULATION OF AVERAGE SHARES OUTSTANDING
Common Stock Outstanding from time-to-time during:
Three Months Ended March 31, 1996 91 2,747,512,520 30,192,445 535,138 30,727,583
</TABLE>
C. CALCULATION OF EARNINGS PER SHARE
Income Per Share = Net Income After Tax
------------------------
Total Shares Outstanding
Income Per Share =
Three Months Ended March 31, 1996 3,028,000 = $0.10
----------
30,727,583
<PAGE>
EXHIBIT 19
TO OUR SHAREHOLDERS
As 1996 begins to unfold, our industry is experiencing a wave of very
positive sentiment, with offshore drilling providing most of the momentum. The
fundamentals of the offshore drilling industry have improved significantly
during the past twelve months, as capacity utilization of the worldwide
offshore rig fleet is at its highest level in more than ten years and is
continuing to edge upward. As a result, day rates have increased and contract
lengths have extended, particularly for "premium" rigs.
This trend favorably impacts Varco as the higher cost and more demanding
environment associated with offshore drilling generally requires the use of
higher capacity and more cost-effective drilling equipment. Additionally, our
key customers, the offshore drilling contractors, are experiencing their best
financial results in many years. These elements combine to create both the need
and financial resources to upgrade rigs and invest in newer technology
equipment.
These industry conditions are reflected in our incoming orders, which
totaled $102.2 million in the first quarter. This is the second consecutive
quarter in which order bookings reached an all-time high for the Company,
surpassing the $85.6 million recorded in the fourth quarter of last year. In
the first quarter of l995 incoming orders were $76.9 million. The increase from
the year ago period is attributable to our Shaffer Division, and is the direct
result of orders for equipment involved in the upgrading of several floating
offshore rigs to operate in deeper water.
Net Income for the first quarter was $3.0 million, $.10 per share, on
Revenues of $71.0 million. For the first quarter of 1995, Net Income was $2.9
million, $.09 per share, and Revenues were $57.6 million. Profitability
continued to be adversely impacted in the first quarter by certain newer
products of our Drilling Systems Division. As reported at the end of last year,
these products have yielded less than typical manufacturing margins and incurred
high field support costs. However, the impact was less than in the fourth
<PAGE>
quarter of last year and our profit improvement plans for these products are
demonstrating progress.
Industry conditions are generally more favorable today than at any time in
recent years. The cold winter has caused oil and gas prices to increase, and
many analysts believe that the long standing excess supply of these commodities
has been substantially eliminated and that our industry is entering a period of
improving economics. While we also sense a fundamental shift in the industry
outlook, our view is tempered by the unpredictability which has characterized
our industry in recent years.
One change which we believe to be enduring is the emphasis by major oil
companies on reducing the unit cost of finding and producing oil and gas. As
noted previously this effort has led to drilling in deeper water and in more
hostile environments, and to an increased reliance on new technology. All of
these factors are particularly beneficial to Varco, and they play directly into
the key strategies we have followed in recent years. Therefore, we will
concentrate on continuing to effectively execute those strategies that have
served us well to date.
We appreciate your continued support.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL INDUSTRY CONDITIONS
Worldwide drilling activity, as measured by the average number of active
drilling rigs, increased slightly in the first three months of 1996 to an
average of approximately 1,803 from an average of approximately 1,786 during the
same period in 1995. The international component of active drilling rigs
averaged approximately 780 in the first quarter of 1996 an increase of 30 over
the prior year. The U.S. rig count was essentially unchanged in the first
quarter of last year, while Canadian activity declined by 12 rigs, to an average
of 315.
Offshore drilling activity increased significantly year-to-year, as
reflected by an increase in rig utilization (mobile offshore rigs under contract
as a percent of available rigs). For the first quarter of 1996, mobile offshore
rig utilization averaged 87%, the highest level in more than ten years, as
compared to 81% in the first quarter of 1995.
RESULTS OF OPERATIONS
Set forth below are the net orders and revenues for the Company's five
operating divisions:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
Net Orders
<S> <C> <C>
Varco Drilling Systems $ 24,343 $23,280
Varco BJ Oil Tools 14,068 12,030
Martin-Decker/TOTCO Instrumentation 13,627 15,653
Shaffer 47,951 22,510
Thule Rigtech 2,231 3,447
-------- -------
Total $102,220 $76,920
======== =======
Revenues
Varco Drilling Systems $ 25,695 $19,848
Varco BJ Oil Tools 11,778 10,323
Martin-Decker/TOTCO Instrumentation 14,639 13,718
Shaffer 15,371 10,370
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Thule Rigtech 2,773 2,913
-------- -------
Total $70,256 $57,172
======== =======
</TABLE>
Order bookings increased $25.3 million, 33%, in the first three months of
1996 as compared to the same period of 1995. The increase is attributable to
the Shaffer Division and included orders to upgrade several offshore rigs
(primarily floating offshore rigs used in deepwater drilling) with higher
capacity pressure control, motion compensation and related equipment. The year-
to-year variations in order rate at the other Divisions reflect typical
quarterly fluctuations for these Divisions.
The increase in revenues for Drilling Systems is primarily due to a $3.3
million increase in sales of pipe handling systems and to the shipment of 12 Top
Drive Drilling Systems during the first quarter as compared to 10 units in the
first quarter of 1995.
The increase in revenue for Shaffer partially reflects the increased order
rate for offshore equipment, although the full impact of Shaffer's increased
order rate is yet to occur. Shaffer's backlog of unshipped orders at March 31,
1996 was approximately $64.5 million as compared to $16.0 million at March 31,
1995.
The Company's new orders were $85.6 million for the fourth quarter of 1995
and $102.2 million for the first quarter of 1996. These rates compare to an
average of $69.8 million for the first three quarters of 1995. Virtually all of
these increases are attributable to the Shaffer Division, resulting from the
offshore rig upgrades discussed above.
At March 31, 1996 the Company's backlog of unshipped orders was
approximately $107.3 million as compared to $75.4 million at December 31, 1995.
In accordance with industry practice, orders and commitments generally are
cancelable by customers at any time. The Company believes that most of the
backlog will be shipped by December 31, 1996.
Gross margins (net sales and rental income less costs of sales and rental
income) as a percentage of net sales and rental income for the first quarter of
1996 was 35.2%. This compares to a gross margin of 41.6% for the same period in
1995. The decline is primarily due to lower margins on Drilling Systems' newer
products.
<PAGE>
The lower Drilling Systems' margins reduced overall margins by
approximately 4.3% and reflect a slightly negative margin on TDS-9S units ($2.8
million in revenue), which includes high field support cost, and lower than
average margins on newer pipe handling products. The balance of the decline is
due to higher Shaffer revenues which carry lower gross margins (due principally
to price competition) than the combined gross margins of the other divisions.
The increase in other income is due to the sale of an equity security that
was previously received in settlement of a previously written-off trade
receivable.
The Company believes that new product development is a significant factor
for the future of the Company. During the first three months of 1996 the Company
spent $3.6 million or 5.0% of revenues on new product development. This compares
to $3.2 million or 5.5% of revenue during the same period in 1995.
Selling, general and administrative expenses increased approximately 6% in
the first quarter 1996 as compared to the first quarter of 1995. As a percent of
revenue, selling, general and administrative expenses decreased to 22.7% from
26.3% in the first quarter of 1996. The dollar increase is primarily due to
selling costs associated with the higher revenue level.
Overall Company employment at March 31, 1996 was 1,684 (including 210
temporary employees) which compares to 1,465 (including 220 temporary employees)
a year ago. This increase is primarily due to an increase in manufacturing
employees.
The effective tax rate for the first quarter of 1996 was 36.5% as compared
to 38.3% for the first quarter of 1995. The lower tax rate is due to a higher
effective foreign tax rate in the first quarter of 1995 as compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996 the Company had cash and cash equivalents of $4.7 million
as compared to $6.8 million at December 31, 1995. This decline was due to an
increase in working capital during the first quarter.
<PAGE>
On March 24, 1995, the Company commenced a "Dutch Auction" type tender
offer (the "Tender Offer") to purchase up to 5,300,000 shares of its Common
Stock at a purchase price not greater than $8.00 per share nor less than $6.75
per share. Pursuant to the Tender Offer, which terminated on April 21, 1995, the
Company purchased 3,150,560 shares of its Common Stock at a purchase price of
$8.00 per share. The aggregate cost to the Company of the Tender Offer,
including expenses, was approximately $26.2 million, which was funded from cash
and cash equivalents and short-term investments.
In July 1992 the Company sold $50.0 million aggregate principal amount of
its 8.95% Senior Notes Due June 30, 1999 (the "Senior Notes") to a group of ten
institutional investors pursuant to a Note Agreement dated as of July 1, 1992
(the "Note Agreement"). The principal of the Senior Notes is payable in five
equal annual installments of $10.0 million, the first of which was made on June
30, 1995. Effective as of March 8, 1995, the holders of the Senior Notes waived
compliance with certain covenants contained in the Note Agreement in order to
permit the Tender Offer and amended certain financial covenants to take into
account the effect of the consummation of the Tender Offer. The Senior Notes
include a yield maintenance prepayment penalty if any principal is repaid prior
to the installment due date. Had the entire outstanding principal amount been
prepaid at December 31, 1995 the prepayment penalty would have been
approximately $1.8 million.
On February 25, 1993 the Company entered into an unsecured revolving credit
agreement with Citicorp USA, Inc. and Citibank, N.A. (the "Credit Agreement").
Effective as of March 17, 1995 the Credit Agreement was amended to (1) extend
the maturity date from March 31, 1996 to October 31, 1998; (2) increase the
total maximum facility from $20.0 to $35.0 million, consisting of a loan
facility of $25.0 million and a letter of credit facility of $10.0 million; and
(3) to amend certain covenants to permit the Tender Offer and to take into
account the effect of the consummation of the Tender Offer on certain financial
ratios. At March 31, 1996 there were $2.0 million in advances outstanding and
$4.9 million in letters of credit outstanding under this facility.
Both the Note Agreement and the Credit Agreement restrict the payment of
dividends (other than dividends payable solely in shares of Common Stock) on,
and repurchases of, Common Stock. Under the terms of the Credit Agreement, which
is generally the more
<PAGE>
restrictive of these, the amount available for the payment of dividends on, and
repurchases of, Common Stock is limited to 25% of the Company's consolidated net
income arising after January 1, 1992, computed on a cumulative basis. In
addition, pursuant to a December 31, 1995 amendment to the Credit Agreement, the
Company may repurchase at any time prior to December 31, 1996 shares of its
Common Stock for an aggregate cost not exceeding $50.0 million including shares
purchased pursuant to the Tender Offer. The Company may also purchase or
otherwise acquire shares of Common Stock from the proceeds of the substantially
concurrent sale of shares of Common Stock.
On May 26, 1994 the Company announced that its Board of Directors
authorized the repurchase of up to one million shares of the Company's Common
Stock for an aggregate purchase price not exceeding $6.0 million (the
"Repurchase Program"). On May 26, 1995 the Company announced an increase and
extension of the above Repurchase Program. The total number of shares authorized
for repurchase was increased to 1,500,000; the maximum aggregate purchase price
was increased to $11.0 million and the purchase period was extended through
December 31, 1996. To date the Company has repurchased on the open market
627,600 shares of its Common Stock at an average price of approximately $8.00
per share. The last such purchase was on December 6, 1995.
At March 31, 1996 the Company's working capital was $95.6 million as
compared to $89.2 million at December 31, 1995 and its current ratio was 2.5 to
1.0 the same as at December 31, 1995. Long-term debt as a percent of total
capitalization was 17% at March 31, 1996 as compared to 16% at December 31,
1995. The increase in working capital is primarily due to an increase in
inventory and receivables during the first quarter of 1996.
The Company's capital expenditures during the first quarter 1996 were $3.5
million as compared to $2.3 million for the first quarter 1995. The Company's
current plans for capital expenditures in 1996 are approximately $13.5 million.
The Company believes its revolving credit facility and its cash and cash
equivalents will be sufficient to meet its capital expenditures, operating cash
needs and the principal payment on the Senior Notes in 1996.
<PAGE>
VARCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
March 31, December 31,
Assets 1996 1995
- ----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,713 $ 6,762
Receivables (net) 64,434 60,683
Inventories 82,085 70,832
Other 9,036 8,663
- ----------------------------------------------------------------------------------------
Total Current Assets 160,268 146,940
Property, plant and equipment at cost 50,953 50,622
less accumulated depreciation
Cost in excess of net assets acquired 35,964 36,371
Other assets 11,759 12,638
- ----------------------------------------------------------------------------------------
Total Assets $258,944 $246,571
========================================================================================
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 26,960 $ 21,356
Other liabilities 27,735 26,397
Current portion of long term debt 10,000 10,000
- ----------------------------------------------------------------------------------------
Total Current Liabilities 64,695 57,753
Long-term debt 31,583 29,539
Other non-current liabilities 8,076 8,100
- ----------------------------------------------------------------------------------------
Total Liabilities 104,354 95,392
Shareholders' Equity:
Common stock and
additional paid-in capital 125,091 124,552
Retained earnings 29,499 26,627
- ----------------------------------------------------------------------------------------
Total Shareholders' Equity 154,590 151,179
- ----------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $258,944 $246,571
========================================================================================
</TABLE>
<PAGE>
VARCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Three Months Ended March 31,
1996 1995
- ----------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash Flows From (Used In) Operating Activities:
Net income $ 3,028 $ 2,913
Depreciation and amortization 3,012 3,012
Increase (decrease) in operating cash flows
Receivables (3,751) (2,782)
Inventories (11,253) (8,655)
Accounts payable 5,604 3,293
Interest payable (886) 1,120
Other 3,350 3,421
- ----------------------------------------------------------------------------
Net cash from operating
activities (896) 2,322
- ----------------------------------------------------------------------------
Cash Flows From (Used in) Investing Activities:
Short term investments 20,735
Equipment purchases (3,521) (2,252)
Proceeds from equipment sales 172 249
- ----------------------------------------------------------------------------
Net cash from (used in) investing
activities (3,349) 18,732
- ----------------------------------------------------------------------------
Cash Flows (Used in) Financing Activities:
Increase in long-term debt and line of credit 2,000
Proceeds from issuance of Common Stock 196
Repurchase of Common Stock (19)
- ----------------------------------------------------------------------------
Net cash (used in) financing activities 2,196 (19)
- ----------------------------------------------------------------------------
Net change in cash and cash equivalents (2,049) 21,035
- ----------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 6,762 8,793
- ----------------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 4,713 $29,828
============================================================================
</TABLE>
<PAGE>
VARCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------------------
(in thousands except per share data)
<S> <C> <C>
Revenues:
Net Sales $63,832 $50,803
Rental Income 6,424 6,369
Other Income 713 473
- -----------------------------------------------------------------------------------
70,969 57,645
- -----------------------------------------------------------------------------------
Cost and Expenses:
Cost of Sales 43,603 31,554
Cost of Rental Income 1,907 1,831
Selling, General and Administrative expense 16,117 15,145
Research and Developments costs 3,572 3,190
Interest Expense 1,005 1,204
- -----------------------------------------------------------------------------------
66,204 52,924
- -----------------------------------------------------------------------------------
Income Before Income Taxes 4,765 4,721
- -----------------------------------------------------------------------------------
Provision for Income Taxes 1,737 1,808
Net Income $ 3,028 $ 2,913
===================================================================================
Net Income per Share of Common Stock $ 0.10 $ 0.09
===================================================================================
Shares Used to Calculate Earnings Per Share 30,728 33,592
===================================================================================
</TABLE>
Note:
These statements are condensed and do not contain disclosures required by
generally accepted accounting principles. Reference should be made to the
financial statements contained in the Annual Report to Shareholders for the year
ended December 31, 1995.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of the registrant included in its first quarter report to
shareholders for the three months ended March 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DECEMBER 31, 1996
<PERIOD-END> MARCH 31, 1996
<CASH> 4,713,000
<SECURITIES> 0
<RECEIVABLES> 62,693,000
<ALLOWANCES> (1,741,000)
<INVENTORY> 82,085,000
<CURRENT-ASSETS> 160,268,000
<PP&E> 113,437,000
<DEPRECIATION> 62,484,000
<TOTAL-ASSETS> 258,944,000
<CURRENT-LIABILITIES> 64,695,000
<BONDS> 31,583,000
<COMMON> 125,091,000
0
0
<OTHER-SE> 29,499,000
<TOTAL-LIABILITY-AND-EQUITY> 258,944,000
<SALES> 70,256,000
<TOTAL-REVENUES> 70,969,000
<CGS> 45,510,000
<TOTAL-COSTS> 61,627,000
<OTHER-EXPENSES> 3,572,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,005,000
<INCOME-PRETAX> 4,765,000
<INCOME-TAX> 1,737,000
<INCOME-CONTINUING> 3,028,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,028,000
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
