<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------------------
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 0-18312
--------------------------
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 76-0252850
- - --------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2835 Holmes Road, Houston, Texas 77051
- - -------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(713) 799-5100
--------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
---------------------------------------------------------------------------
(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_____________
----------
The Registrant had 18,546,075 shares of common stock outstanding as of
September 30, 1995.
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
---------
Part I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets -
September 30, 1995 (unaudited) and December 31, 1994 2
Unaudited Consolidated Statements of Income -
For the Three and Nine Months Ended September 30,
1995 and 1994 3
Unaudited Consolidated Statements of Cash Flows -
For the Nine Months Ended September 30, 1995 and 1994 4
Notes to Unaudited Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7-9
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page 11
Exhibit Index 12-15
Appendix A - Financial Data Schedule 16
</TABLE>
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
--------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
A S S E T S
-----------
Current assets:
Cash and cash equivalents............................................................. $ 8,367 $ 8,531
Accounts receivable, net.............................................................. 46,821 51,068
Inventory, net........................................................................ 12,952 12,431
Deferred federal income taxes......................................................... 2,701 2,701
Prepaid expenses and other............................................................ 8,897 6,263
-------- --------
Total current assets.............................................................. 79,738 80,994
-------- --------
Property and equipment:
Land, buildings and leasehold improvements............................................ 90,623 89,889
Operating equipment................................................................... 104,920 99,508
Equipment leased to customers......................................................... 3,239 3,079
Accumulated depreciation and amortization............................................. (50,978) (42,581)
-------- --------
Net property and equipment........................................................ 147,804 149,895
Identified intangibles, net............................................................. 30,543 32,139
Goodwill, net........................................................................... 48,075 49,032
Other assets, net....................................................................... 5,513 4,967
-------- --------
Total assets...................................................................... $311,673 $317,027
======== ========
<CAPTION>
L I A B I L I T I E S A N D E Q U I T Y
-----------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable....................................................................... $ 11,427 $ 15,010
Accrued liabilities.................................................................... 18,759 19,766
Federal and foreign income taxes payable............................................... 3,612 3,787
Current portion of long-term debt and short-term borrowings............................ 3,918 6,505
-------- --------
Total current liabilities.......................................................... 37,716 45,068
Long-term debt........................................................................... 120,969 123,851
Pension liabilities...................................................................... 10,012 9,306
Deferred taxes payable................................................................... 14,191 13,534
Other liabilities........................................................................ 1,607 1,669
Commitments and contingencies
Total liabilities.................................................................. 184,495 193,428
-------- --------
Redeemable Series A Convertible Preferred Stock, $.01 par value, 5,000,000
shares authorized, 100,000 shares issued and outstanding................................ 10,175 10,175
-------- --------
Common stockholders' equity:
Common stock, $.01 par value, 35,000,000 shares authorized, 18,546,075
shares issued and outstanding (18,466,763 at December 31, 1994)....................... 185 184
Paid-in capital....................................................................... 116,329 115,982
Retained earnings (Accumulated deficit)............................................... 2,922 (1,469)
Cumulative translation adjustment..................................................... (2,433) (1,273)
-------- --------
Total common stockholders' equity.................................................. 117,003 113,424
-------- --------
Total liabilities and equity....................................................... $311,673 $317,027
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
---- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Sale of services .......................................... $44,172 $44,506 $127,242 $128,590
Sale of products........................................... 1,911 4,085 6,347 9,213
Rental income.............................................. 984 862 2,816 2,420
------- ------- -------- --------
47,067 49,453 136,405 140,223
------- ------- -------- --------
Costs and expenses:
Cost of services sold...................................... 32,889 33,389 96,213 97,544
Cost of products sold...................................... 591 2,307 3,382 5,114
Goodwill amortization...................................... 330 300 981 894
Selling, general, and administrative....................... 5,376 5,318 15,713 16,464
Research and engineering costs............................. 869 682 2,659 2,235
------- ------- -------- --------
40,055 41,996 118,948 122,251
------- ------- -------- --------
Operating profit................................................ 7,012 7,457 17,457 17,972
Other expense (income):
Interest expense........................................... 3,007 3,169 9,374 8,992
Interest income............................................ (22) (37) (126) (201)
Foreign exchange........................................... 184 130 (761) 114
Other, net................................................. 224 472 494 1,392
------- ------- -------- --------
Income before income taxes and extraordinary item............... 3,619 3,723 8,476 7,675
Provision for income taxes...................................... 1,617 1,489 3,560 2,840
------- ------- -------- --------
Net income before extraordinary item............................ 2,002 2,234 4,916 4,835
Extraordinary item related to early retirement of
debt, net of income tax benefit of $411,000 in 1994........ -- -- -- (764)
------- ------- -------- --------
Net income...................................................... 2,002 2,234 4,916 4,071
Dividends applicable to redeemable preferred stock.............. 175 175 525 525
------- ------- -------- --------
Net income applicable to common stock........................... $ 1,827 $ 2,059 $ 4,391 $ 3,546
======= ======= ======== ========
Earnings per common share:
Income before extraordinary item and after
deduction of preferred stock dividends................ $0.10 $0.11 $0.24 $0.23
Extraordinary item......................................... -- -- -- (0.04)
------- ------- -------- --------
Net income................................................. $0.10 $0.11 $0.24 $0.19
======= ======= ======== ========
Weighted average number of common shares outstanding............ 18,540,994 18,449,385 18,531,481 18,436,331
========== ========== ========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $4,916 $ 4,071
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization....................................... 11,580 10,670
Provision (recoveries) for losses on accounts receivable........... (137) 63
Provision for deferred income taxes................................ 657 790
Employee savings plan expense funded by issuance of Common stock... 191 137
Write-off of unamortized debt fees................................. -- 1,176
Changes in assets and liabilities, net of effects of
acquired companies:
Decrease in accounts receivable................................ 4,384 2,448
Decrease (increase) in inventory............................... (521) 341
Increase in prepaid expenses and other assets.................. (2,728) (1,683)
Decrease in accounts payable and accrued liabilities........... (4,590) (7,935)
Decrease in federal and foreign income taxes payable........... (175) (338)
Increase (decrease) in other non current liabilities........... 85 (1,465)
------- -------
Net cash provided by operating activities.......................... 13,662 8,275
------- -------
Cash flows used in investing activities:
Capital expenditures................................................... (4,727) (4,299)
Net assets of acquired companies, net of cash acquired................. (2,500) (182)
Other.................................................................. (504) (118)
------- -------
Net cash used in investing activities.............................. (7,731) (4,599)
------- -------
Cash flows provided by financing activities:
Borrowings under financing agreements.................................. 500 65,554
Principal payments under financing agreements.......................... (5,969) (64,098)
Fees associated with Senior Credit Agreement........................... -- (1,387)
Foreign currency options............................................... (258) --
Proceeds from sale of Common stock..................................... 157 --
Dividends paid on Redeemable Series A Convertible Preferred Stock...... (525) (525)
------- -------
Net cash used in financing activities................................. (6,095) (456)
------- -------
Net increase (decrease) in cash and cash equivalents...................... (164) 3,220
Cash and cash equivalents:
Beginning of period.................................................... 8,531 2,492
------- -------
End of period........................................................... $ 8,367 $ 5,712
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the nine month period for:
Interest............................................................. $ 7,576 $ 6,469
======= =======
Taxes................................................................ $ 2,580 $ 3,191
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND AS OF DECEMBER 31, 1994
1. ORGANIZATION AND BASIS OF PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
The accompanying unaudited consolidated financial statements of the
Company and its wholly-owned subsidiaries have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to these rules and
regulations. The unaudited consolidated financial statements included in
this report reflect all the adjustments which the Company considers
necessary for a fair presentation of the results of operations for the
interim periods covered and for the financial condition of the Company at
the date of the interim balance sheet. Results for the interim periods are
not necessarily indicative of results of the year.
The financial statements included in this report should be read in
conjunction with the audited financial statements and accompanying notes
included in the Company's 1994 Form 10-K, filed under the Securities
Exchange Act of 1934 (Commission File No. 0-18312).
2. NET INVENTORY
<TABLE>
<CAPTION>
At September 30, 1995 net inventories consist of the following (in
thousands):
<S> <C>
Components, subassemblies, and expendable parts.......... $ 10,971
Equipment under production............................... 1,981
-------
$ 12,952
========
</TABLE>
3. DIVIDEND RESTRICTIONS
Tuboscope Vetco International Inc.'s (TVI's) Senior Bank Credit Agreement
and 10.75% $75 million Senior Subordinated Notes restrict the ability of
TVI to dividend or otherwise make distributions to the Company. The terms
of the Company's Series A Convertible Preferred Stock restrict the ability
of the Company to pay dividends on its Common Stock.
4. SUMMARIZED FINANCIAL INFORMATION OF REGISTRANT (TVI)
The following is summarized balance sheet information for TVI as of
September 30, 1995 and December 31, 1994 and summarized statements of
income for the nine months ended September, 1995 and 1994. Certain
balances at December 31, 1994 have been reclassified to be consistent with
the September 30, 1995 presentation (in thousands).
SUMMARIZED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Current assets.................................... $ 92,820 $ 84,327
Noncurrent assets................................. 212,666 224,198
-------- --------
Total assets.................................... $305,486 $308,525
======== ========
LIABILITIES AND EQUITY
----------------------
Current liabilities............................... $ 35,998 $ 44,471
Noncurrent liabilities............................ 142,119 140,980
Stockholders' equity.............................. 127,369 123,074
-------- --------
Total liabilities and equity...................... $305,486 $308,525
======== ========
</TABLE>
5
<PAGE>
4. SUMMARIZED FINANCIAL INFORMATION OF REGISTRANT (TVI) (CONT'D)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------
SUMMARIZED STATEMENTS OF INCOME 1995 1994
---- ----
<S> <C> <C>
Revenue.......................................... $134,801 $137,855
======== ========
Operating profit................................. $ 17,315 $ 18,525
======== ========
Income before income taxes....................... $ 8,610 $ 8,055
======== ========
Net income....................................... $ 4,972 $ 4,451
======== ========
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
- - ---------------------
REVENUE. Revenue was approximately $47.1 million and $136.4 million for the
third quarter and first nine months of 1995, respectively, compared to $49.5
million and $140.2 million in the same periods of 1994.
Revenue from the Company's Oilfield Services, comprised of Inspection and
Coating, was approximately $34.5 million and $102.9 million for the third
quarter and nine months ending September 30, 1995, respectively. These results
represented decreases of 5% ($1.9 million) and 1% ($937,000) compared to the
third quarter and first nine months of 1994, respectively. Inspection revenue
was down $1.7 million in the third quarter of 1995 compared to 1994 as prior
year third quarter results included $4.0 million in Algerian equipment sales
which were not repeated in 1995. North American inspection revenue was up
$123,000 despite a 9% decline in the North America rig count. The increase in
North America inspection revenue was due to increased activity at the Company's
Houston facility and improved Canadian operations as a result of an alliance
with a major oil and gas company. Excluding the 1994 Algerian equipment sales,
International Inspection revenue was up $2.1 million as the International rig
count increased 6%. International inspection revenue was also up due to greater
revenue in South America related primarily to the September 1995 acquisition of
Argentina inspection operations from the Company's former agent in that country.
North America Coating revenue was up $169,000 and International Coating revenue
declined $352,000 during the third quarter of 1995 compared to the third quarter
of 1994. North America Coating was up due to greater revenue at the Company's
Midland, Texas Coating plant. International Coating revenue declined due to
slower activity in the Far East as rig activity in that region declined 12% in
the third quarter of 1995 compared to 1994.
Pipeline Services revenue was $5.5 million and $12.6 million for the third
quarter and first nine months of 1995 respectively, an increase of $91,000 over
the third quarter of 1994 and $1.1 million less than the first nine months of
1994. The decline for the first nine months of 1995 occurred during the first
half of the year and was primarily due to lower prices for conventional pipeline
inspection services in the U.S. and project delays in Canada and Saudi Arabia.
Pipeline Services revenue for the third quarter of 1995 was $1.5 million greater
than the second quarter of 1995. While price pressures on conventional pipeline
services have continued in the U.S. during the third quarter of 1995, greater
U.S. volume has offset the decline in prices. The Company's new TruRes/TM/
"High Resolution" pipeline tools are expected to improve the overall pricing of
Pipeline Services revenue as new tools are introduced into the market towards
the end of 1995 and the beginning of 1996.
Industrial Inspection revenue was $3.3 million and $10.4 million for the third
quarter and first nine months of 1995, respectively, down $1.2 million and $2.5
million from the same periods in 1994, respectively. The decline was due mainly
to less work in Saudi Arabia and Germany. The decline in Saudi Arabia was a
result of a decline in activity for a major customer in that country while the
decline in Germany was due to industrial inspection work at nucleur power plants
in 1994 which was not repeated in 1995.
Mill Systems and Sales revenue was $3.1 million and $7.8 million for the quarter
and nine months ending September 30, 1995, respectively, increases of $2.1
million and $2.7 million compared to the same periods of 1994, respectively.
The increase in third quarter results was due to revenue earned by NDT Systems
(which was acquired in October 1994) and international Mill equipment sales in
September 1995.
Other revenue was $863,000 and $2.8 million for the third quarter and first nine
months of 1995, respectively, decreases of $1.2 million and $2.0 million
compared to the same periods of 1994, respectively. The decline was due to the
discontinued environmental operations and lower tank inspection revenue in the
Chicago market.
GROSS MARGIN AND GROSS PROFIT. Gross profit was approximately $13.3 million
(28.2%) and $35.8 million (26.3%) for the third quarter and first nine months of
1995, respectively, compared to $13.5 million (27.2%) and $36.7 million (26.2%)
for the third quarter and first nine months of 1994, respectively. The primary
reason for the decline in gross profit dollars was lower revenue, and the
increase in gross profit percent was due to improved product line mix. Gross
margins (defined as revenue minus variable expenses) were 48.2% for the third
quarter of 1995, up from 45.0% from the third quarter of 1994. The gross margin
percent improved due to a better product line mix as revenue and profits were up
in the Company's higher profit margin areas such as Mill Systems and Sales and
Pipeline Services. Pipeline Services gross margin percents increased from 35.6%
in the second quarter of 1995 to 52.5% in the third quarter
7
<PAGE>
of 1995 due to the impact of higher volume on personnel utilization and tighter
cost controls on parts and supplies.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and administrative
costs were $5.4 million and $15.7 million in the third quarter and first nine
months of 1995, up $58,000 from the third quarter of 1994 and down $751,000 from
the first nine months of 1994. The increase in the third quarter of 1995 was
mainly due to overhead costs associated with the NDT operations which were
acquired in October of 1994. The decrease between the two nine month periods
was mainly due to lower international overhead costs during the first half of
1995. Selling, general and administrative costs were similar in the third
quarter of 1994 and 1995 due to both periods reflecting the full impact of the
restructuring plan implemented in the third quarter of 1993.
RESEARCH AND ENGINEERING COSTS. Research and engineering costs were $869,000
and $2.7 million for the third quarter and first nine months of 1995, increases
of $187,000 and $424,000 over the same periods in 1994, respectively. The
increase was mainly due to costs associated with Truscope/TM/, the Company's new
high-speed ultrasonic inspection system and, research and engineering costs
associated with the NDT operations.
OPERATING PROFIT. Operating profit was $7.0 million and $17.5 million for the
third quarter and first nine months of 1995, respectively, compared to $7.5
million and $18.0 million for the same periods in 1994, as lower revenue was
primarily offset by higher gross margin percents due to a positive product line
mix and lower selling, general and administrative costs.
INTEREST EXPENSE. Interest expense was $3.0 million and $9.4 million in the
three and nine months ended September 30, 1995, a decrease of $162,000 compared
to the third quarter of 1994 and an increase of $382,000 compared to the first
nine months of 1994. The third quarter decrease was a result of lower
outstanding debt balances in the third quarter of 1995 compared to 1994. The
increase for the nine month periods was due to higher interest rates on variable
rate loans in 1995 than in 1994.
OTHER EXPENSE (INCOME). Other expense (income), which includes interest income,
foreign exchange, other expense (net), resulted in net expense of $386,000 for
the third quarter of 1995 compared to $565,000 in the third quarter of 1994.
The decline was due mainly to lower minority interest expense.
Other expense was a net gain of $393,000 for the first nine months of 1995
compared to a net loss of $1.3 million in the same period of 1994. Results for
the first nine months of 1995 included a $1.7 million net gain from an
arbitration award and a $1.0 million expense accrual for an Italian affiliate.
Both of these items occurred in the second quarter of 1995. While the
investigation of the Italian affiliate is ongoing, management currently
believes that any additional costs will be covered by the established reserve.
In addition, foreign exchange gains of $761,000 were recognized in the first
nine months of 1995 compared to foreign exchange losses of $114,000 for the same
period of 1994. The 1995 foreign exchange gains were mainly the result of the
weaker U.S. dollar (during the first half of 1995) and gains on foreign
subsidiaries which have U.S. dollar payables (accounts and notes).
PROVISION FOR INCOME TAXES. The Company's effective tax for the third quarter
of 1995 was approximately 45% compared to 40% in the third quarter of 1994. The
1995 higher effective tax rate was due to losses in certain foreign
jurisdictions which the Company could not benefit from on a consolidated basis,
and foreign withholding taxes in certain taxing jurisdictions where credits are
not allowed.
EXTRAORDINARY ITEM, NET OF INCOME TAX EFFECT. On June 30, 1994, refinancing of
TVI's senior secured term loan and revolving credit facility was completed. The
refinancing and related early retirement of existing senior debt resulted in an
extraordinary after-tax charge of $764,000 associated with the write-off of
unamortized debt fees in the second quarter of 1994.
NET INCOME. Net income for the third quarter and first nine months of 1995 was
$2.0 million and $4.9 million, respectively, compared to $2.2 million and $4.1
million in the third quarter and first nine months of 1994, respectively, due to
the factors discussed above.
FINANCIAL CONDITION AND LIQUIDITY
- - ---------------------------------
Working capital was approximately $42.0 million at September 30, 1995, an
increase of $6.1 million from $35.9 million at December 31, 1994. The increase
in working capital was mainly due to a $2.6 million increase in prepaid
expenses, a $3.6 million decrease in accounts payable, a $1.0 million decrease
in accrued liabilities, and a $2.6 million decrease in the current portion of
long-term debt.
8
<PAGE>
The increase in prepaid expenses was due to insurance payments in the second
quarter of 1995 (the Company's main insurance policies are renewed in the second
quarter of each year) and lease prepayments. The $3.6 million decrease in
accounts payable was due to a decline in U.S. trade payables and lower
outstanding overdraft balances. Accrued liabilities were down due to
restructuring payments made in the first nine months of 1995 and employee bonus
payments which were accrued in 1994. The decrease in the current portion of
long-term debt was due to the retirement of notes payable which originated with
the acquisition of Sound Optical Systems, Inc. (SOS) in July 1990. The
increases in working capital accounts were offset by a $4.2 million decline in
accounts receivable as revenue for the third quarter of 1995 was 9% less than
the fourth quarter of 1994.
Current and long-term debt was $124.9 million at September 30, 1995, a decrease
of $5.5 million from December 31, 1994. The decrease was mainly due to payments
on the Company's Senior debt, payments on the debt related to the Company's
Aberdeen facility, and the retirement of the SOS debt. The Company's
outstanding debt at September 30, 1995 consisted of TVI's $75 million of 10.75%
Senior Subordinated Notes due 2003, $20.5 million of term loans due under TVI's
Senior Credit Agreement, $20.0 million due under TVI's $35 million revolving
credit facility, $5.5 million of notes payable related to the construction of
the Aberdeen, Scotland coating and inspection facility, $2.0 million of
industrial revenue bonds, and $1.9 million of other outstanding debt.
The Company made capital expenditures of $4.7 million for the first nine months
of 1995, compared to $4.3 million in the first nine months of 1994. Capital
spending for the first nine months of 1995 was mainly related to the expansion
of the Amelia, Louisiana inspection facility and construction of Truscope/TM/
(rotary ultrasonic inspection system). The Company's planned 1995 capital
spending is expected to approximate $7 million.
OTHER. The Senior Credit Agreement and the Indenture governing the Subordinated
Notes contain various covenants that limit the ability of the Company, TVI, and
certain subsidiaries to, among other things, pay dividends, purchase capital
stock, incur additional indebtedness, dispose of assets and transact with
affiliates. TVI is also required to maintain, on a consolidated basis, certain
minimum financial ratios, as set forth in the agreements. In addition to the
covenants and financial ratios mentioned above, the credit agreement contains
certain events of default. Management believes it is in compliance with all
covenants in the Senior Credit Agreement and Indenture.
ADOPTION OF STATEMENT NO. 121. In March 1995, the Financial
Accounting Standards Board (FASB) issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS No. 121 established "accounting standards for the impairment of the long-
lived assets, certain identified intangibles, and goodwill related to those
assets to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of." The new statement requires the value of long-
lived assets, certain identified intangibles, and goodwill to be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The initial indication in
determining whether an asset has been impaired is if expected future
undiscounted cash flows of assets, grouped at the lowest level for which there
are identifiable cash flows, is less than the carrying value of those assets.
SFAS No. 121 is effective for financial statements for fiscal years beginning
after December 15, 1995. The Company's existing policy is to evaluate the
realizability of long-term assets on an aggregate basis based on undiscounted
cash flows. Management is currently in the process of accumulating cash flow
information (both historic and future estimates) at the lowest asset grouping
levels for which there are identifiable cash flows. These levels would be
represented by separate product line operations at individual operating
divisions. The Company's adoption of SFAS No. 121 could result in material
impairment losses if the undiscounted cash flow of individual groups of assets
evaluated is less than their net book carrying value.
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and reports of Form 8-K
(a) Exhibits -- Reference is hereby made to the Exhibit Index
commencing on page 12.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
10
<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.
TUBOSCOPE VETCO
INTERNATIONAL CORPORATION
-------------------------
(Registrant)
Date: November 14, 1995 /s/ Ronald L. Koons
------------------------ --------------------------
Ronald L. Koons
Executive Vice President, Chief
Financial Officer and Treasurer
(Duly Authorized Officer,
Principal Financial and
Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
- - ----------- ----------- --------
<S> <C> <C>
3(a) Restated Certificate of Incorporation, dated March 12, 1990. (Note 7)
3(b) Amended and Restated Bylaws. (Note 2)
3(c) Certificate of Designation of Series A Convertible Preferred Stock, (Note 3)
dated October 22, 1991.
3(d) Certificate of Amendment to Restated Certificate of Incorporation (Note 10)
dated May 12, 1992.
3(e) Certificate of Amendment to Restated Certificate of Incorporation (Note 11)
dated May 10, 1994.
4(a) Stockholders' Agreement, dated May 13, 1988, between the (Note 1)
Company, Brentwood, Hub, the Management Investors, the Other
Investors, and the Institutional Investors, including the Common
Stock Registration Rights Agreement attached thereto as Exhibit A.
4(b) Purchase Agreement, dated May 13, 1988, between the Company, (Note 1)
Tuboscope Acquisition Corporation and the purchasers named on the
execution pages thereto.
4(c) Indenture (including the form of Note), dated as of April 1, 1993, (Note 4)
among Tuboscope Vetco International Inc., the Company and
Norwest Bank Minnesota, National Association, as Trustee,
regarding the 10 3/4% Senior Subordinated Notes due 2003 of
Tuboscope Vetco International Inc.
4(e) Various documentation relating to $1,000,000 Alaska Industrial
Revenue Bond financing. (Not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Company hereby agrees to
furnish copies of relevant documentation to the Securities and
Exchange Commission upon request).
4(f) Various documentation relating to $1,000,000 Wyoming Industrial
Revenue Bond financing. (Not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Company hereby agrees to
furnish copies of relevant documentation to the Securities and
Exchange Commission upon request).
4(g) Plan of Recapitalization. (Note 2)
4(h) Various promissory notes in the aggregate principal amount of
$4,000,000 relating to the acquisition of Sound Optics Systems, Inc.,
dba South Optical Systems, Inc. (Not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Company hereby agrees to
furnish copies of the relevant documentation to the Securities and
Exchange Commission upon request).
4(i) Purchase Agreement, dated as of September 30, 1991, between the (Note 3)
Company and BHI Hughes Incorporated relating to Vetco Services
Acquisition.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
- - ----------- ----------- --------
<S> <C> <C>
4(j) Secured Credit Agreement, dated June 30, 1994, between Tuboscope (Note 9)
Vetco International Inc., CTI Inspection Services Inc., Tuboscope
Vetco Capital Corp, Tuboscope Vetco International Corporation and
ABN AMRO Bank, N.V., as Agent.
10(a) Form of Employment Agreement, dated May 13, 1988, between (Note 1)
Tuboscope Inc., the Company and William V. Larkin and E. Wayne
Overman.
10(b) Savings Investment Plan, dated May 13, 1988, as amended by (Note 1)
First Amendment to Savings Investment Plan.
10(c) Second, Third and Fourth Amendments to Savings Investment Plan. (Note 4)
10(d) Fifth, Sixth and Seventh Amendments to Savings Investment Plan. (Note 8)
10(e) Lease Agreement, dated July 1, 1981, between C.M. Thibodaux (Note 1)
Company, Ltd. and AMF Tuboscope, Inc.
10(f) Lease Agreement between Sam J. Siracusa, John Siracusa, Jr., (Note 1)
Elizabeth Ann Siracusa, Louis Anthony Siracusa, Philomena
Siracusa Archer, Catherine Agnes Siracusa, Maria Josette Siracusa,
Julie Ann Siracusa, the Succession of Joseph C. Siracusa and AMF
Tuboscope, Inc., as amended by letter agreement among the same
parties, dated June 14, 1989.
10(g) Agreement to Purchase, Sell and Sublease, dated June 9, 1980, (Note 1)
between Alaska International Construction, Inc. and AMF
Tuboscope, Inc., as amended by letter agreement, dated June 12,
1980 between the same parties.
10(h) Lease Agreement, dated June 10, 1977, between Batinorest and (Note 1)
A.M.F. France.
10(i) Supplementary Agreement Fixed Rental Scheme, dated May 19, (Note 1)
1989, between Jurong Town Corporation and AMF Far East Pte.
Ltd.
10(j) Lease, dated December 13, 1984, between Barclays Nominees (Note 1)
(KWS) Limited and AMF International Limited, as amended by
Transfer of Whole Agreement, dated November 20, 1987, between
AMF International Limited and Tuboscope Limited.
10(k) Description of Life Insurance Plan. (Note 1)
10(l) Amended and Restated Stock Option Plan for Key Employees of (Note 5)
Tuboscope Vetco International Corporation.
10(m) Form of Revised Incentive Stock Option Agreement. (Note 5)
10(n) Form of Revised Non-Qualified Stock Option Agreement. (Note 5)
10(o) Stock Option Plan for Non-Employee Directors of Tuboscope Vetco (Note 6)
International Corporation.
10(p) Amendment to Stock Option Plan for Non-Employee Directors of (Note 6)
Tuboscope Vetco International Corporation.
10(q) Form of Non-Qualified Stock Option Agreement. (Note 6)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
- - ----------- ----------- --------
<S> <C> <C>
10(r) Employee Qualified Stock Purchase Plan. (Note 8)
10(s) Purchase Agreement, dated as of July 20, 1990, by and among Oil (Note 7)
and Gas Manufacturing Company, Inc., F.T. Glascock, Thomas C.
Glascock, J. David Glascock, Hutchison-Hayes International, Inc.,
John F. Joplin, William F. Joplin, Sound Optics Systems, Inc. dba
Sound Optical Systems, Inc. and Tuboscope Inc.
10(t) Form of Employment Agreement, dated July 23, 1990, between (Note 7)
Tuboscope Inc. and Thomas Glascock and William Glascock.
10(u) Purchase Agreement, dated as of September 30, 1991, between the (Note 3)
Company and BHI relating to the Vetco Services Acquisition.
10(v) Amended and Restated Employment Agreement dated June 23, 1993, (Note 8)
between the Company, Tuboscope Vetco International Inc., and
Martin R. Reid.
10(w) Technology Transfer Agreement, dated as of October 29, 1991, (Note 3)
between Tuboscope Inc. and BHI.
10(x) Sublease, dated December 1, 1987, between McDermott (Note 3)
Incorporated and AMF Tuboscope, Inc. as amended by letter
agreement, dated November 10, 1989, between Tuboscope Inc. and
McDermott Incorporated.
10(y) Letter agreement, dated March 5, 1990 amending the Agreement to (Note 3)
Purchase, Sell and Sublease dated June 9, 1980 between AMF
Tuboscope Inc. and Alaska International Construction, Inc. as
amended June 12, 1980.
10(z) Employment Agreement, between Vetco Inspection GmbH and (Note 3)
Gerhard A. Hage.
10(aa) Lease Agreement with respect to Celle, Germany facility. (Note 3)
10(bb) Building Agreement for Land at Jurong, dated May 5, 1983, (Note 3)
between Jurong Town Corporation and Vetco International, Inc.
10(cc) Lease Agreement, dated January 1, 1988, between Mohamed Alhajri (Note 3)
Est. and Vetco Saudi Company.
10(dd) Lease Agreement, dated November 26, 1989, between (Note 3)
Mohammed F. Al-Hajri Est. and Vetco Saudi Arabia Ltd.
10(ee) Lease between J.G.B. Properties Limited and Vetco Inspection (Note 3)
GmbH.
10(ff) Eighth and Ninth Amendment to Savings Investment Plan. (Note 9)
27 Financial Data Exhibit 27
</TABLE>
___________________
14
<PAGE>
Note 1 Previously filed by the Registrant in Registration No. 33-31102 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 2 Previously filed by the Registrant in Registration No. 33-33248 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 3 Previously filed by the Registrant in File No. 33-43525 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 4 Previously filed by the Registrant in Registration No. 33-56182 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 5 Previously filed by the Registrant in Registration No. 33-72150 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 6 Previously filed by the Registrant in Registration No. 33-72072 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 7 Previously filed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 and incorporated by reference
herein pursuant to Rule 12b-32 of the Exchange Act.
Note 8 Previously filed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 and incorporated by reference
herein pursuant to Rule 12b-32 of the Exchange Act.
Note 9 Previously filed in the Quarterly Report on Form 10Q for the quarter
ended June 30, 1994 and incorporated by reference herein pursuant to
Rule 12b-32 of the Exchange Act.
Note 10 Previously filed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and incorporated by reference
herein pursuant to Rule 12b-32 of the Exchange Act.
Note 11 Previously filed in the Company's Proxy Statement for the 1994 Annual
Meeting of Stockholders and incorporated by reference herein pursuant
to Rule 12b-32 of the Exchange Act.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTIAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q
FOR THE QUARTERLY PERIOD ENDED SEPTEBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,367
<SECURITIES> 0
<RECEIVABLES> 48,122
<ALLOWANCES> 1,301
<INVENTORY> 12,952
<CURRENT-ASSETS> 79,738
<PP&E> 198,782
<DEPRECIATION> 50,978
<TOTAL-ASSETS> 311,673
<CURRENT-LIABILITIES> 37,716
<BONDS> 120,969
<COMMON> 185
10,175
0
<OTHER-SE> 116,818
<TOTAL-LIABILITY-AND-EQUITY> 311,673
<SALES> 6,347
<TOTAL-REVENUES> 136,405
<CGS> 3,382
<TOTAL-COSTS> 99,595
<OTHER-EXPENSES> 981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,374
<INCOME-PRETAX> 8,476
<INCOME-TAX> 3,560
<INCOME-CONTINUING> 4,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,916
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
