Hydril (Nasdaq:HYDL) reported earnings for the second quarter ended
June 30, 2006 of $1.04 per diluted share, up 11% sequentially from
$0.94 reported in the first quarter of 2006, and up 44% from $0.72
reported for the second quarter of 2005. On a sequential basis,
second quarter revenue of $142.1 million increased 25%, operating
income of $36.2 million was up 10%, and net income of $25.0 million
was up 10%. Compared to the second quarter of 2005, revenue
increased 55%, operating income increased 45%, and net income
increased 45%. Chris Seaver, President and CEO, commented, "The
strong second quarter results reflect the growing demand for our
products and services in worldwide markets. As a result of our
continuing strong cash flows from operations we have committed to
expand our manufacturing capabilities to meet our customers' needs
and return value to our shareholders through share repurchases,
which we began in the second quarter with purchases of $25
million." Premium Connection Segment Sequentially, second quarter
revenue for Hydril's premium connection segment increased 22% to
$89.4 million, while operating income increased 4% to $28.6
million, and operating margin decreased to 32% from 37%. The
majority of the increase in revenue resulted from our successful
efforts in the international markets to supply a larger percentage
of orders with pipe in addition to threaded connections. As a
result, the increase in low margin pass-through pipe reduced the
segment's operating margin for the quarter. Pressure Control
Segment Second quarter revenue for the pressure control segment
increased 30% sequentially to $52.7 million and operating income
increased 31% to $13.6 million. Capital equipment revenue increased
45% sequentially to $28.5 million and aftermarket revenue increased
16% to $24.2 million. The increase in capital equipment revenue was
primarily the result of progress made on offshore blowout
prevention system projects and strong blowout preventer equipment
shipments. Segment operating margin for the second quarter was 26%,
flat with the first quarter, due to the increase in lower-margin
capital equipment revenue. The capital equipment backlog was $266
million at June 30, 2006, up 14% from $233 million at March 31,
2006, and up from $47 million at June 30, 2005. Market Indicators
As more fully described on our website at www.hydril.com on the
"Market Indicators" page, our principal business drivers are: (1)
the U.S. rig count for rigs drilling at targets deeper than 15,000
feet, (2) the number of Gulf of Mexico rigs under contract, (3) the
international rig count, (4) the worldwide offshore rigs under
contract, and (5) the total U.S. rig count. Conference Call
Hydril's conference call to discuss second quarter financial
results is scheduled for Wednesday, July 26, 2006 at 8:30 a.m. EDT,
(7:30 a.m. CDT) and is accessible by dialing 888-889-5345
(domestic) or 973-935-8516 (international) and referencing passcode
# 7611130. For further information on the call or the webcast,
please visit the company's website at www.hydril.com or see the
company's press release announcing the earnings conference call
dated July 13, 2006. To the extent not provided in the call,
reconciliations of any non-GAAP financial measures discussed in the
call will be available on the Investor Relations page of Hydril's
website. Hydril, headquartered in Houston, Texas, is engaged
worldwide in engineering, manufacturing and marketing premium
connection and pressure control products used for oil and gas
drilling and production. Forward-Looking Statements This press
release contains forward-looking statements concerning expected
future results. These statements relate to future events and the
company's future financial performance, including the company's
business strategy and product development plans, and involve known
and unknown risks, uncertainties and assumptions. These risks,
uncertainties and assumptions, many of which are more fully
described in Hydril Company's Quarterly Report on Form 10-Q for the
quarter-ended March 31, 2006 filed with the Securities and Exchange
Commission, include but are not limited to competition from steel
mills, limitations on the availability of pipe for threading, the
impact of imports of tubular to goods and of international and
domestic trade laws, the loss of or change to distribution methods
of premium connections, the consolidation of end-users, the risks
associated with fixed-price contracts, the impact of changes in oil
and natural gas prices and worldwide and domestic economic
conditions on drilling activity and demand for and pricing of
Hydril's products, the ability to attract and retain skilled labor
and Hydril's ability to successfully develop new technologies and
products and maintain and increase its market share. These factors
may cause Hydril's or the industry's actual results, levels of
activity, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements.
-0- *T HYDRIL COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In
Thousands, Except Share and Per Share Amounts)
--------------------------------------------------
----------------------------------- Three Months Ended (unaudited)
----------------------------------- June 30, March 31, June 30,
2006 2006 2005 ----------------------------------- Revenue Premium
Connection $89,422 $73,549 $59,904 Pressure Control Capital
Equipment 28,513 19,722 11,714 Aftermarket 24,179 20,789 19,989
----------- ----------- ----------- Subtotal Pressure Control
52,692 40,511 31,703 Total Revenue 142,114 114,060 91,607 Total
Gross Profit 54,911 49,879 40,465 Gross Margin 39% 44% 44% Selling,
General, and Admin. Expenses 18,666 17,028 15,468 -----------
----------- ----------- Operating Income (Loss) Premium Connection
28,584 27,526 19,891 Pressure Control 13,601 10,373 9,572 Corporate
Administration (5,940) (5,048) (4,466) ----------- -----------
----------- Total Operating Income 36,245 32,851 24,997 Operating
Margin 26% 29% 27% Loss from Unconsolidated Entites 31 (45) -
Interest Income 1,891 1,470 943 Other Income/(Expense) (70) (99)
(146) ----------- ----------- ----------- Income Before Income
Taxes 38,097 34,177 25,794 Provision for Income Taxes 13,094 11,508
8,545 ----------- ----------- ----------- Net Income $25,003
$22,669 $17,249 Net Income Per Share: Basic $1.05 $0.96 $0.74
Diluted $1.04 $0.94 $0.72 Weighted Average Shares Outstanding:
Basic 23,734,236 23,697,639 23,455,850 Diluted 24,151,659
24,120,861 23,996,733 Depreciation Premium Connection $2,372 $2,257
$2,160 Pressure Control 834 810 755 Corporate Administration 529
506 485 ----------- ----------- ----------- Total Depreciation
3,735 3,573 3,400 Capital Expenditures 9,320 5,005 2,700 Pressure
Control Backlog Capital Equipment $266,357 $232,614 $47,305
----------------------- Six Months Ended (unaudited)
----------------------- June 30, 2006 2005 -----------------------
Revenue Premium Connection $162,971 $110,412 Pressure Control
Capital Equipment 48,235 23,780 Aftermarket 44,968 36,232
----------- ----------- Subtotal Pressure Control 93,203 60,012
Total Revenue 256,174 170,424 Total Gross Profit 104,790 75,872
Gross Margin 41% 45% Selling, General, and Admin. Expenses 35,694
28,776 ----------- ----------- Operating Income (Loss) Premium
Connection 56,110 38,296 Pressure Control 23,974 17,378 Corporate
Administration (10,988) (8,578) ----------- ----------- Total
Operating Income 69,096 47,096 Operating Margin 27% 28% Loss from
Unconsolidated Entites (14) - Interest Income 3,361 1,604 Other
Income/(Expense) (169) (253) ----------- ----------- Income Before
Income Taxes 72,274 48,447 Provision for Income Taxes 24,602 16,186
----------- ----------- Net Income $47,672 $32,261 Net Income Per
Share: Basic $2.01 $1.38 Diluted $1.98 $1.35 Weighted Average
Shares Outstanding: Basic 23,716,039 23,408,931 Diluted 24,129,478
23,942,291 Depreciation Premium Connection $4,629 $4,119 Pressure
Control 1,644 1,515 Corporate Administration 1,035 1,006
----------- ----------- Total Depreciation 7,308 6,640 Capital
Expenditures 14,325 6,764 HYDRIL COMPANY CONSOLIDATED BALANCE
SHEETS (In Thousands)
----------------------------------------------------------------------
June 30, December 31, 2006 2005 ---- ---- (unaudited)
------------------------- CURRENT ASSETS: Cash and cash equivalents
$187,055 $65,145 Investments 7,557 108,084 Total receivables
126,916 78,204 Total inventories 72,255 57,646 Deferred tax asset
12,330 11,390 Other current assets 4,781 3,669 ------------
------------ Total current assets 410,894 324,138 ------------
------------ LONG-TERM ASSETS: Property, net 111,462 105,138 Other
long-term assets 19,954 21,286 ------------ ------------ Total
long-term assets 131,416 126,424 ------------ ------------ TOTAL
$542,310 $450,562 ============ ============ CURRENT LIABILITIES:
Accounts payable $43,003 $23,443 Accrued liabilities and other
current liabilities 79,384 39,934 ------------ ------------ Total
current liabilities 122,387 63,377 ------------ ------------
LONG-TERM LIABILITIES: Deferred tax liability and other tax
obligations 15,144 12,143 Post retirement, pension benefits and
other 15,040 14,207 ------------ ------------ Total long-term
liabilities 30,184 26,350 ------------ ------------ STOCKHOLDERS'
EQUITY: Total stockholders' equity 389,739 360,835 ------------
------------ TOTAL $542,310 $450,562 ============ ============ *T
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