×

Oil States Announces Adjusted First Quarter 2015 Earnings of $0.45 per Share

HOUSTON, April 29, 2015 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the first quarter ended March 31, 2015 of $19.4 million, or $0.38 per diluted share, which included pre-tax charges of $2.1 million for severance and other downsizing initiatives, and a higher effective tax rate driven primarily by a $2.3 million deferred tax adjustment for certain non-deductible items. Excluding the first quarter 2015 significant charges and higher effective tax rate, net income would have been $23.1 million, or $0.45 per diluted share. These results compare to net income from continuing operations of $34.7 million, or $0.64 per diluted share, reported in the first quarter of 2014. Results for the first quarter of 2014 included pre-tax charges of $1.4 million, or $0.02 per diluted share, for transaction costs primarily incurred in connection with the May 30, 2014 spin-off of the accommodations segment into a stand-alone, publicly traded corporation, Civeo Corporation or Civeo.

During the first quarter of 2015, the Company generated revenues of $337.4 million and Adjusted EBITDA (A) of $68.9 million, which excluded $2.1 million of severance and other downsizing initiatives. These results compare to revenues of $405.2 million and Adjusted EBITDA (A) of $92.9 million, which excluded $1.4 million of transaction costs reported in the first quarter of 2014, representing year-over-year declines of 17% and 26%, respectively, primarily due to lower North American activity levels resulting from the significant decline in crude oil prices, the corresponding precipitous drop in the U.S. land drilling rig count and further declines due to certain customers who have elected to drill wells but not complete them.

Cindy B. Taylor, Oil States' President and Chief Executive Officer stated, "First quarter results for our business segments were negatively impacted by the precipitous drop in crude oil prices which have led to dramatic declines in North American land drilling and completion related activity. The activity declines have been further exacerbated by deferred well completions as our exploration and production customers strive to preserve cash flow in a weak commodity price environment, all of which are having a profoundly negative impact on pricing. In our offshore products segment, we achieved commendable results in light of the current environment. Bidding and quoting activity continued in our offshore products segment, albeit at a slower pace, and our first quarter book-to-bill ratio was a relatively strong 0.98x. Beginning in late 2014, and continuing through the current period, we have been proactively addressing our cost structure, controlling discretionary spending, negotiating price decreases with our vendors and maintaining strong liquidity levels to ensure Oil States remains well positioned to weather this downturn in the cycle and can be opportunistic when investment opportunities present themselves."

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from continuing operations for the first quarters of 2015 and 2014, respectively. The historical results of operations of the accommodations segment through its respective transaction closing date has been reported as discontinued operations for all periods reported herein.)

Well Site Services

Well site services generated revenues of $141.8 million and EBITDA of $36.5 million in the first quarter of 2015 compared to revenues and EBITDA of $193.0 million and $63.1 million, respectively, in the first quarter of 2014. Segmental revenues and EBITDA decreased 27% and 42% year-over-year, respectively, primarily due to a 5% year-over-year decrease in the number of completion services jobs performed and a 15% year-over-year decrease in revenue per completion service job as a result of lower activity levels in the U.S. shale basins, coupled with pricing pressure. Lower utilization in the land drilling business, which averaged 44% during the first quarter of 2015 compared with 81% in the first quarter of 2014, also negatively impacted the segmental results. The well site services segment EBITDA included $1.1 million of severance and other downsizing initiatives undertaken in response to the significant activity declines.

Offshore Products

Offshore products generated revenues and EBITDA of $195.6 million and $42.6 million, respectively, in the first quarter of 2015 compared to revenues of $212.2 million and EBITDA of $43.1 million in the first quarter of 2014. Segmental revenues and EBITDA decreased 8% and 1% year-over-year, respectively, primarily due to lower contributions from subsea and drilling product sales and decreased backlog coming into 2015, partially offset by increased service revenues. EBITDA margins improved to 21.8% in the first quarter of 2015, compared to 20.3% realized in the first quarter of 2014. Bidding and quoting activity for the offshore products segment continued during the first quarter of 2015, albeit at a slower pace. Backlog in the offshore products segment at March 31, 2015 decreased 3% to $474 million from $490 million at December 31, 2014 due to delays in award timing and contract negotiations resulting from the significant decline in commodity prices beginning in the fourth quarter of 2014. Backlog totaled $578 million at March 31, 2014. One major project was booked during the first quarter of 2015, consisting of pipeline connectors for a subsea project offshore Brazil. The offshore products segment EBITDA included $1.0 million of severance costs primarily related to cost reduction initiatives made in response to industry activity declines.

Financial Condition

The Company invested $38.3 million in capital expenditures (Capex) during the first quarter of 2015, the majority of which was carryover from 2014. Capex spending primarily related to the addition of completion services equipment deployed to service the U.S. shale plays along with ongoing facility expansions in the offshore products segment.

In the first quarter of 2015, the Company acquired Montgomery Machine Company, Inc. (MMC) for $33.9 million, net of cash acquired. MMC combines machining and proprietary cladding technology and services to the manufacture of high-specification components for the offshore capital equipment industry on a global basis. The operations of MMC have been included in the Company's offshore products segment since the date of the acquisition.

During the first quarter of 2015, the Company repurchased 1.83 million shares, or approximately 3.5% of its shares outstanding, under its authorized share repurchase program at an average price of $42.78 per share. Amounts remaining available under the current share repurchase authorization total $71.5 million which is scheduled to expire on September 1, 2015.

As of March 31, 2015, there was $199.7 million outstanding under the Company's revolving credit facility. Total availability as of March 31, 2015 was $356.5 million (net of standby letters of credit totaling $43.8 million).

Income Taxes

The Company recognized an effective tax rate of 40.6% in the first quarter of 2015. This compares to an effective tax rate of 34.3% in the first quarter of 2014. The higher effective tax rate in the first quarter of 2015 was primarily due to a $2.3 million deferred tax adjustment for certain non-deductible items.

Conference Call Information

The call is scheduled for Thursday, April 30, 2015 at 11:00 am EDT, is being webcast and can be accessed from the Company's website at http://www.oilstatesintl.com. Participants may also join the conference call by dialing (866) 813-5647 in the United States or by dialing +1 847 619-6249 internationally and using the passcode of 39478006. A replay of the conference call will be available one and a half hours after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode of 39478006.

About Oil States

Oil States International, Inc. is an energy services company with a leading market position as a manufacturer of products for deepwater production facilities and certain drilling equipment, as well as a provider of completion services and land drilling services to the oil and gas industry. Oil States is publicly traded on the New York Stock Exchange under the symbol "OIS".

For more information on the Company, please visit Oil States International's website at http://www.oilstatesintl.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included therein are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the energy service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2014 filed by Oil States with the Securities and Exchange Commission on February 23, 2015.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED
MARCH 31,
2015 2014
Revenues $ 337,358 $405,237
Costs and expenses:
Cost of sales and services 237,722 272,371
Selling, general and administrative expenses 35,605 41,409
Depreciation and amortization expense 32,579 30,787
Other operating (income) expense (2,308) 1,404
303,598 345,971
Operating income 33,760 59,266
Interest expense (1,708) (8,046)
Interest income 136 116
Other income 466 1,527
Income from continuing operations before income taxes 32,654 52,863
Income tax provision (13,252) (18,142)
Net income from continuing operations 19,402 34,721
Net income from discontinued operations, net of tax 166 36,795
Net income 19,568 71,516
Less: Net income attributable to noncontrolling interest -- 12
Net income attributable to Oil States International, Inc. $ 19,568 $ 71,504
Net income attributable to Oil States International, Inc.:
Continuing operations $ 19,402 $ 34,709
Discontinued operations 166 36,795
Net income attributable to Oil States International, Inc. $ 19,568 $ 71,504
Basic net income per share attributable to Oil States International, Inc. common stockholders from:
Continuing operations $ 0.38 $ 0.65
Discontinued operations -- 0.68
Net income $ 0.38 $ 1.33
Diluted net income per share attributable to Oil States International, Inc. common stockholders from:
Continuing operations $ 0.38 $ 0.64
Discontinued operations -- 0.68
Net income $ 0.38 $ 1.32
Weighted average number of common shares outstanding:
Basic 50,826 53,288
Diluted 50,936 53,588
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
MARCH 31, DECEMBER 31,
ASSETS 2015 2014
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 72,049 $ 53,263
Accounts receivable, net 377,132 497,124
Inventories, net 237,862 232,490
Prepaid expenses and other current assets 39,226 43,789
Total current assets 726,269 826,666
Property, plant, and equipment, net 659,605 649,846
Goodwill, net 265,295 252,201
Other intangible assets, net 64,128 52,935
Other noncurrent assets 30,091 27,964
Total assets $ 1,745,388 $ 1,809,612
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 79,519 $ 108,949
Accrued liabilities 60,811 96,130
Income taxes 10,881 9,195
Current portion of long-term debt and capitalized leases 523 530
Deferred revenue 46,923 48,948
Other current liabilities 13,268 7,660
Total current liabilities 211,925 271,412
Long-term debt and capitalized leases (1) 205,740 146,835
Deferred income taxes 40,287 33,913
Other noncurrent liabilities 19,597 16,795
Total liabilities 477,549 468,955
Stockholders' equity:
Oil States International, Inc. stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 61,490,615 shares and 60,940,734 shares issued, respectively, and 51,591,765 shares and 53,017,359 shares outstanding, respectively 615 610
Additional paid-in capital 691,852 685,232
Retained earnings 1,170,834 1,151,266
Accumulated other comprehensive loss (36,642) (22,100)
Common stock held in treasury at cost, 9,898,850 and 7,923,375 shares, respectively (558,820) (474,351)
Total Oil States International, Inc. stockholders' equity 1,267,839 1,340,657
Noncontrolling interest -- --
Total stockholders' equity 1,267,839 1,340,657
Total liabilities and stockholders' equity $ 1,745,388 $ 1,809,612
(1) As of March 31, 2015, the Company had approximately $356.5 million available under its revolving credit facility.
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
THREE MONTHS
ENDED MARCH 31,
2015 2014
Cash flows from operating activities:
Net income $ 19,568 $ 71,516
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations (166) (36,795)
Depreciation and amortization 32,579 30,787
Deferred income tax expense (benefit) 5,923 (6,261)
Tax impact of share-based payment arrangements 40 (1,660)
Provision for bad debt (617) 1,829
Gain on disposals of assets (313) (1,242)
Non-cash compensation charge 5,660 5,760
Amortization of deferred financing costs 195 823
Other, net (253) (58)
Changes in operating assets and liabilities, net of effect from acquired businesses:
Accounts receivable 117,900 (9,195)
Inventories (6,235) (11,766)
Accounts payable and accrued liabilities (65,124) (25,199)
Taxes payable 2,889 1,577
Other operating assets and liabilities, net 2,345 1,833
Net cash flows provided by continuing operating activities 114,391 21,949
Net cash flows provided by discontinued operating activities 260 83,362
Net cash flows provided by operating activities 114,651 105,311
Cash flows from investing activities:
Capital expenditures (38,282) (39,901)
Acquisitions of businesses, net of cash acquired (33,948) --
Proceeds from disposition of property, plant and equipment 437 1,980
Other, net 193 (386)
Net cash flows used in continuing investing activities (71,600) (38,307)
Net cash flows used in discontinued investing activities -- (63,295)
Net cash flows used in investing activities (71,600) (101,602)
Cash flows from financing activities:
Revolving credit borrowings, net 59,030 --
Debt and capital lease repayments (131) (129)
Issuance of common stock from share-based payment arrangements 1,008 3,346
Purchase of treasury stock (77,401) (141,043)
Tax impact of share-based payment arrangements (40) 1,660
Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock (6,084) (4,915)
Other, net 1 (1)
Net cash flows used in continuing financing activities (23,617) (141,082)
Net cash flows used in discontinued financing activities -- (1)
Net cash flows used in financing activities (23,617) (141,083)
Effect of exchange rate changes on cash (648) (7,059)
Net change in cash and cash equivalents 18,786 (144,433)
Cash and cash equivalents, beginning of period 53,263 599,306
Cash and cash equivalents, end of period $ 72,049 $ 454,873
Oil States International, Inc. and Subsidiaries
Segment Data
(in thousands)
(unaudited)
Three Months Ended March 31,
2015 2014
Revenues
Completion services $118,111 $146,461
Drilling services 23,678 46,564
Well site services 141,789 193,025
Offshore products 195,569 212,212
Total revenues $337,358 $405,237
EBITDA (A)
Completion services (1) $32,341 $50,123
Drilling services 4,186 12,966
Well site services 36,527 63,089
Offshore products (1) 42,634 43,136
Corporate and eliminations (2) (12,356) (14,657)
Total EBITDA $66,805 $91,568
Operating income / (loss)
Completion services (1) $12,468 $31,045
Drilling services (2,539) 5,795
Well site services 9,929 36,840
Offshore products (1) 36,542 37,348
Corporate and eliminations (2) (12,711) (14,922)
Total operating income $33,760 $59,266
Oil States International, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(unaudited)
Three Months Ended March 31,
2015 2014
Net income from continuing operations $19,402 $34,709
Income tax provision 13,252 18,142
Depreciation and amortization 32,579 30,787
Interest income (136) (116)
Interest expense 1,708 8,046
EBITDA (A) $66,805 $91,568
Adjustments to EBITDA (1, 2):
Non-recurring charges 2,095 1,376
Adjusted EBITDA (A) $68,900 $92,944

(1) Adjustments to EBITDA and operating income for the three months ended March 31, 2015 included severance and other related costs of $1.1 million related to the completion services business and $1.0 million related to the offshore products segment.

(2) Adjustments to EBITDA and operating loss for the three months ended March 31, 2014 included transaction costs of $1.4 million. These costs primarily related to activities associated with the spin-off of Civeo.

(A) The terms EBITDA and Adjusted EBITDA consist of net income from continuing operations plus interest, taxes, depreciation and amortization. EBITDA and Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA and Adjusted EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses EBITDA and Adjusted EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth a reconciliation of EBITDA and Adjusted EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

Oil States International, Inc. and Subsidiaries
Additional Quarterly Segment and Operating Data
(unaudited)
Three Months Ended March 31,
2015 2014
Supplemental operating data:
Offshore products backlog ($ in millions) $474.2 $578.2
Completion services job tickets 12,011 12,699
Average revenue per ticket ($ in thousands) $9.8 $11.5
Land drilling operating statistics:
Average rigs available 34 34
Utilization 44.1% 80.6%
Implied day rate ($ in thousands per day) $17.5 $18.9
Implied daily cash margin ($ in thousands per day) $3.5 $5.4

CONTACT: Company Contact: Lloyd A. Hajdik Oil States International, Inc. Senior Vice President, Chief Financial Officer and Treasurer 713-652-0582 Patricia Gil Oil States International, Inc. Investor Relations 713-470-4860

Source:Oil States International, Inc.