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Press release from GlobeNewswire (a Nasdaq OMX company)

Oil States Announces First Quarter Earnings

Wednesday, April 24, 2013

Oil States Announces First Quarter Earnings

13:16 EDT Wednesday, April 24, 2013

HOUSTON, April 24, 2013 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the quarter ended March 31, 2013 of $102.2 million, or $1.85 per diluted share, which included an after-tax gain of $0.05 per diluted share related to the reversal of an estimated earnout liability associated with a U.S. based acquisition. These results compare to net income of $135.1 million, or $2.43 per diluted share, in the first quarter of 2012, which included a gain of $0.23 per diluted share after-tax from a favorable contract settlement.

The Company generated revenues of $1.1 billion and EBITDA of $228.1 million during the first quarter of 2013, which included a pre-tax gain of $4.0 million related to the liability reversal mentioned above. This compared to revenues of $1.1 billion and EBITDA of $256.7 million in the first quarter of 2012, which included a pre-tax benefit of $17.9 million related to a favorable contract settlement in its U.S. accommodations business (EBITDA(A) defined as net income plus interest, taxes, depreciation and amortization). Consolidated operating income totaled $161.0 million in the current quarter, down from $204.2 million in the first quarter of 2012. Excluding the gains noted above for both the first quarter of 2012 and 2013, EBITDA would have decreased year-over-year by 6% as a result of lower U.S. drilling and completion activity coupled with lower OCTG prices and margins partially offset by organic growth initiatives in the accommodations business, contributions from the Piper Valves and Tempress acquisitions and an increase in drilling and subsea product sales within the offshore products business.

Cindy B. Taylor, Oil States' President and Chief Executive Officer stated, "We were able to report improved earnings on a sequential basis despite lackluster activity during the first quarter of 2013 in our U.S. operations related to onshore drilling and completion activity. We benefited from seasonally stronger Canadian accommodations activity and contributions from the Piper Valves and Tempress acquisitions that closed in 2012."

"We recently announced the construction of The MAC Boggabri Village, our tenth village in Australia, and the opening of Anzac Lodge, our seventh major lodge in the Canadian oil sands region. Investments in both of these facilities are supported by take-or-pay contracts and address our customers' accommodations needs in the metallurgical coal region of Australia and the in-situ oil sands region of Canada."

The Company recognized an effective tax rate of 27.8% in the first quarter of 2013 compared to 28.2% in the first quarter of 2012. The lower effective tax rate in the first quarter of 2013 was primarily due to greater foreign earnings as a percentage of total earnings. Our foreign earnings are taxed at a lower rate than our domestic earnings. The Company invested $107.4 million in capital expenditures during the first quarter of 2013 primarily related to the ongoing expansion of its accommodations business in Canada, Australia and the U.S. in addition to incremental proprietary completion services equipment deployed to service the active U.S. shale plays.

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from the first quarter of 2013 to the results from the first quarter of 2012.)

Accommodations

Accommodations generated revenues of $296.7 million and EBITDA of $136.0 million for the first quarter of 2013 compared to revenues of $301.8 million and EBITDA of $148.7 million in the first quarter of 2012. Results for the first quarter of 2013 in the U.S. included $4.0 million of EBITDA related to the reversal of an estimated earnout liability associated with contingent acquisition consideration, and the first quarter of 2012 included $17.9 million of EBITDA related to a U.S. contract settlement.  Excluding these gains, the accommodations segment's revenues and EBITDA increased 5% and 1% year-over-year, respectively, primarily due to a 13% year-over-year organic increase in average available lodge and village rooms partially offset by occupancy and utilization declines in Australia and the U.S.  Lower occupancy levels at certain Australian villages that began in the third quarter of 2012 due to specific customer mine closures continued to negatively impact our Australian accommodations results. In the U.S., utilization and pricing for our U.S. accommodations were negatively impacted by the stagnant U.S. drilling rig count and increased industry capacity.

Well Site Services

Well site services generated revenues of $177.6 million and EBITDA of $54.0 million in the first quarter of 2013 compared to revenues and EBITDA of $183.0 million and $59.0 million, respectively, in the first quarter of 2012. Revenues and EBITDA decreased 3% and 9% year-over-year, respectively, primarily due to the 12% reduction in U.S. drilling and completion activity, partially offset by contributions from the Tempress acquisition completed in December 2012. Excluding the impact of Tempress, service tickets in our completion services business decreased 7% year-over-year while revenue per ticket increased 6% year-over-year due to strong demand for our higher specification completion equipment and services. Completion services activity was negatively impacted by lower activity levels in most operating regions due to the lower U.S. drilling and completion activity partially offset by increased activity in the Rockies and Bakken regions.

Offshore Products

Offshore products generated revenues and EBITDA of $201.3 million and $35.8 million in the first quarter of 2013 compared to revenues and EBITDA of $185.7 million and $36.1 million in the first quarter of 2012. Revenues increased 8% year-over-year due to contributions from Piper Valves which was acquired in July 2012 in addition to an increase in drilling and subsea product sales; however, EBITDA decreased marginally year-over-year primarily due to product mix.  Backlog totaled $564 million at March 31, 2013 compared to $561 million reported at December 31, 2012 and $529 million reported at March 31, 2012.  Backlog additions during the quarter included large subsea pipeline equipment orders for Brazil and West Africa.

Tubular Services

Tubular services generated revenues of $393.9 million and EBITDA of $15.9 million during the first quarter of 2013 compared to revenues of $428.5 million and EBITDA of $23.5 million in the first quarter of 2012.  Despite the 1% year-over-year increase in tons shipped, revenues and EBITDA decreased 8% and 33% year-over-year, respectively, primarily due to the 12% decrease in U.S. drilling activity, sales mix and reduced mill pricing.  Gross margin as a percent of revenues in the first quarter of 2013 decreased to 5.1% from 6.3% in the first quarter of 2012 primarily due to timing of shipments for key customers and market pressure on margins. The Company's OCTG inventory declined 6% sequentially to $421.7 million at March 31, 2013.

Oil States International, Inc. is a diversified oilfield services company and a leading integrated provider of remote site accommodations with prominent market positions in the Canadian oil sands and the Australian natural resource regions. Oil States is also a leading manufacturer of products for deepwater production facilities and subsea pipelines as well as a provider of completion services, oil country tubular goods distribution 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.

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 oilfield service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2012 filed by Oil States with the SEC on February 20, 2013.

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
     
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
     
  THREE MONTHS ENDED
  MARCH 31,
  2013 2012
     
     
Revenues  $1,069,440 $1,098,992
     
Costs and expenses:     
 Cost of sales and services  792,341 795,797
 Selling, general and administrative expenses  54,888 47,739
 Depreciation and amortization expense  66,915 50,665
 Other operating (income) expense  (5,691) 544
  908,453 894,745
Operating income  160,987 204,247
     
Interest expense, net of capitalized interest  (20,090) (17,944)
Interest income  563 297
Equity in earnings (loss) of unconsolidated affiliates  (707) 420
Other income  1,270 1,735
 Income before income taxes  142,023 188,755
Income tax provision  (39,439) (53,283)
Net income  102,584 135,472
 Less: Net income attributable to noncontrolling interest  395 407
Net income attributable to Oil States International, Inc.  $102,189 $135,065
     
Net income per share attributable to Oil States International, Inc. common stockholders:    
 Basic  $1.86 $2.63
 Diluted  $1.85 $2.43
     
Weighted average number of common shares outstanding:    
 Basic  54,808 51,430
 Diluted  55,373 55,557
 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
     
CONSOLIDATED BALANCE SHEETS
(In Thousands)
     
     
  MARCH 31, DECEMBER 31,
ASSETS 2013 2012
  (UNAUDITED)  
     
Current assets:    
 Cash and cash equivalents  $325,969 $253,172
 Accounts receivable, net  795,355 832,785
 Inventories, net  680,494 701,496
 Prepaid expenses and other current assets  24,408 38,639
 Total current assets  1,826,226 1,826,092
     
Property, plant, and equipment, net  1,885,144 1,852,126
Goodwill, net  521,426 520,818
Other intangible assets, net  142,525 146,103
Other noncurrent assets  93,699 94,823
 Total assets  $4,469,020 $4,439,962
     
 LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities:    
 Accounts payable  $272,303 $279,933
 Accrued liabilities  96,643 107,906
 Income taxes  27,257 29,588
 Current portion of long-term debt and capitalized leases  30,245 30,480
 Deferred revenue  71,540 66,311
 Other current liabilities  8,394 4,314
 Total current liabilities  506,382 518,532
     
 Long-term debt and capitalized leases (1)  1,241,663 1,279,805
 Deferred income taxes  119,913 129,235
 Other noncurrent liabilities  45,842 46,590
 Total liabilities  1,913,800 1,974,162
     
Stockholders' equity:    
 Oil States International, Inc. stockholders' equity:    
 Common stock, $.01 par value, 200,000,000 shares authorized, 58,799,583 shares and 58,488,299 shares issued, respectively, and 54,961,645 shares and 54,695,473 shares outstanding, respectively  588 585
 Additional paid-in capital  599,171 586,070
 Retained earnings  2,001,384 1,899,195
 Accumulated other comprehensive income  84,968 107,097
 Common stock held in treasury at cost, 3,837,938 and 3,792,826 shares, respectively  (132,135) (128,542)
 Total Oil States International, Inc. stockholders' equity  2,553,976 2,464,405
Noncontrolling interest  1,244 1,395
 Total stockholders' equity  2,555,220 2,465,800
 Total liabilities and stockholders' equity  $4,469,020 $4,439,962
     
(1) As of March 31, 2013, the Company had approximately $1.0 billion available under its credit facilities.
 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
     
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
     
  THREE MONTHS
  ENDED MARCH 31,
  2013 2012
     
Cash flows from operating activities:    
Net income  $102,584 $135,472
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  66,915 50,665
Deferred income tax provision  (8,977) 1,727
Excess tax benefits from share-based payment arrangements  (3,322) (5,175)
Gains on disposals of assets  (177) (1,326)
Non-cash compensation charge  6,285 4,399
Accretion of debt discount  ---- 2,035
Amortization of deferred financing costs  2,019 1,800
Other, net  (3,162) (18)
Changes in operating assets and liabilities, net of effect from acquired businesses:    
Accounts receivable  29,000 (105,007)
Inventories  17,824 (71,062)
Accounts payable and accrued liabilities  (16,245) 21,445
Taxes payable  21,155 33,731
Other current assets and liabilities, net  4,721 (1,469)
Net cash flows provided by operating activities  218,620 67,217
     
Cash flows from investing activities:    
Capital expenditures, including capitalized interest  (107,397) (101,402)
Proceeds from disposition of property, plant and equipment  2,075 1,636
Other, net  108 (1,189)
Net cash flows used in investing activities  (105,214) (100,955)
     
Cash flows from financing activities:    
Revolving credit borrowings and (repayments), net  (29,219) 29,941
Term loan repayments  (7,526) (7,526)
Debt and capital lease repayments  (110) (2,183)
Issuance of common stock from share-based payment arrangements  3,498 6,775
Excess tax benefits from share-based payment arrangements  3,322 5,175
Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock  (3,593) (3,410)
Other, net  (200) (15)
Net cash flows provided by (used in) financing activities  (33,828) 28,757
     
Effect of exchange rate changes on cash  (6,770) 3,966
Net change in cash and cash equivalents from continuing operations  72,808 (1,015)
Net cash used in discontinued operations – operating activities  (11) (55)
Cash and cash equivalents, beginning of period  253,172 71,721
Cash and cash equivalents, end of period  $325,969 $70,651
 
Oil States International, Inc.
Segment Data
(in thousands)
(unaudited)
     
  Three Months Ended March 31,
  2013 2012
     
 Revenues     
 Completion services  $137,366 $135,554
 Drilling services   40,203  47,407
     
 Well site services   177,569  182,961
 Accommodations (1)   296,667  301,820
 Offshore products   201,290  185,720
 Tubular services   393,914  428,491
 Total revenues  $1,069,440 $1,098,992
     
 EBITDA (A)     
 Completion services  $44,022 $46,286
 Drilling services   9,990  12,753
     
 Well site services   54,012  59,039
 Accommodations (1)   136,026  148,677
 Offshore products   35,762  36,145
 Tubular services   15,865  23,538
 Corporate and eliminations   (13,595)  (10,739)
 Total EBITDA  $228,070 $256,660
     
 Operating income / (loss)     
 Completion services  $28,659 $33,794
 Drilling services   4,080  7,459
     
 Well site services   32,739  41,253
 Accommodations (1)   94,906  119,025
 Offshore products   32,136  32,501
 Tubular services   15,035  22,421
 Corporate and eliminations   (13,829)  (10,953)
 Total operating income  $160,987 $204,247
     
(1) The revenues of our accommodations segment for the three months ended March 31, 2012 include $18.3 million related to a favorable contract settlement in the U.S. accommodations business. The EBITDA and operating income of our accommodations segment for the three months ended March 31, 2012 includes a pre-tax benefit of $17.9 million related to the settlement. The EBITDA and operating income of our accommodations segment for the three months ended March 31, 2013 includes a pre-tax benefit of $4.0 million related to the reduction of an estimated earnout liability.    
     
 
Oil States International, Inc.
Additional Quarterly Segment and Operating Data
(unaudited)
     
  Three Months Ended March 31,
  2013 2012
     
 Supplemental operating data     
 Lodge/village revenues ($ in thousands)  $213,728 $196,773
 Other accommodations revenues ($ in thousands) (1)   82,939  105,047
 Total accommodations revenues ($ in thousands)  $296,667 $301,820
     
 Average available lodge/village rooms   20,009  17,634
 Lodge/village revenues per available room  $119 $123
     
 Offshore products backlog ($ in millions)  $564.4 $529.3
     
 Completion services job tickets   12,300  12,509
 Average revenue per ticket ($ in thousands)  $11.2 $10.8
     
 Tubular services operating data     
 Shipments (tons in thousands)  207.9 205.4
 Quarter end inventory ($ in millions)  $421.7 $473.1
     
 Land drilling operating statistics     
 Average rigs available  33 33
 Utilization  72.4% 87.7%
 Implied day rate ($ in thousands per day)  $18.5 $17.8
 Implied daily cash margin ($ in thousands per day)  $4.9 $5.0
     
(1) Includes contract settlement revenue for the quarter ended March 31, 2012.    
     
(A) The term EBITDA consists of net income plus interest, taxes, depreciation and amortization. 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 may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding our 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 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 following table sets forth a reconciliation of EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.
 
Oil States International, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(unaudited)
     
  Three Months Ended March 31,
  2013 2012
     
 Net income attributable to Oil States  $102,189 $135,065
 Income tax provision   39,439  53,283
 Depreciation and amortization   66,915  50,665
 Interest income   (563)  (297)
 Interest expense   20,090  17,944
 EBITDA  $228,070 $256,660
CONTACT: Company Contact:
Bradley J. Dodson
Oil States International, Inc.
713-652-0582
Patricia Gil
Oil States International, Inc.
713-470-4860

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