SOURCE: Hydril

January 30, 2006 05:15 ET

Hydril Announces Fourth Quarter 2005 Earnings per Share

HOUSTON, TX -- (MARKET WIRE) -- January 30, 2006 -- Hydril (NASDAQ: HYDL) reported earnings for the fourth quarter ended December 31, 2005 of $0.88 per diluted share, up 9% sequentially from $0.81 reported in the third quarter of 2005, and up 38% from $0.64 reported for the fourth quarter of 2004. The third quarter 2005 included a net gain on the sale of surplus real estate which increased after-tax earnings by $0.06 per diluted share.

On a sequential basis, fourth quarter revenue of $113.3 million was up 22%, operating income of $30.7 million was up 13%, and net income of $21.4 million was up 9%. Compared to the fourth quarter of 2004, revenue increased 31%, operating income increased 35%, and net income increased 41%.

For the year-ended December 31, 2005, earnings per diluted share was $3.05, up 54% when compared to $1.98 per diluted share in 2004. For the year, revenue of $376.7 million was up 32% from the prior year, operating income of $105.0 million was up 58%, and net income of $73.2 million was up 58%.

Chris Seaver, President and CEO, commented, "Sustained growth in deep formation drilling and demand for deepwater rigs propelled Hydril to its second consecutive year of significantly higher revenue and earnings. Strong demand for our premium connection products resulted in that segment generating nearly two-thirds, $246 million, of Hydril's 2005 revenue. The backlog of capital equipment for our pressure control business began a sharp upturn in the third quarter of 2005 resulting in a backlog of $157 million at year-end. The financial impact of these capital equipment orders should be realized over the next three years."

Premium Connection Segment

Fourth quarter revenue for Hydril's premium connection segment increased 16% sequentially to $73.1 million and operating income increased 4% to $23.8 million. These increases were primarily driven by increasing demand for our products in domestic markets and higher pipe sales for international markets. Operating margin for the fourth quarter was 33%, down from 37% for the third quarter due to increased lower-margin pipe revenue, product mix, and slightly higher costs of manufacturing.

Pressure Control Segment

Sequentially, fourth quarter revenue for the pressure control segment increased 34% to $40.2 million and operating income increased 32% to $11.4 million. Aftermarket revenue increased 30% sequentially to $20.9 million and capital equipment revenue increased 38% to $19.3 million. The increase in aftermarket revenue was due in part to the recovery efforts of drilling contractors from the impact of hurricane activity in the Gulf of Mexico. The increase in capital equipment revenue resulted from progress associated with project orders for deepwater and jack-up blowout prevention systems, which are recorded on a percentage-of-completion accounting basis.

At the end of the quarter, the capital equipment backlog reached $157 million up from $61 million at September 30, 2005, and up from $15 million at December 31, 2004. Deliveries for this backlog will begin in the first quarter of 2006 and continue into mid-year 2008.

Market Indicators

As more fully described on our website at www.hydril.com on the "Market Indicators" page, our principal indicators are: (1) the U.S. rig count for rigs drilling at targets deeper than 15,000 feet, (2) Gulf of Mexico rigs under contract, (3) the international rig count, (4) the worldwide offshore rig count, and (5) the total U.S. rig count.

Conference Call

Hydril's conference call to discuss fourth quarter financial results is scheduled for Monday, January 30, 2006 at 1:00 p.m. EST (12:00 p.m. CST; 10:00 a.m. PST) and is accessible by dialing (800) 657-1269 (domestic) or (973) 409-9256 (international) and referencing passcode # 6898705. 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 January 19, 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 September 30, 2005 filed with the Securities and Exchange Commission, include but are not limited to 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 impact of geo-political and other events affecting international markets and trade, Hydril's ability to successfully develop new technologies and products and maintain and increase its market share, the impact of international and domestic trade laws, the change to distribution methods of premium connections, overcapacity in the pressure control industry, and high fixed costs that could affect the pricing of Hydril's products. 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.

HYDRIL COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts)

                            --------------------------------------------
                                        Three Months Ended
                                           (unaudited)
                            --------------------------------------------
                               Dec. 31,       Sept. 30,       Dec. 31,
                                 2005            2005           2004
                            -------------- -------------- --------------

Revenue
  Premium
   Connection                $     73,130   $     62,928   $     58,389
  Pressure Control
      Aftermarket            $     20,890         16,094         14,995
      Capital Equipment            19,306         13,952         13,140
                            -------------- -------------- --------------
        Subtotal Pressure
         Control                   40,196         30,046         28,135

Total Revenue                     113,326         92,974         86,524

Total Gross Profit                 46,407         41,284         36,916
Gross Margin                           41%            44%            43%

Selling, General,
 and Admin.
 Expenses                          15,722         14,109         14,103
                            -------------- -------------- --------------
Operating Income (Loss)
   Premium Connection              23,784         22,974         20,460
   Pressure Control                11,375          8,628          6,253
   Corporate
    Administration                 (4,474)        (4,427)        (3,900)
                            -------------- -------------- --------------
Total Operating
 Income                            30,685         27,175         22,813
Operating Margin                       27%            29%            26%

Interest Income                     1,337            959            466
Other Income/(Expense)               (341)         1,318           (261)
                            -------------- -------------- --------------

Income Before
 Income Taxes                      31,681         29,452         23,018
Provision for
 Income Taxes                      10,311          9,840          7,869
                            -------------- -------------- --------------
Net Income                   $     21,370   $     19,612   $     15,149

Net Income
 Per Share:
  Basic                      $       0.90   $       0.83   $       0.65
  Diluted                    $       0.88   $       0.81   $       0.64

Weighted Average
 Shares
 Outstanding:
  Basic                        23,630,944     23,550,685     23,191,513
  Diluted                      24,155,879     24,121,067     23,765,644

Depreciation
 and Amortization
   Premium Connection        $      2,287   $      2,181   $      2,068
   Pressure Control                   804            797            746
   Corporate
    Administration                    488            490            479
                            -------------- -------------- --------------
Total Depreciation
 and Amortization                   3,579          3,468          3,293


Capital
 Expenditures                       6,454          3,926          5,965


Pressure
 Control Backlog
  Capital Equipment          $    156,718   $     61,164   $     14,576




                             -------------------------------
                                    Twelve Months Ended
                                        (unaudited)
                             -------------------------------
                                          Dec. 31,
                                   2005           2004
                             -------------- --------------
Revenue
  Premium
   Connection                 $    246,470   $    184,782
  Pressure Control
      Aftermarket                   73,216         61,204
      Capital Equipment             57,038         39,367
                             -------------- --------------
        Subtotal Pressure
         Control                   130,254        100,571

Total Revenue                      376,724        285,353

Total Gross Profit                 163,563        118,413
Gross Margin                            43%            41%

Selling, General,
 and Admin.
 Expenses                           58,607         52,007
                             -------------- --------------
Operating Income (Loss)
   Premium Connection               85,054         60,899
   Pressure Control                 37,381         20,971
   Corporate
    Administration                 (17,479)       (15,464)
                             -------------- --------------
Total Operating
 Income                            104,956         66,406
Operating Margin                        28%            23%

Interest Income                      3,900          1,113
Other Income/(Expense)                 724           (335)
                             -------------- --------------

Income Before
 Income Taxes                      109,580         67,184
Provision for
 Income Taxes                       36,337         20,697
                             -------------- --------------
Net Income                    $     73,243   $     46,487

Net Income
 Per Share:
  Basic                       $       3.12   $       2.02
  Diluted                     $       3.05   $       1.98

Weighted Average
 Shares
 Outstanding:
  Basic                         23,500,620     22,996,401
  Diluted                       24,019,273     23,432,493

Depreciation
 and Amortization
   Premium Connection         $      8,587   $      7,815
   Pressure Control                  3,116          2,920
   Corporate
    Administration                   1,984          1,902
                             -------------- --------------
Total Depreciation
 and Amortization                   13,687         12,637


Capital
 Expenditures                       17,144         12,356


Pressure
 Control Backlog
  Capital Equipment

HYDRIL COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
                                               December 31,    December 31,
                                                   2005            2004
                                                ---------       ---------
                                               (unaudited)
                                                ---------       ---------
CURRENT ASSETS:
   Cash and cash equivalents                    $  65,145       $  51,733
   Investments                                    108,084          69,365
   Total receivables                               78,204          62,441
   Total inventories                               57,646          34,820
   Deferred tax asset                              11,390           8,794
   Other current assets                             3,669           3,422
                                                ---------       ---------
                Total current assets              324,138         230,575
                                                ---------       ---------

LONG-TERM ASSETS:
   Property, net                                  105,138         102,368
   Other long-term assets                          21,286          10,703
                                                ---------       ---------
                Total long-term assets            126,424         113,071
                                                ---------       ---------
TOTAL                                           $ 450,562       $ 343,646
                                                =========       =========


CURRENT LIABILITIES:
   Accounts payable                             $  23,443       $  23,292
   Accrued liabilities and other current
    liabilities                                    39,934          31,061
                                                ---------       ---------
              Total current liabilities            63,377          54,353
                                                ---------       ---------

LONG-TERM LIABILITIES:
   Deferred tax liability and other tax
    obligations                                    12,143           2,974
   Post-retirement, pension benefits and other     14,207          11,536
                                                ---------       ---------
             Total long-term liabilities           26,350          14,510
                                                ---------       ---------

STOCKHOLDERS' EQUITY:
            Total stockholders' equity            360,835         274,783
                                                ---------       ---------
TOTAL                                           $ 450,562       $ 343,646
                                                =========       =========


Contact Information

  • Contact:
    Sue Nutt
    Manager, Investor Relations & Corporate Communications
    (281) 985-3532