HYDL Hydril (MM)

Hydril Announces Third Quarter 2003 Earnings HOUSTON, Oct. 28 /PRNewswire-FirstCall/ -- Hydril today reported earnings for the quarter ended September 30, 2003 of $0.34 per diluted share, compared to $0.27 in the second quarter, and up from $0.30 for the prior-year quarter. The current quarter included a research and experimentation income tax credit which, net of expenses, increased earnings by $0.15 per share. On a sequential basis, revenue of $50.2 million was down 8%, operating income of $6.2 million was down 36%, and net income of $7.7 million, which includes the tax credit, was up 25%. Compared to the third quarter of 2002, revenue was down 19%, operating income was down 51%, and net income, which includes the tax credit, was up 11%. Premium Connection Segment Revenue for Hydril's premium connection segment decreased 11% sequentially to $24.8 million and operating income decreased 25% to $5.4 million. The decline in revenue and operating income was due to lower demand in both our North American and international markets which resulted in reduced plant utilization. In the U.S., while the deep formation rig count increased sequentially, this increase was not reflected in improved demand from our distributors as de-stocking continued throughout the quarter. In our international markets, the downturn was deeper than originally expected, particularly in markets impacted by political and civil unrest. Near the end of the third quarter, customer inquiries and orders increased for both our domestic and international markets. The recent bookings trend, and our expectation that the U.S. deep formation rig count will continue gradual improvement through year-end, should drive our premium connection revenue and operating income up in the fourth quarter to a range similar to our second quarter of this year. Pressure Control Segment Revenue for Hydril's pressure control segment decreased 4% sequentially to $25.4 million and operating income decreased 23% to $4.5 million. The decline in revenue was primarily due to lower capital equipment sales, resulting from customer initiated changes that shifted revenue expected in the third quarter into the fourth quarter. The operating income decline resulted from both lower capital equipment revenue and lower-margin projects, compared to higher margins on some specific capital equipment projects in the second quarter. The combination of good commodity prices and a gradually increasing rig count should continue to support strong aftermarket sales. Consequently, we expect our pressure control fourth quarter revenue and operating income to be slightly better than the third quarter. Other During the quarter we completed a research and experimentation tax credit study and as a result recorded a $3.7 million credit to our income tax provision. The $.4 million cost of the study is included in our corporate SG&A expense. The credit covered qualified research and experimentation spending for the ten-year period of 1992 through 2001. Business Drivers As more fully described on our website at http://www.hydril.com/ on the "Business Drivers" page, our principal business drivers are: (1) the U.S. rig count for rigs drilling at targets deeper than 15,000 feet, (2) the U.S. deepwater rig count, measured as rigs under contract, drilling in greater than 1,500 feet of water, (3) the worldwide offshore rig count, and (4) the total U.S. rig count. Conference Call Hydril's conference call to discuss third quarter financial results is scheduled for Wednesday, October 29, 2003 at 10:30 a.m. EST, (9:30 a.m. CST). For further information on the call or the webcast, please visit the company's website at http://www.hydril.com/ or see the company's press release announcing the earnings conference call dated October 14, 2003. 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 fourth quarter results. These statements relate to future events and the company's future financial performance, including the company's business strategy, and involve known and unknown risks and uncertainties. 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 June 30, 2003 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 remain on the leading edge of technology in its products and maintain and increase its market share, the impact of international and domestic trade laws, the loss of or change to distribution methods of premium connections in the U.S. and Canada, 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 Nine Months Ended September 30, September 30, (unaudited) (unaudited) (unaudited) (unaudited) 2003 2002 2003 2002 Revenue Premium Connection $ 24,836 $ 32,816 $ 84,338 $ 96,417 Pressure Control Aftermarket 14,424 13,348 42,046 38,598 Capital Equipment 10,983 15,969 35,748 49,241 Subtotal Pressure Control 25,407 29,317 77,794 87,839 Total Revenue 50,243 62,133 162,132 184,256 Total Gross Profit 18,799 23,627 62,708 68,348 Gross Margin 37% 38% 39% 37% Selling, General, and Admin. Expenses 12,632 11,090 36,525 34,269 Operating Income (Loss) Premium Connection 5,444 9,926 20,880 27,366 Pressure Control 4,471 5,372 15,535 15,693 Corporate Administration (3,748) (2,761) (10,232) (8,980) Total Operating Income 6,167 12,537 26,183 34,079 Operating Margin 12% 20% 16% 18% Interest Expense --- (2,035) (1,101) (4,269) Interest Income 126 328 602 1,158 Other Income/(Expense) (106) (71) (74) (141) Income Before Income Taxes 6,187 10,759 25,610 30,827 Provision (Benefit) for Income Taxes (1,539) 3,820 5,258 10,944 Net Income $ 7,726 $ 6,939 $ 20,352 $ 19,883 Net Income Per Share: Basic $ 0.34 $ 0.31 $ 0.90 $ 0.89 Diluted $ 0.34 $ 0.30 $ 0.89 $ 0.87 Weighted Average Shares Outstanding: Basic 22,765,373 22,423,891 22,680,760 22,381,720 Diluted 23,043,844 22,910,796 22,985,192 22,834,778 Depreciation Premium Connection $ 1,853 $ 1,679 $ 5,444 $ 4,902 Pressure Control 695 632 2,057 1,725 Corporate Administration 440 444 1,301 1,305 Total Depreciation 2,988 2,755 8,802 7,932 Capital Expenditures 1,443 3,596 5,358 15,240 Pressure Control Backlog Capital Equipment $ 17,046 $ 40,506 HYDRIL COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands) September 30, December 31, 2003 2002 (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 43,333 $ 61,590 Investments 10,426 7,899 Total receivables 40,000 40,618 Total inventories 37,991 41,484 Other current assets 13,982 13,015 Total current assets 145,732 164,606 LONG-TERM ASSETS: Property, net 104,869 107,031 Other long-term assets 7,000 6,571 Total long-term assets 111,869 113,602 TOTAL $257,601 $278,208 CURRENT LIABILITIES: Accounts payable $ 13,007 $ 13,723 Accrued liabilities and other current liabilities 20,758 30,400 Current portion of long-term debt and capital leases --- 30,000 Total current liabilities 33,765 74,123 LONG-TERM LIABILITIES: Post retirement, pension benefits and other 13,258 16,948 Total long-term liabilities 13,258 16,948 STOCKHOLDERS' EQUITY: Total stockholders' equity 210,578 187,137 TOTAL $257,601 $278,208 DATASOURCE: Hydril Company CONTACT: Sue Nutt, Investor Relations of Hydril Company, +1-281-985-3493 Web site: http://www.hydril.com/

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