10-Q 1 q33101.txt CORE LABORATORIES N.V. 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ______________ Commission File Number 001-14273 CORE LABORATORIES N.V. (Exact name of registrant as specified in its charter) The Netherlands Not Applicable (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Herengracht 424 1017 BZ Amsterdam The Netherlands Not Applicable (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (31-20)420-3191 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- ------ The number of common shares of the Registrant, par value NLG 0.03 per share, outstanding at May 11, 2001 was 32,411,442. ================================================================================ CORE LABORATORIES N.V. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001 INDEX
Page Part I -- Financial Information Item 1 -- Financial Statements Consolidated Balance Sheets at March 31, 2001 and December 31, 2000......................... 1 Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2000................................................................ 2 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000................................................................ 3 Notes to Consolidated Financial Statements ................................................. 4 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................................................ 9 Item 3 -- Quantitative & Qualitative Disclosures of Market Risk................................. 12 Part II -- Other Information Item 1 -- Legal Proceedings..................................................................... 13 Item 2 -- Changes in Securities................................................................. 13 Item 3 -- Defaults Upon Senior Securities....................................................... 13 Item 4 -- Submission of Matters to a Vote of Security Holders .................................. 13 Item 5 -- Other Information..................................................................... 13 Item 6 -- Exhibits and Reports on Form 8-K...................................................... 13 Signature ....................................................................................... 14
CORE LABORATORIES N.V. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
March 31, December 31, 2001 2000 ---------- ---------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents................................................... $ 13,587 $ 12,918 Accounts receivable, less allowance for doubtful accounts of $9,014 and $9,067 in 2001 and 2000, respectively........................ 105,337 110,915 Inventories ................................................................ 35,337 34,067 Prepaid expenses and other.................................................. 9,776 7,053 Deferred tax asset.......................................................... 7,928 10,265 ---------- ---------- Total current assets.................................................... 171,965 175,218 PROPERTY, PLANT AND EQUIPMENT, net............................................... 84,404 83,338 INTANGIBLES AND GOODWILL, net.................................................... 147,629 147,918 OTHER LONG-TERM ASSETS........................................................... 3,391 4,130 ---------- ---------- Total assets....................................................... $ 407,389 $ 410,604 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt........................................ $ 667 $ 632 Current lease obligations................................................... 134 247 Accounts payable............................................................ 18,924 25,186 Other accrued expenses...................................................... 26,124 25,445 ---------- ---------- Total current liabilities............................................... 45,849 51,510 LONG-TERM DEBT .................................................................. 78,965 82,015 LONG-TERM LEASE OBLIGATIONS...................................................... 31 35 OTHER LONG-TERM LIABILITIES...................................................... 21,481 23,298 MINORITY INTEREST................................................................ 2,053 1,888 SHAREHOLDERS' EQUITY: Preference shares, NLG 0.03 par value; 3,000,000 shares authorized, no shares issued or outstanding......................................... -- -- Common shares, NLG 0.03 par value; 100,000,000 shares authorized, 32,360,552 and 32,208,364 issued and outstanding at March 31, 2001 and December 31, 2000, respectively................... 536 534 Additional paid-in capital.................................................. 183,958 182,695 Retained earnings........................................................... 74,516 68,629 ---------- ---------- Total shareholders' equity.............................................. 259,010 251,858 ---------- ---------- Total liabilities and shareholders' equity......................... $ 407,389 $ 410,604 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 1 CORE LABORATORIES N.V. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data)
Three Months Ended March 31, -------------------------------- 2001 2000 ------------- ------------ (Unaudited) SERVICES......................................................................... $ 70,305 $ 60,269 SALES............................................................................ 19,358 11,965 ------------- ------------ 89,663 72,234 OPERATING EXPENSES: Cost of services............................................................ 54,823 50,778 Cost of sales............................................................... 15,204 8,076 General and administrative expenses ........................................ 3,660 3,303 Depreciation and amortization............................................... 4,347 3,732 Goodwill amortization....................................................... 1,027 1,027 Other income, net........................................................... 469 (569) ------------- ------------ 79,530 66,347 INCOME BEFORE INTEREST EXPENSE AND INCOME TAX EXPENSE.............................................. 10,133 5,887 INTEREST EXPENSE................................................................. 1,957 2,050 ------------- ------------- INCOME BEFORE INCOME TAX EXPENSE................................................. 8,176 3,837 INCOME TAX EXPENSE............................................................... 2,289 1,151 ------------- ------------- NET INCOME....................................................................... $ 5,887 $ 2,686 ============= ============= PER SHARE INFORMATION: BASIC EARNINGS PER SHARE.................................................... $ 0.18 $ 0.09 ============= ============ WEIGHTED AVERAGE BASIC COMMON SHARES OUTSTANDING........................................................... 32,279,377 31,247,546 ============= ============= DILUTED EARNINGS PER SHARE.................................................. $ 0.18 $ 0.08 ============= ============= WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING........................................................... 33,352,438 32,652,538 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 2 CORE LABORATORIES N.V. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended March 31, --------------------------- 2001 2000 ----------- ----------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................. $ 5,887 $ 2,686 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................... 5,374 4,759 Gain on sale of fixed assets............................................ (15) (98) Changes in assets and liabilities: Decrease in accounts receivable......................................... 5,625 4,378 Increase in inventories................................................. (1,270) (6,414) Increase in prepaid expenses............................................ (2,723) (664) Decrease in accounts payable............................................ (6,326) (372) Increase in other accrued expenses..................................... 1,070 4,084 Decrease in net deferred tax asset...................................... 81 195 Decrease in other long-term liabilities................................. (166) (185) Other................................................................... (119) (384) ----------- ------------ Net cash provided by operating activities.......................... 7,418 7,985 ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures........................................................ (5,159) (7,532) Proceeds from sale of fixed assets.......................................... 22 750 Other ...................................................................... 15 (63) ----------- ----------- Net cash used in investing activities................................... (5,122) (6,845) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt.................................................. (3,068) (5,324) Borrowings under long-term debt............................................. 136 109 Capital lease obligation, net............................................... (88) (503) Exercise of stock options................................................... 1,422 1,038 Other....................................................................... (29) (74) ----------- ----------- Net cash used in financing activities................................... (1,627) (4,754) ----------- ----------- NET CHANGE IN CASH............................................................... 669 (3,614) CASH, beginning of period........................................................ 12,918 18,983 ----------- ---------- CASH, end of period.............................................................. $ 13,587 $ 15,369 =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 CORE LABORATORIES N.V. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of Core Laboratories and have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. Balance sheet information as of December 31, 2000 was derived from the 2000 annual audited financial statements. These financial statements should be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in our Form 10-K for the year ended December 31, 2000. Recent Pronouncements In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued and was subsequently amended by SFAS No. 137, which delayed its effective date. As a result, SFAS No. 133 is effective for fiscal years beginning after June 15, 2000, and establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). We do not enter into derivative instruments or buy and sell commodities. Accordingly, adoption of SFAS No. 133 did not have an impact on our financial position or operational results. The Emerging Issues Task Force ("EITF") issued EITF 00-10 which gives guidance on revenue recognition. EITF 00-10 requires that revenue be recognized on all amounts billed to a customer in a sale transaction related to shipping and handling. As a result of the application of this guidance in December 2000, we recognized shipping charges as revenues and an increase to cost of sales. Prior period financial statements reflect this change, which was less than 1% of revenues. 4 2. INVENTORIES Inventories consist primarily of manufactured goods, materials and supplies used for sales or services provided to customers. Inventories are stated at the lower of average or standard cost (including direct material, labor and overhead) or estimated net realizable value and are reflected net of valuation reserves of $1,196,000 at March 31, 2001 and December 31, 2000. Inventories consisted of the following (in thousands): March 31, March 31, 2001 2000 ----------------- ----------------- (Unaudited) Finished goods................ $ 27,667 $ 27,651 Parts and materials........... 4,200 4,126 Work in process............... 3,470 2,290 ----------------- ----------------- Total......... $ 35,337 $ 34,067 ================= ================= 3. INTANGIBLES AND GOODWILL Intangibles include patents, trademarks, service marks and trade names. Goodwill represents the excess of purchase price over the value of the net assets acquired in acquisitions accounted for as purchases. Intangibles and goodwill are charged to expense in equal amounts over their estimated useful lives. We believe that there have been no events or circumstances that warrant revision to the remaining useful lives or which affect the recoverability of intangibles and goodwill. The components of intangibles and goodwill are as follows:
Original Life March 31, December 31, in Years 2001 2000 --------- ------------ ------------ (Unaudited) (in thousands) Acquired trade secrets........................... 5 $ 165 $ 125 Acquired patents, trademarks and trade names..... 10-20 4,497 3,686 Acquired trade name.............................. 40 4,614 4,614 ------------ ------------ Total intangibles....................... 9,276 8,425 ------------ ------------ Goodwill......................................... 5-10 2,506 2,506 Goodwill......................................... 20 3,736 3,736 Goodwill......................................... 40 147,784 147,784 ------------ ------------ Total goodwill.......................... 154,026 154,026 ------------ ------------ Total intangibles and goodwill..... 163,302 162,451 Less - accumulated amortization.................. 15,673 14,533 ------------ ------------ Net intangibles and goodwill.. $ 147,629 $ 147,918 ============ ============
5 4. LONG-TERM DEBT Long-term debt is summarized in the following table (in thousands):
March 31, December 31, 2001 2000 ----------------- ----------------- (Unaudited) Credit Facility with a bank group: $100,000 revolving debt facilities................... $ 4,000 $ 7,000 Senior Notes..................... 75,000 75,000 Other indebtedness.................................... 632 647 ----------------- ----------------- Total debt................................... 79,632 82,647 Less - current maturities............................. 667 632 ----------------- ----------------- Total long-term debt......................... $ 78,965 $ 82,015 ================= =================
In July 1999, we entered into a $100 million Credit Facility which provides for (i) a committed revolving debt facility of $95 million and (ii) a Netherlands guilder denominated revolving debt facility with U.S. dollar equivalency of $5 million. At March 31, 2001, approximately $96 million was available for borrowing under the revolving debt facility. Loans under the Credit Facility bear interest at rates which range from LIBOR plus 1.25% to a maximum of LIBOR plus 1.75%. The interest rate in effect at March 31, 2001 was 6.48% and the average for 2001 was 7.13%. The revolving debt facilities require interest payments only, until maturity in June 2004. In July 1999, we issued $75 million in Senior Notes which bear an average interest rate of 8.16% and require annual principal payments beginning in July 2005 and continuing through July 2011. The terms of the Credit Facility and Senior Notes require us to meet certain financial covenants, including certain minimum equity and cash flow tests. We believe that we are in compliance with all such covenants contained in our credit agreements. All of our material subsidiaries are guarantors or co-borrowers under both credit agreements. 5. RESTRUCTURING CHARGES In the fourth quarter of 1999, we recorded a $7.0 million charge to cover the cost of exiting redundant facilities and restructuring certain of our operations. This charge affected each of our operating segments as follows: Reservoir Description - $2.8 million; Production Enhancement - $1.9 million; Reservoir Management - $2.3 million. We combined personnel and equipment from eight facilities into one Houston facility. No operations were discontinued. The move was completed in the second quarter of 2000. Related charges include severance for approximately 100 field and administrative employees, the accrual of future lease obligations and facility restoration costs and the write-off of redundant fixed assets and leasehold improvements. Substantially all of these employees were terminated as of June 30, 2000. Cash required for the costs incurred through March 31, 2001 of $3.9 million, excluding asset write-offs, was funded from operating activities. We anticipate that the remaining costs will also be funded through cash from operating activities. This charge is summarized in the following table: 6 Restructuring Charges (Dollars in Thousands)
Asset Lease Write- Obligations Severance Restoration offs(a) Other Total ----------- --------- ----------- ------- ------- ------- Total restructuring charges............. $ 2,983 $ 879 $ 786 $ 2,080 $ 308 $ 7,036 Less: Costs incurred through December 31, 2000.............. 1,955 879 683 2,080 308 5,905 ------- ------- ------- ------- ------- ------- Accrual remaining at December 31, 2000.. 1,028 - 103 - - 1,131 Less: Costs incurred through March 31, 2001................. 105 - - - - 105 ------- ------- ------- ------- ------- ------- Accrual remaining at March 31, 2001..... $ 923 $ - $ 103 $ - $ - $ 1,026 ======= ======= ======= ======= ======= =======
(a) The fixed assets and leasehold improvements related to the Houston consolidation were disposed of by the end of June 2000. The write-off approximates the carrying amount as these assets were abandoned or sold for salvage value. Depreciation expense was reduced by approximately $490 in 2000, and will be reduced by $333 in 2001 and $342 thereafter. Also included in this amount were $915 of working capital write-offs related to the restructuring of foreign operations. The asset write-offs attributable to each segment were as follows: Reservoir Description - $1,176; Production Enhancement - $346; Reservoir Management - $558. 6. SEGMENT REPORTING Our business units have been aggregated into three complementary segments which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields. o Reservoir Description: Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry. o Production Enhancement: Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects. o Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs. 7 Segment Analysis We manage our business segments separately due to the different technologies each segment utilizes and requires. Results of these segments are presented below using the same accounting policies as used to prepare the Consolidated Balance Sheets and Statements of Operations. We evaluate performance based on income or loss from operations before income tax, interest and other non-operating income (expense). Summarized financial information concerning our segments is shown in the following table (in thousands):
Three Months Ended March 31, 2001 2000 ----------------------------------------- Revenues (Unaudited) Reservoir Description.......$ 48,719 $ 44,963 Production Enhancement...... 29,624 18,759 Reservoir Management........ 11,320 8,512 --------------- ---------------- Consolidated..............$ 89,663 $ 72,234 =============== ================
Three Months Ended March 31, 2001 2000 ----------------------------------------- Income (loss) before interest and taxes (Unaudited) Reservoir Description....... $ 5,946 $ 3,448 Production Enhancement...... 4,912 4,189 Reservoir Management........ (676) (1,753) Corporate and Other (a)..... (49) 3 -------------- --------------- Consolidated.............. $ 10,133 $ 5,887 ============== ===============
a) "Corporate and Other" represents those items that are not directly related to a particular segment. 7. EARNINGS PER SHARE We present earnings per share in accordance with SFAS No. 128, "Earnings per Share" which requires dual presentation of both basic and diluted earnings per share on the Consolidated Statement of Operations. Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common share outstanding during the period. Diluted earnings per share reflects the net additional shares which would be issued if all dilutive stock options outstanding were exercised. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of earnings per share:
Three Months Ended March 31, 2001 2000 -------------------------- Weighted average basic common shares outstanding. 32,279,377 31,247,546 Effect of dilutive stock options (a)............. 1,073,061 1,404,992 ---------- ---------- Weighted average diluted common shares outstanding 33,352,438 32,652,538 ========== ==========
a) Options totaling 14,676 and 11,676 equivalent common shares were not included in the computation of weighted average diluted common shares for the three months ended March 31, 2001, and 2000, respectively, because the impact of these options was anti-dilutive. 8 CORE LABORATORIES N.V. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Our operations are subject to various risk and other factors including, but not limited to: o our ability to continue to develop or acquire new and useful technology. o the realization of anticipated synergies from acquired businesses and future acquisitions. o our dependence on the oil and gas industry, and the impact of commodity prices on the expenditure levels of our customers. o competition in our markets. o the risks and uncertainties attendant to adverse industry, political, economic and financial market conditions, including stock prices, government regulations, interest rates and credit availability. Core Laboratories was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description, production enhancement and reservoir management services to the oil and gas industry. These services are directed toward enabling our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. We have over 70 offices in more than 50 countries and have approximately 3,950 employees. Results of Operations Service revenues for the first quarter of 2001 increased $10.0 million, or 17% from the same period last year primarily through our Production Enhancement segment driven by improvements in the North American natural gas market as well as an increase in international activity. Cost of services expressed as a percentage of service revenue were 78% and 84% in the first quarter of 2001 and the same period last year, respectively. Sales revenues increased to $19.4 million in the first quarter of 2001 from $12.0 million in the first quarter of 2000, a 62% increase. The increase was due to higher demand for our well completion and stimulation technologies. The U.S. and Venezuela were markets with the largest increases. Cost of sales in the first quarter of 2001 were 79% of sales revenue as compared to 68% the same period last year. 9 General and administrative expenses are comprised of corporate management and centralized administrative services which benefit our operating subsidiaries. Although general and administrative expenses are generally more fixed in nature as a percentage of revenue, we did experience an increase of $0.4 million in 2001 which was largely attributable to growth in the number of people necessary to support increases in the scope of our operations. General and administrative expenses as a percentage of revenues remained below 5% for both periods. Depreciation and amortization expense for the first quarter of 2001 increased $0.6 million as compared to the corresponding period in 2000. This increase was due to additional capital investments, which include the new Houston facility. Amortization of goodwill in the first quarter of 2001 and 2000 was $1.0 million. The decrease in the effective income tax rate to 28% in the first quarter of 2001 from 30% in the same period in the prior year reflects the increase in international earnings taxed at rates lower than The Netherlands statutory rate. Segment Analysis (Dollars in thousands)
Three Months Ended March 31, 2001 2000 ----------------------------------------- Revenues (Unaudited) Reservoir Description.......$ 48,719 $ 44,963 Production Enhancement...... 29,624 18,759 Reservoir Management........ 11,320 8,512 --------------- ---------------- Consolidated..............$ 89,663 $ 72,234 =============== ================
Three Months Ended March 31, 2001 2000 ----------------------------------------- Income (loss) before interest and taxes (Unaudited) Reservoir Description....... $ 5,946 $ 3,448 Production Enhancement...... 4,912 4,189 Reservoir Management........ (676) (1,753) Corporate and Other (a)..... (49) 3 -------------- --------------- Consolidated.............. $ 10,133 $ 5,887 ============== ===============
a) "Corporate and Other" represents those items that are not directly related to a particular segment. Reservoir Description Revenues from the Reservoir Description segment increased $3.8 million in the first quarter of 2001. Increased international demand for our existing services and deepwater services, as well as the introduction of new technologies, bolstered revenue in this segment. Income before interest and taxes increased by $2.5 million due to higher revenues and improved margins of our petroleum service unit. 10 Production Enhancement Revenues from the Production Enhancement segment were $29.6 million in the first quarter of 2001 compared to $18.8 million in the same period in the prior year, an increase of 58%, due to increased demand for our well completion and stimulation technologies. Income before interest and taxes improved $0.7 million to $4.9 million, a 17% increase. Reservoir Management Revenues from the Reservoir Management segment in the first quarter of 2001 were $11.3 million, an increase of $2.8 million compared to the same period in the prior year due to increasing international activity levels of our clients. While we experienced a loss before interest and taxes of $0.7 million in the first quarter of 2001, this showed considerable improvement as compared to a loss of $1.8 million in the same period in the prior year. We anticipate continued improvement throughout 2001. Liquidity and Capital Resources We have historically financed our activities through cash flows from operations, bank credit facilities, equity financing and the issuance of debt. During the three-month period ending March 31, 2001, cash flows from operating activities were $7.4 million, a decrease of $0.6 million from the same period in 2000. At March 31, 2001, we had working capital of $126.1 million and a current ratio of 3.8 to 1.0, compared to working capital of $123.7 million and a current ratio of 3.4 to 1.0 at December 31, 2000. We are a Netherlands holding company and we conduct substantially all of our operations through subsidiaries. Consequently, our cash flow is dependent upon the ability of our subsidiaries to pay cash dividends or otherwise distribute or advance funds to us. Our financing activities used $1.6 million in the three-month period ending March 31, 2001, and $4.8 million in the same period in 2000 as we continued to invest new capital into the company. Our investing activities used $5.1 million in the three-month period ending March 31, 2001 compared to $6.8 million in the same period in 2000. Our ability to maintain and grow our operating income and cash flows is dependent upon continued investing activities. We believe our future cash flows from operations, supplemented by our borrowing capacity and issuances of additional equity should be sufficient to fund debt requirements, capital expenditures, working capital and future acquisitions. 11 CORE LABORATORIES N.V. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK We are exposed to market risk, which is the potential loss arising from adverse changes in market prices and rates. We do not enter, or intend to enter, into derivative financial instruments for trading or speculative purposes. We do not believe that our exposure to market risks, which are primarily related to interest rate changes and fluctuations in foreign exchange rates, are material. During 1999, we issued fixed rate Senior Notes denominated in U.S. dollars. The proceeds were used to pay off variable rate term loans. This significantly reduced our exposure to market risk. This section should be read in conjunction with "Note 4 - Long-Term Debt" of the Notes to Consolidated Financial Statements. 12 CORE LABORATORIES N.V. PART II -- OTHER INFORMATION Item 1. Legal Proceedings. We are from time to time subject to legal proceedings and claims that arise in the ordinary course of business. We believe that the outcome of current legal actions will not have a material adverse effect upon our consolidated financial position or results of operations. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits None (b) Reports on Form 8-K None 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Core Laboratories N.V., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CORE LABORATORIES N.V. by: Core Laboratories International B.V. Dated: May 14,2001 By: /s/ Richard L. Bergmark ------------------------------------- Richard L. Bergmark Chief Financial Officer 14