10-Q 1 q310q.txt CORE LAB 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 September 30, 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 November 6, 2001 was 33,375,228. ================================================================================ CORE LABORATORIES N.V. INDEX
Page Part I -- Financial Information Item 1 -- Financial Statements Consolidated Balance Sheets at September 30, 2001 and December 31, 2000................... 1 Consolidated Statements of Operations for the Three Months ended September 30, 2001 and 2000.......................................................... 2 Consolidated Statements of Operations for the Nine Months ended September 30, 2001 and 2000.......................................................... 3 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2001 and 2000.......................................................... 4 Notes to Consolidated Financial Statements ............................................... 5 Item 2-- Management's Discussion and Analysis of Financial Condition and Results of Operations ...................................................................... 10 Item 3-- Quantitative & Qualitative Disclosures of Market Risk................................ 14 Part II -- Other Information Item 1-- Legal Proceedings.................................................................... 15 Item 2-- Changes in Securities................................................................ 15 Item 3-- Defaults Upon Senior Securities...................................................... 15 Item 4-- Submission of Matters to a Vote of Security Holders ................................. 15 Item 5-- Other Information.................................................................... 15 Item 6-- Exhibits and Reports on Form 8-K..................................................... 15 Signature ..................................................................................... 16
ii CORE LABORATORIES N.V. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
September 30, December 31, 2001 2000 ----------- ---------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents................................................... $ 13,308 $ 12,519 Accounts receivable, less allowance for doubtful accounts of $8,469 and $9,080 in 2001 and 2000, respectively............................ 113,508 113,214 Inventories ................................................................ 45,330 33,514 Prepaid expenses and other.................................................. 11,294 7,085 Deferred tax asset.......................................................... 7,941 10,220 ----------- ------------ Total current assets............................................................. 191,381 176,552 PROPERTY, PLANT AND EQUIPMENT, net............................................... 95,462 84,556 INTANGIBLES AND GOODWILL, net.................................................... 151,844 148,027 OTHER LONG-TERM ASSETS........................................................... 3,661 4,166 ----------- ----------- Total assets..................................................... $ 442,348 $ 413,301 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt........................................ $ 669 $ 733 Current lease obligations................................................... 51 247 Accounts payable............................................................ 17,275 25,931 Other accrued expenses...................................................... 27,098 28,355 ----------- ----------- Total current liabilities........................................................ 45,093 55,266 LONG-TERM DEBT .................................................................. 97,688 83,005 LONG-TERM LEASE OBLIGATIONS...................................................... 26 35 OTHER LONG-TERM LIABILITIES...................................................... 20,845 23,298 MINORITY INTEREST................................................................ 831 632 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, 33,175,071 and 32,814,018 issued and outstanding at September 30, 2001 and December 31, 2000, respectively............... 545 541 Additional paid-in capital.................................................. 186,686 182,847 Retained earnings........................................................... 90,634 67,677 ----------- ----------- Total shareholders' equity.............................................. 277,865 251,065 ----------- ----------- Total liabilities and shareholders' equity....................................... $ 442,348 $ 413,301 =========== ===========
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 September 30, --------------------------- 2001 2000 ----------- ----------- (Unaudited) SERVICES......................................................................... $ 77,321 $ 70,115 SALES............................................................................ 19,776 18,335 ----------- ----------- 97,097 88,450 OPERATING EXPENSES: Cost of services............................................................ 57,107 55,078 Cost of sales............................................................... 15,337 15,203 General and administrative expenses ........................................ 4,259 3,442 Depreciation and amortization............................................... 4,808 3,853 Goodwill amortization....................................................... 1,062 1,046 Other income, net........................................................... (55) (430) ----------- ----------- 82,518 78,192 NCOME BEFORE INTEREST EXPENSE AND INCOME TAX EXPENSE.............................................. 14,579 10,258 INTEREST EXPENSE................................................................. 2,000 2,095 ----------- ----------- INCOME BEFORE INCOME TAX EXPENSE................................................. 12,579 8,163 INCOME TAX EXPENSE............................................................... 3,522 2,382 ----------- ----------- NET INCOME....................................................................... $ 9,057 $ 5,781 =========== =========== PER SHARE INFORMATION: BASIC EARNINGS PER SHARE.................................................... $ 0.27 $ 0.18 =========== =========== WEIGHTED AVERAGE BASIC COMMON SHARES OUTSTANDING........................................................... 33,165,470 32,783,862 =========== =========== DILUTED EARNINGS PER SHARE.................................................. $ 0.27 $ 0.17 =========== =========== WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING........................................................... 33,795,537 33,724,079 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 2 CORE LABORATORIES N.V. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data)
Nine Months ended September 30, --------------------------- 2001 2000 ----------- ----------- (Unaudited) SERVICES......................................................................... $ 224,956 $ 196,045 SALES............................................................................ 54,747 45,446 ----------- ----------- 279,703 241,491 OPERATING EXPENSES: Cost of services............................................................ 170,413 158,460 Cost of sales............................................................... 43,429 36,161 General and administrative expenses ........................................ 11,803 10,128 Depreciation and amortization............................................... 13,761 11,180 Goodwill amortization....................................................... 3,128 3,100 Other income, net........................................................... (637) (866) ----------- ----------- 241,897 218,163 INCOME BEFORE INTEREST EXPENSE AND INCOME TAX EXPENSE.............................................. 37,806 23,328 INTEREST EXPENSE................................................................. 5,921 6,171 ----------- ----------- INCOME BEFORE INCOME TAX EXPENSE................................................. 31,885 17,157 INCOME TAX EXPENSE............................................................... 8,928 5,067 ----------- ----------- NET INCOME....................................................................... $ 22,957 $ 12,090 =========== =========== PER SHARE INFORMATION: BASIC EARNINGS PER SHARE.................................................... $ 0.69 $ 0.37 =========== =========== WEIGHTED AVERAGE BASIC COMMON SHARES OUTSTANDING........................................................... 33,032,668 32,247,155 =========== =========== DILUTED EARNINGS PER SHARE.................................................. $ 0.68 $ 0.36 =========== =========== WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING........................................................... 34,005,908 33,442,389 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 CORE LABORATORIES N.V. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Nine Months ended September 30, --------------------------- 2001 2000 ----------- ----------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................. $ 22,957 $ 12,090 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................... 16,889 14,280 Gain on sale of fixed assets............................................ (148) (495) Changes in assets and liabilities: (Increase)/Decrease in accounts receivable.............................. 124 (9,855) Increase in inventories................................................. (6,411) (11,661) (Increase)/Decrease in prepaid expenses................................. (4,084) 162 Increase/(Decrease) in accounts payable................................. (8,720) 785 Decrease in other accrued expenses...................................... (1,810) (8,744) (Increase)/Decrease in net deferred tax asset........................... (29) 1,085 Increase/(Decrease) in other long-term liabilities...................... (69) 203 Other................................................................... (1,962) 2,022 ----------- ----------- Net cash provided by operating activities.......................... 16,737 (128) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures........................................................ (20,817) (25,880) Acquisitions, net of cash acquired.......................................... (12,735) -- Proceeds from sale of fixed assets.......................................... 201 2,211 Other ...................................................................... (90) 508 ----------- ----------- Net cash used in investing activities................................... (33,441) (23,161) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt.................................................. (6,124) (19,550) Borrowings under long-term debt............................................. 20,716 21,316 Capital lease obligation, net............................................... (203) (1,491) Net proceeds from exercise of over-allotment................................ - 17,303 Exercise of stock options................................................... 2,720 2,523 Other....................................................................... 384 (559) ----------- ----------- Net cash provided by financing activities............................... 17,493 19,542 ----------- ----------- NET CHANGE IN CASH............................................................... 789 (3,747) CASH, beginning of period........................................................ 12,519 18,845 ----------- ----------- CASH, end of period.............................................................. $ 13,308 $ 15,098 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 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 nine month period ended September 30, 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 2001, the Financial Accounting Standards Board ("FASB") issued two statements, SFAS 141, "Business Combinations", and SFAS 142, "Goodwill and Other Intangible Assets", that amend Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations", and supersede APB Opinion No. 17, "Intangible Assets." The two statements modify the method of accounting for business combinations entered into after June 30, 2001 and address the accounting for intangible assets. Goodwill resulting from a business combination after June 30, 2001 would be recognized as an asset but not amortized while goodwill existing at June 30, 2001 will be amortized through December 31, 2001. Beginning January 1, 2002, we will no longer amortize goodwill but will test for impairment annually or more frequently if circumstances indicate a potential impairment. While we do not expect an impairment to arise, we are evaluating the impact of the new accounting standards on existing goodwill and other intangible assets. Goodwill amortization for the three and nine month periods ended September 30, 2001 was $1,062,000 and $3,128,000, respectively, which had an earnings per diluted share impact of $0.03 and $0.09 for the respective periods. 2. ACQUISITIONS On August 1, 2001, we acquired all of the assets of Tesco Corporation's Gris Gun business for approximately $12.7 million. Gris Gun supplies wellbore perforating gun systems and other related completion products primarily to the Canadian market. The transaction was accounted for using the purchase method of accounting and resulted in an increase in goodwill of approximately $5.9 million. On May 22, 2001, we acquired all of the outstanding shares of PROMORE Engineering Inc. ("PROMORE"), a privately held company based in Canada. PROMORE provides innovative solutions for production optimization and monitoring of reservoir environments. We issued approximately 606,000 shares in exchange for all of the outstanding shares of PROMORE. The 5 transaction was accounted for using the pooling-of-interests method of accounting. Accordingly, our consolidated financial statements have been restated for all periods prior to the date of acquisition to include the financial position and results of operations of PROMORE. 3. 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 $2,305,000 and $1,376,000 at September 30, 2001 and December 31, 2000, respectively. Inventories consisted of the following (in thousands): September 30, December 31, 2001 2000 ---------- ---------- (Unaudited) Finished goods.................................. $ 34,132 $ 27,145 Parts and materials............................. 6,562 4,126 Work in process................................. 4,636 2,243 ---------- ---------- Total........................... $ 45,330 $ 33,514 ========== ========== 6 4. 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 acquired prior to July 1, 2001 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. Additional information relating to intangibles and goodwill is included in Note 1. The components of intangibles and goodwill are as follows (in thousands):
Original Life September 30, December 31, in Years 2001 2000 --------- ------------ ------------ (Unaudited) (in thousands) Acquired trade secrets........................... 5 $ 165 $ 125 Acquired patents, trademarks and trade names..... 10-20 4,539 3,686 Acquired trade name.............................. 40 4,614 4,614 ------------ ------------ Total intangibles....................... 9,318 8,425 ------------ ------------ Goodwill......................................... 5-10 2,882 2,639 Goodwill......................................... 20 3,736 3,736 Goodwill......................................... 40 148,099 147,784 Goodwill......................................... N/A 5,905 -- ------------ ------------ Total goodwill.......................... 160,622 154,159 ------------ ------------ Total intangibles and goodwill..... 169,940 162,584 Less - accumulated amortization.................. 18,096 14,557 ------------ ------------ Net intangibles and goodwill.. $ 151,844 $ 148,027 ============ ============
5. LONG-TERM DEBT Long-term debt is summarized in the following table (in thousands):
September 30, December 31, 2001 2000 ----------- ------------ (Unaudited) Credit Facility with a bank group: $100,000 revolving debt facilities................... $ 22,000 $ 7,000 Senior Notes..................... 75,000 75,000 Other indebtedness.................................... 1,357 1,738 ----------- ------------ Total debt................................... 98,357 83,738 Less - current maturities............................. 669 733 ----------- ------------ Total long-term debt......................... $ 97,688 $ 83,005 =========== ============
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 September 30, 2001, approximately $78 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%. 7 The interest rate in effect at September 30, 2001 was 4.25% and the average for 2001 was 5.75%. 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. 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. 8 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 September 30, Nine months ended September 30, ---------------------------------------------------------- 2001 2000 2001 2000 ---------------------------------------------------------- (Unaudited) Revenues: Reservoir Description........................... $ 56,368 $ 48,159 $ 157,817 $ 139,871 Production Enhancement.......................... 27,781 27,457 79,543 66,557 Reservoir Management............................ 12,948 12,834 42,343 35,063 ---------- ---------- ---------- ---------- Consolidated.............................. $ 97,097 $ 88,450 $ 279,703 $ 241,491 ========== ========== ========== ========== Income (Loss) Before Interest and Taxes: Reservoir Description........................... $ 10,459 $ 5,845 $ 24,728 $ 14,654 Production Enhancement.......................... 5,136 4,400 13,839 11,175 Reservoir Management............................ (993) 34 (688) (2,428) Corporate and Other (a)......................... (23) (21) (73) (73) ---------- ---------- ---------- ---------- Consolidated.............................. $ 14,579 $ 10,258 $ 37,806 $ 23,328 ========== ========== ========== ==========
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 September 30, Nine months ended September 30, -------------------------------- -------------------------------- 2001 2000 2001 2000 -------------- -------------- -------------- -------------- Weighted average basic common shares outstanding....................... 33,165,470 32,783,862 33,032,668 32,247,155 Effect of dilutive stock options (a)........ 630,067 940,217 973,240 1,195,234 -------------- -------------- -------------- -------------- Weighted average diluted common shares outstanding................ 33,795,537 33,724,079 34,005,908 33,442,389 ============== ============== ============== ==============
a) Options totaling 1,071,551 and 9,676 equivalent common shares for the three months ended September 30, 2001 and 2000, and 51,801 and 61,676 for the nine months ended for the same period, respectively were not included because the impact of these options was anti-dilutive. 9 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 4,350 employees. Results of Operations Service revenues for the third quarter of 2001 increased $7.2 million, or 10% over the same period last year. Service revenues for the nine month period ended September 30, 2001 increased $28.9 million, or 15% over the same period last year. Cost of services expressed as a percentage of service revenue was 74% and 79% in the third quarter of 2001 and the same period last year, respectively. For the nine month periods ended, the cost of services expressed as a percentage of service revenue were 76% and 81%, respectively. Sales revenues increased $1.4 million to $19.8 million in the third quarter of 2001 from $18.3 million in the third quarter of 2000, an 8% increase. Sales revenue for the nine month period ended September 30, 2001 increased $9.3 million to $54.7 million from $45.4 million in the same period in 2000, a 21% increase. Cost of sales in the third quarter of 2001 were 78% of sales revenue as 10 compared to 83% in the same period last year. For the nine month period ended September 30, 2001 cost of sales was 79% as compared to 80% from the prior year. 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 revenues, we did experience an increase of $0.8 million and $1.7 million for the three and nine month periods ended September 30, 2001, respectively, as compared to the corresponding periods in 2000. These increases were 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 third quarter of 2001 increased $1.0 million and $2.6 million for the three and nine month periods ended September 30, 2001 as compared to the corresponding periods in 2000. This increase was due to additional capital investments, which include the new Houston facility. The effective income tax rate decreased to 28% for the three and nine month periods ended September 30, 2001 from 29% and 30% in the corresponding periods in 2000. This rate change reflects the increase in international earnings taxed at rates lower than The Netherlands statutory rate. Segment Analysis (Dollars in Thousands)
Three months ended September 30, Nine months ended September 30, ---------------------------------------------------------- 2001 2000 2001 2000 ---------------------------------------------------------- (Unaudited) Revenues: Reservoir Description........................... $ 56,368 $ 48,159 $ 157,817 $ 139,871 Production Enhancement.......................... 27,781 27,457 79,543 66,557 Reservoir Management............................ 12,948 12,834 42,343 35,063 ---------- ---------- ---------- ---------- Consolidated.............................. $ 97,097 $ 88,450 $ 279,703 $ 241,491 ========== ========== ========== ========== Income (Loss) Before Interest and Taxes: Reservoir Description........................... $ 10,459 $ 5,845 $ 24,728 $ 14,654 Production Enhancement.......................... 5,136 4,400 13,839 11,175 Reservoir Management............................ (993) 34 (688) (2,428) Corporate and Other (a)......................... (23) (21) (73) (73) ---------- ---------- ---------- ---------- Consolidated.............................. $ 14,579 $ 10,258 $ 37,806 $ 23,328 ========== ========== ========== ==========
a) "Corporate and Other" represents those items that are not directly related to a particular segment. Reservoir Description Revenues for the Reservoir Description segment were $56.4 million for the third quarter of 2001 compared to $48.2 million in the third quarter of 2000. Revenues for the nine month period ended September 30, 2001 were $157.8 million compared to $139.9 million in the same period last year. These increases were due in part to increased demand from international field development projects 11 greater utilization of our higher technology services as well as synergies realized from recent acquisitions. Income before interest and taxes increased by $4.6 million in the third quarter of 2001 and $10.1 million in the nine month period ended September 30, 2001, compared to the same periods in 2000 due to higher revenues and improved margins of our petroleum service unit. Production Enhancement Revenues from the Production Enhancement segment were $27.8 million in the third quarter of 2001 compared to $27.5 million in the same period in the prior year. For the nine month period ended September 30, 2001, revenues increased $13.0 million to $79.5 million, an increase of 20%. These increases were due to the active North American natural gas market and an increase in the overall workload. We have also realized increased levels of market acceptance for our Completion Profiler(TM) and PackScan(TM) technologies. Earnings before interest and taxes in the third quarter of 2001 were up 17% to $5.1 million and 24% to $13.8 million for the nine month period ended September 30, 2001 compared to the same periods in 2000. Reservoir Management Revenues from the Reservoir Management segment in the third quarter of 2001 were relatively consistent with the third quarter of 2000 while revenues for the nine month period ended September 30, 2001 increased $7.3 million compared to the same period in 2000. The increase in the nine month period was due in part to projects initiated in South America and the Far East. Our continuing efforts to reduce our cost structure in this segment resulted in a restructuring of the seismic and engineering field study groups. Expenses related to staff reductions and the restructuring contributed to the loss before interest and taxes for the third quarter of 2001 of $1.0 million compared to minimal earnings in the same period in 2000. The loss before interest and taxes for the nine month period ended September 30, 2001 were $0.7 million compared to a loss of $2.4 million in the same period in 2000. 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 nine month period ending September 30, 2001, cash flows from operating activities were $16.7 million, an increase of $16.9 million from the same period in 2000. At September 30, 2001, we had working capital of $146.3 million and a current ratio of 4.2 to 1.0, compared to working capital of $121.3 million and a current ratio of 3.2 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 provided $17.5 million in the nine month period ending September 30, 2001, and $19.5 million in the same period in 2000. Our investing activities used $33.4 million in the nine month period ending September 30, 2001 compared to $23.2 million in the same period in 2000. The major financing and investing activities in these periods were as follows: 12 o In July 2001, we borrowed approximately $13.0 million to finance the acquisition of Gris Gun. o In June 2000, we received net proceeds of approximately $17.3 million from the exercise of the underwriters' over-allotment option associated with the equity offering. These proceeds were used principally to reduce indebtedness and fund capital expenditures. o Capital expenditures were $20.8 million for the nine month period ending September 30, 2001, and $25.9 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. 13 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 hedging 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 5 - Long-Term Debt" of the Notes to Consolidated Financial Statements. 14 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. In connection with our 2001 acquisitions, we issued approximately 606,000 common shares. Disclosure related to recent issuances of common shares is included in Note 2 of the Notes to Consolidated Financial Statements. With respect to the shares issued in each acquisition, we relied on exemption from registration under Section 4(2) of the Securities Act of 1933. 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 15 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: November 14, 2001 By: /s/ Richard L. Bergmark ------------------------------------- Richard L. Bergmark Chief Financial Officer 16