EX-99.1 3 h08869exv99w1.txt PRESS RELEASE DATED SEPTEMBER 3, 2003 EXHIBIT 99.1 PRESS RELEASE (VERITAS DGC INC. LOGO) VERITAS DGC INC. ANNOUNCES ITS 2003 FOURTH QUARTER AND FISCAL YEAR FINANCIAL RESULTS HOUSTON, TEXAS - SEPTEMBER 3, 2003 - Veritas DGC Inc. (the "Company") (NYSE & TSE: VTS) today announced financial results for its fiscal year 2003 fourth quarter and fiscal year ended July 31, 2003. Revenue and earnings with the comparative amounts for the corresponding periods of fiscal year 2002 are as follows:
THREE MONTHS ENDED FISCAL YEAR ENDED JULY 31, JULY 31, -------------------- -------------------- 2003 2002 2003 2002 ------- ------- ------- ------- (millions, except per share amounts) Revenue $ 119.5 $ 105.4 $ 503.0 $ 455.7 Net loss (58.9) (46.5) (48.2) (23.2) Loss per share - diluted (1.76) (1.43) (1.45) (0.71)
The results for the quarter have been impacted by the following charges:
THREE MONTHS ENDED JULY 31, 2003 ------------------------------------ Notes (millions, except per share amounts) Goodwill impairment 1 $ 39.3* Sale of (RC)2 software operation 2 7.6* Multi-client survey impairment 3 4.9* ------ Total operating charges 51.8 Tax adjustments 4 8.1 ------ Total charges $ 59.9 ====== Total charges per share $ 1.79
* No tax benefits were recognized on the operating charges 1. Impairment of goodwill due to reduced profitability of the applicable reporting unit, lower Company public valuation, and the pending sale of the (RC)2 unit. Of the total write-off, $25.1 million relates to the acquisition of (RC)2 in February 2001. No goodwill remains after the impairment. 2. Expected loss on pending sale of the (RC)2 software operation. 3. Impairment of a multi-client survey in the Gulf of Mexico. 4. Additional valuation allowance on deferred tax assets and year-end tax adjustments. Dave Robson, Chairman and Chief Executive Officer commented, "The disappointing results for the quarter are indicative of the current state of the seismic industry. Despite strong oil company cash flows, we continue to experience lackluster activity and depressed pricing levels. Based on this environment, we have begun a shift toward more contract work, which has lower margins than multi-client but improves our immediate cash flow. The shift was particularly dramatic this quarter, as several potential multi-client sales slid into future quarters. On a positive note, we generated positive free cash flow for the year through a combination of increased cash flows from operating activities and a significant reduction in capital and multi-client spending. We expect to continue to generate positive free cash flow in 2004." Mr. Robson added, "Veritas has always prided itself on maintaining conservative accounting practices where subjectivity is involved. Due to changes in the multi-client business environment, we plan to adopt a more conservative multi-client amortization policy in the first quarter of fiscal 2004. This policy subjects all of our surveys to a minimum amortization beginning on the date of survey completion." Mr. Robson concluded, "Although the seismic industry is experiencing a lull right now, Veritas will continue to invest prudently in its people and infrastructure to remain an industry leader. We remain committed to this business and look forward to better times ahead." Revenue for the fourth quarters and fiscal years ended July 31st consisted of the following:
THREE MONTHS ENDED FISCAL YEAR ENDED JULY 31, JULY 31, ------------------ ----------------- 2003 2002 2003 2002 ------ ------ ------ ------ (millions) Multi-client: Marine $ 38.3 $ 46.6 $162.9 $176.6 Land 8.2 7.2 57.1 49.3 ------ ------ ------ ------ Total multi-client 46.5 53.8 220.0 225.9 Contract: Marine 41.5 20.9 126.7 86.7 Land 31.5 30.7 156.3 143.1 ------ ------ ------ ------ Total contract 73.0 51.6 283.0 229.8 ------ ------ ------ ------ Total revenue $119.5 $105.4 $503.0 $455.7 ====== ====== ====== ======
MULTI-CLIENT REVENUE Multi-client revenue was at the lowest level since the fourth quarter of fiscal 2001, with multi-client revenue decreasing by 14% compared to the fourth quarter of fiscal year 2002. This was primarily due to a 65% decline in Gulf of Mexico sales and a reduction in in-progress multi-client projects. Land multi-client revenue increased by 14% compared to the fourth quarter of 2002 due primarily to two well-funded US surveys. Cash spending on multi-client was $29.0 million during the quarter and the net multi-client library balance at the end of the fiscal year was $371.9 million. CONTRACT REVENUE Contract revenue increased by 41% from the fourth quarter of fiscal year 2002, with most of the increase coming in the marine acquisition operation with projects in the Gulf of Mexico, Trinidad and Asia Pacific. The contract land business was up by 3%. OPERATING LOSS The Company incurred an operating loss of $46.6 million for the quarter due to the charges detailed above and lower gross margins. Excluding both current and prior fourth quarter unusual charges, $51.8 million and $65.4 million respectively, the Company experienced a 71% decline in operating income primarily due to reduced multi-client margins. Multi-client margins, excluding the Gulf of Mexico survey impairment, were 8% compared to 43% in last year's fourth fiscal quarter due to cost overruns on a survey in Nigeria and low levels of sales in the Gulf of Mexico. Contract margins however, improved to 10% of revenue from a loss in the prior year's fourth quarter. OTHER Interest expense increased by $0.4 million from the prior year's fourth quarter due to a higher amount of outstanding debt, partially offset by lower interest rates, and the amortization of the costs associated with executing the current bank facility. Other income of $0.7 million represents primarily interest income on the Company's cash balances. Income tax expense of $8.9 million for the quarter primarily resulted from increased valuation allowances on deferred tax assets. The effective tax rate excluding unusual items was 45% for the quarter and fiscal year. BACKLOG The Company's backlog increased slightly to $173.2 million as of July 31, 2003 compared to $172.3 million as of the end of the third quarter, and declined from $216.4 million as of the prior fiscal year end. CHANGE IN MULTI-CLIENT ACCOUNTING FOR FISCAL YEAR 2004 Beginning in the first quarter of fiscal 2004, the Company will be changing its multi-client accounting policy to include minimum amortization of surveys from their date of completion, as compared to the current practice of amortizing the surveys in the last 24 months of their book lives. The minimum amortization will be calculated on a straight-line basis over five years for all surveys. This change will result in a catch-up adjustment of $22.0 million that will be recognized as additional amortization expense during the first quarter of fiscal year 2004. The effect of this change on future income is dependent upon the sales of each individual survey, as the Company will continue to use the sales forecast method as the primary means of calculating cost of services. The change may result in potentially higher cost of services in any individual period going forward. Excluding the catch-up adjustment, minimum annual amortization for fiscal year 2004 based upon the new accounting method will be $47.8 million, although the total amortization is expected to be higher based on expected survey sales during the year. OUTLOOK We are expecting little change in the operating environment during fiscal 2004. Due to continued focus on current cash flow, the Company plans to shift more of its resources from the multi-client business into the price sensitive, lower margin, contract market. Given normal levels of pre-funding, this will reduce the amount of revenue from new library projects and increase the Company's reliance on less predictable shelf sales. The Company projects positive free cash flow for 2004, with higher capital spending offset by a reduction in spending on multi-client projects. A conference call is scheduled for Thursday, September 4th, at 9:00 a.m. EST. Following a brief presentation, participants will have the opportunity to ask questions. The dial-in number to participate is 800.218.0204. Should you have difficulty with the aforementioned "800" number, phone 303.262.2141 to be connected toll free. There will also be a real-time webcast of the conference call with a slide presentation on the Company's website, www.veritasdgc.com. Windows Media player software is required and is available, free of charge, for download through the website. Individuals accessing the webcast will listen only and will not have the capability to take part in the Q&A session. To hear the audio replay, interested persons can phone 800.405.2236 or 303.590.3000 or to access the webcast replay with slide presentation visit the website at www.veritasdgc.com. Both replays will be available until the close of business Thursday, September 18, 2003. The Company defines free cash flow as cash from operating activities less cash multi-client spending and capital expenditures. This non-GAAP liquidity measure is useful as an addition to the most directly comparable GAAP measure of "cash provided by operating activities" because free cash flow includes investments in operational assets and therefore presents a full picture of cash flow from ongoing operations. This measure excludes items such as proceeds from the disposal of assets, cash paid for acquisitions and all financing activities. A reconciliation of free cash flow to cash provided by operating activities is attached, after the financial summary. The Company cautions that statements in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements as to expectations, beliefs and future financial performance, such as statements regarding our business prospects. All of these are based on current information and expectations that are subject to a number of risks, uncertainties and assumptions. These risks and uncertainties are more fully described in our reports filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material respect from those currently anticipated. Veritas DGC Inc., headquartered in Houston, Texas, is a leading provider of integrated geophysical services and technologies to the petroleum industry worldwide. ### For additional information, please contact: Mindy Ingle, Investor Relations (832) 351-8821 Matt Fitzgerald, Executive Vice President, Chief Financial Officer and Treasurer Visit the Company's website at veritasdgc.com VERITAS DGC INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
THREE MONTHS ENDED FISCAL YEAR ENDED JULY 31, JULY 31, ------------------------ ------------------------ 2003 2002 2003 2002 --------- --------- --------- --------- Revenue $ 119,537 $ 105,415 $ 503,001 $ 455,683 Operating expenses: Cost of services 106,546 78,763 425,217 353,178 Research and development 2,303 3,094 11,630 11,475 General and administrative 5,467 5,877 27,211 23,763 Loss on pending (RC)2 sale 7,627 7,627 Impairment of multi-client surveys 4,893 55,204 4,893 55,204 Merger costs 10,191 14,607 Impairment of goodwill 39,263 39,263 --------- --------- --------- --------- Operating loss (46,562) (47,714) (12,840) (2,544) Interest expense 4,175 3,778 18,534 13,628 Other expense (income), net (731) 4,005 498 1,786 --------- --------- --------- --------- Loss before provision for income taxes (50,006) (55,497) (31,872) (17,958) Income tax expense (benefit) 8,926 (8,980) 16,279 5,192 --------- --------- --------- --------- Net loss $ (58,932) $ (46,517) $ (48,151) $ (23,150) ========= ========= ========= ========= Diluted Earnings Per Share: Weighted average common shares 33,462 32,491 33,305 32,409 Loss per common share $ (1.76) $ (1.43) $ (1.45) $ (0.71) Supplemental Data: Cash 72,626 10,586 72,626 10,586 Multi-client data library 371,949 336,475 371,949 336,475 Interest-bearing debt 194,225 140,000 194,225 140,000 Depreciation and amortization, gross 16,856 16,842 72,664 68,341 Depreciation and amortization, net of amounts capitalized to multi-client library 12,102 8,906 48,304 39,097 Multi-client amortization, excluding impairments 35,220 25,720 142,029 115,287 Free Cash Flow: Cash from operating activities 38,572 36,884 200,714 185,272 Less: Multi-client expenditures, net cash 29,041 41,985 151,693 169,039 Capital expenditures 10,967 15,036 30,497 87,096 --------- --------- --------- --------- Free cash flow (1,436) (20,137) 18,524 (70,863)