HYDL Hydril (MM)

Hydril (Nasdaq:HYDL) reported earnings for the first quarter ended March 31, 2006 of $0.94 per diluted share, up 7% sequentially from $0.88 reported in the fourth quarter of 2005, and up 49% from $0.63 reported for the first quarter of 2005. On a sequential basis, first quarter revenue of $114.1 million was essentially flat, while operating income of $32.9 million was up 7%, and net income of $22.7 million was up 6%. Compared to the first quarter of 2005, revenue and operating income increased 45% and 49%, respectively, and net income increased 51%. Chris Seaver, President and CEO, commented, "Continued growth in our premium connection markets resulted in improved financial performance for the first quarter. Our outlook remains strong for both of our segments, and we remain focused on our commitment to meeting the growing demands of our customers. The backlog of capital equipment for our pressure control segment increased 48% during the quarter, and includes orders received from offshore drilling contractors for deepwater blowout prevention systems." Premium Connection Segment First quarter revenue for Hydril's premium connection segment remained steady sequentially, while operating income increased 16% to $27.5 million. Operating margin of 37% was up from 33% in the prior quarter as a result of higher product sales and less lower-margin pipe sales. Pressure Control Segment Sequentially, first quarter revenue for the pressure control segment increased slightly to $40.5 million and operating income decreased 9% to $10.4 million. Aftermarket revenue was essentially flat with the prior quarter and capital equipment revenue increased 2% sequentially to $19.7 million. Operating margin for the first quarter was 26%, down from 28% for the fourth quarter 2005 due to product mix. The capital equipment backlog was $233 million at March 31, 2006, up 48% from $157 million at December 31, 2005, and up from $30 million at March 31, 2005. Deliveries for this backlog are scheduled into the second half of 2008. Market Indicators As more fully described on our website at www.hydril.com on the "Market Indicators" page, our principal business drivers are: (1) the U.S. rig count for rigs drilling at targets deeper than 15,000 feet, (2) the number of Gulf of Mexico rigs under contract, (3) the international rig count, (4) the worldwide offshore rig count, and (5) the total U.S. rig count. Conference Call Hydril's conference call to discuss first quarter financial results is scheduled for Tuesday, April 25, 2006 at 8:30 a.m. EDT, (7:30 a.m. CDT) and is accessible by dialing 800-657-1269 (domestic) or 973-409-9256 (international) and referencing passcode # 7285142. For further information on the call or the webcast, please visit the company's website at www.hydril.com or see the company's press release announcing the earnings conference call dated April 17, 2006. To the extent not provided in the call, reconciliations of any non-GAAP financial measures discussed in the call will be available on the Investor Relations page of Hydril's website. Hydril, headquartered in Houston, Texas, is engaged worldwide in engineering, manufacturing and marketing premium connection and pressure control products used for oil and gas drilling and production. Forward-Looking Statements This press release contains forward-looking statements concerning expected future results. These statements relate to future events and the company's future financial performance, including the company's business strategy and product development plans, and involve known and unknown risks, uncertainties and assumptions. These risks, uncertainties and assumptions, many of which are more fully described in Hydril Company's Annual Report on Form 10-K for the year-ended December 31, 2005 filed with the Securities and Exchange Commission, include but are not limited to competition from steel mills, limitations on the availability of pipe for threading, the impact of imports of tubular goods and of international and domestic trade laws, the loss of or change to distribution methods of premium connections in the U.S. and Canada, the consolidation of end-users, the risks associated with fixed-price contracts, 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 ability to attract and retain skilled labor and Hydril's ability to successfully develop new technologies and products and maintain and increase its market share. 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. Contact: Sue Nutt, Manager, Investor Relations & Corporate Communications Hydril 281-985-3532 -0- *T HYDRIL COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Share and Per Share Amounts) -------------------------------------------- ----------------------------------- Three Months Ended (unaudited) ----------------------------------- March 31, Dec. 31, March 31, 2006 2005 2005 ----------------------------------- Revenue Premium Connection $73,549 $73,130 $50,508 Pressure Control Aftermarket $20,789 20,890 16,243 Capital Equipment 19,722 19,306 12,066 ----------- ----------- ----------- Subtotal Pressure Control 40,511 40,196 28,309 Total Revenue 114,060 113,326 78,817 Total Gross Profit 49,879 46,407 35,407 Gross Margin 44% 41% 45% Selling, General, and Admin. Expenses 17,028 15,722 13,308 ----------- ----------- ----------- Operating Income (Loss) Premium Connection 27,526 23,784 18,405 Pressure Control 10,373 11,375 7,806 Corporate Administration (5,048) (4,474) (4,112) ----------- ----------- ----------- Total Operating Income 32,851 30,685 22,099 Operating Margin 29% 27% 28% Loss From Unconsolidated Entities (45) - - Interest Income 1,470 1,337 661 Other Income/(Expense) (99) (341) (107) ----------- ----------- ----------- Income Before Income Taxes 34,177 31,681 22,653 Provision for Income Taxes 11,508 10,311 7,641 ----------- ----------- ----------- Net Income $22,669 $21,370 $15,012 Net Income Per Share: Basic $0.96 $0.90 $0.64 Diluted $0.94 $0.88 $0.63 Weighted Average Shares Outstanding: Basic 23,697,639 23,630,944 23,361,493 Diluted 24,120,861 24,155,879 23,920,538 Depreciation and Amortization Premium Connection $2,257 $2,287 $1,959 Pressure Control 810 804 760 Corporate Administration 506 488 521 ----------- ----------- ----------- Total Depreciation 3,573 3,579 3,240 Capital Expenditures 5,005 6,454 4,064 Pressure Control Backlog Capital Equipment $232,614 $156,718 $29,966 HYDRIL COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands) ---------------------------------------------------------------------- March 31, December 31, 2006 2005 ------------ ------------ (unaudited) ------------------------- CURRENT ASSETS: Cash and cash equivalents $63,939 $65,145 Investments 137,136 108,084 Total receivables 93,491 78,204 Total inventories 62,291 57,646 Deferred tax asset 11,792 11,390 Other current assets 3,733 3,669 ------------ ------------ Total current assets 372,382 324,138 ------------ ------------ LONG-TERM ASSETS: Property, net 105,766 105,138 Other long-term assets 18,850 21,286 ------------ ------------ Total long-term assets 124,616 126,424 ------------ ------------ TOTAL $496,998 $450,562 ============ ============ CURRENT LIABILITIES: Accounts payable $30,512 $23,443 Accrued liabilities and other current liabilities 50,947 39,934 ------------ ------------ Total current liabilities 81,459 63,377 ------------ ------------ LONG-TERM LIABILITIES: Deferred tax liability and other tax obligations 10,846 12,143 Post-retirement, pension benefits and other 17,476 14,207 ------------ ------------ Total long-term liabilities 28,322 26,350 ------------ ------------ STOCKHOLDERS' EQUITY: Total stockholders' equity 387,217 360,835 ------------ ------------ TOTAL $496,998 $450,562 ============ ============ *T