HYDL Hydril (MM)

Hydril (NASDAQ:HYDL) reported earnings for the fourth quarter ended December 31, 2006 of $1.07 per diluted share, up 27% sequentially from $0.84 reported in the third quarter of 2006, and up 22% from $0.88 reported for the fourth quarter of 2005. On a sequential basis, fourth quarter revenue of $129.6 million increased 10%, operating income of $35.4 million increased 27%, and net income of $23.9 million increased 22%. Compared to the fourth quarter of 2005, revenue increased 14%, operating income increased 15%, and net income increased 12%. For the year-ended December 31, 2006, earnings per diluted share were $3.88, up 27% when compared to $3.05 per diluted share in 2005. For the year, revenue of $503 million was up 34% from the prior year, operating income of $132.2 million was up 26%, and net income of $91.3 million was up 25%. Chris Seaver, Chairman, President and CEO, commented, �We had a great quarter and Hydril�s financial performance for 2006 improved for the third consecutive year. In addition, each of the past three years was the best performance in over twenty years. Our outlook continues to be strong, and we expect our 2007 financial performance to be better than 2006. We remain focused on providing the best performing, most reliable technologies to drill the most difficult wells, while supporting every customer with the level of service that keeps them drilling.� Premium Connection Segment Sequentially, fourth quarter revenue for Hydril�s premium connection segment increased 10% to $70.2 million, operating income increased 35% to $25.3 million, and operating margin improved to 36% from 29%. The majority of the revenue increase was due to higher activity in international markets, while North America revenue increased slightly. The improvement in operating margin was the result of better plant efficiencies due in part to higher threading volumes, and to product mix. Pressure Control Segment Sequentially, fourth quarter revenue for the pressure control segment increased 11% to $59.3 million and operating income increased 11% to $16.1 million. Capital equipment revenue increased 8% to $35.2 million and aftermarket revenue increased 16% sequentially to $24.1 million. The increase in capital equipment revenue was principally the result of progress made on offshore blowout prevention system projects. During the fourth quarter, we received record capital equipment purchase orders totaling $254 million. At the end of the quarter, the capital equipment backlog reached $508 million, up from $289 million at September 30, 2006, and up from $157 million at December 31, 2005. Share Repurchase Program During the fourth quarter, the company repurchased $73 million of stock under the $150 million share repurchase program authorized by the Board of Directors in early November 2006. For the year 2006, the company repurchased a total of $173 million of stock which included a $100 million share repurchase program which was completed in the third quarter. Market Indicators As more fully described on our website at www.hydril.com in the �Investor Info� tab under �Market Indicators�, our principal indicators are: (1) the U.S. rig count for rigs drilling at targets deeper than 15,000 feet, (2) Gulf of Mexico rigs under contract, (3) the international rig count, (4) worldwide offshore rigs under contract, and (5) the total U.S. land rig count. Conference Call Hydril�s conference call to discuss fourth quarter financial results is scheduled for Thursday, February 1, 2007 at 8:30. a.m. EST (7:30 a.m. CST; 5:30 a.m. PST) and will be accessible by dialing 877-407-0782 (domestic) or 201-689-8567 (international). 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 January 23, 2007. 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 Quarterly Report on Form 10-Q for the quarter-ended September 2006 filed with the Securities and Exchange Commission, include but are not limited to the impact of changes in oil and natural gas prices and worldwide and domestic economic conditions on drilling activity and demand for and pricing of Hydril�s products, the risks associated with fixed-price contracts, the loss of distribution or change to distribution methods or inventory practices for premium connections in the U.S. and Canada, 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, factors that could cause our results to vary significantly from quarter to quarter, the consolidation of end-users, intense competition in our industry, the risks associated with international operations, 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. HYDRIL COMPANY � CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) � � � Three Months Ended Twelve Months Ended (unaudited) (unaudited) Dec. 31, Sept. 30, Dec. 31, Dec. 31, 2006� � 2006� � 2005� 2006� � 2005� Revenue Premium Connection $ 70,226� $ 63,785� $ 73,130� $ 296,982� $ 246,470� Pressure Control Capital Equipment 35,201� 32,654� 19,306� 116,090� 57,038� Aftermarket 24,135� 20,873� 20,890� 89,976� 73,216� Subtotal Pressure Control 59,336� 53,527� 40,196� 206,066� 130,254� � Total Revenue 129,562� 117,312� 113,326� 503,048� 376,724� � Total Gross Profit 53,094� 45,408� 46,407� 203,292� 163,563� Gross Margin 41% 39% 41% 40% 43% � Selling, General, and Admin. Expenses 17,728� 17,658� 15,722� 71,080� 58,607� � Operating Income (Loss) Premium Connection 25,252� 18,691� 23,784� 100,053� 85,054� Pressure Control 16,098� 14,484� 11,375� 54,556� 37,381� Corporate (5,984) (5,425) (4,474) (22,397) (17,479) Total Operating Income 35,366� 27,750� 30,685� 132,212� 104,956� Operating Margin 27% 24% 27% 26% 28% � Income (loss) from Unconsolidated Entities 176� (29) -� 133� -� � Interest Income 2,184� 2,222� 1,337� 7,767� 3,900� Other Income/(Expense) 9� (81) (341) (241) 724� � Income Before Income Taxes 37,735� 29,862� 31,681� 139,871� 109,580� Provision for Income Taxes 13,793� 10,196� 10,311� 48,591� 36,337� Net Income $ 23,942� $ 19,666� $ 21,370� $ 91,280� $ 73,243� � Net Income Per Share: Basic $ 1.08� $ 0.85� $ 0.90� $ 3.94� $ 3.12� Diluted $ 1.07� $ 0.84� $ 0.88� $ 3.88� $ 3.05� � Weighted Average Shares Outstanding: Basic 22,081� 23,180� 23,631� 23,169� 23,501� Diluted 22,406� 23,522� 24,156� 23,526� 24,019� � Depreciation Premium Connection $ 2,437� $ 2,444� $ 2,287� $ 9,510� $ 8,587� Pressure Control $ 935� 859� 804� 3,438� 3,116� Corporate $ 414� 405� 488� 1,854� 1,984� Total Depreciation 3,786� 3,708� 3,579� 14,802� 13,687� � � Capital Expenditures 10,042� 7,828� 6,454� 32,195� 17,144� � Pressure Control Backlog Capital Equipment $ 508,418� $ 289,200� $ 156,718� HYDRIL COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands) � � � � December 31, September 30, December 31, 2006� 2006� 2005� (unaudited) � (unaudited) � � CURRENT ASSETS: Cash and cash equivalents $ 105,473� $ 179,742� $ 65,145� Investments 8,209� 9,254� 108,084� Total receivables 128,295� 76,037� 78,204� Total inventories 96,786� 79,323� 57,646� Deferred tax asset 9,715� 9,792� 11,390� Other current assets 22,559� 4,969� 3,669� Total current assets 371,037� 359,117� 324,138� � LONG-TERM ASSETS: Property, net 123,235� 115,693� 105,138� Other long-term assets 15,759� 15,753� 21,286� Total long-term assets 138,994� 131,446� 126,424� TOTAL $ 510,031� $ 490,563� $ 450,562� � � CURRENT LIABILITIES: Accounts payable $ 40,695� $ 35,990� $ 23,443� Accrued liabilities and other current liabilities 146,860� 89,226� 39,934� Total current liabilities 187,555� 125,216� 63,377� � LONG-TERM LIABILITIES: Deferred tax liability and other tax obligations 15,797� 12,158� 12,143� Post retirement, pension benefits and other 15,297� 15,320� 14,207� Total long-term liabilities 31,094� 27,478� 26,350� � Minority Interest 774� -� -� � STOCKHOLDERS' EQUITY: Total stockholders' equity 290,608� 337,869� 360,835� TOTAL $ 510,031� $ 490,563� $ 450,562�