SERVICE SECTOR / Veritas AGC First Quarter Ending 10/31/97
Report
VERITAS DGC INC. ANNOUNCES RECORD FIRST QUARTER REVENUES AND
EARNINGS
1997-12-09
HOUSTON, TEXAS
Veritas DGC Inc. ("Company") today announced record revenues and earnings for
the fiscal year 1998 first quarter as presented below with the comparative
amounts for the corresponding period of fiscal year 1997.
Three Months Ended October 31,
1997 1996
(In US$ millions, except earnings per share)
Revenue $142.2 $ 76.4
Net Income 21.3 5.2
Earnings Per Share 0.95 0.28
"Our record first quarter results were due to a combination of high levels of
activity within the Company's operating divisions, strong gross margins and
higher levels of data sales, particularly in the deep water Gulf of Mexico,"
said Dave Robson, Chairman and CEO of the Company. "The higher operating
levels and margins were supported by an active seismic industry in all of the
Company's geographic markets as well as an increase in capacity resulting
from an aggressive capital expenditure program during fiscal 1997. The
higher data sales related to substantial funding commitments in the deep
water Gulf of Mexico which were announced in August 1997."
Company revenues increased 86% over the prior first quarter while net income
grew by 313% over the same period of the previous year.
Revenues by service group for the fiscal years 1998 and 1997 first quarters
are as follows:
Three Months Ended October 31,
1997 1996
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(In US$ millions)
Land & Transition Zone Acquisition $ 59.3 $ 40.5
Marine Acquisition 18.3 16.3
Data Processing 22.3 15.4
Data Library 42.3 4.2
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$142.2 $ 76.4
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As the above table demonstrates, all service groups recorded year over year
increases in revenue. The most dramatic growth came from data library sales,
which increased ten-fold from the previous first quarter.
Gross margins for the first quarter of fiscal 1998 were 34% versus 24% for
the prior year first quarter. The increase was primarily due to substantial
sales of high-margin data library surveys in the Gulf of Mexico ("GOM").
Increases for the Company's other service groups reflect enhanced
productivity due to upgraded equipment and improved operating efficiencies.
Operating asset utilization remains near full capacity as a result of strong
market demand and good market visibility. Combined operating backlog for the
Company is US$343 million, representing approximately nine months of current
sales versus US$190 million a year ago.
Land & Transition Zone Acquisition
Revenues from land and transition zone seismic data acquisition increased 47%
from the prior first quarter. Factors contributing to this increase were
high equipment utilization, firm prices and greater recording capacity, which
increased by approximately 5,000 recording channels to 28,700 channels over
the same period of the previous year.
Backlog for the service group remains strong. Canada is entering its active
winter season while the U.S. highland and transition zones are booked into
mid calendar 1998.
The Company has secured a long-term contract in Bolivia and its first
strategic alliance in Argentina. In addition, the Company completed two land
data library projects in the United States. In the Middle East, the Company
continues to operate one crew while aggressively bidding to mobilize the
other.
Marine Acquisition
Marine acquisition revenues increased 12% over last year's first quarter.
The major contributing factor to this increase is the upgrade of the
Company's seismic vessels to new Syntron recording systems. These systems
provide increased capacity and also improve gross margins by minimizing
downtime related to equipment failure. In addition, high prefunding on GOM
projects resulted in increased margins. In the GOM, the Polar Search, the
Polar Princess and the multi-boat operation continued work on multi-client
projects. The Professor Kurentsov completed a 2D project in the North Sea
while the Acadian Searcher and the Ross Seal operated steadily on large 2D
contracts in the Asia Pacific market.
Market conditions remain solid with most of the industry's fleet committed
through calendar 1998. Additional deep water funding commitments provide
backlog into the year 2000 for the Company's GOM fleet. The Company's
vessels in southeast Asia are booked well into the fiscal year 1998 fourth
quarter.
The first of the Company's "Viking" class vessels, slated for the North Sea
market, will enter the fleet in June 1998, as planned. A second vessel of
this class has been ordered and is expected to be available in early calendar
1999.
Data Processing
The 44% increase in data processing revenues over the previous first quarter
continues to be driven by high levels of market activity and the need to
process larger volumes of 3D data through more computer intensive processes
such as prestack time and depth migration. The Company continued to upgrade
and expand the capacity of its processing centers to meet this strong demand
through the addition of more powerful workstations and a NEC supercomputer in
Crawley, England. The introduction of new processing software by the
Company's research and development team continues to positively impact gross
margins through improved efficiencies and expanded technical products.
Data Library
The data library service group made a major contribution to the Company's
first quarter financial results. Sales from all data library markets were
strong. However, the dramatic increase in revenues for this service group
was most directly attributable to strong customer interest in the Company's
expanding surveys in the deep water GOM. Due to the continued high levels of
interest in the deep water GOM, the Company announced in November 1997 that
it has secured further funding commitments in excess of US$50 million, a
portion of which involves "off the shelf" data which is recorded as data
library revenue. The Company is optimistic about additional funding for
these projects.
The Company added approximately 140,000 line kilometers of seismic to its
data base during the first quarter and expects to add a total of 800,000 line
kilometers by the end of the fiscal year bringing its seismic data base total
to 1,800,000 line kilometers. Over 70% of this seismic data is 3D that has
been acquired within the last two years of operation. With the current book
value of this data base at US$18.6 million, future data sales will continue
to make a significant contribution to the Company's earnings.
Should you have any questions regarding this earnings release or require
additional information, the Company has scheduled a telephone conference call
for Wednesday, December 10, 1997 at 11:00 a.m. EST. If you want to
participate, please call 1-800-275-3210. If you are unable to take part in
the telephonic conference there is a digital replay of the call and
subsequent Q&A session available following its conclusion until close of
business Wednesday, December 17, 1997. The telephone number for the digital
replay is 1-800-657-1264.
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 concerning, among other
things, the Company's prospects and development for its operations and the
finalizations of contractual agreements, all of which are subject to certain
risks, uncertainties and assumptions. These risks and assumptions, which are
more fully described in reports filed with the Securities and Exchange
Commission, include changes in market conditions in the oil and gas industry,
as well as, declines in prices of oil and gas. 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. is a leading provider of land, transition zone and
marine-based seismic data acquisition, seismic data processing, and
multi-client data sales to the petroleum industry in selected markets
worldwide.
For additional information, please contact:
Stephanie Schlimper, Investor Relations (713) 512-8821
Larry Fichtner, Executive Vice President of Corporate Communications
Tony Tripodo, Executive Vice President, Chief Financial Officer and Treasurer
VERITAS DGC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In US $000's, except per share amounts)
Three Months Ended
October 31,
1997 1996
--------- ----------
Revenues $ 142,186 $ 76,405
Costs and expenses:
Cost of services 93,253 58,320
Depreciation and amortization 12,514 8,692
Selling, general & administrative 4,539 1,950
Other (income) expense:
Interest 2,034 1,263
Merger related costs 597
Other (308) (256)
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Total 112,032 70,566
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Income before provision for income
taxes and equity in earnings 30,154 5,839
Provision for income taxes 9,649 1,238
Equity in earnings of 50% or less-owned
companies and joint ventures (814) (567)
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Net income $ 21,319 $ 5,168
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Weighted average shares outstanding 22,424 18,382
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Net income per share $ 0.95 $ 0.28
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