HOUSTON, Oct. 22 /PRNewswire-FirstCall/ -- Baker Hughes Incorporated
(NYSE: BHI) today announced that net income for the third quarter 2008 was
$428.9 million or $1.39 per diluted share compared to $389.1 million or $1.22
per diluted share for the third quarter 2007 and $379.3 million or $1.23 per
diluted share for the second quarter 2008. Net income for the second quarter
of 2008 includes a net charge of $0.13 per diluted share relating to the
settlement of litigation.
Revenue for the third quarter 2008 was $3,009.6 million, up 12% compared
to $2,677.6 million for the third quarter 2007 and up less than 1% compared to
$2,997.5 million for the second quarter 2008. North America revenue for the
third quarter 2008 was up 15% compared to the third quarter 2007 and up 3%
compared to the second quarter 2008. Outside of North America, revenue for the
third quarter 2008 was up 11% compared to the third quarter 2007 and down 1%
compared to the second quarter 2008.
Disruptions from the hurricanes in the Gulf of Mexico during the third
quarter 2008 negatively impacted earnings by $0.11 per diluted share. In
addition, third quarter results include a $0.10 per diluted share tax benefit,
which is discrete to the quarter and not expected to recur.
Chad C. Deaton, Baker Hughes chairman, president, and chief executive
officer said, 'Results in the third quarter improved compared to the same
period a year ago led by the strong performance of our product lines in Latin
America and in North America land. Excluding the impact of the hurricanes,
margins would have been higher sequentially.
'The long-term outlook remains favorable; however, the near-term outlook
has become less certain. Our customers will factor lower commodity prices and
slower global demand growth into their budgets and a lack of credit may impact
customer spending.
'In North America, the current lack of readily available commercial credit
combined with increases in natural gas production in excess of demand growth
will likely result in decreased gas drilling into next year. However, a
meaningful share of our North America revenue, from our oilfield chemical and
artificial lift product lines, supports production-related activities and is
less exposed to a decrease in natural gas-directed drilling. We continue to
believe that a significant decline in gas drilling activity would, in a matter
of quarters, bring supply and demand back into balance resulting in subsequent
increases in gas-directed drilling.
'We expect that spending outside North America will continue its multi-
year expansion, although more modestly in 2009 than in recent years. The
global oil market remains tight by historical standards despite the sharp drop
in oil prices, and the energy industry remains challenged to develop adequate
oil and natural gas supplies to offset current declines in existing fields.
'Today, Baker Hughes has a leading portfolio of technologies, a highly-
skilled workforce, a solid balance sheet, a strong credit rating, and an
expanding international infrastructure. Our company is well positioned to
manage through the near-term issues, maintain our investment in the people,
technology and infrastructure necessary to support our long-term growth
objectives, and emerge as a stronger competitor with outstanding growth
prospects.'
During the third quarter of 2008, debt increased $9 million to $1,631
million, and cash and short-term investments increased $55 million to $1,127
million as compared to the second quarter of 2008. In the third quarter 2008,
the company's capital expenditures were $300 million, depreciation and
amortization expense was $158 million and dividend payments were $46 million.
During the third quarter of 2008, the company repurchased 538,900 shares
of common stock at an average price of $71.26 per share for a total of $39
million. At the end of the third quarter of 2008, the company had
authorization remaining to repurchase $1.2 billion in common stock.
Financial Information
Consolidated Statements of Operations
Three Months Ended
(In millions, except per ---------------------------------------
share amounts) September 30, June 30,
UNAUDITED 2008 2007 2008
---------- --------- ---------
Revenues:
Sales $1,446.2 $1,359.5 $1,465.0
Services and rentals 1,563.4 1,318.1 1,532.5
---------- --------- ---------
Total revenues 3,009.6 2,677.6 2,997.5
---------- --------- ---------
Costs and Expenses:
Cost of sales 1,031.9 906.7 1,054.5
Cost of services and rentals 995.9 859.1 942.1
Research and engineering 103.2 94.2 106.4
Marketing, general and
administrative 278.2 235.0 269.9
Litigation settlement - - 62.0
---------- --------- ---------
Total costs and expenses 2,409.2 2,095.0 2,434.9
---------- --------- ---------
Operating income 600.4 582.6 562.6
Equity in income (loss) of
affiliates (0.2) - 1.2
Interest expense (20.5) (16.7) (17.1)
Interest and dividend income 9.9 10.5 4.2
---------- --------- ---------
Income before income taxes 589.6 576.4 550.9
Income taxes (160.7) (187.3) (171.6)
---------- --------- ---------
Net income $428.9 $389.1 $379.3
========== ========= =========
Basic earnings per share $1.40 $1.23 $1.24
Diluted earnings per share $1.39 $1.22 $1.23
Weighted average shares
outstanding, basic 306.7 317.6 306.7
Weighted average shares
outstanding, diluted 308.3 319.8 308.4
Depreciation and amortization
expense $158.1 $134.4 $155.7
Capital expenditures $300.4 $272.7 $312.4
Financial Information
Consolidated Statements of Operations
Nine Months Ended
September 30,
(In millions, except per share amounts) -------------------------
UNAUDITED 2008 2007
----------- ----------
Revenues:
Sales $4,164.5 $3,819.4
Services and rentals 4,513.0 3,868.5
----------- ----------
Total revenues 8,677.5 7,687.9
----------- ----------
Costs and Expenses:
Cost of sales 2,951.8 2,600.0
Cost of services and rentals 2,842.0 2,437.5
Research and engineering 311.9 278.4
Marketing, general and administrative 798.6 692.1
Litigation settlement 62.0 -
----------- ----------
Total costs and expenses 6,966.3 6,008.0
----------- ----------
Operating income 1,711.2 1,679.9
Equity in income of affiliates 1.5 0.4
Gain on sale of product line 28.2 -
Interest expense (53.3) (49.7)
Interest and dividend income 22.1 32.7
----------- ----------
Income before income taxes 1,709.7 1,663.3
Income taxes (506.5) (549.9)
----------- ----------
Net income $1,203.2 $1,113.4
=========== ==========
Basic earnings per share $3.91 $3.49
Diluted earnings per share $3.89 $3.47
Weighted average shares outstanding, basic 307.7 318.6
Weighted average shares outstanding, diluted 309.3 320.7
Depreciation and amortization expense $460.6 $380.3
Capital expenditures $839.4 $811.1
Calculation of EBIT and EBITDA (non-GAAP measures)(1)
Three Months Ended
---------------------------------------
UNAUDITED September 30, June 30,
(In millions) 2008 2007 2008
---------- --------- ---------
Income before income taxes $589.6 $576.4 $550.9
Litigation settlement(2) - - 62.0
Interest expense 20.5 16.7 17.1
---------- --------- ---------
Earnings before interest
expense and taxes (EBIT) 610.1 593.1 630.0
Depreciation and amortization
expense 158.1 134.4 155.7
---------- --------- ---------
Earnings before interest
expense, taxes, depreciation
and amortization (EBITDA) $768.2 $727.5 $785.7
========== ========= =========
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(1) EBIT and EBITDA (as defined in the calculations above) are non-GAAP
measurements.
