Oil States International, Inc. ( OIS) Q2 2011 Earnings Call August 2, 2011 11:00 a.m. ET Executives Patricia Gill Cindy Taylor – President & CEO Bradley Dodson – VP, CFO & Treasurer Analysts Victor Marchon – RBC Capital Markets John Daniel – Simmons & Company John Lawrence – Tudor Pickering Arun Jayaram – Credit Suisse Marshall Atkins – Raymond James Blake Hutchinson – Howard Weil Ryan Fitzgibbon – Global Hunter Securities Daniel Burke – Johnson Rice & Co. Doug Garber – Dahlman Rose Ashish Gupta – GB Capital Presentation Operator
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I will now turn it over to Cindy.Cindy Taylor Thank you, Patricia, and thanks to all of you for joining our call this morning. Our businesses provided strong results for the second quarter of 2011, with notable contributions coming from our growing accommodation segment, due to organic RIM count expansion and last year’s acquisitions of the Mac and Mountain West. Activity for our well site services and tubular services segment remains robust, as horizontal drilling and completion activity continued to increase in the oil shale regions in the United States, which tend to favor our high-end and proprietary equipment. On the hills of a 17% increase in the first quarter of 2011, backlog at our offshore product segment increased 25% during the second quarter to reach a new record level of $519 million as of June 30, 2011. During the second quarter of 2011, Oil States generated earnings of $1.34 per diluted share on $74 million of net income, $161 million of EBITDA, and over $800 million in revenue. At this time, Bradley Dodson will take you through details of our consolidated results and financial position, and then I will conclude our prepared remarks with a discussion of each of our segments, and we’ll give you our thoughts as to the current market outlook. Bradley Dodson Thank you, Cindy. During the second quarter of 2011, we reported operating income of $115 million on revenues of $820 million. Our net income for the second quarter of 2011 totaled $74 million or $1.34 per diluted share.
The comparable second quarter 2010 were $58 million of operating income on revenues of 595 million. Second quarter 2010 net income totaled $37 million or $0.71 per diluted share. The year-over-year increases in profitability were broad based, including higher contributions from each of our business segments, along with the contributions from the three acquisitions closed in the fourth quarter of 2010. During the second quarter of 2011, we completed a $600 million high-yield offering and used those net proceeds to re-pay off any borrowings under U.S. and Canadian revolving credit facilities, as well as for general corporate purposes. The notes were issued at par yielding 6.5% with a 8 year maturity.
The quarterly interest expense will be approximately $18 million going forward, with the additional interest expense from these notes. This quarterly interest expense forecast is expected to continue through the end of 2012.We recently also increased our Australian loan facility to $150 million Australian, on substantial to stand terms and conditions. We plan to use the added borrowing capacity to fund announced expansion of our Australian accommodations business. In terms of third quarter 2011 expectations, we forecast depreciation and amortization to be approximately $47 million, and net interest expense, as I mentioned, to approximate $18 due to the full quarter interest expense associated with high-yield notes. Diluted shares are expected to total 55 million shares in the third quarter of 2011. We currently estimate our effective tax rate for the third quarter of 2011 to be flat to slightly down when compared to the second quarter of 2011. During the second quarter 2011, we reported cash flow from operations of $60 million, offset by a working capital increase of 70 million and capital expenditures of 138 million. Our net debt at the end of the second quarter totaled $954 million and our debt-to-cap ratio is approximately 37%. As of June 30, 2011, the company had $808 million of combined availability under our credit facilities, and a cash balance totaling 123 million. We currently expect to spend approximately $650 million in capital expenditures in 2011. At this time, I’d like to turn the discussion back over to Cindy, who will review the activities in each of our business segments. Cindy Taylor Thank you, Bradley. I’d like to lead off with our accommodation segment. Our major oil sands lodges in Australian villages enjoyed strong occupancy levels during the second quarter of 2011. Accommodations revenues increased 66% year-over-year and EBITDA increased 102% year-over-year. Read the rest of this transcript for free on seekingalpha.com