Hydril Announces Fourth Quarter 2004 Earnings of $0.64 Per Share

    Business Editors/Energy Editors

    HOUSTON--(BUSINESS WIRE)--Feb. 1, 2005--Hydril (Nasdaq:HYDL) reported earnings for the fourth quarter ended December 31, 2004 of $0.64 per diluted share, up 5% sequentially from $0.61 reported in the third quarter of 2004. The third quarter included an income tax benefit of $.05 per diluted share, related to prior years. On a sequential basis, revenue of $86.5 million was up 10%, operating income of $22.8 million was up 15%, and net income of $15.1 million was up 5% from the third quarter.
    For the year-ended December 31, 2004, earnings per diluted share was $1.98, up 78% when compared to $1.11 per diluted share in 2003. For the year, revenue of $285.4 million was up 35% from the prior year, operating income of $66.4 million was up 94%, and net income of $46.5 million was up 82%. The 2004 net income included $.09 per diluted share of income tax benefits related to tax projects completed during the year, compared to $.15 per diluted share of tax benefits for tax projects completed in 2003. These increases were primarily the result of strong demand for premium connections resulting in higher utilization of premium connections manufacturing capacity, and strong pressure control aftermarket sales, which lifted the company-wide operating margin to 23%.
    Chris Seaver, President and CEO, commented, "Hydril enjoyed a rewarding year in 2004. Net income of $1.98 per share set a record for Hydril since its IPO in 2000. Growth in drilling activity around the globe and our earlier expansion of capacity in our premium connections business made this possible. Although the capital equipment sub-segment of our pressure control business was the only portion of our business with lower revenue in 2004 compared to 2003, we are seeing encouraging signs for 2005 and beyond. During the quarter, announcements continued from prominent drilling contractors of higher day-rates and longer-term contracts for deepwater rigs which usually precede the ordering of new capital equipment of the type we produce."

    Premium Connection Segment

    Fourth quarter revenue for Hydril's premium connection segment increased 9% sequentially to $58.4 million and operating income increased 12% to $20.5 million. These increases were driven by continued higher demand for our products in international markets, particularly Latin America, and by higher domestic demand as the result of increasing deep formation drilling.

    Pressure Control Segment

    Sequentially, fourth quarter revenue for the pressure control segment increased 12% to $28.1 million and operating income increased 15% to $6.3 million. Aftermarket revenue decreased 6% to $15.0 million, while capital equipment revenue increased 44% to $13.1 million. The increase in capital equipment revenue was primarily driven by better than expected non-project blowout preventer sales and a new project that began in the fourth quarter of 2004 which was recorded on a percentage-of-completion accounting basis. At the end of the quarter, capital equipment backlog stood at $14.6 million, down sequentially from $15.9 million, but up from $11.5 million as of December 31, 2003.

    Business Drivers

    As more fully described on our website at www.hydril.com on the "Business Drivers" page, our principal business drivers are: (1) the U.S. rig count for rigs drilling at targets deeper than 15,000 feet, (2) the U.S. deepwater rig count, measured as rigs under contract, drilling in greater than 1,500 feet of water, (3) the worldwide offshore rig count, and (4) the total U.S. rig count.

    Conference Call

    Hydril's conference call to discuss fourth quarter financial results is scheduled for Wednesday, February 2, 2005 at 8:30 a.m. ET, (7:30 a.m. CT) and is accessible by dialing 800-657-1269 (domestic) or 973-409-9256 (international) and referencing passcode #5578849. 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 20, 2005.
    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 30, 2004 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 impact of geo-political and other events affecting international markets and trade, Hydril's ability to remain on the leading edge of technology in its products and maintain and increase its market share, the impact of international and domestic trade laws, the loss of or change to distribution methods of premium connections in the U.S. and Canada, overcapacity in the pressure control industry, and high fixed costs that could affect the pricing of Hydril's products. 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 Share and Per Share Amounts) --------------------------------------------------

--------------------------------- ---------------------- Three Months Ended Twelve Months Ended --------------------------------- ---------------------- Dec. 31, Sept. 30, Dec. 31, December 31, 2004 2004 2003 2004 2003 (unaudited) --------------------------------- ---------------------- Revenue Premium Connection $58,389 $53,404 $25,932 $184,782 $110,270 Pressure Control After- market 14,995 15,929 13,002 61,204 55,048 Capital Equipment 13,140 9,094 10,951 39,367 46,699 --------------------------------- ---------------------- Subtotal Pressure Control 28,135 25,023 23,953 100,571 101,747

Total Revenue 86,524 78,427 49,885 285,353 212,017

Total Gross Profit 36,916 33,076 19,185 118,413 81,893 Gross Margin 43% 42% 38% 41% 39%

Selling, General, and Admin. Expenses 14,103 13,308 11,205 52,007 47,730 --------------------------------- ----------------------

Operating Income (Loss) Premium Connection 20,460 18,264 6,731 60,899 27,611 Pressure Control 6,253 5,441 4,726 20,971 20,261 Corporate Adminis- tration (3,900) (3,937) (3,477) (15,464) (13,709) --------------------------------- ---------------------- Total Operating Income 22,813 19,768 7,980 66,406 34,163 Operating Margin 26% 25% 16% 23% 16%

Interest Expense - - - - (1,101) Interest Income 466 293 122 1,113 724 Other Income/ (Expense) (261) (101) (61) (335) (135) --------------------------------- ----------------------

Income Before Income Taxes 23,018 19,960 8,041 67,184 33,651 Provision for Income Taxes 7,869 5,519 2,815 20,697 8,073 --------------------------------- ---------------------- Net Income $15,149 $14,441 $5,226 $46,487 $25,578

Net Income Per Share: Basic $0.65 $0.63 $0.23 $2.02 $1.13 Diluted $0.64 $0.61 $0.23 $1.98 $1.11

Weighted Average Shares Outstanding: Basic 23,191,513 23,030,468 22,811,391 22,996,401 22,710,838 Diluted 23,765,644 23,553,551 23,084,247 23,432,493 23,000,621

Depreciation Premium Connection $2,068 $1,941 $1,923 $7,815 $7,367 Pressure Control 746 731 712 2,920 2,769 Corporate Adminis- tration 479 467 463 1,902 1,764 --------------------------------- ---------------------- Total Depreciation 3,293 3,139 3,098 12,637 11,900

Capital Expenditures 5,965 3,405 3,200 12,356 8,558

Pressure Control Backlog Capital Equipment $14,576 $15,898 $11,535

HYDRIL COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands) ----------------------------------------------------------------------

December 31, December 31, 2004 2003 ---- ----

-------------------------------- CURRENT ASSETS: Cash and cash equivalents $102,398 $54,139 Investments 18,700 6,831 Total receivables 62,441 41,094 Total inventories 34,820 36,416 Other current assets 12,130 13,517 ----------- ----------- Total current assets 230,489 151,997 ----------- ------------

LONG-TERM ASSETS: Property, net 102,368 105,047 Other long-term assets 10,746 10,072 ----------- ------------ Total long-term assets 113,114 115,119 ----------- ------------ TOTAL $343,603 $267,116 =========== ============

CURRENT LIABILITIES: Accounts payable $23,292 $13,481 Accrued liabilities and other current liabilities 31,017 22,021 ----------- ------------ Total current liabilities 54,309 35,502 ----------- ------------

LONG-TERM LIABILITIES: Post retirement, pension benefits and other 14,511 14,604 ----------- ------------ Total long-term liabilities 14,511 14,604 ----------- ------------

STOCKHOLDERS' EQUITY: Total stockholders' equity 274,783 217,010 ----------- ------------ TOTAL $343,603 $267,116 =========== ============

--30--JV/ho*

CONTACT: Hydril, Houston Sue Nutt, 281-985-3532

KEYWORD: TEXAS INDUSTRY KEYWORD: OIL/GAS ENERGY MANUFACTURING EARNINGS CONFERENCE CALLS SOURCE: Hydril

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