BJ SERVICES CO - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to .

Commission file number 1-10570

BJ SERVICES COMPANY

(Exact name of registrant as specified in its charter)


Delaware		63-0084140
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


5500 Northwest Central Drive, Houston, Texas		77092
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (713) 462-4239

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12B-2 of the Exchange Act.)
YES þ NO ¨

There were 159,201,769 shares of the registrant’s common stock, $.10 par value, outstanding as of February 11, 2004.

BJ SERVICES COMPANY

INDEX



PART I—FINANCIAL INFORMATION:

Item 1. Financial Statements

Consolidated Condensed Statement of Operations (Unaudited)—Three months ended December 31, 2003 and 2002		3

Consolidated Condensed Statement of Financial Position (Unaudited)—December 31, 2003 and September 30, 2003		4

Consolidated Statement of Stockholders’ Equity (Unaudited) Three months ended December 31, 2003		5

Consolidated Condensed Statement of Cash Flows (Unaudited)—Three months ended December 31, 2003 and 2002		6

Notes to Unaudited Consolidated Condensed Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3. Quantitative and Qualitative Disclosures About Market Risk		27

Item 4. Controls and Procedures		28

PART II—OTHER INFORMATION		29

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

BJ SERVICES COMPANY

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)


	Three Months Ended December 31,
	2003			2002
Revenue	$	600,799		$	473,124
Operating expenses:
Cost of sales and services		457,730			375,733
Research and engineering		10,505			9,314
Marketing		19,297			17,129
General and administrative		17,881			16,375
Loss on disposal of assets		378			600

Total operating expenses		505,791			419,151

Operating income		95,008			53,973
Interest expense		(4,202	)		(4,001	)
Interest income		820			519
Other expense—net		(496	)		(906	)

Income before income taxes		91,130			49,585
Income tax expense		29,617			16,115

Net income	$	61,513		$	33,470

Earnings per share:
Basic	$	.39		$	.21
Diluted	$	.38		$	.21
Weighted-average shares outstanding:
Basic		158,859			157,574
Diluted		161,905			160,684

The accompanying notes are an integral part of these consolidated condensed financial statements

BJ SERVICES COMPANY

CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION

(UNAUDITED)

(In thousands)


	December 31, 2003		September 30, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	298,288	$	277,666
Receivables—net		479,926		469,656
Inventories:
Products		112,210		109,383
Work in process		2,352		2,048
Parts		49,833		51,137

Total inventories		164,395		162,568
Deferred income taxes		474		718
Other current assets		43,017		31,100

Total current assets		986,100		941,708
Property—net		855,147		850,340
Deferred income taxes		66,759		66,877
Goodwill		884,706		879,710
Other assets		44,779		47,322

	$	2,837,491	$	2,785,957

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	201,647	$	220,031
Short-term borrowings		7,224		5,888
Accrued employee compensation and benefits		56,907		69,205
Income and other taxes		86,623		82,192
Accrued insurance		14,738		14,772
Other accrued liabilities		85,335		78,573

Total current liabilities		452,474		470,661
Commitments and contingencies (Note 6)
Long-term debt		494,939		493,754
Deferred income taxes		7,617		7,475
Other long-term liabilities		150,575		163,435
Stockholders’ equity		1,731,886		1,650,632

	$	2,837,491	$	2,785,957

The accompanying notes are an integral part of these consolidated condensed financial statements

BJ SERVICES COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands)


	Common Stock Shares	Common Stock		Capital In Excess of Par			Treasury Stock			Unearned Compensation			Retained Earnings			Accumulated Other Comprehensive Income			Total
Balance, September 30, 2003	158,306	$	17,376	$	964,348		$	(348,277	)	$	—		$	1,026,832		$	(9,647	)	$	1,650,632
Comprehensive income:
Net income														61,513
Other comprehensive income, net of tax:
Cumulative translation adjustments																	6,916
Forward foreign exchange contracts																	368
Comprehensive income																				68,797
Reissuance of treasury stock for:
Stock options	45							1,020						(48	)					972
Stock purchase plan	495							11,157						(217	)					10,940
Stock performance plan	95				(3,103	)		2,144						898						(61	)
Stock performance plan grant					7,273						(7,273	)
Recognition of unearned compensation											606									606

Balance, December 31, 2003	158,941	$	17,376	$	968,518		$	(333,956	)	$	(6,667	)	$	1,088,978		$	(2,363	)	$	1,731,886

The accompanying notes are an integral part of these consolidated condensed financial statements

BJ SERVICES COMPANY

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

(In thousands)


	Three Months Ended December 31,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	61,513		$	33,470
Adjustments to reconcile net income to cash provided by operating activities:
Minority interest		886			1,196
Amortization of unearned compensation		606			277
Depreciation and amortization		30,694			28,462
Deferred income taxes		3,438			5,535
Changes in:
Receivables		(9,509	)		(22,879	)
Inventories		(1,818	)		2,174
Accounts payable		(18,399	)		(13,766	)
Other current assets and liabilities		(15,587	)		(8,710	)
Other—net		11,708			7,020

Net cash provided by operating activities		63,532			32,779
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(38,121	)		(34,251	)
Proceeds from disposal of assets		2,379			1,560
Acquisitions of businesses, net of cash acquired		(14,182	)		—

Net cash used for investing activities		(49,924	)		(32,691	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net		1,336			4,246
Proceeds from long-term borrowings		1,185			1,167
Proceeds from exercise of stock options and stock purchase plan		4,035			2,784

Net cash provided by financing activities		6,556			8,197

Effect of exchange rate changes on cash		458			(385	)

Increase in cash and cash equivalents		20,622			7,900
Cash and cash equivalents at beginning of period		277,666			84,727

Cash and cash equivalents at end of period	$	298,288		$	92,627

Cash Paid for Interest and Taxes:
Interest	$	1,146		$	1,145
Taxes		22,152			9,440

The accompanying notes are an integral part of these consolidated condensed financial statements

BJ SERVICES COMPANY

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1 General

In the opinion of management, the unaudited consolidated condensed financial statements of BJ Services Company (the “Company”) include all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of its financial position and statement of stockholders’ equity as of December 31, 2003, and its results of operations and cash flows for each of the three-month periods ended December 31, 2003 and 2002. The consolidated condensed statement of financial position at September 30, 2003 is derived from the September 30, 2003 audited consolidated financial statements. Although management believes the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations and cash flows for the three-month period ended December 31, 2003 are not necessarily indicative of the results to be expected for the full year.

Certain amounts for fiscal 2003 have been reclassified in the accompanying consolidated condensed financial statements to conform to the current year presentation.

Note 2 Earnings Per Share (“EPS”)

Basic EPS excludes dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares outstanding during each period and the assumed exercise of dilutive instruments (stock options, the stock purchase plan and the stock incentive plan) less the number of treasury shares assumed to be purchased with the exercise proceeds using the average market price of the Company’s common stock for each of the periods presented. No dilutive effect has been included for the convertible senior notes issued April 24, 2002 (see Note 5 of the Notes to the Consolidated Financial Statements included in the Company’s annual report on Form 10-K for the fiscal year ending September 30, 2003) because the Company currently has the ability and intent to settle the conversion price in cash.

The following table presents informat

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