CLB-2011.9.30-10Q


 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
(Mark One)
 
Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
OR
¨
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:  001-14273
 
CORE LABORATORIES N.V.
(Exact name of registrant as specified in its charter)
 
The Netherlands
Not Applicable
(State of other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
Herengracht 424
 
1017 BZ Amsterdam
 
The Netherlands
Not Applicable
(Address of principal executive offices)
(Zip Code)
 
 
(31-20) 420-3191
(Registrant's telephone number, including area code)
 
None
(Former name, former address and former fiscal year, if changed since last report)

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 Q  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes Q  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Q
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
 
 
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ¨  No Q

The number of common shares of the registrant, par value EUR 0.02 per share, outstanding at October 24, 2011 was 46,626,678.


CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2011
 
INDEX
 
PART I - FINANCIAL INFORMATION
 
 
Page
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
September 30,
2011
 
December 31,
2010
ASSETS
(Unaudited)
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
17,021

 
$
133,880

Accounts receivable, net of allowance for doubtful accounts of $3,461 and  
$3,396 at 2011 and 2010, respectively
157,594

 
154,726

Inventories
52,536

 
33,979

Prepaid expenses and other current assets
27,272

 
26,735

TOTAL CURRENT ASSETS
254,423

 
349,320

PROPERTY, PLANT AND EQUIPMENT, net
110,025

 
104,223

INTANGIBLES, net
7,969

 
8,660

GOODWILL
162,326

 
154,217

DEFERRED TAX ASSETS, net
6,586

 
—

OTHER ASSETS
21,572

 
19,622

TOTAL ASSETS
$
562,901

 
$
636,042

LIABILITIES AND EQUITY
 

 
 

CURRENT LIABILITIES:
 

 
 

Accounts payable
$
46,776

 
$
44,710

Accrued payroll and related costs
30,470

 
28,621

Taxes other than payroll and income
7,656

 
7,796

Unearned revenue
18,912

 
20,181

Income tax payable
10,250

 
21,004

Short-term debt and capital lease obligations
84,493

 
147,543

Other accrued expenses
11,562

 
9,498

TOTAL CURRENT LIABILITIES
210,119

 
279,353

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
155,093

 
—

DEFERRED COMPENSATION
22,307

 
21,241

DEFERRED TAX LIABILITIES, net
—

 
2,198

OTHER LONG-TERM LIABILITIES
36,823

 
32,046

COMMITMENTS AND CONTINGENCIES (Note 6)
 
 
 
EQUITY COMPONENT OF SHORT-TERM DEBT – SENIOR EXCHANGEABLE NOTES
509

 
8,864

EQUITY:
 
 
 

Preference shares, EUR 0.02 par value; 6,000,000 shares authorized,
none issued or outstanding
—

 
—

Common shares, EUR 0.02 par value;
200,000,000 shares authorized, 49,037,806 issued and 46,667,158 outstanding at 2011 and 49,739,912 issued and 45,521,186 outstanding at 2010
1,376

 
1,397

Additional paid-in capital
—

 
—

Retained earnings
296,172

 
536,991

Accumulated other comprehensive income (loss)
(5,979
)
 
(6,207
)
Treasury shares (at cost), 2,370,648 at 2011 and 4,218,726 at 2010
(157,187
)
 
(242,690
)
Total Core Laboratories N.V. shareholders' equity
134,382

 
289,491

Non-controlling interests
3,668

 
2,849

TOTAL EQUITY
138,050

 
292,340

TOTAL LIABILITIES AND EQUITY
$
562,901

 
$
636,042

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

1
                                                                    Return to Index


CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 
Three Months Ended
 
September 30,
 
2011
 
2010
 
(Unaudited)
REVENUE:
 
 
 
Services
$
172,770

 
$
151,671

Product sales
58,574

 
47,550

Total revenue
231,344

 
199,221

OPERATING EXPENSES:
 

 
 

Cost of services, exclusive of depreciation expense shown below
108,601

 
92,914

Cost of product sales, exclusive of depreciation expense shown below
41,711

 
32,858

General and administrative expenses, exclusive of depreciation expense shown below
11,182

 
8,416

Depreciation
5,460

 
5,496

Amortization
278

 
318

Other (income) expense, net
548

 
(998
)
OPERATING INCOME
63,564

 
60,217

Loss on exchange of Senior Exchangeable Notes
31

 
675

Interest expense
3,825

 
4,015

Income before income tax expense
59,708

 
55,527

Income tax expense
14,599

 
16,764

Net income
45,109

 
38,763

Net income (loss) attributable to non-controlling interests
242

 
209

Net income attributable to Core Laboratories N.V.
$
44,867

 
$
38,554

EARNINGS PER SHARE INFORMATION:
 

 
 

Basic earnings per share attributable to Core Laboratories N.V.
$
0.96

 
$
0.86

Diluted earnings per share attributable to Core Laboratories N.V.
$
0.93

 
$
0.79

Cash dividends per share
$
0.25

 
$
0.71

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 

 
 

Basic
46,606

 
44,736

Diluted
48,030

 
48,955














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

2
                                                                    Return to Index


CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 
Nine Months Ended
 
September 30,
 
2011
 
2010
 
(Unaudited)
REVENUE:
 
 
 
Services
$
495,640

 
$
448,123

Product sales
168,222

 
138,337

Total revenue
663,862

 
586,460

OPERATING EXPENSES:
 

 
 

Cost of services, exclusive of depreciation expense shown below
321,334

 
284,682

Cost of product sales, exclusive of depreciation expense shown below
118,001

 
95,595

General and administrative expenses, exclusive of depreciation expense shown below
30,463

 
24,007

Depreciation
16,507

 
16,345

Amortization
867

 
989

Other (income) expense, net
(1,176
)
 
(508
)
OPERATING INCOME
177,866

 
165,350

Loss on exchange of Senior Exchangeable Notes
870

 
675

Interest expense
8,684

 
12,188

Income before income tax expense
168,312

 
152,487

Income tax expense
36,827

 
47,076

Net income
131,485

 
105,411

Net income (loss) attributable to non-controlling interests
(123
)
 
436

Net income attributable to Core Laboratories N.V.
$
131,608

 
$
104,975

EARNINGS PER SHARE INFORMATION:
 

 
 

Basic earnings per share attributable to Core Laboratories N.V.
$
2.87

 
$
2.35

Diluted earnings per share attributable to Core Laboratories N.V.
$
2.71

 
$
2.19

Cash dividends per share
$
0.75

 
$
0.83

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 

 
 

Basic
45,930

 
44,741

Diluted
48,634

 
47,923














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

3
                                                                    Return to Index


CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Nine Months Ended
 
September 30,
 
2011
 
2010
 
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
131,485

 
$
105,411

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Net (recovery) provision for doubtful accounts
(105
)
 
787

Provisions for inventory obsolescence
483

 
513

Equity in earnings of affiliates
(190
)
 
(342
)
Stock-based compensation
13,341

 
6,016

Depreciation and amortization
17,374

 
17,334

Non-cash interest expense
5,841

 
11,590

(Gain) loss on sale of assets
(416
)
 
(80
)
Gain on insurance recovery
(779
)
 
—

Loss on exchange of Senior Exchangeable Notes
870

 
675

Realization of pension obligation
228

 
257

(Increase) decrease in value of life insurance policies
(93
)
 
(575
)
Deferred income taxes
(9,928
)
 
(5,315
)
Changes in assets and liabilities:
 
 
 
Accounts receivable
707

 
(8,142
)
Inventories
(14,204
)
 
1,134

Prepaid expenses and other current assets
703

 
25,185

Other assets
1,692

 
(436
)
Accounts payable
1,370

 
5,500

Accrued expenses
(7,393
)
 
13,304

Other long-term liabilities
5,843

 
(3,687
)
Net cash provided by operating activities
146,829

 
169,129

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Capital expenditures
(18,203
)
 
(19,661
)
Patents and other intangibles
(177
)
 
(180
)
Business acquisitions, net of cash acquired
(21,000
)
 
(9,000
)
Proceeds from sale of assets
683

 
406

Proceeds from insurance recovery
884

 
—

Premiums on life insurance
(1,661
)
 
(1,357
)
Net cash used in investing activities
(39,474
)
 
(29,792
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Repayment of debt
(229,467
)
 
(24,366
)
Proceeds from debt
313,000

 
—

Stock options exercised
295

 
336

Excess tax benefits from stock-based compensation
2,315

 
798

Debt financing costs
(1,997
)
 
—

Settlement of warrants
(219,451
)
 
—

Non-controlling interests - contributions
1,193

 
156

Non-controlling interests - dividends
(251
)
 
(181
)
Dividends paid
(34,356
)
 
(37,095
)
Repurchase of common shares
(55,495
)
 
(92,077
)
Net cash used in financing activities
(224,214
)
 
(152,429
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
(116,859
)
 
(13,092
)
CASH AND CASH EQUIVALENTS, beginning of period
133,880

 
181,045

CASH AND CASH EQUIVALENTS, end of period
$
17,021

 
$
167,953


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

4
                                                                    Return to Index


CORE LABORATORIES N.V.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of Core Laboratories N.V. and its subsidiaries for which we have a controlling voting interest and/or a controlling financial interest. These financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnote disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Core Laboratories N.V. uses the equity method of accounting for investments in which it has less than a majority interest and over which it does not exercise control. Non-controlling interests have been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned.  In the opinion of management, all adjustments considered necessary for the periods presented have been included in these financial statements.  Furthermore, the operating results presented for the three and nine months ended September 30, 2011 may not necessarily be indicative of the results that may be expected for the year ended December 31, 2011.

Core Laboratories N.V.'s balance sheet information for the year ended December 31, 2010 was derived from the 2010 audited consolidated financial statements but does not include all disclosures in accordance with U.S. GAAP.

Certain reclassifications were made to prior period amounts in order to conform to the current period presentation.  These reclassifications had no impact on the reported net income for the three and nine month periods ended September 30, 2011.

References to "Core Lab", "we", "our" and similar phrases are used throughout this Quarterly Report on Form 10-Q and relate collectively to Core Laboratories N.V. and its consolidated subsidiaries.

2.  INVENTORIES

Inventories consist of the following (in thousands):

 
September 30,
2011
 
December 31,
2010
 
(Unaudited)
 
 
Finished goods
$
32,650

 
$
24,476

Parts and materials
16,590

 
6,727

Work in progress
3,296

 
2,776

Total inventories
$
52,536

 
$
33,979


We include freight costs incurred for shipping inventory to customers in the Cost of Sales line of the Consolidated Statements of Operations.

3. GOODWILL AND INTANGIBLES

We account for intangible assets with indefinite lives, including goodwill, in accordance with the applicable accounting guidance, which requires us to evaluate these assets for impairment annually, or more frequently if an indication of impairment has occurred.  Based upon our most recent evaluation, we determined that goodwill is not impaired.  We amortize intangible assets with a defined term on a straight-line basis over their respective useful lives.

In September 2011, we acquired a business providing additional manufacturing capacity for our Canadian operations for $21 million in cash. We have accounted for this acquisition by allocating the purchase price to the net assets acquired based on their estimated fair values at the date of acquisition, resulting in an increase to goodwill of $8.1 million. The acquisition was recorded in the Production Enhancement business segment. The purchase price allocation is preliminary and based on information currently available to us, and is therefore subject to change when we obtain final asset and liability valuations.


5
                                                                    Return to Index


In 2010, we acquired fracture diagnostics assets for $9 million in cash. The acquisition was recorded in the Production Enhancement business segment and resulted in an increase of $5.6 million in goodwill and an increase of $3.2 million in intangible assets.

4.  DEBT AND CAPITAL LEASE OBLIGATIONS

Debt is summarized in the following table (in thousands):

 
September 30,
2011
 
December 31,
2010
 
(Unaudited)
 
 
Senior exchangeable notes
$
84,940

 
$
156,407

Discount on senior exchangeable notes
(504
)
 
(8,864
)
Net senior exchangeable notes
84,436

 
147,543

Senior notes
150,000

 
—

Credit facility
5,000

 
—

Capital lease obligations
150

 
—

Total debt
239,586

 
147,543

Less - current maturities of long-term debt and capital lease obligations
84,493

 
147,543

Long-term debt and capital lease obligations, net
$
155,093

 
$
—


In 2006, Core Laboratories LP, an entity 100% indirectly owned by Core Laboratories N.V., issued $300 million aggregate principal amount of Senior Exchangeable Notes (the "Exchangeable Notes") which are fully and unconditionally guaranteed by Core Laboratories N.V. and mature on October 31, 2011.  The Exchangeable Notes bear interest at a rate of 0.25% per year paid on a semi-annual basis.

With the additional amortization of the discount on the Exchangeable Notes, the effective interest rate is 7.48% for the three and nine month period ended September 30, 2011, which resulted in additional non-cash interest expense of $1.5 million and $3.8 million for the three months ended September 30, 2011 and 2010, respectively, and $5.5 million and $11.5 million for the nine months ended September 30, 2011 and 2010, respectively.  Each Exchangeable Note carries a $1,000 principal amount and is exchangeable into shares of Core Laboratories N.V. common stock under certain circumstances at an exchange price of $45.41 per share, or 22.0221 shares per Exchangeable Note.  Upon exchange, holders will receive cash for the principal amount plus any amount related to fractional shares, and any excess exchange value will be delivered in whole shares of Core Laboratories N.V. common stock at the completion of the valuation period as defined under our Exchangeable Note Indenture agreement.  At September 30, 2011, the Exchangeable Notes were trading at 208% of their face value which is equivalent to $91.7 million of value in excess of the aggregate principal amount. At December 31, 2010, the Exchangeable Notes were trading at 197% of their face value which was equivalent to $151.7 million of value in excess of the aggregate principal amount.  There were 84,940 and 156,407 Exchangeable Notes outstanding at September 30, 2011 and December 31, 2010, respectively.

Under the terms of the Exchangeable Notes, defined criteria were met which allowed the Exchangeable Notes to be early exchanged during the third quarter of 2011, as it was during the second quarter of 2011, and as a result, the equity component of the Exchangeable Notes at September 30, 2011 was classified as temporary equity.  This balance combined with the debt amount reflects the amount that could result in cash settlement upon exchange.  We received eight requests to exchange 6,990 Exchangeable Notes which were settled during the third quarter for $7.0 million in cash and 89,316 shares of our common stock, all of which were treasury shares, resulting in a loss of $31 thousand.  We also received five requests during the third quarter to exchange 16,900 Exchangeable Notes which we will settle during the fourth quarter upon completion of the requisite holding period per the Note Indenture agreement.

In September 2011, we issued two series of senior notes with an aggregate principal amount of $150 million ("Senior Notes") in a private placement transaction. Series A consists of $75 million in aggregate principal amount of notes that bear interest at a fixed rate of 4.01% and are due in full on September 30, 2021. Series B consists of $75 million in aggregate principal amount of notes that bear interest at a fixed rate of 4.11% and are due in full on September 30, 2023. Interest on each series of the Senior Notes is payable semi-annually on March 30 and September 30.
    

6
                                                                    Return to Index


On September 28, 2011, we entered into an agreement to amend our revolving credit facility (the "Credit Facility") that allowed for an aggregate borrowing capacity of $300 million at September 30, 2011. The Credit Facility also provided an option to increase the commitment under the Credit Facility to $350 million, if certain conditions were met.  The Credit Facility bears interest at variable rates from LIBOR plus 1.50% to a maximum of LIBOR plus 2.25%.  Any outstanding balance under the Credit Facility is due September 28, 2016 when the Credit Facility matures.   Interest payment terms are variable depending upon the specific type of borrowing under this facility. Our available capacity is reduced by outstanding letters of credit and performance guarantees and bonds totaling $15.6 million at September 30, 2011 relating to certain projects in progress.  Our available borrowing capacity under the Credit Facility at September 30, 2011 was $279.4 million.  As of September 30, 2011, we had $11.1 million of outstanding letters of credit and performance guarantees and bonds in addition to those under the Credit Facility.

The terms of the Credit Facility and the Senior Notes require us to meet certain financial and operational covenants. We believe that we were in compliance with all such covenants at September 30, 2011.  All of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility.

5.  PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We provide a noncontributory defined benefit pension plan covering substantially all of our Dutch employees (the "Dutch Plan") who were hired prior to 2007 based on years of service and final pay or career average pay, depending on when the employee began participating. The benefits earned by the employees are immediately vested.  We fund the future obligations of the Dutch Plan by purchasing investment contracts from a large multi-national insurance company.  The investment contracts are purchased annually and expire after five years at which time they are replaced with new contracts that are adjusted to include changes in the benefit obligation for the current year and redemption of the expired contracts.  We determine the fair value of these plan assets with the assistance of an actuary using observable inputs (Level 2).  We make annual premium payments to the insurance company, based on each employee's age and current salary.

The following table summarizes the components of net periodic pension cost under this plan for the three and nine months ended September 30, 2011 and 2010 (in thousands):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
 
(Unaudited)
 
(Unaudited)
Service cost
$
340

 
$
294

 
$
1,027

 
$
921

Interest cost
438

 
341

 
1,324

 
1,069

Expected return on plan assets
(204
)
 
(108
)
 
(616
)
 
(338
)
Amortization of transition asset
(21
)
 
(22
)
 
(65
)
 
(66
)
Amortization of prior service cost
39

 
40

 
119

 
120

Amortization of net loss
84

 
94

 
252

 
283

Net periodic pension cost
$
676

 
$
639

 
$
2,041

 
$
1,989


During the nine months ended September 30, 2011, we contributed approximately $1.9 million, as determined by the insurance company, to fund the estimated 2011 premiums on investment contracts held by the Dutch Plan.

We have adopted a non-qualified deferred compensation plan that allows certain highly compensated employees to defer a portion of their salary, commission and bonus, as well as the amount of any reductions in their deferrals under the deferred compensation plan for employees in the United States (the "Deferred Compensation Plan"), due to certain limitations imposed by the U.S. Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").  The Deferred Compensation Plan also provides for employer contributions to be made on behalf of participants equal in amount to certain forfeitures of, and/or reductions in, employer contributions that participants could have received under the 401(k) Plan in the absence of certain limitations imposed by the Internal Revenue Code. Employer contributions to the Deferred Compensation Plan vest ratably over a period of five years. Contributions to the plan are invested in equity and other investment fund assets, and carried on the balance sheet at fair value.  A participant's plan benefits include the participant's deferrals, the vested portion of the employer's contributions, and deemed investment gains and losses on such amounts. The benefits under these contracts are fully vested and payment of benefits generally commences as of the last day of the month following the termination of services except that the payment of benefits for select executives generally commences on the first working day following a six month waiting period

7
                                                                    Return to Index


following the date of termination.

On a recurring basis, we use the market approach to value certain assets and liabilities at fair value at quoted prices in an active market (Level 1) and certain assets and liabilities using significant other observable inputs (Level 2). We do not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). Gains and losses related to the fair value changes in the deferred compensation assets and liabilities are recorded in General and Administrative Expenses in the Consolidated Statements of Operations.  The following table summarizes the fair value balances (in thousands):

(Unaudited)
 
 
Fair Value Measurement at
 
 
 
September 30, 2011
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Deferred compensation plan trust assets
$
8,789

 
$
—

 
$
8,789

 
$
—

Liabilities:
 

 
 

 
 
 
 
Deferred compensation plan
$
13,197

 
$
2,611

 
$
10,586

 
$
—


 
 
 
Fair Value Measurement at
 
 
 
December 31, 2010
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Deferred compensation plan trust assets
$
8,802

 
$
—

 
$
8,802

 
$
—

Liabilities:
 

 
 
 
 
 
 
Deferred compensation plan
$
13,063

 
$
2,275

 
$
10,788

 
$
—


6. COMMITMENTS AND CONTINGENCIES

We have been and may from time to time be named as a defendant in legal actions that arise in the ordinary course of business.  These include, but are not limited to, employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with the provision of our products and services.  Management does not currently believe that any of our pending contractual, employment-related, personal injury or property damage claims and disputes will have a material effect on our future results of operations, financial position or cash flow.

7.  EQUITY

During the three months ended September 30, 2011, we repurchased 30,798 of our common shares for $3.4 million. Included in this total were rights to 10,798 shares valued at $1.2 million that were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants' tax burdens that may result from the issuance of common shares under that plan. During the nine months ended September 30, 2011, we repurchased 604,972 of our common shares for $55.5 million. Included in this total were rights to 40,478 shares valued at $4.1 million that were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants' tax burdens that may result from the issuance of common shares under that plan. Such common shares, unless canceled, may be reissued for a variety of purposes such as future acquisitions, employee stock awards, exchange of the Exchangeable Notes, or settlement of outstanding warrants.

At the annual meeting of shareholders on May 19, 2011 the shareholders approved the cancellation of 702,106 shares of our common stock currently held as treasury stock at a cost of $40.9 million. These treasury shares were canceled on September 2, 2011, after the expiration of the waiting period required under Dutch law. In accordance with ASC 505-30-30-8, we charge the excess of the cost of the treasury stock over its par value to additional paid-in capital. If additional paid-in-capital is not sufficient for this charge, the remainder is charged directly to retained earnings.

In February, May, and August 2011, we paid a quarterly dividend of $0.25 per share of common stock.  In addition, on October 11, 2011, we declared a quarterly dividend of $0.25 per share of common stock for shareholders of record on October 21, 2011 and payable on November 22, 2011.

In 2006, we sold warrants on our common shares, which had an adjusted exercise price in the third quarter of $61.14 per

8
                                                                    Return to Index


share, with an initial 20-day settlement period beginning in December 2011 through January 2012.  The warrant agreement called for the net value of these warrants to be settled with Core Laboratories N.V. common shares.  During 2011, the settlement of all of the warrants was accelerated through a series of agreements with the holder of the warrants. The warrants were settled in four substantially equal 20-day tranches during May, June, August and September of 2011. In each of the four tranches, the exercise price was adjusted based on the daily volume weighted average price of our common stock. These agreements also gave us the option of settling in either cash or our common stock. During the three months ended September 30, 2011, we settled 3.4 million warrants at an average exercise price of $59.79 for $153.7 million in cash and 37,959 shares of our treasury stock. During the nine months ended September 30, 2011, we settled 6.6 million warrants at an average exercise price of $59.84 for $219.5 million in cash and 706,395 shares of our treasury stock.
The following table summarizes our changes in equity for the nine months ended September 30, 2011 (in thousands):
 
Common
 
Additional
Paid-In
 
Retained
 
Accumulated
Other
Comprehensive
 
Treasury
 
Non-
Controlling
 
Total
(Unaudited)
Shares
 
Capital
 
Earnings
 
Income (Loss)
 
Stock
 
Interests
 
Equity
December 31, 2010
$
1,397

 
$
—

 
$
536,991

 
$
(6,207
)
 
$
(242,690
)
 
$
2,849

 
$
292,340

Stock options exercised
—

 
(1,658
)
 
—

 
—

 
1,953

 
—

 
295

Stock based-awards
—

 
6,007

 
(744
)
 
—

 
8,078

 
—

 
13,341

Tax benefit of stock-based awards issued
—

 
2,315

 
—

 
—

 
—

 
—

 
2,315

Repurchase of common shares
—

 
—

 
—

 
—

 
(55,495
)
 
—

 
(55,495
)
Dividends paid
—

 
—

 
(34,356
)
 
—

 
—

 
—

 
(34,356
)
Cancellation of common shares
(21
)
 
—

 
(40,894
)
 
—

 
40,915

 
—

 
—

Equity component of short-term debt
—

 
8,355

 
—

 
—

 
—

 
—

 
8,355

Exchange of Senior Exchangeable Notes
—

 
(8,425
)
 
(40,394
)
 
—

 
46,870

 
—

 
(1,949
)
Settlement of warrants
—

 
(6,594
)
 
(256,039
)
 
—

 
43,182

 
—

 
(219,451
)
Non-controlling interests contribution
—

 
—

 
—

 
—

 
—

 
1,193

 
1,193

Non-controlling interests dividends
—

 
—

 
—

 
—

 
—

 
(251
)
 
(251
)
Comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

 
 

Amortization of deferred pension costs, net of tax
—

 
—

 
—

 
228

 
—

 
—

 
228

Net income (loss)
—

 
—

 
131,608

 
—

 
—

 
(123
)
 
131,485

Total comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
131,713

September 30, 2011
$
1,376

 
$
—

 
$
296,172

 
$
(5,979
)
 
$
(157,187
)
 
$
3,668

 
$
138,050











9
                                                                    Return to Index


Comprehensive Income

The components of comprehensive income consisted of the following (in thousands):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
 
(Unaudited)
 
(Unaudited)
Net income
$
45,109

 
$
38,763

 
$
131,485

 
$
105,411

Amortization of deferred pension costs, net of tax
76

 
86

 
228

 
257

Total comprehensive income
$
45,185

 
$
38,849

 
$
131,713

 
$
105,668


Accumulated other comprehensive income (loss) consisted of the following (in thousands):

 
September 30,
2011
 
December 31,
2010
 
(Unaudited)
 
 
Prior service cost
$
(764
)
 
$
(853
)
Transition asset
276

 
324

Unrecognized net actuarial loss
(5,491
)
 
(5,678
)
Total accumulated other comprehensive income (loss)
$
(5,979
)
 
$
(6,207
)

8.  EARNINGS PER SHARE

We compute basic earnings per common share by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common shares include additional shares in the weighted average share calculations associated with the incremental effect of dilutive employee stock options, restricted stock awards and contingently issuable shares, as determined using the treasury stock method. The
following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share (in thousands):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
 
(Unaudited)
 
(Unaudited)
Weighted average basic common shares outstanding
46,606

 
44,736

 
45,930

 
44,741

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options
12

 
55

 
20

 
58

Contingent shares
80

 
38

 
69

 
37

Restricted stock and other
249

 
591

 
266

 
564

 Senior exchangeable notes
1,083

 
2,030

 
1,144

 
1,735

 Warrants
—

 
1,505

 
1,205

 
788

Weighted average diluted common and potential common shares outstanding
48,030

 
48,955

 
48,634

 
47,923


Included in the table above are 0 and 1,505,000 shares which were added to the share count for the three months ended September 30, 2011 and 2010, respectively, and 1,205,000 and 788,000 shares which were added to the share count for the nine months ended September 30, 2011 and 2010, respectively, because the average share price exceeded the strike price of the warrants.  These shares were included in calculating the impact to our dilutive earnings per share for the three and nine months ended September 30, 2011 and 2010.



10
                                                                    Return to Index


9. OTHER (INCOME) EXPENSE, NET

The components of other (income) expense, net, were as follows (in thousands):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
 
(Unaudited)
 
(Unaudited)
(Gain) loss on sale of assets
$
(278
)
 
$
(88
)
 
$
(416
)
 
$
(80
)
Foreign exchange (gain) loss
1,522

 
(547
)
 
1,001

 
1,074

Interest income
(11
)
 
—

 
(96
)
 
(142
)
Rents and royalties
(440
)
 
(352
)
 
(1,273
)
 
(1,052
)
(Gain) loss on insurance recovery
—

 
—

 
(779
)
 
—

Legal entity realignment
—

711

—

 
711

 
—

Other, net
(245
)
 
(11
)
 
(324
)
 
(308
)
Total other (income) expense, net
$
548

 
$
(998
)
 
$
(1,176
)
 
$
(508
)

During the third quarter of 2010, an office and laboratory facility was damaged by fire, resulting in the loss of the laboratory portion of the building, as well as some of the laboratory equipment.  The final settlement was reached in the first quarter of 2011, which resulted in a gain of $0.8 million.

Foreign exchange (gain) loss by currency are summarized in the following table (in thousands):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
 
(Unaudited)
 
(Unaudited)
Australian Dollar
$
206

 
$
(213
)
 
$
62

 
$
(110
)
British Pound
177

 
(133
)
 
130

 
283

Canadian Dollar
1,146

 
(102
)
 
603

 
(338
)
Euro
151

 
76

 
126

 
1,665

Mexican Peso
(161
)
 
(22
)
 
(19
)
 
72

Russian Ruble
(195
)
 
(18
)
 
(414
)
 
(33
)
Other currencies, net
198

 
(135
)
 
513

 
(465
)
Total (gain) loss
$
1,522

 
$
(547
)
 
$
1,001

 
$
1,074


10.  INCOME TAX EXPENSE

The effective tax rates for the three months ended September 30, 2011 and 2010 were 24.5% and 30.2%, respectively.  The effective tax rates for year to date 2011 and 2010 were 21.9% and 30.9%, respectively. Included in income tax expense is the reversal in the nine months ended September 30, 2011 of $10.4 million in tax liabilities provided over the period of 2007-2010 as a result of recently concluded audits of prior year returns. The decrease in income tax expense also reflects the change in activity levels among jurisdictions with different tax rates.  

11.  SEGMENT REPORTING

We operate our business in three reportable segments:  (1) Reservoir Description, (2) Production Enhancement and (3) Reservoir Management.  These business segments provide different services and utilize different technologies.

•
Reservoir Description: Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry.
•
Production Enhancement: Includes products and services relating to reservoir well completions, perforations,

11
                                                                    Return to Index


stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.
•
Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs.

Results for these business segments are presented below.  We use the same accounting policies to prepare our business segment results as are used to prepare our Consolidated Financial Statements.  We evaluate performance based on income or loss before income tax, interest and other non-operating income (expense). All interest and other non-operating income (expense) is attributable to the Corporate & Other area and is not allocated to specific business segments. Summarized financial information concerning our segments is shown in the following table (in thousands):
(Unaudited)
Reservoir Description
 
Production Enhancement
 
Reservoir Management
 
Corporate & Other 1
 
Consolidated
Three Months Ended September 30, 2011
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
119,853

 
$
97,407

 
$
14,084

 
$
—

 
$
231,344

Inter-segment revenues
446

 
232

 
377

 
(1,055
)
 
—

Segment operating income (loss)
28,780

 
30,728

 
3,502

 
554

 
63,564

Total assets
267,425

 
235,152

 
16,211

 
44,113

 
562,901

Capital expenditures
2,940

 
2,410

 
204

 
665

 
6,219

Depreciation and amortization
3,521

 
1,563

 
164

 
490

 
5,738

Three Months Ended September 30, 2010
 
 
 

 
 

 
 

 
 

Revenues from unaffiliated customers
$
106,485

 
$
78,992

 
$
13,744

 
$
—

 
$
199,221

Inter-segment revenues
441

 
390

 
319

 
(1,150
)
 
—

Segment operating income (loss)
28,014

 
26,260

 
5,535

 
408

 
60,217

Total assets
261,582

 
189,481

 
14,958

 
179,008

 
645,029

Capital expenditures
5,351

 
1,135

 
201

 
278

 
6,965

Depreciation and amortization
3,485

 
1,600

 
199

 
530

 
5,814

Nine Months Ended September 30, 2011
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
346,232

 
$
268,292

 
$
49,338

 
$
—

 
$
663,862

Inter-segment revenues
1,262

 
897

 
1,331

 
(3,490
)
 
—

Segment operating income (loss)
81,847

 
78,490

 
17,473

 
56

 
177,866

Total assets
267,425

 
235,152

 
16,211

 
44,113

 
562,901

Capital expenditures
10,322

 
5,713

 
595

 
1,573

 
18,203

Depreciation and amortization
10,520

 
4,780

 
513

 
1,561

 
17,374

Nine Months Ended September 30, 2010
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
317,106

 
$
227,553

 
$
41,801

 
$
—

 
$
586,460

Inter-segment revenues
989

 
1,103

 
1,034

 
(3,126
)
 
—

Segment operating income (loss)
78,229

 
73,355

 
14,827

 
(1,061
)
 
165,350

Total assets
261,582

 
189,481

 
14,958

 
179,008

 
645,029

Capital expenditures
15,280

 
2,527

 
458

 
1,396

 
19,661

Depreciation and amortization
10,515

 
4,849

 
523

 
1,447

 
17,334

(1) "Corporate & Other" represents those items that are not directly related to a particular segment and eliminations.


12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Core Laboratories N.V. has fully and unconditionally guaranteed all of the Exchangeable Notes issued by Core Laboratories LP in 2006. Core Laboratories LP is an entity 100% indirectly owned by Core Laboratories N.V.

The following condensed consolidating financial information is included so that separate financial statements of Core Laboratories LP are not required to be filed with the U.S. Securities and Exchange Commission (the "SEC"). The condensed consolidating

12
                                                                    Return to Index


financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

The following condensed consolidating financial information presents: balance sheets as of September 30, 2011 and December 31, 2010, statements of operations for each of the three and nine months ended September 30, 2011 and 2010 and the statements of cash flows for each of the nine months ended September 30, 2011 and 2010 of (a) Core Laboratories N.V., parent/guarantor, (b) Core Laboratories LP, issuer of public debt securities guaranteed by Core Laboratories N.V., (c) the non-guarantor subsidiaries, (d) consolidating adjustments necessary to consolidate Core Laboratories N.V. and its subsidiaries and (e) Core Laboratories N.V. on a consolidated basis.


13
                                                                    Return to Index


Condensed Consolidating Balance Sheets (Unaudited)
 
 
 
 
 
 
 
 
(In thousands)
September 30, 2011
 
Core Laboratories N.V. (Parent/ Guarantor)
 
Core Laboratories LP (Issuer)
 
Other Subsidiaries (Non- Guarantors)
 
Consolidating Adjustments
 
Consolidated Total
ASSETS
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,273

 
$
7,986

 
$
7,762

 
$
—

 
$
17,021

Accounts receivable, net
231

 
35,914

 
121,449

 
—

 
157,594

Inventories
—

 
5,461

 
47,075

 
—

 
52,536

Prepaid expenses and other current assets
7,966

 
5,413

 
13,893

 
—

 
27,272

Total current assets
9,470

 
54,774

 
190,179

 
—

 
254,423

PROPERTY, PLANT AND EQUIPMENT, net
—

 
21,014

 
89,011

 
—

 
110,025

GOODWILL AND INTANGIBLES, net
37,318

 
15,244

 
117,733

 
—

 
170,295

INTERCOMPANY RECEIVABLES
21,868

 
143,464

 
681,761

 
(847,093
)
 
—

INVESTMENT IN AFFILIATES
599,191

 
—

 
1,937,663

 
(2,535,970
)
 
884

DEFERRED TAX ASSETS, net
2,167

 
2,453

 
1,966

 
—

 
6,586

OTHER ASSETS
2,823

 
11,936

 
5,929

 
—

 
20,688

TOTAL ASSETS
$
672,837

 
$
248,885

 
$
3,024,242

 
$
(3,383,063
)
 
$
562,901

LIABILITIES AND EQUITY
 
 
 

 
 

 
 

 
 

CURRENT LIABILITIES:
 
 
 

 
 

 
 

 
 

Accounts payable
$
1,014

 
$
6,849

 
$
38,913

 
$
—

 
$
46,776

Short-term debt and lease obligations
—

 
84,436

 
57

 
—

 
84,493

Other accrued expenses
2,802

 
28,820

 
47,228

 
—

 
78,850

Total current liabilities
3,816

 
120,105

 
86,198

 
—

 
210,119

LONG-TERM DEBT & LEASE OBLIGATIONS
—

 
—

 
155,093

 
—

 
155,093

DEFERRED COMPENSATION
6,635

 
15,566

 
106

 
—

 
22,307

DEFERRED TAX LIABILITIES, net
—

 
—

 
—

 
—

 
—

INTERCOMPANY PAYABLES
518,544

 
65,908

 
262,641

 
(847,093
)
 
—

OTHER LONG-TERM LIABILITIES
9,460

 
2,954

 
24,409

 
—

 
36,823

Equity component of short-term debt -senior exchangeable notes
—

 
509

 
—

 
—

 
509

SHAREHOLDERS' EQUITY
134,382

 
43,843

 
2,492,127

 
(2,535,970
)
 
134,382

NON-CONTROLLING INTERESTS
—

 
—

 
3,668

 
—

 
3,668

TOTAL EQUITY
134,382

 
43,843

 
2,495,795

 
(2,535,970
)
 
138,050

TOTAL LIABILITIES AND EQUITY
$
672,837

 
$
248,885

 
$
3,024,242

 
$
(3,383,063
)
 
$
562,901



14
                                                                    Return to Index


Condensed Consolidating Balance Sheets
 
 
 
 
 
 
 
 
(In thousands)
December 31, 2010
 
Core Laboratories N.V. (Parent/ Guarantor)
 
Core Laboratories LP (Issuer)
 
Other Subsidiaries (Non- Guarantors)
 
Consolidating Adjustments
 
Consolidated Total
ASSETS
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
11,162

 
$
88,612

 
$
34,106

 
$
—

 
$
133,880

Accounts receivable, net
10

 
33,637

 
121,079

 
—

 
154,726

Inventories
—

 
4,127

 
29,852

 
—

 
33,979

Prepaid expenses and other current assets
5,641

 
9,437

 
11,657

 
—

 
26,735

 
16,813

 
135,813

 
196,694

 
—

 
349,320

PROPERTY, PLANT AND EQUIPMENT, net
—

 
21,139

 
83,084

 
—

 
104,223

GOODWILL AND INTANGIBLES, net
46,986

 
15,838

 
100,053

 
—

 
162,877

INTERCOMPANY RECEIVABLES
21,749

 
164,945

 
242,754

 
(429,448
)
 
—

INVESTMENT IN AFFILIATES
553,693

 
—

 
1,567,416

 
(2,120,414
)
 
695

DEFERRED TAX ASSETS, net
2,810

 
—

 
6,436

 
(9,246
)
 
—

OTHER ASSETS
3,209

 
13,099

 
2,619

 
—

 
18,927

TOTAL ASSETS
$
645,260

 
$
350,834

 
$
2,199,056

 
$
(2,559,108
)
 
$
636,042

LIABILITIES AND EQUITY
 
 

 
 

 
 

 
 

CURRENT LIABILITIES:
 

 
 

 
 

 
 

 
 

Accounts payable
$
336

 
$
5,144

 
$
39,230

 
$
—

 
$
44,710

Short-term debt and lease obligations
—

 
147,543

 
—

 
—

 
147,543

Other accrued expenses
2,291

 
29,250

 
55,559

 
—

 
87,100

Total current liabilities
2,627

 
181,937

 
94,789

 
—

 
279,353

DEFERRED COMPENSATION
6,159

 
14,981

 
101

 
—

 
21,241

DEFERRED TAX LIABILITIES, net
—

 
11,444

 
—

 
(9,246
)
 
2,198

INTERCOMPANY PAYABLES
333,651

 
—

 
95,797

 
(429,448
)
 
—

OTHER LONG-TERM LIABILITIES
13,332

 
1,099

 
17,615

 
—

 
32,046

Equity component of short-term debt -senior exchangeable notes
—

 
8,864

 
—

 
—

 
8,864

SHAREHOLDERS' EQUITY
289,491

 
132,509

 
1,987,905

 
(2,120,414
)
 
289,491

NON-CONTROLLING INTERESTS
—

 
—

 
2,849

 
—

 
2,849

TOTAL EQUITY
289,491

 
132,509

 
1,990,754

 
(2,120,414
)
 
292,340

TOTAL LIABILITIES AND EQUITY
$
645,260

 
$
350,834

 
$
2,199,056

 
$
(2,559,108
)
 
$
636,042





15
                                                                    Return to Index


Condensed Consolidating Statements of Operations (Unaudited)
 
 
 
 
 
 
 
 
(In thousands)
Three Months Ended September 30, 2011
 
Core Laboratories N.V. (Parent/ Guarantor)
 
Core Laboratories LP (Issuer)
 
Other Subsidiaries (Non- Guarantors)
 
Consolidating Adjustments
 
Consolidated Total
REVENUE
 
 
 
 
 
 
 
 
 
Operating revenue
$
—

 
$
55,777

 
$
175,567

 
$
—

 
$
231,344

Intercompany revenue
486

 
6,091

 
37,676

 
(44,253
)
 
—

Earnings (loss) from consolidated affiliates
42,418

 
—

 
521,367

 
(563,785
)
 
—

Total revenue
42,904

 
61,868

 
734,610

 
(608,038
)
 
231,344

OPERATING EXPENSES
 

 
 

 
 

 
 

 
 

Operating costs
421

 
28,501

 
121,390

 
—

 
150,312

General and administrative expenses
1,451

 
9,706

 
25

 
—

 
11,182

Depreciation and amortization
—

 
1,550

 
4,188

 
—

 
5,738

Other (income) expense, net
(1,088
)
 
2,972

 
32,603

 
(33,939
)
 
548

Operating income
42,120

 
19,139

 
576,404

 
(574,099
)
 
63,564

Loss on exchange of Senior Exchangeable Notes
—

 
31

 
—

 
—

 
31

Interest expense
—

 
12,062

 
—

 
(8,237
)
 
3,825

Income (loss) before income tax expense
42,120

 
7,046

 
576,404

 
(565,862
)
 
59,708

Income tax (benefit) expense
(2,747
)
 
5,817

 
11,529

 
—

 
14,599

Net income
44,867

 
1,229

 
564,875

 
(565,862
)
 
45,109

Net income (loss) attributable to non-controlling interest
—

 
—

 
242

 
—

 
242

Net income (loss) attributable to Core Laboratories
$
44,867

 
$
1,229

 
$
564,633

 
$
(565,862
)
 
$
44,867




16
                                                                    Return to Index


Condensed Consolidating Statements of Operations (Unaudited)
 
 
 
 
 
 
 
 
(In thousands)
Nine Months Ended September 30, 2011
 
Core Laboratories N.V. (Parent/ Guarantor)
 
Core Laboratories LP (Issuer)
 
Other Subsidiaries (Non- Guarantors)
 
Consolidating Adjustments
 
Consolidated Total
REVENUE
 
 
 
 
 
 
 
 
 
Operating revenue
$
—

 
$
156,512

 
$
507,350

 
$
—

 
$
663,862

Intercompany revenue
1,255

 
17,786

 
108,570

 
(127,611
)
 
—

Earnings (loss) from consolidated affiliates
129,126

 
—

 
592,170

 
(721,296
)
 
—

Total revenue
130,381

 
174,298

 
1,208,090

 
(848,907
)
 
663,862

OPERATING EXPENSES
 

 
 

 
 

 
 

 
 

Operating costs
979

 
80,498

 
357,858

 
—

 
439,335

General and administrative expenses
6,066

 
24,360

 
37

 
—

 
30,463

Depreciation and amortization
—

 
4,779

 
12,595

 
—

 
17,374

Other (income) expense, net
(145
)
 
9,581

 
88,945

 
(99,557
)
 
(1,176
)
Operating income
123,481

 
55,080

 
748,655

 
(749,350
)
 
177,866

Loss on exchange of Senior Exchangeable Notes
—

 
870

 
—

 
—

 
870

Interest expense
—

 
95,071

 
—

 
(86,387
)
 
8,684

Income (loss) before income tax expense
123,481

 
(40,861
)
 
748,655