NATCO Group Announces 2nd Quarter 2009 Results
HOUSTON, Aug. 7 /PRNewswire-FirstCall/ — NATCO Group Inc. (NYSE: NTG) today announced revenue for the second quarter 2009 of $155.5 million, compared with the second quarter 2008 revenue of $160.4 million. Net income available to common stockholders for the second quarter 2009 was $6.4 million, or $0.32 per diluted share compared with net income of $6.2 million, or $0.31 per diluted share for the second quarter 2008. Segment profit was $14.1 million for this year’s second quarter compared with $12.1 million for the second quarter last year.
Included in the second quarter 2009 net income available to common stockholders were approximately $1.7 million of costs associated with the proposed acquisition of the Company by Cameron International Corporation (NYSE: CAM) and $0.6 million of costs associated with the Company’s UK subsidiary’s cancellation of certain contracts. The second quarter of 2008 included $3.2 million of certain legal and compliance review costs incurred. Without these charges, all of which were net of tax, net income available to common stockholders would have been $0.44 per diluted share for the second quarter 2009 compared with $0.47 per diluted share in the second quarter of 2008.
Bookings for the second quarter 2009 were $88.2 million, compared with $238.5 million for the second quarter 2008. At June 30, 2009, backlog stood at $246.7 million, compared with backlog of $273.1 million at June 30, 2008, and $280.2 million at year end 2008.
For the year-to-date period ended June 30, 2009, the Company posted revenue of $317.4 million, up 1.6% over the same period in 2008; segment profit of $29.7 million, compared with $30.2 million year to date 2008; and net income available to common stockholders for year to date 2009 of $15.1 million, or $0.75 per diluted share, compared with net income available to common stockholders for year-to-date 2008 of $15.8 million, or $0.80 per diluted share. Included in the year-to-date period ended June 30, 2009 were approximately $1.7 million of costs associated with the proposed acquisition of the Company by Cameron International Corporation (NYSE: CAM), $0.6 million of costs associated with the Company’s UK subsidiary’s cancellation of certain contracts, and $0.3 million of legal and compliance review costs, which, net of tax, total $2.6 million or $0.13 per diluted share. The year-to-date period ended June 30, 2008 included $4.6 million of legal and compliance review costs net of tax, or $0.23 per diluted share.
Bookings for the 2009 year-to-date period were $283.9 million, compared with 2008 year-to-date period bookings of $414.9 million.
Revenue from the Integrated Engineered Solutions segment was $73.9 million in the second quarter 2009, compared to $51.5 million in the second quarter 2008. Segment profit for the second quarter 2009 was $11.9 million, compared with $5.6 million in the prior year period primarily as a result of higher revenue runoff on orders booked during the latter months of 2008. Bookings in the second quarter 2009 totaled $26.5 million, compared with $104.2 million in the second quarter 2008.
For the second quarter 2009, revenue for the Standard & Traditional segment decreased from $85.2 million during the second quarter 2008 to $65.9 million, and segment profit decreased to $3.0 million from $5.0 million. In the second quarter 2009, bookings for the segment were $37.8 million compared with $112.6 million for the second quarter 2008. These decreases were primarily due to lower sales of equipment, parts and services across the US branch network, partially offset by additional sales and incremental margin contribution from the acquisition of Connor Sales Company, Inc. made in the third quarter of the previous year.
Revenue from the Automation & Controls segment in the second quarter 2009 was $17.4 million, compared with $25.0 million in the second quarter 2008. A segment loss of $768,000 was incurred in the second quarter 2009, compared with segment profit of $1.5 million in the second quarter 2008. Revenue was down primarily due to the completion of the Kazakhstan operations as of December 31, 2008 and lower panel and packaged system sales associated with the general decrease in industry activity. Margins have stabilized in spite of deteriorating activity levels due to successful cost cutting initiatives.
Weighted average diluted shares of 19.7 million for the second quarter 2009 were essentially unchanged from the second quarter 2008.
2009 Guidance
In light of the proposed merger, NATCO is withdrawing 2009 guidance and will not hold a quarterly conference call. Interested parties are directed to the Company’s 2nd quarter 10-Q filing for more information.
Pending Acquisition by Cameron
On June 1, 2009, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Cameron International Corporation, a Delaware corporation (“Cameron”) and Octane Acquisition Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Cameron (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Cameron, in exchange for common stock of Cameron. Under the terms of the Merger Agreement, each holder of common stock of the Company will receive 1.185 shares of common stock of Cameron for each share of Company common stock. No fractional shares of common stock of Cameron will be issued in the Merger, and the Company’s stockholders will receive cash in lieu of fractional shares, if any, of Cameron common stock.
The consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, without limitation, the approval of the Merger Agreement by the Company’s stockholders, the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, effectiveness of the registration statement on Form S-4 filed by Cameron with the Securities and Exchange Commission, approval of the listing on the New York Stock Exchange of the shares of common stock of Cameron to be issued in the Merger and the absence of any injunction or restraint that prohibits consummation of the Merger. Each party’s obligation to close the Merger is also subject to the accuracy of representations and warranties of, and compliance with, covenants by the other party to the Merger Agreement, in each case, as set forth in the Merger Agreement. The obligation of each party to close the Merger is also subject to the absence of any material adverse effect on the other party. The Merger Agreement also contains customary representations, warranties, and covenants of Cameron, Merger Sub, and the Company. NATCO and Cameron made the Hart-Scott Rodino filing on June 27, 2009 and received a request for additional information and documentary material (commonly referred to as a second request) from the Department of Justice on July 28, 2009. Cameron filed a Form S-4 Registration Statement with the Securities and Exchange Commission on July 20, 2009.
NATCO Group Inc. is a leading provider of wellhead process equipment, systems and services used in the production of oil and gas. NATCO has designed, manufactured and marketed production equipment and services for over 80 years. NATCO production equipment is used onshore and offshore in most major oil and gas producing regions of the world.
Statements made in this press release that are forward-looking in nature are intended to be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. Forward looking statements in this press release include, but are not limited to, revenue, earnings and segment profit guidance and discussions regarding the proposed merger, markets, potential awards and demand for our products. These statements may differ materially from actual future events or results. Further, bookings and backlog are not necessarily indicative of future results. Readers are referred to documents filed by NATCO Group Inc. with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which identify significant risk factors that could cause actual results to differ from those contained in the forward-looking statements.
NATCO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value data)
----------------------
June 30, December 31,
2009 2008
----------------------
(See Note 1)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $28,218 $17,698
Trade accounts receivable, less allowance
for doubtful accounts of $2,220 and
$2,090 as of June 30, 2009 and
December 31, 2008, respectively 115,570 146,127
Costs and estimated earnings in excess of
billings on uncompleted contracts 34,438 31,237
Inventories, net 50,447 58,163
Deferred income tax assets, net 7,163 8,077
Prepaid expenses and other current assets 6,376 9,724
----------------------
Total current assets $242,212 $271,026
Property, plant and equipment, net 93,007 77,016
Goodwill, net 130,524 127,389
Deferred income tax assets, net 953 708
Intangible and other assets, net 27,924 32,027
----------------------
Total assets $494,620 $508,166
======================
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and other $53,988 $76,253
Accrued expenses 54,076 52,202
Billings on uncompleted contracts in
excess of costs and estimated earnings 52,611 51,131
Income taxes payable 838 5,675
----------------------
Total current liabilities $161,513 $185,261
Long-term deferred tax liabilities 13,814 12,250
Long-term debt - 13,000
Postretirement benefits and other long-term
liabilities 8,505 9,689
----------------------
Total liabilities $183,832 $220,200
======================
Commitments and contingencies Stockholders'
equity:
NATCO Group Inc. stockholders' equity
Series A preferred stock, $.01 par
value; 500,000 shares authorized; no
shares issued and outstanding - -
Common stock, $.01 par value; 50,000,000
shares authorized; 20,255,914 and
20,242,414 shares issued as of June 30,
2009 and December 31, 2008, respectively 203 203
Additional paid-in-capital 163,915 159,193
Retained earnings 151,698 136,588
Treasury stock, 339,631 and 321,274
shares as of June 30, 2009 and
December 31, 2008, respectively (5,265) (4,623)
Accumulated other comprehensive income (1,675) (4,923)
----------------------
Total NATCO Group Inc. stockholders'
equity 308,876 286,438
----------------------
Noncontrolling interests 1,912 1,528
Total equity $310,788 $287,966
----------------------
Total liabilities, redeemable convertible
preferred stock and stockholders' equity $494,620 $508,166
----------------------
Note 1: On January 1, 2009, we adopted SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements" ("SFAS 160"). This
standard amends Accounting Research Bulletin 51, "Consolidated Financial
Statements", to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 has changed the accounting and reporting for minority
interests by re-characterizing them as noncontrolling interests and
classifying them as a component of Equity in our consolidated balance
sheet and requires net income attributable to both the parent and the
noncontrolling interest to be disclosed separately on the face of the
consolidated statement of income. The presentation and disclosure
requirements of SFAS 160 require retrospective application to all prior
periods presented.
SFAS 160 also requires enhanced disclosures to clearly distinguish between
our interests and the interests of noncontrolling owners. Our primary
noncontrolling interest relates to two international subsidiaries and one
subsidiary in the US, which we control and consolidate. Upon adoption of
SFAS 160, we have presented the noncontrolling interest in these three
subsidiaries as equity on our consolidated balance sheets as of June 30,
2009 and December 31, 2008 and presented net income attributable to
noncontrolling interests separately on our consolidated statements of
income for the three and six months ended June 30, 2009 and 2008.
Prior year amounts were previously included in mezzanine equity and
selling, general & administrative expense on our consolidated balance
sheets and consolidated statements of income, respectively. The effect at
December 31, 2008 was a reduction in the reported noncontrolling interest
in mezzanine equity of $1.5 million, which was subsequently reclassified
as a component of
NATCO GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2009 2008 2009 2008
------------------ ------------------
(See Note 1) (See Note 1)
Revenue:
Products $130,601 $134,356 $269,213 $256,783
Services 24,884 26,042 48,174 55,585
-------- -------- -------- --------
Total revenue $155,485 $160,398 $317,387 $312,368
Cost of goods sold and
services:
Products $97,213 $102,604 $198,818 $192,460
Services 12,402 13,654 25,505 29,393
-------- -------- -------- --------
Total cost of goods sold
and services $109,615 $116,258 $224,323 $221,853
-------- -------- -------- --------
Gross profit $45,870 $44,140 $93,064 $90,515
Selling, general and
administrative expense 31,165 31,424 61,458 59,258
Depreciation and amortization
expense 2,835 2,799 6,127 4,851
Interest expense 247 139 523 234
Interest income (12) (225) (32) (609)
Loss on unconsolidated
investment (56) (118) 469 (83)
Other (income)expense, net 846 (155) (447) 992
-------- -------- -------- --------
Income before income taxes and
noncontrolling interests $10,845 $10,276 $24,966 $25,872
Income tax provision 4,072 3,651 8,994 9,170
-------- -------- -------- --------
Net income $6,773 $6,625 $15,972 $16,702
Less: Net income
attributable to
the noncontrolling
interests 385 432 862 656
-------- -------- -------- --------
Net income attributable to
NATCO Group Inc. 6,388 6,193 15,110 16,046
-------- -------- -------- --------
Preferred stock dividends - 0 - 248
-------- -------- -------- --------
Net income available to
common stockholders $6,388 $6,193 $15,110 $15,798
======== ======== ======== ========
Earnings per share:
-Basic $0.32 $0.31 $0.76 $0.82
-Diluted $0.32 $0.31 $0.75 $0.80
Weighted average number of
shares of common stock:
-Basic 19,519 19,552 19,521 18,960
-Diluted 19,651 19,745 19,649 19,743
NATCO GROUP INC. AND SUBSIDIARIES
UNAUDITED SEGMENT INFORMATION
(in thousands)
Three Months Ended Six Months Ended
June 30, March 31, June 30,
-------------------------------------------------
2009 2008 2009 2009 2008
-------------------------------------------------
Revenue:
Integrated
Engineered
Solutions $73,881 $51,545 $60,878 $134,759 $106,426
Standard &
Traditional 65,872 85,201 83,516 149,388 156,086
Automation &
Controls 17,444 24,982 19,094 36,538 53,225
Eliminations (1,712) (1,330) (1,586) (3,298) (3,369)
-------------------------------------------------
Total revenue $155,485 $160,398 $161,902 $317,387 $312,368
=================================================
Gross profit:
Integrated
Engineered
Solutions $24,003 $17,788 $21,663 $45,666 $36,403
Standard &
Traditional 18,863 21,355 22,435 41,298 41,332
Automation &
Controls 3,004 4,997 3,096 6,100 12,780
-------------------------------------------------
Total gross
profit $45,870 $44,140 $47,194 $93,064 $90,515
=================================================
Gross profit
% of revenue:
Integrated
Engineered
Solutions 32.5% 34.5% 35.6% 33.9% 34.2%
Standard &
Traditional 28.6% 25.1% 26.9% 27.6% 26.5%
Automation &
Controls 17.2% 20.0% 16.2% 16.7% 24.0%
Total gross
profit % of
revenue 29.5% 27.5% 29.1% 29.3% 29.0%
Operating
expenses:
Integrated
Engineered
Solutions $12,096 $12,167 $11,777 $23,873 $22,494
Standard &
Traditional 15,887 16,373 16,243 32,130 30,940
Automation &
Controls 3,772 3,478 3,603 7,375 6,832
-------------------------------------------------
Total
operating
expenses $31,755 $32,018 $31,623 $63,378 $60,266
=================================================
Segment
profit: (1)
EBITDA
Integrated
Engineered
Solutions $11,907 $5,621 $9,886 $21,793 $13,909
Standard &
Traditional 2,976 4,982 6,192 9,168 10,392
Automation &
Controls (768) 1,519 (507) (1,275) 5,948
-------------------------------------------------
Total segment
profit $14,115 $12,122 $15,571 $29,686 $30,249
=================================================
Segment profit
% of Revenue
Integrated
Engineered
Solutions 16.1% 10.9% 16.2% 16.2% 13.1%
Standard &
Traditional 4.5% 5.8% 7.4% 6.1% 6.7%
Automation &
Controls -4.4% 6.1% -2.7% -3.5% 11.2%
-------------------------------------------------
Total segment
profit % of
Revenue 9.1% 7.6% 9.6% 9.4% 9.7%
=================================================
Bookings:
Integrated
Engineered
Solutions $26,492 $104,198 $113,203 $139,695 $183,758
Standard &
Traditional 37,782 112,573 64,734 102,516 181,280
Automation &
Controls 23,906 21,707 17,797 41,703 49,824
-------------------------------------------------
Total bookings $88,180 $238,478 $195,734 $283,914 $414,862
=================================================
As of June 30, As of March 31,
Backlog: 2009 2008 2009
----------------------------------
Integrated
Engineered
Solutions $201,269 $173,625 $248,556
Standard &
Traditional 34,289 93,097 62,041
Automation &
Controls 11,183 6,395 3,448
-----------------------------
Total backlog $246,741 $273,117 $314,045
-----------------------------
(1) On January 1, 2009, we adopted SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements" ("SFAS 160"). This
standard amends Accounting Research Bulletin 51, "Consolidated
Financial Statements", to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 has changed the accounting
and reporting for minority interests by re-characterizing them as
noncontrolling interests and classifying them as a component of
Equity in our consolidated balance sheet and requires net income
attributable to both the parent and the noncontrolling interest to be
disclosed separately on the face of the consolidated statement of
income. The presentation and disclosure requirements of SFAS 160
require retrospective application to all prior periods presented.
SFAS 160 also requires enhanced disclosures to clearly distinguish
between our interests and the interests of noncontrolling owners. Our
primary noncontrolling interest relates to two international
subsidiaries and one subsidiary in the US, which we control and
consolidate. Upon adoption of SFAS 160, we have presented the
noncontrolling interest in these three subsidiaries as equity on our
consolidated balance sheets as of June 30, 2009 and December 31, 2008
and presented net income attributable to noncontrolling interests
separately on our consolidated statements of income for the three and
six months ended June 30, 2009 and 2008. Prior year amounts were
previously included in mezzanine equity and selling, general &
administrative expense on our consolidated balance sheets and
consolidated statements of income, respectively. The effect at
December 31, 2008 was a reduction in the reported noncontrolling
interest in mezzanine equity of $1.5 million, which was subsequently
reclassified as a component of eq
(2) The Company allocates corporate and other expenses to each of the
operating segments based on headcount, total assets and revenue.
Total segment profit is a non-GAAP financial measure that is
reconciled to the Consolidated Income Statement as shown below. The
Company believes that segment profit is one of the primary drivers
and provides a more meaningful presentation for measuring the
liquidity and performance of the Company.
(in thousands)
Three Months Ended
June 30, March 31, June 30,
----------------------------------------------
2009 2008 2009 2009 2008
----------------------------------------------
Total segment
profit: $14,115 $12,122 $15,571 $29,686 $30,249
Noncontrolling
interests
expenses (646) (712) (805) (1,451) (1,091)
Depreciation and
amortization 2,835 2,799 3,292 6,127 4,851
Interest expense 247 139 276 523 234
Interest income (12) (225) (20) (32) (609)
Other, net 846 (155) (1,293) (447) 992
----------------------------------------------
Income before income
taxes and
noncontrolling
interests $10,845 $10,276 $14,121 $24,966 $25,872
SOURCE NATCO Group Inc.