HOUSTON, May 2 /PRNewswire-FirstCall/ -- NATCO Group Inc. today announced revenue for the first quarter 2006 of $117.8 million, an increase of 33% over first quarter 2005 revenue of $88.7 million. Net income allocable to common stockholders for the first quarter 2006 was $7.5 million, or $0.41 per diluted share, compared to net income allocable to common stockholders for the first quarter 2005 of $2.5 million, or $0.16 per diluted share.
Segment profit increased to $14.4 million for the first quarter 2006, up 103% from $7.1 million for the first quarter 2005. Bookings for the first quarter 2006 were $154.3 million, up 49% from first quarter 2005 bookings of $103.8 million.
John U. Clarke, NATCO's Chairman and CEO, said, "Our operating results solidly reflect the positive impact from the strong bookings profile of last year and the improved operating efficiencies in each business segment resulting from revenue and cost initiatives started in 2005. Each business segment posted record earnings in the quarter with forward momentum expected to continue well into 2007."
The increase in revenue and segment profit over the prior year's first quarter was primarily due to improved results from both the standard and traditional and built-to-order business lines within the Company's Oil & Water Technologies segment. Also, the Company's Gas Technologies segment increased its earnings contribution from new built-to-order systems, higher throughput at its West Texas CO2 processing facility and replacement membrane sales compared to the prior year's quarter. The Company's Automation & Controls business showed improvement in the first quarter of 2006 compared to the first quarter of 2005 as a result of higher Gulf of Mexico field service work and an increase in revenue from control panel fabrication projects.
For the first quarter 2006, the Oil & Water Technologies segment increased revenue over the first quarter 2005 by 27% to $85.1 million. Segment profit increased $4.2 million to $5.6 million. The improved results included margin benefits from favorable execution activity on several Middle East built-to- order projects and from standard and traditional pricing and margin improvements in North America. First quarter 2006 bookings for the segment increased 44% to $112.8 million from $78.1 million for the first quarter 2005 primarily as a result of increased awards of built-to-order projects.
Revenue from the Gas Technologies segment was $12.7 million in the first quarter 2006, compared to $7.9 million in the first quarter 2005. Segment profit for the first quarter 2006 was $6.1 million compared with $4.1 million in the prior year period primarily as a result of higher membrane replacement sales activity in the current year, higher contribution from CO2 membrane built-to-order projects and higher throughput at the Company's West Texas CO2 processing facility. Bookings in the first quarter 2006 totaled $20.5 million, compared with $11.5 million in the first quarter 2005 due to the award of an add-on to an existing CO2 membrane system announced early in the first quarter 2006.
Revenue and segment profit contribution from the Automation & Controls segment in the first quarter 2006 increased 38% and 70% over the prior year's comparable period to $20.9 million and $2.7 million, respectively. The increase in Gulf of Mexico field service work and higher revenue from panel fabrication projects each contributed to the period over period increase.
Weighted average shares of 19.0 million for the first quarter 2006 increased from 16.0 million in the first quarter of 2005 primarily as a result of the dilutive impact of the Company's outstanding convertible preferred shares.
Mr. Clarke concluded, "NATCO set records for bookings, backlog, net income and earnings per share in the first quarter. Each of our operating segments continues to experience historically high levels of activity. The pricing discipline and cost control initiatives we implemented over the past twelve months have resulted in improved gross profit and segment profit margins. We made very good progress on the integration and consolidation of our UK Execution Center and, as previously announced, will incur a mid-year charge of approximately $2 million related to vacating one of our lease office facilities."
The Company is increasing 2006 guidance with respect to segment profit, now estimated at $58 to $63 million based upon revenues of approximately $500 to $525 million and earnings per diluted common share, excluding special charges, of $1.65 to $1.75. For the second quarter 2006, the Company expects revenue of $115 to $120 million and segment profit of $14.5 to $15.0 million.
The Company will hold its quarterly earnings conference call on Wednesday, May 3rd at 9:00 a.m. Central time. Interested parties are directed to the investor relations page on the Company's website for information on accessing the conference call or webcast.
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 nearly 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 hurricane impacts, markets 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December 31,
2006 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $13,602 $9,198
Trade accounts receivable, less allowance
for doubtful accounts of $1,397 and $1,123
as of March 31, 2006 and December 31, 2005,
respectively 116,304 111,770
Inventories 44,211 37,194
Deferred tax assets, net 3,462 3,465
Prepaid expenses and other current assets 3,324 3,612
Total current assets 180,903 165,239
Property, plant and equipment, net 32,851 33,263
Goodwill, net 80,882 80,891
Deferred income tax assets, net 3,395 3,329
Other assets, net 1,596 1,021
Total assets $299,627 $283,743
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $42,628 $48,720
Accrued expenses and other 43,708 41,781
Customer advances 29,387 18,272
Current installments of long-term debt 24,393 6,429
Income tax payable 3,678 890
Total current liabilities 143,794 116,092
Long-term debt, excluding current installments --- 20,964
Long-term deferred tax liabilities 683 483
Postretirement benefit and other
long-term liabilities 9,683 9,814
Total liabilities $154,160 $147,353
Series B redeemable convertible preferred
stock (aggregate redemption value of
$15,000), $.01 par value. 15,000 shares
authorized, issued and outstanding
(net of issuance costs) 14,222 14,222
Stockholders' equity:
Preferred stock $.01 par value. Authorized
5,000,000 shares (of which 500,000 are
designated as Series A and 15,000 are
designated as Series B); no shares issued
and outstanding (except Series B
shares above) --- ---
Series A preferred stock, $.01 par value.
Authorized 500,000 shares; no shares
issued and outstanding --- ---
Common stock, $.01 par value. Authorized
50,000,000 shares; issued and outstanding
16,995,238 and 16,914,052 shares as of
March 31, 2006 and December 31, 2005,
respectively 170 169
Additional paid-in capital 103,197 101,671
Accumulated earnings 27,398 19,914
Treasury stock, no shares and 2,550 shares
at cost as of March 31, 2006 and
December 31, 2005, respectively --- (22)
Accumulated other comprehensive income 480 436
Total stockholders' equity 131,245 122,168
Commitments and contingencies
Total liabilities, redeemable convertible
preferred stock and stockholders' equity --- ---
$299,627 $283,743
NATCO GROUP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended March 31,
2006 2005
Revenues
Products $97,006 $71,735
Services 20,761 16,921
Total revenue 117,767 88,656
Cost of goods sold
Products $75,935 $58,425
Services 10,424 8,946
Total cost of goods sold 86,359 67,371
Gross profit 31,408 21,285
Selling, general and administrative expense 16,994 14,190
Depreciation and amortization expense 1,445 1,323
Interest expense 703 1,015
Closure, severance and other 50 42
Interest cost on postretirement benefit liability 50 210
Interest income (63) (52)
Other, net (447) (80)
Income before income taxes 12,676 4,637
Income tax provision 4,817 1,762
Net income $7,859 $2,875
Preferred stock dividends 375 375
Net income allocable to common stockholders $7,484 $2,500
Earnings per share allocable to common
stockholders:
- basic $0.45 $0.16
- diluted $0.41 $0.16
Basic weighted average number of shares of
common stock outstanding 16,663 15,816
Diluted weighted average number of shares
of common stock outstanding 19,046 16,042
NATCO GROUP INC. AND SUBSIDIARIES
UNAUDITED SEGMENT INFORMATION
(in thousands, except percentages)
Three Months Ended
March 31, December 31,
2006 2005 2005
Revenue:
Oil & Water Technologies $85,070 $67,005 $87,038
Gas Technologies 12,702 7,897 10,726
Automation & Controls 20,872 15,152 17,827
Eliminations (877) (1,398) (809)
Total revenue $117,767 $88,656 $114,782
Gross profit:
Oil & Water Technologies $19,220 $12,845 $18,256
Gas Technologies 7,596 5,117 6,247
Automation & Controls 4,592 3,323 3,749
Total gross profit $31,408 $21,825 $28,252
Gross profit % of revenue:
Oil & Water Technologies 22.6% 19.2% 21.0%
Gas Technologies 59.8% 64.8% 58.2%
Automation & Controls 22.0% 21.9% 21.0%
Total gross profit % of revenue 26.7% 24.0% 24.6%
Operating expenses:
Oil & Water Technologies $13,589 $11,415 $13,102
Gas Technologies 1,525 1,052 1,450
Automation & Controls 1,880 1,723 2,210
Total operating expenses $16,994 $4,190 $16,762
Segment profit (EBITDA): (A)
Oil & Water Technologies $5,631 $1,430 $5,155
Gas Technologies 6,071 4,065 4,797
Automation & Controls 2,712 1,600 1,538
Total segment profit $14,414 $7,095 $11,490
Segment profit % of revenue:
Oil & Water Technologies 6.6% 2.1% 5.9%
Gas Technologies 47.8% 51.5% 44.7%
Automation & Controls 13.0% 10.6% 8.6%
Total segment profit % of
revenue 12.2% 8.0% 10.0%
Bookings:
Oil & Water Technologies $112,816 $78,080 $105,412
Gas Technologies 20,536 11,534 5,244
Automation & Controls 20,994 14,144 18,219
Total bookings $154,346 $103,758 $128,875
As of As of
March 31, December 31,
Backlog: 2006 2005 2005
Oil & Water Technologies $177,555 $84,022 $149,772
Gas Technologies 18,260 5,668 10,426
Automation & Controls 11,788 2,987 10,826
Total backlog $207,603 $92,677 $171,024
(A) Total segment profit is a non-GAAP financial measure that can be
reconciled to the unaudited condensed consolidated statements of
operations 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
March 31, December 31,
2006 2005 2005
Total Segment profit: $14,414 $7,095 $11,490
Net interest expense 640 963 766
Depreciation and amortization 1,445 1,323 1,295
Closure, severance and other 50 42 539
Interest cost on postretirement
benefit liability 50 210 137
Other, net (447) (80) (127)
Income before income taxes $12,676 $4,637 $8,880
Income tax provision 4,817 1,762 2,505
Net income $7,859 $2,875 $6,375
Preferred stock dividends 375 375 375
Net income allocable to
common stockholders $7,484 $2,500 $6,000
