NATCO Group Announces 3rd Quarter 2009 Results
- Press Release
- Source: NATCO Group Inc.
- On 8:04 am EST, Monday November 9, 2009
HOUSTON, Nov. 9 /PRNewswire-FirstCall/ -- NATCO Group Inc. (NYSE: NTG - News) today announced revenue for the third quarter 2009 of $155.2 million, compared with the third quarter 2008 revenue of $159.3 million. Net income available to common stockholders for the third quarter 2009 was $8.3 million, or $0.41 per diluted share compared with net income of $5.6 million, or $0.27 per diluted share for the third quarter 2008. Segment profit was $17.5 million for this year's third quarter compared with $10.1 million for the third quarter last year.
Included in the third 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 ("Cameron") and $0.2 million of certain legal and compliance review costs. The third quarter of 2008 included $1.8 million of certain legal and compliance review costs. Without these charges, all of which were net of tax, net income available to common stockholders would have been $0.52 per diluted share for the third quarter 2009 compared with $0.37 per diluted share in the third quarter of 2008.
Bookings for the third quarter 2009 were $92.9 million, compared with $222.2 million for the third quarter 2008. At September 30, 2009, backlog stood at $184.5 million, compared with backlog of $336.0 million at September 30, 2008, and $280.2 million at year end 2008.
For the year-to-date period ended September 30, 2009, the Company posted revenue of $472.6 million, compared with $471.6 million for the same period in 2008; segment profit of $47.2 million, compared with $40.4 million year to date 2008; and net income available to common stockholders for year to date 2009 of $23.4 million, or $1.17 per diluted share, compared with net income available to common stockholders for year-to-date 2008 of $21.4 million, or $1.07 per diluted share. Included in the year-to-date period ended September 30, 2009 were approximately $3.5 million of costs associated with the proposed acquisition of the Company by Cameron, $0.6 million of costs associated with the Company's UK subsidiary's cancellation of certain contracts, and $0.2 million of certain legal and compliance review costs, which, net of tax, total $4.3 million or $0.22 per diluted share. The year-to-date period ended September 30, 2008 included $6.4 million of legal and compliance review costs net of tax, or $0.32 per diluted share.
Bookings for the 2009 year-to-date period were $376.8 million, compared with 2008 year-to-date period bookings of $637.0 million.
Revenue from the Integrated Engineered Solutions segment was $88.8 million in the third quarter 2009, compared to $45.5 million in the third quarter 2008. Segment profit for the third quarter 2009 was $20.8 million, compared with $4.4 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 third quarter 2009 totaled $26.2 million, compared with $86.7 million in the third quarter 2008.
For the third quarter 2009, revenue for the Standard & Traditional segment decreased from $96.6 million during the third quarter 2008 to $51.7 million, and segment profit decreased from $6.7 million to a segment loss of $1.7 million. In the third quarter 2009, bookings for the segment were $51.7 million compared with $116.9 million for the third quarter 2008. These decreases were primarily due to the continued decline in well completion activity in North America, partially offset by positive incremental margin contributions from our Connor Sales acquisition which closed in the third quarter of 2008.
Revenue from the Automation & Controls segment in the third quarter 2009 was $16.5 million, compared with $18.5 million in the third quarter 2008. A segment loss of $1.5 million was incurred in the third quarter 2009, compared with a segment loss of $1.0 million in the third quarter 2008. Revenue was down primarily due to the completion of the Kazakhstan operations as of December 31, 2008 and lower panel shop sales associated with the general decrease in industry activity. Segment profit margins deteriorated despite a stabilization of gross margins due to an increase in selling expenses and corporate support costs.
Weighted average diluted shares dropped from 20.0 million for the third quarter 2008 to 19.7 million for the third quarter 2009, primarily as a result of the Company's share repurchase program.
2009 Guidance
In conjunction with the proposed merger, NATCO has previously withdrawn 2009 guidance and will not hold a quarterly conference call. Interested parties are directed to the Company's third quarter 2009 report on Form 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, 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. In order to consummate the merger, the merger agreement must be adopted by NATCO stockholders holding at least a majority of the shares of NATCO common stock outstanding on October 6, 2009, the record date. The proposal is being presented to NATCO stockholders for approval at a special meeting of NATCO stockholders to be held on November 18, 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)
-------- ------------
Sept 30, December 31,
2009 2008
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $38,908 $17,698
Trade accounts receivable, less allowance
for doubtful accounts of $2,398
and $2,090 as of September 30,
2009 and December 31, 2008,
respectively 96,802 146,127
Costs and estimated earnings in excess
of billings on uncompleted contracts 34,359 31,237
Inventories, net 47,311 58,163
Deferred income tax assets, net 10,212 8,077
Prepaid expenses and other
current assets 4,001 9,724
----- -----
Total current assets $231,593 $271,026
Property, plant and equipment, net 99,855 77,016
Goodwill, net 132,404 127,389
Deferred income tax assets, net 992 708
Intangible and other assets, net 28,704 32,027
------ ------
Total assets $493,548 $508,166
======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS'
EQUITY
Current liabilities:
Trade accounts payable and other $53,982 $76,253
Accrued expenses 63,407 52,202
Billings on uncompleted
contracts in excess of costs
and estimated earnings 20,008 51,131
Income taxes payable 5,400 5,675
----- -----
Total current liabilities $142,797 $185,261
Long-term deferred tax liabilities 16,360 12,250
Long-term debt - 13,000
Postretirement benefits and other long-term
liabilities 8,157 9,689
----- -----
Total liabilities $167,314 $220,200
======== ========
Commitments and contingencies
Stockholders' equity:
NATCO Group Inc. stockholders' equity
Preferred stock, $.01 par value;
Authorized 5,000,000 shares (of
which 500,000 are designated
as Series A); no shares issued
and outstanding
Common stock, $.01 par value;
50,000,000 shares authorized;
20,012,434 and 20,242,414
shares issued as of September 30,
2009 and December 31, 2008,
respectively 203 203
Additional paid-in-capital 165,918 159,193
Retained earnings 159,986 136,588
Treasury stock, 243,480 and 321,274
shares as of September 30, 2009 and
December 31, 2008, respectively (4,296) (4,623)
Accumulated other comprehensive income 1,731 (4,923)
----- ------
Total NATCO Group Inc.
stockholders' equity 323,542 286,438
------- -------
Noncontrolling interests 2,692 1,528
Total equity $326,234 $287,966
-------- --------
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity $493,548 $508,166
======== ========
NOTE: On January 1, 2009, we modified presentation of the noncontrolling
interests in our consolidated financial statements in accordance with the
Consolidation Topic of the FASB ASC. This Topic provides accounting and
reporting standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary by re-characterizing minority
interests as noncontrolling interests and classifying them as a component
of equity in our consolidated balance sheet. The guidance requires net
income attributable to both the parent and the noncontrolling interest to
be disclosed separately on the face of the consolidated statement of
operations. The presentation and disclosure requirements of this Topic
require retrospective application to all prior periods presented.
The Consolidation Topic of FASB ASC also requires enhanced disclosures to
clearly distinguish between our interests and the interests of
noncontrolling owners. Our noncontrolling interests relate to two
international subsidiaries (in Japan and Angola) and one subsidiary in the
US (a pilotless burner system company), which we consolidate. In
accordance with this guidance, we presented the noncontrolling interests
in these three subsidiaries as equity on our consolidated balance sheets
as of September 30, 2009 and December 31, 2008 and presented net income
attributable to noncontrolling interests separately on our consolidated
statements of operation for the three and nine months ended September 30,
2009 and 2008. Prior year amounts were previously included in mezzanine
equity and in selling, general and administrative expense on our
consolidated balance sheets and consolidated statements of operation,
respectively. The effect at December 31, 2008 was a reduction in the
reported noncontrolling interest in mezzanine equity of $1.5 million,
which was reclassified as a component of equity.
NATCO GROUP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
-------------- --------------
(See Note 1) (See Note 1)
Revenue:
Products $130,366 $135,548 $399,579 $392,331
Services 24,840 23,719 73,014 79,304
------ ------ ------ ------
Total revenue $155,206 $159,267 $472,593 $471,635
Cost of goods sold and
services:
Products $90,959 $103,019 $289,777 $295,479
Services 12,471 12,826 37,976 42,219
------ ------ ------ ------
Total cost of goods
sold and services $103,430 $115,845 $327,753 $337,698
-------- -------- -------- --------
Gross profit $51,776 $43,422 $144,840 $133,937
Selling, general and
administrative expense 33,876 32,498 95,334 91,756
Depreciation and
amortization expense 3,507 2,285 9,634 7,136
Interest expense 177 199 700 433
Interest income (22) (204) (54) (813)
(Gain) Loss on
unconsolidated
investment (749) 37 (280) (46)
Other (income)expense, net 1,012 (755) 565 237
----- ---- --- ---
Income before income
taxes and
noncontrolling interests $13,975 $9,362 $38,941 $35,234
Income tax provision 5,038 3,331 14,032 12,501
----- ----- ------ ------
Net income $8,937 $6,031 $24,909 $22,733
Less: Net income
attributable to the
noncontrolling
interests 652 463 1,514 1,119
Net income
attributable to
NATCO Group Inc. 8,285 5,568 23,395 21,614
Preferred stock dividends - - - 248
--- --- --- ---
Net income
available to
common
stockholders $8,285 $5,568 $23,395 $21,366
====== ====== ======= =======
Earnings per share:
-Basic $0.42 $0.28 $1.17 $1.09
-Diluted $0.41 $0.27 $1.17 $1.07
Weighted average
number of shares of
common stock:
-Basic 19,546 19,802 19,529 19,373
-Diluted 19,716 19,977 19,672 19,953
NATCO GROUP INC. AND SUBSIDIARIES
UNAUDITED SEGMENT INFORMATION
(in thousands)
Three Months Nine Months
Ended Ended
September 30, June 30, September 30,
------------- -------- -------------
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
Revenue:
Integrated
Engineered
Solutions $88,786 $45,532 $134,759 $223,545 $151,958
Standard & Traditional 51,747 96,568 149,388 201,135 252,654
Automation & Controls 16,535 18,502 36,538 53,073 71,727
Eliminations (1,862) (1,335) (3,298) (5,160) (4,704)
------ ------ ------ ------ ------
Total revenue $155,206 $159,267 $317,387 $472,593 $471,635
======== ======== ======== ======== ========
Gross profit:
Integrated
Engineered
Solutions $34,319 $16,885 $45,666 $79,985 $53,288
Standard & Traditional 14,817 23,846 41,298 56,115 65,178
Automation & Controls 2,639 2,691 6,100 8,739 15,471
----- ----- ----- ----- ------
Total gross profit $51,775 $43,422 $93,064 $144,839 $133,937
======= ======= ======= ======== ========
Gross profit % of
revenue:
Integrated
Engineered
Solutions 38.7% 37.1% 33.9% 35.8% 35.1%
Standard & Traditional 28.6% 24.7% 27.6% 27.9% 25.8%
Automation & Controls 16.0% 14.5% 16.7% 16.5% 21.6%
Total gross profit % of
revenue 33.4% 27.3% 29.3% 30.6% 28.4%
Operating expenses:
Integrated
Engineered
Solutions $13,564 $12,503 $23,873 $37,437 $34,997
Standard & Traditional 16,520 17,145 32,130 48,650 48,085
Automation & Controls 4,142 3,649 7,375 11,517 10,481
----- ----- ----- ------ ------
Total operating
expenses $34,226 $33,297 $63,378 $97,604 $93,563
======= ======= ======= ======= =======
Segment profit:(1)EBITDA
Integrated
Engineered
Solutions $20,755 $4,382 $21,793 $42,548 $18,291
Standard & Traditional $(1,703) $6,701 $9,168 $7,465 $17,093
Automation & Controls $(1,503) $(958) $(1,275) $(2,778) $4,990
------- ----- ------- ------- ------
Total segment profit $17,549 $10,125 $29,686 $47,235 $40,374
======= ======= ======= ======= =======
Segment profit % of
Revenue
Integrated
Engineered
Solutions 23.4% 9.6% 16.2% 19.0% 12.0%
Standard & Traditional -3.3% 6.9% 6.1% 3.7% 6.8%
Automation & Controls -9.1% -5.2% -3.5% -5.2% 7.0%
---- ---- ---- ---- ---
Total segment profit %
of Revenue 11.3% 6.4% 9.4% 10.0% 8.6%
==== === === ==== ===
Bookings:
Integrated
Engineered
Solutions $26,203 $86,737 $139,695 $165,898 $270,495
Standard & Traditional 51,699 116,934 102,516 154,215 298,214
Automation & Controls 15,022 18,515 41,703 56,725 68,339
------ ------ ------ ------ ------
Total bookings $92,924 $222,186 $283,914 $376,838 $637,048
======= ======== ======== ======== ========
As of September 30, As of June 30,
Backlog: 2009 2008 2009
---- ---- ----
Integrated
Engineered
Solutions $138,683 $215,254 $201,269
Standard & Traditional 34,395 113,415 34,289
Automation & Controls 11,379 7,366 11,183
------ ----- ------
Total backlog $184,457 $336,035 $246,741
======== ======== ========
(1) On January 1, 2009, we modified presentation of the noncontrolling
interests in our consolidated financial statements in accordance with
the Consolidation Topic of the FASB ASC. This Topic provides
accounting and reporting standards for the noncontrolling interest in
a subsidiary and for the deconsolidation of a subsidiary by re-
characterizing minority interests as noncontrolling interests and
classifying them as a component of equity in our consolidated balance
sheet. The guidance requires net income attributable to both the
parent and the noncontrolling interest to be disclosed separately on
the face of the consolidated statement of operations. The presentation
and disclosure requirements of this Topic require retrospective
application to all prior periods presented.
The Consolidation Topic of FASB ASC also requires enhanced disclosures
to clearly distinguish between our interests and the interests of
noncontrolling owners. Our noncontrolling interests relate to two
international subsidiaries (in Japan and Angola) and one subsidiary in
the US (a pilotless burner system company), which we consolidate. In
accordance with this guidance, we presented the noncontrolling
interests in these three subsidiaries as equity on our consolidated
balance sheets as of September 30, 2009 and December 31, 2008 and
presented net income attributable to noncontrolling interests
separately on our consolidated statements of operation for the three
and nine months ended September 30, 2009 and 2008. Prior year amounts
were previously included in mezzanine equity and in selling, general
and administrative expense on our consolidated balance sheets and
consolidated statements of operation, respectively. The effect at
December 31, 2008 was a reduction in the reported noncontrolling
interest in mezzanine equity of $1.5 million, which was reclassified
as a component of equity.
Three Months Nine Months
Ended Ended
(in thousands) September 30, June 30, September 30,
------------- -------- -------------
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
See Note (2) See Note (2)
Total segment profit: $17,549 $10,125 $29,686 $47,235 $40,374
Less:
Noncontrolling
interests expenses (1,100) (762) (1,451) (2,551) (1,853)
Depreciation and
amortization 3,507 2,285 6,127 9,634 7,136
Interest expense 177 199 523 700 433
Interest income (22) (204) (32) (54) (813)
Other, net 1,012 (755) (447) 565 237
----- ---- ---- --- ---
Income before income
taxes and noncontrolling
interests $13,975 $9,362 $24,966 $38,941 $35,234
======= ====== ======= ======= =======
(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 above. 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.
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