Subsea shipments, acquisition fuel revenue gains
Cooper Cameron Chairman, President and Chief Executive Officer Sheldon R. Erikson said that the higher revenues were attributable to increased shipments in Cameron's subsea business and the March 2004 acquisition of Petreco, which contributed approximately $35 million to this quarter's revenues.
Cameron shows significant revenue increase
Erikson noted that excluding Petreco, Cameron achieved record revenues for the quarter, and including Petreco, revenues were up more than 50 percent from year-ago levels, due primarily to increased shipments from subsea backlog. "The increase in subsea revenues, however, includes a material amount of third-party content, which flows through our revenues at lower margins and kept Cameron's overall profit margins below traditional levels," he said. "In addition, the drilling business posted solid increases in revenues, both sequentially and compared to year-ago levels, due to project-related shipments."
Erikson said that given the reduction in subsea backlog achieved this quarter, he does not expect Cameron's revenues to increase significantly during the second half of the year, and that the actual level of orders and revenues will, to a large extent, be a function of the pace of activity in a few key markets, including North America and Europe.
CCV revenues at historical highs
CCV's revenues reached the highest quarterly total in their history, due to previously noted improvement in orders for engineered products, including pipeline ball valves. Erikson said the current order activity and business related to the U.S. rig count should keep CCV on pace toward posting the highest full-year revenues in its history.
Cooper Compression benefits from international markets
Cooper Compression also posted sequential and year-over-year increases in revenues, as international markets continue to be strong and pipeline customers return to a more historically normal level of spending on aftermarket parts and services. Erikson said he expects revenues and profits for Cooper Compression to increase in the second half of the year.
Orders increase from year-ago levels due to Petreco addition
Orders received during the second quarter of 2004 totaled $492 million, up 20 percent from year-ago levels, and year-to-date orders were $913 million, down slightly from the first half of 2003. Erikson noted that the second quarter increase from 2003 reflected the addition of Petreco and, despite the absence of any large projects, relatively strong subsea orders. "Although we did not book any major projects during the first half of 2004 -- unlike the first quarter of 2003 -- our year-to-date orders for all of Cooper Cameron are about even with the first half of 2003, and we expect to see full-year orders exceed our year-ago totals."
At June 30, 2004, total backlog was $955 million, down from the prior quarter's $1.02 billion and the June 30, 2003 level of $989 million, largely due to the delivery of equipment out of Cameron's subsea backlog and continuing delays in major subsea project awards.
Balance sheet reflects refinancing steps
At June 30, 2004, Cooper Cameron's total debt was $469.8 million, and cash was $208.6 million, resulting in net debt of $261.2 million and a net debt-to- capitalization ratio of approximately 19.1 percent. Erikson said that during the second quarter, the Company repurchased all $260 million of its zero- coupon convertible debentures; repurchased $185 million of its $200 million of 1.75 percent convertible debentures under a cash tender offer; and issued $238 million of 1.50 percent convertible debentures in a new offering. "The repurchases of the two original series of convertibles removed approximately 4.5 million shares from our fully diluted earnings per share computation," Erikson said. "The new 1.50 percent issue is a contingent convertible, meaning that the underlying common shares are not included in the fully diluted calculation, subject to the Company's stock price reaching certain levels."
Erikson said that the recent repurchase of the debentures required the non-cash after-tax write-off of some $4.6 million of previously capitalized debt issuance costs. He also noted that, in concert with the new convertible offering, the Company repurchased approximately 939,000 shares of its common stock at an average price of approximately $48.96 per share, and will continue to consider acquisition opportunities and share repurchases as uses for its cash.
Erikson also said the Company generated approximately $64.2 million of cash from operating activities during the quarter and $69.2 million for the first six months, and that net capital spending through the first half of the year totaled approximately $20.6 million.
Earnings expectations raised
Erikson said that Cooper Cameron's third quarter earnings are expected to increase to approximately $0.50 to $0.55 per share. He also noted that full- year earnings are expected to be approximately $1.70 to $1.75 per share, including severance charges totaling approximately $5.0 million after-tax, or $0.09 per share, and the write-off of debt issuance costs of $4.6 million after-tax, or $0.09 per share. "We expect improved earnings performance in the second half of the year from all three of our divisions," he said.
Cooper Cameron Corporation is a leading international manufacturer of oil and gas pressure control equipment, including valves, wellheads, controls, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications, and provides oil and gas separation equipment. Cooper Cameron is also a leading manufacturer of centrifugal air compressors, integral and separable gas compressors and turbochargers.
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