We are pleased to report another record quarter fueled by continued industry strength and an optimistic customer base, commented Michael McShane, Chairman and CEO of Grant Prideco. Pricing and mix improved at every segment driving sequential incremental margins of 85%. Each of our three primary operating segments reported operating income margins in excess of 30%, and our total backlog increased to over $1 billion, a 24% sequential increase, which provides strong forward visibility.
Operating Income Margins Increased
Consolidated revenues increased by $122.3 million, or 42%, compared to last years first quarter, as worldwide drilling activity increased 18%. Consolidated operating income margins increased to 28% from 21% for the same prior year period. Other operating expenses (sales and marketing, general and administrative and research and engineering) were reduced to 17% of revenues from 21% for the same prior year period. This improvement primarily reflects reductions in sales and marketing expenses at certain foreign locations at the Companys Drill Bits segment, as well as greater overall operating efficiencies.
Interest expense decreased by $6.2 million, reflecting lower year-over-year debt balances due to significant free cash flow and a debt restructuring in 2005, which reduced the Companys average interest rate by approximately 340 basis points. Equity income from the Companys unconsolidated affiliates increased to $27.3 million from $4.8 million, which primarily reflects increased earnings at Voest-Alpine Tubulars (VAT). VATs first quarter results reflect record seamless OCTG product sales with particularly strong demand in the U.S. and China markets. In addition, losses from the Companys IntelliServ operation, previously accounted for as an equity investment, are now included in operating income. Other income (expense), net decreased from income of $1.1 million in the first quarter of 2005 to a loss of $0.3 million primarily due to foreign exchange losses.
The Companys effective tax rate was 31.3% for the first quarter of 2006 compared to 33.6% in last year's first quarter. The decrease is primarily due to a $3.0 million benefit from U.S. research and experimentation credits for years 2002 through 2005 following the completion of a study in the first quarter of 2006. The effective tax rate for 2006 is expected to be 33.6% for the balance of the year.
The Companys debt to book capitalization was 16.0% at March 31, 2006. With a cash balance of $59.4 million, the Companys net debt to book capitalization was 11.4%. During the quarter, the Company repurchased 522,500 shares of its stock at a total purchase price of $20.1 million.
Drilling Products and Services
Revenues for the Drilling Products and Services segment were a record $194.3 million during the quarter, which represents a 51% increase over last years first quarter. Operating income increased by 79% to $65.0 million, and operating income margins increased to 33% from 28% in last years first quarter. These results reflect increased volumes and pricing across all of this segments product lines. Drill pipe footage sold increased by 23% and average sales price per foot increased by 21% with increased sales of premium drill pipe products. Backlog for this segment increased to a record $871.1 million at March 31, 2006.
Revenues for the Drill Bits segment increased by 29% to a record $116.8 million and operating income increased by 64% to $35.6 million. Operating income margins increased to 30% from 24% in last years first quarter. These improvements primarily reflect the 18% increase in the worldwide rig count and incremental sales related to the Corion acquisition in July 2005. Additionally, this segment continues to benefit from cost reductions in its international locations.
Tubular Technology and Services
Revenues for the Tubular Technology and Services segment increased by 41% to $103.3 million. Operating income increased by more than 100% to $31.2 million, and operating income margins increased to 30% from 21% in last years first quarter. The record results reflect increased volumes and pricing across all of this segments business units, most significantly in its TCA heat-treating facility.
Corporate/Other expenses for the first quarter of 2006 increased to $17.4 million from $11.1 million for the same period last year. This increase is primarily due to operations costs related to the Companys IntelliServ division, which the Company began consolidating after its acquisition in September 2005. Additionally, in connection with the Companys adoption of SFAS 123(R), which requires companys to begin expensing the estimated cost of stock option grants, the Company recorded additional stock based compensation expense of $1.4 million.
Chairman and CEO, Michael McShane commented, Looking forward, we anticipate continued strength in drilling activity and demand from new rigs entering the market. In the second quarter, we expect increases at our Drilling Products segment to be offset by the normal seasonal decline in Canada and a higher expected tax rate. As a result, we are forecasting second quarter earnings to be in the range of $0.66 to $0.68 per diluted share, excluding any unusual items. For the fiscal year, we expect earnings to be in the range of $2.75 to $2.85 per diluted share.
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