FMC Revenue Up 31%, Subsea Sales Up 35%
FMC Technologies, Inc. has reported second quarter 2008 revenue of $1.5 billion, up 27% over the second quarter of 2007. Diluted earnings per share from continuing operations were $0.81, up 47% from $0.55 per diluted share in the prior-year quarter.
The diluted earnings per share of $0.81 for the second quarter included a $0.04 per share charge associated with the planned spin-off of JBT Corporation (JBT) and a $0.05 per share gain associated with the non-cash mark-to-market of foreign currency contracts. JBT, which is comprised of the FoodTech and Airport Systems businesses, is planned to be spun-off to FTI shareholders on July 31, 2008 after market close.
In the quarter, inbound orders for the company totaled $1.4 billion, of which $1.2 billion was in Energy Systems. Backlog was $5.0 billion, including $4.6 billion in Energy Systems.
Operating profit in Energy Systems was strong, up 50% in Energy Production Systems and up 23% in Energy Processing Systems from the second quarter of 2007.
"We are very pleased with our second quarter results and with the progression of the JBT spin-off," said Peter D. Kinnear, President and CEO. "We are increasing our full-year estimate of 2008 FTI diluted earnings per share, excluding JBT, by $0.20 to a range of $2.60 to $2.70. Our new guidance projects year-over-year growth of approximately 36% over the 2007 pro forma diluted earnings of $1.95 per share excluding JBT."
Energy Production Systems
Energy Production Systems' second quarter revenue of $947.7 million increased 31% over the prior-year quarter due mainly to increased subsea systems sales. Revenue for subsea systems was a record $779 million for the quarter, up 35% from the prior-year quarter. Surface wellhead revenue was up over 20% from the prior-year quarter.
Energy Production Systems' operating profit of $104.9 million increased 50 percent over the prior-year quarter. The increase was mainly due to higher volume and operating margin in subsea systems. Operating margin in the segment was 11.1% for the quarter.
Energy Production Systems' inbound orders were $987.3 million for the second quarter including $794 million in subsea systems. Backlog of $4.3 billion was up 60% from the prior-year quarter and included $3.9 billion in subsea backlog.
Energy Processing Systems
Energy Processing Systems' second quarter revenue of $220.8 million was 20% higher than the prior-year quarter. Each business in the segment recorded revenue improvements over the prior-year quarter mostly on higher volume of oil and gas infrastructure products.
Energy Processing Systems' second quarter operating profit of $42.9 million was 23% higher than the prior-year quarter. The improvement was due to the higher volume.
Energy Processing Systems’ inbound orders were $203.5 million for the second quarter. Backlog was $367.2 million, up 9% from the prior-year quarter.
Corporate expense in the second quarter of 2008 was $9.9 million, $0.9 million above the prior-year quarter.
During the quarter, the company incurred $5.5 million in expenses, or $0.04 per share, associated with the efforts to spin-off its FoodTech and Airport Systems businesses. Of the $5.5 million, $0.3 million was in corporate staff expense and $5.2 million was in other expense, net.
Other expense, net, of $6.0 million increased $2.1 million from the second quarter of 2007. The company also incurred a non-cash, mark-to-market gain on foreign currency forward contracts of $11.2 million, or $0.05 per share, compared to a gain in the prior-year quarter of $5.2 million. It is expected that the foreign currency forward contracts will be held to maturity and that the mark-to-market gains and losses will reverse over the life of the contracts netting to zero upon maturity.
The company ended the quarter with net debt of $48.2 million. Net interest income was $0.1 million in the second quarter as compared to a $3.7 million net interest expense in the second quarter of 2007.
In the quarter, the company repurchased 1.2 million shares of common stock for $81 million. Depreciation and amortization for the second quarter of 2008 was $24.0 million, up from $20.9 million in the prior-year quarter. Capital expenditures during the second quarter of 2008 totaled $43.4 million, up from $41.4 million in the prior-year quarter due mainly to investment in subsea intervention assets.
The company recorded an income tax rate of 33.2% for continuing operations in the second quarter. The higher than expected tax rate was due to country mix and the limited deductibility of spin-off expenses.
Summary and Outlook
FMC Technologies reported diluted earnings per share from continuing operations of $0.81, up 47% from the prior-year quarter. This result included a $0.04 per share charge associated with JBT spin-off costs and a $0.05 per share gain associated with the non-cash mark-to-market of foreign currency contracts. The spin-off of JBT is planned for July 31, 2008 after market close.
Energy Production Systems’ and Energy Processing Systems' operating profits were up 50% and 23%, respectively, over the second quarter of 2007. Total company backlog was $5.0 billion, including $4.6 billion in Energy Systems.
The company increased its estimate for its full year 2008 diluted earnings per share from continuing operations, excluding JBT, by $0.20 to a range of $2.60 to $2.70. This guidance represents year-over-year growth of approximately 36% on a comparable basis.
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