Cameron reported net income of $114.6 million, or $0.52 per diluted share, for the quarter ended March 31, 2009, compared with net income of $123.0 million, or $0.53 per diluted share, for the first quarter of 2008. The first quarter 2009 results include a pretax charge of $22.3 million, or $0.07 per diluted share, for severance-related costs incurred during the quarter. In addition, the Company's results for the first quarter of 2008 and the balance sheet at December 31, 2008 have been revised to reflect a new accounting standard, which became effective on January 1, 2009, related to convertible debt.
Year-Over-Year Revenues Decline; Earnings, Excluding Charge, Higher
Revenues were $1,257.0 million for the quarter, down six percent from 2008's $1,339.3 million, and income before income taxes was $167.3 million (including the $22.3 million charge), down seven percent from $180.5 million a year ago. Cameron President and Chief Executive Officer Jack B. Moore said that the revenue decline is due primarily to the timing of certain subsea project deliveries in Drilling & Production Systems (DPS) and lower sales in the Distributed Valves component of the Valves & Measurement (V&M) group, reflecting softness in the North American market. He also noted that improved project-related margins drove the year-over-year increase in earnings, excluding charges.
Orders Reflect Soft Markets, Lack of Sizable Project Awards
Total orders were $983 million for the quarter, down from $1.95 billion in the first quarter of 2008, due largely to overall market weakness and a lack of large project awards. "Lower activity levels, particularly in North American markets, along with customer cash flow and credit issues, are affecting our customers' spending, particularly in our shorter-cycle businesses," Moore said. "In addition, our first quarter 2008 orders included a large subsea project worth approximately $650 million, making the comparison with current-year orders more difficult."
Cameron's backlog declined from $5.61 billion at year-end 2008 to $5.27 billion at the end of the first quarter, but was up eight percent from the March 31, 2008 level of $4.90 billion.
Cash Generation for Yyear Expected to More Than Cover Internal Needs
Cameron's operations utilized cash of $128.3 million during the first quarter of 2009, compared with generating cash flow from operations of $44.3 million a year ago. Moore said the cash utilization in the first quarter was due to an increase in the Company's inventories, primarily to meet customer delivery requirements in the project-related businesses. "This inventory growth will be reversed in subsequent quarters," Moore said, "and we still expect to generate ample free cash for the full year." He also noted that Cameron expects its capital spending during 2009 to be approximately $200 million, down from $272 million last year, with about half of that directed toward the completion of the Malaysian subsea facility expansion and the new Romanian surface equipment plant.
Balance Sheet Remains Strong, Share Buybacks Continue
As of March 31, 2009, Cameron's cash and cash equivalents of $1.44 billion exceeded its total debt by approximately $35 million. "Our balance sheet is healthy and we continue to assess opportunities for uses of cash," Moore said, "including acquisitions and timely repurchases of our own stock." He noted that Cameron repurchased approximately 348,000 shares of its common stock during the first quarter at an average price of about $20.29 per share.
Earnings Guidance Adjusted to Reflect Latest Market Expectations, Lower Tax Rate
Moore said that Cameron's second quarter earnings are expected to be in the range of $0.45 to $0.48 per share, and that the Company anticipates that full-year 2009 earnings will be in the range of $1.85 to $2.00 per share, compared with earlier expectations of $1.75 to $2.00. He noted that the full-year figures exclude the severance costs recorded in the first quarter results, and any similar charges that may be recognized during the year. "The improvement in the lower end of our guidance reflects our expectation that we will continue to efficiently execute on delivery of projects in backlog, as well as an anticipated improvement in our tax rate for the balance of the year." Moore said. "While declines in rig count and related activity in North America have continued, and we expect to see pressure on our sales and margins in certain product lines or regions during the balance of the year, those factors are reflected in our updated guidance." Moore said the Company is continuing to address costs in its supply chain and closely monitor capital spending, and will take whatever steps are necessary to deal with slowdowns in its markets.
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