Cooper Cameron Fourth Quarter Earnings Total $0.47 Per Share
Cooper Cameron Corporation (NYSE: CAM) reported net income of $54.7 million, or $0.47 per diluted share, for the quarter ended December 31, 2005, compared with net income in the prior year's fourth quarter of $28.9 million, or $0.27 per diluted share. (Per share data for all prior periods has been revised to reflect a 2-for-1 stock split effective December 15, 2005.)
Revenues up 35 percent for quarter, 20 percent for year; net income up 81 percent for year
Revenues for the fourth quarter of 2005 were $738.5 million, up 16 percent from the third quarter of this year, and 35 percent above fourth quarter 2004's $547.2 million, with all three business segments contributing to the revenue increase. Revenues for the year were a record $2.52 billion, up approximately 20 percent from 2004's $2.09 billion, with increases in all three segments. Cooper Cameron Chairman, President and Chief Executive Officer Sheldon R. Erikson said that the Company's revenue increases are being driven by a combination of strong markets and acquisitions.
Net income for the year ended December 31, 2005 was the highest in the Company's history at $171.1 million, or $1.52 per diluted share. This compares with 2004 net income of $94.4 million, or $0.88 per diluted share, which included a non-cash after-tax write-off of debt issuance costs of $4.6 million, or $0.04 per diluted share and $2.7 million, or $0.03 per diluted share, for the write-down of a technology investment.
Orders, year-end backlog reach record levels
Orders booked during the fourth quarter of 2005 totaled $786 million, up 23 percent from a year ago, as orders for each of the Company's three divisions were higher than in the fourth quarter of 2004.
Total orders for full-year 2005 were $3.46 billion, up 72 percent from 2004's $2.01 billion. Erikson noted that Cameron's $2.30 billion and Cooper Cameron Valves' (CCV) $711 million were records for total orders in those divisions, surpassing the records set in 2004, and helped drive their backlogs to new highs. Orders in the second quarter of 2005, aided by the booking of the Akpo project, totaled more than $1.1 billion and were the highest for a single quarter in the Company's history.
At year-end 2005, total backlog was $2.16 billion, more than double the $1.00 billion of a year ago, with CCV's backlog reflecting approximately $252 million added through the Dresser acquisition. Both Cameron's and CCV's backlogs, as well as the Company's consolidated backlog, are at the highest levels in their history.
Free cash flow generation remains healthy
Erikson said that Cooper Cameron's free cash flow (net cash provided by operating activities less capital expenditures) totaled $275 million during 2005, compared with approximately $142 million in 2004. "Capital spending for 2005 was approximately $78 million," he said, "and we spent about $329 million on acquisitions during the year, all paid for with cash. We anticipate that during 2006, our divisions will again generate more than enough cash to fund our capital spending needs and day-to-day cash requirements." Erikson noted that he expects capital expenditures to increase to approximately $130 to $150 million during the year as the Company embarks on a significant program to upgrade its machine tools, manufacturing technologies, processes and facilities in order to improve efficiency and address current and expected market demand for Cooper Cameron's products.
Dresser acquisition closed
Erikson said the Company closed on substantially all of the businesses acquired from the Flow Control segment of Dresser, Inc. as of December 1, 2005, and closed on the remaining piece in early January 2006. "We are well under way with the integration of this, the largest acquisition we have made to date, into the CCV operations," Erikson said. "Given the long-term opportunities imbedded in these businesses, we have decided to significantly accelerate the pace of the consolidation, and we now expect to recognize approximately $55 million of related expenses during 2006, of which approximately $36 million will be cash. This should represent the vast majority of the costs required to complete the integration."
Financial condition remains solid in wake of active acquisition year
"Our debt, net of cash and cash equivalents, at year-end was $89 million, and the ratio of this net debt-to-capitalization decreased from 16.3 percent at year-end 2004 to 5.3 percent at year-end 2005," Erikson said. He also noted that as a result of the Company's level of spending on acquisitions during the year, Cooper Cameron repurchased fewer shares of its common stock than in recent periods. The Company spent $9.4 million to buy about 329,000 shares during the year at an average price of approximately $28.56 (after giving effect to the 2-for-1 stock split effective December 15, 2005), compared with share repurchases in 2004 totaling $95.3 million.
Earnings expectations for 2006 reflect current market strength, activity
Erikson said the Company currently expects 2006 earnings to be approximately $1.70 to $1.80 per diluted share, including charges of approximately $0.10 per share for equity- and option-based compensation, and charges of approximately $0.30 per share for expenses related to the integration of the Dresser acquisition. "Our 2006 results will be a function of our ability to turn our record backlog into revenues on a timely and profitable basis, and our progress in integrating the Dresser businesses," Erikson said. "Our performance will also depend, to a great extent, on whether current activity levels in shorter-cycle business across our product lines prove to be sustainable."
Erikson noted that the costs related to the accelerated integration of the Dresser acquisition reflect a couple of changes in the Company's original approach to the process. "First, we have determined that certain of the acquired businesses will be shut down earlier than we had originally anticipated, primarily because they are incurring losses," Erikson said. "Second, we will proceed with the shutdown of certain of our other facilities that are no longer needed as a result of the acquisition, and we will recognize the related costs as a part of the overall restructuring efforts. This will have the effect of reducing the near-term earnings contribution from the acquired businesses, but we expect it to result in a significant improvement in our profitability in 2007 and beyond."
Erikson also noted that he expects Cooper Cameron's first quarter 2006 earnings per diluted share to be approximately $0.32 to $0.34. "This guidance includes integration costs of approximately $0.06 per share, as well as operating losses at two of the acquired Dresser locations of approximately $0.03 per share," he said. "These two operations are currently being restructured, and their financial performance is expected to improve materially over the balance of the year and into 2007." Erikson said the Company's actual results will be dependent on the execution of current projects in backlog, success in the integration process and the pace of activity in the markets served by the Company's divisions, particularly Cameron and CCV.
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, metering and flow measurement equipment.
Cooper Cameron is also a leading manufacturer of centrifugal air compressors,
integral and separable gas compressors and turbochargers.
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