FMC Technologies Reports Strong 1Q06 Results
FMC Technologies, Inc. (NYSE: FTI) reported first quarter 2006 revenue of $869.3 million up 28 percent over the first quarter of 2005 on the strength of the Energy Systems business. Net income for the first quarter of 2006 was $47.0 million, or $0.67 per diluted share. Net income in the first quarter of 2005 was break-even and included a $27.0 million pre-tax loss provision, or $0.24 per diluted share, for the Sonatrach project.
Inbound orders totaled $1.1 billion, up 75 percent over the prior-year quarter. Backlog grew to a record $2.2 billion on strong subsea inbound orders.
During the quarter, the Company repurchased 729,800 shares of its common stock for $35.2 million.
"We are pleased with the outstanding performance in first quarter. Our results were driven by our subsea systems business as well as our surface systems and fluid control businesses," said Joseph H. Netherland, Chairman, and Chief Executive Officer. "Energy Systems' revenue grew 34 percent over the prior-year quarter, Energy Systems' operating profit margins were at record levels, and subsea backlog reached $1.4 billion. As a result of this performance and the expectation for high oilfield market activity levels in 2006, we have increased our estimate for full year 2006 earnings per diluted share to a range of $2.60 to $2.80."
Review of Operations - First Quarter 2006
Revenue for Energy Systems, comprising Energy Production Systems and Energy Processing Systems, was $679.9 million in the first quarter of 2006, up 34 percent from $507.1 million in the first quarter of 2005. Energy Systems' operating profit for the first quarter was $77.2 million, up from $5.8 million in the same period last year. First quarter 2005 segment operating profit included a $27.0 million pre-tax loss provision for the Sonatrach project.
Energy Systems' inbound orders were $833.9 million in the first quarter, up from $437.6 million in the prior year quarter due primarily to strong inbound orders for subsea systems as well as higher demand for surface systems. Subsea orders increased 135 percent and surface systems inbound orders improved 44 percent from the prior-year quarter.
Energy Production Systems
Energy Production Systems' first quarter sales of $527.7 million increased 33 percent over the prior-year quarter, due largely to higher subsea systems and surface systems volume. Revenue for subsea systems was $366.0 million in the quarter, up 25 percent from the prior-year quarter. Surface systems revenue improved significantly over the prior-year quarter and sequentially.
Energy Production Systems' operating profit of $53.9 million is $55.1 million higher than the prior-year quarter. The operating profit increase was due to higher volumes and operating margins for subsea systems and surface systems and to the absence of a Sonatrach charge in the first quarter of 2006.
Energy Production Systems' inbound orders were $682.9 million for the first quarter, up $374.3 million from the prior-year quarter, due mainly to the $503 million of orders for subsea systems. Inbound orders were also strong for surface systems, up 44 percent from prior-year quarter and for floating systems, up significantly from the prior-year quarter on recent awards for turret mooring systems.
Energy Processing Systems
Energy Processing Systems' first quarter revenue of $152.3 million was 38 percent higher than prior-year period. The revenue improvement was the result of strong demand for WECO®/Chiksan® equipment due to the strength in U.S. land drilling activity, as well as improvement in loading systems, measurement systems and material handling.
Energy Processing Systems' first quarter operating profit of $23.3 million improved $16.3 million from prior-year quarter and $5.0 million sequentially. The operating profit improvement is primarily the result of higher WECO®/Chiksan® equipment volume, and to a lesser extent, higher loading systems and material handling volume and cost reduction benefits. In the first quarter of 2005, Energy Processing operating results included $2.1 million of restructuring costs for the material handling business.
Energy Processing Systems' inbound orders were $151.0 million for the first quarter, up 17 percent from the prior-year quarter. Strong demand for WECO®/Chiksan® equipment and loading systems drove the improvement.
FoodTech's first quarter revenue of $123.3 million was up 10 percent from the first quarter of 2005 due primarily to higher volumes of freezing and cooking equipment in the North America poultry processing market and higher demand for citrus projects and food processing equipment. Operating profit of $6.8 million was twice the operating profit of the prior-year period of $3.4 million, due mainly to increased volumes of poultry and other food processing equipment.
Airport Systems' first quarter revenue of $68.2 million was $3.5 million higher than the prior-year quarter due mainly to increased business for airport services from new and existing U.S. airport customers. Airport Systems' first quarter operating profit of $2.5 million was $1.6 million below the prior-year period. Higher operating profit, mainly from increased revenue in the airport services business, offset the absence of the $2.7 million gain on the sale of land in the first quarter of 2005.
Corporate expense in the first quarter of 2006 was $6.8 million, $0.8 million below prior-year period. Other expense, net, of $4.6 million decreased $2.5 million due mainly to a favorable impact of foreign currency.
Net interest expense in the first quarter of 2006 was $1.5 million, up slightly from $1.2 million in the first quarter of 2005.
Net debt increased to $158.0 million at the end of the first quarter of 2006 due mainly to cash requirements for stock repurchases as well as capital expenditures and working capital increases to support growth in the energy business.
Depreciation and amortization for the first quarter of 2006 was $16.7 million, up from $16.0 million in the prior-year quarter.
Capital expenditures during the first quarter of 2006 totaled $29.1 million, up from $11.3 million in the prior-year quarter due primarily to capacity expansion projects in Energy Systems.
Summary and Outlook
FMC Technologies reported net income of $47.0 million, or $0.67 per diluted share on the strength of the Energy Systems. Revenue of $869.3 million was up 28 percent over the prior-year quarter. Subsea Systems' revenue grew 25 percent and backlog increased 43 percent from the prior-year quarter. Increased drilling activity significantly impacted the Company's surface systems and WECO®/Chiksan® businesses, resulting in increased revenue and operating profit. FoodTech delivered revenue and operating profit improvement over the prior-year quarter. Airport Systems' revenue improved while operating profits declined from the prior-year quarter due to the absence of a gain on sale of land recorded in the first quarter of 2005. Total company backlog reached a record $2.2 billion.
The Energy Systems businesses are expected to have another strong year in 2006 driven by the secular growth of subsea and the expectation for continuing high oilfield activity levels. FoodTech operating profits are expected to improve over 2005, while Airport Systems' 2006 operating profits are expected to be in line with 2005 performance.
The Company increased its estimate for full year 2006 earnings per diluted share to a range of $2.60 to $2.80.
FMC Technologies, Inc. is a global
leader providing mission-critical technology solutions for the energy,
food processing and air transportation industries. The Company
designs, manufactures and services technologically sophisticated
systems and products for its customers through its Energy Systems
(comprising Energy Production and Energy Processing), FoodTech and
Airport Systems businesses. FMC Technologies employs approximately
10,000 people and operates 32 manufacturing facilities in 17
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