FMC Reports Strong Second Quarter
FMC Technologies, Inc. reported second quarter 2006 revenue of $998.4 million, up 23 percent over the second quarter of 2005 on the strength of Energy Systems. Net income for the second quarter of 2006 was $65.5 million, or $0.93 per diluted share, and includes a pre-tax gain of $17.1 million, or $0.15 per diluted share, from the settlement of claims pertaining to the Sonatrach project. This compares to an $11.9 million pre-tax loss provision, or $0.10 per diluted share, for the Sonatrach project in the second quarter of 2005. Also recorded in the quarter was $1.9 million of net income, or $0.03 per diluted share, associated with the sale of trademarks related to a discontinued operation.
The company increased estimated full-year 2006 earnings per diluted share from a range of $2.60 to $2.80 to a range of $2.80 to $3.00, excluding the $0.15 per diluted share benefit from the Sonatrach claims settlement and the $0.03 per diluted share benefit from a discontinued operation.
Backlog reached another record at $2.3 billion. Subsea backlog grew to $1.5 billion, up 25 percent from the prior year and 6 percent sequentially.
"We had another outstanding quarter. Not only did our operations perform well, but we also reached a favorable conclusion on the outstanding claims relating to the Sonatrach project," said Joseph H. Netherland, Chairman and Chief Executive Officer. "Energy Systems revenue grew 30 percent over the prior-year quarter with record subsea sales of $453 million and Energy Processing operating margins were at record levels. As a result of this performance and the expectation for continuing high oilfield activity levels for the remainder of 2006, we have once again increased our full-year earnings estimate."
Review of Operations - Second Quarter 2006
Revenue for Energy Systems, comprising Energy Production Systems and Energy Processing Systems, was $772.5 million in the second quarter of 2006, up 30 percent from $594.2 million in the second quarter of 2005. Energy Systems' operating profit for the second quarter was $94.3 million, up from $32.9 million in the same period last year. Second quarter 2006 operating profit included a $17.1 million benefit from the settlement of claims associated with the Sonatrach project. Second quarter 2005 segment operating profit included an $11.9 million pre-tax loss provision for the Sonatrach project. Excluding the impact of Sonatrach from both quarters, operating profit improved 72 percent.
Energy Systems' inbound orders were $880.5 million in the second quarter. Backlog of approximately $2.0 billion was up 6 percent sequentially and 26 percent from the prior year.
Energy Production Systems
Energy Production Systems' second quarter sales of $614.2 million increased 30 percent over the prior-year quarter, due mainly to higher subsea volume. Revenue for subsea systems reached a record $453 million in the quarter, up more than 23 percent from the prior-year quarter and sequentially. Surface systems revenue improved almost 30 percent over the prior-year quarter while floating systems' revenue was almost triple the prior-year quarter. Floating systems' performance in the second quarter of 2006 and 2005 included revenue from the Sonatrach project of $15.0 million and $10.1 million, respectively.
Energy Production Systems' operating profit of $67.4 million is $48.1 million higher than the prior-year quarter or up 250 percent and includes a $17.1 million pre-tax benefit from the settlement of claims pertaining to the Sonatrach project. Energy Production Systems' second quarter 2005 segment operating profit included an $11.9 million pre-tax loss provision for the Sonatrach contract. The remaining operations of floating systems and subsea systems contributed to the increase in profitability through higher sales and operating margins compared with the prior-year quarter.
Energy Production Systems' inbound orders were $698.0 million for the second quarter. Backlog reached $1.7 billion. Subsea backlog grew to $1.5 billion, and subsea sales set a new quarterly record of $453 million.
Energy Processing Systems
Energy Processing Systems' second quarter revenue of $158.8 million was 29 percent higher than the 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 a strong market for LNG (Liquefied Natural Gas) loading systems.
Energy Processing Systems' second quarter operating profit of $26.9 million was almost double the $13.6 million reported in the second quarter of 2005. Energy Processing Systems' second quarter operating profit improved 15 percent sequentially. The operating profit improvement is the result of higher WECO/Chiksan equipment volume, pricing improvement in several product lines, and higher loading systems and material handling volume and efficiencies.
Energy Processing Systems' inbound orders were $182.8 million for the second quarter, up 15 percent from the prior-year quarter due to stronger demand for WECO/Chiksan equipment. Inbound orders were up 21 percent sequentially due to increased demand for LNG loading systems and measurement solutions. Backlog of $237.5 million is 48 percent higher than the prior year, and 11 percent higher than the previous quarter.
Corporate expense in the second quarter of 2006 was $8.6 million, $1.9 million above the prior-year period and other expense, net, of $9.0 million increased $2.3 million due mainly to higher incentive compensation expense.
Net interest expense in the second quarter of 2006 was $2.3 million, up $1.1 million from the prior-year quarter on higher average debt.
Net debt of $152.3 million increased from $103.0 million at year-end 2005 due mainly to working capital increases, capital spending to support energy growth and stock repurchases.
Depreciation and amortization for the second quarter of 2006 was $17.5 million, up from $16.1 million in the prior-year quarter.
Capital expenditures during the second quarter of 2006 totaled $32.1 million, up from $17.6 million in the prior-year quarter due primarily to capacity expansion projects in Energy Systems.
Summary and Outlook
FMC Technologies reported a strong second quarter with revenue of $998.4 million, up 23 percent over the prior-year quarter. Net income was $65.5 million, or $0.93 per diluted share, on the strength of Energy Systems. The company reached a favorable conclusion with Sonatrach and recorded $17.1 million pre-tax, or $0.15 per diluted share, from the settlement of claims pertaining to the Sonatrach project. Subsea systems revenue grew 23 percent and backlog increased 25 percent from the prior-year quarter. Increased drilling activity significantly impacted the Company's WECO/Chiksan business resulting in increased revenue and operating profit. FoodTech delivered revenue and operating profit improvement over the prior-year quarter. Despite lower Airport Systems revenue, operating profits improved slightly on improved margin performance. Total company backlog reached a record $2.3 billion of which $1.5 billion is for subsea systems.
The company's energy businesses continue to expect another strong year in 2006 driven by the secular growth of subsea and the continuing high oilfield activity levels. FoodTech earnings are expected to improve over 2005. Airport Systems 2006 earnings are expected to be in line with 2005 performance.
The company increased its estimate for full-year 2006 earnings to a range of $2.80 to $3.00 per diluted share, which excludes the $0.15 per diluted share benefit from Sonatrach claims settlement and the discontinued operations benefit of $0.03 per diluted share.
FMC Technologies, Inc. provides 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 countries.
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