-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QMilteCe46HXNoZNA+/kBbUKi3j8PieNguYnvDRTcd/hohhHXZuz2uj5dFHdEO9O A1POCfHNuE2fqdmzQ3fW3w== 0000950129-03-001007.txt : 20030225 0000950129-03-001007.hdr.sgml : 20030225 20030225145014 ACCESSION NUMBER: 0000950129-03-001007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030224 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATCO GROUP INC CENTRAL INDEX KEY: 0001057693 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 222906892 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15603 FILM NUMBER: 03579060 BUSINESS ADDRESS: STREET 1: BROOKHOLLOW CENTRAL III STREET 2: 2950 NORTH LOOP WEST STE 750 CITY: HOUSTON STATE: TX ZIP: 77092 BUSINESS PHONE: 7136839292 MAIL ADDRESS: STREET 1: BROOKHOLLOW CENTERL III STREET 2: 2950 NORTH LOOP WEST STE 750 CITY: HOUSTON STATE: TX ZIP: 77092 8-K 1 h03606e8vk.txt NATCO GROUP INC - DATE OF REPORT: FEBRUARY 24,2003 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): February 24, 2003 NATCO Group Inc. (Exact Name of Registrant as Specified in its Charter) DELAWARE 001-15603 22-2906892 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 2950 North Loop West, 7th Floor Houston, Texas 77092 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (713) 683-9292 ITEM 5. OTHER EVENTS On February 24, 2003, NATCO Group Inc. issued a press release announcing the Company's operating results for the fourth quarter and year ended December 31, 2002. This press release is filed as Exhibit 99.1 to this Current Report on Form 8-K, and the contents of such Exhibit are incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 99.1 Press Release, dated February 24, 2003 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 25, 2003 NATCO Group Inc. By: /s/ J. MICHAEL MAYER --------------------------- J. Michael Mayer Senior Vice President and Chief Financial Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- EX-99.1 Press Release, dated February 24, 2003 EX-99.1 3 h03606exv99w1.txt PRESS RELEASE - 4TH QUARTER & YEAR 2002 RESULTS EXHIBIT 99.1 [NATCO GROUP LOGO APPEARS HERE] 2950 North Loop West, Suite 700 Houston, TX 77092 PHONE: (713) 685-8062 FAX: (713) 683-7841 - ------------------------------------------------------------------------------- NATCO Group reports 4th quarter and year 2002 results February 24, 2003 - ------------------------------------------------------------------------------- NATCO Group Inc. (NYSE: NTG - the "Company") today announced fourth quarter 2002 revenue and net income of $75.0 million and $1.3 million ($0.08 per diluted share). Net income excluding a restructuring charge of $0.4 million net of tax, related to the previously announced consolidation of operations at its Canadian subsidiary, was $1.7 million ($0.11 per diluted share). By comparison, revenue and net income in the fourth quarter of 2001 were $66.6 million and $1.7 million ($0.11 per diluted share). Fourth quarter revenue was 12.6% higher than fourth quarter 2001. EBITDA (defined in footnote 1 below) for the fourth quarter was $5.3 million, 14.7% below fourth quarter 2001. Highlighting the quarter were improved results from the North American Operations segment, which reported $5.1 million of segment EBITDA while revenues declined 7.2% to $34.7 million, compared to EBITDA of $3.6 million in the fourth quarter of 2001. Segment EBITDA was at a record level, despite very difficult market conditions for the traditional oil and gas business in both the US and Canada. The results reflected, among other things, completion of a number of projects for Petroleos Mexicanos ("Pemex"), growth in revenue from the Company's flagship Sacroc gas processing facility, and strong membrane replacement sales to customers who use membranes in their own processing facilities. "North American Operations results were outstanding given that sales of traditional equipment and services in the US and Canada were at the lowest point in several years," commented Nat Gregory, Chairman and Chief Executive Officer. "Strong fourth quarter performance bodes well for 2003, as the current recovery in traditional oil and gas markets gains more momentum." "As to Pemex," Gregory went on to say, "NATCO is involved in a number of upgrade and debottlenecking projects in older oilfields, primarily in the Bay of Campeche. We reported almost $10 million of work for Pemex in 2002, and expect solid revenue growth in 2003. However, our Pemex business does vary significantly from quarter to quarter. Most of the revenue from new Pemex projects should fall into the middle and latter part of 2003. As to Sacroc, NATCO is on track with a planned expansion in support of the field operator, Kinder Morgan, and we expect to see steady growth in revenue and profit from the Sacroc facility in the latter part of this year and throughout 2004." North American Operations segment revenue for 2002 was $137.4 million, 5.4% below 2001. However, the average North American rig count fell 27.0% over the same time frame, while segment EBITDA of $14.4 million contributed by North American Operations in 2002 was 4.9% higher than 2001. In the Company's Engineered Systems segment, fourth quarter 2002 revenue of $27.9 million increased 46.6% over the fourth quarter of 2001. Contributing to the revenue increase were results from two large seawater injection projects, one in West Africa and one in the North Sea. Fourth quarter 2002 gross margin percentage was 22.5% compared to 41.6% in the fourth quarter of 2001. Gross margin percentages in 2001 were favorably affected by, among other things, high margin jobs such as CTOC, and excellent performance in late stages of several large projects. During 2002, Engineered Systems margins have generally been lower than in recent years, reflecting a greater share of more conventional project work. Segment bookings were low for the quarter, due primarily to slow activity in worldwide oil and gas markets through the end of the year, as well as continuing variability in awards from quarter to quarter. "Engineered Systems bid activity is currently strong, and although timing remains uncertain, new awards for several large projects are expected in 2003," commented Gregory. Engineered Systems backlog of $71.1 million at the end of the fourth quarter was essentially flat compared to the prior year. EBITDA for the fourth quarter was $1.7 million compared to $3.8 million in the fourth quarter of 2001. Automation and Control Systems revenue in the fourth quarter was up 24.0% compared to the fourth quarter of 2001. Activity levels in the Gulf of Mexico were favorably affected by repair work from hurricanes Isadore and Lili, which damaged a number of Gulf of Mexico offshore production facilities. In addition, revenue from the Company's operations in Nigeria and Kazakhstan increased significantly year over year. Margins were lower than prior year, due in part to higher employee benefit costs, as well as the revenue mix of labor and materials in recent projects. Fourth quarter EBITDA contribution was $1.2 million in both 2002 and 2001. Total debt decreased $9.0 million during the quarter to $52.4 million. The Company's debt-to-capitalization ratio at December 31, 2002 was 36.3%, compared to 40.2% as of September 30, 2002 and 39.7% as of December 31, 2001. The weighted average interest rate on outstanding debt at December 31, 2002 was 4.2%. Working capital as of December 31, 2002 was $34.6 million, down $8.1 million from the September 30, 2002 balance of $42.7 million. The Company incurred net foreign exchange losses net of tax of $0.3 million during the quarter. Excluding the Canadian restructuring charge and currency losses, net income for the quarter would have been $2.0 million ($0.12 per diluted share). Although the Company had quarterly fluctuations in currency gains and losses over the course of 2002, the net impact on earnings was not significant over the year taken as a whole. During the quarter, the Company benefited relative to prior year periods from adoption of SFAS No. 142 "Goodwill and Other Intangible Assets" effective January 1, 2002, which eliminated goodwill amortization expense. For comparison, net income for the quarter ended December 31, 2001 before goodwill amortization would have been $2.7 million ($0.17 per diluted share). The Company's effective tax rate for 2002 reflects the impact of no longer recording goodwill amortization expense. NATCO Group Inc. is a leading provider of wellhead process equipment, systems and services used in the production of oil and gas. NATCO has designed, manufactured and marketed production equipment and services for more than 70 years. NATCO production equipment is used onshore and offshore in most major oil and gas producing regions of the world. Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the oilfield service industry and other factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2001 filed by NATCO Group Inc. on March 28, 2002. (1) EBITDA consists of net income (loss) before interest expense, other expense, interest cost on postretirement benefit liability, income tax provision, and depreciation and amortization expense, less interest income. EBITDA is not a measurement presented in accordance with generally accepted accounting principles. EBITDA should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA is included as a supplemental disclosure because it may provide useful information regarding our ability to service debt and to fund capital expenditures. NATCO GROUP INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31, 2002 2001 ------------- --------- ASSETS Current assets: Cash and cash equivalents.................................. $ 1,689 $ 3,093 Trade accounts receivable, net............................. 74,677 67,922 Inventories................................................ 32,400 37,517 Prepaid expenses and other current assets.................. 7,611 6,725 ---------- --------- Total current assets................................. 116,377 115,257 Property, plant and equipment, net........................... 31,485 31,003 Goodwill, net................................................ 78,977 79,907 Deferred income tax assets, net.............................. 2,984 4,378 Other assets, net............................................ 1,772 2,206 ---------- --------- Total assets......................................... $ 231,595 $ 232,751 ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt..................... $ 7,097 $ 7,000 Accounts payable........................................... 36,074 30,440 Accrued expenses and other................................. 37,243 34,781 Customer advances.......................................... 1,354 5,925 ---------- --------- Total current liabilities............................ 81,768 78,146 Long-term debt, excluding current installments............... 45,257 51,568 Postretirement benefit and other long-term liabilities....... 12,718 14,107 ---------- --------- Total liabilities.................................... 139,743 143,821 ---------- --------- Stockholders' equity: Preferred stock $.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding................. -- -- Class A Common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 15,803,797 and 15,469,078 shares as of December 31, 2002 and 2001, 158 155 respectively............................................. Class B Common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 334,719 shares as of -- 3 December 31, 2001............................................ Additional paid-in capital................................. 97,223 97,223 Accumulated earnings....................................... 8,734 4,857 Treasury stock, 795,692 shares at cost as of December 31, (7,182) (7,182) 2002 and 2001.............................................. Accumulated other comprehensive loss....................... (3,395) (2,858) Notes receivable from officers and stockholders............ (3,686) (3,268) ----------- ---------- Total stockholders' equity........................... 91,852 88,930 ---------- --------- Commitments and contingencies Total liabilities and stockholders' equity........... $ 231,595 $ 232,751 ========== =========
NATCO GROUP INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Twelve Months Ended DECEMBER 31, DECEMBER 31, ---------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- -------- Revenues........................................... $75,002 $66,591 $289,539 $286,582 Cost of goods sold................................. 55,650 47,436 219,354 210,512 ------- ------- -------- -------- Gross profit............................. 19,352 19,155 70,185 76,070 Selling, general and administrative expense........ 14,084 12,981 53,947 51,471 Depreciation and amortization expense.............. 1,318 2,181 4,958 8,143 Closure & other charges(2)......................... 548 -- 548 1,600 Interest expense................................... 1,104 1,196 4,527 4,941 Interest cost on postretirement benefit liability.. 104 122 471 888 Interest income.................................... (74) (423) (248) (660) Other expense, net................................. 636 475 400 429 ------- ------- -------- -------- Income before income taxes............... 1,632 2,623 5,582 9,258 Income tax provision............................... 326 923 1,705 3,895 ------- ------- -------- -------- Net income............................... $ 1,306 $ 1,700 $ 3,877 $ 5,363 ======= ======= ======== ======== EARNINGS PER SHARE: Basic............................................ $ 0.08 $ 0.11 $ 0.25 $ 0.34 Diluted.......................................... $ 0.08 $ 0.11 $ 0.24 $ 0.34 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic............................................ 15,804 15,693 15,804 15,722 Diluted.......................................... 15,867 15,838 15,920 15,966
(2) Closure & other charges included in 2002 costs related to the consolidation of operations in Canada. In 2001, Closure and other charges related to the consolidation of operations in the United Kingdom as well as expenses related to a public debt offering that was not completed. NATCO GROUP INC. AND SUBSIDIARIES UNAUDITED SEGMENT INFORMATION (IN THOUSANDS)
Three Months Ended Twelve Months Ended December 31, December 31, ---------------------- ------------------------ 2002 2001 2002 2001 ---------- ---------- ---------- --------- Revenues: North American Operations 34,726 37,428 137,374 145,147 Engineered Systems 27,928 19,053 107,041 99,021 Automation & Control Systems 14,282 11,521 52,142 47,693 Intersegment Eliminations (1,934) (1,411) (7,018) (5,279) ---------- ---------- ---------- --------- Total Revenues 75,002 66,591 289,539 286,582 ========== ========== ========== ========= Gross Profit: North American Operations 10,611 8,920 37,583 35,475 Engineered Systems 6,290 7,924 23,213 31,221 Automation & Control Systems 2,451 2,311 9,389 9,374 Intersegment Eliminations -- -- -- -- ---------- ---------- ---------- --------- Total Gross Profit 19,352 19,155 70,185 76,070 ========== ========== ========== ========= Gross Profit % of Revenue: North American Operations 30.6% 23.8% 27.4% 24.4% Engineered Systems 22.5% 41.6% 21.7% 31.5% Automation & Control Systems 17.2% 20.1% 18.0% 19.7% ---------- ---------- ---------- --------- Total Gross Profit % of Revenue 25.8% 28.8% 24.2% 26.5% ========== ========== ========== ========= Operating Expense: North American Operations 5,472 5,273 23,182 21,753 Engineered Systems 4,587 4,144 16,954 15,000 Automation & Control Systems 1,261 1,159 4,734 4,606 Technology & Product Development 952 863 3,513 3,615 Corporate and Other 1,812 1,542 5,564 6,497 ---------- ---------- ---------- --------- Total Operating Expense 14,084 12,981 53,947 51,471 ========== ========== ========== ========= EBITDA: North American Operations 5,139 3,647 14,401 13,722 Engineered Systems 1,703 3,780 6,259 16,221 Automation & Control Systems 1,190 1,152 4,655 4,768 Technology & Product Development (952) (863) (3,513) (3,615) Corporate and Other (1,812) (1,542) (5,564) (6,497) ---------- ---------- ---------- --------- Total EBITDA 5,268 6,174 16,238 24,599 ========== ========== ========== ========= Bookings: North American Operations 34,628 40,197 126,104 151,008 Engineered Systems 6,752 23,644 105,698 90,363 Automation & Control Systems 15,450 8,289 46,575 46,363 ---------- ---------- ---------- --------- Total Bookings 56,830 72,130 278,377 287,734 ========== ========== ========== =========
As of December 31, ------------------------- 2002 2001 ------------ ------------ Backlog: North American Operations 14,051 24,405 Engineered Systems 71,059 70,589 Automation & Control Systems 4,989 6,269 ------------ ------------ Total Backlog 90,099 101,263 =========== ============
Note: For presentation purposes revenues have been restated to reflect the elimination of intra-segment revenues that previously were eliminated at the eliminations level. This restatement had no impact on total revenues or total gross profit. -----END PRIVACY-ENHANCED MESSAGE-----