EX-99.1 2 h15100exv99w1.txt PRESS RELEASE - OPERATING RESULTS FOR 1ST QUARTER EXHIBIT 99.1 PRESS RELEASE (NATCOGROUP LOGO) 2950 North Loop West, Suite 700 Houston, TX 77092 PHONE: (713) 685-8062 FAX: (713) 683-7841 NATCO GROUP REPORTS FIRST QUARTER RESULTS; ANNOUNCES RECORD BOOKINGS; RECONFIRMS GUIDANCE HOUSTON, MAY 3, 2004 -------------------------------------------------------------------------------- NATCO Group Inc. (NYSE: NTG) today announced first quarter 2004 revenue of $72.0 million and net loss available to common shareholders of $0.4 million ($(0.03) per share) compared to revenue and net income available to common shareholders of $68.0 million and $0.0 million ($0.00 per share) for the first quarter of 2003. The 2004 first quarter net loss includes a $0.7 million charge related to the refinancing of the Company's bank credit facility and $0.5 million of net foreign exchange transaction losses and restructuring charges, compared to $0.4 million of expenses related to net foreign exchange transaction losses and restructuring charges for the first quarter of 2003. Excluding these charges, net of tax, the Company's earnings available to common shareholders for the quarter would have been $0.3 million ($0.02 per share) as compared to $0.3 million ($0.02 per share) for the first quarter of 2003. The Company reiterated its guidance for earnings per share in 2004 between $0.40 and $0.50. NATCO also reported record bookings of $104.1 million in the first quarter, which represents a 71% increase over the prior year, and a 50% increase over the prior quarter. The Company's backlog increased by 50%, or $32.1 million during the quarter. "As anticipated, the Company saw the effect of the market upturn with strong increases in 1st quarter bookings and backlog", said Chairman and CEO Nat Gregory. "Importantly, quarterly bookings were not dominated by one large job, but represented a broad increase across the Company. Preliminary indications for April bookings appear to support continued momentum." NATCO's revenue for the first quarter increased 6% compared to the first quarter of the prior year. Gross margin as a percent of revenue increased from 23.2% to 23.4% year over year. Total segment profit(1) for the first quarter was $3.5 million as compared to $3.2 million in the prior year. Bookings in the Company's North American Operations segment exceeded $54 million, which is also a record level, reflecting continued improvement in western Canada and the US, especially the Rocky mountain region. However, activity in the Gulf of Mexico remains stagnant. Highlighting first quarter bookings in Canada was the award to supply various equipment for export to a large Russian oil company. Further bookings of projects for this customer were added in April as well. The North American Operations segment reported record segment profit of $4.8 million, significantly higher than 2003 levels. Profitability in this segment improved, in part, as a result of the successful startup of our Sacroc CO2 membrane plant expansion in late December of 2003. Bookings of $17.9 million in the Company's Automation and Control Systems segment were up 30% year over year, led by a significant award to supply control panels for a customer in Kazakhstan. Activity levels and proposals outstanding for international projects are relatively strong in this segment. However, first quarter revenue and segment profit were lower than the first quarter 2003, reflecting run-off of several large projects completed in 2003, as well as reduced spending in the Gulf of Mexico by several large customers in the early part of 2004. Automation and Control Systems revenue for the quarter was $11.6 million compared to $15.2 million a year earlier, and gross margin as a percent of revenue fell to 13.3%, primarily due to unabsorbed production expenses resulting from the reduced activity level. Steps have been taken to reduce production expense in the near future. The outlook for the Automation and Control Systems segment remains positive, particularly in the international arena, although results are not expected to significantly improve until the second half of 2004. Engineered Systems recorded a segment loss for the quarter, reflecting reduced margins on several jobs at the Company's UK subsidiary, Axsia, as well as lower revenue levels due to the difference in backlog run-off between years. Nevertheless, bookings for the quarter were $31.9 million, representing a 44% increase over the prior year and a 59% increase over the prior quarter. Backlog increased $7.9 million from the prior quarter and, based on jobs booked or currently identified, backlog is expected to increase during the second quarter. A key highlight for the first quarter was the award of the first domestic Shell-Paques(TM) desulfurization system. The Company was awarded a similar Shell-Paques(TM) job in April. During the quarter, NATCO refinanced its previous bank credit facility with a new $80 million credit facility. The new facility consists of a $45 million term loan and $35 million of revolving credit capacity, and matures in March 2007. 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 75 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. These statements may differ materially from actual future events or results. Readers are referred to documents filed by NATCO Group Inc. with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which identifies significant risk factors which could cause actual results to differ from those contained in the forward-looking statements. (1) The Company calculates segment profit as income before net interest expense, income taxes, depreciation and amortization expense, write-off of unamortized loan costs, other expense, net and accounting changes. NATCO GROUP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31, 2004 2003 ------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents ......................................................... $ 3,018 $ 1,751 Trade accounts receivable, net .................................................... 71,229 70,902 Inventories ....................................................................... 35,448 34,573 Deferred income taxes, net ........................................................ 2,699 2,846 Income tax receivable ............................................................. 1,290 987 Prepaid expenses and other current assets ......................................... 4,603 3,937 ------------- ------------- Total current assets ........................................................ 118,287 114,996 Property, plant and equipment, net .................................................. 36,666 37,076 Goodwill, net ....................................................................... 80,014 80,097 Deferred income tax assets, net ..................................................... 4,296 4,290 Other assets, net ................................................................... 1,176 1,269 ------------- ------------- Total assets ................................................................ $ 240,439 $ 237,728 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt ............................................ $ 7,926 $ 5,617 Accounts payable .................................................................. 34,877 38,976 Accrued expenses and other ........................................................ 33,349 30,257 Customer advances ................................................................. 5,980 5,527 ------------- ------------- Total current liabilities ................................................... 82,132 80,377 Long-term debt, excluding current installments ...................................... 39,739 38,003 Long-term deferred tax liabilities .................................................. 902 874 Postretirement benefit and other long-term liabilities .............................. 11,616 11,897 ------------- ------------- Total liabilities ........................................................... 134,389 131,151 ------------- ------------- Series B redeemable convertible preferred stock (aggregate redemption value of $15,000), $.01 par value. 15,000 shares authorized, issued and outstanding (net of issuance costs) ............................................. 14,101 14,101 Stockholders' equity: Preferred stock $.01 par value. Authorized 5,000,000 shares (of which 500,000 are authorized under Series A and 15,000 are authorized under Series B); no shares issued and outstanding (except Series B shares above)........ -- -- Series A preferred stock, $.01 par value. Authorized 500,000 shares; no shares issued and outstanding ........................................ -- -- Common stock, $.01 par value. Authorized 50,000,000 shares; issued and outstanding 15,922,661 and 15,854,067 shares as of March 31, 2004 and December 31, 2003, respectively ................. 159 159 Additional paid-in capital ........................................................ 97,783 97,351 Accumulated earnings .............................................................. 7,696 8,115 Treasury stock, 795,692 shares at cost as of March 31, 2004 and December 31, 2003 .............................................................. (7,182) (7,182) Accumulated other comprehensive loss .............................................. (2,630) (2,127) Notes receivable from officers and stockholders ................................... (3,877) (3,840) ------------- ------------- Total stockholders' equity .................................................. 91,949 92,476 ------------- ------------- Commitments and contingencies Total liabilities and stockholders' equity .................................. $ 240,439 $ 237,728 ============= =============
NATCO GROUP INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 2004 2003 ------------- ------------- Revenues ............................................................. $ 71,984 $ 68,013 Cost of goods sold ................................................... 55,169 52,202 ------------- ------------- Gross profit ............................................... 16,815 15,811 Selling, general and administrative expense .......................... 13,295 12,644 Depreciation and amortization expense ................................ 1,374 1,230 Closure and other .................................................... 0 230 Interest expense ..................................................... 935 1,062 Write-off of unamortized loan costs .................................. 667 -- Interest cost on postretirement benefit liability .................... 225 209 Interest income ...................................................... (62) (49) Other, net ........................................................... 454 346 ------------- ------------- Income (loss) before income taxes and cumulative effect of change in accounting principle ....................... (73) 139 Income tax provision (benefit) ....................................... (29) 50 ------------- ------------- Net income (loss) before cumulative effect of change in accounting principle ..................................... (44) 89 Cumulative effect of change in accounting principle (net of tax benefit of $18 in 2003) .............................. -- 34 ------------- ------------- Net income (loss) .......................................... $ (44) $ 55 Preferred stock dividends ............................................ 375 25 ------------- ------------- Net income (loss) available to common stockholders ......... $ (419) $ 30 ============= ============= Earnings per share--basic: Net income (loss) before cumulative effect of change in accounting principle .............................................. $ (0.03) $ -- Cumulative effect of change in accounting principle .................. -- -- ------------- ------------- Net income (loss) available to common stockholders ......... $ (0.03) $ -- ============= ============= Earnings per share--diluted: Net income (loss) before cumulative effect of change in accounting principle .............................................. $ (0.03) $ -- Cumulative effect of change in accounting principle .................. -- -- ------------- ------------- Net (loss) income available to common stockholders ......... $ (0.03) $ -- ============= ============= Basic weighted average number of shares of common stock outstanding ........................................... 15,908 15,804 Diluted weighted average number of shares of common stock outstanding ........................................ 15,908 15,874
NATCO GROUP INC. AND SUBSIDIARIES UNAUDITED SEGMENT INFORMATION (IN THOUSANDS)
Three Months Ended March 31, ------------------------------- 2004 2003 ------------- ------------- Revenue: North American Operations $ 37,508 $ 28,615 Engineered Systems 24,108 26,046 Automation & Control Systems 11,618 15,241 Eliminations (1,250) (1,889) ------------- ------------- Total revenue $ 71,984 $ 68,013 ============= ============= Gross profit: North American Operations $ 11,019 $ 7,354 Engineered Systems 4,248 5,871 Automation & Control Systems 1,548 2,586 Eliminations -- -- ------------- ------------- Total gross profit $ 16,815 $ 15,811 ============= ============= Gross profit % of revenue: North American Operations 29.4% 25.7% Engineered Systems 17.6% 22.5% Automation & Control Systems 13.3% 17.0% Total gross profit % of revenue 23.4% 23.2% Operating expenses: North American Operations $ 6,180 $ 5,809 Engineered Systems 4,422 4,631 Automation & Control Systems 1,160 1,267 Corporate and other 1,533 937 ------------- ------------- Total operating expenses $ 13,295 $ 12,644 ============= ============= Segment profit (loss): North American Operations $ 4,839 $ 1,545 Engineered Systems (174) 1,240 Automation & Control Systems 388 1,319 Corporate and other (1,533) (937) ------------- ------------- Total segment profit $ 3,520 $ 3,167 ============= ============= Bookings: North American Operations $ 54,336 $ 24,881 Engineered Systems 31,859 22,108 Automation & Control Systems 17,856 13,721 ------------- ------------- Total bookings $ 104,051 $ 60,710 ============= =============
As of March 31, ----------------------------- 2004 2003 ------------- ------------- Backlog: North American Operations $ 32,320 $ 10,968 Engineered Systems 52,931 67,151 Automation & Control Systems 10,768 4,677 ------------- ------------- Total backlog $ 96,019 $ 82,796 ============= =============
NATCO GROUP INC. AND SUBSIDIARIES UNAUDITED RECONCILIATION OF EARNINGS AND EARNINGS PER SHARE TO NON-GAAP DISCLOSURES (IN THOUSANDS)
FOR THE QUARTER ENDED MARCH 31, 2004 ------------------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ---------------- ---------------- ---------------- (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net loss .............................................. $ (44) Certain adjustments: Closure and other .................................. 0 Write-off of unamortized loan costs ................ 667 Loss on foreign exchange, net (1) .................. 459 Tax effect (2) .................................... (438) ---------------- Adjusted net income ................................... 644 Preferred stock dividends accrued ..................... (375) ---------------- Income available to common shareholders (adjusted for certain items) .............................. $ 269 ================ BASIC EPS (ADJUSTED FOR CERTAIN ITEMS): Income available to common stockholders ............... $ 269 15,908 $ 0.02 ================ EFFECT OF DILUTIVE SECURITIES Stock options ......................................... -- 109 ---------------- ---------------- DILUTED EPS (ADJUSTED FOR CERTAIN ITEMS): Income available to common stockholders ............... $ 269 16,017 $ 0.02 ================ ================ ================
FOR THE QUARTER ENDED MARCH 31, 2003 ------------------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ---------------- ---------------- ---------------- (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net income ............................................ $ 55 Certain adjustments: Closure and other .................................. 230 Loss on foreign exchange, net (1) .................. 172 Tax effect (2) ..................................... (145) ---------------- Adjusted net income ................................... 312 Preferred stock dividends accrued ..................... (25) ---------------- Income available to common shareholders (adjusted for certain items) .............................. $ 287 ================ BASIC EPS (ADJUSTED FOR CERTAIN ITEMS): Income available to common stockholders ............... $ 287 15,804 $ 0.02 ================ EFFECT OF DILUTIVE SECURITIES Stock options ......................................... -- 70 ---------------- ---------------- ---------------- DILUTED EPS (ADJUSTED FOR CERTAIN ITEMS): Income available to common stockholders ............... $ 287 15,874 $ 0.02 ================ ================ ================
(1) Included in Other, net in the accompanying income statement. (2) Calculated at the applicable effective tax rate for the periods.