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FMC Q2 Revenue Down 31% YOY; Cuts Jobs Ahead of Technip Merger

Share Print Bookmark    |    Wednesday,July 20,2016

FMC Technologies, Inc. reported second quarter 2016 revenue of $1.2 billion, down 32 percent from the prior-year quarter primarily due to lower activity. Diluted earnings per share were $0.01. Adjusted diluted earnings per share were$0.22, which excludes total Company pre-tax charges of $61 million, or $0.21 per diluted share as detailed in the attached financial schedules.

The company also cut ~1,000 jobs to shrink its costs ahead of its business combination with France's Technip.

John Gremp, Chairman and CEO of FMC Technologies, said: "Subsea Technologies delivered solid operating margins as we continue to benefit from our execution momentum as well as the savings from our ongoing restructuring activities. The further deterioration in North Americaled to a significant impact to our Surface Technologies earnings."

Total inbound orders were $537.9 million, including $334.1 million in Subsea Technologies orders. Backlog for the Company was $3.4 billion, including Subsea Technologies backlog of $2.9 billion.

Gremp continued, "Although the timing around the sanctioning of deepwater projects remains uncertain, we continue to focus our strategy on lowering the cost of deepwater development, and I am confident that our merger with Technip will allow us to further improve project economics."

Review of Operations - Second Quarter 2016

Subsea Technologies

Subsea Technologies second quarter revenue was $854.2 million, down 31 percent from the prior-year quarter. After excluding $29.2 million of negative impact due to the strong U.S. dollar, total revenue was down 29 percent from the prior-year quarter.

Subsea Technologies operating profit in the second quarter was $97.2 million. Operating results include a $3 million negative impact related to the strong U.S. dollar. Adjusted operating profit was $120.2 million, excluding charges of $23 million. Total operating profit, excluding foreign currency impact and charges in both periods, was down approximately 33 percent year-over-year, primarily due to the decline in subsea revenues.  

Subsea Technologies operating margins were 11.4 percent; adjusted operating margins were 14.1 percent, excluding charges as detailed in the attached financial schedules.

Subsea Technologies inbound orders for the second quarter were $334.1 million. Backlog was $2.9 billion.

Surface Technologies

Surface Technologies second quarter revenue was $218.7 million, down 40 percent from the prior-year quarter, primarily due to the 53 percent decline in the North American rig count.

Surface Technologies reported an operating loss of $21.7 million; adjusted operating loss was $17.2 million, excluding charges of $4.5 million as detailed in the attached financial schedules.   

Surface Technologies inbound orders for the second quarter were $143.1 million. Backlog was $357 million, predominantly related to our wellhead business outside of North America.

Energy Infrastructure

Energy Infrastructure second quarter revenue was $85.1 million, down 16 percent from the prior-year quarter. The revenue decline was primarily due to lower North American land activity.

Energy Infrastructure reported operating profit of $7.8 million. Operating margins were 9.2 percent.

Energy Infrastructure inbound orders for the second quarter were $62.1 million. Backlog was $133.2 million.

Corporate Items

Corporate expense in the second quarter was $13.1 million, a decrease of $1 million from the prior-year quarter.

Other revenue and other expense, net, increased $23.7 million from the prior-year quarter to $53.2 million of expense. Items of significance included the following:

• $18.2 million, or $0.08 per diluted share of business combination transaction costs related to our proposed merger with Technip;
• $13 million, or $0.04 per diluted share of foreign currency losses, of which $7.5 million resulted from the Nigerian currency devaluation; and
• $6.4 million, or $0.02 per diluted share of transition costs related to facility consolidations.

The Company ended the quarter with net debt of $251.3 million, up $41.7 million sequentially. Net interest expense was $7.6 million in the quarter.

The Company repurchased approximately 782,000 shares of common stock at an average cost of $28.45 per share in the quarter. In accordance with the Business Combination Agreement related to the merger, the Company has suspended share repurchases.

Depreciation and amortization for the second quarter was $49.3 million, and capital expenditures were $31.7 million.

The Company recorded an effective tax rate of 77.6 percent for the second quarter. The tax provision of $7.4 million reflects certain expenses for merger activity that did not receive tax benefit.

Summary

FMC Technologies reported second quarter diluted earnings per share of $0.01. Adjusted diluted earnings per share were $0.22, when excluding total Company pre-tax restructuring and other severance charges, business combination transaction costs, Nigerian currency devaluation, transition and facility consolidation costs, and impairment and other charges of $61 million, or $0.21 per diluted share.  

The Company recorded Subsea Technologies revenue of $854.2 million in the quarter with margins of 11.4 percent; adjusted operating margins were 14.1 percent, excluding charges as detailed in the attached financial schedules.

Total inbound orders of $537.9 million in the second quarter included $334.1 million in Subsea Technologies orders.

The Company's backlog stands at $3.4 billion, including Subsea Technologies backlog of $2.9 billion.