Forum Energy Technologies, Inc. (NYSE: FET) today announced
second quarter 2014 revenue of $428 million compared to $368
million for the second quarter 2013. Net income for the quarter was
$40 million or $0.41 per diluted share compared to $30 million or
$0.32 per diluted share for the prior year period. Included in the
second quarter 2014 results was $0.03 per share of non-operational
items, and excluding these items adjusted diluted earnings per
share were $0.44. See table I for a reconciliation of GAAP to
non-GAAP financial information.
Second Quarter Results by
Segment
Drilling & Subsea
Drilling & Subsea segment revenue in the second quarter 2014
was $279 million, an increase of $70 million, or 34%, from the
second quarter 2013. The increase was primarily due to the
contributions from acquisitions closed subsequent to the second
quarter 2013, and increased sales of subsea remotely operated
vehicles, drilling equipment, and downhole products. Operating
income for the segment in the second quarter 2014 was $50 million,
an increase of $18 million, or 53%, over the prior year period.
Operating margins also improved by 230 basis points over the same
period.
Production & Infrastructure
Production & Infrastructure segment revenue in the second
quarter 2014 was $149 million, a decrease of $9 million from the
second quarter 2013. The segment experienced lower demand for
valves, primarily in Canada, and lower orders of production
processing systems compared to the prior year. Pressure pumping
consumable product revenue increased 30% from the prior year
period. Segment operating income increased 18% due to the addition
of the Global Tubing joint venture acquired in the third quarter
2013 and improved operating contribution from pressure pumping
consumable products.
Review and Outlook
Cris Gaut, Forum’s Chairman and Chief Executive Officer,
remarked, "Our second quarter 2014 results included record revenue
of $428 million and improved operating income and margins over the
first quarter 2014. We are experiencing the benefits of our focus
on improving operating execution and increasing our margins.
"Our Drilling & Subsea segment second quarter 2014 revenue
increased $18 million sequentially primarily due to the strong
demand for subsea equipment and products. We are pleased with the
recent acquisition of Quality Wireline & Cable by Forum.
"The Production & Infrastructure segment experienced a
sequential increase in revenue of $7 million compared to the first
quarter 2014 on increased sales of pressure pumping consumable
products, valves, and production and processing systems.
"Orders received in the second quarter 2014 were $441 million,
4% above our record revenue.
"Forum expects diluted earnings per share for the third quarter
2014 of $0.42 to $0.48."
Recent Events
Forum closed the acquisition of Quality Wireline & Cable,
Inc. ("Quality") during the second quarter of 2014. Based in
Calgary, Alberta, Quality is a leading manufacturer of wireline
cable, a critical consumable product used on wireline units to
perform various well completion and intervention activities.
Forum signed a contract with Marine Platforms Limited to supply
four work-class ROV systems, each complete with a Dynacon Launch
and Recovery System. The order includes three Perry™ heavy
work-class XLX Evo 200HP ROVs, the latest generation of the Perry
XLX series.
Forum recently received a $5 million contract to supply
cementing hardware and casing accessories to an international
service company in the Middle East.
Conference Call
Information
Forum's conference call is scheduled for July 25, 2014 at 9:00
AM CDT. During the call, the company intends to discuss second
quarter 2014 results. To participate in the earnings conference
call, please call 888-713-4218 within North America, or
617-213-4870 outside of North America. The access code is 45216488.
The call will also be broadcast through the Investor Relations link
on Forum’s website at www.f-e-t.com. Participants are encouraged to
log in to the webcast or dial in to the conference call
approximately ten minutes prior to the start time. A replay of the
call will be available for two weeks after the call and may be
accessed by dialing 888-286-8010 within North America, or
617-801-6888 outside of North America. The access code is
87277879.
Forum Energy Technologies is a global oilfield products
company, serving the subsea, drilling, completion, production and
infrastructure sectors of the oil and natural gas
industry. The Company’s products include highly engineered
capital equipment as well as products that are consumed in the
drilling, well construction, production and transportation of oil
and natural gas. With over 3,600 employees, Forum is headquartered
in Houston, TX with manufacturing and distribution
facilities strategically located around the globe. For more
information, please visit www.f-e-t.com.
Forward Looking Statements and Other Legal Disclosure
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that the
company expects, believes or anticipates will or may occur in the
future are forward-looking statements. Without limiting the
generality of the foregoing, forward-looking statements contained
in this press release specifically include the expectations of
plans, strategies, objectives and anticipated financial and
operating results of the company, including any statement about the
company's future financial position, liquidity and capital
resources, operations, performance, acquisitions, returns, capital
expenditure budgets, new product development activities, costs and
other guidance included in this press release.
These statements are based on certain assumptions made by the
company based on management's experience and perception of
historical trends, current conditions, anticipated future
developments and other factors believed to be appropriate. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the company,
which may cause actual results to differ materially from those
implied or expressed by the forward-looking statements. Among other
things, these include the volatility of oil and natural gas prices,
oilfield development activity levels, the availability of raw
materials and specialized equipment, the company's ability to
deliver backlog in a timely fashion, the availability of skilled
and qualified labor, competition in the oil and gas industry,
governmental regulation and taxation of the oil and natural gas
industry, the company's ability to implement new technologies and
services, the availability and terms of capital, and uncertainties
regarding environmental regulations or litigation and other legal
or regulatory developments affecting the company's business, and
other important factors that could cause actual results to differ
materially from those projected as described in the company's
filings with the Securities and Exchange Commission.
Any forward-looking statement speaks only as of the date on
which such statement is made and the company undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Forum Energy Technologies, Inc. Condensed
consolidated statements of income (Unaudited)
Three months ended
June 30, March 31, (in millions, except per share
information)
2014
2013 2014 Revenue $ 428.3 $ 367.9 $ 403.9
Total operating expenses 368.4 320.7 347.8 Earnings from equity
investment 5.9
-
5.3 Operating income 65.8 47.2 61.4
Other expense Interest
expense 7.7 3.1 7.8 Loss (gain) on foreign exchange and other, net
3.1 1.1 1.5 Profit before income taxes 55.0 43.0 52.1 Provision for
income tax expense 15.4 13.1 15.6 Net income 39.6 29.9 36.5 Less:
Net income attributable to noncontrolling interest
-
-
-
Net income attributable to common stockholders (1) $
39.6 $ 29.9 $ 36.5
Weighted average shares
outstanding Basic 92.6 91.0 92.1 Diluted 95.7 94.6 95.2
Earnings per share Basic $ 0.43 $ 0.33 $ 0.40 Diluted $ 0.41
$ 0.32 $ 0.38 (1) Refer to Table 1 for schedule of adjusting
items.
Forum Energy Technologies, Inc.
Condensed consolidated statements of income
(Unaudited) Six months
ended June 30, (in millions, except per share
information)
2014
2013 Revenue $ 832.2 $ 740.9 Total operating expenses
716.2 644.5 Earnings from equity investment 11.2
-
Operating income 127.2 96.4
Other expense
Interest expense 15.5 6.5 Loss (gain) on foreign exchange and
other, net 4.6 (0.4 ) Profit before income taxes 107.1 90.3
Provision for income tax expense 31.0 28.5 Net income 76.1
61.8 Less: Net income attributable to noncontrolling interest
-
-
Net income attributable to common stockholders
(1) $ 76.1 $ 61.8
Weighted average shares
outstanding Basic 92.4 89.8 Diluted 95.4 94.5
Earnings per share Basic $ 0.82 $ 0.69 Diluted $ 0.80 $ 0.65
(1) Refer to Table 2 for schedule of adjusting items.
Forum Energy Technologies, Inc. Condensed
consolidated balance sheets (Unaudited)
June 30, December
31, (in millions of dollars)
2014 2013 Assets Current assets Cash and cash
equivalents $ 32.6 $ 39.6 Other current assets 817.3 769.9 Total
current assets 849.9 809.5 Property and equipment, net of
accumulated depreciation 188.1 180.3 Goodwill and other
intangibles, net 1,120.1 1,097.7 Investment in unconsolidated
subsidiary 58.1 60.3 Other long-term assets 19.1 21.1
Total
assets $ 2,235.3 $ 2,168.9
Liabilities and Equity
Current liabilities Current portion of long-term debt $ 0.9 $ 1.0
Other current liabilities 239.5 218.9 Total current liabilities
240.4 219.9 Long-term debt, net of current portion 436.7 512.1
Other long-term liabilities 118.0 105.9
Total liabilities
795.1 837.9 Total stockholders’ equity 1,439.6 1,330.4
Noncontrolling interest in subsidiary 0.6 0.6
Total equity
1,440.2 1,331.0
Total liabilities and equity $ 2,235.3 $
2,168.9
Forum Energy Technologies, Inc.
Condensed consolidated cash flow information
(Unaudited) Six Months
Ended June 30, (in millions of dollars)
2014 2013 Cash flows
from operating activities Net income $ 76.1 $ 61.8 Depreciation
and amortization 32.2 28.3 Other, primarily working capital 4.8
(0.6 )
Net cash provided by operating activities $
113.1 $ 89.5
Cash flows from investing
activities Capital expenditures for property and equipment $
(28.7 ) $ (30.1 ) Proceeds from sale of property and equipment 2.3
0.3 Acquisition of businesses, net of cash acquired (31.4 ) (2.6 )
Net cash used in investing activities $ (57.8 ) $ (32.4 )
Cash flows from financing activities Borrowings of long-term
debt, including borrowings due to acquisitions $
-
$ 177.9 Repayment of long-term debt (75.5 ) (68.1 ) Payment of
contingent consideration
-
(11.4 ) Other 11.0 5.6
Net cash provided by (used
in) financing activities $ (64.5 ) $ 104.0 Effect of
exchange rate changes on cash 2.2 (2.7 )
Net decrease in cash
and cash equivalents $ (7.0 ) $ 158.4
Forum Energy Technologies, Inc. Supplemental schedule -
Segment information (Unaudited)
As Reported
As Adjusted (5) Three months ended Three
months ended June 30, June 30, March 31,
June 30, June 30, March 31, (in millions of
dollars)
2014 2013
2014 2014 2013 2014 Revenue
Drilling & Subsea $ 279.2 $ 209.2 $ 261.7 $ 279.2 $ 209.2 $
261.7 Production & Infrastructure 149.4 158.9 142.6 149.4 158.9
142.6 Eliminations (0.3 ) (0.2 ) (0.4 ) (0.3 ) (0.2 ) (0.4 )
Total revenue $ 428.3 $ 367.9 $ 403.9 $
428.3 $ 367.9 $ 403.9
Operating
income Drilling & Subsea $ 50.3 $ 32.9 $ 47.0 $ 50.4 $ 32.9
$ 47.0 Operating income margin % 18.0 % 15.7 % 18.0 % 18.1 % 15.7 %
18.0 % Production & Infrastructure (1) 26.6 22.8 23.9 26.9 22.8
23.9 Operating income margin % 17.8 % 14.3 % 16.8 % 18.0 % 14.3 %
16.8 % Corporate (10.7 ) (6.9 ) (8.7 ) (10.4 ) (6.9 ) (8.7 )
Total Segment operating income 66.2 48.8 62.2 66.9 48.8 62.2
Other items not in segment operating income (2) (0.4 ) (1.6 ) (0.8
) 0.3 0.2 0.1
Total operating income $
65.8 $ 47.2 $ 61.4 $ 67.2 $ 49.0
$ 62.3 Operating income margin % 15.4 % 12.8 % 15.2 % 15.7 %
13.3 % 15.4 %
EBITDA (3) Drilling & Subsea
$ 59.5 $ 42.5 $ 58.1 $ 62.3 $ 43.3 $ 58.9 Percentage of D&S
revenue % 21.3 % 20.3 % 22.2 % 22.3 % 20.7 % 22.5 % Production
& Infrastructure 30.0 26.0 26.1 30.2 26.4 26.8 Percentage of
P&I revenue % 20.1 % 16.4 % 18.3 % 20.2 % 16.6 % 18.8 %
Corporate (9.8 ) (6.3 ) (7.5 ) (9.6 ) (6.2 ) (7.5 ) Other items (4)
(0.7 ) (1.7 ) (0.9 )
-
-
-
Total EBITDA $ 79.0 $ 60.5 $ 75.8
$ 82.9 $ 63.5 $ 78.2 Percentage of
total revenue % 18.4 % 16.4 % 18.8 % 19.4 % 17.3 % 19.4 %
(1) Includes earnings from equity investment. (2) Includes
transaction expenses, loss on sale of business and gain/(loss) on
sale of assets.
(3) The Company believes that the
presentation of EBITDA is useful to the Company's investors because
EBITDA is an
appropriate measure of evaluating the company's operating
performance and liquidity that reflects the resources available for
strategic opportunities including, among others, investing in the
business, strengthening the balance sheet, repurchasing the
Company's securities and making strategic acquisitions. In
addition, EBITDA is a widely used benchmark in the investment
community. See the attached separate schedule for the
reconciliation of GAAP to non-GAAP financial information. (4)
Includes transaction expenses and loss on sale of business. (5)
Refer to Table 1 for schedule of adjusting items.
Forum Energy Technologies, Inc. Supplemental schedule -
Segment information (Unaudited)
As Reported As Adjusted (5) Six
months ended Six months ended June 30, June
30, June 30, June 30, (in millions of dollars)
2014 2013 2014
2013 Revenue Drilling & Subsea $ 540.9 $ 431.1 $
540.9 $ 431.1 Production & Infrastructure 292.0 310.1 292.0
310.1 Eliminations (0.7 ) (0.3 ) (0.7 ) (0.3 )
Total revenue
$ 832.2 $ 740.9 $ 832.2 $ 740.9
Operating income Drilling & Subsea $ 97.3 $ 68.1 $ 97.4
$ 68.1 Operating income margin % 18.0 % 15.8 % 18.0 % 15.8 %
Production & Infrastructure (1) 50.5 44.2 50.8 44.2 Operating
income margin % 17.3 % 14.3 % 17.4 % 14.3 % Corporate (19.4 ) (14.1
) (19.1 ) (14.1 )
Total Segment operating income 128.4 98.2
129.1 98.2 Other items not in segment operating income (2) (1.2 )
(1.8 ) 0.4
-
Total operating income $ 127.2 $ 96.4 $
129.5 $ 98.2 Operating income margin % 15.3 % 13.0 %
15.6 % 13.3 %
EBITDA (3) Drilling & Subsea
$ 117.6 $ 89.2 $ 121.2 $ 88.5 Percentage of D&S revenue % 21.7
% 20.7 % 22.4 % 20.5 % Production & Infrastructure 56.1 50.7
57.0 51.2 Percentage of P&I revenue % 19.2 % 16.3 % 19.5 % 16.5
% Corporate (17.3 ) (13.1 ) (17.1 ) (13.0 ) Other items (4) (1.6 )
(1.7 )
-
-
Total EBITDA $ 154.8 $ 125.1 $ 161.1
$ 126.7 Percentage of total revenue % 18.6 % 16.9 %
19.4 % 17.1 % (1) Includes earnings from equity investment.
(2) Includes transaction expenses, loss on sale of business and
gain/(loss) on sale of assets.
(3) The Company believes that the
presentation of EBITDA is useful to the Company's investors
because EBITDA is an appropriate measure of evaluating the
company's operating performance and liquidity that reflects the
resources available for strategic opportunities including, among
others, investing in the business, strengthening the balance sheet,
repurchasing the Company's securities and making strategic
acquisitions. In addition, EBITDA is a widely used benchmark in the
investment community. See the attached separate schedule for the
reconciliation of GAAP to non-GAAP financial information. (4)
Includes transaction expenses and loss on sale of business. (5)
Refer to Table 2 for schedule of adjusting items.
Forum Energy Technologies, Inc. Reconciliation of GAAP to
non-GAAP financial information (Unaudited)
Table 1 - Adjusting items Three
months ended June 30, 2014 June
30, 2013 March 31, 2014
Operating
Diluted Operating
Diluted Operating
Diluted (in millions, except per share
information)
income
EBITDA (1)
EPS income
EBITDA (1)
EPS income
EBITDA (1)
EPS As reported $ 65.8 $ 79.0 $ 0.41 $ 47.2 $ 60.5 $
0.32 $ 61.4 $ 75.8 $ 0.38 % of revenue 15.4 % 18.4 % 12.8 % 16.4 %
15.2 % 18.8 % Restructuring charges 0.7 0.7
-
-
-
-
Transaction expenses 0.7 0.7 1.8 1.8 0.1 0.1 Loss on sale of
business
-
-
0.8 0.8 Loss (gain) on foreign exchange, net (2)
-
2.5
-
1.2
-
1.5
As adjusted (1) $ 67.2
$ 82.9 $ 0.44 $
49.0 $ 63.5 $ 0.34
$ 62.3 $ 78.2
$ 0.40 % of revenue 15.7 % 19.4 % 13.3 % 17.3 % 15.4
% 19.4 %
(1) The Company believes that the
presentation of EBITDA, adjusted EBITDA, adjusted operating income
and adjusted Diluted EPS is
useful to the Company's investors because (i) EBITDA is an
appropriate measure of evaluating the Company's operating
performance and liquidity that reflects the resources available for
strategic opportunities including, among others, investing in the
business, strengthening the balance sheet, repurchasing the
Company's securities and making strategic acquisitions and (ii)
each of adjusted EBITDA, adjusted operating income and adjusted
Diluted EPS is useful to investors to assess and understand
operating performance, especially when comparing those results with
previous and subsequent periods or forecasting performance for
future periods, primarily because management views the excluded
items to be outside of the Company's normal operating results. In
addition, EBITDA is a widely used benchmark in the investment
community. See the attached separate schedule for the
reconciliation of GAAP to non-GAAP financial information.
(2) Loss (gain) on foreign exchange, net
primarily relates to the translation of U.S. dollar denominated
receivables for reporting
purposes only and have no economic impact in dollar terms.
Forum Energy Technologies, Inc. Reconciliation of
GAAP to non-GAAP financial information (Unaudited)
Table 2 - Adjusting items
Six months ended June 30, 2014
June 30, 2013 Operating
Operating
(in millions, except per share information)
income
EBITDA (1)
Diluted EPS income
EBITDA (1)
Diluted EPS As reported $ 127.2 $ 154.8 $ 0.80 $ 96.4
$ 125.1 $ 0.65 % of revenue 15.4 % 18.6 % 13.0 % 16.9 %
Restructuring charges 0.7 0.7
-
-
Loss on sale of business 0.8 0.8
-
-
Transaction expenses 0.8 0.8 1.8 1.8 Loss (gain) on foreign
exchange, net (2)
-
4.0
-
(0.2 )
As adjusted (1) $ 129.5
$ 161.1 $ 0.85 $
98.2 $ 126.7 $
0.67 % of revenue 15.6 % 19.4 % 13.3 % 17.1 %
(1) The Company believes that the
presentation of EBITDA, adjusted EBITDA, adjusted operating income
and
adjusted Diluted EPS is useful to the Company's investors because
(i) EBITDA is an appropriate measure of evaluating the Company's
operating performance and liquidity that reflects the resources
available for strategic opportunities including, among others,
investing in the business, strengthening the balance sheet,
repurchasing the Company's securities and making strategic
acquisitions and (ii) each of adjusted EBITDA, adjusted operating
income and adjusted Diluted EPS is useful to investors to assess
and understand operating performance, especially when comparing
those results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluded items to be outside of the Company's normal operating
results. In addition, EBITDA is a widely used benchmark in the
investment community. See the attached separate schedule for the
reconciliation of GAAP to non-GAAP financial information.
(2) Loss (gain) on foreign exchange, net
primarily relates to the translation of U.S. dollar denominated
receivables for reporting purposes only and have no economic impact
in dollar terms.
Forum Energy Technologies,
Inc. Reconciliation of GAAP to non-GAAP financial
information (Unaudited)
Three months ended June 30,
June 30, March 31, (in millions
of dollars)
2014 2013
2014 EBITDA reconciliation (1) Net income
attributable to common stockholders $ 39.6 $ 29.9 $ 36.5 Interest
expense 7.7 3.1 7.8 Depreciation and amortization 16.3 14.4 15.9
Income tax expense 15.4 13.1 15.6
EBITDA
$ 79.0 $ 60.5 $
75.8
(1) The Company believes that the
presentation of EBITDA is useful to the Company's investors
because EBITDA is an appropriate measure of evaluating the
company's operating performance and liquidity that reflects the
resources available for strategic opportunities including, among
others, investing in the business, strengthening the balance sheet,
repurchasing the Company's securities and making strategic
acquisitions. In addition, EBITDA is a widely used benchmark in the
investment community.
Forum Energy Technologies,
Inc. Reconciliation of GAAP to non-GAAP financial
information (Unaudited)
Six months ended June 30,
June 30, (in millions of dollars)
2014 2013 EBITDA reconciliation
(1) Net income attributable to common stockholders $ 76.1 $
61.8 Interest expense 15.5 6.5 Depreciation and amortization 32.2
28.3 Income tax expense 31.0 28.5
EBITDA $
154.8 $ 125.1
(1) The Company believes that the
presentation of EBITDA is useful to the Company's investors
because EBITDA is an appropriate measure of evaluating the
company's operating performance and liquidity that reflects the
resources available for strategic opportunities including, among
others, investing in the business, strengthening the balance sheet,
repurchasing the Company's securities and making strategic
acquisitions. In addition, EBITDA is a widely used benchmark in the
investment community.
Forum Energy Technologies, Inc.Investor ContactMark
Traylor, 281.368.1108Vice President, Investor Relations &
Planningmark.traylor@f-e-t.comorMedia ContactDonna Smith,
281.949.2514Director, Marketing &
Communicationsdonna.smith@f-e-t.com
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