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Forum Energy Technologies Announces Third Quarter 2019 Results
October 24, 2019 at 8:18 PM EDT
  • Revenue of $239 million
  • Net loss of $533 million and diluted EPS of $(4.83)
  • Adjusted EBITDA of $22 million
  • Cash flow from operations of $35 million and free cash flow after capital expenditures of $32 million
  • Net debt reduced by $70 million

HOUSTON--(BUSINESS WIRE)--Oct. 24, 2019-- Forum Energy Technologies, Inc. (NYSE: FET) today announced third quarter 2019 revenue of $239 million, a decrease of $6 million from the second quarter 2019. Net loss for the quarter was $533 million, or $4.83 per diluted share, compared to net loss of $14 million, or $0.12 per diluted share, for the second quarter 2019. Excluding $535 million, or $4.85 per share of special items, adjusted net income was $0.02 per diluted share in the third quarter 2019 compared to adjusted net loss of $0.08 per diluted share in the second quarter 2019. Forum generated $22 million of adjusted EBITDA in the quarter, a sequential improvement of approximately $4 million on slightly reduced revenue.

Special items in the third quarter 2019 included $532 million of pretax charges related to impairments of goodwill, intangibles, and fixed assets. These charges bring Forum’s book value of equity more in line with the current market value. See Tables 1-5 for a reconciliation of GAAP to non-GAAP financial information.

Cris Gaut, Chairman and Chief Executive Officer, remarked, “Despite challenging market conditions, Forum continues to execute on our business strategy of achieving strong free cash flow, reducing net debt and inventory levels, and growing our market share through our portfolio of winning products. Free cash flow was $32 million in the third quarter, another sequential improvement and the fourth successive quarter of strong free cash flow. Over the past twelve months, we have generated $86 million of free cash flow, representing a greater than 50% annualized free cash yield on our current equity market capitalization. We decreased our net inventory position by $26 million in the quarter, in line with our expectations. We also closed the previously announced disposition of our interest in Ashtead, which generated an additional $39 million of cash proceeds that we used to repay debt. We ended the quarter with net debt of approximately $372 million and total liquidity of $308 million, including an undrawn revolver. We expect to continue to generate strong free cash flow in the fourth quarter.

“Looking ahead to the fourth quarter, we expect a continued decrease in drilling and completions activity in the U.S. onshore market, driven by E&P budget exhaustion and capital discipline. We expect this to result in lower operating results for Forum, as our service company customers are stacking equipment, reducing spending, and deferring maintenance. During this pause in spending by our customers, which we view as temporary and unsustainable, we will focus on generating free cash flow and managing for cost efficiency. In addition, we will foster the recovery in the international and offshore markets through our global sales and distribution network."

Segment Results

Drilling & Downhole segment revenue was $88 million, an increase of $6 million, or 7%, from the second quarter 2019, due to higher deliveries of capital equipment for international markets. Orders in the third quarter were $80 million, a 2% increase from the second quarter. Segment EBITDA increased 57% to $12 million due to higher international sales and cost efficiencies. Drilling & Downhole operations focus primarily on manufactured equipment and consumable products for global drilling, well construction, artificial lift and subsea construction and services markets.

Completions segment revenue was $71 million, a decrease of $11 million, or 13% sequentially, due to lower sales of pressure pumping products. Orders in the third quarter were $65 million, a decrease of $6 million, or 9% from the second quarter 2019, due to lower orders of stimulation products, as the pressure pumping services companies continue cannibalizing their idle fleets and destocking their consumables. The Completions segment designs and manufactures products for the completion, stimulation and intervention markets.

Production segment revenue was $81 million, a decrease of $2 million, or 3% from the second quarter 2019, due to lower sales of surface production equipment. Orders in the third quarter were $55 million, a 27% decrease sequentially, due to deferred order placement for surface production equipment as operators slow their completion activity. In addition, our valve distribution customers placed fewer orders consistent with their destocking strategy. The Production segment manufactures land well site production equipment, desalination refinery equipment, and a wide range of valves for the upstream, midstream and process industry customers.

Subsequent Events

  • In the Production Equipment product line, we have approximately $20 million in firm orders or letters of intent, much of that for process equipment for international markets.
  • Forum Subsea Technologies received another order for a workclass ROV and related equipment for non-oil and gas activity.

Conference Call Information

Forum's conference call is scheduled for Friday, October 25, 2019 at 9:00 AM CDT. During the call, the Company intends to discuss third quarter 2019 results. To participate in the earnings conference call, please call 855-757-8876 within North America, or 631-485-4851 outside of North America. The access code is 2259428. 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 855-859-2056 within North America, or 404-537-3406 outside of North America. The access code is 2259428.

Forum Energy Technologies is a global oilfield products company, serving the drilling, downhole, subsea, completions and production 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. 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 U.S. 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 (loss)

(Unaudited)

 

 

 

 

 

Three months ended

 

 

September 30,

 

June 30,

(in millions, except per share information)

 

2019

 

2018

 

2019

Revenue

 

$

239.3

 

$

267.0

 

$

245.6

Cost of sales

 

176.7

 

192.5

 

182.4

Gross profit

 

62.6

 

74.5

 

63.2

Operating expenses

 

 

 

 

 

 

Selling, general and administrative expenses

 

63.5

 

71.8

 

62.9

Transaction expenses

 

0.3

 

0.8

 

0.1

Impairments of goodwill, intangibles, property and equipment

 

532.3

 

 

Loss (gain) on disposal of assets and other

 

(0.1)

 

0.2

 

0.1

Total operating expenses

 

596.0

 

72.8

 

63.1

Earnings from equity investment

 

 

0.7

 

0.6

Operating income (loss)

 

(533.4)

 

2.4

 

0.7

Other expense (income)

 

 

 

 

 

 

Interest expense

 

7.8

 

7.9

 

8.2

Gain realized on previously held equity investment

 

(1.6)

 

 

Foreign exchange gains and other, net

 

(3.2)

 

(1.3)

 

(2.2)

Total other expense

 

3.0

 

6.6

 

6.0

Loss before income taxes

 

(536.4)

 

(4.2)

 

(5.3)

Income tax expense (benefit)

 

(3.4)

 

(1.1)

 

8.4

Net loss (1)

 

$

(533.0)

 

$

(3.1)

 

$

(13.7)

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

Basic

 

110.3

 

108.9

 

110.0

Diluted

 

110.3

 

108.9

 

110.0

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

Basic

 

$

(4.83)

 

$

(0.03)

 

$

(0.12)

Diluted

 

$

(4.83)

 

$

(0.03)

 

$

(0.12)

 

 

 

 

 

 

 

(1) Refer to Table 1 for schedule of adjusting items.

Forum Energy Technologies, Inc.

Condensed consolidated statements of income (loss)

(Unaudited)

 

 

 

 

 

Nine Months Ended

 

 

September 30, 2019

(in millions, except per share information)

 

2019

 

2018

Revenue

 

$

756.8

 

$

791.3

Cost of sales

 

560.9

 

576.8

Gross profit

 

195.9

 

214.5

Operating expenses

 

 

 

 

Selling, general and administrative expenses

 

195.3

 

215.4

Transaction expenses

 

1.0

 

2.2

Impairments of goodwill, intangibles, property and equipment

 

532.3

 

14.5

Contingent consideration benefit

 

(4.6)

 

Gain on disposal of assets and other

 

(0.1)

 

(1.6)

Total operating expenses

 

723.9

 

230.5

Loss from equity investment

 

(0.3)

 

Operating loss

 

(528.3)

 

(16.0)

Other expense (income)

 

 

 

 

Interest expense

 

24.2

 

23.9

Foreign exchange gains and other, net

 

(3.0)

 

(3.7)

Gain realized on previously held equity investment

 

(1.6)

 

Gain on contribution of subsea rentals business

 

 

(33.5)

Total other (income) expense, net

 

19.6

 

(13.3)

Loss before income taxes

 

(547.9)

 

(2.7)

Income tax expense (benefit)

 

6.7

 

(12.4)

Net income (loss) (1)

 

$

(554.6)

 

$

9.7

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

Basic

 

110.0

 

108.7

Diluted

 

110.0

 

110.8

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

Basic

 

$

(5.04)

 

$

0.09

Diluted

 

$

(5.04)

 

$

0.09

 

 

 

 

 

(1) Refer to Table 2 for schedule of adjusting items.

Forum Energy Technologies, Inc.

Condensed consolidated balance sheets

(Unaudited)

 

 

 

 

(in millions of dollars)

September 30,
2019

 

December 31,
2018

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

28.9

 

$

47.2

Accounts receivable—trade, net

182.6

 

206.1

Inventories, net

443.4

 

479.0

Other current assets

37.6

 

33.7

Total current assets

692.5

 

766.0

Property and equipment, net of accumulated depreciation

160.2

 

177.4

Operating lease assets

50.7

 

Goodwill and other intangibles, net

279.4

 

828.7

Investment in unconsolidated subsidiary

 

45.0

Other long-term assets

16.4

 

12.6

Total assets

$

1,199.2

 

$

1,829.7

Liabilities and equity

 

 

 

Current liabilities

 

 

 

Current portion of long-term debt

$

1.2

 

$

1.2

Other current liabilities

222.9

 

235.7

Total current liabilities

224.1

 

236.9

Long-term debt, net of current portion

399.8

 

517.5

Other long-term liabilities

89.8

 

45.1

Total liabilities

713.7

 

799.5

Total equity

485.5

 

1,030.2

Total liabilities and equity

$

1,199.2

 

$

1,829.7

Forum Energy Technologies, Inc.

Condensed consolidated cash flow information

(Unaudited)

 

 

Nine Months Ended September 30,

(in millions of dollars)

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net income (loss)

 

$

(554.6)

 

$

9.7

Impairments of goodwill, intangibles, property and equipment

 

532.3

 

14.5

Depreciation and amortization

 

48.5

 

55.8

Other noncash items and changes in working capital

 

49.5

 

(104.3)

Net cash provided by (used in) operating activities

 

75.7

 

(24.3)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Capital expenditures for property and equipment

 

(12.6)

 

(19.9)

Proceeds from sale of equity investment, property and equipment

 

39.8

 

9.2

Acquisition of businesses, net of cash acquired

 

 

(8.0)

Net cash provided by (used in) investing activities

 

27.2

 

(18.7)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Repayment of debt, net of borrowings

 

(120.3)

 

(41.9)

Repurchases of stock

 

(1.1)

 

(2.5)

Proceeds from stock issuance

 

 

0.2

Net cash used in financing activities

 

(121.4)

 

(44.2)

 

 

 

 

 

Effect of exchange rate changes on cash

 

0.2

 

(1.1)

Net decrease in cash, cash equivalents and restricted cash

 

$

(18.3)

 

$

(88.3)

Forum Energy Technologies, Inc.

Supplemental schedule - Segment information

(Unaudited)

 

 

 

 

 

 

 

As Reported

 

As Adjusted (4)

 

 

Three months ended

 

Three months ended

(in millions of dollars)

 

September 30,
2019

 

September 30,
2018

 

June 30,
2019

 

September 30,
2019

 

September 30,
2018

 

June 30,
2019

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Drilling & Downhole

 

$

88.3

 

 

$

82.0

 

 

$

82.4

 

 

$

88.3

 

 

$

82.0

 

 

$

82.4

 

Completions

 

70.6

 

 

91.0

 

 

81.5

 

 

70.6

 

 

91.0

 

 

81.5

 

Production

 

81.0

 

 

95.3

 

 

83.3

 

 

81.0

 

 

95.3

 

 

83.3

 

Eliminations

 

(0.6

)

 

(1.3

)

 

(1.6

)

 

(0.6

)

 

(1.3

)

 

(1.6

)

Total revenue

 

$

239.3

 

 

$

267.0

 

 

$

245.6

 

 

$

239.3

 

 

$

267.0

 

 

$

245.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Drilling & Downhole (1)

 

$

4.3

 

 

$

(4.7

)

 

$

1.3

 

 

$

6.4

 

 

$

(0.1

)

 

$

2.0

 

Operating income margin %

 

4.9

%

 

(5.7

)%

 

1.6

%

 

7.2

%

 

(0.1

)%

 

2.4

%

Completions

 

(0.1

)

 

11.6

 

 

2.8

 

 

2.5

 

 

11.9

 

 

2.9

 

Operating income margin %

 

(0.1

)%

 

12.7

%

 

3.4

%

 

3.5

%

 

13.1

%

 

3.6

%

Production

 

2.3

 

 

5.3

 

 

3.6

 

 

3.5

 

 

5.4

 

 

3.6

 

Operating income margin %

 

2.8

%

 

5.6

%

 

4.3

%

 

4.3

%

 

5.7

%

 

4.3

%

Corporate

 

(7.4

)

 

(8.8

)

 

(6.8

)

 

(6.5

)

 

(6.9

)

 

(6.7

)

Total segment operating income (loss)

 

(0.9

)

 

3.4

 

 

0.9

 

 

5.9

 

 

10.3

 

 

1.8

 

Other items not in segment operating income (2)

 

(532.5

)

 

(1.0

)

 

(0.2

)

 

0.1

 

 

 

 

0.1

 

Total operating income (loss)

 

$

(533.4

)

 

$

2.4

 

 

$

0.7

 

 

$

6.0

 

 

$

10.3

 

 

$

1.9

 

Operating income margin %

 

(222.9

)%

 

0.9

%

 

0.3

%

 

2.5

%

 

3.9

%

 

0.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (3)

 

 

 

 

 

 

 

 

 

 

 

 

Drilling & Downhole

 

$

(181.5

)

 

$

4.2

 

 

$

8.1

 

 

$

11.8

 

 

$

7.8

 

 

$

7.5

 

EBITDA Margin %

 

(205.5

)%

 

5.1

%

 

9.8

%

 

13.4

%

 

9.5

%

 

9.1

%

Completions

 

(303.5

)

 

20.1

 

 

11.3

 

 

10.7

 

 

20.5

 

 

11.7

 

EBITDA Margin %

 

(429.9

)%

 

22.1

%

 

13.9

%

 

15.2

%

 

22.5

%

 

14.4

%

Production

 

(19.5

)

 

7.2

 

 

5.2

 

 

5.8

 

 

7.6

 

 

5.7

 

EBITDA Margin %

 

(24.1

)%

 

7.6

%

 

6.2

%

 

7.2

%

 

8.0

%

 

6.8

%

Corporate

 

(8.3

)

 

(9.2

)

 

(5.4

)

 

(6.4

)

 

(6.8

)

 

(6.6

)

Total EBITDA

 

$

(512.8

)

 

$

22.3

 

 

$

19.2

 

 

$

21.9

 

 

$

29.1

 

 

$

18.3

 

EBITDA Margin %

 

(214.3

)%

 

8.4

%

 

7.8

%

 

9.2

%

 

10.9

%

 

7.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes earnings (loss) from equity investment.

 

(2) Includes transaction expenses, gain/(loss) on disposal of assets, and impairments of goodwill, intangibles property and equipment.

 

(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) Refer to Table 1 for schedule of adjusting items.

Forum Energy Technologies, Inc.

Supplemental schedule - Segment information

(Unaudited)

 

 

 

 

 

 

 

As Reported

 

As Adjusted (4)

 

 

Nine months ended

 

Nine months ended

(in millions of dollars)

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

Revenue

 

 

 

 

 

 

 

 

Drilling & Downhole

 

$

256.6

 

 

$

245.4

 

 

$

256.6

 

 

$

245.4

 

Completions

 

246.8

 

 

279.2

 

 

246.8

 

 

279.2

 

Production

 

256.3

 

 

270.3

 

 

256.3

 

 

270.3

 

Eliminations

 

(2.9

)

 

(3.6

)

 

(2.9

)

 

(3.6

)

Total revenue

 

$

756.8

 

 

$

791.3

 

 

$

756.8

 

 

$

791.3

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

Drilling & Downhole (1)

 

$

3.2

 

 

$

(22.5

)

 

$

8.8

 

 

$

(11.7

)

Operating income margin %

 

1.2

%

 

(9.2

)%

 

3.4

%

 

(4.8

)%

Completions

 

9.6

 

 

34.8

 

 

13.0

 

 

38.7

 

Operating income margin %

 

3.9

%

 

12.5

%

 

5.3

%

 

13.9

%

Production

 

10.2

 

 

13.2

 

 

11.8

 

 

13.5

 

Operating income margin %

 

4.0

%

 

4.9

%

 

4.6

%

 

5.0

%

Corporate

 

(22.7

)

 

(26.3

)

 

(20.7

)

 

(23.8

)

Total segment operating income (loss)

 

0.3

 

 

(0.8

)

 

12.9

 

 

16.7

 

Other items not in segment operating income (loss) (2)

 

(528.6

)

 

(15.2

)

 

0.3

 

 

2.3

 

Total operating income (loss)

 

$

(528.3

)

 

$

(16.0

)

 

$

13.2

 

 

$

19.0

 

Operating income margin %

 

(69.8

)%

 

(2.0

)%

 

1.7

%

 

2.4

%

 

 

 

 

 

 

 

 

 

EBITDA (3)

 

 

 

 

 

 

 

 

Drilling & Downhole

 

$

(171.5

)

 

$

24.8

 

 

$

25.3

 

 

$

14.0

 

EBITDA Margin %

 

(66.8

)%

 

10.1

%

 

9.9

%

 

5.7

%

Completions

 

(276.6

)

 

60.0

 

 

38.7

 

 

64.0

 

EBITDA Margin %

 

(112.1

)%

 

21.5

%

 

15.7

%

 

22.9

%

Production

 

(7.8

)

 

20.1

 

 

18.0

 

 

21.1

 

EBITDA Margin %

 

(3.0

)%

 

7.4

%

 

7.0

%

 

7.8

%

Corporate

 

(19.3

)

 

(27.9

)

 

(20.1

)

 

(23.6

)

Total EBITDA

 

$

(475.2

)

 

$

77.0

 

 

$

61.9

 

 

$

75.5

 

EBITDA Margin %

 

(62.8

)%

 

9.7

%

 

8.2

%

 

9.5

%

 

 

 

 

 

 

 

 

 

(1) Includes earnings (loss) from equity investment.

 

(2) Includes transaction expenses, gain (loss) on disposal of assets, contingent consideration benefit, and impairments of goodwill, intangibles, property and equipment.

 

(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) Refer to Table 2 for schedule of adjusting items.

Forum Energy Technologies, Inc.

Supplemental schedule - Orders information

(Unaudited)

 

 

 

 

 

 

 

 

Three months ended

(in millions of dollars)

 

September 30, 2019

 

September 30, 2018

 

June 30, 2019

Orders

 

 

 

 

 

 

Drilling & Downhole

 

$

80.0

 

 

$

90.4

 

 

$

78.3

 

Completions

 

64.5

 

 

84.5

 

 

70.7

 

Production

 

55.2

 

 

99.6

 

 

75.6

 

Total orders

 

$

199.7

 

 

$

274.5

 

 

$

224.6

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Drilling & Downhole

 

$

88.3

 

 

$

82.0

 

 

$

82.4

 

Completions

 

70.6

 

 

91.0

 

 

81.5

 

Production

 

81.0

 

 

95.3

 

 

83.3

 

Eliminations

 

(0.6

)

 

(1.3

)

 

(1.6

)

Total revenue

 

$

239.3

 

 

$

267.0

 

 

$

245.6

 

 

 

 

 

 

 

 

Book to bill ratio (1)

 

 

 

 

 

 

Drilling & Downhole

 

0.91

 

 

1.10

 

 

0.95

 

Completions

 

0.91

 

 

0.93

 

 

0.87

 

Production

 

0.68

 

 

1.05

 

 

0.91

 

Total book to bill ratio

 

0.83

 

 

1.03

 

 

0.91

 

 

 

 

 

 

 

 

(1) The book-to-bill ratio is calculated by dividing the dollar value of orders received in a given period by the revenue earned in that same period. The Company believes that this ratio is useful to investors because it provides an indication of whether the demand for our products, in the markets in which the Company operates, is strengthening or declining. A ratio of greater than one is indicative of improving market demand, while a ratio of less than one would suggest weakening demand. In addition, the Company believes the book-to-bill ratio provides more meaningful insight into future revenues for our business than other measures, such as order backlog, because the majority of the Company's products are activity based consumable items or shorter cycle capital equipment, neither of which are typically ordered by customers far in advance.

Forum Energy Technologies, Inc.

Reconciliation of GAAP to non-GAAP financial information

(Unaudited)

Table 1 - Adjusting items

 

 

 

Three months ended

 

September 30, 2019

 

September 30, 2018

 

June 30, 2019

(in millions, except per share information)

Operating
income
(loss)

 

EBITDA(1)

 

Net
income
(loss)

 

Operating
income
(loss)

 

EBITDA(1)

 

Net
income
(loss)

 

Operating
income
(loss)

 

EBITDA(1)

 

Net
income
(loss)

As reported

$

(533.4

)

 

$

(512.8

)

 

$

(533.0

)

 

$

2.4

 

 

$

22.3

 

 

$

(3.1

)

 

$

0.7

 

 

$

19.2

 

 

$

(13.7

)

% of revenue

(222.9

)%

 

(214.3

)%

 

 

 

0.9

%

 

8.4

%

 

 

 

0.3

%

 

7.8

%

 

 

Restructuring charges and other

2.9

 

 

2.9

 

 

2.9

 

 

7.3

 

 

7.3

 

 

7.3

 

 

0.6

 

 

0.6

 

 

0.6

 

Transaction expenses

0.3

 

 

0.3

 

 

0.3

 

 

0.8

 

 

0.8

 

 

0.8

 

 

0.1

 

 

0.1

 

 

0.1

 

Inventory and other working capital adjustments

2.6

 

 

2.6

 

 

2.6

 

 

(0.7

)

 

(0.7

)

 

(0.7

)

 

 

 

 

 

 

Impairments of goodwill, intangibles, property and equipment

532.3

 

 

532.3

 

 

532.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of basis difference for equity method investment (2)

0.3

 

 

0.3

 

 

0.3

 

 

0.5

 

 

0.5

 

 

0.5

 

 

0.5

 

 

0.5

 

 

0.5

 

Disposal related equity- based compensation recorded by equity investment subsidiary

1.0

 

 

1.0

 

 

1.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain Realized on Previously Held Equity Investment

 

 

(1.6

)

 

(1.6

)

 

 

 

 

 

 

 

 

 

 

 

 

Loss (gain) on foreign exchange, net (3)

 

 

(3.1

)

 

(3.1

)

 

 

 

(1.1

)

 

(1.1

)

 

 

 

(2.1

)

 

(2.1

)

Income tax expense (benefit) of adjustments

 

 

 

 

0.3

 

 

 

 

 

 

(1.2

)

 

 

 

 

 

 

Impact of U.S. tax reform

 

 

 

 

 

 

 

 

 

 

0.3

 

 

 

 

 

 

 

Valuation allowance on deferred tax assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.9

 

As adjusted (1)

$

6.0

 

 

$

21.9

 

 

$

2.0

 

 

$

10.3

 

 

$

29.1

 

 

$

2.8

 

 

$

1.9

 

 

$

18.3

 

 

$

(8.7

)

% of revenue

2.5

%

 

9.2

%

 

 

 

3.9

%

 

10.9

%

 

 

 

0.8

%

 

7.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding as reported

 

 

 

 

110.3

 

 

 

 

 

 

108.9

 

 

 

 

 

 

110.0

 

Diluted shares outstanding as adjusted

 

 

 

 

110.5

 

 

 

 

 

 

110.8

 

 

 

 

 

 

110.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS - as reported

 

 

 

 

$

(4.83

)

 

 

 

 

 

$

(0.03

)

 

 

 

 

 

$

(0.12

)

Diluted EPS - as adjusted

 

 

 

 

$

0.02

 

 

 

 

 

 

$

0.03

 

 

 

 

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The Company believes that the presentation of EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income and adjusted diluted EPS are useful to the Company's investors because (i) each of these financial metrics are 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 and (ii) 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, these benchmarks are widely used in the investment community. See the attached separate schedule for the reconciliation of GAAP to non-GAAP financial information.

 

(2) The difference between the fair value of our interest in Ashtead and the book value of the underlying net assets resulted in a basis difference non-operating gain, which was allocated to fixed assets, intangible assets and goodwill based on their respective fair values as of the transaction date. This amount represents the amortization of the basis difference gain associated with intangible assets and property, plant and equipment which is included in equity earnings (loss) over the estimated life of the respective assets.

 

(3) Foreign exchange, net primarily relates to cash and receivables denominated in U.S. dollars by some of our non-U.S. subsidiaries that report in a local currency, and therefore the loss has no economic impact in dollar terms.

Forum Energy Technologies, Inc.

Reconciliation of GAAP to non-GAAP financial information

(Unaudited)

Table 2 - Adjusting items

 

Nine months ended

 

September 30, 2019

 

September 30, 2018

(in millions, except per share information)

Operating income
(loss)

 

EBITDA(1)

 

Net income
(loss)

 

Operating
income
(loss)

 

EBITDA(1)

 

Net income
(loss)

As reported

$

(528.3

)

 

$

(475.2

)

 

$

(554.6

)

 

$

(16.0

)

 

$

77.0

 

 

$

9.7

 

% of revenue

 

(69.8

)%

 

 

(62.8

)%

 

 

 

 

(2.0

)%

 

 

9.7

%

 

 

Restructuring charges and other

 

8.1

 

 

 

8.1

 

 

 

8.1

 

 

 

11.5

 

 

 

11.5

 

 

 

11.8

 

Transaction expenses

 

1.0

 

 

 

1.0

 

 

 

1.0

 

 

 

2.2

 

 

 

2.2

 

 

 

2.2

 

Inventory and other working capital adjustments

 

2.5

 

 

 

2.5

 

 

 

2.5

 

 

 

5.4

 

 

 

5.4

 

 

 

5.4

 

Impairment of goodwill, intangibles, property and equipment

 

532.3

 

 

 

532.3

 

 

 

532.3

 

 

 

14.5

 

 

 

14.5

 

 

 

14.5

 

Contingent consideration benefit

 

(4.6

)

 

 

(4.6

)

 

 

(4.6

)

 

 

 

 

 

 

Gain on contribution of subsea rentals business

 

 

 

 

 

 

 

 

 

(33.5

)

 

 

(33.5

)

Amortization of basis difference for equity method investment (2)

 

1.2

 

 

 

1.2

 

 

 

1.2

 

 

 

1.4

 

 

 

1.4

 

 

 

1.4

 

Disposal related equity- based compensation recorded by equity investment subsidiary

 

1.0

 

 

 

1.0

 

 

 

1.0

 

 

 

 

 

 

 

Gain realized on previously held equity investment

 

 

 

(1.6

)

 

 

(1.6

)

 

 

 

 

 

 

Loss (gain) on foreign exchange, net (3)

 

 

 

(2.8

)

 

 

(2.8

)

 

 

 

 

(3.0

)

 

 

(3.0

)

Income tax expense (benefit) of adjustments

 

 

 

 

 

0.2

 

 

 

 

 

 

 

0.8

 

Impact of U.S. tax reform

 

 

 

 

 

 

 

 

 

 

 

(15.6

)

Valuation allowance on deferred tax assets

 

 

 

 

 

5.9

 

 

 

 

 

 

 

As adjusted(1)

$

13.2

 

 

$

61.9

 

 

$

(11.4

)

 

$

19.0

 

 

$

75.5

 

 

$

(6.3

)

% of revenue

1.7

%

 

 

8.2

%

 

 

 

 

2.4

%

 

 

9.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding as reported

 

 

 

 

$

110.0

 

 

 

 

 

 

$

110.8

 

Diluted shares outstanding as adjusted

 

 

 

 

$

110.0

 

 

 

 

 

 

$

108.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS - as reported

 

 

 

 

$

(5.04

)

 

 

 

 

 

$

0.09

 

Diluted EPS - as adjusted

 

 

 

 

$

(0.10

)

 

 

 

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

(1) The Company believes that the presentation of EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income and adjusted diluted EPS are useful to the Company's investors because (i) each of these financial metrics are 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 and (ii) 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, these benchmarks are widely used in the investment community. See the attached separate schedule for the reconciliation of GAAP to non-GAAP financial information.

 

(2) The difference between the fair value of our interest in Ashtead and the book value of the underlying net assets resulted in a non-operating gain due to this basis difference which was allocated to fixed assets, intangible assets and goodwill based on their respective fair values as of the transaction date. This amount represents the amortization of the basis difference gain associated with intangible assets and property, plant and equipment which is included in equity earnings (loss) over the estimated life of the respective assets.

 

(3) Foreign exchange, net primarily relates to cash and receivables denominated in U.S. dollars by some of our non-U.S. subsidiaries that report in a local currency, and therefore the loss has no economic impact in dollar terms.

Forum Energy Technologies, Inc.

Reconciliation of GAAP to non-GAAP financial information

(Unaudited)

 

 

Table 3 - Adjusting Items

 

Three months ended

(in millions of dollars)

September 30,
2019

 

September 30,
2018

 

June 30,
2019

EBITDA reconciliation (1)

 

 

 

 

 

Net loss

$

(533.0

)

 

$

(3.1

)

 

$

(13.7

)

Interest expense

7.8

 

 

7.9

 

 

8.2

 

Depreciation and amortization

15.8

 

 

18.6

 

 

16.3

 

Income tax expense (benefit)

(3.4

)

 

(1.1

)

 

8.4

 

EBITDA

$

(512.8

)

 

$

22.3

 

 

$

19.2

 

 

 

 

 

 

 

(1) The Company believes that the presentation of EBITDA is useful to 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.

 

 

 

 

 

Table 4 - Adjusting Items

 

Nine months ended

(in millions of dollars)

September 30,
2019

 

September 30,
2018

EBITDA reconciliation (1)

 

 

 

Net loss

$

(554.6)

 

$

9.7

Interest expense

24.2

 

23.9

Depreciation and amortization

48.5

 

55.8

Income tax expense (benefit)

6.7

 

(12.4)

EBITDA

$

(475.2)

 

$

77.0

 

 

 

 

(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.

Table 5 - Adjusting items

 

Nine months ended

(in millions of dollars)

September 30,
2019

 

September 30,
2018

Free cash flow, before acquisitions, reconciliation (1)

 

 

 

Net cash provided by (used in) operating activities

$

75.7

 

 

$

(24.3

)

Capital expenditures for property and equipment

(12.6

)

 

(19.9

)

Proceeds from sale of property and equipment

0.5

 

 

9.2

 

Free cash flow, before acquisitions

$

63.6

 

 

$

(35.0

)

 

 

 

 

(1) The Company believes free cash flow, before acquisitions is an important measure because it encompasses both profitability and capital management in evaluating results.

Forum Energy Technologies, Inc.

Supplemental schedule - Product line revenue

(Unaudited)

 

 

Three months ended

(in millions of dollars)

 

September 30,
2019

 

September 30,
2018

 

June 30,
2019

Revenue:

 

$

 

%

 

$

 

%

 

$

 

%

Drilling Technologies

 

$

43.2

 

18.1

 

%

 

$

43.3

 

16.2

 

%

 

$

37.3

 

15.3

 

%

Downhole Technologies

 

29.0

 

12.1

 

%

 

27.5

 

10.3

 

%

 

28.8

 

11.7

 

%

Subsea Technologies

 

16.1

 

6.7

 

%

 

11.2

 

4.2

 

%

 

16.3

 

6.6

 

%

Drilling & Downhole

 

88.3

 

36.9

 

%

 

82.0

 

30.7

 

%

 

82.4

 

33.6

 

%

 

 

 

 

 

 

 

 

 

 

Stimulation and Intervention

 

36.4

 

15.2

 

%

 

54.8

 

20.5

 

%

 

46.9

 

19.1

 

%

Coiled Tubing

 

34.2

 

14.3

 

%

 

36.2

 

13.6

 

%

 

34.6

 

14.1

 

%

Completions

 

70.6

 

29.5

 

%

 

91.0

 

34.1

 

%

 

81.5

 

33.2

 

%

 

 

 

 

 

 

 

 

 

 

Production Equipment

 

29.1

 

12.2

 

%

 

37.4

 

14.0

 

%

 

33.0

 

13.4

 

%

Valve Solutions

 

51.9

 

21.6

 

%

 

57.9

 

21.7

 

%

 

50.3

 

20.5

 

%

Production

 

81.0

 

33.8

 

%

 

95.3

 

35.7

 

%

 

83.3

 

33.9

 

%

Eliminations

 

(0.6

)

(0.2

)

%

 

(1.3

)

(0.5

)

%

 

(1.6

)

(0.7

)

%

Total Revenue

 

$

239.3

 

100.0

 

%

 

$

267.0

 

100.0

 

%

 

$

245.6

 

100.0

 

%

 

Source: Forum Energy Technologies, Inc.

Company Contact
Mark Conlon – Director, Investor Relations & Planning
+281.949.2523
Mark.Conlon@f-e-t.com