UNITED STATES
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
April 26, 2012
Date of Report (Date of earliest event reported)
FORUM ENERGY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-35504 | 61-1488595 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) | ||
920 Memorial City Way, Suite 800 | ||
Houston, Texas | 77024 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 281-949-2500
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On April 26, 2012, Forum Energy Technologies, Inc. (the "Company") issued a press release announcing earnings for the quarter ended March 31, 2012. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.
The information contained in this Current Report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is provided as part of the information furnished under Item 2.02 of this Current Report on Form 8-K:
Exhibit No. | Exhibit Title or Description | |
99.1 | Forum Energy Technologies, Inc. press release dated April 26, 2012. | |
Exhibit 99.1 to this report contains “non-GAAP financial measures” as defined in Item 10 of Regulation S-K of the Exchange Act . The non-GAAP financial measures reflect earnings before interest, taxes, depreciation and amortization expense (“EBITDA”). A reconciliation of EBITDA to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”) is included as an attachment to the press release. The Company believes 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.
The presentation of this additional information is not meant to be considered in isolation or as a substitute for the Company's financial results prepared in accordance with GAAP.
SIGNATURES
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.
Date: April 26, 2012 | FORUM ENERGY TECHNOLOGIES, INC. | |||
/s/ James W. Harris | ||||
James W. Harris | ||||
Chief Financial Officer | ||||
Exhibit Index
Exhibit No. | Exhibit Title or Description | |
99.1 | Forum Energy Technologies, Inc. press release dated April 26, 2012. | |
Forum Energy Technologies Reports 2012 First Quarter Net Income of $42.5 million
• | 79% revenue growth over prior year quarter |
• | Consolidated operating income margin of 19% |
• | Full year net income guidance of $175 million to $185 million |
HOUSTON, TEXAS, April 26, 2012 - Forum Energy Technologies, Inc. (NYSE:FET) today reported first quarter 2012 revenue of $363.5 million, up 79 percent over first quarter 2011 revenue of $203.1 million. Net income for the first quarter 2012 was $42.5 million, compared to first quarter 2011 net income of $12.4 million. Diluted earnings per share for the quarter were $0.57, a 185 percent increase over first quarter 2011 diluted earnings of $0.20 per share1.
First Quarter Results by Segment
Drilling & Subsea
Drilling & Subsea revenue in the first quarter was $213.1 million, an increase of 30 percent over pro forma revenue of $163.8 million in the first quarter 2011. Pro forma results for the first quarter 2011 include full period contribution from acquisitions that were completed later in 2011, as if those acquired businesses had been included in the financial results for the first quarter 2011. The Drilling & Subsea segment experienced strong revenue growth across all three products lines, with the Subsea Technologies product line generating the highest rate of growth. Global deepwater and subsea projects drove increased demand for Forum's Perry™ work class remote operating vehicles (ROVs) and contributed significantly to the segment's revenue growth. Segment operating income in the first quarter was $46.0 million, up from $31.3 million of pro forma operating income generated in the first quarter 2011. Operating income margins increased from 19.1 percent (pro forma) to 21.6 percent over the same period. Forum's 2011 investment in additional manufacturing and production capacity facilitated the growth in segment operating income. The improved results for the segment were also supported by increased volume and margins realized from drilling product sales in the quarter.
Production & Infrastructure
Production & Infrastructure reported revenue in the first quarter of $150.6 million, an increase of 53 percent over pro forma revenue of $98.6 million generated in the first quarter 2011. All three product lines experienced strong revenue growth, with the Flow Equipment product line more than doubling its revenue from the pro forma level of the first quarter 2011. North American fracturing activity and associated service intensity in the unconventional resource plays produced significant demand for Forum's consumable flow equipment products. Segment operating income was up 94 percent, from $15.3 million pro forma in the first quarter 2011 to $29.7 million in the first quarter 2012. Operating income margins also increased from 15.5 percent (pro forma) to 19.7 percent over the same period. Contributing to the growth in operating income was the increase in sales of consumable flow equipment products and valves. The Valve Solutions product line
contributed to the segment's increased volume and operating margins due to the strength of the midstream valve market and the introduction of new products into the upstream oil and gas valve market.
Operational Review and Outlook
“Forum delivered outstanding top line growth this quarter compared to last year due to strong organic growth and the contribution of the eight acquisitions we completed in 2011,” remarked Cris Gaut, Chairman and Chief Executive Officer of Forum. “In the first quarter 2012, we experienced strong demand for our products across all of our lines of business and achieved significant improvements in our consolidated operating income margins. The investments we made increased our capacity to produce work class ROVs, surface production equipment and flow equipment, and allowed the company to address the strong demand from our customers for these products. We believe we are positioned to benefit from some of the more attractive growth trends in the industry.”
Forum issued net income guidance for full year 2012 of $175 million to $185 million.
Significant and Subsequent Events
Forum achieved a variety of significant product events in the first quarter. Forum's Davis-Lynch™ brand of casing and cementing tools won several awards from Energy Point Research's 2011 oilfield customer satisfaction survey, including the top rating for downhole cementing equipment; engineering and design; shale oriented applications and six other categories. Forum introduced a new multi-role ROV, the Tomahawk™ in March 2012, a more powerful and capable all-electric and ultra-deepwater vehicle. Forum's Subsea Technologies product line also announced the sale of ten of its most powerful work class vehicles, the Perry™ XLX. In addition, the Production Equipment product line announced the award of one of the largest de-salter units in the world for a U.S. Gulf Coast refinery, using its newest EDGE™ II de-salting technology.
Initial Public Offering and Concurrent Private Placement: Subsequent to the quarter, Forum completed an initial public offering (“IPO”) and began trading on the New York Stock Exchange on April 12, 2012, under the ticker “FET”. Forum simultaneously completed a $50 million private placement. In total, Forum issued 16,556,136 new shares of common stock in the IPO and concurrent private placement and received approximately $308 million in net proceeds that were used to repay outstanding borrowings. At the conclusion of the IPO and private placement, Forum's diluted share count was 92.3 million shares.
Conference Call Information
Forum's conference call is scheduled for April 27, 2012 at 9:00 AM CDT. During the call, the company intends to discuss first quarter 2012 results. To access the call, please call the conference call operator at 888.680.0890, or 617.213.4857 outside of North America. The access code is 55228193. A replay of the call will be available through May 4, 2012. The number for the replay is 888.286.8010 in the United States, or 617.801.6888 for international calls, and the access code is 43711080. The call will also be broadcast through the Investor Relations link on Forum's website. Attendees should log-in to the webcast or dial in approximately ten minutes prior to the call's start time.
Notes:
(1) Reported diluted earnings per share are as of period indicated and do not include the impact of the shares issued in the IPO and concurrent private placement, which occurred subsequent to the first quarter of 2012.
Forum Energy Technologies Inc. (NYSE: FET) is a global provider of manufactured technologies and applied products to the energy industry. With approximately 3,100 employees strategically located throughout the world, Forum is well positioned to provide the products and technologies essential to solving the increasingly complex challenges of the subsea, drilling and production sectors of the oil and gas industry. For more information, please visit Forum's website at 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 reports filed 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.
Investor Contact
Patrick Connelly - Vice President, Strategic Development
Investor Relations
281.949.2513
patrick.connelly@f-e-t.com
Media Contact
Donna Smith - Director, Marketing & Communications
281.949.2514
donna.smith@f-e-t.com
Forum Energy Technologies, Inc. | ||||||||||||
Condensed consolidated statements of income | ||||||||||||
(Unaudited) | ||||||||||||
Three months ended | ||||||||||||
March 31, | December 31, | |||||||||||
(in thousands of dollars, except per share information) | 2012 | 2011 | 2011 | |||||||||
Revenue | $ | 363,489 | $ | 203,052 | $ | 336,719 | ||||||
Total operating expenses | 293,276 | 180,420 | 286,146 | |||||||||
Operating income | 70,213 | 22,632 | 50,573 | |||||||||
Interest expense | 5,786 | 3,240 | 5,809 | |||||||||
(Gain) loss on foreign exchange and sale of assets | 31 | 64 | (883 | ) | ||||||||
Profit before income taxes | 64,396 | 19,328 | 45,647 | |||||||||
Provision for income tax expense | 21,885 | 6,930 | 13,934 | |||||||||
Net income | 42,511 | 12,398 | 31,713 | |||||||||
Less: Net income (loss) attributable to noncontrolling interest | 29 | 29 | (16 | ) | ||||||||
Net income attributable to common stockholders | $ | 42,482 | $ | 12,369 | $ | 31,729 | ||||||
Weighted average shares outstanding | ||||||||||||
Basic | 67,960 | 58,322 | 67,807 | |||||||||
Diluted | 74,741 | 61,247 | 74,033 | |||||||||
Earnings per share | ||||||||||||
Basic | $ | 0.63 | $ | 0.21 | $ | 0.47 | ||||||
Diluted | $ | 0.57 | $ | 0.20 | $ | 0.43 | ||||||
Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated balance sheets | ||||||||
(in thousands of dollars) | March 31, 2012 | December 31, 2011 | ||||||
Assets | (unaudited) | |||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 15,826 | $ | 20,548 | ||||
Other current assets | 651,476 | 598,038 | ||||||
Total current assets | 667,302 | 618,586 | ||||||
Property and equipment, net of accumulated depreciation | 132,514 | 124,840 | ||||||
Goodwill | 606,564 | 600,827 | ||||||
Other long-term assets | 260,862 | 263,062 | ||||||
Total assets | $ | 1,667,242 | $ | 1,607,315 | ||||
Liabilities and Equity | ||||||||
Current liabilities | ||||||||
Accounts payable—trade | 103,361 | 97,642 | ||||||
Accrued liabilities and other current liabilities | 92,524 | 92,251 | ||||||
Other current liabilities | 74,054 | 64,759 | ||||||
Total current liabilities | 269,939 | 254,652 | ||||||
Long-term debt, net of current portion | 647,288 | 660,379 | ||||||
Other long-term liabilities | 36,489 | 37,152 | ||||||
Total liabilities | 953,716 | 952,183 | ||||||
Equity | ||||||||
Total stockholders’ equity | 712,823 | 654,493 | ||||||
Noncontrolling interest in subsidiary | 703 | 639 | ||||||
Total equity | 713,526 | 655,132 | ||||||
Total liabilities and equity | $ | 1,667,242 | $ | 1,607,315 | ||||
Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated statements of cash flows | ||||||||
(Unaudited) | ||||||||
Three months ended March 31, | ||||||||
(in thousands of dollars) | 2012 | 2011 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 42,511 | $ | 12,398 | ||||
Depreciation and amortization | 11,825 | 7,857 | ||||||
Other, primarily working capital | (33,411 | ) | (24,671 | ) | ||||
Net cash provided by (used in) operating activities | 20,925 | (4,416 | ) | |||||
Cash flows from investing activities | ||||||||
Capital expenditures for property and equipment | (12,310 | ) | (6,731 | ) | ||||
Acquisition of businesses, net of cash acquired | (2,839 | ) | (31,509 | ) | ||||
Other | 1,394 | 531 | ||||||
Net cash provided by (used in) investing activities | (13,755 | ) | (37,709 | ) | ||||
Cash flows from financing activities | ||||||||
Borrowings of long-term debt | 39,313 | 7,439 | ||||||
Repayment of long-term debt | (52,397 | ) | (136 | ) | ||||
Other | 3,902 | 31,509 | ||||||
Net cash provided by (used in) financing activities | (9,182 | ) | 38,812 | |||||
Effect of exchange rate changes on cash | (2,710 | ) | 1,325 | |||||
Net increase (decrease) in cash and cash equivalents | $ | (4,722 | ) | $ | (1,988 | ) | ||
Cash and cash equivalents | ||||||||
Beginning of period | 20,548 | 20,348 | ||||||
End of period | $ | 15,826 | $ | 18,360 | ||||
Forum Energy Technologies, Inc. | ||||||||||||||||||||
Supplemental schedule - Segment information | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three months ended | ||||||||||||||||||||
March 31, 2012 | March 31, 2011 | December 31, 2011 | ||||||||||||||||||
(in thousands of dollars) | Actual | Actual | Adjustments (1) | Pro forma | Actual | |||||||||||||||
Revenue | ||||||||||||||||||||
Drilling & Subsea | $ | 213,064 | $ | 120,726 | $ | 43,066 | $ | 163,792 | $ | 193,532 | ||||||||||
Production & Infrastructure | 150,595 | 82,326 | 16,321 | 98,647 | 143,187 | |||||||||||||||
Eliminations | (170 | ) | — | — | — | — | ||||||||||||||
Total revenue | $ | 363,489 | $ | 203,052 | $ | 59,387 | $ | 262,439 | $ | 336,719 | ||||||||||
Gross profit | ||||||||||||||||||||
Drilling & Subsea | $ | 79,214 | $ | 36,049 | $ | 24,366 | $ | 60,415 | $ | 69,812 | ||||||||||
Gross margin % | 37.2 | % | 29.9 | % | 36.9 | % | 36.1 | % | ||||||||||||
Production & Infrastructure | 47,229 | 22,748 | 6,760 | 29,508 | 44,069 | |||||||||||||||
Gross margin % | 31.4 | % | 27.6 | % | 29.9 | % | 30.8 | % | ||||||||||||
Total Gross profit | $ | 126,443 | $ | 58,797 | $ | 31,126 | $ | 89,923 | $ | 113,881 | ||||||||||
Selling, general and administrative expenses | ||||||||||||||||||||
Drilling & Subsea | $ | 33,218 | $ | 20,767 | $ | 8,374 | $ | 29,141 | $ | 35,363 | ||||||||||
Percentage of D&S revenue % | 15.6 | % | 17.2 | % | 17.8 | % | 18.3 | % | ||||||||||||
Production & Infrastructure | 17,537 | 12,362 | 1,863 | 14,225 | 16,801 | |||||||||||||||
Percentage of P&I revenue % | 11.6 | % | 15.0 | % | 14.4 | % | 11.7 | % | ||||||||||||
Corporate | 4,099 | 3,064 | 31 | 3,095 | 4,984 | |||||||||||||||
Total selling, general and administrative expenses | $ | 54,854 | $ | 36,193 | $ | 10,268 | $ | 46,461 | $ | 57,148 | ||||||||||
Operating income | ||||||||||||||||||||
Drilling & Subsea | $ | 45,996 | $ | 15,282 | $ | 15,992 | $ | 31,274 | $ | 34,449 | ||||||||||
Operating income margin % | 21.6 | % | 12.7 | % | 19.1 | % | 17.8 | % | ||||||||||||
Production & Infrastructure | 29,692 | 10,386 | 4,897 | 15,283 | 27,268 | |||||||||||||||
Operating income margin % | 19.7 | % | 12.6 | % | 15.5 | % | 19.0 | % | ||||||||||||
Corporate | (4,099 | ) | (3,064 | ) | (31 | ) | (3,095 | ) | (4,984 | ) | ||||||||||
Total Segment operating income | $ | 71,589 | $ | 22,604 | $ | 20,858 | $ | 43,462 | $ | 56,733 | ||||||||||
EBITDA | ||||||||||||||||||||
Drilling & Subsea | $ | 54,580 | $ | 21,509 | $ | 19,150 | $ | 40,659 | $ | 45,241 | ||||||||||
Percentage of D&S revenue % | 25.6 | % | 17.8 | % | 24.8 | % | 23.4 | % | ||||||||||||
Production & Infrastructure | 32,778 | 12,257 | 5,232 | 17,489 | 30,216 | |||||||||||||||
Percentage of P&I revenue % | 21.8 | % | 14.9 | % | 17.7 | % | 21.1 | % | ||||||||||||
Corporate | (5,380 | ) | (3,370 | ) | (2 | ) | (3,372 | ) | (11,156 | ) | ||||||||||
Total EBITDA | $ | 81,978 | $ | 30,396 | $ | 24,380 | $ | 54,776 | $ | 64,301 | ||||||||||
(1) Adjustments to reflect the eight acquisitions completed in 2011 as if each had occurred on January 1, 2011. | ||||||||||||||||||||
Forum Energy Technologies, Inc. | |||||||||||||||
Reconciliation of GAAP to non-GAAP financial information | |||||||||||||||
(Unaudited) | |||||||||||||||
Three months ended | |||||||||||||||
March 31, 2012 | March 31, 2011 | December 31, 2011 | |||||||||||||
(in thousands of dollars) | Actual | Actual | Pro forma | Actual | |||||||||||
EBITDA reconciliation | |||||||||||||||
Net income attributable to common stockholders | $ | 42,482 | $ | 12,369 | $ | 22,463 | $ | 31,729 | |||||||
Interest expense | 5,786 | 3,240 | 9,233 | 5,809 | |||||||||||
Depreciation and amortization | 11,825 | 7,857 | 11,300 | 12,829 | |||||||||||
Income tax expense | 21,885 | 6,930 | 11,780 | 13,934 | |||||||||||
EBITDA | $ | 81,978 | $ | 30,396 | $ | 54,776 | $ | 64,301 | |||||||