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
Date of Report (Date of earliest event reported): February 14, 2013
FORUM ENERGY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-35504 | 61-1488595 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
920 Memorial City Way, Suite 1000
Houston, Texas 77024
(Address of principal executive offices and 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 February 14, 2013, Forum Energy Technologies, Inc. (the "Company") issued a press release announcing earnings for the quarter and year ended December 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 furnished as an exhibit to this Current Report on Form 8-K:
Exhibit No. | Exhibit Title or Description | |
99.1 | Forum Energy Technologies, Inc. Press Release dated February 14, 2013. | |
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: February 14, 2013 | FORUM ENERGY TECHNOLOGIES, INC. | |||
/s/ James W. Harris | ||||
James W. Harris | ||||
Senior Vice President and Chief Financial Officer | ||||
Exhibit Index
Exhibit No. | Exhibit Title or Description | |
99.1 | Forum Energy Technologies, Inc. Press Release dated February 14, 2013. | |
Forum Energy Technologies Announces Fourth Quarter and Full Year 2012 Earnings
• | 2012 revenue growth of 25% |
• | 2012 net income growth of 62% |
• | 2013 diluted earnings per share guidance of $1.80 to $1.90 |
HOUSTON, TEXAS, February 14, 2013 - Forum Energy Technologies, Inc. (NYSE: FET) today reported fourth quarter 2012 revenue of $330 million compared to $337 million for the fourth quarter 2011. Net income for the fourth quarter 2012 was $24 million, down from fourth quarter 2011 net income of $32 million. Diluted earnings per share for the fourth quarter 2012 were $0.26, compared to fourth quarter 2011 diluted earnings of $0.43 per share. Included in the fourth quarter 2012 results was $0.02 per share of charges for transaction expenses, severance and foreign exchange losses. The fourth quarter 2011 diluted earnings per share did not include the impact of the 16.6 million shares issued in connection with Forum's initial public offering in April 2012.
Forum's total revenue for the full year 2012 was $1.415 billion, an increase of $287 million, or 25% from 2011. Net income was $151 million in 2012, an increase of $58 million, or 62%, from 2011 mainly due to higher market demand for our equipment and products, and the full year benefit in 2012 of the eight acquisitions completed during 2011. Diluted earnings per share for the year were $1.74.
Fourth Quarter Results by Segment
Drilling & Subsea
Drilling & Subsea revenue in the fourth quarter 2012 was $187 million, a decrease of $7 million, or 3%, from the fourth quarter 2011. The Drilling Technologies product line revenue decreased 6% compared to the fourth quarter 2011 on a decrease in the North America rig count. The Subsea Technologies product line revenue increased modestly in the fourth quarter 2012 over the fourth quarter 2011.
Production & Infrastructure
Production & Infrastructure revenue in the fourth quarter 2012 was $143 million, which was flat with revenue in the fourth quarter 2011. Strong demand and revenue growth for Valve Solutions and Production Equipment were offset by significantly lower demand for our Flow Equipment product line in the fourth quarter 2012 compared to the fourth quarter 2011.
Review and Outlook
Cris Gaut, Chairman and Chief Executive Officer of Forum, remarked, "Forum had a successful year during 2012. We delivered record annual revenue with each of our six product lines increasing revenue. We completed our IPO and concurrent private placement in April 2012, and closed four acquisitions in the fourth
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quarter 2012.
"We are not satisfied, however, with our performance during the fourth quarter 2012. A significant factor was the declining U.S. rig count during the period. The latter part of the fourth quarter was particularly challenging as customers significantly reduced spending on consumable products and delayed delivery of capital equipment orders. As a result, we had manufacturing inefficiencies and under absorbed costs, which depressed margins.
"In 2013, we anticipate sequential quarterly revenue and margin improvement in both of our segments, as most of our product lines are seeing improved demand. Our Drilling product line, however, is expected to face continued demand softness until the North America rig count improves. Forum expects diluted earnings per share for the full year 2013 of $1.80 to $1.90, and the first quarter 2013 of $0.31 to $0.35.
"We are pleased to welcome the employees of Dynacon, Inc. and Merrimac Manufacturing, Inc., our two most recent acquisitions, to Forum."
Recent Acquisitions
• | Dynacon, the leading provider of launch and recovery systems used for deployment of remotely operated vehicles and high quality, specialized cable and umbilical handling equipment for all segments of the marine industry. |
• | Merrimac, a manufacturer of premium consumable parts for drilling, well servicing and pressure pumping applications, including mud pump parts, power swivel parts and valves and seats for hydraulic fracturing pumps. |
Conference Call Information
Forum's conference call is scheduled for February 15, 2013 at 9:00 AM CST. During the call, the company intends to discuss fourth quarter 2012 results. To access the call, please call the conference call operator at 888-680-0890 within North America, or 617-213-4857 outside of North America. The access code is 36484946. 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 30 days and may be accessed by dialing 888-286-8010 within North America, or 617-801-6888 outside of North America. The access code is 17205120.
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Forum Energy Technologies, Inc., headquartered in Houston, TX, is a global provider of manufactured technologies and applied products to the energy industry. Forum's over 3,400 employees provide the products and technologies essential to solving the increasingly complex challenges of the energy industry. 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.
Investor Contact
Mark Traylor - Vice President, Investor Relations & Planning
281.368.1108
mark.traylor@f-e-t.com
Media Contact
Donna Smith - Director, Marketing & Communications
281.949.2514
donna.smith@f-e-t.com
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Forum Energy Technologies, Inc. | ||||||||||||
Condensed consolidated statements of income | ||||||||||||
(Unaudited) | ||||||||||||
Three months ended | ||||||||||||
December 31, | September 30, | |||||||||||
(in millions, except per share information) | 2012 | 2011 | 2012 | |||||||||
Revenue | $ | 330.1 | $ | 336.7 | $ | 347.8 | ||||||
Total operating expenses | 292.2 | 286.2 | 284.9 | |||||||||
Operating income | 37.9 | 50.5 | 62.9 | |||||||||
Interest expense | 3.4 | 5.8 | 3.6 | |||||||||
Loss (gain) on foreign exchange | 0.5 | (0.9 | ) | 0.8 | ||||||||
Profit before income taxes | 34.0 | 45.6 | 58.5 | |||||||||
Provision for income tax expense | 10.1 | 13.9 | 17.6 | |||||||||
Net income | 23.9 | 31.7 | 40.9 | |||||||||
Less: Net income attributable to noncontrolling interest | — | — | — | |||||||||
Net income attributable to common stockholders | $ | 23.9 | $ | 31.7 | $ | 40.9 | ||||||
Weighted average shares outstanding (1) | ||||||||||||
Basic | 86.1 | 67.8 | 85.0 | |||||||||
Diluted | 93.4 | 74.0 | 92.3 | |||||||||
Earnings per share | ||||||||||||
Basic | $ | 0.28 | $ | 0.47 | $ | 0.48 | ||||||
Diluted | $ | 0.26 | $ | 0.43 | $ | 0.44 | ||||||
(1) Third and fourth quarter 2012 diluted earnings per share include the impact of the 16.6 million shares issued in connection with the IPO and concurrent private placement on April 12, 2012. | ||||||||||||
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Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated statements of income | ||||||||
(Unaudited) | ||||||||
Year ended | ||||||||
December 31, | ||||||||
(in millions, except per share information) | 2012 | 2011 | ||||||
Revenue | $ | 1,414.9 | $ | 1,128.1 | ||||
Total operating expenses | 1,174.0 | 967.5 | ||||||
Operating income | 240.9 | 160.6 | ||||||
Interest expense | 16.4 | 19.5 | ||||||
Loss on foreign exchange | 1.7 | 0.4 | ||||||
Profit before income taxes | 222.8 | 140.7 | ||||||
Provision for income tax expense | 71.3 | 47.1 | ||||||
Net income | 151.5 | 93.6 | ||||||
Less: Net income attributable to noncontrolling interest | 0.1 | 0.3 | ||||||
Net income attributable to common stockholders | $ | 151.4 | $ | 93.3 | ||||
Weighted average shares outstanding (1) | ||||||||
Basic | 80.1 | 63.3 | ||||||
Diluted | 86.9 | 67.5 | ||||||
Earnings per share | ||||||||
Basic | $ | 1.89 | $ | 1.48 | ||||
Diluted | $ | 1.74 | $ | 1.38 | ||||
(1) Diluted earnings per share for the year ended December 31, 2012 include the weighted impact of the 16.6 million shares issued in connection with the IPO and concurrent private placement on April 12, 2012. | ||||||||
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Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated balance sheets | ||||||||
(in millions of dollars) | December 31, 2012 | December 31, 2011 | ||||||
Assets | (unaudited) | |||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 41.1 | $ | 20.6 | ||||
Other current assets | 733.8 | 598.0 | ||||||
Total current assets | 774.9 | 618.6 | ||||||
Property and equipment, net of accumulated depreciation | 153.0 | 124.8 | ||||||
Goodwill | 696.3 | 600.8 | ||||||
Other long-term assets | 268.8 | 263.1 | ||||||
Total assets | $ | 1,893.0 | $ | 1,607.3 | ||||
Liabilities and Equity | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt and capital lease obligations | $ | 20.5 | $ | 5.2 | ||||
Accounts payable—trade | 99.0 | 97.6 | ||||||
Accrued liabilities | 93.7 | 92.3 | ||||||
Other current liabilities | 67.7 | 59.6 | ||||||
Total current liabilities | 280.9 | 254.7 | ||||||
Long-term debt, net of current portion | 400.2 | 660.4 | ||||||
Other long-term liabilities | 49.7 | 37.1 | ||||||
Total liabilities | 730.8 | 952.2 | ||||||
Equity | ||||||||
Total stockholders’ equity | 1,161.5 | 654.5 | ||||||
Noncontrolling interest in subsidiary | 0.7 | 0.6 | ||||||
Total equity | 1,162.2 | 655.1 | ||||||
Total liabilities and equity | $ | 1,893.0 | $ | 1,607.3 | ||||
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Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated cash flow information | ||||||||
(Unaudited) | ||||||||
Year ended December 31, | ||||||||
(in millions of dollars) | 2012 | 2011 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 151.5 | $ | 93.6 | ||||
Change in contingent consideration | (4.6 | ) | 12.1 | |||||
Impairment of intangible assets | 1.2 | — | ||||||
Depreciation and amortization | 51.8 | 40.8 | ||||||
Other, primarily working capital | (54.9 | ) | (107.2 | ) | ||||
Net cash provided by operating activities, excluding contingent consideration payments (1) | $ | 145.0 | $ | 39.3 | ||||
Cash flows from investing activities | ||||||||
Capital expenditures for property and equipment | $ | (49.7 | ) | $ | (41.2 | ) | ||
Proceeds from sale of property and equipment and other | 5.1 | 1.0 | ||||||
Acquisition of businesses, net of cash acquired | (139.9 | ) | (509.9 | ) | ||||
Net cash provided by (used in) investing activities | $ | (184.5 | ) | $ | (550.1 | ) | ||
Cash flows from financing activities | ||||||||
Borrowings of long-term debt, including borrowings due to acquisitions | $ | 203.3 | $ | 520.3 | ||||
Repayment of long-term debt | (454.0 | ) | (62.0 | ) | ||||
Proceeds of Initial Public Offering, net of offering costs | 256.4 | — | ||||||
Proceeds from concurrent private placement | 50.0 | — | ||||||
Payment of contingent consideration | (18.2 | ) | — | |||||
Excess tax benefits from stock based compensation | 7.3 | 1.0 | ||||||
Proceeds from stock issuance | 14.4 | 57.0 | ||||||
Other | (0.5 | ) | (6.2 | ) | ||||
Net cash provided by (used in) financing activities, including contingent consideration payments | $ | 58.7 | $ | 510.1 | ||||
Effect of exchange rate changes on cash | 1.3 | 0.9 | ||||||
Net increase (decrease) in cash and cash equivalents | $ | 20.5 | $ | 0.2 | ||||
(1) For the year ended December 31, 2012, the amount excluded from cash provided by operating activities for the contingent consideration payment is $7.1 million and this amount is included in the “Payment of contingent consideration” caption. | ||||||||
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Forum Energy Technologies, Inc. | ||||||||||||
Supplemental schedule - Segment information | ||||||||||||
(Unaudited) | ||||||||||||
Three months ended | ||||||||||||
December 31, 2012 | December 31, 2011 | September 30, 2012 | ||||||||||
(in millions of dollars) | Actual | Actual | Actual | |||||||||
Revenue | ||||||||||||
Drilling & Subsea | $ | 187.0 | $ | 193.5 | $ | 203.8 | ||||||
Production & Infrastructure | 143.4 | 143.2 | 144.1 | |||||||||
Eliminations | (0.3 | ) | — | (0.1 | ) | |||||||
Total revenue | $ | 330.1 | $ | 336.7 | $ | 347.8 | ||||||
Operating income | ||||||||||||
Drilling & Subsea | $ | 27.4 | $ | 34.4 | $ | 41.4 | ||||||
Operating income margin % | 14.7 | % | 17.8 | % | 20.3 | % | ||||||
Production & Infrastructure | 17.2 | 27.3 | 25.5 | |||||||||
Operating income margin % | 12.0 | % | 19.1 | % | 17.7 | % | ||||||
Corporate | (5.6 | ) | (5.0 | ) | (6.2 | ) | ||||||
Total Segment operating income | 39.0 | 56.7 | 60.7 | |||||||||
Other items not included in segment operating income (1) | (1.1 | ) | (6.2 | ) | 2.2 | |||||||
Total operating income | $ | 37.9 | $ | 50.5 | $ | 62.9 | ||||||
Operating income margin % | 11.5 | % | 15.0 | % | 18.1 | % | ||||||
EBITDA (2) | ||||||||||||
Drilling & Subsea | $ | 36.7 | $ | 45.2 | $ | 51.8 | ||||||
Percentage of D&S revenue % | 19.6 | % | 23.4 | % | 25.4 | % | ||||||
Production & Infrastructure | 20.7 | 30.2 | 28.8 | |||||||||
Percentage of P&I revenue % | 14.4 | % | 21.1 | % | 20.0 | % | ||||||
Corporate | (5.4 | ) | (4.9 | ) | (6.0 | ) | ||||||
Other items (3) | (0.9 | ) | (6.2 | ) | 0.5 | |||||||
Total EBITDA | $ | 51.1 | $ | 64.3 | $ | 75.1 | ||||||
Percentage of total revenue % | 15.5 | % | 19.1 | % | 21.6 | % | ||||||
(1) Includes contingent consideration, transaction expenses and gain/(loss) on sale of assets. | ||||||||||||
(2) 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. | ||||||||||||
(3) Includes contingent consideration and transaction expenses. | ||||||||||||
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Forum Energy Technologies, Inc. | ||||||||
Supplemental schedule - Segment information | ||||||||
(Unaudited) | ||||||||
Year ended | ||||||||
December 31, 2012 | December 31, 2011 | |||||||
(in millions of dollars) | Actual | Actual | ||||||
Revenue | ||||||||
Drilling & Subsea | $ | 826.5 | $ | 659.4 | ||||
Production & Infrastructure | 589.2 | 468.7 | ||||||
Eliminations | (0.8 | ) | — | |||||
Total revenue | $ | 1,414.9 | $ | 1,128.1 | ||||
Operating income | ||||||||
Drilling & Subsea | $ | 161.2 | $ | 117.9 | ||||
Operating income margin % | 19.5 | % | 17.9 | % | ||||
Production & Infrastructure | 97.3 | 78.0 | ||||||
Operating income margin % | 16.5 | % | 16.6 | % | ||||
Corporate | (20.6 | ) | (20.2 | ) | ||||
Total segment operating income | 237.9 | 175.7 | ||||||
Other items not included in segment operating income (1) | 3.0 | (15.1 | ) | |||||
Total operating income | $ | 240.9 | $ | 160.6 | ||||
Operating income margin % | 17.0 | % | 14.2 | % | ||||
EBITDA (2) | ||||||||
Drilling & Subsea | $ | 198.7 | $ | 148.6 | ||||
Percentage of D&S revenue % | 24.0 | % | 22.5 | % | ||||
Production & Infrastructure | 110.4 | 88.0 | ||||||
Percentage of P&I revenue % | 18.7 | % | 18.8 | % | ||||
Corporate | (19.9 | ) | (20.2 | ) | ||||
Other items (3) | 1.7 | (15.6 | ) | |||||
Total EBITDA | $ | 290.9 | $ | 200.8 | ||||
Percentage of total revenue % | 20.6 | % | 17.8 | % | ||||
(1) Includes contingent consideration, intangible asset impairment, transaction expenses and gain/(loss) on sale of assets. | ||||||||
(2) 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. | ||||||||
(3) Includes contingent consideration, intangible asset impairment and transaction expenses. | ||||||||
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Forum Energy Technologies, Inc. | |||||||||||
Reconciliation of GAAP to non-GAAP financial information | |||||||||||
(Unaudited) | |||||||||||
Three months ended | |||||||||||
December 31, 2012 | December 31, 2011 | September 30, 2012 | |||||||||
(in millions of dollars) | Actual | Actual | Actual | ||||||||
EBITDA reconciliation (1) | |||||||||||
Net income attributable to common stockholders | $ | 23.9 | $ | 31.7 | $ | 40.9 | |||||
Interest expense | 3.4 | 5.8 | 3.6 | ||||||||
Depreciation and amortization | 13.7 | 12.9 | 13.0 | ||||||||
Income tax expense | 10.1 | 13.9 | 17.6 | ||||||||
EBITDA | $ | 51.1 | $ | 64.3 | $ | 75.1 | |||||
(1) 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. | |||||||||||
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Forum Energy Technologies, Inc. | |||||||
Reconciliation of GAAP to non-GAAP financial information | |||||||
(Unaudited) | |||||||
Year ended | |||||||
December 31, 2012 | December 31, 2011 | ||||||
(in millions of dollars) | Actual | Actual | |||||
EBITDA reconciliation (1) | |||||||
Net income attributable to common stockholders | $ | 151.4 | $ | 93.3 | |||
Interest expense | 16.4 | 19.5 | |||||
Depreciation and amortization | 51.8 | 40.9 | |||||
Income tax expense | 71.3 | 47.1 | |||||
EBITDA | $ | 290.9 | $ | 200.8 | |||
(1) 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. | |||||||
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