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): December 1, 2015
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))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
On December 2, 2015, Cris Gaut, the Chairman and Chief Executive Officer of Forum Energy Technologies, Inc. (the “Company”), will be presenting at the Cowen Energy Conference being held on Wednesday, December 2, 2015 at approximately 9:45 a.m. Eastern Standard Time at the New York Hilton Midtown, New York, New York. The information in the presentation will include updated outlook for the fourth quarter.
A live audio webcast will be available at http://wsw.com/webcast/cowen28/fet. The replay of the presentation will be archived in the Investor Relations section of the Company’s website at http://www.f-e-t.com.
The PowerPoint slides that Mr. Gaut will present at the conference are furnished herewith as Exhibit 99.1.
The information furnished pursuant to this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and will not be incorporated by reference into any filing under the Securities Act of 1933 unless specifically identified therein as being incorporated therein by reference.
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 | PowerPoint Presentation, December 2, 2015. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Forum Energy Technologies, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 1, 2015 | FORUM ENERGY TECHNOLOGIES, INC. | |||
/s/ James L. McCulloch | ||||
James L. McCulloch | ||||
Senior Vice President, General Counsel and Secretary | ||||
EXHIBIT INDEX
Exhibit No. | Exhibit Title or Description | |
99.1 | PowerPoint Presentation, December 2, 2015. | |
Forum Energy Technologies Cowen Energy Conference
Confidential 2 Forward Looking Statements The statements made during this presentation, including the answers to your questions, include information that the Company believes to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements involve risk and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. Those risks include, among other things, matters that the Company has described in its earnings release and in its filings with the Securities and Exchange Commission. The Company does not undertake any ongoing obligation, other than that imposed by law, to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after this presentation. In addition, this presentation contains time sensitive information that reflects management's best judgment only as of the date of this presentation.
Confidential 3 2015 Objectives • Generating free cash flow • Focused acquisition strategy • Developing new products • Protecting margins • Improving operational performance
Confidential 4 Free Cash Flow History Cumulative Free Cash Flow - $616 million and Net Income - $592 million Note: Free Cash Flow is a non-GAAP measure. See reconciliation of Free Cash Flow to Net Income at the end of this presentation. $- $100 $200 $300 $400 $500 $600 $700 2009 2010 2011 2012 2013 2014 Net Income FCF
Confidential 5 Free Cash Flow to Net Income Ratio 2009 – 2014 Cumulative Free Cash Flow* to Cumulative Net Income Ratio 0 0.2 0.4 0.6 0.8 1 1.2 FET Average Large Equipment (NOV, FMC, CAM) Average Large Service (SLB, HAL, BHI) *FCF equals cash generated after working capital changes and after capital expenditures Source: Thomson One and Company Reports
Confidential 6 Free Cash Flow 2015 Focus • Working capital reduction • Lower capital expenditures • Focused M&A ($ millions) YTD 9/30/15 2014 2013 Free cash flow, before acquisitions Net income $ 44 $ 174 $ 129 Depreciation and amortization 49 65 61 Other, primarily working capital 24 31 21 Net cash provided by operations $ 117 $ 270 $ 211 Capital expenditures (28) (54) (60) Other 2 3 1 Free cash flow, before acquisitions $ 91 $ 219 $ 152
Confidential 7 Deployment of Cash • Seventeen acquisitions since the 2010 combination • New product development • $150 million share repurchase program − Repurchased 4.4 million shares in Q4 2014 for $100 million − $50 million remaining under existing program
Confidential 8 Capitalization and Credit Statistics Strong balance sheet ($ millions) 9/30/15 12/31/14 Capitalization 6.25% Senior unsecured notes due October 2021 $ 402 $ 403 Senior secured revolving credit facility ($600mm) - 25 Other debt 1 1 Total debt $ 403 $ 429 Total equity 1,431 1,396 Total capitalization $ 1,834 $ 1,825 Less: cash & cash equivalents 76 77 Net capitalization $ 1,758 $ 1,748 Credit Statistics Credit rating (S&P / Moody's) BB / Ba3 BB / Ba3 Net debt $ 327 $ 352 Liquidity $ 663 $ 641 Capitalization ratio 19% 20% Leverage ratio 1.5x 1.0x Interest coverage ratio 8.0x 12.4x
Confidential 9 Flow Equipment Refurbishment & Recertification Power Ends & Pumps J-Mac Tool - 2015 Manifolds & Treating Iron Wood Flowline - 2011 Fluid Ends, Valves, Fittings Phoinix Global - 2011 • The full suite of pumps, replacement power and fluid ends, manifolds, valves and treating iron • Critical consumable products for our hydraulic fracturing customers • Refurbishment and recertification services across the full product offering
Confidential 10 • Building a well intervention product offering for the service companies • Critical consumable products – coiled tubing and wireline • Capital items with significant aftermarket opportunity – pressure control Coiled Tubing Global Tubing JV - 2013 Wireline Cable Quality Wireline - 2014 Pressure Control Vanoil – 2008 Well Intervention
Confidential 11 EDGE™ II Desalter XLX –C ROV Coiled Tubing Products New Products • Coiled Tubing Pipeline –Offshore pipelines – Developing product for large, onshore market • Umbilical Tubes – Specialized offshore applications –Carbon steel coated center tube for injection lines and gaslift tubing • Perry XL series reliability • Highly versatile - tooling to IRM • Compact vessel footprint • Enhanced hydraulics system • High payload capability • Maximizes desalting performance and feedstock capacity • Utilizes our Kick Amp Responder technology • Controls output voltage of crude or desalting coalescing operation
Confidential 12 Improving Operational Performance and Cost Reductions • Manufacturing excellence – Develop and leverage centers of excellence – On time delivery – Shorten manufacturing lead times • Supply chain efficiencies – Supply base rationalization – Sourcing technology – e-sourcing – Upgrade organizational structure • Quality Management Systems – Industry certifications (API/ISO/ASME) – Lean/continuous improvement projects – Shop floor work instructions
Confidential 13 Protecting Margins • Scalable organization − Direct labor & overhead costs − SG&A costs • Minimal sustaining CAPEX requirements • Scalable capital spending with growth prospects • Procurement savings opportunities • Quality management initiatives Material 72% Labor Related 14% Variable Overhead 10% Fixed Overhead 4% 2014 COGS Breakdown
Confidential 14 3rd Quarter 2015 Results (Unaudited) Quarterly Revenue ($millions) and Adjusted EBITDA Margin % Note: EBITDA is a non-GAAP financial measure. See reconciliation of EBITDA to Net Income at the end of this presentation. $469 $439 $348 $284 $245 20.2% 19.1% 17.7% 14.5% 12.8% 0% 5% 10% 15% 20% 25% 30% 35% $100 $125 $150 $175 $200 $225 $250 $275 $300 $325 $350 $375 $400 $425 $450 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Confidential 15 Current Market – Q4 Update • E&P’s have exhausted budgets • Rig count declining • “Fracation” through year-end • Deferring maintenance • Customer priorities: - Preserve liquidity - Reduce expenses - Lower spending on OPEX items 700 750 800 850 900 8/21/2015 11/25/2015 US Land Rig Count US Land Rig Count
Confidential 16 Summary Large cap capabilities, small cap opportunities • Strong financial position • Free cash flow generation for enhanced shareholder value – Focused and disciplined M&A – New product development • Balanced and diverse portfolio mix • Protecting margins in downturn – Cost reductions – Scalable operations – Low CAPEX requirements • Responsive to activity levels – early to recover
Confidential 17 QUESTIONS?
Confidential 18 Offshore Construction Midstream & Downstream Business Drivers Subsea Activity 20% Valves 15% Drilling Contractors Rig Count 30% Oilfield Service Companies E&P Operators Well Count and Well Construction 35% E&P Operators Subsea Construction & Development Drilling Well Construction & Completion Stimulation & Intervention Production Infrastructure Key Customers Markets & Customers Full Well Cycle Exposure
Confidential 19 Focused Acquisition Strategy Global oilfield, manufactured products Leveraged to attractive secular growth trends Strong brand and market position Activity-based, consumable products High Growth International Expansion
Confidential 20 Subsea 19% Drilling 35% Well Construction & Completion 11% Stimulation & Intervention 10% Production 13% Infrastructure 12% United States 60% Europe Africa 17% Asia Pacific 9% Canada 6% Latin America 4% Middle East 4% Consumable Products 50% Other 2% Capital Equipment 48% Onshore 73% Offshore 27% Sources of Revenue As a percent of 2014 sales Purchase Cycle Well Cycle Onshore / Offshore Geography
Confidential 21 Drilling & Subsea Segment Drilling Technologies XL Backsaver P-Quip™ mud pump liner retention system 1,000 ton hydraulic elevator 125 ton air spider Casing slip Drill pipe float valve Mousehole tool Blohm + Voss Oil Tools FLOORHAND™ Wrangler™ Catwalk AMC™ torque machines Offline Activity Crane Merrimac Mud Pump Fluid End Coiled Tubing BOP Drilling Consumable Product Suite Mission Critical Drilling Capital Equipment
Confidential 22 ROV Components Drilling & Subsea Segment Subsea Technologies PIG launchers Tether Management Systems Largest range of ROVs in industry Perry™ and Sub-Atlantic™ VMax™ Simulation Systems Trenchers Hot Stabs
Confidential 23 Production & Infrastructure Segment Flow Equipment
Confidential 24 Davis-Lynch™ Casing & Cementing Technology Drilling & Subsea Segment Downhole Technologies 1) Spears & Associates – 2012 “Oilfield Market Report,” casing hardware market by revenue. Weatherford 39% Halliburton 17% Forum (Davis- Lynch) 11% Top-Co 8% Varel 3% Others 22% Downhole Completion Tools Cannon™ Protection Systems Wireline Composite Frac Plugs Trusted Name in a Consolidated Market1
Confidential 25 Production & Infrastructure Segment Production Equipment Heater Treater Separators Well Manifold Tanks
Confidential 26 Two piece trunnion valves for the shale markets Production & Infrastructure Segment Valve Solutions Specified ball valve of choice for the US Strategic Petroleum Reserve Preferred valve supplier to leading Canadian oil sands producers
Confidential 27 Actual ($ millions) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 EBITDA Reconciliation Net Income attributable to common stockholders $ 52 $ 46 $ 29 $ 9 $ 7 Interest expense 8 7 8 8 7 Depreciation and amortization 17 16 16 16 17 Income tax expense 21 16 11 2 1 Transaction and restructuring expenses 2 3 5 2 2 Loss / (gain) on FX, net (5) (4) (7) 4 (3) Adj. EBITDA $ 95 $ 84 $ 62 $ 41 $ 31 Reconciliation of Non-GAAP Measures (Unaudited) Note: The Company believes EBITDA is useful to investors because it is an appropriate measure of evaluating 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.
Confidential 28 Reconciliation of Non-GAAP Measures (Unaudited) Note: The Company believes free cash flow, before acquisitions is an important measure because it encompasses both profitability and capital management in evaluating results. ($ millions) 2014 2013 2012 2011 2010 2009 Free cash flow, before acquisitions Net income $ 174 $ 129 $ 152 $ 94 $ 24 $ 19 Depreciation and amortization 65 61 52 41 33 38 Other, primarily working capital 31 21 (66) (96) 9 51 Net cash provided by operations $ 270 $ 211 $ 138 $ 39 $ 66 $ 108 Capital expenditures (54) (60) (50) (41) (20) (15) Other 3 1 12 1 1 6 Free cash flow, before acquisitions $ 219 $ 152 $ 100 $ (1) $ 47 $ 99