EX-99.1 2 fetq212earningsrelease.htm FORUM ENERGY TECHNOLOGIES, INC. PRESS RELEASE DATED JULY 26, 2012 FET Q2 12 Earnings Release



Forum Energy Technologies Reports Second Quarter 2012 Diluted EPS of $0.49

•
45 percent revenue growth over prior year quarter
•
Diluted earnings per share growth of 123 percent over prior year quarter
•
Full year diluted earnings per share guidance of $1.85 to $2.00

HOUSTON, TEXAS, July 26, 2012 - Forum Energy Technologies, Inc. (NYSE:FET) today reported second quarter 2012 revenue of $374 million, up forty-five percent over second quarter 2011 revenue of $257 million. Net income for the second quarter 2012 was $44 million, compared to second quarter 2011 net income of $14 million. Diluted earnings per share for the quarter were $0.49, more than doubling second quarter 2011 diluted earnings of $0.22 per share1.

Second Quarter Results by Segment
Drilling & Subsea
Drilling & Subsea revenue in the second quarter 2012 was $223 million, an increase of seventeen percent over pro forma revenue of $190 million in the second quarter 2011. Pro forma results for the second 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 second quarter 2011. All three product lines within Drilling & Subsea generated year over year growth, with the Drilling Technologies product line generating nearly twenty percent growth over pro forma revenue in the second quarter 2011. Reflecting the continued strengthening of demand for our PerryTM work class remotely operated vehicles (ROVs), the Subsea Technologies product line generated seventeen percent revenue growth in the second quarter 2012 over pro forma second quarter 2011. In addition to strong top line growth, Subsea Technologies significantly improved its operating margin percentage over the same quarter last year.

Production & Infrastructure
Production & Infrastructure revenue in the second quarter 2012 was $151 million, a thirty percent increase over pro forma revenue of $116 million in the second quarter 2011. Forum's Production Equipment product line generated more than forty percent revenue growth over second quarter 2011 results on strong demand for production and processing equipment and an expanded customer base. The Valve Solutions product line also generated strong top line and operating margin improvement in the second quarter 2012, with improved distribution and strong market penetration of new valve products facilitating these improvements.




1


Review and Outlook
Cris Gaut, Chairman and Chief Executive Officer of Forum, remarked, "Forum delivered solid revenue improvement due to strong organic growth across our product lines and the continued integration of the eight acquisitions we completed in 2011.  Our revenue growth was attributable to an increase in demand for many of our products, such as our deepwater ROVs and wellsite production and process equipment, as well as the introduction of significant new product offerings.  Demand for our valves also improved as a result of increased activity in the Canadian heavy oil and U.S. pipeline sectors.
"Forum is performing very well as reflected in our first half results, and our prospects remain bright for the balance of the year, with the exception of our Flow Equipment product line.  The weakness experienced by our pressure pumping customers is reducing demand for our flow equipment, and we expect this to continue for the balance of the year.  The outlook for Downhole Technologies, the other new product line we added through acquisitions in 2011, remains strong as international and offshore orders begin to ramp up. Each of our other four product lines is delivering very good results, and their prospects remain positive."
Forum provides diluted earnings per share guidance for full year 2012 of $1.85 to $2.00.

Significant Recent Events
The second quarter 2012 saw a number of significant orders and product development milestones. Among these were:
•
Award to our Drilling Technologies product line of complete pipe handling packages for seven rigs, each of which includes Forum's Offline Activity Crane, WranglerTM 120 Iron Roughneck, WranglerTM PW5000 Elevated Catwalk and a Rotating Mousehole tool
•
Award to our Production Equipment product line for ninety oil production separator systems ordered by a major North American producer
•
Our sixth recent, and first international, award for the EDGETM II desalting technology processing equipment to be installed in the largest refinery in Colombia
•
Delivery and first field use of the Subsea Technologies' PerryTM XT1200 trencher, a first of a kind deepwater vehicle used for subsea pipeline and cable laying operations

Conference Call Information
Forum's conference call is scheduled for July 27, 2012 at 9:00 AM CDT. During the call, the company intends to discuss second quarter 2012 results. To access the call, please call the conference call operator at 888.679.8035, or 617.213.4848 outside of North America. The access code is 14837625. 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. A replay of the call will be available for 30 days, and may be accessed by dialing 888.286.8010 from within the United States, or 617.801.6888 from international locations. The replay access code is 58249486.





Notes:
(1) Second quarter 2012 diluted earnings per share include the weighted impact of the 16.6 million shares issued in the IPO and concurrent private placement on April 12, 2012.

2


Forum Energy Technologies, Inc. (NYSE: FET) is a global provider of manufactured technologies and applied products to the energy industry. With approximately 3,300 employees 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 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
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

3


Forum Energy Technologies, Inc.
 Condensed consolidated statements of income
(Unaudited)
 
 
 
 
 
Three months ended
 
 
June 30,
 
March 31,
(in thousands, except per share information)
 
2012
 
2011
 
2012
Revenue
 
$
373,512

 
$
257,454

 
$
363,489

Total operating expenses
 
303,674

 
230,973

 
293,276

     Operating income
 
69,838

 
26,481

 
70,213

Interest expense
 
3,623

 
4,449

 
5,786

(Gain) loss on foreign exchange
 
335

 
687

 
31

Profit before income taxes
 
65,880

 
21,345

 
64,396

Provision for income tax expense
 
21,742

 
7,453

 
21,885

     Net income
 
44,138

 
13,892

 
42,511

Less: Net income attributable to noncontrolling interest
 
17

 
158

 
29

     Net income attributable to common stockholders
 
$
44,121

 
$
13,734

 
$
42,482

 
 
 
 
 
 
 
Weighted average shares outstanding (1)
 
 
 
 
 
 
     Basic
 
82,495

 
59,471

 
67,960

     Diluted
 
89,794

 
62,660

 
74,741

 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
     Basic
 
$
0.53

 
$
0.23

 
$
0.63

     Diluted
 
$
0.49

 
$
0.22

 
$
0.57

 
 
 
 
 
 
 
(1) Second quarter 2012 diluted earnings per share include the weighted impact of the 16.6 million shares issued in the IPO and concurrent private placement on April 12, 2012.


4


Forum Energy Technologies, Inc.
 Condensed consolidated statements of income
(Unaudited)
 
 
Six months ended
 
 
June 30,
(in thousands, except per share information)
 
2012
 
2011
Revenue
 
$
737,001

 
$
460,506

Total operating expenses
 
596,950

 
411,393

     Operating income
 
140,051

 
49,113

Interest expense
 
9,409

 
7,689

(Gain) loss on foreign exchange
 
366

 
751

Profit before income taxes
 
130,276

 
40,673

Provision for income tax expense
 
43,627

 
14,383

     Net income
 
86,649

 
26,290

Less: Net income attributable to noncontrolling interest
 
46

 
187

     Net income attributable to common stockholders
 
$
86,603

 
$
26,103

 
 
 
 
 
Weighted average shares outstanding (1)
 
 
 
 
     Basic
 
75,248

 
58,889

     Diluted
 
81,990

 
61,333

 
 
 
 
 
Earnings per share
 
 
 
 
     Basic
 
$
1.15

 
$
0.44

     Diluted
 
$
1.06

 
$
0.43

 
 
 
 
 
(1) Second quarter 2012 diluted earnings per share include the weighted impact of the 16.6 million shares issued in the IPO and concurrent private placement on April 12, 2012.

5


Forum Energy Technologies, Inc.
Condensed consolidated balance sheets
 
 
 
 
 
(in thousands of dollars)
 
June 30,
2012
 
December 31,
2011
Assets
 
(unaudited)
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
14,802

 
$
20,548

Other current assets
 
706,333

 
598,038

Total current assets
 
721,135

 
618,586

Property and equipment, net of accumulated depreciation
 
134,785

 
124,840

Goodwill
 
602,795

 
600,827

Other long-term assets
 
247,780

 
263,062

Total assets
 
$
1,706,495

 
$
1,607,315

Liabilities and Equity
 
 
 
 
Current liabilities
 
 
 
 
Current portion of long-term debt and capital lease obligations
 
$
16,621

 
$
5,176

Accounts payable—trade
 
114,493

 
97,642

Accrued liabilities
 
89,742

 
92,251

Other current liabilities
 
35,053

 
59,583

Total current liabilities
 
255,909

 
254,652

Long-term debt, net of current portion
 
349,948

 
660,379

Other long-term liabilities
 
37,645

 
37,152

Total liabilities
 
643,502

 
952,183

Equity
 
 
 
 
Total stockholders’ equity
 
1,062,318

 
654,493

Noncontrolling interest in subsidiary
 
675

 
639

Total equity
 
1,062,993

 
655,132

Total liabilities and equity
 
$
1,706,495

 
$
1,607,315




6


Forum Energy Technologies, Inc.
Condensed consolidated cash flow information
(Unaudited)
 
 
Six months ended June 30,
(in thousands of dollars)
 
2012
 
2011
Cash flows from operating activities
 
 
 
 
Net income
 
$
86,649

 
$
26,290

Change in contingent consideration and impairment of intangible assets
 
(2,739
)
 
5,800

Depreciation and amortization
 
25,105

 
16,355

Other, primarily working capital
 
(76,836
)
 
(46,539
)
Net cash provided by operating activities, excluding contingent consideration payments (1)
 
$
32,179

 
$
1,906

Cash flows from investing activities
 
 
 
 
Capital expenditures for property and equipment
 
$
(25,086
)
 
$
(20,482
)
Acquisition of businesses, net of cash acquired
 
(2,839
)
 
(65,249
)
Other
 
2,627

 
906

Net cash provided by (used in) investing activities
 
$
(25,298
)
 
$
(84,825
)
Cash flows from financing activities
 
 
 
 
Borrowings of long-term debt
 
$
78,464

 
$
76,505

Repayment of long-term debt
 
(383,797
)
 
—

Proceeds of IPO, net of offering costs
 
256,880

 
—

Proceeds from concurrent private placement
 
50,000

 
—

Payment of contingent consideration
 
(18,227
)
 
—

Other
 
4,065

 
49,552

Net cash provided by (used in) financing activities, including contingent consideration payments
 
$
(12,615
)
 
$
126,057

Effect of exchange rate changes on cash
 
(12
)
 
2,651

Net increase (decrease) in cash and cash equivalents
 
$
(5,746
)
 
$
45,789

 
 
 
 
 
(1) For the six months ended June 30, 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.


7


Forum Energy Technologies, Inc.
Supplemental schedule - Segment information
(Unaudited)
 
 
Three months ended
 
 
June 30, 2012
 
June 30,
2011
 
March 31,
2012
(in thousands of dollars)
 
Actual
 
Actual
 
Adjustments (1)
 
Pro forma
 
Actual
Revenue
 
 
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
222,651

 
$
147,239

 
$
43,091

 
$
190,330

 
$
213,064

Production & Infrastructure
 
151,080

 
110,215

 
5,709

 
115,924

 
150,595

Eliminations
 
(219
)
 
—

 
—

 
—

 
(170
)
Total revenue
 
$
373,512

 
$
257,454

 
$
48,800

 
$
306,254

 
$
363,489

 
 
 
 
 
 
 
 
 
 
 
Gross profit
 
 
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
80,812

 
$
46,653

 
$
22,854

 
$
69,507

 
$
79,214

Gross margin %
 
36.3
%
 
31.7
%
 
 
 
36.5
%
 
37.2
%
Production & Infrastructure
 
41,990

 
30,539

 
3,987

 
34,526

 
47,229

Gross margin %
 
27.8
%
 
27.7
%
 
 
 
29.8
%
 
31.4
%
Total Gross profit
 
$
122,802

 
$
77,192

 
$
26,841

 
$
104,033

 
$
126,443

Gross margin %
 
32.9
%
 
30.0
%
 
 
 
34.0
%
 
34.8
%
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
34,430

 
$
21,869

 
$
9,402

 
$
31,271

 
$
33,218

Percentage of D&S revenue %
 
15.5
%
 
14.9
%
 
 
 
16.4
%
 
15.6
%
Production & Infrastructure
 
17,131

 
13,899

 
1,344

 
15,243

 
17,537

Percentage of P&I revenue %
 
11.3
%
 
12.6
%
 
 
 
13.1
%
 
11.6
%
Corporate
 
4,644

 
6,919

 
—

 
6,919

 
4,099

Total selling, general and administrative expenses
 
$
56,205

 
$
42,687

 
$
10,746

 
$
53,433

 
$
54,854

Percentage of total revenue %
 
15.0
%
 
16.6
%
 
 
 
17.4
%
 
15.1
%
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
46,382

 
$
24,784

 
$
13,452

 
$
38,236

 
$
45,996

Operating income margin %
 
20.8
%
 
16.8
%
 
 
 
20.1
%
 
21.6
%
Production & Infrastructure
 
24,859

 
16,640

 
2,643

 
19,283

 
29,692

Operating income margin %
 
16.5
%
 
15.1
%
 
 
 
16.6
%
 
19.7
%
Corporate
 
(4,644
)
 
(6,919
)
 
—

 
(6,919
)
 
(4,099
)
Total Segment operating income
 
66,597

 
34,505

 
16,095

 
50,600

 
71,589

Other items not included in segment operating income (2)
 
3,241

 
(8,024
)
 
—

 
(8,024
)
 
(1,376
)
Total operating income
 
$
69,838

 
$
26,481

 
$
16,095

 
$
42,576

 
$
70,213

Operating income margin %
 
18.7
%
 
10.3
%
 
 
 
13.9
%
 
19.3
%
 
 
 
 
 
 
 
 
 
 
 
EBITDA
 
 
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
55,634

 
$
30,124

 
$
15,676

 
$
45,800

 
$
54,580

Percentage of D&S revenue %
 
25.0
%
 
20.5
%
 
 
 
24.1
%
 
25.6
%
Production & Infrastructure
 
28,108

 
19,038

 
2,775

 
21,813

 
32,778

Percentage of P&I revenue %
 
18.6
%
 
17.3
%
 
 
 
18.8
%
 
21.8
%
Corporate
 
(4,273
)
 
(6,887
)
 
935

 
(5,952
)
 
(4,025
)
Other items (3)
 
3,297

 
(8,141
)
 
—

 
(8,141
)
 
(1,355
)
Total EBITDA
 
$
82,766

 
$
34,134

 
$
19,386

 
$
53,520

 
$
81,978

Percentage of total revenue %
 
22.2
%
 
13.3
%
 
 
 
17.5
%
 
22.6
%
 
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to reflect the eight acquisitions completed in 2011 as if each had occurred on January 1, 2011.
(2) Includes contingent consideration, intangible asset impairment, transaction expenses and gain/(loss) on sale of assets.
(3) Includes contingent consideration, intangible asset impairment and transaction expenses.


8


Forum Energy Technologies, Inc.
Supplemental schedule - Segment information
(Unaudited)
 
 
Six months ended
 
 
June 30,
2012
 
June 30,
2011
(in thousands of dollars)
 
Actual
 
Actual
 
Adjustments (1)
 
Pro forma
Revenue
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
435,715

 
$
267,965

 
$
86,157

 
$
354,122

Production & Infrastructure
 
301,675

 
192,541

 
22,030

 
214,571

Eliminations
 
(389
)
 
—

 
—

 
—

Total revenue
 
$
737,001

 
$
460,506

 
$
108,187

 
$
568,693

 
 
 
 
 
 
 
 
 
Gross profit
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
160,026

 
$
82,702

 
$
47,220

 
$
129,922

Gross margin %
 
36.7
%
 
30.9
%
 
 
 
36.7
%
Production & Infrastructure
 
89,219

 
53,287

 
10,747

 
64,034

Gross margin %
 
29.6
%
 
27.7
%
 
 
 
29.8
%
Total Gross profit
 
$
249,245

 
$
135,989

 
$
57,967

 
$
193,956

Gross margin %
 
33.8
%
 
29.5
%
 
 
 
34.1
%
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
67,648

 
$
42,636

 
$
17,776

 
$
60,412

Percentage of D&S revenue %
 
15.5
%
 
15.9
%
 
 
 
17.1
%
Production & Infrastructure
 
34,668

 
26,261

 
3,207

 
29,468

Percentage of P&I revenue %
 
11.5
%
 
13.6
%
 
 
 
13.7
%
Corporate
 
8,743

 
9,983

 
31

 
10,014

Total selling, general and administrative expenses
 
$
111,059

 
$
78,880

 
$
21,014

 
$
99,894

Percentage of total revenue %
 
15.1
%
 
17.1
%
 
 
 
17.6
%
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
92,378

 
$
40,066

 
$
29,444

 
$
69,510

Operating income margin %
 
21.2
%
 
15.0
%
 
 
 
19.6
%
Production & Infrastructure
 
54,551

 
27,026

 
7,540

 
34,566

Operating income margin %
 
18.1
%
 
14.0
%
 
 
 
16.1
%
Corporate
 
(8,743
)
 
(9,983
)
 
(31
)
 
(10,014
)
Total segment operating income
 
138,186

 
57,109

 
36,953

 
94,062

Other items not included in segment operating income (2)
 
1,865

 
(7,996
)
 
—

 
(7,996
)
Total operating income
 
$
140,051

 
$
49,113

 
$
36,953

 
$
86,066

Operating income margin %
 
19.0
%
 
10.7
%
 
 
 
15.1
%
 
 
 
 
 
 
 
 
 
EBITDA
 
 
 
 
 
 
 
 
Drilling & Subsea
 
$
110,214

 
$
51,633

 
$
35,757

 
$
87,390

Percentage of D&S revenue %
 
25.3
%
 
19.3
%
 
 
 
24.7
%
Production & Infrastructure
 
60,886

 
31,295

 
8,007

 
39,302

Percentage of P&I revenue %
 
20.2
%
 
16.3
%
 
 
 
18.3
%
Corporate
 
(8,298
)
 
(9,983
)
 
2

 
(9,981
)
Other items (3)
 
1,942

 
(8,415
)
 
—

 
(8,415
)
Total EBITDA
 
$
164,744

 
$
64,530

 
$
43,766

 
$
108,296

Percentage of total revenue %
 
22.4
%
 
14.0
%
 
 
 
19.0
%
 
 
 
 
 
 
 
 
 
(1) Adjustments to reflect the eight acquisitions completed in 2011 as if each had occurred on January 1, 2011.
(2) Includes contingent consideration, intangible asset impairment, transaction expenses and gain/(loss) on sale of assets.
(3) Includes contingent consideration, intangible asset impairment and transaction expenses.


9


Forum Energy Technologies, Inc.
Reconciliation of GAAP to non-GAAP financial information
(Unaudited)
 
Three months ended
 
June 30,
2012
 
June 30,
2011
 
March 31,
2012
(in thousands of dollars)
Actual
 
Actual
 
Pro forma
 
Actual
EBITDA reconciliation
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
44,121

 
$
13,734

 
$
20,541

 
$
42,482

Interest expense
3,623

 
4,449

 
10,256

 
5,786

Depreciation and amortization
13,280

 
8,498

 
11,762

 
11,825

Income tax expense
21,742

 
7,453

 
10,961

 
21,885

     EBITDA
$
82,766

 
$
34,134

 
$
53,520

 
$
81,978



10



Forum Energy Technologies, Inc.
Reconciliation of GAAP to non-GAAP financial information
(Unaudited)
 
Six months ended
 
June 30,
2012
 
June 30,
2011
(in thousands of dollars)
Actual
 
Actual
 
Pro forma
EBITDA reconciliation
 
 
 
 
 
Net income attributable to common stockholders
$
86,603

 
$
26,103

 
$
43,003

Interest expense
9,409

 
7,689

 
19,489

Depreciation and amortization
25,105

 
16,355

 
23,083

Income tax expense
43,627

 
14,383

 
22,721

     EBITDA
$
164,744

 
$
64,530

 
$
108,296



11