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Forum Energy Technologies, Inc. (FET)
Q1 2013 Earnings Call
April 26, 2013 10:00 AM ET
Mark Traylor – VP, IR
Chris Gaut – Chairman and CEO
Jim Harris – SVP and CFO
Charlie Jones – President of Drilling, Downhole and Subsea Segment
Wendell Brooks – President of Production and Infrastructure Segment
Doug Becker – Bank of America
Brad Handler – Jefferies
Jonathan Sisto – Credit Suisse
Michael Rubino – Stephens
Robin Shoemaker – Citigroup
Bill Sanchez – Howard Weil
Brandon Dobell – William Blair
Michael Urban – Deutsche Bank
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At this time, all participants are in a listen-only mode. And all lines have been placed on mute to prevent any background noise. We will be facilitating a question-and-answer session after the speakers’ remarks. As a reminder, this conference call is being recorded for replay purposes.
After the speakers’ remarks today, I will instruct you on the procedures for asking questions. I will turn the conference over to Mark Traylor, Vice President of Investor Relations and Planning. Please proceed, sir.
Thank you, Leann. Good morning, and welcome to Forum Energy Technologies’ quarterly earnings conference call for the first quarter 2012. With us today to present formal remarks is Cris Gaut, Forum’s Chairman and Chief Executive Officer; as well as Jim Harris, Senior Vice President and Chief Financial Officer. Also with us today are Forum’s two division presidents: Charlie Jones, President of the Drilling & Subsea division; and Wendell Brooks, President of our Production & Infrastructure division. We issued our earnings release last night and it is available on our website.
The statements made during this conference call including the answers to your questions include information that we believe 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.
These risks include, among other things, matters that we have described in our earnings release and in our filings with the Securities and Exchange Commission. We do 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 call.
In addition, this conference call contains time-sensitive information that reflects management’s best judgment only as of the day of the live call. Management’s statements may include non-GAAP financial measures. For reconciliation of these measures, please refer to our earnings news release available on our website. This call is being recorded. A replay of the call will be available on our website for 30 days following this call.
I’m now pleased to turn the call over to Chris Gaut, our CEO.
Thanks Mark, and good morning. I will start with some highlights from the quarter and offer few thoughts on the outlook for our business and then I will turn it over to Jim, who will provide greater detail on our financial performance.
In the first quarter 2013, our diluted earnings per share were $0.34. We generated $65 million of EBITDA, $373 million of revenue producing EBITDA margins of 17.3%.
During the first quarter, we improved sequential revenue, operating income and margin in both of our business segments and improved customer spending for our capital equipment and consumable products. Delivery in the first quarter of previously deferred capital equipment orders and the full quarter benefit of the four acquisitions completed during the fourth quarter of 2012.
Total orders during the first quarter were $385 million. On a sequential basis, we had a 15% increase in orders from the fourth quarter and higher orders for the drilling, subsea and valve product lines. The first quarter book-to-bill ratio was 103% for the company as a whole, 118% for drilling in Subsea division and 81% for the Production and Infrastructure division.
Although Production and Infrastructure experienced a lower book-to-bill ratio in the quarter, their backlog is strong due to the very high level of new orders received in the prior quarter for delivery throughout 2013. The Drilling Technologies product line experienced an increase in orders for both drilling consumable products and capital equipment in the first quarter and reverses the three prior quarterly trend of declining orders attributed to the steady decrease in the North America rig counts during 2012.
We are pleased with this increase in orders to begin the new year in our drilling product line. I would note that there has been a shift in capital equipment orders to international markets, which carry longer lead times and later revenue recognition.
In our Subsea product line, we saw good orders for ROVs in the first quarter and our outlook for additional orders is strong. During the quarter, Forum Subsea went a record level of new orders for our ROV systems and spares.
Included in these orders are launch and recovery systems and buoyancy products from our recent acquisitions. The strength in ROV orders covered our full range of observation and work class, as well as trenching vehicles, including a very large 1,500 horsepower trencher for Helix Energy.
Further, we are winning vehicle orders from new customers we haven’t served previously. In the Downhole Technologies product line, we are opening an 82,000 square foot distribution center to support demand growth. And one of our recent acquisitions Wireline Solutions we are pleased with market uptake of our ProDrill composite hydraulic fracturing plus.