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Forum Energy Technologies Inc (FET)
Q2 2013 Earnings Conference Call
July 26, 2013 10:00 ET
Mark Traylor - Vice President, Investor Relations and Planning
Chris Gaut - Chairman and Chief Executive Officer
Jim Harris - Senior Vice President and Chief Financial Officer
Charlie Jones - President, Drilling & Subsea
Wendell Brooks - President, Production & Infrastructure
Doug Becker - Bank of America/Merrill Lynch
Jeffrey Tillery - Tudor, Pickering, Holt
Jonathan Sisto - Credit Suisse
Robin Shoemaker - Citigroup
Brandon Dobell - William Blair
Mike Urban - Deutsche Bank
Brad Handler - Jefferies
Blake Hutchinson - Howard Weil
William Thompson - JPMorgan
» Forum Energy's CEO Discusses Q4 2012 Results - Earnings Call Transcript
» Boardwalk Pipeline Partners, LP Management Discusses Q2 2013 Results - Earnings Call Transcript
Now, I’d like to turn the call over to Mr. Mark Traylor, Vice President, Investor Relations and Planning. Please proceed, sir.
Thank you, Ian. Good morning, and welcome to Forum Energy Technologies’ quarterly earnings conference call for the second quarter 2013. With us today to present formal remarks is Chris 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 our 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 date 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 the call.
I am now pleased to turn the call over to Chris Gaut, our CEO.
Thanks Mark. Good morning. I will start with an overview of the quarter and offer a few thoughts on the outlook for our business and then turn it over to Jim, who will provide greater detail on our financial performance.
In the second quarter 2013, we’ve generated $60 million of EBITDA, $368 million of revenue producing EBITDA margins of 16.4%. Diluted earnings per share were $0.34 excluding $0.02 related to transaction expenses and foreign exchange losses. Our second quarter revenue, operating income and margin were roughly flat with our first quarter results. We are disappointed that we did not generate the revenue growth and margin improvement in the first half of the year that we had expected. The revenue growth did not materialize due to the flat North America rig count and the depressed pressure pumping market. We carry costs in expectation of additional revenue growth thus negatively impacting our margins. We are now addressing the cost overhang and we will see improvement in margins in second half of this year.
Total orders during the second quarter were $356 million. We had an 8% decrease in orders from the first quarter primarily due to a more normalized level of orders for our subsea product line after the exceptionally high volume of orders received in this product line during the first quarter. Bookings increased sequentially in drilling, downhole production equipment and flow equipment. The second quarter book to bill ratio was 97% for the company as a whole, 101% for Drilling and Subsea and 91% Production and Infrastructure division.
The Drilling Technologies product line experienced another strong increase in orders for both consumable products and capital equipment. We were pleased to receive several significant orders for specialized handling tools from international markets as a result of our strategy to expand outside of North America. International orders were typically associated with longer delivery times and later revenue recognition. We should see the delivery of some of those products beginning later in third quarter. Order levels for the North America market remained consistent with our first quarter levels.
The acquisition of Blohm & Voss Oil Tools significantly strengthens the tubular handling offering within our drilling technologies product line. The Blohm & Voss brand is well recognized in the industry and has a strong reputation for delivering high quality products to a global customer base. And its strength in international and offshore markets complements Forum’s strength in the North America landmark.
In addition, we see an opportunity to expand the market for our combined product offering by utilizing the combined global sales, distribution and service channels. And we welcome all of the employees of Blohm & Voss Tools to the Forum’s family.
Our subsea product lines orders fall sequentially from the record levels experienced in the first quarter of the year as customers continue to match most vehicle orders with contract awards. Based on discussions with our customers the long-term outlook for this sector remains strong. As part of our strategy to broaden our subsea product portfolio, we are pleased with the recent acquisition of Moffat, a leading manufacturer of subsea pipeline inspection launching and receiving systems and subsea connectors. Activities related to pipeline installation, maintenance and inspection drive demand for Moffat products which remain on the seafloor after use. We see an opportunity to increase Moffat’s revenues by leveraging Forum’s global sales and distribution network.