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Forum Energy Technologies (FET)
Q3 2013 Earnings Conference Call
October 25, 2013 10:00 AM ET
Mark Traylor - VP, IR
Chris Gaut - Chairman and CEO
Jim Harris - SVP and CFO
Wendell Brooks - President - Production and Infrastructure
Brad Handler - Jefferies
David Anderson - JPMorgan
Jonathan Sisto - Credit Suisse
Robin Shoemaker - Citi
Brandon Dobell - William Blair
Jeff Tillery - Tudor, Pickering, Holt
Blake Hutchinson - Howard Weil
Mike Urban - Deutsche Bank
Previous Statements by FET
» Forum Energy Technologies Inc (FET) CEO Discusses Q2 2013 Results - Earnings Call Transcript
» Forum Energy Technologies' CEO Discusses Q1 2013 Results - Earnings Call Transcript
» Forum Energy's CEO Discusses Q4 2012 Results - Earnings Call Transcript
…quarterly earning conference call for the third quarter 2013, with us today to present formal remarks are 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 is Wendell Brooks our President of Production and 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 in the meaning of the Private Securities Litigation Reform Act. Forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. These risks include amongst 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 date of the live call. Management statements may include non-GAAP financial measures, for reconciliation of these measures 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 and good morning. I will start with an overview of the quarter and offer a few thoughts on the outlook for our business and then I will turn it over to Jim who will provide more detail on our financial performance. In the third quarter 2013 we had record revenue of $390 million and improved sequential operating income and margins. Margin improvement was our primary objective this quarter and I'm pleased that our employees delivered on that objective.
The third quarter results include $12 million in pretax charges associated with executive severance, facility consolidation and several other non-recurring and non-operating items. Excluding these items adjusted net income was $0.44 per diluted share and adjusted EBITDA was $79 million.
EBITDA margins in the third quarter were 20%, and we achieved this goal ahead of our stated fourth quarter objective. We implemented a number of restructuring and cost reduction initiatives during the third quarter resulting in approximately $8 million of cost reductions from our annual G&A run rate, primarily in our drilling and subsea segment as well as additional direct cost savings. Total orders during the third quarter were $354 million consistent with orders in the second quarter. Bookings increased sequentially for drilling capital equipment to well construction and completion products. The third quarter book to bill ratio was 91% for the company as a whole, 94% for drilling at subsea and 85% for production and infrastructure.
Our D&S segment achieved a significant improvement in operating margins compared to the first half of this year due to restructuring of the business during the third quarter and to an increase in revenues. Orders continued at a very strong pace for drilling capital equipment especially for international customers. We received capital equipment orders associated with new land rigs and continue to improve our participation in the offshore market with our catwalks, cranes and manifolds.
Blohm + Voss continue to receive orders for specialized handing tools for international and offshore markets. Order levels for consumable products in the North America market remains steady with the second quarter levels. During the quarter, drilling reduced their SG&A spending, consolidated office and operations facilities and had better absorption of manufacturing cost. These actions improved EBITDA margins into low 20% range for our drilling product line and that’s a significant increase compared to recent quarters.
The integration and performance of Blohm + Voss is progressing well. The Blohm + Voss brand name is well recognized in the industry and has a strong reputation for delivering high quality products to a global customer base and its strengthened international offshore market complements Forum’s strength in the North America land market.
Our subsea product line orders in the third quarter were good though lower than the record level set in the first half of the year and will remain lumpy. During the quarter, we sold five of our new generation work class ROVs, scheduled for customer delivery in the first quarter 2014.