- Bookings increased 34% sequentially to $124 million
- Revenue increased 9% sequentially to $113 million
- Net loss of $33 million and diluted EPS of negative $5.85
- Adjusted EBITDA improved $7 million sequentially to negative $3 million
- Operating cash flow of $2 million and free cash flow of $4 million
- Cash of $129 million and total liquidity of $240 million
Forum Energy Technologies, Inc. (NYSE:FET) today announced fourth quarter 2020 revenue of $113 million, an increase of $9 million from the third quarter 2020. Orders received in the quarter increased by $32 million to $124 million. Net loss for the quarter was $33 million, or $5.85 per diluted share, compared to a net loss of $22 million, or $3.86 per diluted share, for the third quarter 2020. Excluding $6 million, or $1.05 per share of special items, adjusted net loss was $4.80 per diluted share in the fourth quarter 2020, compared to an adjusted net loss of $6.00 per diluted share in the third quarter 2020. Adjusted EBITDA improved by $7 million sequentially to negative $2.6 million.
Special items in the fourth quarter 2020, on a pre-tax basis, included an $88 million gain from the ABZ and Quadrant valve brand asset sale. The gain was offset by $86 million of asset impairments and restructuring costs as well as $7 million in foreign exchange losses and $2 million of transaction expenses. See Tables 1-3 for a reconciliation of GAAP to non-GAAP financial information.
Cris Gaut, Chairman and Chief Executive Officer, remarked, “In the fourth quarter, drilling and completion activity accelerated as oil and natural gas prices improved. We took advantage of this activity increase as our bookings were up by 34% and revenue increased 9%, resulting in a book-to-bill ratio of 110%.
“In order to improve our returns as the market recovers, we restructured our portfolio, exiting lower margin products that would dilute our results. These changes focus our resources on higher margin, differentiated products with better leverage to improving activity levels.
“During the fourth quarter, we closed the sale of our ABZ and Quadrant valve brands for $105 million in cash, reducing our net debt by roughly one-third. Compared to the prior year end, net debt was down $141 million to $201 million at December 31, 2020. We ended the fourth quarter with $129 million in cash on-hand and only $13 million drawn on our credit facility, resulting in liquidity of $240 million.
“The steps taken by Forum in the fourth quarter position us to perform well and take advantage of market opportunities afforded to us in the rising-market environment.“
Segment Results
Drilling & Downhole segment revenue was $50 million and orders were $58 million, an increase of 16% and 49%, respectively, from the third quarter 2020. The revenue increase was driven by higher demand for our premium drilling handling tools for international markets. Our subsea product line received a significant non-oil and gas order in the fourth quarter. Segment adjusted EBITDA was $1 million, up $5 million from the third quarter, resulting primarily from higher revenues and further cost reductions. Drilling & Downhole operations focus primarily on capital equipment and consumable products for global well construction, artificial lift and subsea markets.
Completions segment revenue was $31 million, a sequential increase of $11 million, or 56%, due to the strong increase in well completions activity in the fourth quarter. Orders in the fourth quarter were $30 million, an increase of $12 million, or 65%, from the third quarter 2020. Segment adjusted EBITDA was $1 million, up $5 million from the third quarter primarily due increased operating leverage on the higher sales volumes. The Completions segment designs and manufactures products for the coiled tubing, wireline and stimulation markets.
Production segment revenue was $33 million, a decrease of $8 million, or 20% from the third quarter 2020, due to continued customer de-stocking of both valves and surface production equipment. Orders in the fourth quarter were $36 million, a 3% increase sequentially. Segment adjusted EBITDA decreased by $3 million sequentially to break-even as a result of the decline in revenue. The Production segment manufactures land well site production equipment, desalination process equipment, and a wide range of valves for upstream, midstream and process industry customers.
FET (Forum Energy Technologies) is a global company, serving the crude oil, natural gas, and renewable energy industries. FET is headquartered in Houston, TX with quality manufacturing, efficient distribution, and service facilities conveniently located to support the major energy-producing regions of the world. For more information, please visit 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 severity and duration of the COVID-19 pandemic and related repercussions resulting from the negative impact on demand for oil and gas, 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 natural 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 U.S. 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.
Forum Energy Technologies, Inc. | ||||||||||||
Condensed consolidated statements of net loss | ||||||||||||
(Unaudited) | ||||||||||||
Three months ended | ||||||||||||
December 31, | September 30, | |||||||||||
(in millions, except per share information) | 2020 | 2019 | 2020 | |||||||||
Revenue | $ | 113.0 | $ | 199.8 | $ | 103.6 | ||||||
Cost of sales | 172.1 | 150.9 | 90.5 | |||||||||
Gross profit | (59.1 | ) | 48.9 | 13.1 | ||||||||
Operating expenses | ||||||||||||
Selling, general and administrative expenses | 43.2 | 56.4 | 46.0 | |||||||||
Transaction expenses | 2.3 | 0.2 | 0.7 | |||||||||
Impairments of property and equipment | — | — | 3.0 | |||||||||
Loss (gain) on disposal of assets and other | (0.5 | ) | 0.1 | 0.5 | ||||||||
Total operating expenses | 45.0 | 56.7 | 50.2 | |||||||||
Operating loss | (104.1 | ) | (7.8 | ) | (37.1 | ) | ||||||
Other expense (income) | ||||||||||||
Interest expense | 8.7 | 7.4 | 8.5 | |||||||||
Foreign exchange losses and other, net | 7.4 | 8.1 | 3.3 | |||||||||
Gain on disposition of business | (88.4 | ) | (2.3 | ) | — | |||||||
Gain on extinguishment of debt | — | — | (28.7 | ) | ||||||||
Deferred loan costs written off | — | — | 0.3 | |||||||||
Total other (income) expense, net | (72.3 | ) | 13.2 | (16.6 | ) | |||||||
Loss before income taxes | (31.8 | ) | (21.0 | ) | (20.5 | ) | ||||||
Income tax expense (benefit) | 0.9 | (8.6 | ) | 1.1 | ||||||||
Net loss (1) | $ | (32.7 | ) | $ | (12.4 | ) | $ | (21.6 | ) | |||
Weighted average shares outstanding | ||||||||||||
Basic | 5.6 | 5.5 | 5.6 | |||||||||
Diluted | 5.6 | 5.5 | 5.6 | |||||||||
Loss per share | ||||||||||||
Basic | $ | (5.85 | ) | $ | (2.25 | ) | $ | (3.86 | ) | |||
Diluted | $ | (5.85 | ) | $ | (2.25 | ) | $ | (3.86 | ) | |||
(1) Refer to Table 1 for schedule of adjusting items. | ||||||||||||
Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated statements of net loss | ||||||||
(Unaudited) | ||||||||
Year ended | ||||||||
December 31, | ||||||||
(in millions, except per share information) | 2020 | 2019 | ||||||
Revenue | $ | 512.5 | $ | 956.5 | ||||
Cost of sales | 523.5 | 711.6 | ||||||
Gross profit | (11.0 | ) | 244.9 | |||||
Operating expenses | ||||||||
Selling, general and administrative expenses | 197.7 | 251.7 | ||||||
Impairments of goodwill, intangibles, property and equipment | 20.4 | 532.3 | ||||||
Transaction expenses | 3.1 | 1.2 | ||||||
Contingent consideration benefit | — | (4.6 | ) | |||||
Loss (gain) on disposal of assets and other | (0.6 | ) | 0.1 | |||||
Total operating expenses | 220.6 | 780.7 | ||||||
Loss from equity investment | — | (0.3 | ) | |||||
Operating loss | (231.6 | ) | (536.1 | ) | ||||
Other expense (income) | ||||||||
Interest expense | 30.3 | 31.6 | ||||||
Gain on extinguishment of debt | (72.5 | ) | — | |||||
Deferred loan costs written off | 2.3 | — | ||||||
Foreign exchange losses and other, net | 6.5 | 5.1 | ||||||
Gain realized on previously held equity investment | — | (1.6 | ) | |||||
Gain on disposition of business | (88.4 | ) | (2.3 | ) | ||||
Total other (income) expense, net | (121.8 | ) | 32.8 | |||||
Loss before income taxes | (109.8 | ) | (568.9 | ) | ||||
Income tax benefit | $ | (12.9 | ) | $ | (1.8 | ) | ||
Net loss | $ | (96.9 | ) | $ | (567.1 | ) | ||
Weighted average shares outstanding | ||||||||
Basic | 5.6 | 5.5 | ||||||
Diluted | 5.6 | 5.5 | ||||||
Loss per share | ||||||||
Basic | $ | (17.37 | ) | $ | (103.01 | ) | ||
Diluted | $ | (17.37 | ) | $ | (103.01 | ) | ||
(1) Refer to Table 2 for schedule of adjusting items. | ||||||||
Forum Energy Technologies, Inc. | ||||||
Condensed consolidated balance sheets | ||||||
(Unaudited) | ||||||
(in millions of dollars) | December 31, 2020 | December 31, 2019 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 128.6 | $ | 57.9 | ||
Accounts receivable—trade, net | 80.6 | 154.2 | ||||
Inventories, net | 251.7 | 414.6 | ||||
Other current assets | 29.3 | 39.2 | ||||
Total current assets | 490.2 | 665.9 | ||||
Property and equipment, net of accumulated depreciation | 113.7 | 154.8 | ||||
Operating lease assets | 31.5 | 48.7 | ||||
Intangibles, net | 240.4 | 272.3 | ||||
Other long-term assets | 14.1 | 18.3 | ||||
Total assets | $ | 889.9 | $ | 1,160.0 | ||
Liabilities and equity | ||||||
Current liabilities | ||||||
Current portion of long-term debt | $ | 1.3 | $ | 0.7 | ||
Other current liabilities | 123.6 | 196.2 | ||||
Total current liabilities | 124.9 | 196.9 | ||||
Long-term debt, net of current portion | 293.4 | 398.9 | ||||
Other long-term liabilities | 65.4 | 78.2 | ||||
Total liabilities | 483.7 | 674.0 | ||||
Total equity | 406.2 | 486.0 | ||||
Total liabilities and equity | $ | 889.9 | $ | 1,160.0 |
Forum Energy Technologies, Inc. | ||||||||
Condensed consolidated cash flow information | ||||||||
(Unaudited) | ||||||||
Year ended | ||||||||
December 31, | ||||||||
(in millions of dollars) | 2020 | 2019 | ||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (96.9 | ) | $ | (567.1 | ) | ||
Impairments of goodwill, intangible assets, property and equipment | 20.4 | 532.3 | ||||||
Depreciation and amortization | 51.0 | 63.3 | ||||||
Impairments of operating lease assets | 15.4 | 2.4 | ||||||
Inventory write downs | 100.8 | 10.3 | ||||||
Gain on disposition of business | (88.4 | ) | (2.3 | ) | ||||
Gain on extinguishment of debt | (72.5 | ) | — | |||||
Other noncash items and changes in working capital | 74.1 | 65.2 | ||||||
Net cash provided by operating activities | 3.9 | 104.1 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures for property and equipment | (2.2 | ) | (15.1 | ) | ||||
Proceeds from sale of business and equity investment | 105.2 | 42.7 | ||||||
Proceeds from the sale of property and equipment | 5.3 | 0.5 | ||||||
Net cash provided by investing activities | 108.3 | 28.1 | ||||||
Cash flows from financing activities | ||||||||
Borrowings of debt | 182.3 | 137.0 | ||||||
Repayments of debt | (170.4 | ) | (258.1 | ) | ||||
Cash paid to repurchase 2021 Notes | (40.3 | ) | — | |||||
Bond exchange early participation payment | (3.5 | ) | — | |||||
Repurchases of stock | (0.2 | ) | (1.1 | ) | ||||
Deferred financing costs | (9.7 | ) | — | |||||
Net cash used in financing activities | (41.8 | ) | (122.2 | ) | ||||
Effect of exchange rate changes on cash | 0.3 | 0.7 | ||||||
Net decrease in cash, cash equivalents and restricted cash | $ | 70.7 | $ | 10.7 |
Full story available on Benzinga.com
Forum Energy Technologies, Inc. | ||||||||||||||||||||||||
Supplemental schedule - Segment information | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
As Reported | As Adjusted (3) | |||||||||||||||||||||||
Three months ended | Three months ended | |||||||||||||||||||||||
(in millions of dollars) | December 31, 2020 | December 31, 2019 | September 30, 2020 | December 31, 2020 | December 31, 2019 | September 30, 2020 | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||
Drilling & Downhole | $ | 49.9 | $ | 78.2 | $ | 43.2 | $ | 49.9 | $ | 78.2 | $ | 43.2 | ||||||||||||
Completions | 30.6 | 58.3 | 19.6 | 30.6 | 58.3 | 19.6 | ||||||||||||||||||
Production | 32.5 | 64.7 | 40.8 | 32.5 | 64.7 | 40.8 | ||||||||||||||||||
Eliminations | — | (1.4 | ) | — | — | (1.4 | ) | — | ||||||||||||||||
Total revenue | $ | 113.0 | $ | 199.8 | $ | 103.6 | $ | 113.0 | $ | 199.8 | $ | 103.6 | ||||||||||||
Operating income (loss) | ||||||||||||||||||||||||
Drilling & Downhole | $ | (21.2 | ) | $ | 4.2 | $ | (13.2 | ) | $ | (3.9 | ) | $ | 4.0 | $ | (8.4 | ) |