Forum Energy Technologies Reports 2012 First Quarter Net Income of $42.5 Million
27 April 2012Forum Energy Technologies, Inc today reported first quarter 2012 revenue of $363 million, up 79 percent over first quarter 2011 revenue of $203 million. Net income for the first quarter 2012 was $42.5 million, compared to first quarter 2011 net income of $12.4 million. Diluted earnings per share for the quarter were $0.57, a 185 percent increase over first quarter 2011 diluted earnings of $0.20 per share1.
First Quarter Results by Segment
Drilling & Subsea
Drilling & Subsea revenue in the first quarter was $213.1 million, an increase of 30 percent over pro forma revenue of $163.8 million in the first quarter 2011. Pro forma results for the first 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 first quarter 2011. The Drilling & Subsea segment experienced strong revenue growth across all three products lines, with the Subsea Technologies product line generating the highest rate of growth. Global deepwater and subsea projects drove increased demand for Forum's Perry(TM) work class remote operating vehicles (ROVs) and contributed significantly to the segment's revenue growth. Segment operating income in the first quarter was $46.0 million, up from $31.3 million of pro forma operating income generated in the first quarter 2011. Operating income margins increased from 19.1 percent (pro forma) to 21.6 percent over the same period. Forum's 2011 investment in additional manufacturing and production capacity facilitated the growth in segment operating income. The improved results for the segment were also supported by increased volume and margins realized from drilling product sales in the quarter.
Production & Infrastructure
Production & Infrastructure reported revenue in the first quarter of $150.6 million, an increase of 53 percent over pro forma revenue of $98.6 million generated in the first quarter 2011. All three product lines experienced strong revenue growth, with the Flow Equipment product line more than doubling its revenue from the pro forma level of the first quarter 2011. North American fracturing activity and associated service intensity in the unconventional resource plays produced significant demand for Forum's consumable flow equipment products. Segment operating income was up 94 percent, from $15.3 million pro forma in the first quarter 2011 to $29.7 million in the first quarter 2012. Operating income margins also increased from 15.5 percent (pro forma) to 19.7 percent over the same period. Contributing to the growth in operating income was the increase in sales of consumable flow equipment products and valves. The Valve Solutions product line contributed to the segment's increased volume and operating margins due to the strength of the midstream valve market and the introduction of new products into the upstream oil and gas valve market.
Operational Review and Outlook
"Forum delivered outstanding top line growth this quarter compared to last year due to strong organic growth and the contribution of the eight acquisitions we completed in 2011," remarked Cris Gaut, Chairman and Chief Executive Officer of Forum. "In the first quarter 2012, we experienced strong demand for our products across all of our lines of business and achieved significant improvements in our consolidated operating income margins. The investments we made increased our capacity to produce work class ROVs, surface production equipment and flow equipment, and allowed the company to address the strong demand from our customers for these products. We believe we are positioned to benefit from some of the more attractive growth trends in the industry."
Forum issued net income guidance for full year 2012 of $175 million to $185 million.
Significant and Subsequent Events
Forum achieved a variety of significant product events in the first quarter. Forum's Davis-Lynch(TM) brand of casing and cementing tools won several awards from Energy Point Research's 2011 oilfield customer satisfaction survey, including the top rating for downhole cementing equipment; engineering and design; shale oriented applications and six other categories. Forum introduced a new multi-role ROV, the Tomahawk(TM) in March 2012, a more powerful and capable all-electric and ultra-deepwater vehicle. Forum's Subsea Technologies product line also announced the sale of ten of its most powerful work class vehicles, the Perry(TM) XLX. In addition, the Production Equipment product line announced the award of one of the largest de-salter units in the world for a U.S. Gulf Coast refinery, using its newest EDGE(TM) II de-salting technology.
Initial Public Offering and Concurrent Private Placement: Subsequent to the quarter, Forum completed an initial public offering ("IPO") and began trading on the New York Stock Exchange on April 12, 2012, under the ticker "FET". Forum simultaneously completed a $50 million private placement. In total, Forum issued 16,556,136 new shares of common stock in the IPO and concurrent private placement and received approximately $308 million in net proceeds that were used to repay outstanding borrowings. At the conclusion of the IPO and private placement, Forum's diluted share count was 92.3 million shares.