Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
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| | |
þ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the Quarterly Period Ended September 30, 2016 |
OR
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| | |
o | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number 001-35504
FORUM ENERGY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
|
| | |
Delaware | | 61-1488595 |
(State or other jurisdiction of | | (I.R.S. Employer Identification No.) |
incorporation or organization) | | |
920 Memorial City Way, Suite 1000
Houston, Texas 77024
(Address of principal executive offices)
(281) 949-2500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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| | | | | | |
Large accelerated filer þ | | Accelerated filer o | | Non-accelerated filer o | | Smaller reporting company o |
| | | | (Do not check if a smaller reporting company) | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of November 1, 2016, there were 91,424,555 common shares outstanding.
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Forum Energy Technologies, Inc. and subsidiaries
Condensed consolidated statements of comprehensive income (loss)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
(in thousands, except per share information) | 2016 | | 2015 | | 2016 | | 2015 |
Revenue | $ | 138,268 |
| | $ | 244,993 |
| | $ | 440,432 |
| | $ | 877,504 |
|
Cost of sales | 108,984 |
| | 179,231 |
| | 371,310 |
| | 617,733 |
|
Gross profit | 29,284 |
| | 65,762 |
| | 69,122 |
| | 259,771 |
|
Operating expenses | | | | | | | |
Selling, general and administrative expenses | 53,362 |
| | 57,235 |
| | 171,638 |
| | 197,020 |
|
Transaction expenses | 341 |
| | 193 |
| | 571 |
| | 433 |
|
Loss (gain) on sale of assets and other | 2,217 |
| | 11 |
| | 2,233 |
| | (264 | ) |
Total operating expenses | 55,920 |
| | 57,439 |
| | 174,442 |
| | 197,189 |
|
Earnings from equity investment | 414 |
| | 3,870 |
| | 1,207 |
| | 12,281 |
|
Operating income (loss) | (26,222 | ) | | 12,193 |
| | (104,113 | ) | | 74,863 |
|
Other expense (income) | | | | | | | |
Interest expense | 6,746 |
| | 7,453 |
| | 20,664 |
| | 22,687 |
|
Deferred financing costs written off | — |
| | — |
| | 2,588 |
| | — |
|
Foreign exchange (gains) losses and other, net | (3,152 | ) | | (2,910 | ) | | (14,546 | ) | | (5,511 | ) |
Total other expense | 3,594 |
| | 4,543 |
| | 8,706 |
| | 17,176 |
|
Income (loss) before income taxes | (29,816 | ) | | 7,650 |
| | (112,819 | ) | | 57,687 |
|
Provision (benefit) for income tax expense | (11,821 | ) | | 932 |
| | (43,374 | ) | | 13,448 |
|
Net income (loss) | (17,995 | ) | | 6,718 |
| | (69,445 | ) | | 44,239 |
|
Less: Income (loss) attributable to noncontrolling interest | (6 | ) | | (2 | ) | | 24 |
| | (27 | ) |
Net income (loss) attributable to common stockholders | (17,989 | ) | | 6,720 |
| | (69,469 | ) | | 44,266 |
|
| | | | | | | |
Weighted average shares outstanding | | | | | | | |
Basic | 90,860 |
| | 90,058 |
| | 90,682 |
| | 89,770 |
|
Diluted | 90,860 |
| | 91,687 |
| | 90,682 |
| | 91,576 |
|
Earnings (losses) per share | | | | | | | |
Basic | $ | (0.20 | ) | | $ | 0.07 |
| | $ | (0.77 | ) | | $ | 0.49 |
|
Diluted | $ | (0.20 | ) | | $ | 0.07 |
| | $ | (0.77 | ) | | $ | 0.48 |
|
| | | | | | | |
| | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Net income (loss) | (17,995 | ) | | 6,718 |
| | (69,445 | ) | | 44,239 |
|
Change in foreign currency translation, net of tax of $0 | (6,243 | ) | | (18,747 | ) | | (25,618 | ) | | (30,553 | ) |
Gain (loss) on pension liability | (14 | ) | | (2 | ) | | (33 | ) | | 68 |
|
Comprehensive income (loss) | (24,252 | ) | | (12,031 | ) | | (95,096 | ) | | 13,754 |
|
Less: comprehensive loss (income) attributable to noncontrolling interests | (27 | ) | | 64 |
| | (156 | ) | | 118 |
|
Comprehensive income (loss) attributable to common stockholders | $ | (24,279 | ) | | $ | (11,967 | ) | | $ | (95,252 | ) | | $ | 13,872 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Forum Energy Technologies, Inc. and subsidiaries
Condensed consolidated balance sheets
(Unaudited)
|
| | | | | | | |
(in thousands, except share information) | September 30, 2016 | | December 31, 2015 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 132,534 |
| | $ | 109,249 |
|
Accounts receivable—trade, net | 100,255 |
| | 138,597 |
|
Inventories, net | 355,232 |
| | 424,121 |
|
Income tax receivable | 32,801 |
| | — |
|
Prepaid expenses and other current assets | 29,626 |
| | 33,836 |
|
Costs and estimated profits in excess of billings | 10,301 |
| | 12,009 |
|
Total current assets | 660,749 |
| | 717,812 |
|
Property and equipment, net of accumulated depreciation | 159,453 |
| | 186,667 |
|
Deferred financing costs, net | 1,412 |
| | 4,125 |
|
Intangibles, net | 225,520 |
| | 246,650 |
|
Goodwill | 660,976 |
| | 669,036 |
|
Investment in unconsolidated subsidiary | 58,523 |
| | 57,719 |
|
Deferred income taxes, net | 720 |
| | 780 |
|
Other long-term assets | 3,032 |
| | 3,253 |
|
Total assets | $ | 1,770,385 |
| | $ | 1,886,042 |
|
Liabilities and equity | | | |
Current liabilities | | | |
Current portion of long-term debt | $ | 38 |
| | $ | 253 |
|
Accounts payable—trade | 60,146 |
| | 76,823 |
|
Accrued liabilities | 55,824 |
| | 58,563 |
|
Deferred revenue | 8,751 |
| | 7,283 |
|
Billings in excess of costs and profits recognized | 1,604 |
| | 8,631 |
|
Total current liabilities | 126,363 |
| | 151,553 |
|
Long-term debt, net of current portion | 396,498 |
| | 396,016 |
|
Deferred income taxes, net | 39,093 |
| | 51,100 |
|
Other long-term liabilities | 30,341 |
| | 29,956 |
|
Total liabilities | 592,295 |
| | 628,625 |
|
Commitments and contingencies (Note 12) |
| |
|
|
Equity | | | |
Common stock, $0.01 par value, 296,000,000 shares authorized, 99,550,209 and 98,605,902 shares issued | 996 |
| | 986 |
|
Additional paid-in capital | 907,300 |
| | 891,248 |
|
Treasury stock at cost, 8,159,887 and 8,145,802 shares | (133,611 | ) | | (133,318 | ) |
Retained earnings | 510,683 |
| | 580,152 |
|
Accumulated other comprehensive income (loss) | (107,831 | ) | | (82,048 | ) |
Total stockholders’ equity | 1,177,537 |
| | 1,257,020 |
|
Noncontrolling interest in subsidiary | 553 |
| | 397 |
|
Total equity | 1,178,090 |
| | 1,257,417 |
|
Total liabilities and equity | $ | 1,770,385 |
| | $ | 1,886,042 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Forum Energy Technologies, Inc. and subsidiaries
Condensed consolidated statements of cash flows
(Unaudited)
|
| | | | | | | |
| Nine Months Ended September 30, |
(in thousands, except share information) | 2016 | | 2015 |
Cash flows from operating activities | | | |
Net income (loss) | $ | (69,445 | ) | | $ | 44,239 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities | | | |
Depreciation expense | 27,141 |
| | 28,721 |
|
Amortization of intangible assets | 19,709 |
| | 20,558 |
|
Share-based compensation expense | 15,521 |
| | 17,090 |
|
Deferred income taxes | (12,988 | ) | | (1,528 | ) |
Deferred financing cost written off | 2,588 |
| | — |
|
Inventory write down | 24,479 |
| | 6,613 |
|
Earnings from equity investment, net of distributions | (804 | ) | | (6,782 | ) |
Other | 4,137 |
| | 4,523 |
|
Changes in operating assets and liabilities | | | |
Accounts receivable—trade | 35,673 |
| | 129,601 |
|
Inventories | 44,538 |
| | (31,342 | ) |
Income tax receivable | (32,801 | ) | | — |
|
Prepaid expenses and other current assets | 7,113 |
| | (2,019 | ) |
Accounts payable, deferred revenue and other accrued liabilities | (15,130 | ) | | (81,496 | ) |
Costs and estimated profits in excess of billings, net | (5,511 | ) | | (10,472 | ) |
Net cash provided by operating activities | $ | 44,220 |
| | $ | 117,706 |
|
Cash flows from investing activities | | | |
Acquisition of businesses, net of cash acquired | (2,700 | ) | | (60,836 | ) |
Capital expenditures for property and equipment | (13,438 | ) | | (28,046 | ) |
Proceeds from sale of property and equipment | 3,710 |
| | 1,699 |
|
Net cash used in investing activities | $ | (12,428 | ) | | $ | (87,183 | ) |
Cash flows from financing activities | | | |
Borrowings under Credit Facility | — |
| | 79,943 |
|
Repayment of long-term debt | (254 | ) | | (105,985 | ) |
Excess tax benefits from stock based compensation | — |
| | 206 |
|
Repurchases of stock | (292 | ) | | (6,246 | ) |
Proceeds from stock issuance | 1,761 |
| | 4,618 |
|
Deferred financing costs | (513 | ) | | — |
|
Net cash provided by (used in) financing activities | $ | 702 |
| | $ | (27,464 | ) |
Effect of exchange rate changes on cash | (9,209 | ) | | (3,453 | ) |
Net increase (decrease) in cash and cash equivalents | 23,285 |
| | (394 | ) |
Cash and cash equivalents | | | |
Beginning of period | 109,249 |
| | 76,579 |
|
End of period | $ | 132,534 |
| | $ | 76,185 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements
(Unaudited)
1. Organization and basis of presentation
Forum Energy Technologies, Inc. (the "Company"), a Delaware corporation, is a global oilfield products company, serving the drilling, subsea, completions, production and infrastructure sectors of the oil and natural gas industry. The Company designs, manufactures and distributes products and engages in aftermarket services, parts supply and related services that complement the Company’s product offering.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.
The Company's investment in an operating entity where the Company has the ability to exert significant influence, but does not control operating and financial policies, is accounted for using the equity method. The Company's share of the net income (loss) of this entity is recorded as "Earnings from equity investment" in the unaudited condensed consolidated statements of comprehensive income (loss). The investment in this entity is included in "Investment in unconsolidated subsidiary" in the unaudited condensed consolidated balance sheets. The Company reports its share of equity earnings within operating income (loss) as the investee's operations are integral to the operations of the Company.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company's financial position, results of operations and cash flows have been included. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other interim period.
These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America ("GAAP") for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015, which are included in the Company’s 2015 Annual Report on Form 10-K filed with the SEC on February 26, 2016, as updated by Exhibit 99.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 23, 2016 (the "Annual Report").
2. Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB"), which are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.
In August 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-15 Cash Flow Statement (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The only issue currently relevant to the Company is distributions received from equity method investees, where the new guidance allows an accounting policy election between the cumulative earnings approach and the nature distribution approach. The Company will continue to use the cumulative earnings approach, therefore the guidance is not expected to have a material impact on the Company's consolidated financial statements. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of Accounting Standards Updates No. 2014-09 and No. 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. This new guidance rescinded certain SEC staff observer comments in Topic 605 related to revenue and expense recognition for freight services in process and accounting for
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
shipping and handling fees and costs, in Topic 932 related to gas-balancing arrangements, and in Topic 815 related to the nature of a host contract related to a hybrid instrument issued in the form of a share. ASU 2016-11 is effective upon adoption of Topic 606 and is not expected to have a material impact on the Company's consolidated financial statements.
In March, April and May 2016, the FASB issued a series of ASUs on revenue standards, including No. 2016-08 Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations, No. 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing, and No. 2016-12 Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-08 amended the guidance in the new revenue standard on assessing whether an entity is a principal or an agent in a revenue transaction, which impacts whether an entity reports revenue on a gross or net basis. ASU No. 2016-10 amended and clarified the guidance in the new revenue standard on identifying performance obligation and accounting for licenses of intellectual property and addressed the implementation issues. ASU No. 2016-12 amended and updated only the narrow aspects of Topic 606. The above standards will take effect for public companies for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of the adoption of the above guidance.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. This new guidance includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements: a) All excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement; b) Excess tax benefits should be classified along with other income tax cash flows as an operating activity; c) An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur; d) The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions; e) Cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. There are also two additional provisions for non-public entities that do not apply to the Company. The standard will take effect for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of the adoption of this guidance.
In February 2016, the FASB issued ASU No. 2016-02, Leases. Under this new guidance, lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of greater than twelve months. The standard will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of the adoption of this guidance.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern. The new standard requires management to evaluate whether there are conditions or events that raise substantial doubt as to an entity's ability to continue as a going concern for both annual and interim reporting periods. The guidance is effective for the Company for the annual period ending after December 15, 2016 and interim periods thereafter. The guidance is not expected to have a material impact on the Company's consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The new standard is to be effective for the fiscal year beginning after December 15, 2017. Companies are able to early adopt the pronouncement, however not before fiscal years beginning after December 15, 2016. The Company is currently evaluating the impacts of the adoption and the implementation approach to be used.
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
3. Acquisitions and Dispositions
2016 Acquisition
In April 2016, the Company completed the acquisition of the wholesale completion packers business of Team Oil Tools, Inc. The acquisition includes a wide variety of completion and service tools, including retrievable and permanent packers, bridge plugs and accessories which are sold to oilfield service providers, packer repair companies and distributors on a global basis, and is included in the Completions segment. The fair values of the assets acquired and liabilities assumed have not been presented because they are not material to the unaudited condensed consolidated financial statements.
2015 Acquisition
Effective February 2, 2015, the Company completed the acquisition of J-Mac Tool, Inc. ("J-Mac") for consideration of $61.9 million, including $1.1 million paid subsequent to September 30, 2016 in conjunction with the completion of the review of working capital. J-Mac is a Fort Worth, Texas based manufacturer of high quality hydraulic fracturing pumps, power ends, fluid ends and other pump accessories. J-Mac is included in the Completions segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):
|
| | | | |
| | 2015 Acquisition |
Current assets, net of cash acquired | | $ | 36,174 |
|
Property and equipment | | 11,506 |
|
Intangible assets (primarily customer relationships) | | 10,400 |
|
Tax-deductible goodwill | | 13,977 |
|
Current liabilities | | (10,129 | ) |
Long-term liabilities | | (22 | ) |
Net assets acquired | | $ | 61,906 |
|
Revenues and net income (loss) related to the acquisitions were not significant for the current and prior periods presented in this report. Pro forma results of operations for 2015 and 2016 acquisitions have not been presented because the effects were not material to the unaudited condensed consolidated financial statements on either an individual or aggregate basis.
Dispositions and Assets Held for Sale
In the third quarter 2016, management approved a plan to sell the land and building located in Robstown, Texas (the “Robstown assets”) in the Completions segment with a total carrying value of $8.2 million. The decision to sell the Robstown assets was primarily intended to achieve cost savings from the consolidation of manufacturing locations. The Robstown assets were classified as held for sale as of September 30, 2016, and were reported within the balance sheet line item Prepaid expenses and other current assets. The Robstown assets are recorded at their fair value, net of estimated cost to sell, of $6.1 million. As a result, a $2.1 million write-down was recorded during the third quarter of 2016, which is included in Loss (gain) on sale of assets and other in our Condensed consolidated statements of comprehensive income (loss). The Robstown assets are expected to be sold in the fourth quarter of 2016.
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
4. Inventories
The Company's significant components of inventory at September 30, 2016 and December 31, 2015 were as follows (in thousands):
|
| | | | | | | |
| September 30, 2016 | | December 31, 2015 |
Raw materials and parts | $ | 117,882 |
| | $ | 148,372 |
|
Work in process | 26,762 |
| | 38,381 |
|
Finished goods | 293,609 |
| | 315,256 |
|
Gross inventories | 438,253 |
| | 502,009 |
|
Inventory reserve | (83,021 | ) | | (77,888 | ) |
Inventories | $ | 355,232 |
| | $ | 424,121 |
|
5. Goodwill and intangible assets
Goodwill
The changes in the carrying amount of goodwill from December 31, 2015 to September 30, 2016, were as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Drilling & Subsea | | Completions | | Production & Infrastructure | | Total |
Goodwill Balance at December 31, 2015, net | $ | 334,595 |
| | $ | 316,914 |
| | $ | 17,527 |
| | $ | 669,036 |
|
Acquisitions | — |
| | — |
| | — |
| | — |
|
Impact of non-U.S. local currency translation | (9,602 | ) | | 1,353 |
| | 189 |
| | (8,060 | ) |
Goodwill Balance at September 30, 2016, net | $ | 324,993 |
| | $ | 318,267 |
| | $ | 17,716 |
| | $ | 660,976 |
|
The Company performs its annual impairment tests of goodwill as of October 1. There was no impairment of goodwill during the three and nine months ended September 30, 2016. Accumulated impairment losses on goodwill were $168.8 million as of September 30, 2016 and December 31, 2015.
Intangible assets
Intangible assets consisted of the following as of September 30, 2016 and December 31, 2015, respectively (in thousands): |
| | | | | | | | | | | | | |
| September 30, 2016 |
| Gross carrying amount | | Accumulated amortization | | Net amortizable intangibles | | Amortization period (in years) |
Customer relationships | $ | 274,533 |
| | $ | (112,599 | ) | | $ | 161,934 |
| | 4-15 |
Patents and technology | 34,514 |
| | (11,781 | ) | | 22,733 |
| | 5-17 |
Non-compete agreements | 6,321 |
| | (5,598 | ) | | 723 |
| | 3-6 |
Trade names | 45,001 |
| | (17,503 | ) | | 27,498 |
| | 10-15 |
Distributor relationships | 22,160 |
| | (14,758 | ) | | 7,402 |
| | 8-15 |
Trademark | 5,230 |
| | — |
| | 5,230 |
| | Indefinite |
Intangible Assets Total | $ | 387,759 |
| | $ | (162,239 | ) | | $ | 225,520 |
| | |
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
|
| | | | | | | | | | | | | |
| December 31, 2015 |
| Gross carrying amount | | Accumulated amortization | | Net amortizable intangibles | | Amortization period (in years) |
Customer relationships | $ | 280,297 |
| | $ | (101,636 | ) | | $ | 178,661 |
| | 4-15 |
Patents and technology | 34,140 |
| | (10,264 | ) | | 23,876 |
| | 5-17 |
Non-compete agreements | 7,269 |
| | (6,292 | ) | | 977 |
| | 3-6 |
Trade names | 45,446 |
| | (15,890 | ) | | 29,556 |
| | 10-15 |
Distributor relationships | 22,160 |
| | (13,810 | ) | | 8,350 |
| | 8-15 |
Trademark | 5,230 |
| | — |
| | 5,230 |
| | Indefinite |
Intangible Assets Total | $ | 394,542 |
| | $ | (147,892 | ) | | $ | 246,650 |
| | |
6. Investment in unconsolidated subsidiary
Effective July 1, 2013, the Company jointly purchased Global Tubing, LLC ("Global Tubing") with an equal partner, with management retaining a small interest. Global Tubing is a Dayton, Texas based provider of coiled tubing strings and related services. The Company's equity investment is reported in the Completions segment and is accounted for using the equity method of accounting. As Global Tubing's products are complementary to the Company’s well intervention and stimulation products and the investment's business is integral to the Company's operations, the earnings from the equity investment are included within operating income.
Condensed financial data for the equity investment in the unconsolidated subsidiary is summarized as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Net revenues | $ | 17,099 |
| | $ | 26,033 |
| | $ | 49,851 |
| | $ | 81,513 |
|
Gross profit | 3,684 |
| | 11,731 |
| | 12,082 |
| | 36,505 |
|
Net income | 863 |
| | 8,063 |
| | 2,515 |
| | 25,588 |
|
The Company's earnings from equity investment | 414 |
| | 3,870 |
| | 1,207 |
| | 12,281 |
|
7. Debt
Notes payable and lines of credit as of September 30, 2016 and December 31, 2015 consisted of the following (in thousands): |
| | | | | | | |
| September 30, 2016 | | December 31, 2015 |
6.25% Senior Notes due October 2021 | $ | 400,000 |
| | $ | 400,000 |
|
Unamortized debt premium | 2,091 |
| | 2,395 |
|
Deferred financing cost | (5,599 | ) | | (6,425 | ) |
Senior secured revolving credit facility | — |
| | — |
|
Other debt | 44 |
| | 299 |
|
Total debt | 396,536 |
| | 396,269 |
|
Less: current maturities | 38 |
| | 253 |
|
Long-term debt | $ | 396,498 |
| | $ | 396,016 |
|
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
Senior Notes Due 2021
The Senior Notes bear interest at a rate of 6.250% per annum, payable on April 1 and October 1 of each year, and mature on October 1, 2021. The Senior Notes are senior unsecured obligations, and are guaranteed on a senior unsecured basis by the Company’s subsidiaries that guarantee the Credit Facility and rank junior to, among other indebtedness, the Credit Facility to the extent of the value of the collateral securing the Credit Facility.
Credit Facility
On February 25, 2016, the Company amended its senior secured credit facility (the "Credit Facility" and such amendment, the "Amended Facility") to reduce commitment fees and provide borrowing capacity for general corporate purposes. The Amended Facility provides for a revolving credit line of up to $200.0 million, including up to $25.0 million available for letters of credit and up to $10.0 million in swingline loans. Availability under the Amended Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the United States, United Kingdom and Canada, eligible inventory in the United States, and cash on hand.
The Amended Facility reduced the borrowing capacity from $600.0 million to $200.0 million. Accordingly, the Company has written off $2.6 million of the deferred financing costs related to the Credit Facility.
The Credit Facility matures in November 2018. As of September 30, 2016, we had no borrowings outstanding under the Credit Facility, and $17.3 million of outstanding letters of credit. As of September 30, 2016, the Company had the capacity to borrow an additional $108.0 million subject to certain limitations in the Credit Facility. Weighted average interest rates under the Credit Facility for the twelve months ended December 31, 2015 were approximately 2%.
There have been no changes to the financial covenants disclosed in Item 8 of the Annual Report, as updated by Exhibit 99.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 23, 2016, and the Company was in compliance with all financial covenants at September 30, 2016.
8. Income taxes
The Company's effective tax rate was 38.4% for the nine months ended September 30, 2016 and 23.3% for the nine months ended September 30, 2015. The effective tax rate was 39.6% for the three months ended September 30, 2016 and 12.2% for the three months ended September 30, 2015. The tax rates for the three and nine months ended September 30, 2016 are higher than the comparable period in 2015 primarily due to the losses incurred in the United States, which are benefited at a higher statutory tax rate, offset by earnings outside the United States in jurisdictions subject to lower tax rates. The effective tax rate can vary from period to period depending on the Company's relative mix of U.S. and non-U.S. earnings and losses.The Company expects to realize a net operating loss in the United States in 2016. In the third quarter 2016, the Company determined it would elect to carry the net operating loss back to recover taxes paid in earlier periods. As a result, the tax benefit of $32.8 million was reclassified from deferred taxes to income tax receivable.
9. Fair value measurements
At September 30, 2016, the Company had no debt outstanding under the Credit Facility, and $17.3 million of outstanding letters of credit. Substantially all of the debt, if any, under the Credit Facility incurs interest at a variable interest rate and, therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.
The fair value of the Company’s Senior Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At September 30, 2016, the fair value and the carrying value of the Company’s Senior Notes approximated $378.5 million and $402.1 million, respectively. At December 31, 2015, the fair value and the carrying value of the Company’s Senior Notes approximated $334.1 million and $402.5 million, respectively.
There were no outstanding financial assets as of September 30, 2016 and December 31, 2015 that required measuring the amounts at fair value. The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and there were no transfers between levels of the fair value hierarchy during the nine months ended September 30, 2016.
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
10. Business segments
Beginning with the first quarter of 2016, the Company realigned its segments. Completions was designated as a separate segment in recognition of its expanded operations and its significant growth potential. The Company is reporting its results of operations in the following three reportable segments: Drilling & Subsea, Completions and Production & Infrastructure, instead of the original two reportable segments. Management’s change in the composition of the Company’s reportable segments was made in order to align with activity drivers and the customers of our product group, and how management reviews and evaluates operating performance. This change will be reflected on a retrospective basis in accordance with GAAP, with prior years adjusted to reflect the change in reportable segments. The amounts indicated below as "Corporate" relate to costs and assets not allocated to the reportable operating segments. Summary financial data by segment follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Revenue: | | | | | | | |
Drilling & Subsea | $ | 50,830 |
| | $ | 110,849 |
| | $ | 172,859 |
| | $ | 404,121 |
|
Completions | 33,549 |
| | 55,627 |
| | 92,320 |
| | 222,465 |
|
Production & Infrastructure | 54,030 |
| | 78,791 |
| | 176,364 |
| | 251,850 |
|
Intersegment eliminations | (141 | ) | | (274 | ) | | (1,111 | ) | | (932 | ) |
Total revenue | $ | 138,268 |
| | $ | 244,993 |
| | $ | 440,432 |
| | $ | 877,504 |
|
| | | | | | | |
Operating income (loss): | | | | | | | |
Drilling & Subsea | $ | (11,340 | ) | | $ | 5,438 |
| | $ | (41,696 | ) | | $ | 35,569 |
|
Completions | (5,205 | ) | | 5,380 |
| | (39,687 | ) | | 36,805 |
|
Production & Infrastructure | (713 | ) | | 6,572 |
| | 494 |
| | 23,995 |
|
Corporate | (6,406 | ) | | (4,993 | ) | | (20,420 | ) | | (21,337 | ) |
Total segment operating income (loss) | (23,664 | ) | | 12,397 |
| | (101,309 | ) | | 75,032 |
|
Transaction expenses | 341 |
| | 193 |
| | 571 |
| | 433 |
|
Loss (gain) on sale of assets and other | 2,217 |
| | 11 |
| | 2,233 |
| | (264 | ) |
Income (loss) from operations | $ | (26,222 | ) | | $ | 12,193 |
| | $ | (104,113 | ) | | $ | 74,863 |
|
A summary of consolidated assets by reportable segment is as follows (in thousands):
|
| | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
Assets | | | | |
Drilling & Subsea | | $ | 810,905 |
| | $ | 912,324 |
|
Completions | | 696,532 |
| | 728,745 |
|
Production & Infrastructure | | 172,272 |
| | 187,741 |
|
Corporate | | 90,676 |
| | 57,232 |
|
Total assets | | $ | 1,770,385 |
| | $ | 1,886,042 |
|
Corporate assets include, among other items, prepaid assets, cash and deferred financing costs.
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
11. Earnings per share
The calculation of basic and diluted earnings (losses) per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Net Income (loss) attributable to common stockholders | $ | (17,989 | ) | | $ | 6,720 |
| | $ | (69,469 | ) | | $ | 44,266 |
|
| | | | | | | |
Average shares outstanding (basic) | 90,860 |
| | 90,058 |
| | 90,682 |
| | 89,770 |
|
Common stock equivalents | — |
| | 1,629 |
| | — |
| | 1,806 |
|
Diluted shares | 90,860 |
| | 91,687 |
| | 90,682 |
| | 91,576 |
|
Earnings (losses) per share | | | | | | | |
Basic earnings (losses) per share | $ | (0.20 | ) | | $ | 0.07 |
| | $ | (0.77 | ) | | $ | 0.49 |
|
Diluted earnings (losses) per share | $ | (0.20 | ) | | $ | 0.07 |
| | $ | (0.77 | ) | | $ | 0.48 |
|
The diluted earnings per share calculation excludes all stock options for the three and nine months ended September 30, 2016, because there is a net loss for each respective period. The diluted earnings per share calculation excludes approximately 2.0 million stock options for the three months ended September 30, 2015, and approximately 1.8 million stock options for the nine months ended September 30, 2015, because they were anti-dilutive as the option exercise price was greater than the average market price of the common stock.
12. Commitments and contingencies
In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions that may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage. Reserves have been established that are believed to be appropriate in light of the outcomes that are considered to be probable and can be reasonably estimated. The reserves accrued at September 30, 2016 and December 31, 2015, respectively, are immaterial.
13. Stockholders' equity
Share-based compensation
During the nine months ended September 30, 2016, the Company granted 818,620 options and 1,716,239 shares of restricted stock or restricted stock units, which includes 257,900 performance share awards with a market condition. The stock options were granted with exercise prices of $9.39. Of the restricted stock or restricted stock units granted, 1,338,522 vest ratably over four years on each anniversary of the grant date. 119,817 shares of restricted stock or restricted stock units were granted to the non-employee members of the Board of Directors, which have a twelve month vesting period from the grant date. The performance share awards granted may settle for between zero and two shares of the Company's common stock. The number of shares issued pursuant to the performance share awards will be determined based on the total shareholder return of the Company's common stock as compared to a group of peer companies, measured annually over a one year, two year and three-year performance period.
14. Related party transactions
The Company has sold and purchased equipment and services to and from various affiliates of certain directors. The dollar amounts related to these related party activities are not material to the Company’s unaudited condensed consolidated financial statements.
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
15. Condensed consolidating financial statements
The Senior Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several and on an unsecured basis.
|
| | | | | | | | | | | | | | | | | | | | |
Condensed consolidating statements of comprehensive income (loss) |
| | | | | | | | | | |
| | Three months ended September 30, 2016 |
| | FET (Parent) | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
| | | | | | (in thousands) | | | | |
Revenue | | $ | — |
| | $ | 101,357 |
| | $ | 44,869 |
| | $ | (7,958 | ) | | $ | 138,268 |
|
Cost of sales | | — |
| | 81,250 |
| | 36,767 |
| | (9,033 | ) | | 108,984 |
|
Gross profit | | — |
| | 20,107 |
| | 8,102 |
| | 1,075 |
| | 29,284 |
|
Operating expenses | | | | | | | | | | |
Selling, general and administrative expenses | | — |
| | 42,569 |
| | 10,793 |
| | — |
| | 53,362 |
|
Transaction expenses | | — |
| | 306 |
| | 35 |
| | — |
| | 341 |
|
Loss (gain) on sale of assets and other | | — |
| | 2,130 |
| | 87 |
| | — |
| | 2,217 |
|
Total operating expenses | | — |
| | 45,005 |
| | 10,915 |
| | — |
| | 55,920 |
|
Earnings from equity investment | | — |
| | 414 |
| | — |
| | — |
| | 414 |
|
Equity earnings (losses) from affiliate, net of tax | | (13,579 | ) | | 1,620 |
| | — |
| | 11,959 |
| | — |
|
Operating income (loss) | | (13,579 | ) | | (22,864 | ) | | (2,813 | ) | | 13,034 |
| | (26,222 | ) |
Other expense (income) | | | | | | | | | | |
Interest expense (income) | | 6,785 |
| | (84 | ) | | 45 |
| | — |
| | 6,746 |
|
Foreign exchange (gains) losses and other, net | | — |
| | (19 | ) | | (3,133 | ) | | — |
| | (3,152 | ) |
Total other expense (income) | | 6,785 |
| | (103 | ) | | (3,088 | ) | | — |
| | 3,594 |
|
Income (loss) before income taxes | | (20,364 | ) | | (22,761 | ) | | 275 |
| | 13,034 |
| | (29,816 | ) |
Provision (benefit) for income tax expense | | (2,375 | ) | | (9,182 | ) | | (264 | ) | | — |
| | (11,821 | ) |
Net income (loss) | | (17,989 | ) | | (13,579 | ) | | 539 |
| | 13,034 |
| | (17,995 | ) |
Less: Income (loss) attributable to noncontrolling interest | | — |
| | — |
| | (6 | ) | | — |
| | (6 | ) |
Net income (loss) attributable to common stockholders | | (17,989 | ) | | (13,579 | ) | | 545 |
| | 13,034 |
| | (17,989 | ) |
| | | | | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | |
Net income (loss) | | (17,989 | ) | | (13,579 | ) | | 539 |
| | 13,034 |
| | (17,995 | ) |
Change in foreign currency translation, net of tax of $0 | | (6,243 | ) | | (6,243 | ) | | (6,243 | ) | | 12,486 |
| | (6,243 | ) |
Change in pension liability | | (14 | ) | | (14 | ) | | (14 | ) | | 28 |
| | (14 | ) |
Comprehensive income (loss) | | (24,246 | ) | | (19,836 | ) | | (5,718 | ) | | 25,548 |
| | (24,252 | ) |
Less: comprehensive (income) loss attributable to noncontrolling interests | | — |
| | — |
| | (27 | ) | |
| | (27 | ) |
Comprehensive income (loss) attributable to common stockholders | | $ | (24,246 | ) | | $ | (19,836 | ) | | $ | (5,745 | ) | | $ | 25,548 |
| | $ | (24,279 | ) |
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
Condensed consolidating statements of comprehensive income (loss) |
| | | | | | | | | | |
| | Three months ended September 30, 2015 |
| | FET (Parent) | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
| | | | | | (in thousands) | | | | |
Revenue | | $ | — |
| | $ | 182,986 |
| | $ | 83,751 |
| | $ | (21,744 | ) | | $ | 244,993 |
|
Cost of sales | | — |
| | 140,444 |
| | 60,494 |
| | (21,707 | ) | | 179,231 |
|
Gross profit | | — |
| | 42,542 |
| | 23,257 |
| | (37 | ) | | 65,762 |
|
Operating expenses | | | | | | | | | | |
Selling, general and administrative expenses | | — |
| | 41,157 |
| | 16,078 |
| | — |
| | 57,235 |
|
Transaction expenses | | — |
| | 193 |
| | — |
| | — |
| | 193 |
|
Loss (gain) on sale of assets and other | | — |
| | (15 | ) | | 26 |
| | — |
| | 11 |
|
Total operating expenses | | — |
| | 41,335 |
| | 16,104 |
| | — |
| | 57,439 |
|
Earnings from equity investment | | — |
| | 3,870 |
| | — |
| | — |
| | 3,870 |
|
Equity earnings from affiliates, net of tax | | 11,568 |
| | 8,286 |
| | — |
| | (19,854 | ) | | — |
|
Operating income (loss) | | 11,568 |
| | 13,363 |
| | 7,153 |
| | (19,891 | ) | | 12,193 |
|
Other expense (income) | | | | | | | | | | |
Interest expense (income) | | 7,458 |
| | (1 | ) | | (4 | ) | | — |
| | 7,453 |
|
Foreign exchange (gains) losses and other, net | | — |
| | (253 | ) | | (2,657 | ) | | — |
| | (2,910 | ) |
Total other expense (income) | | 7,458 |
| | (254 | ) | | (2,661 | ) | | — |
| | 4,543 |
|
Income (loss) before income taxes | | 4,110 |
| | 13,617 |
| | 9,814 |
| | (19,891 | ) | | 7,650 |
|
Provision (benefit) for income tax expense | | (2,610 | ) | | 2,049 |
| | 1,493 |
| | — |
| | 932 |
|
Net income (loss) | | 6,720 |
| | 11,568 |
| | 8,321 |
| | (19,891 | ) | | 6,718 |
|
Less: Income (loss) attributable to noncontrolling interest | | — |
| | — |
| | (2 | ) | | — |
| | (2 | ) |
Net income (loss) attributable to common stockholders | | 6,720 |
| | 11,568 |
| | 8,323 |
| | (19,891 | ) | | 6,720 |
|
| | | | | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | |
Net income (loss) | | 6,720 |
| | 11,568 |
| | 8,321 |
| | (19,891 | ) | | 6,718 |
|
Change in foreign currency translation, net of tax of $0 | | (18,747 | ) | | (18,747 | ) | | (18,747 | ) | | 37,494 |
| | (18,747 | ) |
Change in pension liability | | (2 | ) | | (2 | ) | | (2 | ) | | 4 |
| | (2 | ) |
Comprehensive income (loss) | | (12,029 | ) | | (7,181 | ) | | (10,428 | ) | | 17,607 |
| | (12,031 | ) |
Less: comprehensive (income) loss attributable to noncontrolling interests | | — |
| | — |
| | 64 |
| | — |
| | 64 |
|
Comprehensive income (loss) attributable to common stockholders | | $ | (12,029 | ) | | $ | (7,181 | ) | | $ | (10,364 | ) | | $ | 17,607 |
| | $ | (11,967 | ) |
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
Condensed consolidating statements of comprehensive income (loss) |
| | | | | | | | | | |
| | Nine months ended September 30, 2016 |
| | FET (Parent) | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
| | | | | | (in thousands) | | | | |
Revenue | | $ | — |
| | $ | 321,734 |
| | $ | 151,383 |
| | $ | (32,685 | ) | | $ | 440,432 |
|
Cost of sales | | — |
| | 281,666 |
| | 123,631 |
| | (33,987 | ) | | 371,310 |
|
Gross profit | | — |
| | 40,068 |
| | 27,752 |
| | 1,302 |
| | 69,122 |
|
Operating expenses | | | | | | | | | | |
Selling, general and administrative expenses | | — |
| | 137,099 |
| | 34,539 |
| | — |
| | 171,638 |
|
Transaction expenses | | — |
| | 536 |
| | 35 |
| | — |
| | 571 |
|
Loss (gain) on sale of assets and other | | — |
| | 2,310 |
| | (77 | ) | | — |
| | 2,233 |
|
Total operating expenses | | — |
| | 139,945 |
| | 34,497 |
| | — |
| | 174,442 |
|
Earnings from equity investment | | — |
| | 1,207 |
| | — |
| | — |
| | 1,207 |
|
Equity earnings (losses) from affiliates, net of tax | | (54,323 | ) | | 7,765 |
| | — |
| | 46,558 |
| | — |
|
Operating income (loss) | | (54,323 | ) | | (90,905 | ) | | (6,745 | ) | | 47,860 |
| | (104,113 | ) |
Other expense (income) | | | | | | | | | | |
Interest expense (income) | | 20,713 |
| | (97 | ) | | 48 |
| | — |
| | 20,664 |
|
Deferred loan costs written off | | 2,588 |
| | — |
| | — |
| | — |
| | 2,588 |
|
Foreign exchange (gains) losses and other, net | | — |
| | (553 | ) | | (13,993 | ) | | — |
| | (14,546 | ) |
Total other expense (income) | | 23,301 |
| | (650 | ) | | (13,945 | ) | | — |
| | 8,706 |
|
Income (loss) before income taxes | | (77,624 | ) | | (90,255 | ) | | 7,200 |
| | 47,860 |
| | (112,819 | ) |
Provision (benefit) for income tax expense | | (8,155 | ) | | (35,932 | ) | | 713 |
| | — |
| | (43,374 | ) |
Net income (loss) | | (69,469 | ) | | (54,323 | ) | | 6,487 |
| | 47,860 |
| | (69,445 | ) |
Less: Income (loss) attributable to noncontrolling interest | | — |
| | — |
| | 24 |
| | — |
| | 24 |
|
Net income (loss) attributable to common stockholders | | (69,469 | ) | | (54,323 | ) | | 6,463 |
| | 47,860 |
| | (69,469 | ) |
| | | | | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | |
Net income (loss) | | (69,469 | ) | | (54,323 | ) | | 6,487 |
| | 47,860 |
| | (69,445 | ) |
Change in foreign currency translation, net of tax of $0 | | (25,618 | ) | | (25,618 | ) | | (25,618 | ) | | 51,236 |
| | (25,618 | ) |
Change in pension liability | | (33 | ) | | (33 | ) | | (33 | ) | | 66 |
| | (33 | ) |
Comprehensive income (loss) | | (95,120 | ) | | (79,974 | ) | | (19,164 | ) | | 99,162 |
| | (95,096 | ) |
Less: comprehensive (income) loss attributable to noncontrolling interests | | — |
| | — |
| | (156 | ) | | — |
| | (156 | ) |
Comprehensive income (loss) attributable to common stockholders | | $ | (95,120 | ) | | $ | (79,974 | ) | | $ | (19,320 | ) | | $ | 99,162 |
| | $ | (95,252 | ) |
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
Condensed consolidating statements of comprehensive income (loss) |
| | | | | | | | | | |
| | Nine months ended September 30, 2015 |
| | FET (Parent) | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
| | | | | | (in thousands) | | | | |
Revenue | | $ | — |
| | $ | 661,419 |
| | $ | 306,431 |
| | $ | (90,346 | ) | | $ | 877,504 |
|
Cost of sales | | — |
| | 484,338 |
| | 221,940 |
| | (88,545 | ) | | 617,733 |
|
Gross profit | | — |
| | 177,081 |
| | 84,491 |
| | (1,801 | ) | | 259,771 |
|
Operating expenses | | | | | | | | | | |
Selling, general and administrative expenses | | — |
| | 150,955 |
| | 46,065 |
| | — |
| | 197,020 |
|
Transaction expenses | | — |
| | 433 |
| | — |
| | — |
| | 433 |
|
Loss (gain) on sale of assets and other | | — |
| | (73 | ) | | (191 | ) | | — |
| | (264 | ) |
Total operating expenses | | — |
| | 151,315 |
| | 45,874 |
| | — |
| | 197,189 |
|
Earnings from equity investment | | — |
| | 12,281 |
| | — |
| | — |
| | 12,281 |
|
Equity earnings from affiliates, net of tax | | 59,002 |
| | 35,116 |
| | — |
| | (94,118 | ) | | — |
|
Operating income (loss) | | 59,002 |
| | 73,163 |
| | 38,617 |
| | (95,919 | ) | | 74,863 |
|
Other expense (income) | | | | | | | | | | |
Interest expense (income) | | 22,670 |
| | 13 |
| | 4 |
| | — |
| | 22,687 |
|
Foreign exchange (gains) losses and other, net | | — |
| | (407 | ) | | (5,104 | ) | | — |
| | (5,511 | ) |
Total other expense (income) | | 22,670 |
| | (394 | ) | | (5,100 | ) | | — |
| | 17,176 |
|
Income (loss) before income taxes | | 36,332 |
| | 73,557 |
| | 43,717 |
| | (95,919 | ) | | 57,687 |
|
Provision (benefit) for income tax expense | | (7,934 | ) | | 14,555 |
| | 6,827 |
| | — |
| | 13,448 |
|
Net income (loss) | | 44,266 |
| | 59,002 |
| | 36,890 |
| | (95,919 | ) | | 44,239 |
|
Less: Income (loss) attributable to noncontrolling interest | | — |
| | — |
| | (27 | ) | | — |
| | (27 | ) |
Net income (loss) attributable to common stockholders | | 44,266 |
| | 59,002 |
| | 36,917 |
| | (95,919 | ) | | 44,266 |
|
| | | | | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | |
Net income (loss) | | 44,266 |
| | 59,002 |
| | 36,890 |
| | (95,919 | ) | | 44,239 |
|
Change in foreign currency translation, net of tax of $0 | | (30,553 | ) | | (30,553 | ) | | (30,553 | ) | | 61,106 |
| | (30,553 | ) |
Change in pension liability | | 68 |
| | 68 |
| | 68 |
| | (136 | ) | | 68 |
|
Comprehensive income (loss) | | 13,781 |
| | 28,517 |
| | 6,405 |
| | (34,949 | ) | | 13,754 |
|
Less: comprehensive (income) loss attributable to noncontrolling interests | | — |
| | — |
| | 118 |
| | — |
| | 118 |
|
Comprehensive income (loss) attributable to common stockholders | | $ | 13,781 |
| | $ | 28,517 |
| | $ | 6,523 |
| | $ | (34,949 | ) | | $ | 13,872 |
|
Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
Condensed consolidating balance sheets |
| | | | | | | | | | |
| | September 30, 2016 |
| | FET (Parent) | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
| | | | | | (in thousands) | | | | |
Assets | | | | | | | | | | |
Current assets | | | | | | | | | | |
Cash and cash equivalents | | $ | 65 |
| | $ | 44,930 |
| | $ | 87,539 |
| | $ | — |
| | $ | 132,534 |
|
Accounts receivable—trade, net | | — |
| | 66,272 |
| | 33,983 |
| | — |
| | 100,255 |
|
Inventories | | — |
| | 275,694 |
| | 87,640 |
| | (8,102 | ) | | 355,232 |
|
Cost and profits in excess of billings | | — |
| | 5,627 |
| | 4,674 |
| | — |
| | 10,301 |
|
Income tax receivable | | — |
| | 32,801 |
| | — |
| | — |
| | 32,801 |
|
Other current assets | | 230 |
| | 23,088 |
| | 6,308 |
| | — |
| | 29,626 |
|
Total current assets | | 295 |
| | 448,412 |
| | 220,144 |
| | (8,102 | ) | | 660,749 |
|
Property and equipment, net of accumulated depreciation | | — |
| | 132,087 |
| | 27,366 |
| | — |
| | 159,453 |
|
Deferred financing costs, net | | 1,412 |
| | — |
| | — |
| | — |
| | 1,412 |
|
Deferred income taxes, net | | — |
| | — |
| | 720 |
| | — |
| | 720 |
|
Intangibles | | — |
| | 171,488 |
| | 54,032 |
| | — |
| | 225,520 |
|
Goodwill | | — |
| | 481,374 |
| | 179,602 |
| | — |
| | 660,976 |
|
Investment in unconsolidated subsidiary | | — |
| | 58,523 |
| | — |
| | — |
| | 58,523 |
|
Investment in affiliates | | 1,108,601 |
| | 476,874 |
| | — |
| | (1,585,475 | ) | | — |
|
Long-term advances to affiliates | | 476,656 |
| | — |
| | 61,774 |
| | (538,430 | ) | | — |
|
Other long-term assets | | — |
| | 2,363 |
| | 669 |
| | — |
| | 3,032 |
|
Total assets | | $ | 1,586,964 |
| | $ | 1,771,121 |
| | $ | 544,307 |
| | $ | (2,132,007 | ) | | $ | 1,770,385 |
|
Liabilities and equity | | | | | | | | | | |
Current liabilities | | | | | | | | | | |
Current portion of long-term debt | | $ | — |
| | $ | 28 |
| | $ | 10 |
| | $ | — |
| | $ | 38 |
|
Accounts payable—trade | | — |
| | 43,463 |
| | 16,683 |
| | — |
| | 60,146 |
|
Accrued liabilities | | 12,935 |
| | 35,199 |
| | |