Forum Energy Technologies, Inc. (NYSE:FET) today announced fourth quarter 2015 revenue of $196 million, compared to $439 million in the fourth quarter 2014. Net loss for the quarter was $164 million, or $1.81 per diluted share, compared to net income of $46 million, or $0.49 per diluted share, for the prior year period. Excluding $1.69 per share of special items, the adjusted net loss was $0.12 per diluted share in the fourth quarter of 2015. Forum generated free cash flow after capital expenditures of $34 million during the fourth quarter of 2015.
Special items in the fourth quarter 2015 included pre-tax charges of $125 million for goodwill and intangible asset impairments, $43 million for inventory and other working capital reserves, $13 million for restructuring charges, and $4 million of foreign exchange gains. See Table 1 for a reconciliation of GAAP to non-GAAP financial information.
Average oil prices in 2015 decreased approximately 45% from the prior year and the North America rig count declined over 60% during the year. This led to significant reductions in customer spending, which negatively impacted fourth quarter and full year results.
Drilling & Subsea segment revenue in the fourth quarter 2015 was $104 million, a decrease of $174 million, or 63%, from the fourth quarter 2014. Production & Infrastructure segment revenue in the fourth quarter 2015 was $92 million, a decrease of $68 million, or 43%, from the prior year period.
Forum’s total revenue for the full year 2015 was $1.1 billion, a decrease of $666 million or 38%, from 2014. Net loss was $119 million, or $1.33 per diluted share. Excluding $1.73 per share of special items, adjusted diluted earnings per share were $0.40 for the full year 2015. Free cash flow after capital expenditures for the full year 2015 was $125 million. See Tables 2-5 for a reconciliation of GAAP to non-GAAP financial information.
Review and Outlook
Cris Gaut, Forum’s Chairman and Chief Executive Officer, remarked, ‘In 2015, we demonstrated the scalability of our business model and our ability to generate strong cash flow throughout the business cycle. We reduced our cost structure in line with declining activity levels and improved our operational efficiency, allowing us to achieve full year operating income decremental margins of 30%, consistent with our full year gross margins of 29%. Once again in 2015, our free cash flow significantly exceeded our net income, and we ended the year with $109 million of cash on hand. Our balance sheet remains strong with nothing drawn on our bank credit facility and no debt maturities until 2021.
‘The fourth quarter of 2015 unfolded with exhausted E&P budgets, further declines in the rig count, deferred maintenance of equipment, and very low customer spending. New orders received by Forum in the fourth quarter were $171 million, resulting in a book to bill ratio of 87%. Our operating margins declined in the fourth quarter compared to the prior period as it became increasingly difficult to continue to reduce our operating expenses in line with declining revenue.
‘Our Drilling & Subsea segment fourth quarter 2015 revenue declined $35 million, or 25%, sequentially on lower sales of drilling and subsea capital equipment and softer demand for consumable products across the segment.
‘The Production & Infrastructure segment experienced a sequential decrease in revenue of $14 million, or 13%, compared to the third quarter 2015 primarily on reduced sales of valves and pressure pumping consumable equipment.
‘This year will be another challenge for all industry participants as this downturn continues to run its course. Although we have been cutting costs for more than a year and will continue to focus on our cost structure, we believe it is important to preserve our operational capability. Our weighting towards consumable products and short cycle capital equipment is responsive to activity levels, enabling Forum to be at the leading edge of resupplying our customers when activity recovers.
‘For 2016, we remain focused on generating free cash flow, improving operational efficiency, and executing our disciplined acquisition strategy, while preserving our strong balance sheet.’
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