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Frank’s International N.V. Announces Fourth Quarter and Full Year 2014 Results
February 25, 2015 at 7:00 AM EST
  • 2014 revenue was $1.15 billion, up 7% year-over-year
  • International Services 2014 revenue grew 13% year-over-year to $539 million
  • Diluted EPS was $1.03 per share
  • Adjusted EBITDA in 2014 was $450 million, up 3% year-over-year

HOUSTON--(BUSINESS WIRE)--Feb. 25, 2015-- Frank’s International N.V. (NYSE: FI) (the “Company”) today reported revenues of $319.0 million, and net income of $51.5 million for the three months ended December 31, 2014. Diluted earnings per share for the fourth quarter were $0.22, with weighted average shares outstanding of 208.1 million. Adjusted EBITDA for the quarter was $124.4 million or 39.0% of revenue.

Full year 2014 revenues were $1,152.6 million and net income was $229.3 million. Diluted earnings per share were $1.03 per share with weighted average shares outstanding of 207.8 million. Adjusted EBITDA was $450.4 million or 39.1% of revenue.

Fourth quarter and full year 2014 results include $13.0 million, or $0.06 per diluted share, of exchange loss related to the devaluation of the Venezuela Bolivar. This reflects a change in translation from the official rate of 6.3 Bolivars per U.S. dollar to the SICAD II exchange rate of 50 Bolivars per U.S. dollar. This loss is excluded from the Adjusted EBITDA calculation.

Gary Luquette, Frank’s International’s President and Chief Executive Officer, said, “2014 was another record year for Frank’s International with over $1.1 billion in revenue. We continued to look for opportunities to grow through innovation and help our customers improve the costs and integrity of their wells.

“Looking at 2015, we believe we are in sound financial shape. We are taking definitive steps to ensure we not only survive the downturn but prosper in it, and that we will be positioned to ramp up quickly and effectively once commodity prices rebound.”

Fourth Quarter 2014 Results

  • Revenue was $319.0 million, up 7.7% compared to the third quarter of 2014, and up 13.1% compared to the fourth quarter of 2013
    • International Services revenue was $145.9 million, up 1.8% compared to the third quarter of 2014, and up 19.3% year-over-year
    • U.S. Services revenue was $118.2 million, up 5.4% compared to the third quarter of 2014, and up 4.0% year-over-year
    • Tubular Sales revenue was $55.0 million, up 35.0% compared to the third quarter of 2014, and up 19.0% year-over-year
  • Net income was $51.5 million with $34.6 million, or $0.22 per share, attributable to common shareholders
  • Diluted earnings per share were $0.22 with weighted average shares outstanding of 208.1 million
  • Adjusted EBITDA totaled $124.4 million with an Adjusted EBITDA margin of 39.0%
  • Effective tax rate for the fourth quarter of 2014 was 31.6%

Full Year 2014 Results

  • Revenue was $1,152.6 million, up 7.0% year-over-year
    • International Services revenue was $537.3 million, up 13.0% year-over-year
    • U.S. Services revenue was $439.6 million, up 1.1% year-over-year
    • Tubular Sales revenue was $175.7 million, up 4.9% year-over-year
  • Net income was $229.3 million with $159.0 million, or $1.03 per share, attributable to common shareholders
  • Diluted earnings per share were $1.03 with weighted average shares outstanding of 207.8 million
  • Adjusted EBITDA totaled $450.4 million with an Adjusted EBITDA margin of 39.1%
  • Effective tax rate for 2014 was 24.7%
  • Cash flow from operations for 2014 was $368.9 million, up 33.0% year-over-year

Adjusted EBITDA, Adjusted EBITDA margin and segment Adjusted EBITDA, which are financial measures not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), are defined and reconciled to their most directly comparable GAAP financial measures below. Adjusted EBITDA, segment Adjusted EBITDA and the other segment data discussed below do not include income from discontinued operations. Please see “Use of Non-GAAP Financial Measures” and the reconciliations appearing under the heading “Non-GAAP Financial Measures”.

Segment Results

International Services

International Services revenue from external sales was $145.9 million in the fourth quarter of 2014, up 1.8% compared to the third quarter of 2014, and up 19.3% compared to the fourth quarter of 2013. Full year 2014 revenue from external sales was $537.3 million, up 13.0% year-over-year. Full year 2014 revenue increases were driven by growth in all regions, except Latin America, which was impacted by reduced activity in Venezuela and Brazil as compared to 2013. West Africa was the largest revenue and highest growth region in 2014.

Segment Adjusted EBITDA for the fourth quarter of 2014 of $66.2 million, or 45.4% of revenue, was up 1.3% compared to the third quarter of 2014, and up 42.4% compared to the fourth quarter of 2013. Segment Adjusted EBITDA for 2014 was $231.5 million, or 43.1% of revenue, up 16.0% year-over-year. Adjusted EBITDA increased due to revenue growth in 2014 related to more activity and higher margin opportunities in the Company’s offshore markets.

U.S. Services

U.S. Services revenue from external sales was $118.2 million in the fourth quarter of 2014, up 5.4% compared to the third quarter of 2014, and up 4.0% compared to the fourth quarter of 2013. Full year 2014 revenue from external sales was $439.6 million, up 1.1% year-over-year.

For the fourth quarter, onshore revenue within the U.S. Services segment of $46.9 million was up 0.9% compared to the third quarter of 2014 and up 10.3% compared to the fourth quarter of 2013. Full year 2014 revenue was $168.8 million, down 3.0% year-over-year. The Company’s updated pricing strategy and realigned management team mitigated revenue and market share decline.

Offshore revenue within the U.S. Services segment of $71.3 million for the fourth quarter was up 8.6% compared to the third quarter of 2014 and flat compared to the fourth quarter of 2013. Full year 2014 revenue was $270.9 million, up 3.8% year-over-year. Year-over-year increases in revenue from additional floating rigs in the region was offset by delayed activity in the third quarter due to loop currents.

Segment Adjusted EBITDA for the fourth quarter of $47.9 million, or 40.6% of revenue, was up 4.7% compared to the third quarter of 2014 and down 2.1% compared to the fourth quarter of 2013. Segment Adjusted EBITDA for 2014 was $180.6 million, or 41.1% of revenue, down 9.0% year-over-year.

Tubular Sales

Tubular Sales revenue from external sales was $55.0 million in the fourth quarter of 2014, up 35.0% compared to the third quarter of 2014, and up 19.0% compared to the fourth quarter of 2013. Full year 2014 revenue from external sales was $175.7 million, up 4.9% year-over-year.

Segment Adjusted EBITDA for the fourth quarter was $10.3 million, or 18.8% of revenue, up 10.6% compared to the third quarter of 2014, and down 29.8% compared to the fourth quarter of 2013. Segment Adjusted EBITDA for 2014 was $38.4 million, or 21.8% of revenue, down 5.6% year-over-year.

Total pipe and connector inventory increased $16.4 million from December 31, 2013 to $185.1 million at December 31, 2014.

Deferred revenue increased $13.5 million from December 31, 2013 to $76.1 million at December 31, 2014.

Capital Expenditures and Balance Sheet

Capital expenditures were $173.0 million for 2014, of which $118.9 million was for new rental equipment and $54.1 million was for buildings, improvements and other property, plant and equipment. The Company’s consolidated cash balance at December 31, 2014 was $489.4 million compared to $404.9 million at December 31, 2013. At December 31, 2014 there was $93.4 million of unused capacity under the Company’s $100.0 million credit facility, net of outstanding letters of credit.

Dividends

On February 23, 2015, the Board of Managing Directors of the Company (the “Management Board”), with the approval from the Board of Supervisory Directors of the Company (the “Supervisory Board”, and jointly with the Management Board, the “Boards”), declared a cash dividend of $0.15 per share (subject to applicable Dutch dividend withholding tax), payable on March 18, 2015, to all common stockholders of record as of March 6, 2015 as part of its regular quarterly cash dividend program. Future declarations of dividends and their record and payment dates are subject to the final determination of the Boards.

Conference Call

The Company will host a conference call to discuss fourth quarter and full year results, as well as management’s outlook for 2015, on Wednesday February 25, 2015 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). Participants may join the conference call by dialing (888) 771-4371 or (847) 585-4405. The conference access code is 38827207. To listen via live web cast, please visit the Investor Relations section of the Company’s website, www.franksinternational.com.

An audio replay of the conference call will be available approximately two hours after the conclusion of the call and will remain available for seven days. It can be accessed by dialing (888) 843-7419 or (630) 652-3042. The conference call replay access code is 38827207. The replay will also be available in the Investor Relations section of the Company’s website approximately two hours after the conclusion of the call and remain available for approximately 90 days.

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 statements, estimates and projections regarding the Company’s future business strategy and prospects for growth, cash flows and liquidity, financial strategy, budget, projections and operating results, the amount, nature and timing of capital expenditures, the availability and terms of capital, the level of activity in the oil and gas industry, volatility of oil and gas prices, unique risks associated with offshore operations, political, economic and regulatory uncertainties in international operations, the ability to develop new technologies and products, the ability to protect intellectual property rights, the ability to employ and retain skilled and qualified workers, the level of competition in the Company’s industry and other guidance. These statements are based on certain assumptions made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, 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. These include the factors discussed or referenced in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 that will be filed with the SEC. 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.

About Frank’s International

Frank’s International N.V. is a global oil services company that provides a broad and comprehensive range of highly engineered tubular services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells. Founded in 1938, Frank’s has over 4,500 employees and provides services in approximately 60 countries on six continents. The Company’s common stock is traded on the NYSE under the symbol “FI.” Additional information is available on the Company’s web site, www.franksinternational.com.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-GAAP financial measures of Adjusted EBITDA, segment Adjusted EBITDA and Adjusted EBITDA margin, which may be used periodically by management when discussing the Company’s financial results with investors and analysts. The accompanying schedules of this news release provide a reconciliation of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with GAAP. Adjusted EBITDA, segment Adjusted EBITDA and Adjusted EBITDA margin are presented because management believes these metrics provide additional information relative to the performance of the Company’s business. These metrics are commonly employed by financial analysts and investors to evaluate the operating and financial performance of the Company from period to period and to compare it with the performance of other publicly traded companies within the industry. You should not consider Adjusted EBITDA, segment Adjusted EBITDA and Adjusted EBITDA margin in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Because Adjusted EBITDA, segment Adjusted EBITDA and Adjusted EBITDA margin may be defined differently by other companies in the Company’s industry, the Company’s presentation of Adjusted EBITDA, segment Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The Company defines Adjusted EBITDA as income from continuing operations before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss and other non-cash adjustments. The Company uses Adjusted EBITDA to assess its financial performance because it allows the Company to compare its operating performance on a consistent basis across periods by removing the effects of its capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and items outside the control of the Company’s management team (such as income tax rates). The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by total revenue.

Please see the accompanying financial tables for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures.

                   
FRANK'S INTERNATIONAL N.V.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended Year Ended

December 31,

September 30, December 31, December 31,
2014 2014 2013 2014 2013
Revenues:
Equipment rentals and services $ 263,005 $ 254,047 $ 234,378 $ 969,703 $ 902,960
Products   56,015     42,136     47,694     182,929     174,762  
Total revenue   319,020     296,183     282,072     1,152,632     1,077,722  
 
Operating expenses:
Cost of revenues, exclusive of
depreciation and amortization
Equipment rentals and services 97,916 97,919 81,393 369,855 310,244
Products 34,599 23,237 32,358 110,126 124,092
General and administrative expenses 70,947 65,220 64,739 267,378 224,755
Depreciation and amortization 23,699 23,254 21,489 90,041 78,082
Loss on sale of assets   96     280     (190 )   289     (122 )
Operating income   91,763     86,273     82,283     314,943     340,671  
 
Other income (expense):
Other income (37 ) 1,483 925 6,735 9,460
Interest income (expense), net 64 (13 ) (160 ) 87 (653 )
Foreign currency gain (loss)   (16,515 )   (526 )   (442 )   (17,041 )   (2,556 )
Total other income (expense)   (16,488 )   944     323     (10,219 )   6,251  
Income from continuing operations
before income tax expense 75,275 87,217 82,606 304,724 346,922
Income tax expense   23,814     19,777     6,158     75,412     38,727  
 
Income from continuing operations 51,461 67,440 76,448 229,312 308,195
Income from discontinued operations,
net of tax   -     -     -     -     42,635  
Net income 51,461 67,440 76,448 229,312 350,830
Net income attributable to
noncontrolling interest   16,849     20,094     21,363     70,275     95,368  
Net income attributable to
Frank's International N.V. $ 34,612   $ 47,346   $ 55,085   $ 159,037   $ 255,462  
 
Basic earnings per share:
Continuing operations $ 0.22 $ 0.31 $ 0.36 $ 1.03 $ 1.69
Discontinued operations   -     -     -     -     0.24  
Total $ 0.22   $ 0.31   $ 0.36   $ 1.03   $ 1.93  
 
Diluted earnings per share:
Continuing operations $ 0.22 $ 0.31 $ 0.36 $ 1.03 $ 1.62
Discontinued operations   -     -     -     -     0.23  
Total $ 0.22   $ 0.31   $ 0.36   $ 1.03   $ 1.85  
 
Weighted average common shares
outstanding:
Basic   154,275     153,923     153,524     153,814     132,257  
Diluted   208,075     207,934     207,275     207,828     185,506  
                   
FRANK'S INTERNATIONAL N.V.
SELECTED OPERATING SEGMENT DATA
(In thousands)
(Unaudited)
 
 
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
Revenue
International Services $ 145,888 $ 143,330 $ 122,256 $ 537,259 $ 475,297
U.S. Services 118,170 112,149 113,645 439,638 434,940
Tubular Sales   54,962     40,704   46,171   175,735     167,485
Total $ 319,020   $ 296,183 $ 282,072 $ 1,152,632   $ 1,077,722
 
Segment Adjusted EBITDA:

International Services

$ 66,209 $ 65,359 $ 46,486 $ 231,469 $ 199,620
U.S. Services 47,932 45,796 48,948 180,575 198,442
Tubular Sales   10,338     9,343   14,731   38,366     40,624
Total 124,479 120,498 110,165 450,410 438,686
Corporate and other   (40 )   6   50   (34 )   53
Total Adjusted EBITDA $ 124,439   $ 120,504 $ 110,215 $ 450,376   $ 438,739
           
FRANK'S INTERNATIONAL N.V.
SELECTED BALANCE SHEET AND CASH FLOW DATA
(In thousands)
(Unaudited)
 
December 31,
2014 2013
Cash and cash equivalents $ 489,354 $ 404,947
Working capital 900,280 795,472
Property, plant and equipment, net 580,142 511,199
Total assets 1,758,681 1,561,195
Total debt 304 376
Series A preferred stock 705 705
Total stockholders' equity 1,211,990 1,097,432
Noncontrolling interest 260,546 235,895
Total equity 1,472,536 1,333,327
 
 
Year Ended
December 31,
2014 2013
 
Net cash provided by operating activities $ 368,860 $ 277,431
Net cash used in investing activities (173,643 ) (137,500 )
Net cash provided by (used in) financing activities   (115,750 )   110,234  
79,467 250,165
Effect of exchange rate changes on cash activities   4,940     1,837  
Increase in cash and cash equivalents $ 84,407   $ 252,002  
 
Capital expenditures $ 172,952   $ 184,504  
                     

FRANK'S INTERNATIONAL N.V.
NON-GAAP FINANCIAL MEASURES
($ in thousands)
(Unaudited)


ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION

 
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
 
Revenues $ 319,020   $ 296,183   $ 282,072   $ 1,152,632   $ 1,077,722  
 
 
Income from continuing operations $ 51,461 $ 67,440 $ 76,448 $ 229,312 $ 308,195
Interest (income) expense, net (64 ) 13 160 (87 ) 653
Depreciation and amortization 23,699 23,254 21,489 90,041 78,082
Income tax expense 23,814 19,777 6,158 75,412 38,727
(Gain) loss on sale of assets 96 280 (190 ) 289 (122 )
Foreign currency (gain) loss 16,515 526 442 17,041 2,556
Stock-based compensation 8,918 9,214 4,700 38,368 7,220
IPO transaction-related costs   -     -     1,008     -     3,428  
Adjusted EBITDA $ 124,439   $ 120,504   $ 110,215   $ 450,376   $ 438,739  
 
Adjusted EBITDA margin 39.0 % 40.7 % 39.1 % 39.1 % 40.7 %
 
SEGMENT ADJUSTED EBITDA RECONCILIATION
 
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
Segment Adjusted EBITDA:
International Services $ 66,209 $ 65,359 $ 46,486 $ 231,469 $ 199,620
U.S. Services 47,932 45,796 48,948 180,575 198,442
Tubular Sales   10,338     9,343     14,731     38,366     40,624  
Total 124,479 120,498 110,165 450,410 438,686
Corporate and other   (40 )   6     50     (34 )   53  
Adjusted EBITDA Total 124,439 120,504 110,215 450,376 438,739
Interest income (expense), net 64 (13 ) (160 ) 87 (653 )
Income tax expense (23,814 ) (19,777 ) (6,158 ) (75,412 ) (38,727 )
Depreciation and amortization (23,699 ) (23,254 ) (21,489 ) (90,041 ) (78,082 )
Gain (loss) on sale of assets (96 ) (280 ) 190 (289 ) 122
Foreign currency gain (loss) (16,515 ) (526 ) (442 ) (17,041 ) (2,556 )
Stock-based compensation (8,918 ) (9,214 ) (4,700 ) (38,368 ) (7,220 )
IPO transaction-related costs   -     -     (1,008 )   -     (3,428 )
Income from continuing operations $ 51,461   $ 67,440   $ 76,448   $ 229,312   $ 308,195  
                       
FRANK'S INTERNATIONAL N.V.
EARNINGS PER SHARE CALCULATIONS
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
Numerator - Basic
Income from continuing operations $ 51,461 $ 67,440 $ 76,448 $ 229,312 $ 308,195
Less: Net income attributable to
noncontrolling interest (16,849 ) (20,094 ) (21,363 ) (70,275 ) (95,368 )
Discontinued operations attributable
to noncontrolling interest - - - - 10,935
Less: Preferred stock dividends   -     -     -     (1 )   -  
Income from continuing operations
attributable to common shareholders 34,612 47,346 55,085 159,036 223,762
Income from discontinued operations
attributable to FINV   -     -     -     -     31,700  
Net income attributable to
common shareholders $ 34,612   $ 47,346   $ 55,085   $ 159,036   $ 255,462  
 
Numerator - Diluted
Income from continuing operations
applicable to common shareholders $ 34,612 $ 47,346 $ 55,085 $ 159,036 $ 223,762
Add: Exchange of noncontrolling interest
for common stock (1) 12,195 16,335 18,796 54,866 77,106
Add: Preferred stock dividends   -     -     -     1     -  
Diluted income from continuing operations
applicable to common shareholders 46,807 63,681 73,881 213,903 300,868
Income from discontinued operations,
net of tax   -     -     -     -     42,635  
Dilutive net income available
to common shareholders $ 46,807   $ 63,681   $ 73,881   $ 213,903   $ 343,503  
 
Denominator
Basic weighted average common shares 154,275 153,923 153,524 153,814 132,257
Exchange of noncontrolling interest
for common stock 52,976 52,976 52,976 52,976 52,976
Restricted stock units   824     1,035     775     1,038     273  
Diluted weighted average common shares   208,075     207,934     207,275     207,828     185,506  
 
Basic earnings per common share:
Continuing operations $ 0.22 $ 0.31 $ 0.36 $ 1.03 $ 1.69
Discontinued operations   -     -     -     -     0.24  
Total $ 0.22   $ 0.31   $ 0.36   $ 1.03   $ 1.93  
 
Diluted earnings per common share:
Continuing operations $ 0.22 $ 0.31 $ 0.36 $ 1.03 $ 1.62
Discontinued operations   -     -     -     -     0.23  
Total $ 0.22   $ 0.31   $ 0.36   $ 1.03   $ 1.85  
__________________
(1) Adjusted for the additional tax expense
upon the assume conversion of the
Preferred Stock $ 4,654 $ 3,759 $ 2,567 $ 15,409 $ 7,327

Source: Frank’s International N.V.

Frank’s International N.V.
Thomas Dunavant, 713-358-7343
Manager – Finance and Investor Relations
thomas.dunavant@franksintl.com
or
Josh Grodin, 713-231-2468
Director – Communications and Public Relations
josh.grodin@franksintl.com