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News Release

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Frank’s International N.V. Announces Third Quarter 2015 Results
  • Third quarter revenue and Adjusted EBITDA were $239.9 million and $73.3 million, respectively, representing a 30.6% EBITDA margin
  • Activity levels in the quarter were stable in U.S. Offshore; declined in U.S. Land and the International segment, particularly in West Africa
  • Delivered record Tubular Sales revenue and Adjusted EBITDA of $62.4 million and $16.0 million, respectively
  • Generated positive free cash flow of $62.0 million, the ninth consecutive quarter of positive free cash flow

HOUSTON, Nov. 03, 2015 (GLOBE NEWSWIRE) -- Frank’s International N.V. (NYSE:FI) (the “Company”) today reported revenues of $239.9 million, and income from continuing operations of $24.1 million for the three months ended September 30, 2015. Diluted earnings per share for the third quarter were $0.11. Adjusted EBITDA for the third quarter was $73.3 million or 30.6% of revenue while free cash flow from operations totaled $62.0 million (See Adjusted EBITDA and free cash flow non-GAAP reconciliations included in this release).

President and CEO Gary Luquette commented, “Our focus as a company continues to center around controlling what we can control in the face of a challenging business climate. Revenues for the quarter were down in both services segments, but the benefits of our cost cutting actions and manufacturing improvements began to take hold in the U.S. Services and Tubular Sales segment margins. Activity levels were mixed during the quarter as we saw a steady Gulf of Mexico business offset by a weaker than expected International business, specifically West Africa. The International business segment margins were disproportionately impacted as the decrease in revenues outpaced our cost saving initiatives in the segment, which we expect to more fully realize in the next few quarters.”

“While business conditions continued to deteriorate in the quarter, the Frank’s team continued to serve our customers’ needs by delivering record sales in our Tubular Sales segment and holding or growing market share in our core U.S. and International areas. The outlook remains uncertain as we move towards the end of 2015 and into 2016, but further downside risk in the near term can be expected as commodity prices remain low and further capital spending cuts are anticipated.”

“Even in the face of a difficult macro environment, our strategy remains the same. We will control what we can control and offer our customers advanced technology that will further reduce their operational costs and place a premium on safe operations. Our strong balance sheet and business optimization initiatives will provide the framework for Frank’s to emerge from the down cycle a leaner company poised to take advantage of the opportunity to continue to expand our footprint in new and existing markets around the globe.”

Third Quarter 2015 Results

  • Revenue was $239.9 million, down 5.7% compared to the second quarter of 2015, and down 19.0% year-over-year
    • International Services revenue was $103.1 million, down 16.0% compared to the second quarter of 2015, and down 28.1% year-over-year
    • U.S. Services revenue was $74.4 million, down 5.1% compared to the second quarter of 2015, and down 33.6% year-over-year
    • Tubular Sales revenue was $62.4 million, up 17.2% compared to the second quarter of 2015, and up 53.3% year-over-year
  • Adjusted EBITDA totaled $73.3 million with an Adjusted EBITDA margin of 30.6%
  • Diluted earnings per share were $0.11, with weighted average shares outstanding of 209 million

Segment Results

International Services

International Services revenue from external sales was $103.1 million in the third quarter of 2015, down 16.0% compared to the second quarter of 2015, and down 28.1% compared to the third quarter of 2014. Year-over-year and sequential results were impacted by decreased activity by customers due to the lower commodity price environment, which drove customers to reduce spending, defer projects and request additional price concessions.

Segment Adjusted EBITDA for the third quarter of $39.2 million, or 38.0% of revenue, was down 29.2% compared to the second quarter of 2015, and down 40.1% compared to the third quarter of 2014. Adjusted EBITDA margin decreased sequentially due to lower volumes and price discounts, partially offset by lower compensation and supply costs.

U.S. Services

U.S. Services revenue from external sales was $74.4 million in the third quarter of 2015, down 5.1% compared to the second quarter of 2015, and down 33.6% compared to the third quarter of 2014.

For the third quarter, land revenue within the U.S. Services segment of $21.7 million was down 15.2% compared to the second quarter of 2015, and down 53.3% compared to the third quarter of 2014. Sequential and year-over-year revenue declines were driven by lower activity and pricing discounts, partially offset by an increase in market share.

Offshore revenue within the U.S. Services segment of $52.7 million for the third quarter was roughly flat compared to the second quarter of 2015, and down 19.8% compared to the third quarter of 2014. Revenue held up as a result of customers moving past operational delays, partially offset by the impact from loop currents.

Segment Adjusted EBITDA for the third quarter of $18.2 million, or 24.4% of revenue, was up 9.0% compared to the second quarter of 2015, and down 60.3% compared to the third quarter of 2014. Adjusted EBITDA and Adjusted EBITDA margin increased from the second quarter due to increased activity primarily in the U.S. offshore market.

Tubular Sales

Tubular Sales revenue from external sales was $62.4 million in the third quarter of 2015, up 17.2% compared to the second quarter of 2015, and up 53.3% compared to the third quarter of 2014. Revenue increased sequentially due to favorable volumes from contracted and spot market opportunities.

Segment Adjusted EBITDA for the third quarter of $16.0 million, or 25.6% of revenue, was up 100.4% compared to the second quarter of 2015, and up 71.1% compared to the third quarter of 2014. Sequential improvement in EBITDA margin was due to higher volumes, favorable business mix and cost rationalization actions in the manufacturing unit.

Total pipe and connector inventory decreased $34.6 million from December 31, 2014 to $150.4 million at September 30, 2015.

Deferred revenue decreased $17.7 million from December 31, 2014 to $58.4 million at September 30, 2015.

Capital Expenditures and Balance Sheet

Capital expenditures were $17.5 million for the third quarter of 2015; year to date 2015 capital expenditures were $88.3 million. The Company’s consolidated cash balance at September 30, 2015, was $507.1 million compared to $489.4 million at December 31, 2014. At September 30, 2015 there was $94.2 million of unused capacity under the Company’s $100.0 million credit facility, net of outstanding letters of credit.

Dividends

On November 2, 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 December 15, 2015 to all common stockholders of record as of November 27, 2015, as part of its regular quarterly cash dividend program. The Company has paid dividends on our common stock of $69.6 million, or an aggregate of $0.45 per common share, during the nine months ended September 30, 2015. Future declarations of dividends and their record and payment dates, if any, are subject to the final determination of the Boards.

Conference Call

The Company will host a conference call to discuss third quarter results on Tuesday, November 3, 2015 at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). Participants may join the conference call by dialing (888) 771-4371 or (847) 585-4405. The conference access code is 40913038. To listen via live web cast, please visit the Investor Relations section of the Company’s website, www.franksinternational.com. A presentation will also be posted on the Company’s website prior to the conference call.

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 40913038. 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 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, which have declined significantly in recent 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, 2014 and in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 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 4,000 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 website, www.franksinternational.com.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-GAAP financial measures of free cash flow, 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. Free cash flow, 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 free cash flow, 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 free cash flow, 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 free cash flow, 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 free cash flow as net cash provided by operating activities less capital expenditures. 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, stock-based compensation, other non-cash adjustments and unusual charges. The Company uses free cash flow and 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   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
    2015       2015       2014       2015       2014  
 Revenues:                   
 Equipment rentals and services  $   176,553     $   201,282     $   254,047     $   610,240     $   706,698  
 Products      63,330         53,022         42,136         161,384         126,914  
 Total revenue      239,883         254,304         296,183         771,624         833,612  
                   
 Operating expenses:                   
 Cost of revenues, exclusive of                   
 depreciation and amortization                   
 Equipment rentals and services      72,389         76,692         97,919         242,681         271,939  
 Products      34,174         33,060         23,237         90,081         75,527  
 General and administrative expenses      66,929         73,797         65,220         210,523         196,431  
 Depreciation and amortization      29,032         27,710         23,254         80,743         66,342  
 Severance and other charges      1,186         1,049         -         14,208         -  
 Change in value of contingent                   
  consideration      (1,532 )       -         -         (1,532 )       -  
 Loss (gain) on sale of assets      (1,392 )       687         280         (521 )       193  
 Operating income      39,097         41,309         86,273         135,441         223,180  
                   
 Other income (expense):                   
 Other income      918         971         1,483         2,976         6,772  
 Interest income (expense), net      173         (31 )       (13 )       150         23  
 Foreign currency gain (loss)      (5,329 )       (2,767 )       (526 )       (6,563 )       (526 )
 Total other income (expense)      (4,238 )       (1,827 )       944         (3,437 )       6,269  
                   
 Income before income tax expense      34,859         39,482         87,217         132,004         229,449  
 Income tax expense      10,771         10,629         19,777         32,662         51,598  
                   
 Net income      24,088         28,853         67,440         99,342         177,851  
 Net income attributable to                   
 noncontrolling interest      7,523         8,023         20,094         27,668         53,426  
 Net income attributable to                   
 Frank's International N.V.      16,565         20,830         47,346         71,674         124,425  
 Preferred stock dividends      -         (2 )       -         (2 )       (1 )
 Net income available to                   
 Frank's International N.V.                   
  common shareholders  $   16,565     $   20,828     $   47,346     $   71,672     $   124,424  
                   
 Earnings per common share:                   
 Basic  $   0.11     $   0.14     $   0.31     $   0.46     $   0.81  
 Diluted  $   0.11     $   0.14     $   0.31     $   0.46     $   0.80  
                   
 Weighted average common shares                   
 outstanding:                   
 Basic      154,813         154,344         153,923         154,502         153,659  
 Diluted      209,349         209,114         207,934         209,052         207,751  
                                       

 

 
 FRANK'S INTERNATIONAL N.V. 
 SELECTED OPERATING SEGMENT DATA 
 (In thousands) 
 (Unaudited) 
                   
                   
  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
    2015       2015       2014       2015       2014  
Revenue                  
International Services $ 103,076     $ 122,640     $ 143,330     $ 349,918     $ 391,371  
U.S. Services   74,417       78,418       112,149       262,120       321,468  
Tubular Sales   62,390       53,246       40,704       159,586       120,773  
Total Revenue $ 239,883     $ 254,304     $ 296,183     $ 771,624     $ 833,612  
                   
Segment Adjusted EBITDA:                  
International Services $ 39,157     $ 55,311     $ 65,359     $ 146,752     $ 165,260  
U.S. Services   18,190       16,684       45,796       79,767       132,643  
Tubular Sales   15,985       7,978       9,343       27,082       28,028  
Total   73,332       79,973       120,498       253,601       325,931  
Corporate and other   12       31       6       37       6  
Total Adjusted EBITDA $ 73,344     $ 80,004     $ 120,504     $ 253,638     $ 325,937  
                                       

 

 
 FRANK'S INTERNATIONAL N.V. 
 SELECTED BALANCE SHEET AND CASH FLOW DATA 
 (In thousands) 
 (Unaudited) 
         
     September 30,     December 31, 
      2015       2014  
Cash and cash equivalents   $ 507,053     $ 489,354  
Working capital     840,220       900,280  
Property, plant and equipment, net     643,313       580,142  
Total assets     1,736,144       1,758,681  
Total debt     247       304  
Series A preferred stock     705       705  
Total stockholders' equity     1,224,691       1,211,990  
Noncontrolling interest     241,223       260,546  
Total equity     1,465,914       1,472,536  
         
 
    Nine Months Ended
    September 30,
      2015       2014  
         
Net cash provided by operating activities   $ 295,387     $ 273,927  
Net cash used in investing activities     (163,966 )     (125,073 )
Net cash used in financing activities     (117,240 )     (82,849 )
      14,181       66,005  
Effect of exchange rate changes on cash activities   3,518       (2,564 )
Increase in cash and cash equivalents   $ 17,699     $ 63,441  
         
Capital expenditures   $ 88,296     $ 124,187  
                 

 

 
 FRANK'S INTERNATIONAL N.V. 
 NON-GAAP FINANCIAL MEASURES AND RECONCILIATION 
 ($ in thousands) 
 (Unaudited) 
                     
 ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION 
                     
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
      2015       2015       2014       2015       2014  
                     
Revenues    $ 239,883     $ 254,304     $ 296,183     $ 771,624     $ 833,612  
                     
                     
Income from continuing operations   $ 24,088     $ 28,853     $ 67,440     $ 99,342     $ 177,851  
Interest (income) expense, net     (173 )     31       13       (150 )     (23 )
Income tax expense     10,771       10,629       19,777       32,662       51,598  
Depreciation and amortization     29,032       27,710       23,254       80,743       66,342  
Loss (gain) on sale of assets     (1,392 )     687       280       (521 )     193  
Foreign currency loss     5,329       2,767       526       6,563       526  
Stock-based compensation expense     6,035       8,278       9,214       22,323       29,450  
Severance and other charges     1,186       1,049       -       14,208       -  
Change in value of contingent consideration     (1,532 )     -       -       (1,532 )     -  
Adjusted EBITDA    $ 73,344     $ 80,004     $ 120,504     $ 253,638     $ 325,937  
                     
 Adjusted EBITDA margin      30.6 %     31.5 %     40.7 %     32.9 %     39.1 %
                     
 SEGMENT ADJUSTED EBITDA RECONCILIATION 
                     
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
      2015       2015       2014       2015       2014  
Segment Adjusted EBITDA:                    
International Services   $ 39,157     $ 55,311     $ 65,359     $ 146,752     $ 165,260  
U.S. Services     18,190       16,684       45,796       79,767       132,643  
Tubular Sales     15,985       7,978       9,343       27,082       28,028  
Total     73,332       79,973       120,498       253,601       325,931  
Corporate and other     12       31       6       37       6  
Adjusted EBITDA Total     73,344       80,004       120,504       253,638       325,937  
Interest income (expense), net     173       (31 )     (13 )     150       23  
Income tax expense     (10,771 )     (10,629 )     (19,777 )     (32,662 )     (51,598 )
Depreciation and amortization     (29,032 )     (27,710 )     (23,254 )     (80,743 )     (66,342 )
(Loss) gain on sale of assets     1,392       (687 )     (280 )     521       (193 )
Foreign currency loss     (5,329 )     (2,767 )     (526 )     (6,563 )     (526 )
Stock-based compensation expense     (6,035 )     (8,278 )     (9,214 )     (22,323 )     (29,450 )
Severance and other charges     (1,186 )     (1,049 )     -       (14,208 )     -  
Change in value of contingent consideration     1,532       -       -       1,532       -  
Income from continuing operations   $ 24,088     $ 28,853     $ 67,440     $ 99,342     $ 177,851  
                     
 FREE CASH FLOW RECONCILIATION 
                     
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
      2015       2015       2014       2015       2014  
Net cash provided by operating activities   $ 79,475     $ 115,783     $ 111,982     $ 295,387     $ 273,927  
Less: Capital expenditures     17,453       26,972       46,465       88,296       124,187  
Free cash flow    $ 62,022     $ 88,811     $ 65,517     $ 207,091     $ 149,740  
                                         

 

 
 FRANK'S INTERNATIONAL N.V. 
 EARNINGS PER SHARE CALCULATIONS 
 (In thousands, except per share amounts) 
 (Unaudited) 
                   
  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
    2015       2015       2014       2015       2014  
 Numerator - Basic                   
 Income from continuing operations  $   24,088     $   28,853     $   67,440     $   99,342     $   177,851  
 Less: Net income attributable to                  
 noncontrolling interest      (7,523 )       (8,023 )       (20,094 )       (27,668 )       (53,426 )
 Less: Preferred stock dividends      -         (2 )       -         (2 )       (1 )
 Net income available to                  
 common shareholders  $   16,565     $   20,828     $   47,346     $   71,672     $   124,424  
                   
 Numerator - Diluted                   
 Income from continuing operations                  
 attributable to common shareholders  $   16,565     $   20,828     $   47,346     $   71,672     $   124,424  
 Add: Net income attributable to                  
 noncontrolling interest (1)      5,911         7,664         16,335         23,513         42,671  
 Add: Preferred stock dividends      -         2         -         2         1  
 Dilutive net income available                  
 to common shareholders  $   22,476     $   28,494     $   63,681     $   95,187     $   167,096  
                   
 Denominator                   
 Basic weighted average common shares      154,813         154,344         153,923         154,502         153,659  
 Exchange of noncontrolling interest                  
 for common stock      52,976         52,976         52,976         52,976         52,976  
 Restricted stock units      1,559         1,789         1,035         1,573         1,116  
 Stock to be issued pursuant to employee stock purchase plan      1         5         -          1         -   
 Diluted weighted average common shares      209,349         209,114         207,934         209,052         207,751  
                   
 Earnings per common share:                   
 Basic  $   0.11     $   0.14     $   0.31     $   0.46     $   0.81  
 Diluted  $   0.11     $   0.14     $   0.31     $   0.46     $   0.80  
       
 __________________                   
 (1)  Adjusted for the additional tax expense                 
  upon the assumed conversion of the                   
  Preferred Stock  $   1,612     $   359     $   3,759     $   4,155     $   10,755  
                                       

 

Contacts:
Blake Holcomb, Director – Investor Relations
blake.holcomb@franksintl.com
713-231-7463

Caroline Mansur – Interim Director, Communications and External Affairs
caroline.mansur@franksintl.com
713-231-2527

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