News Release

Frank’s International N.V. Announces Third Quarter 2014 Results
  • Total revenue increased 9% sequentially
  • International Services revenue grew 11% sequentially and 18% year-over-year
  • Total Company Adjusted EBITDA margin was 41%
  • Diluted earnings per share were $0.31

HOUSTON--(BUSINESS WIRE)--Nov. 7, 2014-- Frank’s International N.V. (NYSE: FI) (the “Company”) today reported revenues of $296.2 million, and net income of $67.4 million for the three months ended September 30, 2014. Diluted earnings per share for the third quarter were $0.31, with weighted average shares outstanding of 207.9 million. Adjusted EBITDA for the quarter was $120.5 million or 40.7% of revenue.

D. Keith Mosing, Frank’s International’s Chairman, Chief Executive Officer and President, said, “Frank’s International delivered strong results in the third quarter with $296 million in revenue and over 40% Adjusted EBITDA margins. Each of our three segments reported increases in revenue both on a sequential quarter basis and year-over-year. Our continued growth is driven by our customers’ pursuit of oil and gas reserves with deeper, more complex wells.” Mr. Mosing continued, “We are maintaining our full year 2014 guidance including at least 10 percent revenue growth in the Gulf of Mexico and International Services segment and total Company Adjusted EBITDA margin between 37 and 39 percent.”

Third Quarter 2014 Results

  • Revenue was $296.2 million, up 8.5% compared to the second quarter of 2014, and up 9.7% compared to the third quarter of 2013
    • International Services revenue was $143.3 million, up 10.7% compared to the second quarter of 2014, and up 17.8% year-over-year
    • U.S. Services revenue was $112.1 million, up 6.2% compared to the second quarter of 2014, and up 3.7% year-over-year
    • Tubular Sales revenue was $40.7 million, up 7.4% compared to the second quarter of 2014, and up 1.0% year-over-year
  • Net income was $67.4 million with $47.3 million, or $0.31 per share, attributable to common shareholders
  • Diluted earnings per share were $0.31 with weighted average shares outstanding of 207.9 million
  • Adjusted EBITDA totaled $120.5 million with an Adjusted EBITDA margin of 40.7%
  • Effective tax rate for the third quarter of 2014 was 22.7%
  • Cash flow from operations for the first nine months of 2014 was $273.9 million, up 14.1% 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 $143.3 million in the third quarter of 2014, up 10.7% compared to the second quarter of 2014, and up 17.8% compared to the third quarter of 2013. Third quarter 2014 sequential revenue increases were driven by 10 percent plus growth in West Africa, Europe, Latin America and the Middle East. West Africa, Europe and the Middle East also had 10 percent plus year-over-year revenue growth. Growth was driven by increased offshore rig count and increased market share.

Segment Adjusted EBITDA for the third quarter of 2014 of $65.4 million was up 33.7% compared to the second quarter of 2014, and up 34.1% compared to the third quarter of 2013. Segment Adjusted EBITDA margin for the third quarter 2014 was 45.6% of external revenue. Adjusted EBITDA increased due to revenue growth in the third quarter related to higher margin opportunities in the Company’s offshore markets and less operating expense.

U.S. Services

U.S. Services revenue from external sales was $112.1 million in the third quarter of 2014, up 6.2% compared to the second quarter of 2014, and up 3.7% compared to the third quarter of 2013.

For the third quarter, onshore revenue within the U.S. Services segment of $46.5 million was up 18.1% compared to the second quarter of 2014 and down 0.6% year-over-year. The Company’s updated strategy and commitment to reinvesting in the U.S. land market has led to increased revenue and market share.

Offshore revenue within the U.S. Services segment for the third quarter was essentially flat with the second quarter of 2014 but increased 7.0% year-over-year to $65.7 million. Flat sequential revenue was due to ocean currents which caused extended rig downtime. This decline was offset by work on two new drillships that entered the region in the third quarter.

Segment Adjusted EBITDA of $45.8 million was up 1.8% compared to the second quarter of 2014 and down 3.0% compared to the third quarter of 2013. Segment Adjusted EBITDA margin was 40.8% of external revenue for the third quarter of 2014.

Tubular Sales

Tubular Sales revenue from external sales was $40.7 million in the third quarter of 2014, up 7.4% compared to the second quarter of 2014, and up 1.0% compared to the third quarter of 2013. Year-over-year and sequential increases in revenue were due to timing of deliveries related to customers’ projects. Total pipe and connector inventory decreased $6.9 million from June 30, 2014 to $190.2 million at September 30, 2014 as the Company works to reduce its total inventory.

Segment Adjusted EBITDA for the second quarter was $9.3 million, up slightly compared to the second quarter of 2014, and up 75.0% compared to the third quarter of 2013. Segment Adjusted EBITDA margin was 23.0% of external revenue for the third quarter of 2014.

Capital Expenditures and Balance Sheet

Capital expenditures were $124.2 million for the first nine months of 2014. The Company’s consolidated cash balance at September 30, 2014 was $468.4 million compared to $404.9 million at December 31, 2013. At September 30, 2014, there was $92.7 million of unused capacity under the Company’s $100.0 million credit facility, net of outstanding letters of credit.

Dividends

On November 5, 2014, 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 that the Company will pay a cash dividend of $0.15 per share (subject to applicable Dutch dividend withholding tax) on December 15, 2014 to all common stockholders of record as of November 28, 2014 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.

2014 Outlook

The Company is maintaining its full year 2014 outlook. The Company currently expects:

  • International Services revenue to grow at least 10% year-over-year;
  • Revenue from the offshore portion of the U.S. Services segment revenue to grow at least 10%;
  • Revenue from the onshore portion of the U.S. Services segment to decline 10%;
  • Tubular Sales revenue to grow at least 4%;
  • Adjusted EBITDA margin to be between 37% and 39%;
  • The effective tax rate for 2014 is expected to be between 20% and 25%; and,
  • 2014 capital expenditures is expected to be approximately $190 million.

Conference Call

The Company will host a conference call to discuss second quarter results on Friday, November 7, 2014 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 38260917. 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 38260917. 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 and Section 21E of the Securities Exchange Act of 1934. 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. 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 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 Nine Months Ended
September 30, June 30, September 30, September 30,
2014 2014 2013 2014 2013
Revenues:
Equipment rentals and services $ 254,047 $ 231,838 $ 228,069 $ 706,698 $ 668,582
Products   42,136     41,099   42,033   126,914     127,068  
Total revenue   296,183     272,937   270,102   833,612     795,650  
 
Operating expenses:
Cost of revenues, exclusive of
depreciation and amortization
Equipment rentals and services 97,919 90,029 79,213 271,939 228,851
Products 23,237 26,261 31,581 75,527 91,734
General and administrative expenses 65,220 71,760 64,104 196,431 160,016
Depreciation and amortization 23,254 21,895 19,887 66,342 56,593
Loss on sale of assets   280     154   124   193     68  
Operating income   86,273     62,838   75,193   223,180     258,388  
 
Other income (expense):
Other income 1,483 2,918 1,128 6,772 8,535
Interest income (expense), net (13 ) 80 170 23 (493 )
Foreign currency gain (loss)   (526 )   65   3,161   (526 )   (2,114 )
Total other income (expense)   944     3,063   4,459   6,269     5,928  
Income from continuing operations
before income tax expense 87,217 65,901 79,652 229,449 264,316
Income tax expense   19,777     15,852   20,185   51,598     32,569  
 
Income from continuing operations 67,440 50,049 59,467 177,851 231,747
Income from discontinued operations,
net of tax   -     -   -   -     42,635  
Net income 67,440 50,049 59,467 177,851 274,382
Net income attributable to
noncontrolling interest   20,094     14,833   18,653   53,426     74,005  
Net income attributable to
Frank's International N.V. $ 47,346   $ 35,216 $ 40,814 $ 124,425   $ 200,377  
 
Basic earnings per share:
Continuing operations $ 0.31 $ 0.23 $ 0.30 $ 0.81 $ 1.35
Discontinued operations   -     -   -   -     0.25  
Total $ 0.31   $ 0.23 $ 0.30 $ 0.81   $ 1.60  
 
Diluted earnings per share:
Continuing operations $ 0.31 $ 0.23 $ 0.29 $ 0.80 $ 1.27
Discontinued operations   -     -   -   -     0.24  
Total $ 0.31   $ 0.23 $ 0.29 $ 0.80   $ 1.51  
 
Weighted average common shares
outstanding:
Basic   153,923     153,524   137,024   153,659     125,090  
Diluted   207,934     207,822   190,435   207,751     178,211  
         
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,
2014 2014 2013 2014 2013
Revenue
International Services $ 143,330 $ 129,456 $ 121,680 $ 391,371 $ 353,041
U.S. Services 112,149 105,564 108,126 321,468 321,295
Tubular Sales   40,704   37,917   40,296     120,773   121,314
Total $ 296,183 $ 272,937 $ 270,102   $ 833,612 $ 795,650
 
Segment Adjusted EBITDA:
International Services $ 65,359 $ 48,873 48,752 $ 165,260 $ 153,134
U.S. Services 45,796 44,968 47,215 132,643 149,494
Tubular Sales 9,343 9,311 5,338 28,028 25,893
Corporate and other   6   -   (33 )   6   3
Total $ 120,504 $ 103,152 $ 101,272   $ 325,937 $ 328,524
             
FRANK'S INTERNATIONAL N.V.
SELECTED BALANCE SHEET AND CASH FLOW DATA
(In thousands)
(Unaudited)
 
September 30, December 31,
2014 2013
Cash and cash equivalents $ 468,388 $ 404,947
Working capital 863,916 795,472
Property, plant and equipment, net 567,306 511,199
Total assets 1,705,940 1,561,195
Total debt 322 376
Series A preferred stock 705 705
Total stockholders' equity 1,195,454 1,097,432
Noncontrolling interest 254,953 235,895
Total equity 1,450,407 1,333,327
 
 
Nine Months Ended
September 30,
2014 2013
Net cash provided by operating activities $ 273,927 $ 240,157
Net cash used in investing activities (125,073 ) (79,621 )
Net cash provided by (used in) financing activities   (82,849 )   133,478  
66,005 294,014
Effect of exchange rate changes on cash activities   (2,564 )   2,563  
Increase in cash and cash equivalents $ 63,441   $ 296,577  
 
Capital expenditures $ 124,187   $ 126,763  
                             
FRANK'S INTERNATIONAL N.V.
NON-GAAP FINANCIAL MEASURES
($ in thousands)
(Unaudited)
 
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION
 
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
2014 2014 2013 2014 2013
 
Revenues $ 296,183   $ 272,937   $ 270,102   $ 833,612   $ 795,650  
 
 
Income from continuing operations $ 67,440 $ 50,049 $ 59,467 $ 177,851 $ 231,747
Interest (income) expense, net 13 (80 ) (170 ) (23 ) 493
Depreciation and amortization 23,254 21,895 19,887 66,342 56,593
Income tax expense 19,777 15,852 20,185 51,598 32,569
Loss on sale of assets 280 154 124 193 68
Foreign currency (gain) loss 526 (65 ) (3,161 ) 526 2,114
Stock-based compensation 9,214 15,347 2,520 29,450 2,520
IPO transaction-related costs   -     -     2,420     -     2,420  
Adjusted EBITDA $ 120,504   $ 103,152   $ 101,272   $ 325,937   $ 328,524  
 
Adjusted EBITDA margin 40.7 % 37.8 % 37.5 % 39.1 % 41.3 %
 
SEGMENT ADJUSTED EBITDA RECONCILIATION
 
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
2014 2014 2013 2014 2013
Segment Adjusted EBITDA:
International Services $ 65,359 $ 48,873 $ 48,752 $ 165,260 $ 153,134
U.S. Services 45,796 44,968 47,215 132,643 149,494
Tubular Sales 9,343 9,311 5,338 28,028 25,893
Corporate and other   6     -     (33 )   6     3  
Adjusted EBITDA Total 120,504 103,152 101,272 325,937 328,524
Interest income (expense), net (13 ) 80 170 23 (493 )
Income tax expense (19,777 ) (15,852 ) (20,185 ) (51,598 ) (32,569 )
Depreciation and amortization (23,254 ) (21,895 ) (19,887 ) (66,342 ) (56,593 )
Loss on sale of assets (280 ) (154 ) (124 ) (193 ) (68 )
Foreign currency gain (loss) (526 ) 65 3,161 (526 ) (2,114 )
Stock-based compensation (9,214 ) (15,347 ) (2,520 ) (29,450 ) (2,520 )
IPO transaction-related costs   -     -     (2,420 )   -     (2,420 )
Income from continuing operations $ 67,440   $ 50,049   $ 59,467   $ 177,851   $ 231,747  
                   
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,
2014 2014 2013 2014 2013
Numerator - Basic
Income from continuing operations $ 67,440 $ 50,049 $ 59,467 $ 177,851 $ 231,747
Less: Net income attributable to
noncontrolling interest (20,094 ) (14,833 ) (18,653 ) (53,426 ) (74,005 )
Discontinued operations attributable
to noncontrolling interest - - - - 10,935
Less: Preferred stock dividends   -     (1 )   -     (1 )   -  
Income from continuing operations
attributable to common shareholders 47,346 35,215 40,814 124,424 168,677
Income from discontinued operations
attributable to FINV   -     -     -     -     31,700  
Net income attributable to
common shareholders $ 47,346   $ 35,215   $ 40,814   $ 124,424   $ 200,377  
 
Numerator - Diluted
Income from continuing operations
applicable to common shareholders $ 47,346 $ 35,215 $ 40,814 $ 124,424 $ 168,677
Add: Exchange of noncontrolling interest
for common stock (1) 16,335 11,776 13,893 42,671 58,310
Add: Preferred stock dividends   -     1     -     1     -  
Diluted income from continuing operations
applicable to common shareholders 63,681 46,992 54,707 167,096 226,987
Income from discontinued operations,
net of tax   -     -     -     -     42,635  
Dilutive net income available
to common shareholders $ 63,681   $ 46,992   $ 54,707   $ 167,096   $ 269,622  
 
Denominator
Basic weighted average common shares 153,923 153,524 137,024 153,659 125,090
Exchange of noncontrolling interest
for common stock 52,976 52,976 52,976 52,976 52,976
Restricted stock units   1,035     1,322     435     1,116     145  
Diluted weighted average common shares   207,934     207,822     190,435     207,751     178,211  
 
Basic earnings per common share:
Continuing operations $ 0.31 $ 0.23 $ 0.30 $ 0.81 $ 1.35
Discontinued operations   -     -     -     -     0.25  
Total $ 0.31   $ 0.23   $ 0.30   $ 0.81   $ 1.60  
 
Diluted earnings per common share:
Continuing operations $ 0.31 $ 0.23 $ 0.29 $ 0.80 $ 1.27
Discontinued operations   -     -     -     -     0.24  
Total $ 0.31   $ 0.23   $ 0.29   $ 0.80   $ 1.51  
__________________
(1) Adjusted for the additional tax expense
upon the assume conversion of the
Preferred Stock $ 3,759 $ 3,057 $ 4,760 $ 10,755 $ 4,760

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