- First quarter revenue of $153 million and adjusted EBITDA of $32 million
- First quarter free cash flow of $38 million, ending cash and investments of $609 million
- Revised estimated annualized savings from cost reducing initiatives of more than $75 million up from $60 million annualized
- Announces Board of Directors approval of $150 million share repurchase program
HOUSTON, April 27, 2016 (GLOBE NEWSWIRE) -- Frank’s International N.V. (NYSE:FI) (the “Company” or “Frank’s”) today reported revenues of $153 million, and a net loss from continuing operations of $1 million for the three months ended March 31, 2016. Adjusted EBITDA for the quarter was $32 million or 21% of revenue.
“In the face of strong headwinds and market deterioration not seen in our industry in decades, Frank’s was able to deliver positive free cash flow and maintain market share in our tubular running services segments during the first quarter of 2016,” said Gary Luquette, the Company’s President and Chief Executive Officer.
“While we do not anticipate significant improvement to activity or pricing of our services in the near term, we do plan to take advantage of our strong balance sheet to maintain our dividend, compete for market share and position Frank’s organizationally and operationally for scalable and sustainable growth when drilling and completion activity growth resumes.”
First Quarter 2016 Results
- Revenue was $153 million, down 45% compared to the first quarter of 2015, and down 24% compared to the fourth quarter of 2015
- International Services revenue was $83 million, down 33% compared to the first quarter of 2015, and down 10% sequentially
- U.S. Services revenue was $49 million, down 55% compared to the first quarter of 2015, and down 24% sequentially
- Tubular Sales revenue was $22 million, down 51% compared to the first quarter of 2015, and down 53% sequentially
- Net loss from continuing operations was $2 million and net loss attributable to common shareholders was $1 million, or $0.00 per share.
- Adjusted EBITDA totaled $32 million with an adjusted EBITDA margin of 21%
- Free cash flow of $38 million, or 25% of revenue
Adjusted EBITDA, adjusted EBITDA margin, segment adjusted EBITDA and free cash flow, 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. Please see “Use of Non-GAAP Financial Measures” and the reconciliations to the nearest comparable GAAP measures.
Segment Results
International Services
International Services revenue from external sales was $83.1 million in the first quarter of 2016, down 33.1% compared to the first quarter of 2015, and down 9.9% compared to the fourth quarter of 2015. Year-over-year results were negatively impacted by the dramatic decrease in drilling and completion activity across our international operating areas due to the depressed commodity price environment. Sequential results were impacted by delays in the commencement of certain projects in the Middle East and suspensions and cancellations across the Latin America region.
Segment adjusted EBITDA for the first quarter of 2016 of $31.4 million, or 37.8% of revenue, was down 40.0% compared to the first quarter of 2015, and down 12.2% compared to the fourth quarter of 2015. Adjusted EBITDA was impacted by year-over-year revenue decreases due to lower activity, primarily in the West Africa region, and sequential revenue declines for the reasons referenced above, partially offset by cost reductions.
U.S. Services
U.S. Services revenue from external sales was $48.8 million in the first quarter of 2016, down 55.4% compared to the first quarter of 2015, and down 24.2% compared to the fourth quarter of 2015.
For the first quarter, onshore revenue within the U.S. Services segment of $10.7 million was down 69.4% compared to the first quarter of 2015, and down 41.2% compared to the fourth quarter of 2015. Sequential revenue declines were comparable to the 42.7% decline in the U.S. onshore drilled well count for the same period, partially offset by cost savings related to a reduced workforce and further consolidation of U.S. onshore base locations.
Offshore revenue within the U.S. Services segment of $38.1 million for the first quarter was down 48.8% compared to the first quarter of 2015, and down 17.5% compared to the fourth quarter of 2015. Revenue decreased year-over-year and sequentially due to decreased activity from project cancellations and further price concessions to customers.
Segment adjusted EBITDA for the first quarter of $0.7 million, or 1.5% of revenue, was down 98.4% compared to the first quarter of 2015, and down 94.9% compared to the fourth quarter of 2015. Adjusted EBITDA and adjusted EBITDA margin were lower due to a $3.3 million adjusted EBITDA loss from the onshore business and higher corporate expense related to third party professional and consulting fees.
Tubular Sales
Tubular Sales revenue was $21.6 million in the first quarter of 2016, down 50.8% compared to the first quarter of 2015, and down 53.4% compared to the fourth quarter of 2015. Revenue experienced declines from lower volumes due to weak international sales and decreased deepwater fabrication revenue.
Segment adjusted EBITDA for the first quarter was a loss of $0.4 million. Adjusted EBITDA and adjusted EBTIDA margin were negatively impacted by overhead costs associated with the Company’s manufacturing division included in the Tubular Sales results.
Capital Expenditures and Balance Sheet
Capital expenditures were $8.3 million for the first quarter of 2016. The Company’s consolidated cash balance at March 31, 2016 was $608.8 million compared to $602.4 million at December 31, 2015. As of March 31, 2016, there was $95 million of unused capacity under the Company’s $100.0 million credit facility, net of outstanding letters of credit.
Dividends and Share Repurchase Program
The Company expects that its Board of Managing Directors (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”) will, at the next scheduled meeting of the Supervisory Board on May 20, 2016, declare a cash dividend of $0.15 per share (subject to applicable Dutch dividend withholding tax) to all common stockholders of record as of June 3, 2016, and with a payment date on June 17, 2016, as part of its regular quarterly cash dividend program. As customary, any declaration and payment of dividends are subject to the determination by the Boards and no assurances can be given that any such dividend will be declared as expected.
Additionally, the Board of Directors approved a new program to repurchase up to $150 million of shares of the Company’s common stock from time to time. Repurchases under the Company’s new program will be made at prevailing prices on the open market or in privately negotiated transactions as permitted by securities laws, subject to market conditions, applicable legal requirements, and other relevant factors. The timing and amount of any shares repurchased will be determined by the Company’s management. This share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or discontinued at any time at the Company’s discretion.
Conference Call
The Company will host a conference call to discuss first quarter results on Wednesday, April 27, 2016 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 42225367. To listen via live webcast, 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 42225367. 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 will 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, 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, 2015 that has been filed with the SEC and in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 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, and we caution you not to rely on them unduly.
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 approximately 3,600 employees and provides services in over 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 press 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 press 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, unrealized and realized gains (losses) and 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 OPERATIONS | |||||||||||||
| (In thousands, except per share data) | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended | |||||||||||||
| March 31, | December 31, | March 31, | |||||||||||
| 2016 | 2015 | 2015 | |||||||||||
| Revenues: | |||||||||||||
| Equipment rentals and services | $ | 131,257 | $ | 156,012 | $ | 232,405 | |||||||
| Products | 22,229 | 46,964 | 45,032 | ||||||||||
| Total revenue | 153,486 | 202,976 | 277,437 | ||||||||||
| Operating expenses: | |||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | |||||||||||||
| Equipment rentals and services | 55,801 | 61,792 | 93,600 | ||||||||||
| Products | 12,329 | 23,837 | 22,847 | ||||||||||
| General and administrative expenses | 58,952 | 60,155 | 69,797 | ||||||||||
| Depreciation and amortization | 29,450 | 28,219 | 24,001 | ||||||||||
| Severance and other charges | 606 | 21,276 | 11,973 | ||||||||||
| (Gain) loss on sale of assets | (770 | ) | (517 | ) | 184 | ||||||||
| Operating income (loss) | (2,882 | ) | 8,214 | 55,035 | |||||||||
| Other income (expense): | |||||||||||||
| Other income (expense) | (497 | ) | 2,815 | 1,087 | |||||||||
| Interest income (expense), net | 206 | 191 | 8 | ||||||||||
| Foreign currency gain (loss) | (41 | ) | 205 | 1,533 | |||||||||
| Total other income (expense) | (332 | ) | 3,211 | 2,628 | |||||||||
| Income (loss) before income tax expense (benefit) | (3,214 | ) | 11,425 | 57,663 | |||||||||
| Income tax expense (benefit) | (806 | ) | 4,657 | 11,262 | |||||||||
| Net income (loss) | (2,408 | ) | 6,768 | 46,401 | |||||||||
| Net income (loss) attributable to noncontrolling interest | (1,636 | ) | (668 | ) | 12,122 | ||||||||
| Net income (loss) attributable to Frank's International N.V. | $ | (772 | ) | $ | 7,436 | $ | 34,279 | ||||||
| Earnings per common share: | |||||||||||||
| Basic | $ | - | $ | 0.05 | $ | 0.22 | |||||||
| Diluted | $ | - | $ | 0.04 | $ | 0.21 | |||||||
| Weighted average common shares outstanding: | |||||||||||||
| Basic | 155,244 | 155,137 | 154,329 | ||||||||||
| Diluted | 155,244 | 209,468 | 208,479 | ||||||||||
| FRANK'S INTERNATIONAL N.V. | ||||||||||||
| SELECTED OPERATING SEGMENT DATA | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2016 | 2015 | 2015 | ||||||||||
| Revenue | ||||||||||||
| International Services | $ | 83,063 | $ | 92,189 | $ | 124,201 | ||||||
| U.S. Services | 48,779 | 64,317 | 109,286 | |||||||||
| Tubular Sales | 21,644 | 46,470 | 43,950 | |||||||||
| Total Revenue | $ | 153,486 | $ | 202,976 | $ | 277,437 | ||||||
| Segment Adjusted EBITDA: | ||||||||||||
| International Services | $ | 31,379 | $ | 35,723 | $ | 52,285 | ||||||
| U.S. Services | 715 | 14,104 | 44,893 | |||||||||
| Tubular Sales | (446 | ) | 13,917 | 3,119 | ||||||||
| Total | 31,648 | 63,744 | 100,297 | |||||||||
| Corporate and other | 21 | 59 | (7 | ) | ||||||||
| Total Adjusted EBITDA | $ | 31,669 | $ | 63,803 | $ | 100,290 | ||||||
| FRANK'S INTERNATIONAL N.V. | ||||||||||
| SELECTED BALANCE SHEET AND CASH FLOW DATA | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| March 31, | December 31, | |||||||||
| 2016 | 2015 | |||||||||
| Cash and cash equivalents | $ | 608,798 | $ | 602,359 | ||||||
| Working capital | 823,496 | 834,110 | ||||||||
| Property, plant and equipment, net | 605,884 | 624,959 | ||||||||
| Total assets | 1,677,834 | 1,726,838 | ||||||||
| Total debt | 4,636 | 7,321 | ||||||||
| Series A preferred stock | 705 | 705 | ||||||||
| Total stockholders' equity | 1,193,369 | 1,211,299 | ||||||||
| Noncontrolling interest | 234,202 | 240,127 | ||||||||
| Total equity | 1,427,571 | 1,451,426 | ||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2016 | 2015 | |||||||||
| Net cash provided by operating activities | $ | 46,163 | $ | 100,129 | ||||||
| Net cash used in investing activities | (7,823 | ) | (43,795 | ) | ||||||
| Net cash used in financing activities | (31,194 | ) | (44,187 | ) | ||||||
| 7,146 | 12,147 | |||||||||
| Effect of exchange rate changes on cash activities | (707 | ) | (3,059 | ) | ||||||
| Increase in cash and cash equivalents | $ | 6,439 | $ | 9,088 | ||||||
| Capital expenditures | $ | 8,268 | $ | 43,871 | ||||||
| FRANK'S INTERNATIONAL N.V. | ||||||||||||||
| NON-GAAP FINANCIAL MEASURES AND RECONCILIATION | ||||||||||||||
| ($ in thousands) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||
| 2016 | 2015 | 2015 | ||||||||||||
| Revenues | $ | 153,486 | $ | 202,976 | $ | 277,437 | ||||||||
| Income (loss) from continuing operations | $ | (2,408 | ) | $ | 6,768 | $ | 46,401 | |||||||
| Interest (income) expense, net | (206 | ) | (191 | ) | (8 | ) | ||||||||
| Income tax expense (benefit) | (806 | ) | 4,657 | 11,262 | ||||||||||
| Depreciation and amortization | 29,450 | 28,219 | 24,001 | |||||||||||
| (Gain) loss on sale of assets | (770 | ) | (517 | ) | 184 | |||||||||
| Foreign currency (gain) loss | 41 | (205 | ) | (1,533 | ) | |||||||||
| Stock-based compensation expense | 4,104 | 3,796 | 8,010 | |||||||||||
| Severance and other charges | 606 | 21,276 | 11,973 | |||||||||||
| Unrealized and realized (gains) losses | 1,658 | - | - | |||||||||||
| Adjusted EBITDA | $ | 31,669 | $ | 63,803 | $ | 100,290 | ||||||||
| Adjusted EBITDA margin | 20.6 | % | 31.4 | % | 36.1 | % | ||||||||
| SEGMENT ADJUSTED EBITDA RECONCILIATION | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||
| 2016 | 2015 | 2015 | ||||||||||||
| Segment Adjusted EBITDA: | ||||||||||||||
| International Services | $ | 31,379 | $ | 35,723 | $ | 52,285 | ||||||||
| U.S. Services | 715 | 14,104 | 44,893 | |||||||||||
| Tubular Sales | (446 | ) | 13,917 | 3,119 | ||||||||||
| Total | 31,648 | 63,744 | 100,297 | |||||||||||
| Corporate and other | 21 | 59 | (7 | ) | ||||||||||
| Adjusted EBITDA Total | 31,669 | 63,803 | 100,290 | |||||||||||
| Interest income (expense), net | 206 | 191 | 8 | |||||||||||
| Income tax (expense) benefit | 806 | (4,657 | ) | (11,262 | ) | |||||||||
| Depreciation and amortization | (29,450 | ) | (28,219 | ) | (24,001 | ) | ||||||||
| Gain (loss) on sale of assets | 770 | 517 | (184 | ) | ||||||||||
| Foreign currency gain (loss) | (41 | ) | 205 | 1,533 | ||||||||||
| Stock-based compensation expense | (4,104 | ) | (3,796 | ) | (8,010 | ) | ||||||||
| Severance and other charges | (606 | ) | (21,276 | ) | (11,973 | ) | ||||||||
| Unrealized and realized gains (losses) | (1,658 | ) | - | - | ||||||||||
| Income (loss) from continuing operations | $ | (2,408 | ) | $ | 6,768 | $ | 46,401 | |||||||
| FREE CASH FLOW RECONCILIATION | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||
| 2016 | 2015 | 2015 | ||||||||||||
| Net cash provided by operating activities | $ | 46,163 | $ | 132,371 | $ | 100,129 | ||||||||
| Less: capital expenditures | 8,268 | 11,427 | 43,871 | |||||||||||
| Free cash flow | $ | 37,895 | $ | 120,944 | $ | 56,258 | ||||||||
| FRANK'S INTERNATIONAL N.V. | ||||||||||||
| EARNINGS PER SHARE CALCULATIONS | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2016 | 2015 | 2015 | ||||||||||
| Numerator - Basic | ||||||||||||
| Income (loss) from continuing operations | $ | (2,408 | ) | $ | 6,768 | $ | 46,401 | |||||
| Less: Net (income) loss attributable to noncontrolling interest | 1,636 | 668 | (12,122 | ) | ||||||||
| Net income (loss) available to common shareholders | $ | (772 | ) | $ | 7,436 | $ | 34,279 | |||||
| Numerator - Diluted | ||||||||||||
| Income (loss) from continuing operations attributable to common shareholders | $ | (772 | ) | $ | 7,436 | $ | 34,279 | |||||
| Add: Net income attributable to noncontrolling interest (1), (2) | - | 1,271 | 9,938 | |||||||||
| Dilutive net income (loss) available to common shareholders | $ | (772 | ) | $ | 8,707 | $ | 44,217 | |||||
| Denominator | ||||||||||||
| Basic weighted average common shares | 155,244 | 155,137 | 154,329 | |||||||||
| Exchange of noncontrolling interest for common stock (2) | - | 52,976 | 52,976 | |||||||||
| Restricted stock units (2) | - | 1,351 | 1,173 | |||||||||
| Stock to be issued pursuant to employee stock purchase plan | - | 4 | 1 | |||||||||
| Diluted weighted average common shares | 155,244 | 209,468 | 208,479 | |||||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | - | $ | 0.05 | $ | 0.22 | ||||||
| Diluted | $ | - | $ | 0.04 | $ | 0.21 | ||||||
| __________________ | ||||||||||||
| (1) Adjusted for the additional tax expense (benefit) upon the assumed conversion of the Preferred Stock | $ | - | $ | (1,939 | ) | $ | 2,184 | |||||
| (2) Approximately 54.4 million shares of potentially convertible preferred stock to common stock and unvested restricted stock units have been excluded from the computation of diluted earnings per share as the effect would be anti-dilutive when the results from operations are at a net loss. | ||||||||||||