Forum Energy Technologies(FET) - 2019 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Presents unaudited condensed financial statements for Q2 and H1 2019, detailing net losses and the adoption of ASU 842 Condensed consolidated statements of comprehensive income (loss) Details comprehensive income, showing a net loss of $13.7 million for Q2 2019 and $21.6 million for H1 2019 Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $245,648 | $274,003 | $517,490 | $524,234 | | Gross Profit | $63,188 | $72,669 | $133,286 | $139,956 | | Operating Income (Loss) | $736 | $(11,702) | $5,033 | $(18,408) | | Net Income (Loss) | $(13,734) | $(15,349) | $(21,622) | $12,717 | | Diluted EPS | $(0.12) | $(0.14) | $(0.20) | $0.11 | Condensed consolidated balance sheets Reports total assets of $1.822 billion and total equity of $1.020 billion as of June 30, 2019 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $727,882 | $766,017 | | Total Assets | $1,821,711 | $1,829,652 | | Total Current Liabilities | $224,296 | $236,930 | | Total Liabilities | $801,500 | $799,526 | | Total Equity | $1,020,211 | $1,030,126 | Condensed consolidated statements of cash flows Highlights $40.8 million net cash from operations for H1 2019, a significant improvement from prior year Condensed Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $40,784 | $(25,737) | | Net cash used in investing activities | $(8,846) | $(5,331) | | Net cash used in financing activities | $(42,120) | $(43,890) | | Net decrease in cash | $(9,876) | $(76,111) | Condensed consolidated statements of changes in stockholders' equity Total equity decreased by approximately $10 million to $1.020 billion by June 30, 2019, due to net loss - Total equity declined by approximately $10 million during the first six months of 2019, from $1,030.1 million to $1,020.2 million[18] Notes to condensed consolidated financial statements Provides detailed explanations including segment changes, ASU 842 adoption, debt structure, and acquisition benefits - In Q1 2019, the company recognized a $4.6 million benefit from reducing the estimated fair value of the contingent cash liability associated with the 2018 acquisition of Houston Global Heat Transfer LLC (GHT)[35][147] - Total debt as of June 30, 2019, was $479.2 million, primarily consisting of $400.0 million in 6.25% Senior Notes due 2021 and $79.0 million outstanding under the senior secured revolving credit facility[46] - In Q2 2018, the company recognized $14.5 million of impairment losses on certain intangible assets (primarily customer relationships) related to the decision to exit specific products within the Subsea and Downhole product lines[45][130][146] - In the first quarter of 2019, the company changed its reporting segments to Drilling & Downhole, Completions, and Production to better align with business activity drivers and the well cycle[25][67] - The company adopted the new lease accounting standard ASU 842 on January 1, 2019, resulting in the recognition of approximately $54 million in net operating lease assets and $65 million in operating lease liabilities[29] Management's discussion and analysis of financial condition and results of operations Discusses financial condition, market impact, and improved operating cash flow of $40.8 million in H1 2019 - Management attributes lower 2019 drilling and completions activity to the significant oil price decline in late 2018, which negatively impacted customer capital expenditure budgets[114] Results of Operations Comparison (in thousands) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $245,648 | $274,003 | $517,490 | $524,234 | | % Change YoY | (10.3)% | - | (1.3)% | - | | Operating Income (Loss) | $736 | $(11,702) | $5,033 | $(18,408) | | Net Loss / (Income) | $(13,734) | $(15,349) | $(21,622) | $12,717 | - Net cash from operations improved to $40.8 million in H1 2019 from a use of $25.7 million in H1 2018, driven by working capital improvements which provided $13.7 million in cash versus a $55.2 million use of cash in the prior year period[155] Quantitative and qualitative disclosures about market risk Identifies primary market risks as foreign currency and interest rate changes, with no significant profile changes - The company is exposed to market risk from changes in foreign currency exchange rates and interest rates[164] - No significant changes to market risk exposure were reported since year-end 2018[165] Controls and procedures Management concluded disclosure controls were effective as of June 30, 2019, with no material changes - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2019[167] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2019[168] PART II - OTHER INFORMATION Legal proceedings Involved in various legal actions, with management expecting no material adverse financial effect - Information is incorporated by reference from Note 12, which states that pending legal actions are not expected to have a material adverse effect on the company's financial position or results[73][170] Risk factors Refers readers to the 2018 Annual Report on Form 10-K for comprehensive risk factor information - The report refers to the Risk Factors section in the 2018 Annual Report on Form 10-K for detailed risk information[170] Unregistered sales of equity securities and use of proceeds No common stock repurchases in Q2 2019, with $49.8 million remaining authorized for repurchase - No shares of common stock were repurchased during the three months ended June 30, 2019[172] - As of June 30, 2019, $49.8 million remains available for repurchase under the company's stock repurchase program[173] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported[174] Mine Safety Disclosures This item is noted as not applicable to the company - Not applicable[176] Other Information Corrected the stockholder proposal deadline for the 2020 annual meeting to January 15 - February 14, 2020 - A correction was made to the stockholder proposal deadline for the 2020 annual meeting, now set for no earlier than January 15, 2020, and no later than February 14, 2020[177] Exhibits Lists filed exhibits, including CEO/CFO certifications and Inline XBRL data files - Lists filed exhibits, including CEO/CFO certifications (Sections 302 and 906) and Inline XBRL data files[179] Signatures Report signed on July 31, 2019, by Senior VP, CFO, Treasurer, and Chief Accounting Officer - The report was signed on July 31, 2019, by Pablo G. Mercado, Senior Vice President, Chief Financial Officer and Treasurer, and Tylar K. Schmitt, Vice President and Chief Accounting Officer[184]