BAKER HUGHES NET INCOME $(936) MLN
BAKER HUGHES THIRD QUARTER RESULTS:
- Revenue of $3.8 billion for the quarter, down 5% sequentially and 39% year-over-year
- Adjusted operating profit margin increased 140 bps sequentially
- Free cash flow for the quarter of $348 million
- GAAP net loss per share of $0.36 for the quarter, includes $0.31 per share of restructuring charges and merger-related costs
"In the third quarter, we delivered increased operating profit sequentially, despite deteriorating market conditions and lower revenue," said Martin Craighead, Baker Hughes Chairman and Chief Executive Officer. "Internationally, despite a 4% decrease in revenue we expanded margins across all of our segments as a result of continued cost reductions. In North America, margins declined further driven by ongoing weakness in the U.S. onshore market, and unfavorable mix in the Gulf of Mexico. Although ourCanada business grew sequentially due to seasonal activity, the recovery was less pronounced than prior years. Compared to the third quarter of 2014, revenue in North America declined 57% on sharply lower activity and unfavorable pricing, while actions we have taken to right-size our operational structure resulted in decremental adjusted operating profit margins of 30%.
"As our customers focus increasingly on managing cash, we are experiencing a current shift in spend favoring production optimization projects over exploration and development. As such, we are seeing stronger interest in our production offerings, particularly upstream and refinery chemicals, that provide our customers with optimized production from existing wells and increased ultimate recovery. Consistent with our earlier forecast, we expect further activity reductions and pricing pressures to continue across the globe for well construction for the remainder of the year, as our customers adapt their spending to the lower oil price environment.
"In the fourth quarter, we expect activity in North America to decline as our customers adjust activity for lower commodity prices, exacerbated by an extended holiday impact. Internationally, seasonal year-end product sales are not expected to offset the anticipated decline in activity. We remain focused on proactively managing our cost structure, efficiently reducing our working capital, and strategically targeting revenue opportunities to continue to increase profitability, generate positive cash flow, and maintain a strong balance sheet.
"Regarding the pending merger, I continue to be pleased with the efforts of the teams working on regulatory matters and developing plans for a successful integration. The recently announced plan to divest certain businesses is another important step in the process to complete the transaction. These businesses represent industry leading products and services with extremely proud histories of innovation and value creation for our clients throughout the world.
"Finally, I would like to recognize all of our employees for their hard work, commitment to Baker Hughes, and continued focus on our customers, while working safely in an extremely difficult business environment."
2015 Third Quarter Results
Revenue for the quarter was $3.8 billion, down 39% compared to the third quarter of 2014. Compared to the prior quarter, revenue declined $182 million or 5%.
On a GAAP basis, net loss attributable to Baker Hughes for the third quarter was $159 million or $0.36 per diluted share.
Adjusted EBITDA (a non-GAAP measure) for the third quarter of 2015 was $522 million, an increase of $63 million or 14% sequentially, and a decrease of $666 million or 56% compared to the third quarter of 2014.
Adjusted net loss (a non-GAAP measure) for the third quarter of 2015 was $22 million or $0.05 per diluted share. Adjusted net loss for the third quarter excludes $191 million before-tax or $137 million after-tax ($0.31 per diluted share) in adjustments. The adjustments include restructuring charges of $98 million before-tax or $70 million after-tax ($0.16 per diluted share) and $93 million before-tax or $67 million after-tax ($0.15 per diluted share) for merger and other related costs.
Free cash flow (a non-GAAP measure) for the quarter was $348 million. Excluding restructuring payments of $56 million, free cash flow would have been $404 million for the quarter.
For the quarter, capital expenditures were $178 million, a decrease of $80 million or 31% sequentially, and down $247 million or 58% compared to the third quarter of 2014. Depreciation and amortization expense for the third quarter of 2015 was $432 million, relatively flat sequentially and down 5% compared to the prior year quarter.
Excluding merger-related costs, corporate costs were $26 million, compared to $42 million in the prior quarter and $57 million in the third quarter of 2014. The reduction in corporate costs is mainly a result of workforce reductions and lower discretionary spend.
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