Good morning, ladies and gentleman and welcome to the Forum Energy Technology's Earnings Release Conference Call for the third quarter 2013. My name is Alex and I will be your coordinator for today's call. At this time all participants are in a listen only mode and all lines have been placed on mute to prevent any background noise. We will be facilitating a question and answer session after the speakers' remarks. As a reminder this call is being recorded for replay purposes. After the speakers' remarks today, I will instruct you on the procedure for asking questions. I will now turn the call over to Mark Traylor, Vice President and Investor Relations and Planning. Please proceed, sir.

…quarterly earning conference call for the third quarter 2013, with us today to present formal remarks are Chris Gaut- Forum's Chairman and Chief Executive Officer as well as Jim Harris, Senior Vice President and Chief Financial Officer. Also with us today is Wendell Brooks our President of Production and Infrastructure division. We issued our earnings release last night and it is available on our website. The statements made during this conference call including the answers to your questions, include information that we believe to be forward looking statements in the meaning of the Private Securities Litigation Reform Act. Forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. These risks include amongst other things matters that we have described in our earnings release and in our filings with the Securities and Exchange Commission. We do not undertake any ongoing obligation other than that imposed by law to publicly update or revise any forward looking statements to reflect future events, information or circumstances that arise after this call. In addition this conference call contains time sensitive information that reflects management's best judgment only as of the date of the live call. Management statements may include non-GAAP financial measures, for reconciliation of these measures refer to our earnings news release available on our website. This call is being recorded. A replay of the call will be available on our website for 30 days following the call, I am now pleased to turn the call over to Chris Gaut, our CEO.

Thanks Mark and good morning. I will start with an overview of the quarter and offer a few thoughts on the outlook for our business and then I will turn it over to Jim who will provide more detail on our financial performance. In the third quarter 2013 we had record revenue of $390 million and improved sequential operating income and margins. Margin improvement was our primary objective this quarter and I'm pleased that our employees delivered on that objective. The third quarter results include $12 million in pretax charges associated with executive severance, facility consolidation and several other non-recurring and non-operating items. Excluding these items adjusted net income was $0.44 per diluted share and adjusted EBITDA was $79 million. EBITDA margins in the third quarter were 20%, and we achieved this goal ahead of our stated fourth quarter objective. We implemented a number of restructuring and cost reduction initiatives during the third quarter resulting in approximately $8 million of cost reductions from our annual G&A run rate, primarily in our drilling and subsea segment as well as additional direct cost savings. Total orders during the third quarter were $354 million consistent with orders in the second quarter. Bookings increased sequentially for drilling capital equipment to well construction and completion products. The third quarter book to bill ratio was 91% for the company as a whole, 94% for drilling at subsea and 85% for production and infrastructure. Our D&S segment achieved a significant improvement in operating margins compared to the first half of this year due to restructuring of the business during the third quarter and to an increase in revenues. Orders continued at a very strong pace for drilling capital equipment especially for international customers. We received capital equipment orders associated with new land rigs and continue to improve…

Thank you, Chris, and good morning. Consolidated revenues of $390 million for the third quarter are up approximately 6% sequentially and represent a record level for the company. Our Drilling and Subsea segment revenue increased 19% sequentially, while our Production and Infrastructure segment revenue was down 10% from its second quarter record. Net income for the third quarter was $33 million, up $3 million from the second quarter including pretax charges of $12 million for several non-recurring and non-operating items. Over 75% of these charges were noncash. As anticipated and adjusting our cost base to return EBITDA margins to above the 20% level, we incurred charges in the quarter of $6.5 million associated with facility consolidations and severance. In addition we wrote off $2.1 million of deferred loan costs attributable to our bank term loan which was paid off in October with proceeds from the $300 million senior unsecured bonds. Finally the results for the quarter also include non-operating charges of $2.4 million in foreign exchange losses, and $1.1 million in transaction expenses, 800,000 of which are reported as part of earnings from our equity investment in Global Tubing. Excluding these non-recurring and non-operating items adjusted net income increased $10 million or over 30%. These charges equate to $0.09 per fully diluted share after tax making our adjusted earnings per share for the quarter $0.44. On a comparable basis for both quarters, excluding these charges adjusted EBITDA margins improved 300 basis points sequentially to 20.3%. The margin improvement is attributable to the targeted reductions in our cost space and the higher revenues in several product lines. We expect to achieve comparable margins in the fourth quarter and into 2014. I will now review our segment results comparing the third quarter of 2013 sequentially with the second quarter of 2013. Our…

Thanks, Jim. I think Forum had a good third quarter. We had record revenue and improved our sequential financial performance, executed our key objective to improve margins and successfully completed our first bond offering. The integration and performance of our recent acquisitions are progressing as expected. We saw improvement in international bookings and continue to position the company for international and offshore growth. I am pleased with the progress Forum has made and want to recognize and thank our employees for their good work. We’ll now open up for questions. Alex?

(Operator Instructions). Our first question comes from the line of Brad Handler from Jefferies.

Maybe just a couple of questions keying of your comments, this may be starting with the experience in the quarter on the production on the valving side and the slowing that you’re seeing, you’re obviously not the only one saying this over the course of this week but I’m curious what - to what do you attribute some of the slowing? Is that a function of sort of digesting your customers, digesting decent purchases in the first half of the year or what do you - again to what do you can you attribute it and what’s your visibility on how that might progresses as we look towards 2014?

Yes, I think we're in a period here between some very high activity in intra-fields pipeline work on the one hand and before the purchasing really ramps up for the large petrochemical projects that are being planned.

I agree to that. I think our customers slow their purchases down in the third quarter. They have a little too much inventory right now but the inquiries continue to be at a very high level. So, we see this as more a pause than anything else right now.

How much of the purchasing behavior, this might help us and help me understand anyway, how much is a standardized kind of buy? So there is ability to buy in some sort of bulk and they know it will attributive to projects as they progress versus it being very project or pipeline specific.

Well, these are largely distributed valves and they’re going through the distribution system so I think they are - I think the implication here Brad is that there is a fair amount of inventory with the PBF companies, the pipe valve and fittings companies.

I was thinking perhaps of a more engineered custom product and that probably clears it up for me.

Our ball valve business is stronger but the -- a lot on the more distributed valves are experiencing -- there is plenty of inventory out there, right now.

I suppose I wouldn’t mind asking the same question on the production equipment side. Is there an element of the same? Have your customers prepped for various pad completion and therefore there is a -- they are sort of saturated for the moment or what’s the visibility there?

So yes, I think that there were two things there, I think that there is some elements of just more measured approach and not a great deal of urgency. But I think there are some specific things to the contracts that we have here and the rate at which we’re completing those and we do have some lower margin contracts currently working through our system this quarter and next quarter that is taking some time to get out, I think I have digested those during the fourth quarter, Wendell and then from that point we think that we’ll see some margins and we do see some volume improvement in the fourth quarter.

That's right. We -- frankly, we’ve had some execution problems as we moved into the larger heavier vessels for the multi-well pad applications and so we're working through those issues that will work through itself out in the fourth quarter. Activity remains very good, enquiries are good, so I think most of the problems are ones that we're just working through right now are not market related.

Production equipment's been a very strong product line for us. We think that it will be going forward but it didn't have -- among our businesses it was not one that had its best quarter this time. I think over in the D&S side, on the drilling and subsea businesses some very good performance and the benefit of the cost savings and the efficiency drive is really evident.

I appreciate that, I don't want to steal all too much here or too much time. But could I ask maybe an unrelated follow up related to kind of how the management team may be forming, so congratulations on hiring Bill to that spot. Do you envision perhaps there is sort of a drilling SVP and does maybe that division somehow get split in how it's managed going forward?

No, we are recruiting currently for a drilling SVP, and we're going to make sure we have the right person there. We're very pleased with the hire of Bill Boyle, a very experienced executive and I think an example of the caliber of person that we’re looking for. In the interim I think the drilling group is performing much better under the direction of the interim heads that we have and I am very pleased with the performance of that group, it's coming a long way.

Our next question comes from the line of David Anderson, JPMorgan.

So this quarter there has been a lot of talk about supply chain management, manufacturing capacity and what not. Last year you guys undertook some cost rationalization on your flow [line] [ph] equipment. So just wondering as you look around and clearly it's obviously it's been a big deal in terms of execution issues for a lot of people. As you survey your businesses or how do you feel in terms of your capacity levels. Do you feel like you are stretched in any of the place? I am particularly thinking about the offshore component maybe in terms of the Davis-Lynch business or perhaps in the ROV side? Are there any issues to worry about in terms of supply chain or capacity?

David that's a big question, and we work hard to anticipate where the constraints might be and addressing those. And that resource planning is a key function of senior management. So within our drilling, handling equipment we have a large new facility coming online at the end of the fourth quarter. We are moving around our manufacturing capacity for our ROVs, to be more efficient in that regard. And I think it will give us some cost margin improvements as well. We recently expanded our -- also within the subsea business; we're currently expanding our capacity to build launch and recovery systems at Dynacon, an acquisition we made a little less than a year ago and have seen exceptional demand growth. We during the third quarter brought on additional capacity for development of our production equipment business and I think that part of that business is performing well. So David I think the -- and then touching on the Downhole tool business, I was just down there recently and very impressed with the layout improvements, the additional equipment that we have brought in and how well the distribution center is going as we started that up. So I think that it will serve us well for the additional capacity that we're anticipating for our Downhole business.

So I mean obviously you are a little bit more shorter cycle than some of the others who have had these struggles. So basically I think what the message is you feel pretty good right now where you stand, you think that if business picks up or flattens out over the next couple of quarters you don't foresee any kind of execution issue or supply chain things over the next several quarters?

That's right David. And I think a strength of Forum is that in our business we can respond because our build cycles aren't as long. We can respond more quickly.

On the Davis-Lynch side I believe you signed a master frame agreement with a couple of the large cap service companies. Can you talk about that a little bit, can you just kind of give us a context of what you think it could mean to this business? Just I mean I don't expect you to tell me what the revenues and operating margins are. Maybe just give us a handle in terms of kind of the volume flow through could go to. I mean how do we think about this and its contribution over the next couple of years?

Yes and I've alluded to this briefly in the earlier remarks, but we have received the first large orders, millions of dollars of orders from the major service companies. We’ll begin delivering and recognizing revenue on those just late this year. They have more of an impact in 2014 and the beginning of 2014. But that is clearly something we’re looking to build upon. Very pleased to have these first significant groups of contracts both internationally and domestically but I feel that that will be an excellent growth driver for us in 2014.

Thank you. Our next question comes from the line of Jonathan Sisto from Credit Suisse.

Good morning gentlemen. Jim I think you mentioned in your remarks that you are expecting comparable margins in Q4 in 2014. Should we be interpreting that in that you guys are maxed out for the next five quarters?

I didn’t mean to put a lid on operating margins and EBITDA margins Jonathan that was more a comment that we feel like what we’ve achieved, we’ll be able to recur with that but we do have other margin opportunities with this new plan that Chris described. So my only point with that comment is that we expect to continue to see margins at least at this level.

Very good, and understanding that the top line within drilling and subsea can be fairly episodic ROVs, big drilling capital equipment orders, how do we see that trending given the shift is more international than domestic as we look into ’14?

Yes, I think we will have international component growing. The subsea business a driver there, the capital equipment but we’re also looking to sell more of our consumable products on the international side through The Blohm and Voss acquisition. And even for some of our capital equipment on the drilling side, Jon, keep in mind that our orders there, our pieces of capital equipments are typically 500,000 to $1 million per unit not multi millions of dollars. The lumpiest part we have is the ROVs, which would be 3 million, 4 million, 5 million for a work class vehicle or 10 million for a trencher. But the drilling capital equipment is not -- does not come for us in very large lumps per unit.

Thank you. Our next question comes from the line of Robin Shoemaker.

Thank you. Chris, I want to ask you about how you assess customer inventories of consumable products at this juncture? I noticed that you did see a 5% increase in flow equipment sales in the quarter. But the expectation would be and perhaps it takes just a higher rig count for this to occur, but that once customer inventories were depleted and you see a little bit better activity levels that you would see some continued, very strong sales in consumable products. So how do you assess your customer inventory situation now?

Yes, I think the customer inventories pretty much across the Board have now normalized. And we’re getting back to a situation where our consumable product sales are aligned with activity levels. I think that’s true in our drilling business. I think it’s true in our flow equipments business, I think it’s true in our -- a lot of our well construction and downhaul business although we do have these opportunities now with newer customers to us with the big service companies on top of that.

Okay, so you would kind of anticipate the next few quarters to see some -- if inventories normalize you would see some modest growth in sales of consumable products from off of a very low level of course?

Right, so we’re seeing that in flow equipment and as additional units would go back to work whether the pumping units or drilling rigs, those would have to be restocked and that would be a benefit. But I think we now see that there is not that oversupply we’ve worked through that with the customers and our revenue levels will reflect changes in activity from here.

Okay. If I may just ask also about the global tubing acquisition, we hear from the various service companies of very-very competitive market conditions and pricing for coil tubing services, and they are probably in the same mode as pressure public companies in terms of wanting to conserve capital and perhaps take idle equipment or coiled tubing strings off vital equipment but in any case, how is the sales of this acquisition that you made split between international, domestic markets and do they manufacture these both small and large diameter coiled tubing strings, it seems that the small diameter is one that’s really, has an excessive capacity.

Yes, Global Tubing can supply a full range of coiled tubing strings; it has a very modern facility. The current breakdown is about for Global Tubing about 80% domestic, 20% international. They have recently expanded their presence in the Canadian market, so I think that will be a growth opportunity for Global in the -- in 2014. We're seeing more opportunities for international sales into Europe and Asia and I think that will be a growth opportunity for them as well as further penetration with the more internationally oriented service companies. But yes, they -- and I think that Global has a good reputation for service and for technology and that's how they compete.

Thank you, our next question comes from the line of Brandon Dobell from William Blair.

Wondering if you could focus on I guess margin trajectory within drilling in subsea but also within production and infrastructure. I guess, from your perspective what's going to be the bigger lever to get margins to progress from here? Is it just revenue scale or kind of more process inventory, kind of throughput efficiencies that you can drag out of those businesses?

I think we've made very good progress on the drilling and subsea side this quarter on cost structure. So I think we've seen not all but certainly most of the benefit from a cost structure standpoint in DNS. We’ll see further improvement in margins I think driven more on the -- and I think more of the driver results for DNS going forward will be revenue growth right. On my side as I mention my prepared remarks, we now are focused on margins there, we need to get the margins backup in P&I, we're focused on that and then in 2014 looking for some revenue growth on that cost structure.

And then I think Chris, your comment about planning for I think stable land rig counts here in North America the next couple three quarters. It sounds like within that there's an assumption just kind of based on the momentum you have in flow equipment, that the consumable side of it will continue to act better or should we expect that the assumptions you've got in the next couple of quarters for your revenues don't expect an awful lot momentum in flow equipment.

I think we're seeing modest improvement in volumes in the flow equipment business, we work through the oversupply there and we're going to see gradual improvement. I think it's going to be aligned with the number of frack stages that are done. Certainly more as -- at the point where utilization of frack equipment goes up and units need to be resupplied that would be an increment for us. But we're going to be talking about activity and as we all know, the level of stages being fracked is pretty good, so we feel good about that business.

Okay and then final one from me, within P&I your comments about valves here, the pause that you guys expect in contracts awards, you think that's just through a yearend thing or do you think we've got a couple of three quarters where people just kind of sit on their hands a little bit before activity picks up on some of those larger petrochem facility opportunities?

Yes, I don't think we expect a pickup in the first quarter 2014, but later in 2014 we do expect to see some -- and increases in that business and some awards of some of the bigger contracts.

Thank you. Our next question comes from the line of Jeff Tillery from Tudor, Pickering, Holt.

In the drilling and subsea business you obviously saw a very quick impact of the cost initiatives you've taken, as you look at what you're contemplating on the P&I side, how does that compare I guess in both magnitude of the cost opportunity as well as the timing of implementation?

Right, so, I think on the valve business, as we said we do expect that to come back next year so we're -- but I think there's limited cost restructuring that we’re going to be doing there, some but not a great deal. On the PE side, I think we do have opportunity to get margins up there, but as mentioned, we do have a mix, a fact that is bit of hampering us this quarter and next quarter, there work through that and do better in ’14.

So just a relative opportunity in that segment, it’s smaller I guess, fewer acquisitions there, is that the right takeaway?

As volumes get up, I think we can -- my personal view Jeff is that we can get the margins few hundred basis points in P&I overtime, right.

It’s still significant, so.

Yes.

In next quarter or two within that business, if I guess if I look at the order intake for P&I the last three quarters it’s averaging about $130 million a quarter, is that where we see the revenues migrate towards kind of over the next six months or so?

I am sorry Jeff could you repeat the question?

Sure, over the last three quarter, the P&I order in balance have averaged about 130 million a quarter, is that roughly the revenue outlook we need to be thinking about for each of the next two quarters there?

No, I don’t think so necessarily. We do have within P&I some customers -- some large customers where we have their master agreements. They don’t give us big orders in advance but give us a continual stream of orders. So although that can be a significant part of our revenue we don't -- it doesn’t help our backlog and booking so much, if that make senses, right.

And Jeff I’d add to that, we do carry some backlog in the production equipment and valves area. The loss will be supportive of revenue as we expect these orders to pick up going forward. So revenue will be at a higher level than you’re expecting.

Then last question I had just within the Drilling and Subsea businesses, the business seems more skewed international today, obviously even excluding Blohm and Voss, the order intake over the last three or four quarters has been skewed a little bit more intentional than in the past. That's had more of a longer lead time impact in terms of impacting your revenue. Are you at the point where those issues are getting [anniversaried] and so we see more normal revenue progression as we watch orders?

Yes, so we have been working through that the past couple of quarters, yes. So, we've had the pain there, yes.

Thank you. Our next question comes from the line of Blake Hutchinson from Howard Weil.

Just a couple questions around kind of near term guidance. On the last call, you talked a bit about the longer lead international revenue stream from drilling and its possible impact on 3Q and 4Q. Did we actually see a good bit more of that in 3Q than you expected or is there still more to come which gives us kind of a height and confidence in the drilling sub-segment for 4Q?

Sure, Blake, we have seen for three quarters in a row now a good uptick in orders and they have remained at that elevated level through the third quarter. So there is a bit of bodyweight effect with these international orders that shipments should in the fourth quarter start to catch up with the level of orders we’ve seen, for the last several quarters, so yes, we should see a good increase.

So, true to form you didn’t really see a big impact from that in 3Q?

It was small. I think we talked about an 8% increase sequentially, so there was a small increase. In the third quarter we’ll see more as we deliver in the fourth quarter.

Okay and then Chris, regarding this Subsea segment, you would call out and just as you often do the lumpiness of business and pointed towards 1Q as a potential delivery point first for a bulk of some recent orders. Does that suggest the comparison maybe tough here in 4Q for that sub-segment?

Not necessarily, that is the one toughest to pin down, I would say. But now I think we’ve got some good work in-house that’s we will be working to deliver. And we have some discussions with customers ongoing. If those come through here quickly, we’d receive some recognition in the fourth quarter. I would say on our Subsea business, we are aware of the very large number of subsea equipment awards during 2013. Our timing for what we built tends to be 12 to 18 months behind that. So we do see all of the Subsea Equipment awards in 2013 being a positive driver for our business next year.

Great, that’s helpful, and then Jim I am sorry if I missed this. Is there a new cash rate assumption to be made post this host of acquisitions?

Yes, we’re holding, Blake, it’s a 31.5% expected for the fourth quarter. And we will give guidance on the 2014 rate after we’ve gone through the planning process.

The last question comes from the line of Mike Urban from Deutsche Bank.

I don't want to belabor the point on the questions on -- they are kind of flat or flattish margin guidance out there. But it just does seem like just about everything you’re pointing to would suggest improvement here over the next few quarters whether that’s higher volume, some -- the full effect of some of the restructuring and efficiency initiatives especially on the P&I side, and just integration of the acquisition which you guys have always done a good job. So I am just trying to understand actually what would cause that flat margin outlook and understanding, the need to be conservative, and I appreciate that. But I mean, is that a timing issue? Just do you need time to implement some of these things or some mix, some pricing? Just trying to understand actually what would cause you to be flat because everything else kind of points up.

Well let me reiterate on the DNF side, I think we've seen the biggest increase in margins there, the cost restructuring has been done. From here it’s more a revenue growth story there. On the P&I side, that is going to take some time. We will be working on that in the fourth quarter but we do have some contracts to work through and I don’t think you’re going to get a great bit of help on the Valve side in Q4 yet. So it will take some time on the P&I side, right. We are going to get those margins up on the P&I side.

Look like, so more timing than anything.

We appreciate your interest. I know it’s a busy time for all of our listeners. But please, when you get a chance of any follow-up questions for us, give us a call and we look forward to seeing you all same. Thanks.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.