On January 21, Baker Hughes (BHI) reported 4Q13 earnings. Highlights include the following:
Baker Hughes posted 4Q13 adjusted net income of $0.62 per share, compared to consensus estimates of $0.61 (excluding after-tax severance charges of $0.06 per diluted share, including after-tax losses of $0.18 in Iraq related to disruptions in operations and other non-recurring items). Adjusted EPS decreased 23% sequentially from 3Q13 EPS of $0.81, and increased 29% year-over-year from 4Q12 EPS of $0.49. Adjusted net income for 2013 was $1.17 billion, compared to $1.35 billion in 2012 ($2.62 per diluted share in 2013 vs. $3.07 per diluted share in 2012). Note that BHI had already guided to 4Q13 EPS of $0.60-0.62 in an announcement on January 10. The company had previously announced that 4Q13 suffered from disruptions to operations in Iraq. In its earnings pre-announcement, the company noted that Iraq operations resumed by the end of December and that expenses related to the disruption totaled ~$80 million, or ~$0.18 per share.
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Adjusted EBITDA in 4Q13 totaled $955 million, compared to consensus estimates of $934. Adjusted EBITDA during the quarter was down sequentially from 3Q13 of $1.02 billion, and up year-over-year from 4Q12 adjusted EBITDA of $857 million. For full year 2013 adjusted EBITDA was $3.73 billion, down year-over-year from adjusted EBITDA of $3.82 billion.
Revenue during 4Q13 totaled $5.86 billion, compared to consensus estimates of $5.68 billion. Revenue during the quarter increased 1% sequentially over 3Q13 revenue of $5.79 billion, and 10% year-over-year from 4Q12 revenue of $5.33 billion. Revenue in 2013 was $22.4 billion, an increase of 5% over 2012 revenue of $21.4 billion.
Capex in 4Q13 was $533 million. Capex for full year 2013 was $2.1 billion, a 28% decrease from 2012 levels.
Free cash flow in 4Q13 was $649 million. During 2013, BHI generated $1.5 billion of free cash flow, the highest amount it ever has generated during a fiscal year. Management noted that FCF was driven in part by working capital management (~$280 million reduction in accounts receivable and inventory) as well as a “disciplined approach to capital expenditures.” Given strong free cash flow and a positive future outlook, BHI repurchased $350 million of its stock in the open market. Meanwhile, the company was able to reduce its debt by $194 million in 4Q13 to $4.4 billion, with total debt to capitalization at 19.7% at year end.