Focus on Cost Improvement and Project Execution
Results in Significant Operating Margin Improvements
McDermott International, Inc. (NYSE:MDR) (“McDermott” or the
“Company”) today announced financial and operational results for
the three and six months ended June 30, 2016.
|
($ in millions, except per share amounts) |
|
|
Three Months Ended |
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Delta |
|
|
|
Six Months Ended |
|
|
Delta |
|
|
|
June 30, 2016 |
|
|
June 30, 2015 |
|
|
Yr-over-Yr |
|
|
|
June 30, 2016 |
|
|
June 30, 2015 |
|
|
Yr-over-Yr |
|
|
Revenues |
$ |
706.6 |
|
|
$ |
1,046.5 |
|
|
$ |
(339.9 |
) |
|
|
$ |
1,435.7 |
|
|
$ |
1,597.0 |
|
|
$ |
(161.3 |
) |
|
Operating Income |
|
57.0 |
|
|
|
49.1 |
|
|
|
7.9 |
|
|
|
|
93.0 |
|
|
|
62.4 |
|
|
|
30.6 |
|
|
Operating Margin |
|
8.1 |
% |
|
|
4.7 |
% |
|
|
3.4 |
% |
|
|
|
6.5 |
% |
|
|
3.9 |
% |
|
|
2.6 |
% |
|
Net Income /
(Loss) |
|
20.7 |
|
|
|
11.5 |
|
|
|
9.2 |
|
|
|
|
18.5 |
|
|
|
(3.0 |
) |
|
|
21.5 |
|
|
Diluted EPS |
|
0.07 |
|
|
|
0.04 |
|
|
|
0.03 |
|
|
|
|
0.07 |
|
|
|
(0.01 |
) |
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income1 |
|
59.5 |
|
|
|
64.5 |
|
|
|
(5.0 |
) |
|
|
|
134.1 |
|
|
|
88.2 |
|
|
|
45.9 |
|
|
Adjusted Operating
Margin1 |
|
8.4 |
% |
|
|
6.2 |
% |
|
|
2.2 |
% |
|
|
|
9.3 |
% |
|
|
5.5 |
% |
|
|
3.8 |
% |
|
Adjusted Net
Income1 |
|
22.8 |
|
|
|
26.8 |
|
|
|
(4.0 |
) |
|
|
|
59.1 |
|
|
|
22.4 |
|
|
|
36.7 |
|
|
Adjusted Diluted
EPS1 |
|
0.08 |
|
|
|
0.09 |
|
|
|
(0.01 |
) |
|
|
|
0.21 |
|
|
|
0.08 |
|
|
|
0.13 |
|
|
|
|
|
|
|
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|
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|
|
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|
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|
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|
|
|
|
|
Cash Provided (Used) by
Operating Activities |
|
16.5 |
|
|
|
(7.5 |
) |
|
|
24.0 |
|
|
|
|
75.8 |
|
|
|
(26.1 |
) |
|
|
101.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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1) Adjustments to the GAAP financial measures
include $2.5 million and $15.4 million of restructuring charges
during the quarters ended June 30, 2016 and 2015, respectively, and
$8.9 million and $25.8 million of restructuring charges during the
six months ended June 30, 2016 and 2015, respectively.
Adjustments to the GAAP financial measures for the six months ended
June 30, 2016 also include a $32.3 million impairment of our Agile
vessel following the customer’s termination of the vessel charter
in May 2016 given the lack of opportunities for this type of
vessel. These adjustments have been income tax effected when
included in net income. The calculations of total and per
share adjusted net income and adjusted operating income and margins
are shown in the appendix entitled “Reconciliation of GAAP to
Non-GAAP Financial Measures.”
“We are pleased to report operational
profitability across all of our Areas driven by our continued focus
on cost management and successful project execution. Key
awards in both Mexico and the Middle East resulted in a substantial
order intake providing a solid foundation for 2017, with $2.4
billion of expected revenue already recorded in backlog.
Securing these awards demonstrates our continued ability to provide
local, vertically integrated solutions that meet our customers’
complex project needs in multiple markets,” said David Dickson,
President and Chief Executive Officer of McDermott. “The
award of Abkatun-A2, our largest project with Pemex to-date,
supports our strategic goal of leading in Mexico, and our extensive
offshore experience and strong customer relationship in the Middle
East resulted in the award of three separate large projects under
our Saudi Aramco LTA II, previously announced as an Arabian Gulf
customer. We also won further pipeline work with Brunei Shell
Petroleum under a multi-year offshore installation contract,
awarded in 2014, building on our successful 2015 campaign
performance. Additionally, our flagship vessel, the DLV 2000,
was delivered into operations in June on the INPEX Ichthys project
and has been executing exceptionally well. This quarter also
marked the impressive achievement of 35 million man-hours lost time
incident free at our Batam yard and 35 million man-hours lost time
incident free in our Middle East Area, demonstrating our continued
commitment to excellence in safety performance. In May, we
secured the letter of credit capacity for our expected future
bidding activity and provided greater certainty around our credit
and debt structure through early 2019, with the completion of the
amendment and extension of our Credit Agreement. Looking at
the current market, despite the recent rise in commodity prices,
customer investment timing continues to be uncertain. As a
result, we are maintaining a strong focus on our cost and
operational effectiveness, concentrating on areas where capital is
available to invest and strengthening our customer
relationships.”
Second Quarter 2016 Operating
Results
Second quarter 2016 earnings attributable to
McDermott stockholders on a consolidated basis prepared in
accordance with U.S. generally accepted accounting principles
(“GAAP”) were $20.7 million, or $0.07 per fully diluted share,
compared to a net income of $11.5 million, or $0.04 per fully
diluted share, for the prior-year second quarter. The Company
generated second quarter 2016 adjusted net income of $22.8 million,
or $0.08 per adjusted fully diluted share, excluding restructuring
charges of $2.5 million, compared to an adjusted net income of
$26.8 million, or $0.09 per adjusted fully diluted share, excluding
restructuring charges of $15.4 million, in the prior-year second
quarter.
The Company reported second quarter 2016
revenues of $706.6 million, a decrease of $339.9 million, compared
to revenues of $1,046.5 million for the prior-year second
quarter. The key projects driving revenue for the second
quarter of 2016 were INPEX Ichthys and Saudi Aramco’s Marjan GOSP
and LTA II Lump Sum projects. The decrease from the prior-year
second quarter is primarily due to marine activity by our
subcontractor Heerema on the INPEX Ichthys project in the second
quarter of 2015 that was more substantial than activity in the
second quarter of 2016.
The Company’s operating income for the second
quarter of 2016 was $57.0 million, or an operating margin of 8.1%,
compared to $49.1 million, or an operating margin of 4.7%, for the
second quarter of 2015. The Company’s adjusted operating
income for the second quarter 2016 was $59.5 million, or an
adjusted operating margin of 8.4%, compared to $64.5 million, or an
adjusted operating margin of 6.2%, for the second quarter of 2015,
excluding the restructuring adjustments mentioned above.
Operating income for the second quarter of 2016 was primarily
driven by marine activity on the INPEX Ichthys, Twelve Jackets, and
Marjan GOSP projects as well as a productivity improvement on the
Jack St. Malo Phase 2 project. Our operating margin for the
second quarter of 2016 was higher due to project improvements and
the full impact of our cost restructuring programs.
Cash provided by operating activities in the
second quarter 2016 was $16.5 million, an increase compared to the
$7.5 million of cash used in the second quarter 2015. While
we had a decrease in total cash primarily due to capital
expenditures for the DLV 2000 and the $75 million prepayment of our
Term Loan B associated with the amendment and extension of our
credit facility, our operating cash flow remained positive,
primarily resulting from steady collections in the Middle East.
First Half 2016 Operating
Results
Net income attributable to McDermott
stockholders on a consolidated basis prepared in accordance with
GAAP for the first six months of 2016 was $18.5 million, or $0.07
per fully diluted share, compared to a net loss of $3.0 million, or
$0.01 per fully diluted share, for the first six months of
2015. For the first half of 2016, adjusted net income was
$59.1 million, or $0.21 per fully diluted share, excluding
restructuring charges of $8.9 million and an impairment loss of
$32.3 million related to the Agile vessel, compared to adjusted net
income of $22.4 million, or $0.08 per adjusted fully diluted share,
excluding restructuring charges of $25.8 million in the first six
months of 2015.
The Company reported revenues of $1,435.7
million for the first six months of 2016, a decrease of $161.3
million, compared to revenues of $1,597.0 million for the
prior-year comparable period. Revenue for the first half of
2016 was primarily impacted by the INPEX Ichthys and Saudi Aramco’s
Marjan GOSP and Twelve Jackets projects.
The Company’s operating income for the first six
months of 2016 was $93.0 million, or an operating margin of 6.5%,
compared to $62.4 million, or an operating margin of 3.9%, for the
comparable period of 2015. The Company’s adjusted operating
income for June 2016 year-to-date was $134.1 million, or an
adjusted operating margin of 9.3%, compared to $88.2 million, or an
adjusted operating margin of 5.5%, for the first six months of
2015, excluding the adjustments mentioned above. Operating
income for the first six months of 2016 was primarily driven by
marine activity on the INPEX Ichthys and the Saudi Aramco’s Twelve
Jackets and Marjan GOSP projects. Our operating margin for
the first half of 2016 was higher due to project improvements and
the full impact of our cost restructuring programs.
Cash provided by operating activities in the
first half of 2016 was $75.8 million, an increase compared to the
$26.1 million of cash used in the 2015 comparable period.
Overdue payments received from Pemex during the first quarter of
2016, as well as steady collections in the Middle East, positively
impacted the first six months of cash provided by operating
activities.
Operational Review
|
As of June 30, 2016 |
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|
|
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|
AEA |
|
|
MEA |
|
|
|
|
ASA |
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Total |
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($ in billions) |
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Backlog |
$ |
0.6 |
|
|
$ |
2.9 |
|
|
|
|
$ |
0.9 |
|
|
|
$ |
4.4 |
|
|
|
|
|
|
|
|
|
Bids & Change
Orders Outstanding |
|
0.9 |
|
|
|
2.4 |
|
|
|
|
|
0.9 |
|
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
Targets |
|
5.3 |
|
|
|
1.9 |
|
|
|
|
|
5.3 |
|
|
|
|
12.5 |
|
|
|
|
|
|
|
|
|
Total |
|
6.8 |
|
|
|
7.2 |
|
|
|
|
|
7.1 |
|
|
|
|
21.1 |
|
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Three Months Ended June 30, 2016 |
|
|
|
Six Months Ended June 30, 2016 |
|
|
AEA |
|
|
MEA |
|
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|
|
ASA |
|
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|
AEA |
|
|
MEA |
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|
ASA |
|
($ in millions) |
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|
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|
|
|
|
|
|
|
|
|
|
New Orders |
$ |
475.9 |
|
|
$ |
653.6 |
|
|
|
|
$ |
105.6 |
|
|
|
$ |
468.6 |
|
|
$ |
770.3 |
|
|
$ |
335.2 |
|
Revenue |
|
86.8 |
|
|
|
317.8 |
|
|
|
|
|
302.0 |
|
|
|
|
149.5 |
|
|
|
588.1 |
|
|
|
698.1 |
|
Book-to-Bill |
|
5.5 |
x |
|
|
2.1 |
x |
|
|
|
|
0.3 |
x |
|
|
|
3.1 |
x |
|
|
1.3 |
x |
|
|
0.5 |
x |
Operating Income |
|
3.2 |
|
|
|
42.0 |
|
|
|
|
|
12.3 |
|
|
|
|
(21.8 |
) |
|
|
80.4 |
|
|
|
37.4 |
|
Operating Margin |
|
3.6 |
% |
|
|
13.2 |
% |
|
|
|
|
4.1 |
% |
|
|
|
(14.6 |
%) |
|
|
13.7 |
% |
|
|
5.4 |
% |
Adjusted Operating
Income |
|
2.7 |
|
|
|
42.0 |
|
|
|
|
|
14.8 |
|
|
|
|
12.4 |
|
|
|
80.4 |
|
|
|
41.3 |
|
Adjusted Operating
Margin |
|
3.1 |
% |
|
|
13.2 |
% |
|
|
|
|
4.9 |
% |
|
|
|
8.3 |
% |
|
|
13.7 |
% |
|
|
5.9 |
% |
Capex |
|
0.9 |
|
|
|
2.5 |
|
|
|
|
|
134.6 |
|
|
|
|
3.5 |
|
|
|
4.7 |
|
|
|
161.6 |
|
|
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As of June 30, 2016, the Company’s backlog was
$4.4 billion, compared to $3.8 billion at March 31, 2016. Of the
June 30, 2016 backlog, approximately 80% is related to offshore
operations and approximately 20% is related to subsea operations.
Order intake in the second quarter of 2016 totaled $1.2 billion,
including the award of the Pemex Abkatun-A2 project and three
separate contracts with Saudi Aramco, previously announced as
awards by an Arabian Gulf customer, resulting in a book-to-bill
ratio of 1.7x. At June 30, 2016, the Company had bids
outstanding and target projects of approximately $16.7 billion in
its pipeline that it expects will be awarded in the market through
September 30, 2017. In total, the Company’s potential revenue
pipeline, including backlog, was $21.1 billion as of June 30,
2016.
In the Americas, Europe and Africa (“AEA”),
following the successful delivery of the Pemex PB Litoral project,
we were recently awarded the Abkatun-A2 project, which is our
largest project in size and value to-date for Pemex. All
aspects of the project will be based in Mexico, with fabrication
executed at our top-tier Altamira facility. The platform will
be located in Mexico’s Bay of Campeche in 124 feet of water, and
will provide replacement and expansion capabilities to the existing
Ku-Maloob-Zaap, Cantarell and Ayatsil facilities. We have
resumed work on the Ayatsil C project, which was previously
suspended by Pemex to allow for assessment of the overall Ayatsil
field infrastructure sequencing requirements. Fabrication of
the 7,500-ton jacket on the project is now on track for completion
in July, with planned installation by the DB 50 in the fourth
quarter of 2016. In May, the Chevron Jack St. Malo Phase 2
project (“JSM2”) successfully completed offshore execution, with
the DB 50 installing the four slot subsea manifold and the
North Ocean 102 completing the remaining subsea scope, which
included installation of two 77,260 foot dynamic control
umbilicals. As a first for the area, the JSM2 jumpers were
fabricated at the Gulfport Spoolbase, demonstrating the range of
capabilities at this facility. After the successful
installation work on JSM2, the DB 50 completed installation and
heavy-lift work for several other customers, including Anchor,
Williams and Shell.
The Middle East (“MEA”) backlog was increased
this quarter by the award of a substantial package consisting of
three new EPCI projects for Saudi Aramco. All three awards
involve brownfield work scopes in fields in which we have extensive
experience. During the quarter, execution of the Saudi Aramco LTA
II Lump Sum project has continued to progress well following the
early start to fabrication in the first quarter of 2016. The
last remaining jacket on the Twelve Jackets project is complete,
ready for load-out and installation and expected to meet the
customer’s revised timing. The
offshore pre-commissioning on the ADMA 4 Gas Injection project
in Abu Dhabi has now commenced after the successful completion of
all major installation scopes. Meanwhile, progress on Qatar
projects remain on track with a notable milestone being the
installation of the jacket for Qatar Petroleum at the North Field
Alpha complex. The Area remains focused on safety after the
recent and impressive achievement of 35 million man-hours Lost Time
Incident (“LTI”) free.
Asia (“ASA”) new orders in the second quarter of
2016 included the award of transportation and installation work for
Brunei Shell Petroleum Company under the three-year installation
contract which was awarded in 2014. The 2017 campaign
includes 20 miles of pipeline installations, with the associated
beach and pipeline crossings, tie-ins, riser installation and
pre-commissioning of the completed system in the Fairley and Ampa
fields offshore Brunei. Offshore Malaysia, the Company’s
Derrick Barge 30 successfully completed the Hess Bergading project,
which included the installation of a large processing facility
jacket and a wellhead platform jacket and topside. The INPEX
Ichthys project continues to remain on schedule off the north coast
of Australia and our recently delivered vessel, the DLV 2000, is
executing flawlessly on the installation of various pipeline spools
and large subsea facilities on the project. The ONGC
Vashishta project has achieved significant progress in engineering
and procurement, and the start of fabrication by our consortium
partner, L&T Hydrocarbon Engineering, is now due to start ahead
of schedule. In the Batam yard, fabrication work on the
modules for the Yamal LNG Project remains on schedule with the
first batch of modules ready for shipment as planned in the third
quarter of 2016. Fabrication of subsea modules, umbilical
termination assemblies and subsea distribution units for the FMC
Jangkrik project is also progressing well in Batam, with the subsea
structures fabrication now in the final phase of factory acceptance
testing. The Batam yard has also accomplished an excellent record
of 35 million man hours LTI free this quarter.
Cost Structure Progress
Substantially all remaining activities for the
McDermott Profitability Initiative (“MPI”) have been
completed. During the quarter the majority of the resources
at our ASA headquarters moved from Singapore to Kuala Lumpur.
In addition, we completed the remaining sourcing initiatives.
We still expect MPI to result in cash savings of $150 million
annually, which remains incorporated into our 2016 guidance.
Our Additional Overhead Reduction (“AOR”)
program, which was initiated in the fourth quarter of 2015, is
nearing completion, with the expected conclusion of all remaining
activities by the end of the third quarter of 2016. We still
anticipate in-year cash savings of $45 million resulting from the
program.
The Company’s restructuring costs for second
quarter of 2016 were $2 million and are now expected to be
approximately $12 million for the full-year 2016, as a result of
remaining actions for both the MPI and AOR programs.
2016 Outlook
($ in millions, except per share amounts, or as
indicated) |
|
Q1’16 Guidance |
|
Q2’16 Guidance |
Revenues |
~2.7B |
|
~2.7B |
Operating Income |
~108 |
|
~126 |
Net Loss |
~(29) |
|
~(8) |
Diluted Loss Per
Share |
~(0.12) |
|
~(0.03) |
Net Interest
Expense1 |
~60 |
|
~60 |
Income Tax Expense |
~60 |
|
~60 |
|
|
|
|
Adjusted Operating
Income2,4 |
~155 |
|
~170 |
Adjusted Net
Income2,4 |
~18 |
|
~35 |
Adjusted Diluted
EPS2,4 |
~0.06 |
|
~0.12 |
Adjusted EBITDA2,4 |
~245 |
|
~256 |
|
|
|
|
Restructuring
Expense |
~15 |
|
~12 |
Cash Interest / DIC
Amortization Interest |
~60 / ~13 |
|
~60 /
~14 |
Capex |
~265 |
|
~250 |
Ending Cash and
Restricted Cash |
~590 |
|
~505 |
Ending Gross Debt3 |
~840 |
|
~765 |
Cash from Operating
Activities |
~115 |
|
~105 |
Free Cash Flow4 |
~(150) |
|
~(145) |
|
|
|
|
|
|
1) Net Interest Expense is gross interest expense less
capitalized interest and interest income.2) Adjustments to the
outlook GAAP financial measures include restructuring costs of $12
million and $15 million in Q2’16 guidance and Q1’16 guidance,
respectively, and $32 million for an asset impairment in the first
quarter of 2016. Net Income figures for Q2’16 have been tax
effected.3) Ending Gross Debt does not include any reduction
related to debt issuance costs4) The calculations of forecasted
total and per share adjusted net income, adjusted operating income,
adjusted EBITDA and free cash flow are shown in the appendices
entitled “Reconciliation of Forecast GAAP Financials to Non-GAAP
Financial Measures.”~ = approximately
Updates to our full-year 2016 guidance are
driven by revisions in our expected project sequencing and
improvements in projects that have recently been completed.
Although uncertainty remains in the macro commodity environment,
for now, we will continue to concentrate on our highest value
proposition opportunities, executing our existing backlog,
increasing customer alignment, our asset utilization and
cost/liquidity management.
Credit Facility
Amendment and Extension
In May 2016, we satisfied all the conditions to
effectiveness of Amendment No. 3 to our Credit Agreement
(“Amendment No. 3”) which in part extended the maturity date of our
letter of credit facility to April 22, 2019 (or January 15, 2019 if
the term loan remains outstanding or is not refinanced by that
date). In April, other provisions of Amendment No. 3 became
effective for the first quarter of 2016, including replacing an
existing minimum EBITDA requirement with what we believe is a more
conventional covenant package, comprised of two leverage ratios and
a fixed charge coverage ratio and reduced certain reporting
requirements to the Credit Agreement lenders. As a part of
obtaining the term lender consents to Amendment No. 3, we repaid
$75 million of our term loan and entered into Amendment No. 4 to
our Credit Agreement, which increased the applicable margin on the
term loan by 300 basis points per annum and requires the net cash
proceeds from any sale of the DLV 2000 be applied to repay the term
loan.
Other Financial Information
Weighted average common shares outstanding on a
fully diluted basis were approximately 284.9 million and 289.7
million for the quarters ended June 30, 2016 and 2015,
respectively, and 283.1 million and 237.9 million for the six
months ended June 30, 2016 and 2015, respectively. Common
shares for the settlement of the common stock purchase contracts
related to the Tangible Equity Units (“TEUs”) representing 40.9
million additional shares, as well as other potentially dilutive
shares, were included in the calculation of diluted weighted
average shares on an unadjusted and adjusted basis for the quarters
ended June 30, 2016 and June 30, 2015, and the six months ended
June 30, 2016. For the six months ended June 30, 2015, the
TEUs and other dilutive shares were not included in the fully
diluted share count for unadjusted loss per share due to their
anti-dilutive effect, but were included in the fully diluted share
count for adjusted earnings per share.
Conference Call
McDermott has scheduled a conference call and
webcast related to its second quarter results today at 4:00 p.m.
U.S. Central Time. Interested parties may listen over the
Internet through a link posted in the Investor Relations section of
the Company’s Web site. A replay of the webcast will be available
for seven days after the call and may be accessed by dialing (855)
859-2056, Passcode #46416559. In addition, a presentation will be
available on the Investor Relations section of the Company’s Web
site that contains supplemental information on the Company’s
financials, operations and business outlook.
About the Company
McDermott is a leading provider of integrated
engineering, procurement, construction and installation (EPCI) and
module fabrication services for upstream field developments
worldwide. The Company delivers fixed and floating production
facilities, pipelines, installations and subsea systems from
concept to commissioning for complex Offshore and Subsea oil and
gas projects to help oil companies safely produce and transport
hydrocarbons. Our customers include national and major energy
companies. Operating in approximately 20 countries across the
world, our locally focused and globally integrated resources
include approximately 11,400 employees, a diversified fleet of
specialty marine construction vessels, fabrication facilities and
engineering offices. We are renowned for our extensive knowledge
and experience, technological advancements, performance records,
superior safety and commitment to deliver. McDermott has
served the energy industry since 1923, and shares of its common
stock are listed on the New York Stock Exchange.
To learn more, please visit our website at
www.mcdermott.com
NON-GAAP Measures
This press release includes several “non-GAAP”
financial measures as defined under Regulation G of the U.S.
Securities Exchange Act of 1934, as amended. We report our
financial results in accordance with U.S. generally accepted
accounting principles, but believe that certain non-GAAP financial
measures provide useful supplemental information to investors
regarding the underlying business trends and performance of our
ongoing operations and are useful for period-over-period
comparisons of those operations. The non-GAAP measures we have
presented in this press release include non-GAAP Adjusted Operating
Income (Loss), non-GAAP Adjusted Operating Margin, the total
and diluted per share amounts of non-GAAP Adjusted Net Income
(Loss) attributable to the Company, EBITDA and adjusted EBITDA, and
Free Cash Flow. These non-GAAP financial measures should be
considered as supplemental to, and not as a substitute for, or
superior to, the financial measures prepared in accordance with
GAAP.
Reconciliations of these non-GAAP financial
measures to the most comparable GAAP measures are provided in the
supplemental information set forth at the end of this press
release.
Forward-Looking
Statements
In accordance with the Safe Harbor provisions of
the Private Securities Litigation Reform Act of 1995, McDermott
cautions that statements in this press release which are
forward-looking, and provide other than historical information,
involve risks, contingencies and uncertainties that may impact
McDermott's actual results of operations. These forward-looking
statements include, but are not limited to, statements about
backlog, bids outstanding, target projects and revenue pipeline, to
the extent these may be viewed as indicators of future revenues or
profitability, the expected value, scope, execution and timing of
projects discussed, credit and debt structure, future savings and
costs related to the McDermott Profitability Initiative and the
Additional Overhead Reduction program, and McDermott’s earnings and
other guidance for the full year of 2016 and 2016 outlook.
Although we believe that the expectations reflected in those
forward-looking statements are reasonable, we can give no assurance
that those expectations will prove to have been correct.
Those statements are made by using various underlying assumptions
and are subject to numerous risks, contingencies and uncertainties,
including, among others: adverse changes in the markets in which we
operate or credit markets, our inability to successfully execute on
contracts in backlog, changes in project design or schedules, the
availability of qualified personnel, changes in the terms, scope or
timing of contracts, contract cancellations, change orders and
other modifications and actions by our customers and other business
counterparties, changes in industry norms and adverse outcomes in
legal or other dispute resolution proceedings. If one or more
of these risks materialize, or if underlying assumptions prove
incorrect, actual results may vary materially from those
expected. You should not place undue reliance on
forward-looking statements. For a more complete discussion of these
and other risk factors, please see McDermott's annual and quarterly
filings with the Securities and Exchange Commission, including its
annual reports on Form 10-K for the year ended December 31, 2015
and subsequent quarterly reports on Form 10-Q. This press
release reflects management's views as of the date hereof. Except
to the extent required by applicable law, McDermott undertakes no
obligation to update or revise any forward-looking statement.
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(Unaudited) |
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
|
|
(In thousands, except share and per share
amounts) |
|
Revenues |
|
$ |
706,627 |
|
|
$ |
1,046,537 |
|
|
$ |
1,435,659 |
|
|
$ |
1,597,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations |
|
|
595,442 |
|
|
|
925,522 |
|
|
|
1,211,475 |
|
|
|
1,400,981 |
|
Selling, general and administrative
expenses |
|
|
52,075 |
|
|
|
47,793 |
|
|
|
90,403 |
|
|
|
99,469 |
|
Impairment loss |
|
|
- |
|
|
|
6,808 |
|
|
|
32,311 |
|
|
|
6,808 |
|
Loss (gain) on asset disposals |
|
|
(362 |
) |
|
|
1,910 |
|
|
|
(362 |
) |
|
|
1,543 |
|
Restructuring expenses |
|
|
2,484 |
|
|
|
15,391 |
|
|
|
8,851 |
|
|
|
25,780 |
|
|
|
Total costs and expenses |
|
|
649,639 |
|
|
|
997,424 |
|
|
|
1,342,678 |
|
|
|
1,534,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
56,988 |
|
|
|
49,113 |
|
|
|
92,981 |
|
|
|
62,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(12,655 |
) |
|
|
(12,985 |
) |
|
|
(23,893 |
) |
|
|
(25,164 |
) |
Gain (loss) on foreign currency,
net |
|
|
(1,974 |
) |
|
|
1,943 |
|
|
|
(5,157 |
) |
|
|
475 |
|
Other expense, net |
|
|
(877 |
) |
|
|
(359 |
) |
|
|
(1,085 |
) |
|
|
(456 |
) |
Total other expense |
|
|
(15,506 |
) |
|
|
(11,401 |
) |
|
|
(30,135 |
) |
|
|
(25,145 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
|
41,482 |
|
|
|
37,712 |
|
|
|
62,846 |
|
|
|
37,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
19,804 |
|
|
|
16,541 |
|
|
|
39,134 |
|
|
|
21,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
(loss) from investments in unconsolidated affiliates |
|
|
21,678 |
|
|
|
21,171 |
|
|
|
23,712 |
|
|
|
15,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
investments in unconsolidated affiliates |
|
|
127 |
|
|
|
(7,481 |
) |
|
|
(4,351 |
) |
|
|
(14,222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
21,805 |
|
|
|
13,690 |
|
|
|
19,361 |
|
|
|
1,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to
noncontrolling interest |
|
|
1,148 |
|
|
|
2,164 |
|
|
|
876 |
|
|
|
4,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
$ |
20,657 |
|
|
$ |
11,526 |
|
|
$ |
18,485 |
|
|
$ |
(2,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
0.09 |
|
|
|
0.05 |
|
|
|
0.08 |
|
|
|
(0.01 |
) |
Diluted: |
|
|
0.07 |
|
|
|
0.04 |
|
|
|
0.07 |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
computation of income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
240,338,540 |
|
|
|
238,332,012 |
|
|
|
239,739,204 |
|
|
|
237,918,366 |
|
Diluted: |
|
|
284,909,414 |
|
|
|
289,689,981 |
|
|
|
283,132,238 |
|
|
|
237,918,366 |
|
McDERMOTT INTERNATIONAL, INC. |
|
EARNINGS PER SHARE COMPUTATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June
30, |
|
|
June
30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
|
(In thousands, except share and per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
$ |
20,657 |
|
|
$ |
11,526 |
|
|
$ |
18,485 |
|
|
$ |
(2,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares (basic) |
|
240,338,540 |
|
|
|
238,332,012 |
|
|
|
239,739,204 |
|
|
|
237,918,366 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible equity units |
|
40,896,300 |
|
|
|
40,896,300 |
|
|
|
40,896,300 |
|
|
|
- |
|
Stock options, restricted stock,
and restricted stock units |
|
3,674,574 |
|
|
|
10,461,669 |
|
|
|
2,496,734 |
|
|
|
- |
|
|
|
Adjusted weighted
average common shares andassumed exercises of stock options and
vesting of stock awards (diluted) |
|
284,909,414 |
|
|
|
289,689,981 |
|
|
|
283,132,238 |
|
|
|
237,918,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (Loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
$ |
0.09 |
|
|
$ |
0.05 |
|
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
Diluted: |
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.07 |
|
|
$ |
(0.01 |
) |
SUPPLEMENTARY DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
(In thousands) |
|
|
|
|
|
|
|
|
Depreciation &
amortization expense |
|
$ |
21,395 |
|
|
$ |
26,044 |
|
|
$ |
41,997 |
|
|
$ |
51,371 |
|
|
Drydock
amortization |
|
$ |
2,992 |
|
|
$ |
4,386 |
|
|
$ |
6,932 |
|
|
$ |
9,658 |
|
|
Capital
expenditures |
|
$ |
138,774 |
|
|
$ |
24,013 |
|
|
$ |
170,674 |
|
|
$ |
47,985 |
|
|
Backlog |
|
$ |
4,369,844 |
|
|
$ |
3,130,340 |
|
|
$ |
4,369,844 |
|
|
$ |
3,130,340 |
|
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED BALANCE
SHEETS(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
June 30,2016 |
|
|
December 31,2015 |
|
|
|
|
|
(In thousands, except share and per share
amounts) |
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
470,023 |
|
|
$ |
664,844 |
|
Restricted cash and cash
equivalents |
|
|
112,792 |
|
|
|
116,801 |
|
Accounts receivable—trade,
net |
|
|
273,625 |
|
|
|
208,474 |
|
Accounts
receivable—other |
|
|
54,998 |
|
|
|
66,689 |
|
Contracts in progress |
|
|
304,790 |
|
|
|
435,829 |
|
Other current assets |
|
|
44,549 |
|
|
|
34,641 |
|
Total current assets |
|
|
1,260,777 |
|
|
|
1,527,278 |
|
Property, plant
and equipment |
|
|
2,559,108 |
|
|
|
2,467,352 |
|
Less accumulated
depreciation |
|
|
(853,463 |
) |
|
|
(856,493 |
) |
Net property, plant and
equipment |
|
|
1,705,645 |
|
|
|
1,610,859 |
|
Accounts
receivable—long-term retainages |
|
|
128,190 |
|
|
|
155,061 |
|
Investments in
unconsolidated affiliates |
|
|
27,866 |
|
|
|
26,551 |
|
Deferred income
taxes |
|
|
13,154 |
|
|
|
18,822 |
|
Other assets |
|
|
38,296 |
|
|
|
48,505 |
|
Total assets |
|
$ |
3,173,928 |
|
|
$ |
3,387,076 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Notes payable and current
maturities of long-term debt |
|
$ |
52,802 |
|
|
$ |
24,882 |
|
Accounts payable |
|
|
215,987 |
|
|
|
279,821 |
|
Accrued liabilities |
|
|
269,277 |
|
|
|
330,943 |
|
Advance billings on
contracts |
|
|
101,421 |
|
|
|
164,773 |
|
Income taxes payable |
|
|
21,833 |
|
|
|
23,787 |
|
Total current
liabilities |
|
|
661,320 |
|
|
|
824,206 |
|
Long-term
debt |
|
|
704,108 |
|
|
|
819,001 |
|
Self-insurance |
|
|
19,975 |
|
|
|
18,653 |
|
Pension
liability |
|
|
23,940 |
|
|
|
24,066 |
|
Non-current
income taxes |
|
|
58,379 |
|
|
|
52,559 |
|
Other
liabilities |
|
|
109,746 |
|
|
|
101,870 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders'
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $1.00
per share, authorized 400,000,000 shares; |
|
|
|
|
|
|
|
|
issued 248,646,454 and 246,841,128 shares, respectively |
|
|
248,646 |
|
|
|
246,841 |
|
|
|
|
|
|
|
|
|
|
Capital in excess
of par value (including prepaid common stock purchase
contracts) |
|
1,689,103 |
|
|
|
1,687,059 |
|
Accumulated deficit |
|
|
(242,399 |
) |
|
|
(260,884 |
) |
Accumulated other
comprehensive loss |
|
|
(65,875 |
) |
|
|
(93,955 |
) |
Treasury stock, at cost:
8,074,794 and 7,824,204 shares, respectively |
|
|
(93,792 |
) |
|
|
(92,262 |
) |
Stockholders'
Equity—McDermott International, Inc. |
|
|
1,535,683 |
|
|
|
1,486,799 |
|
Noncontrolling interest |
|
|
60,777 |
|
|
|
59,922 |
|
Total Equity |
|
|
1,596,460 |
|
|
|
1,546,721 |
|
Total Liabilities and
Equity |
|
$ |
3,173,928 |
|
|
$ |
3,387,076 |
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(Unaudited) |
|
|
|
Six Months Ended June 30, |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
(In thousands) |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
19,361 |
|
|
$ |
1,642 |
|
Non-cash items included
in net income: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
41,997 |
|
|
|
51,371 |
|
Drydock amortization |
|
|
6,932 |
|
|
|
9,658 |
|
Impairment loss |
|
|
32,311 |
|
|
|
6,808 |
|
Stock-based compensation
charges |
|
|
9,242 |
|
|
|
9,891 |
|
Loss from investments in
unconsolidated affiliates |
|
|
4,351 |
|
|
|
14,222 |
|
Loss (gain) on asset disposals |
|
|
(362 |
) |
|
|
1,543 |
|
Restructuring (gain) expense |
|
|
(1,500 |
) |
|
|
9,153 |
|
Deferred income taxes |
|
|
5,667 |
|
|
|
(1,215 |
) |
Other non-cash items |
|
|
1,143 |
|
|
|
(495 |
) |
Changes in assets and
liabilities that provided (used) cash: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(30,835 |
) |
|
|
(147,293 |
) |
Contracts in progress, net of
advance billings on contracts |
|
|
67,698 |
|
|
|
(129,932 |
) |
Accounts payable |
|
|
(65,212 |
) |
|
|
120,586 |
|
Accrued and other current
liabilities |
|
|
(45,523 |
) |
|
|
48,380 |
|
Pension liability |
|
|
(751 |
) |
|
|
(942 |
) |
Other assets and liabilities |
|
|
31,271 |
|
|
|
(19,443 |
) |
Total cash provided by
(used in) operating activities |
|
|
75,790 |
|
|
|
(26,066 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment |
|
|
(170,674 |
) |
|
|
(47,985 |
) |
(Increase) decrease in
restricted cash and cash equivalents |
|
|
4,009 |
|
|
|
(6,842 |
) |
Investments in
unconsolidated affiliates |
|
|
(4,105 |
) |
|
|
(4,783 |
) |
Proceeds from asset
dispositions |
|
|
388 |
|
|
|
10,510 |
|
Sales and maturities of
available-for-sale securities |
|
|
- |
|
|
|
2,875 |
|
Other investing
activities |
|
|
- |
|
|
|
(232 |
) |
Total cash used in
investing activities |
|
|
(170,382 |
) |
|
|
(46,457 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
(88,845 |
) |
|
|
(13,402 |
) |
Repurchase of common
stock |
|
|
(2,572 |
) |
|
|
(1,448 |
) |
Payment of debt
issuance costs |
|
|
(8,211 |
) |
|
|
- |
|
Other |
|
|
- |
|
|
|
(13 |
) |
Total cash used in
financing activities |
|
|
(99,628 |
) |
|
|
(14,863 |
) |
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash and cash equivalents |
|
|
(601 |
) |
|
|
(1,348 |
) |
Net decrease in
cash and cash equivalents |
|
|
(194,821 |
) |
|
|
(88,734 |
) |
Cash and cash
equivalents at beginning of period |
|
|
664,844 |
|
|
|
665,309 |
|
Cash and cash
equivalents at end of period |
|
$ |
470,023 |
|
|
$ |
576,575 |
|
McDERMOTT INTERNATIONAL,
INCRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
McDermott reports our financial results in
accordance with the U.S. generally accepted accounting principles
(“GAAP”). This press release also includes several Non-GAAP1
financial measures as defined under the SEC’s Regulation G. The
following tables reconcile Non-GAAP financial measures to
comparable GAAP financial measures:
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, 2016 |
|
|
June 30, 2015 |
|
|
June 30, 2016 |
|
|
June 30, 2015 |
|
(In thousands,
except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income
(Loss) Attributable to MDR |
$ |
20,657 |
|
|
$ |
11,526 |
|
|
$ |
18,485 |
|
|
$ |
(2,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges2 |
|
2,484 |
|
|
|
15,391 |
|
|
|
8,851 |
|
|
|
25,780 |
|
Impairment loss3 |
|
- |
|
|
|
- |
|
|
|
32,311 |
|
|
|
- |
|
Total Non-GAAP Adjustments |
|
2,484 |
|
|
|
15,391 |
|
|
|
41,162 |
|
|
|
25,780 |
|
Tax Effect of Non-GAAP Changes |
|
(327 |
) |
|
|
(132 |
) |
|
|
(500 |
) |
|
|
(353 |
) |
Total Non-GAAP Adjustments (After
Tax) |
|
2,157 |
|
|
|
15,259 |
|
|
|
40,662 |
|
|
|
25,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Net Income Attributable to MDR |
$ |
22,814 |
|
|
$ |
26,785 |
|
|
$ |
59,147 |
|
|
$ |
22,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
Income |
$ |
56,988 |
|
|
$ |
49,113 |
|
|
$ |
92,981 |
|
|
$ |
62,419 |
|
Non-GAAP Adjustments |
|
2,484 |
|
|
|
15,391 |
|
|
|
41,162 |
|
|
|
25,780 |
|
Non-GAAP Adjusted
Operating Income |
$ |
59,472 |
|
|
$ |
64,504 |
|
|
$ |
134,143 |
|
|
$ |
88,199 |
|
Non-GAAP Adjusted
Operating Margin |
|
8.4 |
% |
|
|
6.2 |
% |
|
|
9.3 |
% |
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.07 |
|
|
$ |
(0.01 |
) |
Non-GAAP Adjustments |
|
0.01 |
|
|
|
0.05 |
|
|
|
0.14 |
|
|
|
0.09 |
|
Non-GAAP Diluted
EPS4 |
$ |
0.08 |
|
|
$ |
0.09 |
|
|
$ |
0.21 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
240,338,540 |
|
|
|
238,332,012 |
|
|
|
239,739,204 |
|
|
|
237,918,366 |
|
|
Diluted |
|
284,909,414 |
|
|
|
289,689,981 |
|
|
|
283,132,238 |
|
|
|
289,418,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Non-GAAP measures include the total and diluted
per share amounts of adjusted net income (loss) attributable to the
Company and adjusted operating income and operating margin, in each
case excluding the impact of certain identified items. We believe
that total and per share adjusted net income (loss) and adjusted
operating income and operating margin are useful measures for
investors to review because they provide consistent measures of the
underlying results of our ongoing business. Furthermore, our
management uses adjusted net income (loss) and adjusted operating
income as measures of the performance of our operations. However,
Non-GAAP measures should not be considered as substitutes for
operating income, net income or other data prepared and reported in
accordance with GAAP and should be viewed in addition to the
Company’s reported results prepared in accordance with GAAP.
2Restructuring charges are primarily associated
with workforce reductions, facility closures, consultant fees,
lease terminations and asset impairments.
3Impairment loss is related to an impairment of
our Agile vessel during first quarter of 2016, upon termination of
its charter in May 2016 given the lack of opportunities for this
type of vessel.
4Diluted EPS is calculated using a share count
determined by whether the period has a net income or a net
loss. In the event of net income, Diluted EPS uses the fully
diluted share count; however, in the event of a net loss, the
potentially dilutive shares are excluded from the share count.
McDERMOTT INTERNATIONAL,
INCRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
McDermott reports our financial results in
accordance with the U.S. generally accepted accounting principles
(“GAAP”). This press release also includes several Non-GAAP1
financial measures as defined under the SEC’s Regulation G. The
following tables reconcile Non-GAAP financial measures to
comparable GAAP financial measures:
|
Three Months Ended June 30, 2016 |
|
|
Six Months Ended June 30, 2016 |
|
|
AEA |
|
|
MEA |
|
|
ASA |
|
|
AEA |
|
|
|
|
MEA |
|
|
|
|
ASA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
86,810 |
|
|
$ |
317,834 |
|
|
$ |
301,983 |
|
|
$ |
149,435 |
|
|
|
|
$ |
588,089 |
|
|
|
|
$ |
698,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
Income (Loss) |
|
3,168 |
|
|
|
41,959 |
|
|
|
12,274 |
|
|
|
(21,753 |
) |
|
|
|
|
80,426 |
|
|
|
|
|
37,407 |
|
GAAP Operating
Margin |
|
3.6 |
% |
|
|
13.2 |
% |
|
|
4.1 |
% |
|
|
-14.6 |
% |
|
|
|
|
13.7 |
% |
|
|
|
|
5.4 |
% |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring2 |
|
(462 |
) |
|
|
- |
|
|
|
2,533 |
|
|
|
1,874 |
|
|
|
|
|
17 |
|
|
|
|
|
3,861 |
|
Impairment3 |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,311 |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
Total Non-GAAP
Adjustments |
|
(462 |
) |
|
|
- |
|
|
|
2,533 |
|
|
|
34,185 |
|
|
|
|
|
17 |
|
|
|
|
|
3,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Operating Income (Loss) |
$ |
2,706 |
|
|
$ |
41,959 |
|
|
$ |
14,807 |
|
|
$ |
12,432 |
|
|
|
|
$ |
80,443 |
|
|
|
|
$ |
41,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Operating Margin |
|
3.1 |
% |
|
|
13.2 |
% |
|
|
4.9 |
% |
|
|
8.3 |
% |
|
|
|
|
13.7 |
% |
|
|
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Non-GAAP measures include the total and diluted
per share amounts of adjusted net income (loss) attributable to the
Company and adjusted operating income and operating margin, in each
case excluding the impact of certain identified items. We believe
that total and per share adjusted net income (loss) and adjusted
operating income and operating margin are useful measures for
investors to review because they provide consistent measures of the
underlying results of our ongoing business. Furthermore, our
management uses adjusted net income (loss) and adjusted operating
income as measures of the performance of our operations. However,
Non-GAAP measures should not be considered as substitutes for
operating income, net income or other data prepared and reported in
accordance with GAAP and should be viewed in addition to the
Company’s reported results prepared in accordance with GAAP.
2Restructuring charges are primarily associated
with workforce reductions, facility closures, consultant fees,
lease terminations and asset impairments.
3Impairment loss is related to an impairment of
our Agile vessel during first quarter of 2016, upon termination of
its charter in May 2016 given the lack of opportunities for this
type of vessel.
McDERMOTT INTERNATIONAL,
INCRECONCILIATION OF FORECAST GAAP FINANCIAL
MEASURES TO NON-GAAP FINANCIAL MEASURES
This press release includes several
forward-looking Non-GAAP1 financial measures as defined under the
SEC’s Regulation G. We believe forward looking financial measures
are within reasonable measure. The following table reconciles
Non-GAAP financial measures to comparable GAAP financial
measures:
|
|
Q1' 16Guidance |
|
Q2' 16Guidance |
(In thousands,
except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Loss Attributable to MDR |
|
$ |
(29,000 |
) |
|
$ |
(8,300 |
) |
|
|
|
|
|
|
|
|
|
Less:
Adjustments |
|
|
|
|
|
|
|
|
Restructuring charges2 |
|
|
15,000 |
|
|
|
12,000 |
|
Impairment Loss3 |
|
|
32,000 |
|
|
|
32,000 |
|
Total Non-GAAP Adjustments |
|
|
47,000 |
|
|
|
44,000 |
|
Tax Effect of Non-GAAP
changes4 |
|
|
- |
|
|
|
(700 |
) |
Total Non-GAAP Adjustments (Net of
Tax) |
|
|
47,000 |
|
|
|
43,300 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Net Income Attributable to MDR |
|
$ |
18,000 |
|
|
$ |
35,000 |
|
|
|
|
|
|
|
|
|
|
GAAP Operating
Income |
|
$ |
108,000 |
|
|
$ |
126,000 |
|
Non-GAAP Adjustments |
|
|
47,000 |
|
|
|
44,000 |
|
Non-GAAP Adjusted
Operating Income |
|
$ |
155,000 |
|
|
$ |
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
Non-GAAP Adjustments |
|
|
0.18 |
|
|
|
0.15 |
|
Non-GAAP Diluted
EPS5 |
|
$ |
0.06 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
|
$ |
115,000 |
|
|
$ |
105,000 |
|
Capital expenditures |
|
|
(265,000 |
) |
|
|
(250,000 |
) |
Free cash
flow |
|
$ |
(150,000 |
) |
|
$ |
(145,000 |
) |
|
|
|
|
|
|
|
|
|
GAAP Net Loss
Attributable to the Company |
|
$ |
(29,000 |
) |
|
$ |
(8,300 |
) |
Add: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
107,000 |
|
|
|
100,300 |
|
Interest Expense, Net |
|
|
60,000 |
|
|
|
60,000 |
|
Provision for Taxes |
|
|
60,000 |
|
|
|
60,000 |
|
EBITDA |
|
$ |
198,000 |
|
|
$ |
212,000 |
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
198,000 |
|
|
$ |
212,000 |
|
Adjustments |
|
|
47,000 |
|
|
|
44,000 |
|
Adjusted
EBITDA |
|
$ |
245,000 |
|
|
$ |
256,000 |
|
|
1Forecast Non-GAAP measures include the total
and diluted per share amounts of adjusted net income (loss)
attributable to the Company and adjusted operating income, free
cash flow, EBITDA and Adjusted EBITDA, in each case excluding the
impact of certain identified items. See footnote 1 to the preceding
tables for a discussion of adjusted net income (loss) attributable
to the Company. We define “free cash flow” as cash flows from
operations less capital expenditures. We believe investors
consider free cash flow as an important measure because it
generally represents funds available to pursue opportunities that
may enhance shareholder value, such as making acquisitions or other
investments. Our management uses free cash flow for that
reason. We define EBITDA as net income plus depreciation and
amortization, interest expense, net and provision for income
taxes. We define Adjusted EBITDA as EBITDA less the
adjustments relating to restructuring charges and impairment loss
detailed on the second immediately preceding page. We have
included EBITDA and Adjusted EBITDA disclosures in this press
release because EBITDA is widely used by investors for valuation
and comparing our financial performance with the performance of
other companies in our industry and because Adjusted EBITDA
provides a consistent measure of EBITDA relating to our underlying
business. Our management also uses EBITDA and Adjusted EBITDA
to monitor and compare the financial performance of our operations.
EBITDA and Adjusted EBITDA do not give effect to the cash
that we must use to service our debt or pay our income taxes, and
thus do not reflect the funds actually available for capital
expenditures, dividends or various other purposes. In
addition, our presentation of EBITDA and Adjusted EBITDA may not be
comparable to similarly titled measures in other companies’
reports. You should not consider EBITDA or Adjusted EBITDA in
isolation from, or as a substitute for, net income or cash flow
measures prepared in accordance with U.S. GAAP.
2Restructuring charges are primarily associated
with workforce reductions, facility closures, consultant fee, lease
terminations and asset impairments.
3Impairment loss is related to an impairment of
our Agile vessel during first quarter of 2016 upon termination of
its charter in May 2016 given the lack of opportunities for this
type of vessel.
4We did not adjust Q1’16 Guidance for taxes and
therefore tax impacts are not included.
5Diluted EPS is calculated using a share count
determined by whether the period has a net income or a net
loss. In the event of net income, Diluted EPS uses the fully
diluted share count; however, in the event of a net loss the
potentially dilutive shares are excluded from the share count.
CONTACT:
Investors & Financial Media
Kathy Murray
Vice President, Treasurer and Investor Relations
281.870.5147
kamurray@mcdermott.com
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