Fourth Quarter Order Intake Maintains Leading
Position in Middle East with 2016 Book-to-Bill of 1.0x
McDermott International, Inc. (NYSE:MDR) (“McDermott,” the
“Company,” “we” or “us”) today announced financial and operational
results for the fourth quarter and full-year ended December 31,
2016.
|
($ in millions, except per share amounts) |
|
|
Three Months Ended |
|
|
Delta |
|
|
Year Ended |
|
|
Delta |
|
|
Dec 31, 2016 |
|
|
Dec 31, 2015 |
|
|
Yr-over-Yr |
|
|
Dec 31, 2016 |
|
|
Dec 31, 2015 |
|
|
Yr-over-Yr |
|
Revenues |
$ |
641.8 |
|
|
$ |
667.4 |
|
|
$ |
(25.6 |
) |
|
$ |
2,636.0 |
|
|
$ |
3,070.3 |
|
|
$ |
(434.3 |
) |
Operating Income |
|
6.3 |
|
|
|
16.3 |
|
|
|
(10.0 |
) |
|
|
142.3 |
|
|
|
112.7 |
|
|
|
29.6 |
|
Operating Margin |
|
1.0 |
% |
|
|
2.4 |
% |
|
|
-1.4 |
% |
|
|
5.4 |
% |
|
|
3.7 |
% |
|
|
1.7 |
% |
Net Income (Loss) |
|
(0.5 |
) |
|
|
(18.7 |
) |
|
|
18.2 |
|
|
|
34.1 |
|
|
|
(18.0 |
) |
|
|
52.1 |
|
Diluted EPS |
|
(0.00 |
) |
|
|
(0.08 |
) |
|
|
0.08 |
|
|
|
0.12 |
|
|
|
(0.08 |
) |
|
|
0.20 |
|
Adjusted Operating
Income1.4 |
|
12.3 |
|
|
|
51.0 |
|
|
|
(38.7 |
) |
|
|
203.1 |
|
|
|
203.0 |
|
|
|
0.1 |
|
Adjusted Operating
Margin1,4 |
|
1.9 |
% |
|
|
7.6 |
% |
|
|
-5.7 |
% |
|
|
7.7 |
% |
|
|
6.6 |
% |
|
|
1.1 |
% |
Adjusted Net
Income2,3,4 |
|
5.6 |
|
|
|
15.3 |
|
|
|
(9.7 |
) |
|
|
89.4 |
|
|
|
71.2 |
|
|
|
18.2 |
|
Adjusted Diluted
EPS2,3,4 |
|
0.02 |
|
|
|
0.05 |
|
|
|
(0.03 |
) |
|
|
0.31 |
|
|
|
0.25 |
|
|
|
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Provided (Used) by
Operating Activities |
|
52.6 |
|
|
|
60.6 |
|
|
|
(8.0 |
) |
|
|
178.2 |
|
|
|
55.3 |
|
|
|
122.9 |
|
1 Adjusted Operating Income includes the
following adjustments to GAAP Operating Income:
- $0.6 million and $8.7 million of restructuring charges during
the fourth quarters of 2016 and 2015, respectively, and $11.3
million and $40.8 million of restructuring charges for the
full-years ended December 31, 2016 and 2015,
respectively.
- $10.9 million and $55.0 million of impairment charges for the
quarter and full-year of December 31, 2016, respectively, and $6.8
million of impairment charges for the full-year of 2015.
- $16.7 million legal settlement charge for the third quarter and
full-year of 2015.
- $5.4 million gain from year-end mark-to-market (“MTM”) pension
adjustments for the quarter and year ended December 31, 2016, and
$26.0 million loss from year-end MTM pension adjustments for the
quarter and year ended December 31, 2015. These adjustments are
recorded in selling, general and administrative expenses in the
fourth quarter of each respective year in accordance with our
pension accounting policy.
2 Adjusted Net Income includes the adjustments
to GAAP Operating Income mentioned above and the following
adjustment for non-operating activity:
- $5.0 million gain recorded in other income (expense) during
2016 as we exited from our joint venture with THHE Fabricators Sdn.
Bhd. (“THF”), a subsidiary of TH Heavy Engineering Berhad
(“THHE”).
3 Tax effects of Non-GAAP adjustments represent
the tax impacts of the adjustments during the period. The
Non-GAAP adjusting items are primarily attributable to tax
jurisdictions in which we currently do not pay taxes and,
therefore, no tax impact is applied to them. For the Non-GAAP
adjusting items in jurisdictions where taxes are paid, the tax
impacts on those adjustments are computed, individually, using the
statutory tax rate in effect in each applicable taxable
jurisdiction.
4 The calculations of total and per share
adjusted net income and adjusted operating income and margins are
shown in the appendix entitled “Reconciliation of Non-GAAP to GAAP
Financial Measures.” The appendix also includes additional
information related to the adjustments mentioned above.
“I am extremely pleased to report a profitable
full-year 2016, despite the prolonged downturn. Our 2016
operational and financial performance is a direct reflection of the
changes made over the past three years. The fourth quarter
was an excellent quarter operationally, with strong order intake of
$1 billion and ending backlog of $4.3 billion. Unfortunately,
net income ended in a slight loss due to an increase in the
estimated costs on our INPEX Ichthys project in Australia.
This increase represents costs to replace failed subsea-pipe
connector components which were a standard design and supplied by a
reputable supplier. Despite the increased costs, the
project remains in a profitable position. Our top priority is
collaborating with the customer and supplier to replace the failed
components and maintaining the agreed project schedule,” said David
Dickson, President and Chief Executive Officer of McDermott.
“2016 has proven to be a pivotal year for
McDermott, as we turned the corner from stabilizing and optimizing
the business to focusing on growth and building a sustainable,
profitable business for the future. Our strategic initiatives
such as One McDermott Way and Taking the Lead have made great
strides this year, as seen through a Middle East customer approving
work share with fabrication in our Batam fabrication yard and our
Middle East Area reaching an impressive 48 million man-hours LTI
free. Looking forward to 2017, we plan to build upon the
successes of 2016, and we began the year by enhancing our current
fleet through the strategic purchase and subsequent sale leaseback
of the Amazon. In 2017, we will continue to build upon our
strengthened relationships by providing customer-driven solutions
centered on our engineering expertise, vertically integrated
capabilities and in-market presence, while we also increase our
focus on technology and grow in our key markets as we prepare for
the upturn,” Dickson said.
Fourth Quarter 2016 Operating
Results
Fourth quarter 2016 earnings attributable to
McDermott stockholders, in accordance with U.S. generally accepted
accounting principles (“GAAP”) were a net loss of $0.5 million, or
$0.00 per fully diluted share, compared to a net loss of $18.7
million, or $0.08 per fully diluted share, for the prior-year
fourth quarter. We generated fourth quarter 2016 adjusted net
income of $5.6 million, or $0.02 per adjusted fully diluted share,
excluding restructuring charges of $0.6 million, an impairment loss
of $10.9 million related to a marine asset and the year-end
non-cash MTM pension gain of $5.4 million, compared to an adjusted
net income of $15.3 million, or $0.05 per adjusted fully diluted
share, excluding restructuring charges of $8.7 million and the
year-end non-cash MTM pension loss of $26.0 million, in the
prior-year fourth quarter. This quarter, we recognized a
reduction of $13.0 million in income tax expense as a result of a
change in valuation allowances associated with deferred tax assets
recognized due to improving results in Saudi Arabia and Mexico.
Additionally, we now operate under a tax holiday in Malaysia
which further reduced income taxes in the fourth quarter and will
also benefit future periods.
The Company reported fourth quarter 2016
revenues of $641.8 million, a decrease of $25.6 million, compared
to revenues of $667.4 million for the prior-year fourth
quarter. The key projects driving revenue for the fourth
quarter of 2016 were the INPEX Ichthys, Saudi Aramco Long Term
Agreement II (LTA II), KJO Hout and ONGC Vashishta projects. The
decrease from the prior-year fourth quarter is primarily due to
Pemex PB Litoral project and the additional costs on the INPEX
Ichthys project caused by the failed subsea-pipe connector
components, partially offset by increased activity on the Saudi
Aramco LTA II Lump Sum projects.
Our operating income for the fourth quarter of
2016 was $6.3 million, or an operating margin of 1.0%, compared to
$16.3 million, or an operating margin of 2.4%, for the fourth
quarter of 2015. Our adjusted operating income for the fourth
quarter of 2016 was $12.3 million, or an adjusted operating margin
of 1.9%, excluding the restructuring charges, impairment loss and
MTM pension adjustment mentioned above, compared to $51.0 million,
or an adjusted operating margin of 7.6%, for the fourth quarter of
2015, excluding the restructuring charges and pension losses
mentioned above. Operating income for the fourth quarter of
2016 was primarily driven by marine activity on the INPEX Ichthys,
Saudi Aramco LTA II and Pemex Ayatsil-C projects and offset by the
increase in estimated costs at completion on our INPEX Ichthys
project in Australia.
During January 2017, we identified failures in
supplier-provided, subsea-pipe connector components previously
installed on the INPEX Ichthys project. These failed
components were a standard design provided by a reputable
supplier. As a result, we have determined that our estimated
costs at completion for the project, as a whole, will increase by
$34 million due to costs attributable to replacing the failed
components. These increased costs reduced fourth quarter
operating income by $31 million, and net income by $25 million
after taxes.
Cash provided by operating activities in the
fourth quarter of 2016 was $52.6 million, a decrease compared to
the $60.6 million of cash provided in the fourth quarter of
2015. This was primarily driven by lower collections on the
INPEX Ichthys project compared to the fourth quarter of 2015.
Full-Year 2016 Operating
Results
Net income attributable to McDermott
stockholders, in accordance with GAAP, for the full-year of 2016
was $34.1 million, or $0.12 per fully diluted share, compared to a
net loss of $18.0 million, or $0.08 per fully diluted share, for
the full-year of 2015. For the full-year 2016, adjusted net
income was $89.4 million, or $0.31 per fully diluted share,
excluding restructuring charges of $11.3 million, impairment
charges of $55.0 million, a gain of $5.0 million on the exit from
our joint venture with THHE and a gain of $5.4 million non-cash MTM
pension adjustment, compared to adjusted net income of $71.2
million, or $0.25 per adjusted fully diluted share, excluding
restructuring charges of $40.8 million, impairment charges of $6.8
million, a legal settlement of $16.7 million and non-cash MTM
pension loss of $26.0 million during the full-year of 2015.
Our income tax provision for the full-year of 2016 included
approximately $13.0 million of tax adjustments recorded during the
fourth quarter of 2016 as a result of a change in valuation
allowances associated with deferred tax assets recognized due to
improving results in Saudi Arabia and Mexico. Additionally,
we now operate under a tax holiday in Malaysia which further
reduced income taxes in 2016 and will also benefit future
years.
The Company reported revenues of $2,636.0
million for the full-year of 2016, a decrease of $434.3 million,
compared to $3,070.3 million of 2015 revenues. The decrease was
primarily due to lower activity on our INPEX Ichthys project and
completion of the 2015 campaign of the Brunei Shell Pipeline
Replacement project. Revenue for the full-year of 2016 was
primarily driven by the INPEX Ichthys, Saudi Aramco LTA II and
Marjan power system replacement, and the RasGas Flow Assurance and
Looping projects.
Our operating income for the full-year of 2016
was $142.3 million, or an operating margin of 5.4%, compared to
$112.7 million, or an operating margin of 3.7%, for the comparable
2015 period. Our adjusted operating income for the full-year
of 2016 was $203.1 million, or an adjusted operating margin of
7.7%, excluding the restructuring charges, impairment charges and
pension MTM gain mentioned above, compared to $203.0 million, or an
adjusted operating margin of 6.6%, for the full-year 2015,
excluding the restructuring charges, impairment loss, legal
settlement and pension MTM loss mentioned above. Operating
income for the full-year of 2016 was primarily driven by marine
activity on the INPEX Ichthys, Saudi Aramco’s LTA II, Marjan power
system replacement, and 12 Jackets projects, as well as a pipeline
repair project in the Middle East region. Our operating
margin for the full-year of 2016 was higher due to project
execution driven improvements, final closeouts, change orders
driven by alignment with customer needs and the full impact of our
cost restructuring programs.
Cash provided by operating activities in the
full-year of 2016 was $178.2 million, an increase compared to the
$55.3 million of cash provided in 2015. Overdue payments
received from Pemex during the first quarter, as well as steady
collections in the Middle East, positively impacted cash provided
by operating activities for 2016.
Operational Review
|
As of December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
AEA |
|
|
MEA |
|
|
ASA |
|
|
Total |
|
|
|
|
|
|
|
|
|
($ in billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog |
$ |
0.5 |
|
|
$ |
3.1 |
|
|
$ |
0.7 |
|
|
$ |
4.3 |
|
|
|
|
|
|
|
|
|
Bids & Change
Orders Outstanding |
|
1.4 |
|
|
|
0.2 |
|
|
|
0.6 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
Targets |
|
5.5 |
|
|
|
5.2 |
|
|
|
3.7 |
|
|
|
14.4 |
|
|
|
|
|
|
|
|
|
Total |
|
7.4 |
|
|
|
8.5 |
|
|
|
5.0 |
|
|
|
20.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Dec 31, 2016 |
|
|
Year Ended Dec 31, 2016 |
|
|
AEA |
|
|
MEA |
|
|
ASA |
|
|
AEA |
|
|
MEA |
|
|
ASA |
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders |
$ |
17.4 |
|
|
$ |
861.9 |
|
|
$ |
168.1 |
|
|
$ |
492.2 |
|
|
$ |
1,658.4 |
|
|
$ |
575.8 |
|
Revenue |
|
66.8 |
|
|
|
318.8 |
|
|
|
256.2 |
|
|
|
286.0 |
|
|
|
1,241.6 |
|
|
|
1,108.4 |
|
Book-to-Bill |
|
0.3 |
x |
|
|
2.7 |
x |
|
|
0.7 |
x |
|
|
1.7 |
x |
|
|
1.3 |
x |
|
|
0.5 |
x |
Operating Income |
|
(3.2 |
) |
|
|
37.7 |
|
|
|
(28.2 |
) |
|
|
(29.8 |
) |
|
|
166.8 |
|
|
|
8.6 |
|
Operating Margin |
|
-4.8 |
% |
|
|
11.8 |
% |
|
|
-11.0 |
% |
|
|
-10.4 |
% |
|
|
13.4 |
% |
|
|
0.8 |
% |
Adjusted Operating
Income1 |
|
3.4 |
|
|
|
36.9 |
|
|
|
(27.9 |
) |
|
|
11.2 |
|
|
|
166.0 |
|
|
|
25.9 |
|
Adjusted Operating
Margin1 |
|
5.0 |
% |
|
|
11.6 |
% |
|
|
-10.9 |
% |
|
|
3.9 |
% |
|
|
13.4 |
% |
|
|
2.3 |
% |
Capex |
|
12.9 |
|
|
|
5.6 |
|
|
|
12.1 |
|
|
|
16.7 |
|
|
|
18.6 |
|
|
|
190.3 |
|
1 The calculations of segment adjusted operating income and
margins are shown in the appendix entitled “Reconciliation of
Non-GAAP to GAAP Financial Measures.”
As of December 31, 2016, the Company’s backlog
was $4.3 billion, compared to $3.9 billion at September 30, 2016.
Of the December 31, 2016 backlog, approximately 84% was related to
offshore operations and approximately 16% was related to subsea
operations. Order intake in the fourth quarter of 2016 totaled $1.0
billion, resulting in a book-to-bill ratio of 1.7x, with order
intake of $2.7 billion and a book-to-bill ratio of 1.0x for the
year ended December 31, 2016. At December 31, 2016, the
Company had bids outstanding and target projects of approximately
$2.2 billion and $14.4 billion, respectively, in its pipeline that
it expects will be awarded in the market through March 31,
2018. In total, the Company’s potential revenue pipeline,
including backlog, was $20.9 billion as of December 31, 2016.
The Americas, Europe and Africa (“AEA”) Area,
during the fourth quarter of 2016, completed the successful
installation of the Pemex Ayatsil-C 7,500 ton jacket in the Bay of
Campeche, Mexico, demonstrating customer alignment and proven
execution. The Ayatsil-C jacket was launched off the McDermott
I-600 barge and installed by the DB50. Also in Mexico,
fabrication of the compression platform on the Abkatun A-2 project
commenced in October and is proceeding ahead of plan. The project
remains on track to meet the 900-day execution schedule.
Strategically focusing on our engineering expertise as an
enabler and building our in-market capabilities, we expanded our
Mexico City office by hiring 80 engineers and support resources
working to the One McDermott Way. In our Altamira fabrication yard,
upgrades commenced to increase skidway and loadout capabilities and
provide covered blast and paint facilities and are expected to be
completed in April 2017. Front-end engineering and design
(“FEED”) and early detailed engineering for a Caribbean gas
development has continued throughout the quarter and remains on
track to meet the agreed deliverables; and a FEED project for a
SURF facility off the coast of East Africa was substantially
completed by year-end and is in the final stages of closeout.
In the Middle East (“MEA”) Area, fabrication
activity in the fourth quarter was driven by Saudi Aramco projects
and the KJO Hout jacket and deck structures. Marine
operations continued in both Saudi Arabia and Qatar.
Execution of the Saudi Aramco Lump Sum LTA II project, awarded in
2015, is progressing according to schedule, and is in the
fabrication phase, with work being shared between the Jebel Ali and
Dammam fabrication facilities. Cooperation and consistency between
all facilities is driven by our One McDermott Way and as a result,
a Middle East customer approved work share on a specific project
for the fabrication of jackets in our Batam yard. The KJO Hout
Jacket and topside will be installed and pre-commissioned in the
first quarter of 2017; the project is more than 55% complete and is
expected to be fully complete in the second quarter of 2017. The
Marjan power systems project continued to meet key milestones in
line with client requirements, as did the three Saudi Aramco jobs
awarded in the second quarter of 2016. The three jobs awarded in
the second quarter are in the preliminary stages of fabrication,
with activity expected during 2017. Fabrication and installation of
the Bul Hanine jackets is complete, with minor closeout work
remaining. In Qatar, we focused on offshore work for the
RasGas Flow Assurance and Looping project, which remains on
schedule. The MEA area also continued to demonstrate McDermott’s
Taking the Lead initiative, reaching an impressive 48-million
man-hours lost time incident (“LTI”) free.
In the Asia (“ASA”) Area, the INPEX Ichthys
project continues to progress as we work collaboratively with the
customer and supplier to rectify the subsea connector component
issue and expect to keep in line with the overall project
schedule. The DLV 2000 completed her second campaign on the
project alongside the CSV 108. During the fourth quarter, the
DLV 2000 installed infield umbilicals, subsea structures and subsea
spools. The Woodside Greater Western Flank Phase 2 pipeline
project continues with the engineering, procurement and
preparations for the start of fabrication in the first quarter of
2017. The Vashishta project for ONGC continues to achieve
significant progress, commencing the offshore phase of the project
with the mobilization of the DB30 and supporting fleet. Fabrication
of the subsea structures continues in line with the project
schedule at Larsen & Toubro, our consortium partner’s,
fabrication yard in Kattupalli. The mobilization of
McDermott’s mobile spoolbase was completed, and production of the
pipeline stalks has progressed well in preparation for the arrival
of the NO 105 in the first quarter of 2017 when she is scheduled to
install the deepwater pipeline sections. On the Brunei Shell
Petroleum transportation and installation project, pre-installation
survey for the pipelines was completed in the fourth quarter of
2016. The project continues to prepare for the offshore
campaign scheduled to commence in the second quarter of 2017.
Fabrication of the Yamal LNG modules in our Batam yard is
progressing well, with 89% progress achieved. Also in Batam,
fabrication and loadout of the subsea modules for the TechnipFMC
Jangkrik project was completed in the fourth quarter with a total
weight of approximately 3,100 tonnes.
Acquisition of the Amazon
Early in 2017, we completed the purchase of a
newly built deepwater pipelay and construction vessel named the
Amazon. The vessel is equipped with 49,514 square feet (4,600
square meters) of deck space complete with two 440-ton (400-tonne)
cranes, a service speed of 12 knots and accommodation for up to 200
crew and service staff. We plan to upgrade the vessel to address
the ultradeepwater market with a state-of-the-art J-lay system and
the latest vessel technology. In the near term, we plan to make
minor capital expenditure investments to bring the vessel up to
Company standards and use the vessel on existing construction and
pipelay projects. In February of 2017, funding for the vessel
acquisition was secured through a sale and leaseback arrangement
under which we have control of the vessel in exchange for a daily
charter-hire rate. The planned upgrade to the state-of-the-art
J-lay system and related financing are expected to be considered in
line with market conditions.
Cost Structure Progress
All remaining activities for the McDermott
Profitability Initiative (“MPI”) were completed in the third
quarter of 2016. MPI resulted in annualized cash savings of
$150 million.
All remaining activities for the Additional
Overhead Reduction (“AOR”) program, which was initiated in the
fourth quarter of 2015, were completed in the fourth quarter of
2016 and achieved in-year cash savings of $46 million and
annualized cash savings of $51 million.
Our restructuring costs for the fourth quarter
of 2016 were $0.6 million and $11.3 million for the full-year of
2016.
2017 Guidance
($ in
millions, except per share amounts or as indicated for
revenues) |
|
2017 InitialOutlook |
|
Updated Full-Year 2017 Guidance |
Revenues |
$2.7B -
$3.0B |
|
~$3.2B |
Operating
Income |
$170 -
$190 |
|
~$225 |
Operating
Margin |
|
|
~7.0% |
Net
Income/(Loss)1 |
|
|
~$80 |
Diluted
Income/(Loss) Per Share |
$0.16 -
$0.19 |
|
~$0.29 |
Net
Interest Expense2 |
|
|
~$70 |
Income
Tax Expense |
|
|
~$70 |
EBITDA3 |
$260 -
$290 |
|
~$325 |
|
|
|
|
Cash
Interest / DIC Amortization Interest |
|
|
~$60/
~$10 |
Capex |
$50 -
$70 |
|
~$120 |
Ending
Cash, Restricted Cash and Cash Equivalents |
|
|
~$450 |
Ending
Gross Debt4 |
|
|
~$770 |
Cash from
Operating Activities |
|
|
~$(15) |
Free Cash
Flow3 |
|
|
~$(135) |
Adjusted
Free Cash Flow3 |
|
|
~$(83) |
~ = approximately1 Our forecasted U.S. GAAP net
income attributable to the Company does not include any amount
representing forecasted pension actuarial gain or loss, because we
have no basis to estimate pension actuarial gain or loss amounts
for the forecast period and cannot estimate such amount without
unreasonable effort. 2 Net Interest Expense is gross interest
expense less capitalized interest and interest income.3 The
calculations of EBITDA, Free Cash Flow and Adjusted Free Cash Flow,
which are Non-GAAP measures, are shown in the appendix entitled
“Reconciliation of Forecast Non-GAAP Financial Measures to GAAP
Financial Measures.”4 Ending Gross Debt does not include any
reduction related to debt issuance costs.
In 2017, we expect higher revenue and margins
driven by order intake as well as our responsiveness and
flexibility in meeting customer drivers with associated
rescheduling of work from 2018 into 2017. Our expectations
for capex were increased due to the purchase of the Amazon.
The Amazon purchase capex outflow will be offset by a sale and
leaseback arrangement. Our guidance for 2017 ending cash,
cash from operating activities and free cash flow was negatively
impacted by the additional costs associated with the failed,
supplier-provided, subsea-pipe connector components on the INPEX
Ichthys project. Additionally, we are expecting negative free
cash flow, primarily driven by a large use of working capital
attributable to the ramp-up of the Pemex Abkatun Project and other
projects in Asia and the Middle East. The use of working
capital for Abkatun is expected to be partially offset by specific
project related financing. It is reasonably possible that
costs on the INPEX Ichthys project could increase by an additional
$10 million due to the failed subsea-pipe connector components on
the Ichthys project; however, that is not reflected in guidance at
this time.
Other Financial Information
Weighted average common shares outstanding on a
fully diluted basis were approximately 241.3 million and 238.7
million for the quarters ended December 31, 2016 and 2015,
respectively, and 284.2 million and 238.2 million for the years
ended December 31, 2016 and 2015, respectively. Common shares
for the settlement of the common stock purchase contracts related
to the Tangible Equity Units (“TEUs”) representing 40.8 million
additional shares, as well as other potentially dilutive shares,
were included on an adjusted and unadjusted basis for the year
ended December 31, 2016.
Conference Call
McDermott has scheduled a conference call and
webcast related to its fourth quarter and full-year 2016 results
today at 7:30 a.m. U.S. Central Time. Interested parties may
listen over the Internet through a link posted in the Investor
Relations section of McDermott’s website. A replay of the webcast
will be available for seven days after the call and may be accessed
by dialing (855) 859-2056, Passcode 46148001. In addition, a
presentation will be available on the Investor Relations section of
McDermott’s website that contains supplemental information on
McDermott’s financials, operations and 2017 Guidance.
About the Company
McDermott is a leading provider of integrated
engineering, procurement, construction and installation (“EPCI”),
front-end engineering and design (“FEED”) and module fabrication
services for upstream field developments worldwide. McDermott
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 12,400 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.
Non-GAAP measures are comprised of the total and
diluted per share amounts of adjusted net income (loss)
attributable to the Company and adjusted operating income and
operating income margin for the Company as a whole and each of its
segments, in each case excluding the impact of certain identified
items. The excluded items represent items that our management
does not consider to be representative of our normal
operations. We believe that total and diluted per share
adjusted net income (loss) and adjusted operating income and
operating margin are useful measures for investors to review
because they provide a consistent measure of the underlying
financial results of our ongoing business and, in our management’s
view, allows for a supplemental comparison against historical
results and expectations for future performance. Furthermore, our
management uses adjusted net income (loss) and adjusted operating
income as a measure of the performance of our operations for
budgeting and forecasting, as well as employee incentive
compensation. However, Non-GAAP measures should not 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.
The Forecast non-GAAP measures we have presented
in this press release include forecast free cash flow, adjusted
free cash flow and EBITDA, in each case excluding the impact of
certain identified items. We believe these forward-looking
financial measures are within reasonable measure. 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. Additionally,
adjusted free cash flow represents free cash flow plus cash
expected as a result of the sale leaseback arrangement for the
acquisition of the Amazon vessel. We define EBITDA as net
income plus depreciation and amortization, interest expense, net,
and provision for income taxes. We have included 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. Our
management also uses EBITDA to monitor and compare the financial
performance of our operations. EBITDA does not give effect to
the cash that we must use to service our debt or pay our income
taxes, and thus does reflect the funds actually available for
capital expenditures, dividends or various other purposes. In
addition, our presentation of EBITDA may not be comparable to
similarly titled measures in other companies’ reports. You
should not consider EBITDA in isolation from, or as a substitute
for, net income or cash flow measures prepared in accordance with
U.S. GAAP.
Reconciliations of these non-GAAP financial
measures and forecast non-GAAP financial measures to the most
comparable GAAP measures are provided in the tables 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, among other things, statements about backlog,
bids and change orders outstanding, target projects and revenue
pipeline, to the extent these may be viewed as indicators of future
revenues or profitability, expectations and plans for 2017, the
expected timing and specifications of upgrades to our Altamira
fabrication yard, the expected scope, execution and timing
associated with the projects discussed, the expected utilization of
McDermott’s vessels and McDermott’s earnings and other guidance for
2017 and expectations related thereto. 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 report on Form 10-K
for the year ended December 31, 2016. 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 |
|
|
|
|
|
Year Ended December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
|
(In thousands, except share and per share
amounts) |
|
Revenues |
|
$ |
2,635,983 |
|
|
$ |
3,070,275 |
|
|
$ |
2,300,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations |
|
|
2,249,616 |
|
|
|
2,691,284 |
|
|
|
2,113,013 |
|
Selling,
general and administrative expenses |
|
|
178,752 |
|
|
|
217,239 |
|
|
|
208,564 |
|
Impairment loss (recovery) |
|
|
54,958 |
|
|
|
6,808 |
|
|
|
(9,002 |
) |
Loss
(gain) on asset disposals |
|
|
(859 |
) |
|
|
1,443 |
|
|
|
(46,201 |
) |
Restructuring expenses |
|
|
11,263 |
|
|
|
40,819 |
|
|
|
18,113 |
|
Total
costs and expenses |
|
|
2,493,730 |
|
|
|
2,957,593 |
|
|
|
2,284,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
142,253 |
|
|
|
112,682 |
|
|
|
16,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
(58,871 |
) |
|
|
(50,058 |
) |
|
|
(60,877 |
) |
Gain
(loss) on foreign currency, net |
|
|
(5,556 |
) |
|
|
(464 |
) |
|
|
7,234 |
|
Other
income (expense), net |
|
|
4,489 |
|
|
|
2,450 |
|
|
|
(232 |
) |
Total
other expense |
|
|
(59,938 |
) |
|
|
(48,072 |
) |
|
|
(53,875 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
provision for income taxes |
|
|
82,315 |
|
|
|
64,610 |
|
|
|
(37,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
41,926 |
|
|
|
51,963 |
|
|
|
20,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
loss from Investments in Unconsolidated Affiliates |
|
|
40,389 |
|
|
|
12,647 |
|
|
|
(57,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Investments
in Unconsolidated Affiliates |
|
|
(4,090 |
) |
|
|
(21,486 |
) |
|
|
(7,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
36,299 |
|
|
|
(8,839 |
) |
|
|
(65,394 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net
income attributable to noncontrolling interest |
|
|
2,182 |
|
|
|
9,144 |
|
|
|
10,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
$ |
34,117 |
|
|
$ |
(17,983 |
) |
|
$ |
(75,994 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.14 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.32 |
) |
Diluted |
|
$ |
0.12 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
computation of net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
240,359,363 |
|
|
|
238,240,763 |
|
|
|
237,229,086 |
|
Diluted |
|
|
284,184,239 |
|
|
|
238,240,763 |
|
|
|
237,229,086 |
|
McDERMOTT INTERNATIONAL, INC. |
|
EARNINGS PER SHARE COMPUTATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
December 31, |
|
|
December 31, |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
(In thousands, except share and per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
$ |
(476 |
) |
|
$ |
(18,668 |
) |
|
$ |
34,117 |
|
|
$ |
(17,983 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares (basic) |
|
241,258,644 |
|
|
|
238,670,881 |
|
|
|
240,359,363 |
|
|
|
238,240,763 |
|
Effect of
dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
equity units |
|
- |
|
|
|
- |
|
|
|
40,824,938 |
|
|
|
- |
|
Stock
options, restricted stock and restricted stock units |
|
- |
|
|
|
- |
|
|
|
2,999,938 |
|
|
|
- |
|
Adjusted weighted
average common shares and assumed exercises of stock options and
vesting of stock awards (diluted) |
|
241,258,644 |
|
|
|
238,670,881 |
|
|
|
284,184,239 |
|
|
|
238,240,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
$ |
(0.00 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.14 |
|
|
$ |
(0.08 |
) |
Diluted: |
$ |
(0.00 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.12 |
|
|
$ |
(0.08 |
) |
SUPPLEMENTARY DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Dec 31, |
|
|
Year Ended Dec 31, |
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
(In thousands) |
|
|
(In thousands) |
Depreciation &
amortization expense |
$ |
22,990 |
|
|
$ |
24,352 |
|
|
$ |
89,882 |
|
|
$ |
100,334 |
Drydock
amortization |
|
2,932 |
|
|
|
4,037 |
|
|
|
12,795 |
|
|
|
17,947 |
Capital
expenditures |
|
30,686 |
|
|
|
36,733 |
|
|
|
228,079 |
|
|
|
102,851 |
Backlog |
|
4,321,851 |
|
|
|
4,231,447 |
|
|
|
4,321,851 |
|
|
|
4,231,447 |
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2016 |
|
|
December 31,2015 |
|
|
|
(In thousands, except share and per share
amounts) |
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
595,921 |
|
|
$ |
664,844 |
|
Restricted cash and cash equivalents |
|
|
16,412 |
|
|
|
116,801 |
|
Accounts receivable—trade, net |
|
|
334,384 |
|
|
|
208,474 |
|
Accounts receivable—other |
|
|
36,929 |
|
|
|
66,689 |
|
Contracts in progress |
|
|
319,138 |
|
|
|
435,829 |
|
Other current assets |
|
|
29,599 |
|
|
|
34,641 |
|
Total current assets |
|
|
1,332,383 |
|
|
|
1,527,278 |
|
Property, plant
and equipment |
|
|
2,586,179 |
|
|
|
2,467,352 |
|
Less accumulated depreciation |
|
|
(898,878 |
) |
|
|
(856,493 |
) |
Property, plant and equipment, net |
|
|
1,687,301 |
|
|
|
1,610,859 |
|
Accounts
receivable—long-term retainages |
|
|
127,193 |
|
|
|
155,061 |
|
Investments in
Unconsolidated Affiliates |
|
|
17,023 |
|
|
|
26,551 |
|
Deferred income
taxes |
|
|
21,116 |
|
|
|
18,822 |
|
Other assets |
|
|
37,214 |
|
|
|
48,505 |
|
Total assets |
|
$ |
3,222,230 |
|
|
$ |
3,387,076 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Notes payable and current maturities of long-term debt |
|
$ |
48,125 |
|
|
$ |
24,882 |
|
Accounts payable |
|
|
173,203 |
|
|
|
279,821 |
|
Accrued liabilities |
|
|
277,584 |
|
|
|
330,943 |
|
Advance billings on contracts |
|
|
192,486 |
|
|
|
164,773 |
|
Income taxes payable |
|
|
17,945 |
|
|
|
23,787 |
|
Total current liabilities |
|
|
709,343 |
|
|
|
824,206 |
|
Long-term
debt |
|
|
704,395 |
|
|
|
819,001 |
|
Self-insurance |
|
|
16,980 |
|
|
|
18,653 |
|
Pension
liabilities |
|
|
19,471 |
|
|
|
24,066 |
|
Non-current
income taxes |
|
|
60,870 |
|
|
|
52,559 |
|
Other
liabilities |
|
|
115,703 |
|
|
|
101,870 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
|
Common stock, par value $1.00 per share, authorized
400,000,000 shares; |
|
|
|
|
|
|
|
|
issued 249,690,281 and 246,841,128 shares, respectively |
|
|
249,690 |
|
|
|
246,841 |
|
Capital in excess of par value (including prepaid common
stock purchase contracts) |
|
1,695,119 |
|
|
|
1,687,059 |
|
Accumulated deficit |
|
|
(226,767 |
) |
|
|
(260,884 |
) |
Accumulated other comprehensive loss |
|
|
(66,895 |
) |
|
|
(93,955 |
) |
Treasury stock, at cost: 8,302,004 and 7,824,204 shares,
respectively |
|
|
(94,957 |
) |
|
|
(92,262 |
) |
Stockholders' Equity—McDermott International, Inc. |
|
|
1,556,190 |
|
|
|
1,486,799 |
|
Noncontrolling interest |
|
|
39,278 |
|
|
|
59,922 |
|
Total equity |
|
|
1,595,468 |
|
|
|
1,546,721 |
|
Total liabilities and equity |
|
$ |
3,222,230 |
|
|
$ |
3,387,076 |
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
|
|
Year Ended December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
|
(In thousands) |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
36,299 |
|
|
$ |
(8,839 |
) |
|
$ |
(65,394 |
) |
Non-cash items included
in net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
89,882 |
|
|
|
100,334 |
|
|
|
93,185 |
|
Drydock
amortization |
|
|
12,795 |
|
|
|
17,947 |
|
|
|
19,719 |
|
Impairment loss (recovery) |
|
|
54,958 |
|
|
|
6,808 |
|
|
|
(9,002 |
) |
Stock-based compensation charges |
|
|
22,680 |
|
|
|
16,593 |
|
|
|
18,565 |
|
Loss from
investments in Unconsolidated Affiliates |
|
|
4,090 |
|
|
|
21,486 |
|
|
|
7,848 |
|
(Gain)
loss on foreign currency, net |
|
|
(5,984 |
) |
|
|
6,238 |
|
|
|
(10,310 |
) |
Restructuring expense (gain) |
|
|
(1,350 |
) |
|
|
7,473 |
|
|
|
(2,310 |
) |
Loss
(gain) on asset disposals |
|
|
(859 |
) |
|
|
1,443 |
|
|
|
(46,201 |
) |
Deferred
income taxes |
|
|
(2,695 |
) |
|
|
3,525 |
|
|
|
891 |
|
Pension
(gain) expense |
|
|
(3,228 |
) |
|
|
19,821 |
|
|
|
(4,291 |
) |
Debt
issuance cost amortization |
|
|
13,141 |
|
|
|
12,767 |
|
|
|
22,915 |
|
Other
non-cash items |
|
|
(5,392 |
) |
|
|
1,269 |
|
|
|
686 |
|
Changes in operating
assets and liabilities that provided (used) cash: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(89,776 |
) |
|
|
(82,697 |
) |
|
|
166,385 |
|
Contracts
in progress, net of Advance billings on contracts |
|
|
144,412 |
|
|
|
(113,338 |
) |
|
|
(10,695 |
) |
Accounts
payable |
|
|
(101,845 |
) |
|
|
78,646 |
|
|
|
(154,439 |
) |
Accrued
and other current liabilities |
|
|
(37,064 |
) |
|
|
(33,969 |
) |
|
|
(2,801 |
) |
Pension
liability |
|
|
(1,684 |
) |
|
|
(1,506 |
) |
|
|
(1,861 |
) |
Income
taxes |
|
|
2,469 |
|
|
|
1,778 |
|
|
|
(4,668 |
) |
Other
assets and liabilities, net |
|
|
47,330 |
|
|
|
(507 |
) |
|
|
(11,262 |
) |
Total cash provided by operating activities |
|
|
178,179 |
|
|
|
55,272 |
|
|
|
6,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment |
|
|
(228,079 |
) |
|
|
(102,851 |
) |
|
|
(321,187 |
) |
Investments in
unconsolidated affiliates |
|
|
(5,093 |
) |
|
|
(7,038 |
) |
|
|
(2,420 |
) |
Proceeds from asset
dispositions |
|
|
2,366 |
|
|
|
10,724 |
|
|
|
71,961 |
|
Sales and maturities of
available-for-sale securities |
|
|
- |
|
|
|
3,176 |
|
|
|
12,978 |
|
Purchases of
available-for-sale securities |
|
|
- |
|
|
|
- |
|
|
|
(3,695 |
) |
Other investing
activities |
|
|
- |
|
|
|
417 |
|
|
|
(2,706 |
) |
Total cash used in investing activities |
|
|
(230,806 |
) |
|
|
(95,572 |
) |
|
|
(245,069 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
(103,020 |
) |
|
|
(26,938 |
) |
|
|
(298,534 |
) |
Proceeds from debt |
|
|
- |
|
|
|
- |
|
|
|
1,328,875 |
|
Repurchase of common
stock |
|
|
(4,022 |
) |
|
|
(1,720 |
) |
|
|
(1,707 |
) |
Payment of debt
issuance costs |
|
|
(8,730 |
) |
|
|
(170 |
) |
|
|
(39,112 |
) |
Distributions to
noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
(6,352 |
) |
Issuance of common
stock |
|
|
- |
|
|
|
682 |
|
|
|
327 |
|
Acquisition of
noncontrolling interest |
|
|
- |
|
|
|
(24 |
) |
|
|
(32,943 |
) |
Total cash provided by (used in) financing
activities |
|
|
(115,772 |
) |
|
|
(28,170 |
) |
|
|
950,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash, cash equivalents and restricted
cash |
|
|
(913 |
) |
|
|
(2,779 |
) |
|
|
(1,905 |
) |
Net increase
(decrease) in cash, cash equivalents and restricted
cash |
|
|
(169,312 |
) |
|
|
(71,249 |
) |
|
|
710,540 |
|
Cash, cash
equivalents and restricted cash at beginning of year |
|
|
781,645 |
|
|
|
852,894 |
|
|
|
142,354 |
|
Cash, cash
equivalents and restricted cash at end of year |
|
$ |
612,333 |
|
|
$ |
781,645 |
|
|
$ |
852,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McDERMOTT INTERNATIONAL,
INC.RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL
MEASURES
McDermott reports its financial results in
accordance with the U.S. generally accepted accounting principles
(“GAAP”). This press release also includes several Non-GAAP
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 |
|
|
Year Ended |
|
|
Dec 31, 2016 |
|
|
Dec 31, 2015 |
|
|
Dec 31, 2016 |
|
|
Dec 31, 2015 |
|
(In thousands,
except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income
Attributable to MDR |
$ |
(476 |
) |
|
$ |
(18,668 |
) |
|
$ |
34,117 |
|
|
$ |
(17,983 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges1 |
|
576 |
|
|
|
8,693 |
|
|
|
11,263 |
|
|
|
40,819 |
|
Impairment loss2 |
|
10,889 |
|
|
|
- |
|
|
|
54,958 |
|
|
|
6,808 |
|
Gain on
JV exit3 |
|
- |
|
|
|
- |
|
|
|
(5,003 |
) |
|
|
- |
|
Legal
settlement4 |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,682 |
|
Non-cash
actuarial loss (gain) on benefit plans5 |
|
(5,391 |
) |
|
|
26,013 |
|
|
|
(5,391 |
) |
|
|
26,013 |
|
Total Non-GAAP Adjustments |
|
6,074 |
|
|
|
34,706 |
|
|
|
55,827 |
|
|
|
90,322 |
|
Tax
Effect of Non-GAAP Changes6 |
|
(10 |
) |
|
|
(759 |
) |
|
|
(536 |
) |
|
|
(1,142 |
) |
Total
Non-GAAP Adjustments (After Tax) |
|
6,064 |
|
|
|
33,947 |
|
|
|
55,291 |
|
|
|
89,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted Net Income Attributable to MDR |
$ |
5,588 |
|
|
$ |
15,279 |
|
|
$ |
89,408 |
|
|
$ |
71,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
Income |
$ |
6,217 |
|
|
$ |
16,277 |
|
|
$ |
142,253 |
|
|
$ |
112,682 |
|
Non-GAAP
Adjustments7 |
|
6,074 |
|
|
|
34,706 |
|
|
|
60,830 |
|
|
|
90,322 |
|
Non-GAAP
Adjusted Operating Income |
$ |
12,291 |
|
|
$ |
50,983 |
|
|
$ |
203,083 |
|
|
$ |
203,004 |
|
Non-GAAP
Adjusted Operating Margin |
|
1.9 |
% |
|
|
7.6 |
% |
|
|
7.7 |
% |
|
|
6.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
(0.00 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.12 |
|
|
$ |
(0.08 |
) |
Non-GAAP
Adjustments |
|
0.02 |
|
|
|
0.13 |
|
|
|
0.19 |
|
|
|
0.33 |
|
Non-GAAP
Diluted EPS8 |
$ |
0.02 |
|
|
$ |
0.05 |
|
|
$ |
0.31 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
241,258,644 |
|
|
|
238,670,881 |
|
|
|
240,359,363 |
|
|
|
238,240,763 |
|
Diluted |
|
285,563,031 |
|
|
|
282,701,538 |
|
|
|
284,184,239 |
|
|
|
281,531,013 |
|
1 Restructuring charges were primarily associated with personnel
reductions, facility closures, consultant fees, lease terminations
and asset impairments.2 Impairment Charges:
- During the third and fourth quarters of 2016, we recognized
impairment charges of $11.8 million and $10.9 million,
respectively, related to certain marine assets after we determined
that their carrying values were either not recoverable or exceeded
their respective fair values;
- During the first quarter of 2016, we recognized $32.3 million
of impairment charge related to our Agile vessel following the
customer’s termination of the vessel charter in May 2016 and given
the lack of opportunities for this vessel. The Agile was
decommissioned and disposed of in the third quarter of 2016;
and
- During 2015, we abandonment of a marine pipelay welding system
project and recognized a $6.8 million impairment charge.
3 During the third quarter of 2016, we mutually
and amicably exited our joint venture with THF, a subsidiary of
THHE, in Malaysia. We sold our THF interest to THHE and recognized
a $5.0 million gain is recorded in Other income (expense), net.
This gain is not expected to be repeated in the future. 4 Costs
related to a legal settlement of $16.7 million were recorded during
the third quarter of 20155 Our Non-GAAP measures exclude 100% of
pension actuarial loss (gain) included in our Consolidated
Financial Statements. The $5.4 million gain from year-end MTM
pension adjustments for the quarter and year ended December 31,
2016, and $26.0 million loss from year-end MTM pension adjustments
for the quarter and year ended December 31, 2015. These adjustments
are recorded in selling, general and administrative expenses in the
fourth quarter of each respective year in accordance with our
pension accounting policy. Actuarial gains and losses are primarily
driven by changes in the actuarial assumptions, discount rates and
actual return on pension assets. The $5.4 million 2016 MTM
adjustment was comprised of a $4.5 million gain on our pension plan
assets and $0.9 million of lower actuarial pension liabilities. The
$4.5 million of MTM adjustment is the difference between $21.6
million of expected return on pension plan assets recognized during
2016 and a $26.1 million actual gain on plan assets as of December
31, 2016. The $26.0 million of 2015 MTM adjustment for actuarial
loss was comprised of a $52.0 million actuarial loss on our pension
plan assets, partially offset by a $26.0 million gain due to an
increase in discount rates. The $52.0 million actuarial loss on our
pension plan assets is the difference between $29.5 million of
expected return on pension plan assets recognized during 2015 and
$22.5 million of actuarial loss on plan assets as of December 31,
2015. Our non-GAAP pension adjustment does not include $1.0 million
and $6.2 million of net pension benefit recognized during 2016 and
2015, respectively, related to expected return on plan assets net
of interest costs for our non-contributory defined benefit pension
plans.6 Represents tax effects of Non-GAAP adjustments. The
Non-GAAP adjusting items are primarily attributable to tax
jurisdictions in which we currently do not pay taxes and,
therefore, no tax impact is applied to them. For the Non-GAAP
adjusting items in jurisdictions where taxes are paid, the tax
impacts on those adjustments are computed, individually, using the
statutory tax rate in effect in each applicable taxable
jurisdiction.7 Includes the Non-GAAP adjustments described in
footnotes 1, 2, 4, and 5 above. The $5.0 million adjustment
described in footnote 3 above was excluded as the gain was
reflected in Other Income (expense), net in our Consolidated
Statement of Operations and thus was excluded from operating
income.8 Diluted EPS is calculated using a share count determined
by whether the period has a net income or a net loss. In the
event of net income, Diluted EPS uses the fully diluted share
count; however, in the event of a net loss, the potentially
dilutive shares are excluded from the share count as they are
anti-dilutive.
|
|
McDERMOTT INTERNATIONAL,
INC.RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL
MEASURES |
|
|
|
|
Three Months Ended Dec 31, 2016 |
|
|
Year Ended Dec 31, 2016 |
|
($ in
thousands) |
AEA |
|
|
MEA |
|
|
ASA |
|
|
AEA |
|
|
MEA |
|
|
ASA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
66,854 |
|
|
$ |
318,771 |
|
|
$ |
256,156 |
|
|
$ |
285,988 |
|
|
$ |
1,241,591 |
|
|
$ |
1,108,404 |
|
GAAP Operating
Income (Loss) |
|
(3,192 |
) |
|
|
37,719 |
|
|
|
(28,263 |
) |
|
|
(29,829 |
) |
|
|
166,774 |
|
|
|
8,569 |
|
GAAP Operating
Margin |
|
-4.8 |
% |
|
|
11.8 |
% |
|
|
-11.0 |
% |
|
|
-10.4 |
% |
|
|
13.4 |
% |
|
|
0.8 |
% |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring1,2 |
|
468 |
|
|
|
- |
|
|
|
108 |
|
|
|
2,663 |
|
|
|
17 |
|
|
|
5,369 |
|
Impairment3 |
|
10,661 |
|
|
|
- |
|
|
|
228 |
|
|
|
42,972 |
|
|
|
- |
|
|
|
11,986 |
|
Actuarial loss (gain)
on benefit plans4 |
|
(4,584 |
) |
|
|
(807 |
) |
|
|
- |
|
|
|
(4,584 |
) |
|
|
(807 |
) |
|
|
- |
|
Total Non-GAAP
Adjustments1 |
|
6,545 |
|
|
|
(807 |
) |
|
|
336 |
|
|
|
41,051 |
|
|
|
(790 |
) |
|
|
17,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Operating Income (Loss)1 |
$ |
3,353 |
|
|
$ |
36,912 |
|
|
$ |
(27,927 |
) |
|
$ |
11,222 |
|
|
$ |
165,984 |
|
|
$ |
25,924 |
|
Non-GAAP Adjusted
Operating Margin |
|
5.0 |
% |
|
|
11.6 |
% |
|
|
-10.9 |
% |
|
|
3.9 |
% |
|
|
13.4 |
% |
|
|
2.3 |
% |
1 Segment restructuring charges excludes Corporate and other
restructuring charges2 Restructuring charges were primarily
associated with personnel reductions, facility closures, consultant
fees, lease terminations and asset impairments.3 Impairment:
- AEA Segment – During the fourth quarter of 2016, we impaired
certain marine assets given the lack of opportunities and
recognized a $10.7 million impairment charge. We recognized a
$32.3 million impairment charge during the first quarter of 2016
related to our Agile vessel following the customer’s termination of
the vessel charter in May 2016 and lack of opportunities for the
vessel. The Agile was decommissioned and disposed of in the
third quarter of 2016.
- ASA Segment – In the fourth quarter of 2016, a $0.2 million
impairment charge was recognized on miscellaneous equipment.
An $11.8 million impairment charge was recognized in the third
quarter of 2016 as we determined the carrying values of certain
marine assets were not recoverable and exceeded their respective
fair values.
4 $5.4 million in gain was recorded in the
quarter ended December 31, 2016, as a result of non-cash actuarial
MTM adjustments related to pension plans.
McDERMOTT INTERNATIONAL,
INC.RECONCILIATION OF FORECAST NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES |
|
|
Full-Year 2017 Guidance |
(In
millions) |
|
|
|
Cash flows from
operating activities |
~$(15) |
Capital
expenditures |
~120 |
Free cash
flow |
~$(135) |
Cash
received from Amazon sale leaseback arrangement |
~52 |
Adjusted free
cash flow |
~$(83) |
|
|
GAAP Net Income
(Loss) Attributable to the Company |
~$80 |
Add: |
|
Depreciation and amortization |
~105 |
Interest
expense, net |
~70 |
Provision
for taxes |
~70 |
EBITDA |
~$325 |
CONTACT:
Investors & Financial Media
Kathy Murray
Vice President, Treasurer and Investor Relations
281.870.5147
kamurray@mcdermott.com
McDermott (NYSE:MDR)
Historical Stock Chart
From Aug 2024 to Sep 2024
McDermott (NYSE:MDR)
Historical Stock Chart
From Sep 2023 to Sep 2024