Strong Start to 2017 with Increased Guidance due
to Increased Profitability and Cash Flow
McDermott International, Inc. (NYSE:MDR) (“McDermott,” the
“Company,” “we” or “us”) today announced financial and operational
results for the first quarter ended March 31, 2017.
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($ in millions, except per share amounts) |
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Three Months Ended |
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Delta |
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Mar 31, 2017 |
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Mar 31, 2016 |
|
|
Yr-over-Yr |
|
Revenues |
$ |
519.4 |
|
|
$ |
729.0 |
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$ |
(209.6 |
) |
Operating Income |
|
56.0 |
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|
36.0 |
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|
20.0 |
|
Operating Margin |
|
10.8 |
% |
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|
4.9 |
% |
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|
5.9 |
% |
Net Income (Loss)
Attributable to McDermott |
|
21.9 |
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|
|
(2.2 |
) |
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|
24.1 |
|
Diluted EPS |
|
0.08 |
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|
|
(0.01 |
) |
|
|
0.09 |
|
Adjusted Operating
Income1 |
|
56.0 |
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|
|
74.7 |
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(18.7 |
) |
Adjusted Operating
Margin1 |
|
10.8 |
% |
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|
10.2 |
% |
|
|
0.6 |
% |
Adjusted Net Income
Attributable to McDermott1,2 |
|
21.9 |
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|
36.3 |
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(14.4 |
) |
Adjusted Diluted
EPS1,2 |
|
0.08 |
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|
0.13 |
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(0.05 |
) |
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Cash Provided (Used) by
Operating Activities |
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48.5 |
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59.3 |
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(10.8 |
) |
1 Adjusted
Operating Income and Adjusted Net Income include the following
adjustments to Operating Income computed in accordance with U.S.
generally accepted accounting principles (“GAAP”) and GAAP Net
Income, respectively: |
|
• $6.4 million
of restructuring charges during the first quarter of 2016.•
$32.3 million of impairment charges during the first quarter of
2016. |
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. 2 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. |
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“McDermott saw a profitable and strategic start
to 2017 and I am extremely pleased with our first quarter
performance. Excellent project execution and customer
alignment led to cost savings, better than anticipated closeouts
and customer driven change orders, driving McDermott’s
profitability. Over the past few years, we have worked to
stabilize and optimize the business and are now taking long-term
strategic steps to transform McDermott for sustainability and
growth,” said David Dickson, President and Chief Executive Officer
of McDermott. “During the first quarter, we signed a
strategic Memorandum of Understanding (“MOU”) with Saudi Aramco for
a land lease at the new maritime facility at Ras Al Khair in Saudi
Arabia, which we believe strengthens our leadership position in the
Middle East. We announced the strategic acquisition and sale
leaseback of the Amazon vessel to build our ultradeepwater
capabilities when upgraded as planned; and we also began
implementation of a first-of-its-kind project lifecycle management
software platform that will leverage data and analytics to improve
efficiency and productivity and create a digital twin to mirror the
as-built physical state with a living, up-to-date 3D model.
This new technology will position McDermott as a valued partner for
our customers from concept to decommissioning. Additionally,
with continued focus on our Taking the Lead quality and safety
culture, we achieved an outstanding full year LTI-free as a
company. While there were limited material contracts awarded
in our market during the quarter, we still see a solid revenue
pipeline, and these strategic investments help position McDermott
for continued success as the market
recovers.”
First Quarter 2017 Operating
Results
First quarter 2017 earnings attributable to
McDermott stockholders, computed in accordance with U.S. generally
accepted accounting principles (“GAAP”), were $21.9 million, or
$0.08 per fully diluted share, compared to a net loss of $2.2
million, or $0.01 per fully diluted share, for the prior-year first
quarter. We generated first quarter 2017 net income of $21.9
million, or $0.08 per fully diluted share, for which there were no
adjustments from GAAP, compared to an adjusted net income of $36.3
million, or $0.13 per adjusted fully diluted share, excluding
restructuring charges of $6.4 million and impairment charges of
$32.3 million, in the prior-year first quarter.
The Company reported first quarter 2017 revenues
of $519.4 million, a decrease of $209.6 million, compared to
revenues of $729.0 million for the prior-year first quarter.
The key projects driving revenue for the first quarter of 2017 were
the ONGC Vashishta, Saudi Aramco Long Term Agreement II (“LTA II”),
KJO Hout and INPEX Ichthys projects. The decrease from the
prior-year first quarter is primarily due to reduced activity on
Ichthys as the project progresses through the installation
phase.
Our operating income for the first quarter of
2017 was $56.0 million, or an operating margin of 10.8%, compared
to $36.0 million, or an operating margin of 4.9%, for the first
quarter of 2016. Our operating income for the first quarter
of 2017 was $56.0 million, or an operating margin of 10.8%, for
which there were no adjustments from GAAP, compared to $74.7
million, or an adjusted operating margin of 10.2%, for the
first quarter of 2016, excluding the restructuring charges and
impairment mentioned above. Operating income for the first
quarter of 2017 was primarily driven by fabrication and marine
activity under the Saudi Aramco LTA II, marine activity on Karan-45
and progress on the Marjan power system replacement, fabrication
activity on Yamal and fabrication on Abkatun-A2. These
activities were partially offset by a decrease in activity on
Ichthys and a decrease in active projects in AEA compared to the
same quarter last year.
Cash provided by operating activities in the
first quarter of 2017 was $48.5 million, a decrease compared to the
$59.3 million of cash provided in the first quarter of
2016. The decrease was primarily driven by higher receivable
collections from Pemex in the first quarter of 2016 compared to the
first quarter of 2017.
Operational Review
We report financial results under three
reportable segments consisting of (1) the Americas, Europe and
Africa (“AEA”), (2) the Middle East (“MEA”) and (3) Asia (“ASA”).
We also report certain corporate and other non-operating activities
under the heading “Corporate and Other”. Corporate and Other
primarily reflects costs that are not allocated to our reportable
segments.
In the first quarter of 2017, we implemented
changes to our financial reporting structure to better align with
how we operate the business. Corporate expenses, certain centrally
managed initiatives (such as restructuring charges), impairments,
year-end mark-to-market (“MTM”) pension actuarial gains and losses,
costs not attributable to a particular reportable segment, and
unallocated direct operating expenses associated with the
underutilization of vessels, fabrication facilities and engineering
resources, are no longer apportioned to our reportable segments.
Those expenses are now reported under “Corporate and Other”.
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Revenue
Pipeline |
As of March 31, 2017 |
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AEA |
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MEA |
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ASA |
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Total |
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($ in billions) |
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Backlog |
$ |
0.5 |
|
|
$ |
2.8 |
|
|
$ |
0.6 |
|
|
$ |
3.9 |
|
Bids & Change
Orders Outstanding |
|
1.6 |
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|
1.0 |
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|
0.5 |
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3.1 |
|
Targets |
|
4.6 |
|
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|
5.1 |
|
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|
2.9 |
|
|
|
12.6 |
|
Total |
|
6.7 |
|
|
|
8.9 |
|
|
|
4.0 |
|
|
|
19.6 |
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Operating
Results |
Three Months Ended March 31,
2017 |
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Segment Operating Results |
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Corporate &Other1 |
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AEA |
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MEA |
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ASA |
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($ in millions) |
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New Orders |
$ |
25.6 |
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|
$ |
50.4 |
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|
$ |
20.0 |
|
|
$ |
- |
|
Revenue |
|
28.1 |
|
|
|
310.1 |
|
|
|
181.2 |
|
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|
- |
|
Book-to-Bill |
|
0.9 |
x |
|
|
0.2 |
x |
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|
0.1 |
x |
|
|
- |
|
Operating Income |
|
0.2 |
|
|
|
64.4 |
|
|
|
29.8 |
|
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(38.4 |
) |
Operating Margin |
|
0.7 |
% |
|
|
20.8 |
% |
|
|
16.4 |
% |
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|
- |
|
Capex |
|
5.3 |
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|
5.9 |
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3.5 |
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48.2 |
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1
“Corporate and Other” includes corporate expenses, certain
centrally managed initiatives (such as restructuring charges),
impairments, year-end mark-to-market (“MTM”) pension actuarial
gains and losses, costs not attributable to a particular reportable
segment, and unallocated direct operating expenses associated with
the underutilization of vessels, fabrication facilities and
engineering resources. |
|
As of March 31, 2017, the Company’s backlog was
$3.9 billion, compared to $4.3 billion at December 31, 2016. Of the
March 31, 2017 backlog, approximately 85% was related to offshore
operations and approximately 15% was related to subsea operations.
Order intake in the first quarter of 2017 totaled $96 million,
resulting in a book-to-bill ratio of 0.2x. At March 31,
2017, the Company had bids outstanding and target projects of
approximately $3.1 billion and $12.6 billion, respectively, in its
pipeline that it expects will be awarded in the market through June
30, 2018. In total, the Company’s potential revenue pipeline,
including backlog, was $19.6 billion as of March 31, 2017.
In the Americas, Europe and Africa (“AEA”) Area,
during the first quarter of 2017, detail design and fabrication of
the compression platform for the Abkatun-A2 project progressed with
the project continuing to advance on schedule. Front-end
engineering and design (“FEED”) and early detailed engineering for
a Caribbean gas development continued throughout the quarter and is
progressing ahead of plan. During the quarter, we were
awarded the Hess Penn State subsea scope, which includes
installation of a rigid pipeline that is scheduled to be fabricated
in our Gulfport Spoolbase and reeled onto the NO 105 for
installation offshore. The project scope also includes
installation of a 4,500 foot umbilical and four electrical flying
leads, fabrication and installation of two pipeline end
terminations (“PLETS”) and pipeline pre-commissioning and system
start-up support. In our Altamira fabrication yard, upgrades to
increase skidway and loadout capabilities are substantially
complete, and the blast and paint facility foundations and framing
have been installed. These upgrades are on track for completion
early in the second quarter of 2017.
In the Middle East (“MEA”) Area, fabrication
activity increased steadily through the first quarter, with the
Jebel Ali and Dammam facilities operating at high levels of
utilization. Regional marine assets continued to operate in
Qatar, Saudi Arabia and the Khafji Neutral Zone. Qatar marine
activity was focused on the RasGas Flow Assurance and Looping
project, with the umbilical installation scope completed ahead of
schedule. Additionally, the DLV 2000 has now relocated to the
Middle East, where she is expected to remain busy on existing
contracts for most of 2017. Installation of the KJO Hout
structures was completed during the quarter, with pipeline activity
and platform hook up and commissioning still remaining.
Project completion is still expected in the second quarter of
2017. Engineering and procurement on the Saudi Aramco Lump
Sum LTA II project are in the final stages, with focus now
transitioning to fabrication. Progress on the three Saudi
Aramco projects awarded in the second quarter of 2016 remains on
target. The Safaniya Phase 5 and 4 Jackets and 3 Observation
Platforms projects are in the engineering and procurement phases,
with both slightly ahead of the overall planned progress. The
Area’s exceptional QHSES performance was maintained through the
quarter, now reaching 54 million man hours lost time incident
(“LTI”) free.
In the Asia (“ASA”) Area, during the first
quarter of 2017, the LV 108 carried out subsea construction and
pre-commissioning works to prepare for the arrival of the floating
facilities on the INPEX Ichthys project. Also on Ichthys, we
continued working collaboratively with INPEX and the supplier to
rectify the subsea connector component issue identified in January
2017. Engineering, procurement and fabrication of the pre-lay
structures, in-line tees (“ILTs”) and PLETs for the Woodside
Greater Western Flank Phase 2 pipeline project commenced in
February, and the project is progressing on schedule. In
India, the ONGC Vashishta project continues to achieve significant
progress with the completion of the shallow water section of
pipelines and umbilical installation by the DB 30. The
fabrication of pipe stalks for the deepwater pipelay was completed
utilizing McDermott’s mobile spoolbase in our consortium partner
Larsen & Toubro’s fabrication yard in Kattupalli, along with
the first and second loadouts onboard the NO 105. The NO 105
also completed the installation of the first two deepwater pipeline
sections and continues to install the remaining two. The DB
30 is scheduled to mobilize at the end of April 2017 for the Brunei
Shell Petroleum offshore pipelines installation. In our Batam
fabrication yard, fabrication of the modules for the Yamal LNG
project is reaching the final completion stage with sailaway
scheduled in April 2017. Also in Batam, the fabrication of 14
jackets for Saudi Aramco is progressing well, with 3 of the 14
jackets complete and sailed on a fast transport vessel to Ras
Tanura, Saudi Arabia.
In the first quarter of 2017 for Corporate and
Other, costs were mainly attributable to selling, general, and
administrative costs of $12.9 million and unallocated direct
operating expenses of $27.3 million. Unallocated direct operating
expenses were primarily driven by the underutilization of marine
assets which incurred less than standard activity during the first
quarter. These expenses were offset by a gain of $3.4 million on
the sale of certain thrusters.
2017 Guidance
($ in millions, except per share amounts or as
indicated for revenues)
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Initial FY'17 Guidance |
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Updated FY'17 Guidance |
Revenues |
~$3.2B |
|
~$3.2B |
Operating Income |
~$225 |
|
~$265 |
Operating Margin |
~7.0% |
|
~8.0% |
Net Income1 |
~$80 |
|
~$120 |
Diluted Income Per
Share |
~$0.29 |
|
~$0.42 |
|
|
|
|
Debt
Measures |
|
|
|
Net Interest
Expense2 |
~$70 |
|
~$70 |
Cash Interest / DIC
Amortization Interest |
~$60/
~$10 |
|
~$60/
~$10 |
Ending Cash, Restricted
Cash and Cash Equivalents |
~$450 |
|
~$550 |
Ending Gross Debt3 |
~$770 |
|
~$770 |
|
|
|
|
Other Financial
Measures |
|
|
|
Income Tax Expense |
~$70 |
|
~$70 |
EBITDA4 |
~$325 |
|
~$365 |
Cash from Operating
Activities |
~$(15) |
|
~$85 |
Capex |
~$120 |
|
~$120 |
Free Cash Flow4 |
~$(135) |
|
~$(35) |
Adjusted Free Cash
Flow4 |
~$(83) |
|
~$17 |
Corporate and
Other5 |
NA |
|
~$(190) |
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~ =
approximately1 Our forecasted GAAP net income attributable to
McDermott does not include any amount representing 2017 year end
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 Ending Gross Debt
excludes debt issuance costs.4 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.”5
“Corporate and Other” includes corporate expenses, certain
centrally managed initiatives (such as restructuring charges),
impairments, year-end mark-to-market (“MTM”) pension actuarial
gains and losses, costs not attributable to a particular reportable
segment, and unallocated direct operating expenses associated with
the underutilization of vessels, fabrication facilities and
engineering resources. |
|
The increase in 2017 guidance is mainly
attributable to increased profitability and cash flow due to
closeouts from excellent project execution in the first quarter of
2017, as well as customer driven change orders awarded this
quarter. While we expect change orders, close-outs and
settlements to continue as part of our normal business activities,
the period in which they are recognized is largely driven by the
finalization of agreements with customers and suppliers and, as a
result, is difficult to predict.
We previously reported it was reasonably
possible costs on the INPEX Ichthys project could increase by an
additional $10 million due to a failure identified in a
supplier-provided subsea-pipe connector component, which had
previously been installed. However, we have continued to mitigate
the $10 million risk and now believe the range of reasonably
possible additional costs has decreased to $5 million.
Costs forecasted under Corporate and Other
include $115 million of unallocated direct operating expenses
resulting from the expected underutilization of our marine assets
during 2017.
Other Financial Information
Weighted average common shares outstanding on a
fully diluted basis were approximately 282.3 million and 239.1
million for the quarters ended March 31, 2017 and 2016,
respectively. Additional shares of 38.0 million related to
the Tangible Equity Units (“TEUs”), as well as other potentially
dilutive shares, were included in the quarterly dilution
calculation for the quarter ended March 31, 2017. Subsequent
to quarter end, on or about April 3, 2017, we delivered 40.8
million shares of our common stock related to the settlement of the
TEUs.
Conference Call
McDermott has scheduled a conference call and
webcast related to its first quarter 2017 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 2104294. 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 13,500 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 (“GAAP”), 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, 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 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.
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, our beliefs with respect to the expected
benefits to be derived from recent strategic activities, including
the MOU signed with Saudi Aramco, the planned upgrades to the
Amazon and the implementation of the project lifecycle management
software platform, the expected scope, execution and timing
associated with the projects discussed, the expected timing of
upgrades to our Altamira fabrication yard, the expected utilization
of the DLV 2000, McDermott’s earnings and other guidance for 2017
and expectations related to the guidance, expectations with respect
to change orders, close-outs and settlements, our
expectations with respect to the range of additional costs on the
Ichthys project related to the subsea-pipe connector component
issue identified in January 2017 and the expected underutilization
of our marine assets in 2017. 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 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.
|
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|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(Unaudited) |
|
|
|
Three months Ended March 31, |
|
|
|
2017 |
|
|
2016 |
|
|
|
(In thousands, except share and per share
amounts) |
|
Revenues |
|
$ |
519,431 |
|
|
$ |
729,032 |
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
|
|
Cost of
operations |
|
|
428,590 |
|
|
|
616,002 |
|
Research
and development expenses |
|
|
480 |
|
|
|
31 |
|
Selling,
general and administrative expenses |
|
|
36,587 |
|
|
|
38,328 |
|
Other
operating (income) expenses |
|
|
(2,211 |
) |
|
|
38,678 |
|
Total
costs and expenses |
|
|
463,446 |
|
|
|
693,039 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
55,985 |
|
|
|
35,993 |
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
(17,706 |
) |
|
|
(11,238 |
) |
Other
non-operating income (expense), net |
|
|
614 |
|
|
|
(3,391 |
) |
Total
other expense |
|
|
(17,092 |
) |
|
|
(14,629 |
) |
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
|
38,893 |
|
|
|
21,364 |
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
10,771 |
|
|
|
19,330 |
|
|
|
|
|
|
|
|
|
|
Income before loss from
Investments in Unconsolidated Affiliates |
|
|
28,122 |
|
|
|
2,034 |
|
|
|
|
|
|
|
|
|
|
Loss from Investments
in Unconsolidated Affiliates |
|
|
(3,927 |
) |
|
|
(4,478 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
24,195 |
|
|
|
(2,444 |
) |
|
|
|
|
|
|
|
|
|
Less: Net
income (loss) attributable to noncontrolling interest |
|
|
2,279 |
|
|
|
(272 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
$ |
21,916 |
|
|
$ |
(2,172 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to McDermott International, Inc.: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.09 |
|
|
$ |
(0.01 |
) |
Diluted |
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
Shares used in the
computation of net income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
241,829,988 |
|
|
|
239,137,912 |
|
Diluted |
|
|
282,285,595 |
|
|
|
239,137,912 |
|
|
|
|
|
|
|
|
|
|
|
|
McDERMOTT INTERNATIONAL, INC. |
|
EARNINGS PER SHARE COMPUTATION |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
|
2016 |
|
|
(In thousands, except share and per share
amounts) |
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
$ |
21,916 |
|
|
$ |
(2,172 |
) |
|
|
|
|
|
|
|
|
Weighted average common
shares (basic) |
|
241,829,988 |
|
|
|
239,137,912 |
|
Effect of
dilutive securities: |
|
|
|
|
|
|
|
Tangible
equity units |
|
38,000,936 |
|
|
|
- |
|
Stock
options, restricted stock and restricted stock units |
|
2,454,671 |
|
|
|
- |
|
Adjusted weighted
average common shares and assumed exercises of stock options and
vesting of stock awards (diluted) |
|
282,285,595 |
|
|
|
239,137,912 |
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to McDermott International, Inc. |
|
|
|
|
|
|
|
Basic: |
$ |
0.09 |
|
|
$ |
(0.01 |
) |
Diluted: |
$ |
0.08 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DATA |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
|
|
(In thousands) |
|
Depreciation &
amortization |
$ |
21,381 |
|
|
$ |
24,542 |
|
Capital
expenditures |
|
62,849 |
|
|
|
31,900 |
|
Backlog |
|
3,898,357 |
|
|
|
3,841,367 |
|
|
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017 |
|
|
December 31, 2016 |
|
|
|
(In thousands, except share and per share
amounts) |
|
Assets |
|
(Unaudited) |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
623,538 |
|
|
$ |
595,921 |
|
Restricted cash and cash equivalents |
|
|
18,221 |
|
|
|
16,412 |
|
Accounts receivable—trade, net |
|
|
199,252 |
|
|
|
334,384 |
|
Accounts receivable—other |
|
|
45,660 |
|
|
|
36,929 |
|
Contracts in progress |
|
|
473,741 |
|
|
|
319,138 |
|
Other current assets |
|
|
38,555 |
|
|
|
29,599 |
|
Total current assets |
|
|
1,398,967 |
|
|
|
1,332,383 |
|
Property, plant
and equipment |
|
|
2,599,623 |
|
|
|
2,586,179 |
|
Less accumulated depreciation |
|
|
(914,208 |
) |
|
|
(898,878 |
) |
Property, plant and equipment, net |
|
|
1,685,415 |
|
|
|
1,687,301 |
|
Accounts
receivable—long-term retainages |
|
|
101,004 |
|
|
|
127,193 |
|
Investments in
Unconsolidated Affiliates |
|
|
13,259 |
|
|
|
17,023 |
|
Deferred income
taxes |
|
|
20,083 |
|
|
|
21,116 |
|
Other assets |
|
|
31,435 |
|
|
|
37,214 |
|
Total assets |
|
$ |
3,250,163 |
|
|
$ |
3,222,230 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Notes payable and current maturities of long-term debt |
|
$ |
45,206 |
|
|
$ |
48,125 |
|
Accounts payable |
|
|
270,284 |
|
|
|
173,203 |
|
Accrued liabilities |
|
|
273,585 |
|
|
|
277,584 |
|
Advance billings on contracts |
|
|
89,703 |
|
|
|
192,486 |
|
Income taxes payable |
|
|
18,851 |
|
|
|
17,945 |
|
Total current liabilities |
|
|
697,629 |
|
|
|
709,343 |
|
Long-term
debt |
|
|
720,225 |
|
|
|
704,395 |
|
Self-insurance |
|
|
17,013 |
|
|
|
16,980 |
|
Pension
liabilities |
|
|
19,326 |
|
|
|
19,471 |
|
Non-current
income taxes |
|
|
59,458 |
|
|
|
60,870 |
|
Other
liabilities |
|
|
117,607 |
|
|
|
115,703 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
|
Common stock, par value $1.00 per share, authorized
400,000,000 shares; |
|
|
|
|
|
|
|
|
issued 251,489,592 and 249,690,281 shares, respectively |
|
|
251,490 |
|
|
|
249,690 |
|
Capital in excess of par value (including prepaid common
stock purchase contracts) |
|
1,691,164 |
|
|
|
1,695,119 |
|
Accumulated deficit |
|
|
(204,851 |
) |
|
|
(226,767 |
) |
Accumulated other comprehensive loss |
|
|
(64,484 |
) |
|
|
(66,895 |
) |
Treasury stock, at cost: 8,447,797 and 8,302,004 shares,
respectively |
|
|
(95,953 |
) |
|
|
(94,957 |
) |
Stockholders' Equity—McDermott International, Inc. |
|
|
1,577,366 |
|
|
|
1,556,190 |
|
Noncontrolling interest |
|
|
41,539 |
|
|
|
39,278 |
|
Total equity |
|
|
1,618,905 |
|
|
|
1,595,468 |
|
Total liabilities and equity |
|
$ |
3,250,163 |
|
|
$ |
3,222,230 |
|
|
|
|
|
|
|
|
|
|
|
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
2017 |
|
|
2016 |
|
|
|
(In thousands) |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
24,195 |
|
|
$ |
(2,444 |
) |
Non-cash items included
in net income (loss): |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
21,381 |
|
|
|
24,542 |
|
Impairment loss |
|
|
- |
|
|
|
32,311 |
|
Stock-based compensation charges |
|
|
4,637 |
|
|
|
1,484 |
|
Loss from
investments in Unconsolidated Affiliates |
|
|
3,927 |
|
|
|
4,478 |
|
Other
non-cash items |
|
|
2,990 |
|
|
|
2,466 |
|
Changes in operating
assets and liabilities that provided (used) cash: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
161,321 |
|
|
|
(61,248 |
) |
Contracts
in progress, net of Advance billings on contracts |
|
|
(241,700 |
) |
|
|
50,839 |
|
Accounts
payable |
|
|
95,276 |
|
|
|
16,762 |
|
Accrued
and other current liabilities |
|
|
1,869 |
|
|
|
(16,112 |
) |
Other
assets and liabilities, net |
|
|
(25,444 |
) |
|
|
6,202 |
|
Total cash provided by operating activities |
|
|
48,452 |
|
|
|
59,280 |
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment |
|
|
(62,849 |
) |
|
|
(31,900 |
) |
Proceeds from asset
dispositions |
|
|
55,391 |
|
|
|
- |
|
Investments in
Unconsolidated Affiliates |
|
|
- |
|
|
|
(4,105 |
) |
Total cash used in investing activities |
|
|
(7,458 |
) |
|
|
(36,005 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
(5,167 |
) |
|
|
(4,752 |
) |
Repurchase of common
stock |
|
|
(6,614 |
) |
|
|
(2,200 |
) |
Total cash provided by used in financing
activities |
|
|
(11,781 |
) |
|
|
(6,952 |
) |
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash, cash equivalents and restricted
cash |
|
|
213 |
|
|
|
(139 |
) |
Net increase in
cash, cash equivalents and restricted cash |
|
|
29,426 |
|
|
|
16,184 |
|
Cash, cash
equivalents and restricted cash at beginning of
period |
|
|
612,333 |
|
|
|
781,645 |
|
Cash, cash
equivalents and restricted cash at end of period |
|
$ |
641,759 |
|
|
$ |
797,829 |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
Mar 31, 2017 |
|
|
Mar 31, 2016 |
|
(In thousands,
except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income
Attributable to MDR |
$ |
21,916 |
|
|
$ |
(2,172 |
) |
|
|
|
|
|
|
|
|
Less:
Adjustments |
|
|
|
|
|
|
|
Restructuring charges1 |
|
- |
|
|
|
6,367 |
|
Impairment loss2 |
|
- |
|
|
|
32,311 |
|
Total Non-GAAP Adjustments |
|
- |
|
|
|
38,678 |
|
Tax
Effect of Non-GAAP Changes3 |
|
- |
|
|
|
(170 |
) |
Total
Non-GAAP Adjustments (After Tax) |
|
- |
|
|
|
38,508 |
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted Net Income Attributable to McDermott |
$ |
21,916 |
|
|
$ |
36,336 |
|
|
|
|
|
|
|
|
|
GAAP Operating
Income |
$ |
55,985 |
|
|
$ |
35,993 |
|
Non-GAAP
Adjustments4 |
|
- |
|
|
|
38,678 |
|
Non-GAAP
Adjusted Operating Income |
$ |
55,985 |
|
|
$ |
74,671 |
|
Non-GAAP
Adjusted Operating Margin |
|
10.8 |
% |
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
0.08 |
|
|
$ |
(0.01 |
) |
Non-GAAP
Adjustments |
|
- |
|
|
|
0.14 |
|
Non-GAAP
Diluted EPS5 |
$ |
0.08 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
Shares used in
computation of income per share: |
|
|
|
|
|
|
|
Basic |
|
241,829,988 |
|
|
|
239,137,912 |
|
Diluted |
|
282,285,595 |
|
|
|
280,093,343 |
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
$ |
48,452 |
|
|
$ |
59,280 |
|
Capital
expenditures |
|
(62,849 |
) |
|
|
(31,900 |
) |
Free cash
flow |
$ |
(14,397 |
) |
|
$ |
27,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
Revenue |
$ |
519,431 |
|
|
$ |
729,032 |
|
|
|
|
|
|
|
|
|
1
Restructuring charges were primarily associated with personnel
reductions, facility closures, consultant fees, lease terminations
and asset impairments.2 During the first quarter of 2016, we
recognized $32.3 million of impairment charge related to our Agile
vessel following the customer’s termination of the vessel charter
in May 2016 and given the lack of opportunities for this vessel.
The Agile was decommissioned and disposed of in the third quarter
of 2016.3 Represents tax effects of Non-GAAP adjustments. The
Non-GAAP adjusting items are primarily attributable to tax
jurisdictions in which we currently do not pay taxes and,
therefore, no tax impact is applied to them. For the Non-GAAP
adjusting items in jurisdictions where taxes are paid, the tax
impacts on those adjustments are computed, individually, using the
statutory tax rate in effect in each applicable taxable
jurisdiction.4 Includes the Non-GAAP adjustments described in
footnotes 1 and 2 above.5 Diluted EPS is calculated using a share
count determined by whether the period has a net income or a net
loss. In the event of net income, Diluted EPS uses the fully
diluted share count; however, in the event of a net loss, the
potentially dilutive shares are excluded from the share count as
they are anti-dilutive. |
|
|
McDERMOTT INTERNATIONAL,
INC.RECONCILIATION OF FORECAST NON-GAAP FINANCIAL
MEASURES TO GAAP FINANCIAL MEASURES |
|
|
Initial FY'17 Guidance |
|
Updated FY'17 Guidance |
(In
millions) |
|
|
|
|
|
|
|
Cash flows from
operating activities |
~$(15) |
|
~$85 |
Capital
expenditures |
~120 |
|
~120 |
Free cash
flow |
~$(135) |
|
~$(35) |
Cash
received from Amazon sale leaseback arrangement |
~52 |
|
~52 |
Adjusted free
cash flow |
~$(83) |
|
~$17 |
|
|
|
|
GAAP Net Income
(Loss) Attributable to McDermott |
~$80 |
|
~$120 |
Add: |
|
|
|
Depreciation and amortization |
~105 |
|
~105 |
Interest
expense, net |
~70 |
|
~70 |
Provision
for taxes |
~70 |
|
~70 |
EBITDA |
~$325 |
|
~$365 |
|
|
|
|
CONTACT:
Investors & Financial Media
Kathy Murray
Vice President, Treasurer and Investor Relations
281.870.5147
kamurray@mcdermott.com
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