Excellence in Project Execution Drives
Operational Profitability in First Quarter
McDermott International, Inc. (NYSE:MDR) (“McDermott” or the
“Company”) today announced financial and operational results for
the first quarter ended March 31, 2016.
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First Quarter
Results |
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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, 2016 |
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Mar. 31, 2015 |
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Yr-over-Yr |
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Revenues |
$ |
729.0 |
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$ |
550.5 |
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$ |
178.5 |
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Adjusted Operating
Income1 |
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74.7 |
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23.7 |
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51.0 |
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Adjusted Operating
Margin1 |
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10.2 |
% |
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4.3 |
% |
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5.9 |
% |
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Adjusted Net Income
(Loss)1 |
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36.5 |
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(4.1 |
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40.6 |
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Adjusted Diluted
EPS1 |
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0.13 |
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(0.02 |
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0.15 |
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Cash Provided by
Operating Activities |
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59.3 |
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(18.5 |
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77.8 |
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Operating Income |
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36.0 |
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13.3 |
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22.7 |
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Operating Margin |
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4.9 |
% |
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2.4 |
% |
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2.5 |
% |
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Net Income /
(Loss) |
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(2.2 |
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(14.5 |
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12.3 |
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Diluted EPS |
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(0.01 |
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(0.06 |
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0.05 |
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1) Adjustments to the GAAP financial measures
include $6.4 million and $10.4 million of restructuring charges
during the quarters ended March 2016 and 2015, respectively, and
$32.3 million for the impairment of the Agile vessel in first
quarter of 2016.
“Overall, we have had a very positive start to
the year, with our results reflecting strong project execution
across the entire portfolio and operational profitability on an
adjusted basis in all three Areas. The first quarter also
marked a significant milestone in the completion of the extremely
complex PB Litoral project,” said David Dickson, President and
Chief Executive Officer of McDermott. “We have also had
success in winning two important awards during the quarter,
including work for our new flagship vessel the DLV 2000, through
the award of the Woodside Greater Western Flank Phase 2 project, as
well as securing a large offshore pipeline-related EPCI project in
the Middle East that is scheduled to be completed during the
year. Within the project portfolio, the LTA II Lump Sum
project with Saudi Aramco achieved its fabrication start milestone
ahead of schedule and the INPEX Ichthys project continues to remain
on schedule. In April, we were also pleased to host the
naming ceremony for the DLV 2000, and look forward to its delivery
to operations in the second quarter, when it is expected to
mobilize into the INPEX Ichthys project. We also celebrated
the opening of our new Asia Area headquarters in Kuala Lumpur,
Malaysia. In addition, we recently completed changes to our
credit facility through an amendment to our financial covenants,
which we believe are now more conventional. The macro
environment still remains uncertain, and recently one of our
customers, Petrobras, decided to terminate the charter of our Agile
vessel. As a result, we have recorded an impairment during
the quarter reflecting the lack of opportunities for this vessel in
our current revenue pipeline. Despite the current market
conditions, we see continued bidding activity in our core markets
and a steady level of opportunities in our revenue pipeline.”
First Quarter 2016 Operating
Results
The Company generated first quarter 2016
adjusted net income of $36.5 million, or $0.13 per adjusted fully
diluted share, excluding restructuring charges of $6.4 million and
impairment loss of $32.3 million, compared to an adjusted net loss
of $4.1 million, or $0.02 per adjusted fully diluted share,
excluding restructuring charges of $10.4 million in the prior-year
first quarter. First quarter 2016 earnings attributable to
McDermott stockholders on a consolidated basis prepared in
accordance with U.S. generally accepted accounting principles
(“GAAP”) was a net loss of $2.2 million, or $0.01 per fully diluted
share, compared to a net loss of $14.5 million, or $0.06 per fully
diluted share, for the prior-year first quarter.
The Company reported first quarter 2016 revenues
of $729.0 million, an increase of $178.5 million, compared to
revenues of $550.5 million for the prior-year first quarter.
The INPEX Ichthys and Saudi Aramco 12 Jackets projects drove the
increase in revenue year over year. The key projects
contributing to revenue for the first quarter of 2016 were INPEX
Ichthys and both Saudi Aramco’s 12 Jackets and Marjan GOSP.
The Company’s adjusted operating income for the
first quarter 2016 was $74.7 million, or an adjusted operating
margin of 10.2%, compared to $23.7 million, or an adjusted
operating margin of 4.3%, for the first quarter of 2015, excluding
the adjustments mentioned above. The Company’s operating
income on an unadjusted basis for the first quarter of 2016 was
$36.0 million, or an operating margin of 4.9%, compared to $13.3
million, or an operating margin of 2.4%, for the first quarter of
2015. Operating income for the first quarter of 2016 was
positively impacted by continued project execution on the INPEX
Ichthys project, successful completion of the PB Litoral project
ahead of the agreed-upon schedule and an extensive offshore
installation campaign on the Saudi Aramco 12 Jackets project, where
activities remained on schedule.
Cash provided by operating activities in the
first quarter 2016 was $59.3 million, an increase compared to the
$18.5 million of cash used in the first quarter 2015. Cash
provided by operating activities in the first quarter of 2016 was
positively impacted by the substantial collection from Pemex on the
overdue balances.
The calculations of total and per share adjusted
net income and adjusted operating income and margins are shown in
the appendix entitled “Reconciliation of GAAP to Non-GAAP Financial
Measures.”
Operational Review
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Three Months Ended March 31,
2016 |
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AEA |
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MEA |
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ASA |
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($ in billions) |
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Backlog |
$ |
0.2 |
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$ |
2.5 |
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$ |
1.1 |
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Bids & Change
Orders Outstanding |
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0.4 |
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2.5 |
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1.8 |
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Targets |
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4.5 |
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4.0 |
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5.2 |
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($ in millions) |
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New Orders |
$ |
(7.3 |
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$ |
116.7 |
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$ |
229.6 |
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Revenue |
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62.5 |
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270.3 |
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396.2 |
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Book-to-Bill |
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- |
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0.4 |
x |
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0.6 |
x |
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Adjusted Operating
Income |
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9.7 |
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38.5 |
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26.5 |
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Adjusted Operating
Margin |
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15.5 |
% |
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14.2 |
% |
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6.7 |
% |
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Capex |
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2.6 |
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2.2 |
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27.0 |
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Operating Income |
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(24.9 |
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38.5 |
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25.1 |
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Operating Margin |
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(39.8 |
%) |
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14.2 |
% |
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6.3 |
% |
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As of March 31, 2016, the Company’s backlog was
$3.8 billion, compared to $4.2 billion at December 31, 2015. Of the
March 31, 2016 backlog, approximately 71% is related to offshore
operations and approximately 29% is related to subsea operations.
Order intake in the first quarter of 2016 totaled $339 million,
including the award of a large transportation and installation
contract with Woodside and a large fast-tracked pipeline-related
EPCI project in the Middle East, partially offset by the
cancellation of the Agile charter, resulting in a book-to-bill
ratio of 0.5x. At March 31, 2016, the Company had bids
outstanding and target projects of approximately $18.4 billion in
projects that it expects to be awarded in the market through June
30, 2017. In total, the Company’s potential revenue pipeline,
including backlog, was $22.2 billion as of March 31, 2016.
Americas, Europe and Africa (“AEA”) successfully
recorded two new orders, both leveraging the Derrick Barge 50 (“DB
50”) deep water heavy lift vessel, in the U.S. Gulf of Mexico
(“GoM”). During March, we completed the PB Litoral project,
as marked by the achievement of first gas and introduction of crude
oil. Final handover to Pemex occurred in early April. Also in
Mexico, fabrication continued on the Pemex 7,500-ton Ayatsil C
Jacket, with significant progress on the build and assembly work.
Early in April, Pemex issued a notification to temporarily suspend
the project for 120 days to allow for assessment of the overall
Ayatsil field infrastructure sequencing requirements. We
continue to work with Pemex to develop the best solution for the
project, including the timing of completion of the fabrication
work. The Exxon Julia project offshore phase was completed in
the first quarter, with the DB 50 executing the final installation
work in late January. The LLOG Otis pipeline project
successfully completed inaugural pipe spooling from McDermott’s new
spoolbase in Gulfport, Mississippi. The North Ocean 105 then
successfully installed the 7,000 foot Steel Catenary Riser and laid
11.6 miles of flowline in water depth of approximately 4,000
feet. Installation work on the project was subsequently
completed in April. The 5-year Agile charter with Petrobras
in Brazil continued delivering to the customer and achieved over 3
million man-hours without a Lost Time Incident (“LTI”).
However, Petrobras notified us that it will terminate the contract
in May 2016, as a result of non-renewal of the Charter
Authorization Certificate. We are working with Petrobras to
close out the contract and, accordingly, have taken a reduction of
$38 million in our backlog as of the end of the quarter.
Also, as a result of this event and the lack of opportunities in
our current revenue pipeline for this vessel, we have recorded a
non-cash impairment charge of $32 million during the first
quarter.
The Middle East (“MEA”) project backlog was
further strengthened with the award of a large pipeline-related
EPCI project in the first quarter of 2016. This offshore
project is fast tracked, with work that began in the first quarter
of 2016, and is expected to be completed within the year. In
addition, execution of the mega Lump Sum project awarded under the
Saudi Aramco Long Term Agreement (“LTA II”) achieved its
fabrication start milestone ahead of schedule this quarter. The
fabrication progress on the 12 Jackets project remained on track,
with timely completion, load-out and installation of six
jackets in the first quarter, with an additional three jackets
currently ready for load out and installation. The
installation and hook-up activities for the ongoing ADMA 4 Gas
Injection project in Abu Dhabi continued with exceptional safety
performance and in accordance with the agreed schedule. MEA
operations have now surpassed over 34 million man-hours without an
LTI, and this industry-leading safety performance continues to be
underpinned by our focused injury prevention programs.
Asia (“ASA”) new orders in first quarter 2016
included the award of the Greater Western Flank Phase 2 project for
Woodside in Australia, which will utilize the newly built DLV 2000,
as well as a traditional transportation and installation contract
in Malaysia on the Hess Petroleum Begarding project. The work in
Malaysia includes installation of a large processing facility
jacket and a wellhead platform jacket and topside. This work
is expected to utilize the Derrick Barge 30 and to commence in the
second quarter of 2016. The INPEX Ichthys project continues
to progress well with Heerema, our subcontractor on the project,
completing J-lay operations, installing all the lifted subsea
facilities, and commencing the installation of mooring chains. The
Construction Support Vessel 108 has been active throughout the
quarter with pipeline pre-commissioning activities, as well as
pipeline stabilization work. In addition, the Ichthys project
has completed the major scope of fabrication activities in the
Batam yard. The ONGC Vashishta project also progressed well,
with engineering and orders for long lead time items placed.
In addition, the pre-engineering onshore survey for that project
was completed within the first quarter.
Cost Structure Progress
The remaining activities for the McDermott
Profitability Initiative (“MPI”) continue to progress well, and we
expect to substantially complete the move of resources from
Singapore to Kuala Lumpur, along with additional sourcing
initiatives, in the second quarter of 2016. MPI is still
expected to result in cash savings of $150 million annually, which
remains incorporated into our 2016 guidance.
A continued focus on our cost culture has
generated additional opportunities for cost reductions within the
Additional Overhead Reduction (“AOR”) program. Due to these
additional actions, we now anticipate completing AOR in the third
quarter of 2016, resulting in expected in-year cash savings of $45
million.
The Company’s restructuring costs for first
quarter of 2016 were $6 million and are expected to be
approximately $15 million for the full-year 2016 as a result of
remaining actions for both the MPI and AOR programs.
2016 Outlook
($ in millions, except per share amounts, or as
indicated) |
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Initial FY'16 Guidance |
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Updated FY'16 Guidance1 |
Revenues |
~2.9B |
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~2.7B |
Adjusted Operating
Income2,4 |
~125 |
|
~155 |
Net Interest
Expense3 |
~64 |
|
~60 |
Income Tax Expense |
~55 |
|
~60 |
Adjusted Net
Income4 |
~0 |
|
~18 |
Adjusted Diluted
EPS4 |
~0.00 |
|
~0.06 |
Adjusted EBITDA4 |
~240 |
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~245 |
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Restructuring
Expense |
~10 |
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~15 |
Cash Interest / DIC
Amortization Interest |
~60 / ~14 |
|
~60 /
~13 |
Capex3 |
~260 |
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~265 |
Ending Cash and
Restricted Cash |
~580 |
|
~590 |
Ending Gross Debt5 |
~840 |
|
~840 |
Free Cash Flow |
~(160) |
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~(150) |
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1) Our updated guidance does not reflect the range of possible
outcomes that may result from our ongoing process of obtaining
consents from our term lenders under our Senior Secured Credit
Agreement to, among other things, extend the maturity date of the
letter of credit facility commitments under the Credit
Agreement. Those outcomes could include a reduction in our
term loan indebtedness in 2016, an increase in the interest rate
applicable to our term loan indebtedness and/or a fee payable to
the term loan lenders in connection with those consents.2) Initial
guidance for operating income has been updated to reflect a ~$10M
reclassification on our income statement to exclude Income/Loss
from Unconsolidated Affiliates from Operating Income. 3) Net
Interest Expense has been reduced by ~$10M for initial guidance and
~$13M for updated guidance for capitalized interest included in
Capex.4) Items are adjusted for restructuring costs and an asset
impairment in the first quarter of 2016. 5) Ending Gross Debt
does not include any reduction related to debt issuance costs~ =
approximately
Updates to our full-year 2016 guidance are
driven by revisions in our expected project sequencing,
improvements in projects that have recently been completed,
additional improvements from cost reduction programs and the impact
of the cancellation of the Agile vessel charter. It also
includes additional capitalized interest based on the updated
delivery schedule of the DLV 2000 vessel.
Uncertainty remains in the macro commodity
environment and, as such, we expect to see pressure from potential
customer capital expenditure spending delays, increased pricing
constraints given contraction in certain markets and lower
utilization of our assets. For now, we will continue to
concentrate on our highest value proposition opportunities,
executing well our existing backlog, increasing customer alignment,
our asset utilization and cost/liquidity management.
The calculations of forecasted total and per
share adjusted net income, adjusted operating income and free cash
flow are shown in the appendices entitled “Reconciliation of
Forecast GAAP Financials to Non-GAAP Financial Measures.”
Credit Facility
Amendment
On April 18 2016, we entered into an amendment
to our Senior Secured Credit Agreement (the “Amendment”). The
Amendment replaced an existing minimum EBITDA requirement with what
we believe is a more conventional covenant package comprised of two
leverage ratios and a fixed charge ratio and reduced certain
reporting requirements to the Credit Agreement lenders. This
change to our financial covenants was completed in April and was
effective for the covenants tested at the end of the first quarter
of 2016. Also in April 2016, we entered into an unsecured and
uncommitted bilateral letter of credit arrangement for
approximately $100 million with a Middle East bank. This new
relationship is expected to support McDermott’s strong bidding
activity in the Middle East.
Additionally, we have begun seeking consents
from our existing term lenders to extend the maturity date of the
letter of credit facility to April 22, 2019 (or January 15, 2019 if
the term loan remains outstanding or is not refinanced by that
date), to increase the baskets for purchase money indebtedness,
acquisitions and purchase of junior priority debt and to extend the
window to mortgage the DLV 2000 by one year to allow the Company to
consider potential financing options, all as contemplated by the
recent amendment to the Credit Agreement (subject to the obtaining
of such consents). These terms would be effective only if we
receive the necessary consents and satisfy the conditions to
closing on or before June 30, 2016. Due to the fact that this
involves a negotiation process with third parties, we can provide
no assurance that such terms will become effective as provided in
the recent amendment to the Credit Agreement.
Other Financial Information
Weighted average common shares outstanding on a
fully diluted basis were approximately 239.1 million and 237.5
million for the quarters ended March 31, 2016 and 2015,
respectively. Common shares for the settlement of the common stock
purchase contracts related to the Tangible Equity Units (“TEUs”)
representing 40.9 million additional shares, as well as other
potentially dilutive shares, were not included in the calculation
of diluted weighted average shares for the quarters ended March 31,
2016 and March 31, 2015 for earnings per share due to their
anti-dilutive effect. For the quarter ended March 31, 2016,
the TEUs and other dilutive shares were included in the fully
diluted share count for adjusted earnings per share. For the
quarter ended March 31, 2015, the TEUs and other dilutive shares
were not included in the fully diluted share count for adjusted
earnings per share, due to their anti-dilutive effect.
Conference Call
McDermott has scheduled a conference call and
webcast related to its first quarter results today at 4:00 p.m.
U.S. Central Time. Interested parties may listen over the
Internet through a link posted in the Investor Relations section of
the Company’s Web site. A replay of the webcast will be available
for seven days after the call and may be accessed by dialing (855)
539-0893, Passcode #92943382. In addition, a presentation will be
available on the Investor Relations section of the Company’s Web
site that contains supplemental information on the Company’s
financials, operations and business outlook.
About the Company
McDermott is a leading provider of integrated
engineering, procurement, construction and installation (EPCI) and
module fabrication services for upstream field developments
worldwide. The Company delivers fixed and floating production
facilities, pipelines, installations and subsea systems from
concept to commissioning for complex Offshore and Subsea oil and
gas projects to help oil companies safely produce and transport
hydrocarbons. Our customers include national and major energy
companies. Operating in approximately 20 countries across the
world, our locally focused and globally integrated resources
include approximately 11,200 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 is listed on the New York
Stock Exchange.
To learn more, please visit our website at
www.mcdermott.com
NON-GAAP Measures
This press release includes several “non-GAAP”
financial measures as defined under Regulation G of the U.S.
Securities Exchange Act of 1934, as amended. We report our
financial results in accordance with U.S. generally accepted
accounting principles, but believe that certain non-GAAP financial
measures provide useful supplemental information to investors
regarding the underlying business trends and performance of our
ongoing operations and are useful for period-over-period
comparisons of those operations. The non-GAAP measures we have
presented in this press release include non-GAAP Adjusted Operating
Income (Loss), non-GAAP Adjusted Operating Margin, the total
and diluted per share amounts of non-GAAP Adjusted Net Income
(Loss) attributable to the Company, EBITDA and Free Cash Flow.
These non-GAAP financial measures should be considered as a
supplement to, and not as a substitute for, or superior to, the
financial measures prepared in accordance with GAAP.
Reconciliations of these non-GAAP financial
measures to the most comparable GAAP measures are provided in the
supplemental information set forth at the end of this press
release.
Forward-Looking Statements
In accordance with the Safe Harbor provisions of
the Private Securities Litigation Reform Act of 1995, McDermott
cautions that statements in this press release which are
forward-looking, and provide other than historical information,
involve risks, contingencies and uncertainties that may impact
McDermott's actual results of operations. These forward-looking
statements include, but are not limited to, statements about
backlog, bids outstanding, target projects and revenue pipeline, to
the extent these may be viewed as indicators of future revenues or
profitability, the expected value, scope, execution and timing of
projects discussed, the expected timing of delivery of the DLV
2000, future savings and costs related to the McDermott
Profitability Initiative and the Additional Overhead Reduction
program, McDermott’s earnings, and other guidance for the full year
of 2016 and 2016 outlook. Although we believe that the
expectations reflected in those forward-looking statements are
reasonable, we can give no assurance that those expectations will
prove to have been correct. Those statements are made by
using various underlying assumptions and are subject to numerous
risks, contingencies and uncertainties, including, among others:
adverse changes in the markets in which we operate or credit
markets, our inability to successfully execute on contracts in
backlog, changes in project design or schedules, the availability
of qualified personnel, changes in the terms, scope or timing of
contracts, contract cancellations, change orders and other
modifications and actions by our customers and business partners,
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, 2015 and subsequent quarterly report on
Form 10-Q. This press release reflects management's views as
of the date hereof. Except to the extent required by applicable
law, McDermott undertakes no obligation to update or revise any
forward-looking statement.
|
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2016 |
|
|
2015 |
|
|
(In thousands, except shareand
per share amounts) |
|
Revenues |
$ |
729,032 |
|
|
$ |
550,463 |
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
|
Cost of operations |
|
616,033 |
|
|
|
475,459 |
|
Selling, general and administrative
expenses |
|
38,328 |
|
|
|
51,676 |
|
Impairment loss |
|
32,311 |
|
|
|
- |
|
Gains on asset disposals |
|
- |
|
|
|
(367 |
) |
Restructuring expenses |
|
6,367 |
|
|
|
10,389 |
|
Total costs and expenses |
|
693,039 |
|
|
|
537,157 |
|
|
|
|
|
|
|
|
|
Operating income |
|
35,993 |
|
|
|
13,306 |
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
Interest expense, net |
|
(11,238 |
) |
|
|
(12,179 |
) |
Loss on foreign currency, net |
|
(3,183 |
) |
|
|
(1,468 |
) |
Other expense, net |
|
(208 |
) |
|
|
(97 |
) |
Total other expense |
|
(14,629 |
) |
|
|
(13,744 |
) |
|
|
|
|
|
|
|
|
Income (loss) before
provision for income taxes |
|
21,364 |
|
|
|
(438 |
) |
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
19,330 |
|
|
|
4,869 |
|
|
|
|
|
|
|
|
|
Income (loss)
before loss from investments in unconsolidated affiliates |
|
2,034 |
|
|
|
(5,307 |
) |
|
|
|
|
|
|
|
|
Loss from investments
in unconsolidated affiliates |
|
(4,478 |
) |
|
|
(6,741 |
) |
|
|
|
|
|
|
|
|
Net loss |
|
(2,444 |
) |
|
|
(12,048 |
) |
|
|
|
|
|
|
|
|
Less: Net income (loss)
attributable to noncontrolling interest |
|
(272 |
) |
|
|
2,459 |
|
|
|
|
|
|
|
|
|
Net loss attributable
to McDermott International, Inc. |
$ |
(2,172 |
) |
|
$ |
(14,507 |
) |
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
Net loss attributable
to McDermott International, Inc. |
|
|
|
|
|
|
|
Basic: |
|
(0.01 |
) |
|
|
(0.06 |
) |
Diluted: |
|
(0.01 |
) |
|
|
(0.06 |
) |
|
|
|
|
|
|
|
|
Shares used in the
computation of loss per share: |
|
|
|
|
|
|
|
Basic: |
|
239,137,912 |
|
|
|
237,504,719 |
|
Diluted: |
|
239,137,912 |
|
|
|
237,504,719 |
|
McDERMOTT INTERNATIONAL, INC. |
|
EARNINGS PER SHARE COMPUTATION |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2016 |
|
|
2015 |
|
|
(In thousands, except share and per share
amounts) |
|
|
|
|
|
|
|
|
|
Net loss attributable
to McDermott International, Inc. |
$ |
(2,172 |
) |
|
$ |
(14,507 |
) |
|
|
|
|
|
|
|
|
Weighted average common
shares (basic) |
|
239,137,912 |
|
|
|
237,504,719 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
Tangible equity units |
|
- |
|
|
|
- |
|
Stock options, restricted stock,
and restricted stock units |
|
- |
|
|
|
- |
|
Adjusted weighted
average common shares and assumed exercises of stock options and
vesting of stock awards (diluted) |
|
239,137,912 |
|
|
|
237,504,719 |
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
Net loss attributable
to McDermott International, Inc. |
|
|
|
|
|
|
|
Basic: |
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
Diluted: |
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
SUPPLEMENTARY DATA |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2016 |
|
|
2015 |
|
|
(In thousands) |
|
Depreciation &
amortization expense |
$ |
20,602 |
|
|
$ |
25,327 |
|
Drydock
amortization |
|
3,940 |
|
|
|
5,272 |
|
Capital
expenditures |
|
31,900 |
|
|
|
23,972 |
|
Backlog |
|
3,841,367 |
|
|
|
3,748,384 |
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
March 31,2016 |
|
|
December 31,2015 |
|
|
|
(In thousands, except share and per share
amounts) |
|
|
|
(unaudited) |
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
696,103 |
|
|
$ |
664,844 |
|
Restricted cash and cash
equivalents |
|
|
101,726 |
|
|
|
116,801 |
|
Accounts receivable – trade,
net |
|
|
271,713 |
|
|
|
208,474 |
|
Accounts receivable –
other |
|
|
55,350 |
|
|
|
66,689 |
|
Contracts in progress |
|
|
358,501 |
|
|
|
435,829 |
|
Other current assets |
|
|
46,716 |
|
|
|
34,641 |
|
Total current assets |
|
|
1,530,109 |
|
|
|
1,527,278 |
|
Property, plant
and equipment |
|
|
2,432,169 |
|
|
|
2,467,352 |
|
Less accumulated
depreciation |
|
|
(838,050 |
) |
|
|
(856,493 |
) |
Net property, plant and
equipment |
|
|
1,594,119 |
|
|
|
1,610,859 |
|
Accounts
receivable – long-term retainages |
|
|
160,515 |
|
|
|
155,061 |
|
Investments in
unconsolidated affiliates |
|
|
26,844 |
|
|
|
26,551 |
|
Deferred income
taxes |
|
|
13,657 |
|
|
|
18,822 |
|
Other assets |
|
|
46,314 |
|
|
|
48,505 |
|
Total Assets |
|
$ |
3,371,558 |
|
|
$ |
3,387,076 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Notes payable and current
maturities of long-term debt |
|
$ |
25,298 |
|
|
$ |
24,882 |
|
Accounts payable |
|
|
298,297 |
|
|
|
279,821 |
|
Accrued liabilities |
|
|
299,277 |
|
|
|
330,943 |
|
Advance billings on
contracts |
|
|
138,272 |
|
|
|
164,773 |
|
Income taxes payable |
|
|
21,541 |
|
|
|
23,787 |
|
Total current
liabilities |
|
|
782,685 |
|
|
|
824,206 |
|
Long-term
debt |
|
|
815,641 |
|
|
|
819,001 |
|
Self-insurance |
|
|
19,363 |
|
|
|
18,653 |
|
Pension
liability |
|
|
24,025 |
|
|
|
24,066 |
|
Non-current
income taxes |
|
|
55,121 |
|
|
|
52,559 |
|
Other
liabilities |
|
|
104,735 |
|
|
|
101,870 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders'
Equity: |
|
|
|
|
|
|
|
|
Common stock, par value $1.00
per share, authorized 400,000,000 shares; |
|
|
|
|
|
|
|
|
issued 248,374,567 and
246,841,128 shares, respectively |
|
|
248,374 |
|
|
|
246,841 |
|
Capital in excess of par
value (including prepaid common stock purchase contracts) |
|
|
1,685,061 |
|
|
|
1,687,059 |
|
Accumulated deficit |
|
|
(263,056 |
) |
|
|
(260,884 |
) |
Treasury stock, at cost:
8,020,427 and 7,824,204 shares, respectively |
|
|
(93,539 |
) |
|
|
(92,262 |
) |
Accumulated other
comprehensive loss |
|
|
(66,489 |
) |
|
|
(93,955 |
) |
Stockholders' Equity -
McDermott International, Inc. |
|
|
1,510,351 |
|
|
|
1,486,799 |
|
Noncontrolling interest |
|
|
59,637 |
|
|
|
59,922 |
|
Total Equity |
|
|
1,569,988 |
|
|
|
1,546,721 |
|
Total Liabilities and
Equity |
|
$ |
3,371,558 |
|
|
$ |
3,387,076 |
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
2016 |
|
|
2015 |
|
|
|
(In thousands) |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,444 |
) |
|
$ |
(12,048 |
) |
Non-cash items included
in net loss: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
20,602 |
|
|
|
25,327 |
|
Impairment loss |
|
|
32,311 |
|
|
|
- |
|
Drydock amortization |
|
|
3,940 |
|
|
|
5,272 |
|
Stock-based compensation
charges |
|
|
1,484 |
|
|
|
4,278 |
|
Loss from investments in
unconsolidated affiliates |
|
|
4,478 |
|
|
|
6,741 |
|
Restructuring expense |
|
|
- |
|
|
|
4,169 |
|
Deferred income taxes |
|
|
5,164 |
|
|
|
(5,341 |
) |
Other non-cash items |
|
|
(2,698 |
) |
|
|
(1,839 |
) |
Changes in assets and
liabilities that provided (used) cash: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(61,248 |
) |
|
|
(69,214 |
) |
Contracts in progress net of
advance billings on contracts |
|
|
50,839 |
|
|
|
(61,021 |
) |
Accounts payable |
|
|
16,762 |
|
|
|
110,785 |
|
Accrued and other current
liabilities |
|
|
(16,112 |
) |
|
|
(5,723 |
) |
Pension liability |
|
|
(375 |
) |
|
|
(555 |
) |
Other assets and liabilities |
|
|
6,577 |
|
|
|
(19,370 |
) |
Total cash provided by
(used in) operating activities |
|
|
59,280 |
|
|
|
(18,539 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment |
|
|
(31,900 |
) |
|
|
(23,972 |
) |
(Increase) decrease in
restricted cash and cash equivalents |
|
|
15,075 |
|
|
|
(12,179 |
) |
Sales and maturities of
available-for-sale securities |
|
|
- |
|
|
|
1,775 |
|
Investments in
unconsolidated affiliates |
|
|
(4,105 |
) |
|
|
(4,696 |
) |
Other investing
activities |
|
|
- |
|
|
|
76 |
|
Total cash used in
investing activities |
|
|
(20,930 |
) |
|
|
(38,996 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
(4,752 |
) |
|
|
(4,706 |
) |
Repurchase of common
stock |
|
|
(2,200 |
) |
|
|
(1,003 |
) |
Other |
|
|
- |
|
|
|
(320 |
) |
Total cash used in
financing activities |
|
|
(6,952 |
) |
|
|
(6,029 |
) |
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash and cash equivalents |
|
|
(139 |
) |
|
|
(1,109 |
) |
Net increase (decrease) in cash and cash
equivalents |
|
|
31,259 |
|
|
|
(64,673 |
) |
Cash and cash
equivalents at beginning of period |
|
|
664,844 |
|
|
|
665,309 |
|
Cash and cash equivalents at end of
period |
|
$ |
696,103 |
|
|
$ |
600,636 |
|
|
|
|
|
|
|
|
|
|
McDERMOTT INTERNATIONAL,
INCRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
McDermott reports our financial results in
accordance with the U.S. generally accepted accounting principles
(“GAAP”). This press release also includes several Non-GAAP1
financial measures as defined under the SEC’s Regulation G. The
following table reconciles Non-GAAP financial measures to
comparable GAAP financial measures:
|
Three Months Ended March 31, |
|
|
2016 |
|
|
2015 |
|
(In thousands,
except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Loss Attributable to the Company |
$ |
|
(2,172 |
) |
|
|
$ |
|
(14,507 |
) |
|
|
|
|
|
|
|
|
|
|
|
Less:
Adjustments |
|
|
|
|
|
|
|
|
|
Restructuring charges2 |
|
|
6,367 |
|
|
|
|
|
10,389 |
|
|
Impairment Loss3 |
|
|
32,311 |
|
|
|
|
|
- |
|
|
Total Non-GAAP Adjustments |
|
|
38,678 |
|
|
|
|
|
10,389 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Net Income (Loss) Attributable to the Company |
$ |
|
36,506 |
|
|
|
$ |
|
(4,118 |
) |
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
Income |
$ |
|
35,993 |
|
|
|
$ |
|
13,306 |
|
|
Non-GAAP Adjustments |
|
|
38,678 |
|
|
|
|
|
10,389 |
|
|
Non-GAAP Adjusted
Operating Income |
$ |
|
74,671 |
|
|
|
$ |
|
23,695 |
|
|
Non-GAAP Adjusted
Operating Margin |
|
|
10.2 |
% |
|
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
|
(0.01 |
) |
|
|
$ |
|
(0.06 |
) |
|
Non-GAAP Adjustments |
|
|
0.14 |
|
|
|
|
|
0.04 |
|
|
Non-GAAP Diluted
EPS4 |
$ |
|
0.13 |
|
|
|
$ |
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
Shares used in
computation of loss per share: |
|
|
|
|
|
|
|
Basic |
|
|
239,137,912 |
|
|
|
|
|
237,504,719 |
|
|
Diluted |
|
|
280,093,343 |
|
|
|
|
|
237,504,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Non-GAAP measures include the total and diluted
per share amounts of adjusted net income (loss) attributable to the
Company and adjusted operating income and operating margin, in each
case excluding the impact of certain identified items. We believe
that adjusted net income (loss) and adjusted operating income and
operating margin are useful measures for investors to review
because they provide consistent measures of the underlying results
of our ongoing business. Furthermore, our management uses adjusted
net income (loss) and adjusted operating income as measures of the
performance of our operations. However, Non-GAAP measures should
not considered as substitutes for operating income, net income or
other data prepared and reported in accordance with GAAP and
should be viewed in addition to the Company’s reported results
prepared in accordance with GAAP.
2Restructuring charges are primarily associated
with workforce reductions, facility closures, consultant fees,
lease terminations and asset impairments.
3Impairment loss is related to an impairment of
our Agile vessel during first quarter of
2016.
4Diluted EPS is calculated using a share count determined by
whether the period has a net income or a net loss. In the
event of net income, Diluted EPS uses the fully diluted share
count; however, in the event of a net loss the potentially dilutive
shares are excluded from the share count.
McDERMOTT INTERNATIONAL,
INCRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
McDermott reports our financial results in
accordance with the U.S. generally accepted accounting principles
(“GAAP”). This press release also includes several Non-GAAP1
financial measures as defined under the SEC’s Regulation G. The
following table reconciles Non-GAAP financial measures to
comparable GAAP financial measures:
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Three Months Ended March 31,
2016 |
|
|
|
|
AEA |
|
|
|
|
MEA |
|
|
|
|
ASA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
62,625 |
|
|
|
|
$ |
270,255 |
|
|
|
|
$ |
396,152 |
|
|
|
|
GAAP Operating
Income (Loss) |
|
(24,921 |
) |
|
|
|
|
38,467 |
|
|
|
|
|
25,133 |
|
|
|
|
GAAP Operating
Margin |
|
-39.8 |
% |
|
|
|
|
14.2 |
% |
|
|
|
|
6.3 |
% |
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring2 |
|
2,336 |
|
|
|
|
|
17 |
|
|
|
|
|
1,328 |
|
|
|
|
Impairment Loss3 |
|
32,311 |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Total Non-GAAP
Adjustments |
|
34,647 |
|
|
|
|
|
17 |
|
|
|
|
|
1,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Operating Income (Loss) |
$ |
9,726 |
|
|
|
|
$ |
38,484 |
|
|
|
|
$ |
26,461 |
|
|
|
|
Non-GAAP Adjusted
Operating Margin |
|
15.5 |
% |
|
|
|
|
14.2 |
% |
|
|
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Non-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, in each
case excluding the impact of certain identified items. We believe
that adjusted net income (loss) and adjusted operating income are
useful measure for investors to review because they provide a
consistent measure of the underlying results of our ongoing
business. Furthermore, our management uses adjusted net income
(loss) and adjusted operating income as a measure of the
performance of our operations. However, Non-GAAP measures should
not be considered as substitutes for operating income, net income
or other data prepared and reported in accordance with GAAP and
should be viewed in addition to the Company’s reported results
prepared in accordance with GAAP.
2Restructuring charges are primarily associated
with workforce reductions, facility closures, consultant fees,
lease terminations and asset impairments.
3Impairment loss is related to an impairment of
our Agile vessel during first quarter of
2016.
McDERMOTT INTERNATIONAL,
INC RECONCILIATION OF FORECAST GAAP FINANCIAL
MEASURES TO NON-GAAP FINANCIAL MEASURES
This press release includes several
forward-looking Non-GAAP1 financial measures as defined under the
SEC’s Regulation G. We believe forward looking financial measures
are within reasonable measure. The following table reconciles
Non-GAAP financial measures to comparable GAAP financial
measures:
|
Year Ended December 31, 2016 |
|
(In thousands,
except per share amounts) |
|
|
|
|
|
|
|
GAAP Net
Loss Attributable to MDR |
$ |
(29,000 |
) |
|
|
|
|
Less:
Adjustments |
|
|
|
Restructuring charges2 |
|
15,000 |
|
Impairment Loss3 |
|
32,000 |
|
Total Non-GAAP Adjustments |
|
47,000 |
|
|
|
|
|
Non-GAAP Adjusted
Net Loss Attributable to MDR |
$ |
18,000 |
|
|
|
|
|
GAAP Operating
Income |
$ |
108,000 |
|
Non-GAAP Adjustments |
|
47,000 |
|
Non-GAAP Adjusted
Operating Income |
$ |
155,000 |
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
(0.12 |
) |
Non-GAAP Adjustments |
|
0.18 |
|
Non-GAAP Diluted
EPS4 |
$ |
0.06 |
|
|
|
|
|
Cash flows from
operating activities |
$ |
115,000 |
|
Capital expenditures |
|
(265,000 |
) |
Free cash
flow |
$ |
(150,000 |
) |
|
|
|
|
GAAP Net Loss
Attributable to the Company |
$ |
(29,000 |
) |
Add: |
|
|
|
Depreciation and amortization |
|
107,000 |
|
Interest expense, net |
|
60,000 |
|
Provision for taxes |
|
60,000 |
|
EBITDA |
$ |
198,000 |
|
|
|
|
|
EBITDA |
$ |
198,000 |
|
Adjustments |
|
47,000 |
|
Adjusted
EBITDA |
$ |
245,000 |
|
|
|
|
|
1Forecast Non-GAAP measures include the total
and diluted per share amounts of adjusted net income (loss)
attributable to the Company and adjusted operating income, free
cash flow, EBITDA and Adjusted EBITDA, in each case excluding the
impact of certain identified items. See second immediately
preceding page for a discussion of adjusted net income (loss)
attributable to the Company. We define “free cash flow” as
cash flows from operations less capital expenditures. We
believe investors consider free cash flow as an important measure
because it generally represents funds available to pursue
opportunities that may enhance shareholder value, such as making
acquisitions or other investments. Our management uses free
cash flow for that reason. We define EBITDA as net income
plus depreciation and amortization, interest expense, net and
provision for income taxes. We define Adjusted EBITDA as
EBITDA less the adjustments relating to restructuring charges and
impairment loss detailed on the second immediately preceding
page. We have included EBITDA and Adjusted EBITDA disclosures
in this press release because EBITDA is widely used by investors
for valuation and comparing our financial performance with the
performance of other companies in our industry and because Adjusted
EBITDA provides a consistent measure of EBITDA relating to our
underlying business. Our management also uses EBITDA and
Adjusted EBITDA to monitor and compare the financial performance of
our operations. EBITDA and Adjusted EBITDA do not give effect
to the cash that we must use to service our debt or pay our income
taxes, and thus do not reflect the funds actually available for
capital expenditures, dividends or various other purposes. In
addition, our presentation of EBITDA and Adjusted EBITDA may not be
comparable to similarly titled measures in other companies’
reports. You should not consider EBITDA or Adjusted EBITDA
in isolation from, or as a substitute for, net income or cash flow
measures prepared in accordance with U.S. GAAP.
2Restructuring charges are primarily associated
with workforce reductions, facility closures, consultant fee, lease
terminations and asset impairments.
3Impairment loss is related to an impairment of
our Agile vessel during first quarter of 2016.
4Diluted EPS is calculated using a share count
determined by whether the period has a net income or a net
loss. In the event of net income, Diluted EPS uses the fully
diluted share count; however, in the event of a net loss the
potentially dilutive shares are excluded from the share
count.
CONTACT:
Investors & Financial Media
Kathy Murray
Vice President, Treasurer and Investor Relations
281.870.5147
kamurray@mcdermott.com
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