Significant Progress on Business Improvement
Initiatives and Plan to Stabilize Company
Completed New Financing to Enhance Financial
Flexibility and Support Company’s Growth
Robust Backlog of $4.4 Billion
Completed Remaining First-of-a-kind
Projects
Company to Host Conference Call and Webcast
Today at 4:00 pm CT
McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today announced financial results for the quarter ended
March 31, 2014. The Company reported a first quarter net loss of
$50 million or $0.21 per fully diluted share, and an operating loss
of $42 million. The Company reported first quarter revenues of $604
million, a decrease of 25% percent compared to revenues of $807
million in the corresponding period of 2013. The Company reported
first quarter 2013 net income of $21 million, or $0.09 per fully
diluted share, and operating income of $53 million.
“While our financial results reflect the impact of our legacy
backlog and reorganization expenses, we made significant progress
during the quarter on our plan to improve operational performance
of the Company,” said David Dickson, President and Chief Executive
Officer of McDermott. “With the support and confidence of our
lenders and investors, we completed our new financing arrangements
in April; we improved focus on business accountability and customer
relationships; and we completed our remaining first-of-a-kind
projects in Malaysia and Brazil.”
Dickson added, “We are starting to see tangible improvement in
the performance and execution of many of our legacy projects. We
completed installation of the tension leg platform for the Papa
Terra project in Brazil, achieved mechanical completion of Siakap
in Malaysia, and installation of the COP project in Azerbaijan is
complete. As we complete implementation of our new organization, we
look forward to further operational improvements and capitalizing
on the robust offshore EPCI market to drive long-term growth,
profitability and shareholder value creation.”
Contract Backlog Summary
As of March 31, 2014, the Company’s backlog was approximately
$4.4 billion, compared to $4.8 billion at December 31, 2013. Of the
March 31, 2014 backlog, approximately 42% related to offshore
operations and approximately 58% related to subsea operations. As
expected, bookings during the first quarter totaled $166 million
and included a charter of the Lay Vessel North Ocean 105 in
Brazil.
At the end of the first quarter, the Company had $3.5 billion in
bids and change orders outstanding. The Company is targeting to bid
approximately $17 billion in projects that are expected to be
awarded in the next five quarters. In total, the Company’s revenue
pipeline was $25 billion as of March 31, 2014.
Business Improvement Initiative Update
The Company is moving forward with the implementation of the
organizational design announced in March 2014 and expects to
complete the transition by the end of the second quarter 2014. The
Company continues to review its portfolio of assets to ensure
optimal capital deployment. In the first quarter, the Derrick Lay
Barge KP1 was sold for $8 million. In April 2014, a property that
was previously used as a fabrication facility was sold for $32
million. Both of these dispositions were of non-strategic
assets.
McDermott continues to take actions to reduce its cost
structure, including the cessation of fabrication activity at the
Company’s Morgan City, Louisiana facility and preparations to close
the Company’s Caspian operations upon conclusion of a project in
2014. At the same time, McDermott continues to attract strong
talent to the organization. Since November 2013, over 125
experienced professionals have joined the Company.
Balance Sheet Summary and Financing Update
As of March 31, 2014, McDermott reported total assets of
approximately $3.0 billion. Included in this amount is
approximately $317 million in cash and cash equivalents, restricted
cash and investments. At quarter-end the Company had approximately
$308 million in debt outstanding. In addition, total equity was
$1.4 billion, or approximately 47% of total assets.
In April 2014, the Company completed new financing arrangements
that are expected to provide financial flexibility necessary to
execute our business improvement initiatives and liquidity to
support the Company’s growth plans.
The new financing arrangements include a $400 million three-year
letter of credit facility, a $300 million five-year term loan, the
issuance of $500 million of seven-year senior secured notes, and
the issuance of $287.5 million of tangible equity units. The
tangible equity units are composed of three-year amortizing, senior
unsecured notes in an aggregate principal amount of $47.5 million
and prepaid common stock purchase contracts, which will settle on
or before April 1, 2017.
Concurrent with the new financing arrangements, the Company
cancelled its former $950 million revolving credit facility and
terminated a bridge-loan commitment.
As of April 30, 2014, the Company had approximately $1.1 billion
in cash, restricted cash and investments and approximately $900
million in debt outstanding.
Conference Call
McDermott has scheduled a conference call and webcast related to
its first quarter 2014 results today at 4:00 p.m. U.S. Central
Daylight Time. Interested parties may listen over the Internet
through a link posted in the Investor Relations section of the
Company’s Web site. The replay will also be available on the
Company’s Web site following the end of the call.
About the Company
McDermott is a leading provider of integrated engineering,
procurement, construction and installation (EPCI) services for
upstream field developments worldwide. The Company delivers fixed
and floating production facilities, pipelines 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 clients include national and major energy
companies. Operating in more than 20 countries across the world,
our locally focused and globally integrated resources include
approximately 14,000 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
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 and change orders outstanding, and projects McDermott
expects to bid and the timing of award of such, to the extent these
may be viewed as indicators of future revenues or profitability,
optimism about further operational improvements and capitalizing on
the robust offshore EPCI market, expectations on the timing for
completion of the transition of the Company’s new organizational
design, continued review of the Company’s portfolio of assets and
continued actions to reduce the Company’s cost structure. 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 scope or timing
of contracts, and contract cancellations, change orders and other
modifications. 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, 2013 and subsequent quarterly reports on Form 10-Q.
This news 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.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
Three Months EndedMarch 31, 2014
2013 (In thousands) Revenues $ 603,811
$ 807,488 Costs and Expenses: Cost of operations 591,493
712,814 Selling, general and administrative expenses 55,397 52,226
Gain on asset disposals
(6,439
)
(14,716
)
Restructuring charges 6,125
-
Total costs and expenses 646,576
750,324 Equity in Earnings (Loss) of Unconsolidated
Affiliates 1,123
(4,131
)
Operating Income (Loss)
(41,642
)
53,033 Other Income (Expense): Interest income
61 342 Loss on foreign currency – net
(4,082
)
(2,526
)
Other income (expense) – net
(265
)
782 Total other income (expense)
(4,286
)
(1,402
)
Income (loss) before provision for income taxes and
noncontrolling interests
(45,928
)
51,631 Provision for Income Taxes 3,489
27,313 Net Income (Loss)
(49,417
)
24,318 Less: Net Income Attributable to Noncontrolling
Interests 536 3,765 Net Income
(Loss) Attributable to McDermott International, Inc.
$
(49,953
)
$ 20,553
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months EndedMarch 31, 2014
2013
(In thousands, except share and per
share amounts)
Basic: Income from operations less noncontrolling
interests
$
(49,953
)
$ 20,553 Net income attributable to McDermott International, Inc.
$
(49,953
)
$ 20,553
Diluted: Weighted average common
shares (basic) 236,961,158 235,941,185
Effect of dilutive securities: Stock options, restricted stock and
restricted stock units
-
3,258,696 Adjusted weighted average common
shares and assumed exercises of stock options and vesting of stock
awards (diluted) 236,961,158 239,199,881
Basic earnings per share: Income from continuing
operations less noncontrolling interests
(0.21
)
0.09 Net income attributable to McDermott International, Inc.
(0.21
)
0.09
Diluted earnings per share: Income from
continuing operations less noncontrolling interests
(0.21
)
0.09 Net income attributable to McDermott International, Inc.
(0.21
)
0.09
SUPPLEMENTARY DATA
Three Months EndedMarch 31, 2014
2013 (In thousands) Drydock amortization $ 6,946 $
5,550 Depreciation & amortization expense $ 24,602 $ 20,222
Capital expenditures $ 37,893 $ 37,649 Backlog $ 4,364,422 $
4,802,223
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31, 2014
December 31, 2013
(In thousands, except share and per
share amounts)
Assets Current Assets: Cash and cash equivalents $ 268,130 $
118,702 Restricted cash and cash equivalents 43,286 23,652
Accounts receivable--trade, net
332,062 381,858
Accounts receivable--other
109,330 89,273 Contracts in progress 431,893 425,986 Deferred
income taxes 7,092 7,091 Investments 3,248
-
Assets held for sale 1,396 1,396 Other current assets 61,353
32,242 Total Current Assets
1,257,790 1,080,200 Property, Plant and
Equipment 2,397,254 2,367,686 Less accumulated depreciation
(913,650 ) (889,009 ) Net Property, Plant and
Equipment 1,483,604 1,478,677 Investments 2,189 13,511 Investments
in Unconsolidated Affiliates 48,897 50,536 Assets Held for Sale
10,121 12,243 Other Assets 221,328 172,204
Total Assets $ 3,023,929 $ 2,807,371
Liabilities and Equity Current Liabilities: Notes
payable and current maturities of long-term debt $ 258,417 $ 39,543
Accounts payable 423,166 398,739 Accrued liabilities 383,401
365,224 Advance billings on contracts 278,881 278,929 Deferred
income taxes 20,257 17,892 Income taxes payable 16,656
20,657 Total Current Liabilities
1,380,778 1,120,984 Long-Term Debt
49,761 49,019 Self-Insurance 21,715 20,531 Pension Liability 15,516
15,681 Other Liabilities 55,455 56,042 Commitments and
Contingencies 89,019 104,770 Stockholders’ Equity: Common stock,
par value $1.00 per share, authorized 400,000,000 shares; issued
244,739,400 and 244,271,365 shares at March 31, 2014 and December
31, 2013, respectively 244,739 244,271 Capital in excess of par
value 1,417,374 1,414,457 Retained earnings (121,110 ) (71,157 )
Treasury stock, at cost, 7,231,536 and 7,130,294 shares at March
31, 2014 and December 31, 2013,
respectively
(97,407 ) (97,926 ) Accumulated other comprehensive loss
(122,742 ) (140,131 )
Stockholders’ Equity--McDermott
International, Inc.
1,320,854 1,349,514 Noncontrolling Interests 90,831
90,830 Total Equity 1,411,685
1,440,344 Total Liabilities and Equity $
3,023,929 $ 2,807,371
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
Three Months Ended
March 31,
2014 2013 (In thousands) CASH FLOWS FROM
OPERATING ACTIVITIES: Net income (loss)
$
(49,417
)
$ 24,318 Non-cash items included in net income: Depreciation and
amortization 24,602 20,222 Drydock amortization 6,946 5,550
Restructuring charges 675
-
Equity in (earnings) loss of unconsolidated affiliates
(1,123
)
4,131 Gain on asset disposals
(6,439
)
(14,716
)
Benefit for deferred taxes
(2,628
)
5,332 Stock-based compensation charges 4,387 3,923 Net periodic
pension benefit cost 2,854 642 Other non-cash items 2,331 1,749
Changes in assets and liabilities, net of effects from
dispositions: Accounts receivable 26,365
(6,573
)
Net contracts in progress and advance billings on contracts
(5,974
)
(19,935
)
Accounts payable 32,727
(125,234
)
Accrued and other current liabilities 15,046
(20,774
)
Pension liability and accrued postretirement and employee benefits
5,880
(19,657
)
Other assets and liabilities
(78,560
)
(46,093
)
TOTAL CASH USED IN OPERATING ACTIVITIES
(22,328
)
(187,115
)
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
property, plant and equipment
(37,893
)
(37,649
)
Increase in restricted cash and cash equivalents
(19,634
)
(3,826
)
Purchases of available-for-sale securities
(1,997
)
(3,744
)
Sales and maturities of available-for-sale securities 10,055 31,193
Proceeds from the sale and disposal of assets 8,370 35,621 Other
investing activities
(1,950
)
(4,596
)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
(43,049
)
16,999
CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from short term debt 250,000
-
Payment of debt
(31,373
)
(1,494
)
Distributions to noncontrolling interests
(502
)
(6,200
)
Debt issuance costs and other financing activities
(3,356
)
(1,015
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
214,769
(8,709
)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 36
213 NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 149,428
(178,612
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
118,702 640,147 CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 268,130 $ 461,535
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for: Income taxes (net of refunds) $
11,668 $ 25,916
McDermott International, Inc.Investors & Financial
MediaSteve Oldham, +1.281.870.5147orTrade, General &
Local MediaLouise Denly,
+1.281.870.5025ldenly@mcdermott.com
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