Turnaround on track
Company to Host Conference Call and Webcast
Today at 4:00 p.m. CT
McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today announced financial results for the quarter ended
June 30, 2014. The Company reported a second quarter 2014 net loss
of $11 million or $0.05 per fully diluted share, compared to a net
loss of $149 million or $0.63 per diluted share in the prior-year
quarter. Weighted average common shares outstanding on a fully
diluted basis were approximately 237 million and 236 million in the
quarters ended June 30, 2014 and June 30, 2013, respectively.
The Company reported second quarter revenues of $476 million, a
decrease of 26% compared to revenues of $647 million in the
corresponding period of 2013 due to lower marine contribution.
Operating income was $28 million in the second quarter 2014 and
included $46 million of gains on asset sales and $1 million of
restructuring expenses. These results compare to the prior-year
operating loss of $150 million, which included $15 million of
restructuring expenses.
“The results reflect our efforts to improve execution, and we
are pleased to return three legacy projects to profitability and to
complete two others,” said David Dickson, President and Chief
Executive Officer of McDermott. Dickson added, “I am encouraged by
the steps our reorganized management team is taking to promote
cultural change as we focus on improving our competitiveness and
building quality backlog.”
The Company’s other expense for the second quarter 2014 was $32
million compared to other income of $9 million in the year-ago
quarter due to increased interest expense. The second quarter 2014
interest expense included $28 million of expenses related to prior
financing arrangements.
Contract Backlog Summary
As of June 30, 2014, the Company’s backlog was $4.1 billion,
compared to $4.4 billion at March 31, 2014. Of the June 30, 2014
backlog, approximately 39% related to offshore operations and
approximately 61% related to subsea operations. Order intake in the
second quarter 2014 totaled $176 million.
At the end of the second quarter, the Company had $8.4 billion
in bids and change orders outstanding. The Company is targeting to
bid approximately $9.8 billion in projects that are expected to be
awarded in the next five quarters. In total, the Company’s revenue
pipeline was $22 billion as of June 30, 2014.
Balance Sheet Summary
As of June 30, 2014, McDermott reported total assets of $3.7
billion. Included in this amount is $958 million in cash and cash
equivalents, restricted cash and investments. At quarter-end the
Company had $904 million in debt outstanding and total equity of
$1.6 billion, or 45% of total assets.
Conference Call
McDermott has scheduled a conference call and webcast related to
its second 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. In addition, a
presentation will be available on the Investor Relations section of
the Company’s Web site that contains supplemental information on
our operations and our business outlook.
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 the profitability of
legacy projects, backlog, bids and change orders outstanding,
projects McDermott expects to bid and the timing of award of such,
and revenue pipeline, to the extent these may be viewed as
indicators of future revenues or profitability, optimism about
steps being taken to promote cultural change and the Company’s
focus on improving competitiveness to build quality backlog.
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
OPERATIONS
Three Months EndedJune 30, Six Months
EndedJune 30, 2014 2013 2014
2013 (Unaudited)
(In thousands, except share and per
share amounts)
Revenues $ 476,083 $ 647,250 $ 1,079,894 $
1,454,738 Costs and Expenses: Cost of operations
432,298 723,259 1,023,791 1,436,073 Selling, general and
administrative expenses 56,877 52,617 112,274 104,843 Gain on asset
disposals (45,769 ) (13 ) (52,208 ) (14,729 ) Restructuring
expenses 1,263 15,462 7,388
15,462 Total costs and expenses
444,669 791,325 1,091,245
1,541,649 Equity in Loss of Unconsolidated Affiliates
(3,322 ) (5,461 ) (2,199 ) (9,592 )
Operating Income (Loss) 28,092 (149,536
) (13,550 ) (96,503 ) Other Income (Expense):
Interest income (expense)--net
(38,745 ) 428 (38,684 ) 770
Gain on foreign currency--net
6,622 8,904 2,540 6,378
Other income (expense)--net
(312 ) (31 ) (577 ) 751
Total other income (expense) (32,435 ) 9,301
(36,721 ) 7,899 Loss before provision
for income taxes and noncontrolling interests (4,343 )
(140,235 ) (50,271 ) (88,604 )
Provision for Income Taxes 4,788 5,902
8,277 33,215 Net Loss
(9,131 ) (146,137 ) (58,548 ) (121,819 )
Less: Net Income Attributable to Noncontrolling Interests
1,699 3,286 2,235
7,051 Net Loss Attributable to McDermott
International, Inc. $ (10,830 ) $ (149,423 ) $ (60,783 ) $ (128,870
)
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months EndedJune 30, Six Months
EndedJune 30, 2014 2013 2014
2013 (In thousands, except share and per share
amounts) Net loss attributable to McDermott International, Inc.
$
(10,830
)
$
(149,423
)
$
(60,783
)
$ (128,870 ) Weighted average common shares (basic)
237,395,580 236,199,438 237,178,369 236,070,311 Effect of dilutive
securities: 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)
237,395,580 236,199,438
237,178,369 236,070,311
Basic
earnings per share: Net loss attributable to McDermott
International, Inc.
(0.05
)
(0.63
)
(0.26
)
(0.55
)
Diluted earnings per share: Net loss attributable to
McDermott International, Inc.
(0.05
)
(0.63
)
(0.26
)
(0.55
)
SUPPLEMENTARY DATA
Three Months EndedJune 30, Six Months
EndedJune 30, 2014 2013 2014
2013 (In thousands) Depreciation & amortization
expense $ 21,645 $ 19,096 $ 46,247 $ 39,318 Drydock amortization $
3,020 $ 4,381 $ 9,966 $ 9,931 Capital expenditures $ 117,064 $
106,826 $ 154,957 $ 144,475 Backlog $ 4,063,900 $ 5,090,868 $
4,063,900 $ 5,090,868
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
June 30,2014 December 31,2013
(Unaudited)
(In thousands, except shareand
per share amounts)
Assets Current Assets: Cash and cash equivalents
$
764,034
$ 118,702 Restricted cash and cash equivalents 189,871 23,652
Accounts receivable--trade, net
225,459 381,858
Accounts receivable--other
72,347 89,273 Contracts in progress 440,345 425,986 Deferred income
taxes 9,092 7,091 Assets held for sale 1,396 1,396 Other current
assets 43,339 32,242 Total
Current Assets 1,745,883 1,080,200
Property, Plant and Equipment 2,343,876 2,367,686 Less
accumulated depreciation
(790,871
)
(889,009
)
Net Property, Plant and Equipment 1,553,005 1,478,677
Accounts receivable-- long-term
retainages
145,883 65,365 Investments in Unconsolidated Affiliates 46,111
50,536 Deferred income taxes 18,220 16,766 Assets held for sale
10,121 12,243 Investments 4,219 13,511 Other Assets 119,757
90,073 Total Assets $ 3,643,199
$ 2,807,371
Liabilities and Equity Current
Liabilities: Notes payable and current maturities of long-term debt
$ 26,285 $ 39,543 Accounts payable 347,910 398,739 Accrued
liabilities 326,573 365,224 Advance billings on contracts 204,536
278,929 Deferred income taxes 19,564 17,892 Income taxes payable
15,660 20,657 Total Current
Liabilities 940,528 1,120,984
Long-Term Debt 878,090 49,019 Self-Insurance 22,625 20,531 Pension
Liability 15,320 15,681 Non-current Income Taxes 57,084 56,042
Other Liabilities 82,009 104,770 Commitments and Contingencies
Stockholders’ Equity: Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued 244,950,464 and 244,271,365
shares at June 30, 2014 and December 31, 2013, respectively 244,950
244,271 Capital in excess of par value (including prepaid common
stock purchase contracts) 1,661,543 1,414,457 Retained earnings
(131,940
)
(71,157
)
Treasury stock, at cost, 7,316,539 and 7,130,294 shares at June 30,
2014 and December 31, 2013, respectively
(97,069
)
(97,926
)
Accumulated other comprehensive loss
(119,221
)
(140,131
)
Stockholders’ Equity--McDermott
International, Inc.
1,558,263 1,349,514 Noncontrolling Interests 89,280
90,830 Total Equity 1,647,543
1,440,344 Total Liabilities and Equity $
3,643,199 $ 2,807,371
McDERMOTT
INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS Six Months
Ended June 30, 2014 2013
(Unaudited) (In thousands) CASH FLOWS FROM
OPERATING ACTIVITIES: Net loss $
(58,548
)
$ (121,819 ) Non-cash items included in net loss: Depreciation and
amortization 46,247 39,318 Drydock amortization 9,966 9,931
Stock-based compensation charges 10,352 10,110 Net periodic pension
benefit cost 6,164 (641 ) Equity in loss of unconsolidated
affiliates 2,199 9,592 Restructuring activity (982 ) 12,104 Gain on
asset disposals (52,208 ) (14,729 ) Benefit for deferred taxes
(4,375 ) (4,314 ) Gain on foreign currency (2,540 ) (6,378 ) Other
non-cash items 374 321 Changes in assets and liabilities, net of
effects from acquisitions and dispositions: Accounts receivable
86,305 54,106 Net contracts in progress and advance billings on
contracts (88,771 ) (4,051 ) Accounts payable (31,756 ) 24,413
Accrued and other current liabilities (9,706 ) (23,299 ) Pension
liability and accrued postretirement and employee benefits 9,563
(25,973 ) Derivative instruments and hedging activities (26,153 )
(71,013 ) Other assets and liabilities 10,958
15,840 TOTAL CASH USED IN OPERATING ACTIVITIES
(92,911 ) (96,482 )
CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of property, plant and equipment (154,957
) (144,475 ) Increase in restricted cash and cash equivalents
(166,219 ) (6,370 ) Purchases of available-for-sale securities
(1,997 ) (8,637 ) Sales and maturities of available-for-sale
securities 11,303 34,031 Proceeds from the sale and disposal of
assets 53,704 35,672 Other investing activities (5,076 )
(6,939 ) TOTAL CASH USED IN INVESTING ACTIVITIES
(263,242 ) (96,718 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from 8% senior Notes 500,000
-
Proceeds from term Loan 300,000
-
Proceeds from prepaid common stock purchase contracts issuance
240,044
-
Proceeds from amortizing notes issuance 47,456
-
Issuance of common stock 169 45 Payments - long term debt (35,705 )
(7,073 ) Borrowings - short term debt 250,000
-
Payments - short term debt (250,000 )
-
Debt issuance costs (45,521 )
-
Distributions to noncontrolling interests (3,754 ) (11,243 ) Other
financing activities (1,413 ) (1,083 ) TOTAL CASH
PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,001,276
(19,354 ) EFFECTS OF EXCHANGE RATE CHANGES ON CASH
209 118 NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 645,332 (212,436 ) CASH AND
CASH EQUIVALENTS AT BEGINNING OF PERIOD 118,702
640,147 CASH AND CASH EQUIVALENTS AT END OF PERIOD $
764,034 $ 427,711
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION: Cash paid during the period for:
Income taxes (net of refunds) $ 17,162 $ 72,363 Interest expense
(net of amount capitalized) $ 10,884
-
McDermott International, Inc.Investors & Financial
MediaSteve Oldham, 281.870.5147soldham@mcdermott.comorTrade,
General & Local MediaLouise Denly,
281.870.5025ldenly@mcdermott.com
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