Results Reflect Improved Execution, Recent
Awards in Middle East and Asia
New Business Partnerships with Industry
Leaders
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 fourth quarter
and full year ended December 31, 2014. The Company reported fourth
quarter 2014 net income of $8.2 million, or $0.03 per fully diluted
share, compared to a net loss of $326.2 million, or $1.38 per
diluted share, in the prior-year quarter. For the year ended
December 31, 2014, the Company reported a net loss of $76.0
million, or $0.32 per fully diluted share, compared to a net loss
of $508.9 million, or $2.15 per diluted share, in the prior
year.
“McDermott is in a much stronger position today, compared to a
year ago, as a result of our turnaround efforts. With the
recapitalization of the Company in early 2014, we raised the
liquidity needed to work through our legacy contracts, capital
expenditure commitments and initiatives for 2014 and for the
foreseeable future,” said David Dickson, President and Chief
Executive Officer of McDermott.
“We delivered better project execution throughout the year and
successfully closed out a number of challenging legacy contracts.
The installation of the riser support structure in the fourth
quarter was a significant milestone for the INPEX-operated Ichthys
project, the industry’s largest subsea contract at its time of
award. Our recent awards from Brunei Shell Petroleum, Qatar
Petroleum, Pemex and Saudi Aramco and the resolution of legacy
commercial issues with other clients reflect our improving customer
relationships. Even in a lower oil commodity price environment,
with McDermott’s differentiated capabilities we continue to see
opportunities to bid and win new work. With our liquidity, a team
of talented leaders and our relentless drive for greater cost
efficiency, we believe the Company has the strength to work through
the industry’s current headwinds.”
Mr. Dickson added, “In addition, our new partnerships with two
industry leaders represent part of McDermott’s overall growth
strategy. In January, we formed io oil & gas™ consulting with
GE Oil & Gas. The new venture is focused on conceptual and
pre-FEED consulting for offshore and subsea field development. It
leverages both companies’ experience to provide the most efficient
solutions, resulting in more accurate cost and schedule estimates
at the early stages of developments. Additionally, in February, we
announced a strategic alliance with Petrofac to combine our
complementary capabilities to deliver large integrated EPCI subsea
projects with Petrofac’s new high-end SURF, ultra-deepwater pipelay
and ultra-heavy lift vessel, the JSD 6000. Together, we plan to
provide clients an integrated solution on the largest and most
complex deepwater developments.”
McDermott Announces Plan Expected to Improve Cost
Structure
McDermott also announced the results of a major review of the
Company’s cost structure, which is expected to drive an improvement
in profitability and flexibility through reducing fixed and
variable costs.
The three key components of the plan include:
- Increased organizational efficiency,
commencing in the first quarter of this year, with expected savings
starting in the second quarter of 2015
- Centralization of various front- and
back-office functions
- Operational cost initiatives leveraging
McDermott’s global scale and the outsourcing of some non-core
business activities
The Company anticipates annual cash savings in 2015, before
restructuring costs, of approximately $50 million, with an
annualized expected cash savings of $100 million, starting in 2016.
McDermott expects to incur $25 million to $35 million in
restructuring costs in 2015, as a result of the review.
Fourth Quarter 2014 Operating Results
The Company reported fourth quarter 2014 revenues of $806.4
million, an increase of $289.1 million compared to revenues of
$517.3 million for the prior-year quarter.
The Company’s operating income was $25.9 million for the fourth
quarter 2014 and included $1.7 million of asset impairment and $6.0
million of restructuring expenses. These results compare to the
prior-year period operating loss of $317.9 million, which included
$84.5 million of asset impairments and $16.2 million of
restructuring expenses. Cash flow from operations for the fourth
quarter 2014 was $119.3 million compared to a net use of cash of
$88.5 million for the fourth quarter 2013.
Full Year 2014 Operating Results
For the year ended December 31, 2014, the Company reported
revenues of $2.3 billion, compared to $2.7 billion for the year
ended December 31, 2013.
Operating income was $8.6 million for the year ended December
31, 2014, which included $46.2 million of gains on asset sales and
$18.1 million of restructuring expenses. These results compare to
an operating loss of $456.7 million for the year ended December 31,
2013, which included $84.5 million of asset impairments and $35.7
million of restructuring expenses. Cash flow from operations for
the year ended December 31, 2014 was $7.0 million compared to a net
use of $256.6 million for the year ended December 31, 2013.
The Company’s other expense for the year ended December 31, 2014
was $53.9 million, compared to other income of $15.9 million for
the year ended December 31, 2013, due to increased interest
expense.
Operational Update
In the Asia Pacific segment, the Company completed the
installation of the riser support structure and reeled pipelay
scope on the Ichthys project. The Company also completed the
float-over installation of the central processing platform on the
PETRONAS Kepodang project and the transportation and installation
of a single-point mooring tower for the Banyu Urip field in
Indonesia.
In the Middle East segment, McDermott’s in-house vessels
completed major structural installation campaigns and related
tie-in activities for two ongoing projects in Saudi Arabia. In
addition, the Company’s Derrick Barge 27 crew celebrated eleven
years and 11 million man-hours without a lost time incident.
In the Americas segment, the Company experienced significant
execution improvements on the PB Litoral-A project and increased
productivity at its Altamira yard. McDermott’s Derrick Barge 50
also recently completed a heavy lift of a 3,250-ton jacket, a
record for the vessel.
Other Financial Information
As of December 31, 2014, McDermott reported total assets of $3.4
billion. Included in this amount was $852.9 million in cash and
cash equivalents and restricted cash. At year end, the Company had
$891.5 million in debt outstanding and total equity of $1.5
billion, or 45% of total assets. The Company was in compliance with
all debt covenants for the quarter ended December 31, 2014.
Weighted average common shares outstanding on a fully diluted
basis were approximately 284.1 million and 237.0 million for the
quarters ended December 31, 2014 and December 31, 2013,
respectively. Potential dilutive common shares for the settlement
of our common stock purchase contracts totaling 40.9 million shares
were considered in the calculation of diluted weighted average
shares, because of the Company’s positive net income position for
the quarter ended December 31, 2014.
For the years ended December 31, 2014 and December 31, 2013,
weighted average common shares outstanding on a fully diluted basis
were 237.2 million and 236.5 million, respectively. Due to the
anti-dilutive effect, common shares for the settlement of our
common stock purchase contracts were not considered in the
calculation of diluted weighted average shares for the year ended
December 31, 2014.
Contract Backlog Summary
As of December 31, 2014, the Company’s backlog was $3.6 billion,
compared to $4.0 billion at September 30, 2014. Of the December 31,
2014 backlog, approximately 43% related to offshore operations and
approximately 57% related to subsea operations. Order intake in the
fourth quarter 2014 totaled $427.7 million and included a pipeline
repair project in Brunei and change orders on existing
projects.
At December 31, 2014, the Company had $8.6 billion in bids and
change orders outstanding compared to $10.5 billion at September
30, 2014. At December 31, 2014, the Company was targeting to bid
approximately $17.6 billion in projects that it expects to be
awarded to the market through March 31, 2016. In total, the
Company’s potential revenue pipeline was $29.8 billion as of
December 31, 2014.
2015 Outlook
The Company expects revenues to be in the range of $3.3 billion
to $3.6 billion and operating income to be in the range of $25
million to $50 million, including expected restructuring charges in
the range of $25 million to $35 million.
The Company expects capital expenditures to be in the range of
$275 million to $295 million, excluding capitalized interest of
approximately $25 million. At year-end 2015, cash and restricted
cash is expected to be in the range of $600 million to $650 million
and debt to be $865 million, provided contracting terms and
industry norms on working capital remain stable.
Conference Call
McDermott has scheduled a conference call and webcast related to
its fourth quarter and full year 2014 results today at 4:00 p.m.
U.S. Central Standard 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 13,400 employees, a diversified fleet of specialty
marine construction vessels, fabrication facilities and engineering
offices. We are renowned for our extensive knowledge and
experience, technological advancements, performance records,
superior safety and commitment to deliver. McDermott has served the
energy industry since 1923 and 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, projects McDermott expects to bid and the
timing of award of such, and revenue pipeline, to the extent to
which these may be viewed as indicators of future revenues or
profitability; continued opportunities to bid and win new work; our
liquidity; our customer relationships; our beliefs in McDermott’s
strengths in the current industry environment; the results of our
io oil and gas venture and our alliance with Petrofac; expectations
regarding improvements, savings and costs related to McDermott’s
profitability initiative and the timing of such; and statements
about McDermott’s 2015 outlook, including the expected range of
revenues, operating income, restructuring charges, capital
expenditures, cash and restricted cash and debt at December 31,
2015. 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. 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, 2014. 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.
CONSOLIDATED STATEMENTS OF
INCOME
Three Months EndedDecember 31, Year
EndedDecember 31, 2014 2013 2014
2013 (In thousands) Revenues $ 806,400
$ 517,338 $ 2,300,889 $ 2,658,932 Costs and
Expenses: Cost of operations 718,951 678,938 2,113,013 2,801,426
Selling, general and administrative expenses 51,475 52,148 208,564
193,126 Asset impairments (9,002 ) 84,482 (9,002 ) 84,482 Gains on
asset disposals 10,825 292 (46,201 ) (15,200 ) Restructuring
expenses 6,001 16,225 18,113
35,727 Total costs and expenses 778,250
832,085 2,284,487
3,099,561 Equity in Losses of Unconsolidated Affiliates
(2,201 ) (3,149 ) (7,848 ) (16,116 )
Operating Income (Loss) 25,949 (317,896
) 8,554 (456,745 ) Other Income (Expense):
Interest income (expense) - net (10,346 ) 220 (60,877 ) 1,353 Gain
(loss) on foreign currency-net 7,091 6,034 7,234 16,872 Other
income (expense) - net (128 ) (4,152 ) (232 )
(2,339 ) Total other income (expense) (3,383 )
2,102 (53,875 ) 15,886 Income
(loss) from continuing operations before provision for income taxes
and noncontrolling interests 22,566 (315,794 ) (45,321 ) (440,859 )
Provision for Income Taxes 10,332 3,558
20,073 49,051 Net income (loss)
12,234 (319,352 ) (65,394 ) (489,910 )
Less: net income attributable to noncontrolling interest
4,059 6,884 10,600 18,958
Net income (loss) attributable to McDermott
International, Inc. $ 8,175 $ (326,236 ) $ (75,994 ) $
(508,868 )
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months EndedDecember 31,
Year EndedDecember 31,
2014 2013 2014 2013 (In thousands,
except share and per share amounts) Income (loss) from
continuing operations less noncontrolling interest $ 8,175 $
(326,236 ) $ (75,994 ) $ (508,868 ) Income from discontinued
operations, net of tax
-
-
-
-
Net income (loss) attributable to McDermott International,
Inc. Income (loss) from continuing operations less noncontrolling
interest $ 8,175 $ (326,236 ) $ (75,994 ) $ (508,868 )
Weighted average common shares (basic) 237,130,209 236,952,496
237,229,086 236,514,584 Effect of dilutive securities: Stock
options, restricted stock and restricted stock units
47,011,244
-
-
-
Adjusted weighted average common shares and assumed
exercises of stock options and vesting of stock awards (diluted)
284,141,453 236,952,496 237,229,086
236,514,584
Basic earnings per share
: Income (loss) from continuing operations less noncontrolling
interest 0.03 (1.38 ) (0.32 ) (2.15 ) Income (loss) from
discontinued operations, net of tax
-
-
-
-
Net income (loss) attributable to McDermott International, Inc.
0.03 (1.38 ) (0.32 ) (2.15 )
Diluted earnings per
share: Income (loss) from continuing operations less
noncontrolling interest 0.03 (1.38 ) (0.32 ) (2.15 ) Income (loss)
from discontinued operations, net of tax
-
-
-
-
Net income (loss) attributable to McDermott International, Inc.
0.03 (1.38 ) (0.32 ) (2.15 )
SUPPLEMENTARY DATA
Three Months EndedDecember 31,
Year EndedDecember 31,
2014 2013 2014 2013 (In
thousands) Drydock amortization $ 4,152 $ 4,288 $ 19,719 $
18,467 Depreciation & amortization expense $ 24,530 $ 24,466 $
93,185 $ 84,580 Capital expenditures $ 104,661 $ 58,565 $ 321,187 $
283,962 Backlog $ 3,600,999 $ 4,802,223 $ 3,600,999 $ 4,802,223
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
2014
December 31,
2013
(In thousands, except share and per share amounts)
Assets Current Assets: Cash and cash equivalents $ 665,309 $
118,702 Restricted cash and cash equivalents 187,585 23,652
Accounts receivable – trade, net 143,370 381,858 Accounts
receivable – other 81,088 89,273 Contracts in progress 357,617
425,986 Deferred income taxes 7,514 7,091 Assets held for sale
14,253 1,396 Other current assets 51,378 32,242 Total
Current Assets 1,508,114 1,080,200 Property, Plant
and Equipment 2,473,563 2,367,686 Less accumulated depreciation
(830,467 ) (889,009 ) Net Property, Plant and
Equipment 1,643,096 1,478,677 Accounts Receivable – Long-Term
Retainages 137,468 65,365 Investments in Unconsolidated Affiliates
38,186 50,536 Deferred Income Taxes 17,313 16,766 Assets Held for
Sale
-
12,243 Investments 2,216 13,511 Other Assets 97,564
90,073 Total Assets $ 3,443,957 $ 2,807,371
Liabilities
and Equity Current Liabilities: Notes payable and current
maturities of long-term debt $ 27,026 $ 39,543 Accounts payable
251,924 398,739 Accrued liabilities 337,209 365,224 Advance
billings on contracts 199,865 278,929 Deferred income taxes 19,753
17,892 Income taxes payable 25,165 20,657 Total
Current Liabilities 860,942 1,120,984 Long-Term Debt
864,521 49,019 Self-Insurance 17,026 20,531 Pension Liability
18,403 15,681 Non-current Income Taxes 49,229 56,042 Other
Liabilities 94,722 104,770 Commitments and Contingencies
Stockholders' Equity: Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued 245,209,850 and 244,271,365
shares at December 31, 2014 and December 31, 2013, respectively
245,210 244,271 Capital in excess of par value (including prepaid
common stock purchase contracts) 1,676,815 1,414,457 Accumulated
Deficit (239,572 ) (163,578 ) Treasury stock, at cost: 7,400,027
and 7,130,294 shares at at December 31, 2014 and December 31, 2013,
respectively (96,441 ) (97,926 ) Accumulated other comprehensive
loss (97,808 ) (47,710 ) Stockholders' Equity -
McDermott International, Inc. 1,488,204 1,349,514 Noncontrolling
interest 50,910 90,830 Total Equity 1,539,114
1,440,344 Total Liabilities and Equity $ 3,443,957 $
2,807,371
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
December 31, 2014 2013 (In
thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net
Income (Loss) $ (65,394 ) $ (489,910 ) (Income) loss from
discontinued operations, net of tax - - Income (loss)
from continuing operations (65,394 ) (489,910 ) Non-cash items
included in net loss: Depreciation and amortization 93,185 84,580
Drydock amortization 19,719 18,467 Loss on asset impairments (9,002
) 84,482 Stock-based compensation charges 18,565 21,100 Equity in
losses of unconsolidated affiliates 7,848 16,116 Gain on foreign
currency-net (10,310 ) (13,247 ) Restructuring activity (2,310 )
18,044 Gain on asset disposals (46,201 ) (15,200 ) Deferred taxes
891 (5,359 ) Other non-cash items (3,605 ) (6,029 ) Changes in
assets and liabilities, net of effects from acquisitions and
dispositions: Accounts receivable 166,385 30,156 Net contracts in
progress and advance billings on contracts (10,695 ) 171,397
Accounts payable (154,439 ) (17,493 ) Accrued and other current
liabilities (2,801 ) (22,155 ) Pension liability and accrued
postretirement and employee benefits (1,861 ) (30,828 ) Income
taxes (4,668 ) (54,431 ) Other assets and liabilities 11,653
(46,301 ) TOTAL CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES - CONTINUING OPERATIONS 6,960 (256,611 )
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
property, plant and equipment (321,187 ) (283,962 ) (Increase)
decrease in restricted cash and cash equivalents (163,933 ) (5,536
) Purchases of available-for-sale securities (3,695 ) (10,535 )
Sales and maturities of available-for-sale securities 12,978 43,959
Investments in unconsolidated affiliates (2,420 ) (9,354 ) Proceeds
from asset dispositions 71,961 37,386 Other investing activities
(2,706 ) (3,113 ) NET CASH USED IN INVESTING
ACTIVITIES - CONTINUING OPERATIONS (409,002 ) (231,155 ) NET CASH
PROVIDED BY INVESTING ACTIVITIES - DISCONTINUED OPERATIONS -
- TOTAL CASH USED IN INVESTING ACTIVITIES (409,002 )
(231,155 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 1,328,875 296,000 Payment of debt (298,534 )
(310,146 ) Issuance of common stock 327 68 Purchase of treasury
stock (1,707 ) (1,106 ) Debt issuance costs (39,112 ) (4,905 )
Distributions to noncontrolling interests (6,352 ) (13,743 )
Acquisition of noncontrolling interest (32,943 ) -
TOTAL CASH PROVIDED BY (USED IN
) FINANCING ACTIVITIES
950,554 (33,832 ) EFFECTS OF EXCHANGE RATE CHANGES ON
CASH (1,905 ) 153 NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 546,607 (521,445 ) CASH AND CASH
EQUIVALENTS AT BEGINNING OF YEAR 118,702 640,147 CASH
AND CASH EQUIVALENTS AT END OF YEAR $ 665,309 $ 118,702
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid
during the period for: Income taxes (net of refunds) $ 26,661 $
105,444 Interest expense (net of amount capitalized) $ 28,390 -
McDermott International, Inc.Investors & Financial
MediaDarcey Matthews, 281.870.5147Vice President, Investor
Relationsdmatthews@mcdermott.com
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