Exceptional Third Quarter Results Driven by One
McDermott Way
McDermott International, Inc. (NYSE:MDR) (“McDermott,” the
“Company,” “we” or “us”) today announced financial and operational
results for the third quarter and nine months ended September 30,
2017.
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($ in millions, except per share amounts) |
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Three Months Ended |
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Delta |
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Nine Months Ended |
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Delta |
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Sept 30,2017 |
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Sept 30,2016 |
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Yr-over-Yr |
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Sept 30,2017 |
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Sept 30,2016 |
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Yr-over-Yr |
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Revenues |
$ |
958.5 |
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$ |
558.5 |
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$ |
400.0 |
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$ |
2,266.6 |
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$ |
1,994.2 |
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$ |
272.4 |
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Operating Income |
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127.1 |
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43.1 |
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84.0 |
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270.3 |
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136.0 |
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134.3 |
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Operating Margin |
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13.3 |
% |
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7.7 |
% |
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5.6 |
% |
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11.9 |
% |
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6.8 |
% |
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5.1 |
% |
Net Income |
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94.7 |
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16.1 |
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78.6 |
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153.0 |
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34.6 |
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118.4 |
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Diluted EPS |
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0.33 |
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0.06 |
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|
0.27 |
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0.54 |
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0.12 |
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0.42 |
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Adjusted Operating
Income1 |
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127.1 |
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56.6 |
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70.5 |
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270.3 |
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190.8 |
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79.5 |
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Adjusted Operating
Margin1 |
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13.3 |
% |
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10.1 |
% |
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3.2 |
% |
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11.9 |
% |
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9.6 |
% |
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2.3 |
% |
Adjusted Net
Income1,2 |
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94.7 |
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25.8 |
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68.9 |
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153.0 |
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84.9 |
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68.1 |
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Adjusted Diluted
EPS1,2 |
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0.33 |
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0.09 |
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0.24 |
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0.54 |
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0.30 |
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0.24 |
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Cash Provided by
Operating Activities |
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45.3 |
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49.8 |
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(4.5 |
) |
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135.5 |
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125.6 |
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9.9 |
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1 Adjusted Operating Income and Adjusted Margin
include the following adjustments to Operating Income computed in
accordance with U.S. generally accepted accounting principles
(“GAAP”):
- $1.8 million and $10.7 million of restructuring charges during
the third quarter and nine months ended September 30, 2016,
respectively.
- $11.8 million and $44.1 million of impairment charges during
the third quarter and nine months ended September 30, 2016,
respectively.
Adjusted Net Income includes the adjustments to
Operating Income computed in accordance with GAAP mentioned above
and the following adjustment for non-operating activity:
- $5.0 million gain during the quarter and nine months ended
September 30, 2016, resulting from the exit of our joint venture
investment in THHE Fabricators Sdn. Bhd. (“THF”), a subsidiary of
TH Heavy Engineering Berhad (“THHE”).
The calculations of total and per share Adjusted
Net Income and Adjusted Operating Income and margins are shown in
the appendix entitled “Reconciliation of Non-GAAP to GAAP Financial
Measures.” The appendix also includes additional information
related to the adjustments mentioned above. 2 The calculations
of Adjusted Net Income and Adjusted Diluted EPS reflect the tax
effects of Non-GAAP adjustments during the period. The
Non-GAAP adjusting items are primarily attributable to tax
jurisdictions in which we currently do not pay taxes and,
therefore, no tax impact is applied to those items. For the
Non-GAAP adjusting items in jurisdictions where taxes are paid, the
tax impacts on those adjustments are computed, individually, using
the statutory tax rate in effect in each applicable tax
jurisdiction.
“I am extremely pleased to announce our
exceptional third quarter results. The One McDermott Way continues
to drive excellence in project execution throughout the company and
led to increasing profitability in the third quarter. This quarter,
we had many operational accomplishments, including: near completion
of the largest subsea project in the world, Inpex Ichthys, with
successful completion of the mooring and hook-up of the FPSO
facility and installation of the flexible risers; significant
progress on the Pemex Abkatun-A2 and BP Angelin projects in our
Altamira facility; and a flawless dual lift with the DB 27 and DB
30 on the Marjan power system project,” said David Dickson,
President and Chief Executive Officer of McDermott. “We also
recently announced two letters of award; a significant award in the
Middle East, demonstrating our operational expertise and strong
relationships in the area, and an award for KG-D6, a significant
subsea installation project, from Reliance Industries in India,
supporting our continued focus and growing presence in the country.
This quarter, our company-wide focus on safety led us to surpass an
impressive 60 million man-hours LTI-free as a company. We also
continue to see a robust revenue opportunity pipeline throughout
all three areas, with increased bidding opportunities and a growing
level of FEED activity.”
Third Quarter 2017 Operating
Results
Third quarter 2017 earnings attributable to
McDermott stockholders, computed in accordance with U.S. generally
accepted accounting principles (“GAAP”), were $94.7 million, or
$0.33 per fully diluted share, compared to $16.1 million, or $0.06
per fully diluted share, for the prior-year third quarter. This
quarter, we made no adjustments from our presentation in accordance
with GAAP net income. For the prior-year third quarter, we
reported adjusted net income of $25.8 million, or $0.09 per
adjusted fully diluted share, excluding restructuring charges of
$1.8 million, an impairment loss of $11.8 million and a gain of
$5.0 million on the exit of our joint venture with THHE.
We reported third quarter 2017 revenues of
$958.5 million, an increase of $400.0 million, compared to revenues
of $558.5 million for the prior-year third quarter. The key
projects driving revenue for the third quarter of 2017 were the
Saudi Aramco LTA II Lump Sum, Saudi Aramco Marjan power system
replacement and Inpex Ichthys projects. The increase from the
prior-year third quarter was primarily due to increased activity
across the portfolio of projects in the Middle East.
Our operating income for the third quarter of
2017 was $127.1 million, or an operating margin of 13.3%, compared
to $43.1 million, or an operating margin of 7.7%, for the third
quarter of 2016. This quarter, we made no adjustments from our
presentation in accordance with GAAP operating income. For the
prior-year third quarter, we reported adjusted operating income of
$56.6 million, or an adjusted operating margin of 10.1%, excluding
the restructuring charges and impairment mentioned
above. Operating income for the third quarter of 2017 was
primarily driven by fabrication and marine activity on the Saudi
Aramco LTA II Lump Sum project, marine activity on the Saudi Aramco
Marjan power system replacement project and progress on the Inpex
Ichthys project.
Cash provided by operating activities in the
third quarter of 2017 was $45.3 million, a decrease compared to the
$49.8 million of cash provided in the third quarter of
2016. The decrease was primarily driven by working capital
build on projects with national oil companies, partially offset by
higher operating results.
Nine Months Ended September 2017
Operating Results
Earnings attributable to McDermott stockholders,
computed in accordance with GAAP, in the first nine months of 2017
were $153.0 million, or $0.54 per fully diluted share, compared to
earnings of $34.6 million, or $0.12 per fully diluted share, for
the corresponding 2016 period. For the first nine months of 2017,
we made no adjustments from GAAP net income. For the first
nine months of 2016, we reported an adjusted net income of $84.9
million, or $0.30 per adjusted fully diluted share, excluding
restructuring charges of $10.7 million, impairment charges of $44.1
million and a gain of $5.0 million on the exit of the joint venture
with THHE.
Revenues for the first nine months of 2017 were
$2,266.6 million, an increase of $272.4 million, compared to
revenues of $1,994.2 million for the corresponding 2016
period. The key projects driving revenue for the first nine
months of 2017 were the Saudi Aramco LTA II Lump Sum, Saudi Aramco
Marjan power system replacement, Inpex Ichthys and ONGC Vashishta
projects. The increase from the prior-year first nine months was
primarily due to increased activity across the portfolio of
projects in the Middle East.
Our operating income for the first nine months
of 2017 was $270.3 million, or an operating margin of 11.9%,
compared to $136.0 million, or an operating margin of 6.8%, for the
same period of 2016. For the first nine months of 2017, we
made no adjustments from GAAP operating income. For the first
nine months of 2016, we reported adjusted operating income of
$190.8 million, or an adjusted operating margin of 9.6%, excluding
the restructuring charges and impairment mentioned
above. Operating income for the first nine months of 2017 was
primarily driven by fabrication and marine activity on the Saudi
Aramco LTA II Lump Sum project, marine activity on the Saudi Aramco
Marjan power system replacement project and progress on the Inpex
Ichthys project.
Cash provided by operating activities in the
first nine months of 2017 was $135.5 million, an increase compared
to the $125.6 million of cash provided in the corresponding period
of 2016. The increase was primarily driven by higher operating
results and reflected a lower than anticipated working capital
build with national oil companies in the first nine months of 2017
through our efficient working capital management.
Operational
Review
Revenue
Pipeline |
As of Sept 30, 2017 |
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AEA |
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MEA |
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ASA |
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Total |
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($ in billions) |
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Backlog |
$ |
0.5 |
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$ |
1.6 |
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$ |
0.3 |
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$ |
2.4 |
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Bids & Change
Orders Outstanding1 |
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2.9 |
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1.5 |
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1.0 |
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5.4 |
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Targets2 |
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4.5 |
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4.8 |
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3.3 |
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12.6 |
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Total |
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7.9 |
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7.9 |
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4.6 |
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20.4 |
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Operating
Results |
Three Months Ended Sept 30, 2017 |
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Nine Months Ended Sept 30, 2017 |
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Segment Operating Results |
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Corporate and Other3 |
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Segment Operating Results |
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Corporate and Other3 |
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AEA |
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MEA |
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ASA |
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AEA |
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MEA |
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ASA |
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($ in millions) |
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New Orders |
$ |
21.4 |
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$ |
41.5 |
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$ |
26.0 |
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$ |
- |
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$ |
163.4 |
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$ |
130.1 |
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$ |
79.2 |
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$ |
- |
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Revenue |
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61.0 |
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736.3 |
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161.2 |
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- |
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130.7 |
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1,603.0 |
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533.0 |
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- |
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Book-to-Bill |
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0.4 |
x |
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0.1 |
x |
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0.2 |
x |
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- |
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1.3 |
x |
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0.1 |
x |
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0.1 |
x |
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- |
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Operating Income |
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(7.2 |
) |
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163.6 |
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23.7 |
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(53.1 |
) |
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(18.3 |
) |
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345.5 |
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86.4 |
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(143.3 |
) |
Operating Margin |
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-11.8 |
% |
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22.2 |
% |
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14.7 |
% |
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- |
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-14.0 |
% |
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21.6 |
% |
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16.2 |
% |
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- |
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Capex |
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5.4 |
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7.9 |
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1.8 |
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1.1 |
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20.7 |
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18.5 |
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7.5 |
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50.4 |
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1 There is no assurance that bids outstanding
will be awarded to McDermott or that outstanding change orders
ultimately will be approved and paid by the applicable customers in
the full amounts requested or at all. 2 Target projects are those
that McDermott has identified as anticipated to be awarded by
customers in the next five quarters through competitive bidding
processes and capable of being performed by McDermott. There is no
assurance that target projects will be awarded to McDermott. 3
Corporate and Other includes corporate expenses, certain centrally
managed initiatives (such as restructuring charges), impairments,
year-end mark-to-market (“MTM”) pension actuarial gains and losses,
costs not attributable to a particular reportable segment and
unallocated direct operating expenses associated with the
underutilization of vessels, fabrication facilities and engineering
resources.
As of September 30, 2017, the Company’s backlog
was $2.4 billion, compared to $3.3 billion at June 30, 2017. Of the
September 30, 2017 backlog, 85% was related to offshore operations
and 15% was related to subsea operations. Order intake in the third
quarter of 2017 totaled $89 million, resulting in a book-to-bill
ratio of 0.1x. At September 30, 2017, there were bids and change
orders outstanding and identified target projects of approximately
$5.4 billion and $12.6 billion, respectively, in the revenue
opportunity pipeline that we expect will be awarded in the market
through December 31, 2018. In total, the revenue opportunity
pipeline, including the Company’s backlog, was $20.4 billion as of
September 30, 2017.
In the Americas, Europe and Africa (“AEA”) Area,
the Pemex Abkatun-A2 project continued to progress on schedule,
with fabrication activities on the compression platform and several
key deck lifts, and with only the top deck lift remaining and
scheduled for the fourth quarter. Thirty percent of spool
fabrication has been achieved, and jacket fabrication continues
ahead of schedule. The BP Angelin project continued to progress
well, with procurement of all the topside equipment and packages
and the jacket and topside fabrication underway. Onshore
commissioning is scheduled to commence in the fourth quarter, and
preparations are being made for the loadout and offshore campaign
to take place during 2018. The rigid pipeline stalks for the Hess
Penn State project were successfully loaded out from our Gulfport
spoolbase and the NO 105 subsequently completed the safe
installation of the pipeline, including all required
pre-commissioning. On the Atlanta Project in Brazil, we are
finalizing plans for mobilization of the vessels to perform
installation activities. Also during the quarter, we secured a
project for fabrication of a pipeline in our Gulfport spoolbase and
installation by the NO 105.
In the Middle East (“MEA”) Area, fabrication
activity continued above standard utilization levels, with area
marine assets operating at historic levels while maintaining high
standards of quality, performance and safety. Fabrication on
each of the Saudi Aramco LTA II Lump Sum, Header 9, BRRI Platform
and 9 Jackets projects is progressing on schedule. The Marjan
power system replacement project is progressing ahead of schedule,
with marine activity for the jacket and deck installation and
hook-up work taking place during the quarter. Engineering,
fabrication and procurement activities associated with the Safaniya
Phase 5 project are progressing well, and fabrication on the 4
Jackets and 3 Observation Platforms project continues to progress
in line with the agreed schedule. The KJO Hout project is
substantially complete, with the final pipeline tie-in and
pre-commissioning scheduled to take place in the fourth quarter.
During the quarter, we were awarded one of the larger front-end
engineering and designs (“FEED”) for McDermott to date in the area,
by a repeat customer. The Area’s exceptional QHSES performance was
maintained through the third quarter, achieving more than 68
million man hours Lost Time Incident (“LTI”) free.
In the Asia (“ASA”) Area, progress continued on
the Inpex Ichthys project, with the successful completion of the
mooring and hook-up of the floating production storage offloading
(“FPSO”) facility off the western coast of Australia and
installation of the flexible risers by the LV 108.
Pre-commissioning work continues with our operational performance
now significantly de-risked. Woodside Greater Western Flank Phase
II pipeline project is progressing on schedule, with engineering,
procurement and fabrication currently taking place. In India, the
ONGC Vashishta project continues to achieve progress with the NO
102 completing the installation of the remaining deepwater
umbilicals and most of the pipeline jumpers. Our consortium
partner, Larsen & Toubro, has completed the construction of the
onshore pipeline sections and installation of the onshore
umbilical. A consortium of McDermott and Baker Hughes, a GE
company, was awarded a FEED contract by POSCO Daewoo Corporation
for an engineering, procurement, construction, installation and
commissioning (“EPCIC”) tender for Shwe Phase 2, covering new
subsea umbilicals, risers and flowlines (“SURF”) and subsea
production system (“SPS”) facilities and platform brownfield
modifications, offshore Myanmar. Engineering work on the FEED
competition commenced in August and is progressing on
schedule.
In the third quarter of 2017 for Corporate and Other, costs were
mainly attributable to selling, general and administrative expenses
of $27.1 million and unallocated direct operating expenses of $24.1
million. Unallocated direct operating expenses were primarily
driven by the ramp-down of activity in the Batam fabrication yard
and underutilization of certain marine assets.
Full Year 2017 Guidance
($ in millions, except per share amounts or as
indicated for revenues) |
|
|
Q2'17 Guidance |
|
Q3'17 Guidance |
Revenues |
~$3.2B |
|
~$3.0B |
Operating Income |
~$265 |
|
~$295 |
Operating Margin |
~8.0% |
|
~9.8% |
Net Income1 |
~$120 |
|
~$150 |
Diluted Income Per
Share |
~$0.42 |
|
~$0.53 |
|
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|
Debt
Measures |
|
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|
Net Interest
Expense2 |
~$70 |
|
~$65 |
Cash Interest / DIC
Amortization Interest |
~$55/~$15 |
|
~$50/~$15 |
Ending Cash, Restricted
Cash and Cash Equivalents |
~$315 |
|
~$360 |
Ending Gross Debt3 |
~$550 |
|
~$550 |
|
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|
Other Financial
Measures |
|
|
|
Income Tax Expense |
~$70 |
|
~$75 |
EBITDA4 |
~$365 |
|
~$395 |
Cash from Operating
Activities |
~$85 |
|
~$120 |
Capex |
~$120 |
|
~$120 |
Free Cash Flow4 |
~$(35) |
|
~$
- |
Adjusted Free Cash
Flow4 |
~$17 |
|
~$52 |
Corporate and
Other5 |
~$(190) |
|
~$(210) |
~ = approximately1 Our forecasted net income
attributable to McDermott includes an estimate of the 2017 year-end
pension actuarial gain or loss. 2 Net Interest Expense is gross
interest expense less capitalized interest and interest income.3
Ending Gross Debt excludes debt issuance costs.4 The calculations
of EBITDA, Free Cash Flow and Adjusted Free Cash Flow, which are
Non-GAAP measures, are shown in the appendix entitled
“Reconciliation of Forecast Non-GAAP Financial Measures to GAAP
Financial Measures.”5 Corporate and Other includes corporate
expenses, certain centrally managed initiatives (such as
restructuring charges), impairments, year-end mark-to-market
(“MTM”) pension actuarial gains and losses, costs not attributable
to a particular reportable segment, and unallocated direct
operating expenses associated with the underutilization of vessels,
fabrication facilities and engineering resources.
We are adjusting our 2017 full year guidance
this quarter. Earnings metrics are increasing due to exceptional
operational performance, close-outs and change orders on existing
projects and better than anticipated weather conditions in the
third quarter.
Driven by the increase in earnings metrics
above, we are now forecasting Cash from Operating Activities of
$120 million. The forecasted Ending Cash, Restricted Cash and Cash
Equivalents for 2017 are expected to increase to approximately $360
million as a result of our improved free cash flow.
Other Financial
InformationWeighted average common shares outstanding on a
fully diluted basis were approximately 285.8 million and 283.9
million for the quarters ended September 30, 2017 and 2016,
respectively, and 284.9 million and 283.1 million for the nine
months ended September 30, 2017 and 2016, respectively. Additional
weighted average shares of 12.8 million related to the Tangible
Equity Units (“TEUs”), as well as other potentially dilutive
shares, were included for the nine months ended September 30, 2017,
and 40.9 million weighted average shares related to the TEUs, as
well as other potentially dilutive shares, were included for the
quarter and nine months ended September 30, 2016.
Conference
Call
McDermott has scheduled a conference call and
webcast related to its third quarter 2017 results at 7:30 a.m.,
U.S. Central Time, today. Interested parties may listen over
the Internet through a link posted in the Investor Relations
section of McDermott’s website. A replay of the webcast will be
available for seven days after the call and may be accessed by
dialing (855) 859-2056, Passcode 95919773. In addition, a
presentation will be available on the Investor Relations section of
McDermott’s website that contains supplemental information on
McDermott’s financials, operations and 2017 Guidance.
About the Company
McDermott is a leading provider of integrated
engineering, procurement, construction and installation (“EPCI”),
front-end engineering and design (“FEED”) and module fabrication
services for upstream field developments worldwide. McDermott
delivers fixed and floating production facilities, pipelines,
installations and subsea systems from concept to commissioning for
complex Offshore and Subsea oil and gas projects to help oil
companies safely produce and transport hydrocarbons. Our
customers include national and major energy companies.
Operating in approximately 20 countries across the world, our
locally focused and globally integrated resources include
approximately 12,000 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 shares of its common
stock are listed on the New York Stock Exchange.
To learn more, please visit our website at
www.mcdermott.com
Non-GAAP Measures
This press release includes several “non-GAAP”
financial measures as defined under Regulation G of the U.S.
Securities Exchange Act of 1934, as amended. We report our
financial results in accordance with GAAP, but believe that certain
non-GAAP financial measures provide useful supplemental information
to investors regarding the underlying business trends and
performance of our ongoing operations and are useful for
period-over-period comparisons of those operations.
Non-GAAP measures include the total and diluted
per share amounts of adjusted net income attributable to McDermott
and adjusted operating income and operating income margin for
McDermott, in each case excluding the impact of certain identified
items. The excluded items represent items that our management
does not consider to be representative of our normal
operations. We believe that total and diluted per share
adjusted net income and adjusted operating income and operating
margin are useful measures for investors to review, because they
provide a consistent measure of the underlying financial results of
our ongoing business and, in our management’s view, allow for a
supplemental comparison against historical results and expectations
for future performance. Furthermore, our management uses adjusted
net income and adjusted operating income as measures of the
performance of our operations for budgeting and forecasting, as
well as employee incentive compensation. However, Non-GAAP measures
should not be considered as substitutes for operating income, net
income or other data prepared and reported in accordance with GAAP
and should be viewed in addition to our reported results prepared
in accordance with GAAP.
The forecast non-GAAP measures we have presented
in this press release include forecast free cash flow, adjusted
free cash flow and EBITDA, in each case excluding the impacts of
certain identified items. We believe these forward-looking
financial measures are within reasonable measure. We define
“free cash flow” as cash flows from operations less capital
expenditures. We believe investors consider free cash flow as
an important measure, because it generally represents funds
available to pursue opportunities that may enhance shareholder
value, such as making acquisitions or other investments. Our
management uses free cash flow for that reason. Additionally,
adjusted free cash flow represents free cash flow plus cash
received as a result of the sale-leaseback arrangement for the
Amazon vessel. We define EBITDA as net income plus
depreciation and amortization, interest expense, net, and provision
for income taxes. We have included EBITDA disclosures in this
press release because EBITDA is widely used by investors for
valuation and comparing our financial performance with the
performance of other companies in our industry. Our
management also uses EBITDA to monitor and compare the financial
performance of our operations. EBITDA does not give effect to
the cash that we must use to service our debt or pay our income
taxes, and thus does reflect the funds actually available for
capital expenditures, dividends or various other purposes.
Our presentations of free cash flow and EBITDA may not be
comparable to similarly titled measures in other companies’
reports. You should not consider free cash flow and EBITDA
in isolation from, or as a substitute for, net income or cash flow
measures prepared in accordance with U.S. GAAP.
Reconciliations of these non-GAAP financial
measures and forecast non-GAAP financial measures to the most
comparable GAAP measures are provided in the tables set forth at
the end of this press release.
Forward-Looking Statements
In accordance with the Safe Harbor provisions of
the Private Securities Litigation Reform Act of 1995, McDermott
cautions that statements in this press release which are
forward-looking, and provide other than historical information,
involve risks, contingencies and uncertainties that may impact
McDermott's actual results of operations. These forward-looking
statements include, among other things, statements about backlog,
bids and change orders outstanding, target projects and revenue
pipeline, to the extent these may be viewed as indicators of future
revenues or profitability, the expected scope, execution and timing
of activities associated with the projects discussed and
McDermott’s earnings and other guidance for 2017 and expectations
related to the guidance. 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
execute on contracts in backlog successfully, changes in project
design or schedules, the availability of qualified personnel,
changes in the terms, scope or timing of contracts, contract
cancellations, change orders and other modifications and actions by
our customers and other business counterparties, changes in
industry norms and adverse outcomes in legal or other dispute
resolution proceedings. If one or more of these risks
materialize, or if underlying assumptions prove incorrect, actual
results may vary materially from those expected. You should
not place undue reliance on forward looking statements. For a
more complete discussion of these and other risk factors, please
see McDermott's annual and quarterly filings with the Securities
and Exchange Commission, including its annual report on Form 10-K
for the year ended December 31, 2016 and subsequent quarterly
reports on Form 10-Q. This press release reflects management's
views as of the date hereof. Except to the extent required by
applicable law, McDermott undertakes no obligation to update or
revise any forward-looking statement.
CONTACT:
Investors & Financial
Media Ty LawrenceVice
President, Treasurer and Investor
Relations
281.870.5147TPLawrence@mcdermott.com
|
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(Unaudited) |
|
|
|
Three Months EndedSeptember 30, |
|
|
Nine Months EndedSeptember 30, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
(In thousands, except share and per share
amounts) |
|
Revenues |
|
$ |
958,531 |
|
|
$ |
558,543 |
|
|
$ |
2,266,635 |
|
|
$ |
1,994,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations |
|
|
773,910 |
|
|
|
455,430 |
|
|
|
1,852,949 |
|
|
|
1,666,775 |
|
Research
and development expenses |
|
|
1,657 |
|
|
|
69 |
|
|
|
2,958 |
|
|
|
199 |
|
Selling,
general and administrative expenses |
|
|
55,671 |
|
|
|
46,983 |
|
|
|
142,280 |
|
|
|
137,386 |
|
Other
operating (income) expenses, net |
|
|
221 |
|
|
|
13,006 |
|
|
|
(1,808 |
) |
|
|
53,806 |
|
Total
costs and expenses |
|
|
831,459 |
|
|
|
515,488 |
|
|
|
1,996,379 |
|
|
|
1,858,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
127,072 |
|
|
|
43,055 |
|
|
|
270,256 |
|
|
|
136,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
(11,976 |
) |
|
|
(17,431 |
) |
|
|
(50,886 |
) |
|
|
(41,324 |
) |
Other
non-operating income (expense), net |
|
|
803 |
|
|
|
5,237 |
|
|
|
(1,074 |
) |
|
|
(1,005 |
) |
Total
other expense, net |
|
|
(11,173 |
) |
|
|
(12,194 |
) |
|
|
(51,960 |
) |
|
|
(42,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
|
115,899 |
|
|
|
30,861 |
|
|
|
218,296 |
|
|
|
93,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
19,532 |
|
|
|
15,976 |
|
|
|
53,221 |
|
|
|
55,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
(loss) from Investments in Unconsolidated Affiliates |
|
|
96,367 |
|
|
|
14,885 |
|
|
|
165,075 |
|
|
|
38,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
Investments in Unconsolidated Affiliates |
|
|
(3,441 |
) |
|
|
1,507 |
|
|
|
(11,495 |
) |
|
|
(2,844 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
92,926 |
|
|
|
16,392 |
|
|
|
153,580 |
|
|
|
35,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net
income (loss) attributable to noncontrolling interest |
|
|
(1,775 |
) |
|
|
284 |
|
|
|
550 |
|
|
|
1,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to McDermott International, Inc. |
|
$ |
94,701 |
|
|
$ |
16,108 |
|
|
$ |
153,030 |
|
|
$ |
34,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to McDermott International, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.33 |
|
|
$ |
0.07 |
|
|
$ |
0.57 |
|
|
$ |
0.14 |
|
Diluted |
|
$ |
0.33 |
|
|
$ |
0.06 |
|
|
$ |
0.54 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
computation of net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
283,991,161 |
|
|
|
240,899,888 |
|
|
|
269,720,153 |
|
|
|
240,093,169 |
|
Diluted |
|
|
285,774,621 |
|
|
|
283,907,353 |
|
|
|
284,859,710 |
|
|
|
283,132,920 |
|
McDERMOTT INTERNATIONAL, INC. |
|
EARNINGS PER SHARE COMPUTATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Sept 30, |
|
|
Nine Months Ended Sept 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
(In thousands, except share and per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to McDermott International, Inc. |
$ |
94,701 |
|
|
$ |
16,108 |
|
|
$ |
153,030 |
|
|
$ |
34,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares (basic) |
|
283,991,161 |
|
|
|
240,899,888 |
|
|
|
269,720,153 |
|
|
|
240,093,169 |
|
Effect of
dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
equity units |
|
- |
|
|
|
40,896,300 |
|
|
|
12,827,388 |
|
|
|
40,896,300 |
|
Stock
options, restricted stock and restricted stock units |
|
1,783,460 |
|
|
|
2,111,165 |
|
|
|
2,312,169 |
|
|
|
2,143,451 |
|
Adjusted weighted
average common shares and assumed exercises of stock options and
vesting of stock awards (diluted) |
|
285,774,621 |
|
|
|
283,907,353 |
|
|
|
284,859,710 |
|
|
|
283,132,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to McDermott International, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
$ |
0.33 |
|
|
$ |
0.07 |
|
|
$ |
0.57 |
|
|
$ |
0.14 |
|
Diluted: |
$ |
0.33 |
|
|
$ |
0.06 |
|
|
$ |
0.54 |
|
|
$ |
0.12 |
|
SUPPLEMENTARY DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Sept 30, |
|
|
Nine Months Ended Sept 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
(In thousands) |
|
|
(In thousands) |
|
Depreciation &
amortization |
$ |
28,347 |
|
|
$ |
27,826 |
|
|
$ |
78,032 |
|
|
$ |
76,755 |
|
Capital
expenditures |
|
16,184 |
|
|
|
26,719 |
|
|
|
97,106 |
|
|
|
197,393 |
|
Backlog |
|
2,427,940 |
|
|
|
3,916,240 |
|
|
|
2,427,940 |
|
|
|
3,916,240 |
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
|
|
(In thousands, except share and per share
amounts) |
|
Assets |
|
(Unaudited) |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
416,352 |
|
|
$ |
595,921 |
|
Restricted cash and cash equivalents |
|
|
18,221 |
|
|
|
16,412 |
|
Accounts receivable—trade, net |
|
|
263,119 |
|
|
|
334,384 |
|
Accounts receivable—other |
|
|
47,237 |
|
|
|
36,929 |
|
Contracts in progress |
|
|
855,531 |
|
|
|
319,138 |
|
Other current assets |
|
|
38,049 |
|
|
|
29,599 |
|
Total current assets |
|
|
1,638,509 |
|
|
|
1,332,383 |
|
Property, plant
and equipment |
|
|
2,630,228 |
|
|
|
2,586,179 |
|
Less accumulated depreciation |
|
|
(965,819 |
) |
|
|
(898,878 |
) |
Property, plant and equipment, net |
|
|
1,664,409 |
|
|
|
1,687,301 |
|
Accounts
receivable—long-term retainages |
|
|
75,615 |
|
|
|
127,193 |
|
Investments in
Unconsolidated Affiliates |
|
|
10,226 |
|
|
|
17,023 |
|
Deferred income
taxes |
|
|
14,439 |
|
|
|
21,116 |
|
Other assets |
|
|
58,237 |
|
|
|
37,214 |
|
Total assets |
|
$ |
3,461,435 |
|
|
$ |
3,222,230 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Notes payable and current maturities of long-term debt |
|
$ |
19,035 |
|
|
$ |
48,125 |
|
Accounts payable |
|
|
511,092 |
|
|
|
173,203 |
|
Accrued liabilities |
|
|
358,586 |
|
|
|
277,584 |
|
Advance billings on contracts |
|
|
42,793 |
|
|
|
192,486 |
|
Income taxes payable |
|
|
31,346 |
|
|
|
17,945 |
|
Total current liabilities |
|
|
962,852 |
|
|
|
709,343 |
|
Long-term
debt |
|
|
521,642 |
|
|
|
704,395 |
|
Self-insurance |
|
|
18,014 |
|
|
|
16,980 |
|
Pension
liabilities |
|
|
18,870 |
|
|
|
19,471 |
|
Non-current
income taxes |
|
|
60,626 |
|
|
|
60,870 |
|
Other
liabilities |
|
|
119,506 |
|
|
|
115,703 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
|
Common stock, par value $1.00 per share, authorized
400,000,000 shares; |
|
|
|
|
|
|
|
|
issued 292,502,927 and 249,690,281 shares, respectively |
|
|
292,503 |
|
|
|
249,690 |
|
Capital in excess of par value |
|
1,660,114 |
|
|
|
1,695,119 |
|
Accumulated deficit |
|
|
(73,737 |
) |
|
|
(226,767 |
) |
Accumulated other comprehensive loss |
|
|
(53,604 |
) |
|
|
(66,895 |
) |
Treasury stock, at cost: 8,494,167 and 8,302,004 shares,
respectively |
|
|
(96,245 |
) |
|
|
(94,957 |
) |
Stockholders' Equity—McDermott International, Inc. |
|
|
1,729,031 |
|
|
|
1,556,190 |
|
Noncontrolling interest |
|
|
30,894 |
|
|
|
39,278 |
|
Total equity |
|
|
1,759,925 |
|
|
|
1,595,468 |
|
Total liabilities and equity |
|
$ |
3,461,435 |
|
|
$ |
3,222,230 |
|
McDERMOTT INTERNATIONAL, INC. |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(Unaudited) |
|
|
|
Nine Months Ended September 30, |
|
|
|
2017 |
|
|
2016 |
|
|
|
(In thousands) |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
153,580 |
|
|
$ |
35,753 |
|
Non-cash items included
in net income: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
78,032 |
|
|
|
76,755 |
|
Impairment loss |
|
|
- |
|
|
|
44,069 |
|
Stock-based compensation charges |
|
|
19,543 |
|
|
|
14,011 |
|
Loss from
investments in Unconsolidated Affiliates |
|
|
11,495 |
|
|
|
2,844 |
|
Other
non-cash items |
|
|
17,525 |
|
|
|
7,782 |
|
Changes in operating
assets and liabilities that provided (used) cash: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
119,623 |
|
|
|
(29,661 |
) |
Contracts
in progress, net of Advance billings on contracts |
|
|
(673,420 |
) |
|
|
53,608 |
|
Accounts
payable |
|
|
338,906 |
|
|
|
(110,196 |
) |
Accrued
and other current liabilities |
|
|
79,866 |
|
|
|
(13,426 |
) |
Other
assets and liabilities, net |
|
|
(9,648 |
) |
|
|
44,060 |
|
Total cash provided by operating activities |
|
|
135,502 |
|
|
|
125,599 |
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment |
|
|
(97,106 |
) |
|
|
(197,393 |
) |
Proceeds from asset
dispositions |
|
|
55,391 |
|
|
|
1,123 |
|
Investments in
Unconsolidated Affiliates |
|
|
(2,769 |
) |
|
|
(4,105 |
) |
Total cash used in investing activities |
|
|
(44,484 |
) |
|
|
(200,375 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
(230,715 |
) |
|
|
(93,755 |
) |
Payment of debt
issuance cost |
|
|
(20,564 |
) |
|
|
(8,256 |
) |
Acquisition of
Noncontrolling interest |
|
|
(10,652 |
) |
|
|
- |
|
Repurchase of common
stock |
|
|
(7,126 |
) |
|
|
(3,909 |
) |
Total cash used in financing activities |
|
|
(269,057 |
) |
|
|
(105,920 |
) |
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash, cash equivalents and restricted
cash |
|
|
279 |
|
|
|
(861 |
) |
Net decrease in
cash, cash equivalents and restricted cash |
|
|
(177,760 |
) |
|
|
(181,557 |
) |
Cash, cash
equivalents and restricted cash at beginning of
period |
|
|
612,333 |
|
|
|
781,645 |
|
Cash, cash
equivalents and restricted cash at end of period |
|
$ |
434,573 |
|
|
$ |
600,088 |
|
McDERMOTT INTERNATIONAL,
INC.RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL
MEASURES
McDermott reports its financial results in
accordance with U.S. generally accepted accounting principles
(“GAAP”). This press release also includes several Non-GAAP
financial measures as defined under the SEC’s Regulation G. The
following tables reconcile Non-GAAP financial measures to
comparable GAAP financial measures:
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Sept 30, 2017 |
|
|
Sept 30, 2016 |
|
|
Sept 30, 2017 |
|
|
Sept 30, 2016 |
|
(In thousands,
except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income
Attributable to MDR |
$ |
94,701 |
|
|
$ |
16,108 |
|
|
$ |
153,030 |
|
|
$ |
34,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges1 |
|
- |
|
|
|
1,836 |
|
|
|
- |
|
|
|
10,687 |
|
Impairment loss2 |
|
- |
|
|
|
11,758 |
|
|
|
- |
|
|
|
44,069 |
|
Gain on
JV exit3 |
|
- |
|
|
|
(5,003 |
) |
|
|
- |
|
|
|
(5,003 |
) |
Total Non-GAAP Adjustments |
|
- |
|
|
|
8,591 |
|
|
|
- |
|
|
|
49,753 |
|
Tax
Effect of Non-GAAP Changes4 |
|
- |
|
|
|
1,094 |
|
|
|
- |
|
|
|
594 |
|
Total
Non-GAAP Adjustments (After Tax) |
|
- |
|
|
|
9,685 |
|
|
|
- |
|
|
|
50,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted Net Income Attributable to McDermott |
$ |
94,701 |
|
|
$ |
25,793 |
|
|
$ |
153,030 |
|
|
$ |
84,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
Income |
$ |
127,072 |
|
|
$ |
43,055 |
|
|
$ |
270,256 |
|
|
$ |
136,036 |
|
Non-GAAP
Adjustments5 |
|
- |
|
|
|
13,594 |
|
|
|
- |
|
|
|
54,756 |
|
Non-GAAP
Adjusted Operating Income |
$ |
127,072 |
|
|
$ |
56,649 |
|
|
$ |
270,256 |
|
|
$ |
190,792 |
|
Non-GAAP
Adjusted Operating Margin |
|
13.3 |
% |
|
|
10.1 |
% |
|
|
11.9 |
% |
|
|
9.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
0.33 |
|
|
$ |
0.06 |
|
|
$ |
0.54 |
|
|
$ |
0.12 |
|
Non-GAAP
Adjustments |
|
- |
|
|
|
0.03 |
|
|
|
- |
|
|
|
0.18 |
|
Non-GAAP
Diluted EPS |
$ |
0.33 |
|
|
$ |
0.09 |
|
|
$ |
0.54 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
283,991,161 |
|
|
|
240,899,888 |
|
|
|
269,720,153 |
|
|
|
240,093,169 |
|
Diluted |
|
285,774,621 |
|
|
|
283,907,353 |
|
|
|
284,859,710 |
|
|
|
283,132,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
$ |
45,319 |
|
|
$ |
49,809 |
|
|
$ |
135,502 |
|
|
$ |
125,599 |
|
Capital
expenditures |
|
(16,184 |
) |
|
|
(26,719 |
) |
|
|
(97,106 |
) |
|
|
(197,393 |
) |
Free cash
flow |
$ |
29,135 |
|
|
$ |
23,090 |
|
|
$ |
38,396 |
|
|
$ |
(71,794 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
Revenue |
$ |
958,531 |
|
|
$ |
558,543 |
|
|
$ |
2,266,635 |
|
|
$ |
1,994,202 |
|
1 Restructuring charges were primarily
associated with personnel reductions, facility closures, consultant
fees, lease terminations and asset impairments. 2 We
recognized $11.8 million and $44.1 million of impairment charges
during the quarter and nine months ended September 30, 2016. During
the third quarter of 2016, we recognized impairment of $11.8
million on certain marine assets. In the first quarter of
2016, we recognized impairment of $32.3 million related to our
Agile vessel following the customer’s termination of the vessel
charter in May 2016 and given the lack of opportunities for the
vessel. The Agile was decommissioned and disposed of in the third
quarter of 2016.3 We recognized a $5.0 million gain resulting from
the exit from our joint venture investment in THHE Fabricators Sdn.
Bhd. (“THF”), a subsidiary of TH Heavy Engineering Berhad (“THHE”),
in the third quarter of 2016. 4 Represents tax effects of Non-GAAP
adjustments. The Non-GAAP adjusting items are primarily
attributable to tax jurisdictions in which we currently do not pay
taxes and, therefore, no tax impact is applied to those
items. For the Non-GAAP adjusting items in jurisdictions
where taxes are paid, the tax impacts on those adjustments are
computed, individually, using the statutory tax rate in effect in
each applicable tax jurisdiction.5 Includes the Non-GAAP
adjustments described in footnotes 1 and 2 above for each
applicable period.
|
McDERMOTT INTERNATIONAL,
INC.RECONCILIATION OF FORECAST NON-GAAP FINANCIAL
MEASURES TO GAAP FINANCIAL MEASURES |
|
|
Q2'17 Guidance |
|
|
Q3'17 Guidance |
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
~$85 |
|
|
~$120 |
|
Capital
expenditures |
~120 |
|
|
~120 |
|
Free cash
flow |
~$(35) |
|
|
~$ - |
|
Cash
received from Amazon sale leaseback arrangement |
|
52 |
|
|
|
52 |
|
Adjusted free
cash flow |
~$17 |
|
|
~$52 |
|
|
|
|
|
|
|
|
|
GAAP Net Income
(Loss) Attributable to McDermott |
~$120 |
|
|
~$150 |
|
Add: |
|
|
|
|
|
|
|
Depreciation and amortization |
~105 |
|
|
~105 |
|
Interest
expense, net |
~70 |
|
|
~65 |
|
Provision
for taxes |
~70 |
|
|
~75 |
|
EBITDA |
~$365 |
|
|
~$395 |
|
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