McDermott Reports First Quarter 2014 Financial Results 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 Business Wire HOUSTON -- May 7, 2014 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 Ended March 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 1,123 (4,131 ) Affiliates 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 (45,928 ) 51,631 taxes and noncontrolling interests 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 $ (49,953 ) $ 20,553 International, Inc. McDERMOTT INTERNATIONAL, INC. EARNINGS PER SHARE COMPUTATION Three Months Ended March 31, 2014 2013 (In thousands, except share and per share amounts) Basic: Income from operations less $ (49,953 ) $ 20,553 noncontrolling interests Net income attributable to $ (49,953 ) $ 20,553 McDermott International, Inc. Diluted: Weighted average common shares 236,961,158 235,941,185 (basic) Effect of dilutive securities: Stock options, restricted stock - 3,258,696 and restricted stock units Adjusted weighted average common shares and assumed exercises of stock options and vesting of 236,961,158 239,199,881 stock awards (diluted) Basic earnings per share: Income from continuing operations less noncontrolling (0.21 ) 0.09 interests Net income attributable to (0.21 ) 0.09 McDermott International, Inc. Diluted earnings per share: Income from continuing operations less noncontrolling (0.21 ) 0.09 interests Net income attributable to (0.21 ) 0.09 McDermott International, Inc. SUPPLEMENTARY DATA Three Months Ended March 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, December 31, 2014 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 48,897 50,536 Affiliates 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 $ 258,417 $ 39,543 of long-term debt 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 244,739 244,271 and December 31, 2013, respectively 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 1,320,854 1,349,514 International, Inc. 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 (1,123 ) 4,131 affiliates 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 (5,974 ) (19,935 ) billings on contracts Accounts payable 32,727 (125,234 ) Accrued and other current liabilities 15,046 (20,774 ) Pension liability and accrued postretirement 5,880 (19,657 ) and employee benefits 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 (19,634 ) (3,826 ) equivalents Purchases of available-for-sale securities (1,997 ) (3,744 ) Sales and maturities of available-for-sale 10,055 31,193 securities 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 (43,049 ) 16,999 ACTIVITIES 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 (3,356 ) (1,015 ) activities NET CASH PROVIDED BY (USED IN) FINANCING 214,769 (8,709 ) ACTIVITIES EFFECTS OF EXCHANGE RATE CHANGES ON CASH 36 213 NET INCREASE (DECREASE) IN CASH AND CASH 149,428 (178,612 ) EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF 118,702 640,147 PERIOD 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 Contact: McDermott International, Inc. Investors & Financial Media Steve Oldham, +1.281.870.5147 or Trade, General & Local Media Louise Denly, +1.281.870.5025 firstname.lastname@example.org
McDermott Reports First Quarter 2014 Financial Results
Press spacebar to pause and continue. Press esc to stop.