McDermott Reports Second Quarter 2014 Financial Results Turnaround on track Company to Host Conference Call and Webcast Today at 4:00 p.m. CT Business Wire HOUSTON -- August 4, 2014 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 Ended Six Months Ended June 30, June 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 432,298 723,259 1,023,791 1,436,073 operations Selling, general and 56,877 52,617 112,274 104,843 administrative expenses Gain on asset (45,769 ) (13 ) (52,208 ) (14,729 ) disposals Restructuring 1,263 15,462 7,388 15,462 expenses Total costs 444,669 791,325 1,091,245 1,541,649 and expenses Equity in Loss of (3,322 ) (5,461 ) (2,199 ) (9,592 ) Unconsolidated Affiliates Operating 28,092 (149,536 ) (13,550 ) (96,503 ) Income (Loss) Other Income (Expense): Interest income (38,745 ) 428 (38,684 ) 770 (expense)--net Gain on foreign 6,622 8,904 2,540 6,378 currency--net Other income (312 ) (31 ) (577 ) 751 (expense)--net Total other income (32,435 ) 9,301 (36,721 ) 7,899 (expense) Loss before provision for income taxes (4,343 ) (140,235 ) (50,271 ) (88,604 ) and noncontrolling interests Provision for 4,788 5,902 8,277 33,215 Income Taxes Net Loss (9,131 ) (146,137 ) (58,548 ) (121,819 ) Less: Net Income Attributable 1,699 3,286 2,235 7,051 to Noncontrolling Interests Net Loss Attributable to McDermott $ (10,830 ) $ (149,423 ) $ (60,783 ) $ (128,870 ) International, Inc. McDERMOTT INTERNATIONAL, INC. EARNINGS PER SHARE COMPUTATION Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 (In thousands, except share and per share amounts) Net loss attributable to McDermott $ (10,830 ) $ (149,423 ) $ (60,783 ) $ (128,870 ) International, Inc. Weighted average common 237,395,580 236,199,438 237,178,369 236,070,311 shares (basic) Effect of dilutive securities: Stock options, restricted stock and - - - - restricted stock units Adjusted weighted average common shares and assumed 237,395,580 236,199,438 237,178,369 236,070,311 exercises of stock options and vesting of stock awards (diluted) Basic earnings per share: Net loss attributable to McDermott (0.05 ) (0.63 ) (0.26 ) (0.55 ) International, Inc. Diluted earnings per share: Net loss attributable to McDermott (0.05 ) (0.63 ) (0.26 ) (0.55 ) International, Inc. SUPPLEMENTARY DATA Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 (In thousands) Depreciation & amortization $ 21,645 $ 19,096 $ 46,247 $ 39,318 expense Drydock $ 3,020 $ 4,381 $ 9,966 $ 9,931 amortization Capital $ 117,064 $ 106,826 $ 154,957 $ 144,475 expenditures Backlog $ 4,063,900 $ 5,090,868 $ 4,063,900 $ 5,090,868 McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2014 2013 (Unaudited) (In thousands, except share and 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 $ 26,285 $ 39,543 long-term debt 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 244,950 244,271 30, 2014 and December 31, 2013, respectively Capital in excess of par value (including 1,661,543 1,414,457 prepaid common stock purchase contracts) Retained earnings (131,940 ) (71,157 ) Treasury stock, at cost, 7,316,539 and 7,130,294 shares at June 30, 2014 and (97,069 ) (97,926 ) December 31, 2013, respectively Accumulated other comprehensive loss (119,221 ) (140,131 ) Stockholders’ Equity--McDermott 1,558,263 1,349,514 International, Inc. 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 2,199 9,592 affiliates 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 (88,771 ) (4,051 ) billings on contracts Accounts payable (31,756 ) 24,413 Accrued and other current liabilities (9,706 ) (23,299 ) Pension liability and accrued 9,563 (25,973 ) postretirement and employee benefits Derivative instruments and hedging (26,153 ) (71,013 ) activities 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 (154,957 ) (144,475 ) equipment Increase in restricted cash and cash (166,219 ) (6,370 ) equivalents Purchases of available-for-sale (1,997 ) (8,637 ) securities Sales and maturities of 11,303 34,031 available-for-sale securities Proceeds from the sale and disposal of 53,704 35,672 assets 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 240,044 - purchase contracts issuance 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) 1,001,276 (19,354 ) FINANCING ACTIVITIES EFFECTS OF EXCHANGE RATE CHANGES ON CASH 209 118 NET INCREASE (DECREASE) IN CASH AND CASH 645,332 (212,436 ) EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF 118,702 640,147 PERIOD CASH AND CASH EQUIVALENTS AT END OF $ 764,034 $ 427,711 PERIOD 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 $ 10,884 - capitalized) Contact: McDermott International, Inc. Investors & Financial Media Steve Oldham, 281.870.5147 email@example.com or Trade, General & Local Media Louise Denly, 281.870.5025 firstname.lastname@example.org
McDermott Reports Second Quarter 2014 Financial Results
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