HOUSTON, July 29, 2019 /PRNewswire/ -- McDermott
International, Inc. (NYSE: MDR) today reported revenues of
$2.1 billion, a net loss of
$(146) million, or $(0.80) per diluted share, and an operating loss
of $(61) million for the second
quarter of 2019.
Excluding a $101 million non-cash
loss on the sale of its Alloy Piping Products (APP) business, as
well as restructuring, integration and transaction costs of
$31 million, as outlined in an
accompanying table, McDermott's adjusted net loss for the second
quarter of 2019 was $(14) million, or
$($0.07) per diluted share, and its adjusted operating income was
$71
million.
David Dickson, President and
Chief Executive Officer of McDermott, said: "Although the
company reported mixed results for the second quarter of 2019, we
are encouraged by the record-setting level of backlog and new
awards. We are also pleased with the visibility we have into
expected 2020 revenues, of which $7.4
billion was already in backlog as of the end of the second
quarter of 2019. This is well above the $4.2
billion of 2019 revenues we had in backlog this time last
year. This strong market posture continues to demonstrate the
benefits of our combination with CB&I and the opportunities
available in a strong market environment. McDermott has booked more
than $19 billion of awards since the
May 2018 combination with CB&I,
demonstrating continued customer confidence and healthy end
markets. Importantly, as of the end of the second quarter of 2019,
legacy CB&I projects represented only about 14% of the current
backlog. All the awards we've won since the combination were booked
under McDermott's stringent risk management protocols, which we
believe pave the way for us to deliver consistent margin
performance through the application of the One McDermott Way in the
execution of this backlog. The company continues to remain on
schedule executing the Cameron and
Freeport LNG projects. The Cameron
settlement agreement we signed earlier this month is a testament to
the mutually productive relationship we have built with this
customer since the combination – and the associated incentives
provided a meaningful contribution to our second quarter
results.
"This is a year of transition as we position McDermott to fully
optimize the benefits of our combination with CB&I and as we
steadily advance toward completion of the Cameron and Freeport projects," added Dickson.
"Nevertheless, the company today has updated its guidance for 2019.
The reduction in our guidance is due to four main factors: 1)
the weaker than expected operating results for the second quarter
of 2019; 2) the impact of reduced revenues and higher unallocated
operating expenses due to slippage in certain new awards and
customer changes to schedule on several projects; 3) changes in our
assumptions about the expected performance of legacy CB&I
projects in our NCSA operating segment; and 4) a shift from the
fourth quarter of 2019 to 2020 in the assumed timing of remaining
incentives on the Cameron LNG project. Even so, we expect to see a
sharp improvement in the company's operating income by the fourth
quarter of this year, as we build momentum heading into 2020.
"Looking ahead, our revenue opportunity pipeline remains near a
historic high and, more specifically, we are seeing steady upward
momentum in a number of key areas. For example, in the strategic
area of front end engineering design (FEED), our awards through the
first half of 2019 are already more than double what we won in all
of 2018 – in terms of both man-hours and dollar value – and that's
especially important as FEED work positions us for EPC
opportunities. This year we have booked $1.5
billion of EPC work as a result of FEED work that's been
done since the combination. Further, in our Technology business, we
are forecasting the number of license sales to increase by 25% this
year versus 2018. One of the recent highlights was our selection as
the Master Licensor by S-OIL, an affiliate of Saudi Aramco, in
support of its ethylene cracker and downstream petrochemicals
complex, being developed as a major expansion of S-OIL's existing
refinery in South Korea. Our Technology business gives us
unparalleled insight into upcoming EPC opportunities, and we see
roughly $40 billion of potential EPC
pull-through opportunities in the refining and petrochemical
markets over the next five years. We believe the petrochemical
market, in particular, is poised for another wave of investment in
the next 12 to 24 months, with world ethylene capacity expected to
increase by more than 40% between 2019 and 2028."
Second Quarter 2019 Operating Performance
McDermott's adjusted operating income in the second quarter of
2019 was $71 million, which
included:
- The benefit of a settlement agreement on the Cameron LNG
project, under which $110 million of
progress incentives were recognized during the quarter;
- $38 million on the Freeport LNG
project as a result of increased construction and subcontractor
costs; and
- $33 million on the company's
offshore projects for Pemex in the Gulf
of Mexico related to disagreements with the customer that
have arisen coincident with changes in that company's leadership
team and the country's political landscape.
|
Three months
Ended
|
|
|
Delta
|
|
|
Six months
Ended
|
|
|
Delta
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
Qtr-on-Qtr
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
YTD-on-
YTD
|
|
|
($ in millions,
except per share amounts)
|
|
Revenues
|
$
|
2,137
|
|
|
$
|
1,735
|
|
|
$
|
402
|
|
|
$
|
4,348
|
|
|
$
|
2,343
|
|
|
$
|
2,005
|
|
Operating (Loss)
Income
|
|
(61)
|
|
|
|
49
|
|
|
|
(110)
|
|
|
|
(48)
|
|
|
|
113
|
|
|
|
(161)
|
|
Operating
Margin
|
|
-2.9
|
%
|
|
|
2.8
|
%
|
|
|
-5.7
|
%
|
|
|
-1.1
|
%
|
|
|
4.8
|
%
|
|
|
-5.9
|
%
|
Net (Loss)
Income
|
|
(146)
|
|
|
|
47
|
|
|
|
(193)
|
|
|
|
(216)
|
|
|
|
82
|
|
|
|
(298)
|
|
Diluted
EPS1
|
$
|
(0.80)
|
|
|
|
0.33
|
|
|
|
(1.13)
|
|
|
|
(1.19)
|
|
|
|
0.68
|
|
|
|
(1.87)
|
|
Total Intangibles
Amortization2
|
|
32
|
|
|
|
22
|
|
|
|
10
|
|
|
|
64
|
|
|
|
22
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income (Loss)3
|
|
71
|
|
|
|
149
|
|
|
|
(78)
|
|
|
|
157
|
|
|
|
228
|
|
|
|
(71)
|
|
Adjusted Operating
Margin3
|
|
3.3
|
%
|
|
|
8.6
|
%
|
|
|
-5.3
|
%
|
|
|
3.6
|
%
|
|
|
9.7
|
%
|
|
|
-6.1
|
%
|
Adjusted Net (Loss)
Income3,4
|
|
(14)
|
|
|
|
40
|
|
|
|
(54)
|
|
|
|
(11)
|
|
|
|
90
|
|
|
|
(101)
|
|
Adjusted Diluted
(Loss) Earnings Per Share1,3,4
|
$
|
(0.07)
|
|
|
|
0.28
|
|
|
|
(0.36)
|
|
|
|
(0.06)
|
|
|
|
0.75
|
|
|
|
(0.80)
|
|
Adjusted
EBITDA3
|
|
112
|
|
|
|
85
|
|
|
|
27
|
|
|
|
416
|
|
|
|
190
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Provided by
Operating Activities
|
|
(205)
|
|
|
|
398
|
|
|
|
(603)
|
|
|
|
(449)
|
|
|
|
435
|
|
|
|
(884)
|
|
Capital
Expenditures
|
|
15
|
|
|
|
24
|
|
|
|
(9)
|
|
|
|
33
|
|
|
|
43
|
|
|
|
(10)
|
|
Free Cash
Flow3
|
|
(220)
|
|
|
|
374
|
|
|
|
(594)
|
|
|
|
(482)
|
|
|
|
392
|
|
|
|
(874)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
Capital5
|
|
(1,844)
|
|
|
|
(1,444)
|
|
|
|
(400)
|
|
|
|
(1,844)
|
|
|
|
(1,444)
|
|
|
|
(400)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Diluted (Loss)
Earnings Per Share and adjusted diluted (loss) earnings per share
were calculated using weighted average diluted shares of 182
million and 144 million for the three months ended June 30, 2019
and 2018, respectively, and weighted average diluted shares of 181
million and 120 million for the six months ended June 30, 2019 and
2018, respectively.
|
2
|
Total intangibles
amortization includes the sum of project-related intangibles
amortization, other intangibles amortization and amortization of
intangible assets resulting from investments in unconsolidated
affiliates, all of which are associated with the intangible assets
and liabilities acquired in the business combination with CB&I
(the "Combination").
|
3
|
Adjusted operating
(loss) income, adjusted operating margin, adjusted net (loss)
income, adjusted diluted (loss) earnings per share and adjusted
EBITDA reflect adjustments to Operating Income and Net Income
computed in accordance with U.S. generally accepted accounting
principles ("GAAP"). The reconciliations of these non-GAAP
measures, as well as free cash flow, to the respective most
comparable GAAP measures are provided in the appendix entitled
"Reconciliation of Non-GAAP to GAAP Financial Measures."
|
4
|
The calculations of
adjusted net (loss) income and adjusted diluted EPS reflect the tax
effects of non-GAAP adjustments during each applicable period. In
jurisdictions in which we currently do not pay taxes, no tax impact
is applied to non-GAAP adjusting items.
|
5
|
Working capital =
(current assets, less cash and cash equivalents, restricted cash
and project-related intangibles) – (current liabilities, less
current maturities of long-term debt and project-related intangible
liabilities).
|
Asset Sales
During the second quarter of 2019, McDermott completed the sale
of the APP business, the distribution and manufacturing arm of its
pipe fabrication business. McDermott continues to pursue a sale of
the remaining portion of its pipe fabrication business.
We have identified potential buyers for our industrial storage
tank business, and sales efforts with respect to that business
remain ongoing. In connection with that contemplated sale, we may
retain a continuing minority ownership or other economic interest
in the business. Our anticipated aggregate net cash proceeds from
the pipe fabrication and storage tank transactions are now expected
to be lower than the approximately $1
billion we previously estimated. Our ongoing competitive
sale process is now expected to result in a closing of the sale of
the storage tank business in the fourth quarter of 2019.
Cash and Liquidity
Cash used by operating activities in the second quarter of 2019
was $(205) million. This primarily
reflected the company's net loss and the usage of cash on the
Cameron LNG project. Total cash availability was $1.0 billion at June 30,
2019, consisting of $455
million of unrestricted cash and $568
million of availability under McDermott's revolving credit
facility. As of June 30, 2019,
McDermott had approximately $1.4
billion of combined availability under its principal letter
of credit facilities, uncommitted bilateral credit facilities and
surety arrangements. McDermott was in compliance with all financial
covenants under its financing arrangements as of June 30, 2019.
Reporting Segment Update
McDermott's segment reporting is presented as: North, Central
and South America, or NCSA;
Europe, Africa, Russia and Caspian, or EARC; Middle East and North Africa, or MENA; Asia Pacific, or APAC; and Technology, or
TECH. The company also reports results for Corporate. Segment and
Corporate results are summarized below.
Segment
Financial
Highlights
|
Three months Ended
June 30, 2019
|
|
|
Segment Operating
Results
|
|
|
|
|
|
|
|
|
|
|
NCSA
|
|
|
EARC
|
|
|
MENA
|
|
|
APAC
|
|
|
TECH
|
|
|
Corporate
|
|
|
Total
|
|
|
($ in
millions)
|
|
New Orders
|
$
|
800
|
|
|
$
|
2,309
|
|
|
$
|
4,057
|
|
|
$
|
21
|
|
|
$
|
118
|
|
|
$
|
-
|
|
|
$
|
7,306
|
|
Backlog1
|
|
8,123
|
|
|
|
4,032
|
|
|
|
6,538
|
|
|
|
1,289
|
|
|
|
565
|
|
|
-
|
|
|
|
20,547
|
|
Revenue
|
|
1,259
|
|
|
|
192
|
|
|
|
399
|
|
|
|
133
|
|
|
|
154
|
|
|
-
|
|
|
|
2,137
|
|
Book-to-Bill
|
|
0.6
|
x
|
|
|
12.0
|
x
|
|
|
10.2
|
x
|
|
|
0.2
|
x
|
|
|
0.8
|
x
|
|
|
-
|
|
|
|
3.4
|
x
|
Operating Income
(Loss)
|
|
15
|
|
|
|
4
|
|
|
|
29
|
|
|
|
2
|
|
|
|
35
|
|
|
|
(146)
|
|
|
|
(61)
|
|
Operating
Margin
|
|
1.2
|
%
|
|
|
2.1
|
%
|
|
|
7.3
|
%
|
|
|
1.5
|
%
|
|
|
22.7
|
%
|
|
|
-
|
|
|
|
-2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income (Loss)2
|
|
117
|
|
|
|
4
|
|
|
|
29
|
|
|
|
2
|
|
|
|
35
|
|
|
|
(115)
|
|
|
|
71
|
|
Adjusted Operating
Margin2
|
|
9.3
|
%
|
|
|
2.1
|
%
|
|
|
7.3
|
%
|
|
|
1.5
|
%
|
|
|
22.7
|
%
|
|
|
-
|
|
|
|
3.3
|
%
|
Capex
|
|
2
|
|
|
|
0
|
|
|
|
5
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8
|
|
|
|
15
|
|
|
Note: All amounts
have been rounded to the nearest million. Individual line
items may not sum to totals as a result of rounding.
|
1
|
Our backlog is equal
to our Remaining Performance Obligations (RPOs) as determined in
accordance with U.S. GAAP.
|
2
|
Adjusted Operating
Income (Loss) and Margin, by segment, are non-GAAP measures.
Reconciliations to the most comparable GAAP measures are provided
in the appendix entitled "Reconciliation of Segment Non-GAAP to
GAAP Financial Measures."
|
Product Offering
Financial
Highlights
|
Three months Ended
June 30, 2019
|
|
|
Offshore
&
Subsea
|
|
|
LNG
|
|
|
Downstream
|
|
|
Power
|
|
|
Total
|
|
|
($ In
millions)
|
|
New Orders
|
$
|
4,423
|
|
|
$
|
2,170
|
|
|
$
|
624
|
|
|
$
|
89
|
|
|
$
|
7,306
|
|
Backlog
|
|
8,906
|
|
|
|
6,264
|
|
|
|
4,889
|
|
|
|
487
|
|
|
$
|
20,547
|
|
Revenue
|
|
661
|
|
|
|
411
|
|
|
|
740
|
|
|
|
325
|
|
|
$
|
2,137
|
|
North, Central and South
America (NCSA)
NCSA reported revenues of $1.3
billion and operating income and margin of $15 million and 1.2%, respectively. Excluding the
loss on the sale of the APP business, adjusted operating income and
margin for NCSA were $117 million and
9.3%, respectively. Results for the quarter included the benefit of
a settlement agreement on the Cameron LNG project, under which
$110 million of progress incentives
were recognized during the quarter. The results also reflected
increased cost estimates on a number of projects, including the
$38 million on the Freeport LNG
project and $33 million on offshore
projects in the Gulf of Mexico.
NCSA achieved significant operational milestones during the
second quarter. The first cargo was shipped from Cameron's Train 1 during the quarter, with
substantial completion of Phase 1 expected in the third quarter.
Trains 2 and 3 continue to progress on schedule, with the overall
project reaching 93% completion (on a cumulative basis) during the
quarter. Freeport continues to
progress well, reaching 95% completion (on a cumulative basis) for
all three trains. Commissioning of Train 1 continued with the
introduction of feed gas early in the third quarter. The first
cargo shipment is expected in the third quarter. First gas was
achieved on the Abkatun project during the second quarter, with
first oil achieved in early July and substantial completion
expected in the third quarter. The Entergy St. Charles power
project was completed and turned over to the owner during the
quarter. Additionally, NCSA booked several new awards during the
quarter, including the Petrobras Sepia Phase 1 field development in
Brazil and the ENI Amoca EPC
project in Mexico.
Europe, Africa, Russia and Caspian (EARC)
EARC reported revenues of $192
million and operating income and margin of $4 million and 2.1%, respectively. Key
contributors to revenues and operating income were the Total Tyra,
Lukoil refinery and Afipsky refinery projects.
As the LNG cycle continues to show momentum, the Mozambique LNG
EPC contract was awarded to McDermott's joint venture with Saipem
and Chiyoda after Anadarko reached final investment decision (FID)
during the quarter. We believe our execution of this project will
continue to demonstrate the company's ability to deliver
comprehensive EPC solutions for world-scale LNG developments. Work
on the BP Tortue EPC project commenced during the quarter, with
engineering and early procurement activities. The Total Tyra
project continued to progress with engineering, procurement and
construction, including the delivery of structural steel plates,
bulk piping material and electrical equipment. The project
reached 38% completion during the quarter. Construction
progress continued on the Lukoil refinery project, which reached
25% completion during the quarter.
Middle East and North Africa (MENA)
MENA reported revenues of $399
million and operating income and margin of $29 million and 7.3%, respectively. Key
contributors were the Saudi Aramco Safaniya Phases 5 and 6, QP Bul
Hanine, ADNOC Crude Flexibility, Sasref and Liwa projects.
Operating income was impacted by transitioning from mature backlog
to newer contracts.
MENA demonstrated McDermott's continued strength in the region
by booking record-level order intake during the second quarter,
resulting in the highest level of backlog ever attained by
McDermott in the area. Among the new awards during the quarter were
two mega projects for Saudi Aramco located in the Marjan field.
Safaniya Phase 5 continued with close-out activities, with
substantial completion expected in the third quarter. Safaniya
Phase 6 continues to progress, with fabrication of 8 out of 11
decks and 7 out of 10 jackets completed and the achievement of an
impressive 8 million man hours without a lost-time incident. The QP
Bul Hanine project completed the initial pipelay campaign, with
installation continuing through the third quarter.
Asia Pacific (APAC)
APAC reported revenues of $133
million and operating income and margin of $2 million and 1.5%, respectively. Operating
income was driven by various active projects and closeout-related
savings in Australia and
India.
During the second quarter of 2019, APAC made significant
operational progress across the region. The first of two offshore
campaigns for Reliance KG-D6 was successfully completed using the
DLV 2000 to perform its first piggy-back pipelay. The second
campaign is expected to commence in the fourth quarter of 2019. The
ONGC KG 98/2 project continues to progress well, with preparations
for the first offshore season well underway and environmental
approvals and nearshore work well advanced. The DB 30 mobilized
during the quarter to execute the Pan Malaysia field development
project. The Posco International Schwe Phase 2 development is well
advanced, with preparations underway for work to commence on the
Shwe CRP platform in early 2020.
Technology (TECH)
TECH reported revenues of $154
million and operating income and margin of $35 million and 22.7%, respectively, primarily
driven by catalyst shipments, execution progress, earned fees and
process performance.
In July 2019, the business
strengthened its leadership role in process technology with the
acquisition of the assets and intellectual property of Siluria
Technologies. The acquisition gives McDermott ownership of a
proprietary catalytic process that transforms methane—one of the
most abundant, inexpensive and widely available hydrocarbons on
earth—into valuable commodity chemicals in an efficient,
scalable manner using processes that can be integrated into
existing industry infrastructure or placed as modules at locations
where stranded methane gas is available such as the Permian.
Included in the acquisition was a commercial demonstration-scale
unit currently operating at a petrochemical facility in
Texas.
Corporate
Corporate expenses include various corporate and other
non-operating activities. Corporate expense in the second quarter
of 2019 was $146 million, mainly
attributable to: selling, general, administrative and other
expenses of $52 million; $59 million of unallocated operating costs;
$20 million of costs for
restructuring and integration; and $11
million of transaction-related costs associated with the
ongoing process to sell the company's non-core storage tank and
pipe fabrication businesses.
Revenue Opportunity Pipeline
McDermott's revenue opportunity pipeline consists of Backlog,
Bids & Change Orders Outstanding and Target Projects, which are
those projects McDermott expects to be awarded in the market in the
next five quarters. McDermott defines Backlog as Remaining
Performance Obligations (RPOs) as determined in accordance with
GAAP.
At the end of the second quarter of 2019, McDermott's revenue
opportunity pipeline was approximately 90.2 billion, primarily
driven by MENA, NCSA and EARC with continuing momentum in the
offshore/subsea, downstream and LNG markets.
Revenue
Opportunity Pipeline
|
As
of
|
|
|
|
|
|
|
June 30,
2019
|
|
|
Mar 31,
2019
|
|
|
Dec 31,
2018
|
|
|
Sep 30,
2018
|
|
|
Jun 30,
2018
|
|
|
|
|
|
|
($ in
billions)
|
|
|
|
|
|
Backlog
|
$
|
20.5
|
|
|
$
|
15.4
|
|
|
$
|
10.9
|
|
|
$
|
11.5
|
|
|
$
|
10.2
|
|
|
|
|
|
Bids & Change
Orders Outstanding1
|
|
15.6
|
|
|
|
17.7
|
|
|
|
20.3
|
|
|
|
20.7
|
|
|
|
19.0
|
|
|
|
|
|
Targets2
|
|
54.1
|
|
|
|
58.0
|
|
|
|
61.9
|
|
|
|
48.1
|
|
|
|
49.3
|
|
|
|
|
|
Total
|
|
90.2
|
|
|
|
91.1
|
|
|
|
93.1
|
|
|
|
80.3
|
|
|
|
78.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
Opportunity Pipeline
by Segment
|
As of June 30,
2019
|
|
|
NCSA
|
|
|
EARC
|
|
|
MENA
|
|
|
APAC
|
|
|
TECH
|
|
|
Total
|
|
|
($ in
billions)
|
|
Backlog
|
$
|
8.1
|
|
|
$
|
4.0
|
|
|
$
|
6.5
|
|
|
$
|
1.3
|
|
|
$
|
0.6
|
|
|
$
|
20.5
|
|
Bids & Change
Orders Outstanding1
|
|
1.0
|
|
|
|
10.7
|
|
|
|
1.0
|
|
|
|
2.8
|
|
|
|
-
|
|
|
$
|
15.6
|
|
Targets2
|
|
14.7
|
|
|
|
6.2
|
|
|
|
25.3
|
|
|
|
6.3
|
|
|
|
1.6
|
|
|
$
|
54.1
|
|
Total
|
|
23.8
|
|
|
|
20.9
|
|
|
|
32.9
|
|
|
|
10.4
|
|
|
|
2.2
|
|
|
|
90.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: All amounts
have been rounded to the nearest tenth of a billion. Individual
line items may not sum to totals as a result of
rounding.
|
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 or prospective customers in the next five quarters
through competitive bidding processes and are capable of being
performed by McDermott. There is no assurance that target projects
will be awarded to McDermott or at all.
|
2019 Guidance
The company today has updated its guidance for 2019 driven by
four main factors: 1) the weaker than expected operating results
for the second quarter of 2019; 2) the impact of reduced revenues
and higher unallocated operating expenses due to slippage in
certain new awards and customer changes to schedule on several
projects; 3) changes in our assumptions about the expected
performance of legacy CB&I projects in our NCSA operating
segment; and 4) a shift from the fourth quarter of 2019 to 2020 in
the assumed timing of remaining incentives on the Cameron LNG
project. Full-year guidance assumes a sharp improvement in
operating income in the fourth quarter of 2019, as the company
builds momentum heading into 2020. (Guidance below is based on the
company's existing portfolio of businesses.)
|
|
Full Year 2019
Guidance Revised
Q2'19
|
|
|
($ in millions,
except per share
amounts or as indicated)
|
Revenues
|
|
~$9.5B
|
Operating
Income
|
|
~$220
|
Operating
Margin
|
|
~2.3%
|
Net Interest
Expense1
|
|
~$395
|
Income Tax
Expense
|
|
~$65
|
Accretion on
Redeemable Preferred Stock
|
|
~$15
|
Dividends on
Redeemable Preferred Stock
|
|
~$36
|
Net Loss
|
|
~$(310)
|
Diluted Net Loss, Per
Share
|
|
~$(1.65)
|
Diluted Share
Count
|
|
~188
|
EBITDA2
|
|
~$475
|
Corporate and Other
Operating Expense3
|
|
~$(550)
|
|
|
|
Adjustment
|
|
|
Restructuring and
Integration Costs4
|
|
~$120
|
Transaction
Costs5
|
|
~$30
|
APP Loss on
Sale
|
|
~$100
|
|
|
|
Adjusted Earnings
Metrics
|
|
|
Adjusted Operating
Income2
|
|
~$470
|
Adjusted Operating
Margin2
|
|
~4.9%
|
Adjusted Net
Loss2
|
|
~$(60)
|
Adjusted Diluted Net
Loss Per Share2
|
|
~$(0.32)
|
Adjusted
EBITDA2
|
|
~$725
|
|
|
|
Cash Flow &
Other Metrics
|
|
|
Cash used in
Operating Activities
|
|
~$(495)
|
Capex
|
|
~$145
|
Free Cash
Flow2
|
|
~$(640)
|
Cash Interest / DIC
Amortization Interest
|
|
~$350 /
~$40
|
Cash Taxes
|
|
~$65
|
Cash, Restricted Cash
and Cash Equivalents
|
|
~$545
|
Gross
Debt6
|
|
~$3.8B
|
Net Working
Capital
|
|
~$(1.4)B
|
|
|
1
|
Net interest expense
is gross interest expense less capitalized interest and interest
income.
|
2
|
The calculations of
EBITDA, adjusted operating income, adjusted operating margin,
adjusted net income, adjusted diluted EPS, adjusted EBITDA and free
cash flow, which are non-GAAP measures, are shown in the appendix
entitled "Reconciliation of Forecast Non-GAAP Financial Measures to
Forecast GAAP Financial Measures."
|
3
|
Corporate and Other
Operating Income (expense) represents the operating income
(expense) from corporate and non-operating activities, including
certain centrally managed initiatives, such as restructuring and
integration costs and costs to achieve the Combination
Profitability Initiative (CPI), impairments, annual mark-to-market
pension adjustments, costs not attributable to a particular
reporting segment and unallocated direct operating expenses
associated with the underutilization of vessels, fabrication
facilities and engineering resources.
|
4
|
Restructuring and
integration costs, including costs to achieve the
CPI.
|
5
|
Transaction costs
associated with the ongoing process to sell the company's non-core
storage tank and pipe fabrication businesses.
|
6
|
Ending gross debt
excludes debt issuance costs and operating and finance lease
obligations.
|
Conference
Call
McDermott has scheduled a conference call and webcast related to
its second quarter 2019 results at 4:00
p.m., U.S. Central time, today. Shareholders and other
interested parties are invited to listen to the call by
visiting www.mcdermott-investors.com or by calling
1-706-634-2259 (Conference ID: 9386389). A presentation of
supplemental financial information will be available on McDermott's
Investor Relations site at that time. A replay of the webcast
will be available on McDermott's website for seven days after the
call.
About McDermott
McDermott is a premier, fully integrated provider of technology,
engineering and construction solutions to the energy industry. For
more than a century, customers have trusted McDermott to design and
build end-to-end infrastructure and technology solutions to
transport and transform oil and gas into the products the world
needs today. Our proprietary technologies, integrated expertise and
comprehensive solutions deliver certainty, innovation and added
value to energy projects around the world. Customers rely on
McDermott to deliver certainty to the most complex projects, from
concept to commissioning. It is called the "One McDermott Way."
Operating in over 54 countries, McDermott's locally focused and
globally integrated resources include approximately 32,000
employees and engineers, a diversified fleet of specialty marine
construction vessels and fabrication facilities around the world.
To learn more, visit www.mcdermott.com.
Non-GAAP Measures
This communication 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. The forecast non-GAAP measures we
have presented in this communication include forecast EBITDA,
adjusted operating income (loss), adjusted operating income margin,
adjusted net income, adjusted diluted EPS, free cash flow, EBITDA
and adjusted EBITDA. We believe these forward-looking financial
measures are within reasonable measure.
Non-GAAP measures include adjusted operating income (loss),
adjusted operating income margin, adjusted net income, adjusted
diluted EPS, free cash flow, EBITDA and adjusted EBITDA, in each
case excluding the impacts 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 these metrics are useful for investors to review, because they
provide more consistent measures 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 each of these metrics 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.
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 stockholder
value, such as making acquisitions or other investments. Our
management uses free cash flow for that reason. We define EBITDA as
net income plus depreciation and amortization, interest expense,
net, provision for income taxes and accretion and dividends on
redeemable preferred stock. We define adjusted EBITDA as EBITDA
adjusted to exclude significant, non-recurring transactions to our
operating income, both gains and charges. We have included
EBITDA and adjusted EBITDA disclosures in this communication
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 and
adjusted EBITDA to monitor and compare the financial performance of
our operations. EBITDA and adjusted EBITDA do not give effect to
the cash that we must use to service our debt or pay our income
taxes, and thus do not reflect the funds actually available for
capital expenditures, dividends or various other purposes. Our
presentations of free cash flow, EBITDA and adjusted EBITDA may not
be comparable to similarly titled measures in other companies'
reports. You should not consider free cash flow, EBITDA and
adjusted EBITDA in isolation from, or as substitutes 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 included in this
communication.
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 communication which are forward-looking, and
provide other than historical information, involve risks,
contingencies and uncertainties that may impact actual results of
operations of McDermott. These forward-looking statements include,
among other things, statements about 2019 guidance, earnings and
cashflow into 2020, project milestones and percentage of completion
and expected timetables, cost estimates on identified projects,
cost recoveries and schedule-based incentives on projects,
assessments and beliefs with respect to legacy CB&I projects
(including the Cameron and
Freeport LNG projects) and the Mozambique LNG project, the market
outlook for our various market sectors, backlog, bids and change
orders outstanding, target projects and revenue opportunity
pipeline, to the extent these may be viewed as indicators of future
revenues or profitability, Technology license sales, pull-through
opportunities, the contemplated sales of the pipe fabrication and
storage tank businesses and the anticipated timing of those
transactions, our potential and our beliefs with respect to the
benefits of our combination with CB&I. 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 McDermott operates or
credit or capital markets; the inability of McDermott 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 customers and other
business counterparties of McDermott; changes in industry norms;
negotiations with third parties with respect to the sale of the
pipe fabrication and storage tank businesses; 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 each of McDermott's annual and quarterly filings with
the U.S. Securities and Exchange Commission, including McDermott's
annual report on Form 10-K for the year ended December 31, 2018 and subsequent quarterly
reports on Form 10-Q. This communication reflects the views of
McDermott's management 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
Scott Lamb
Vice President, Investor Relations
+1 832.513.1068
scott.lamb@mcdermott.com
Global Media Relations
Gentry Brann
Senior Vice President, Communications, Marketing and
Administration
+1 281 870 5269
Gentry.Brann@McDermott.com
START OF APPENDIX
McDERMOTT
INTERNATIONAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(In millions,
except per share amounts)
|
|
Revenues
|
|
$
|
2,137
|
|
|
$
|
1,735
|
|
|
$
|
4,348
|
|
|
$
|
2,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations
|
|
|
1,949
|
|
|
|
1,486
|
|
|
|
3,967
|
|
|
|
1,962
|
|
Project intangibles
and inventory-related amortization
|
|
|
10
|
|
|
|
12
|
|
|
|
20
|
|
|
|
12
|
|
Total cost of
operations
|
|
|
1,959
|
|
|
|
1,498
|
|
|
|
3,987
|
|
|
|
1,974
|
|
Research and
development expenses
|
|
|
8
|
|
|
|
5
|
|
|
|
16
|
|
|
|
5
|
|
Selling, general and
administrative expenses
|
|
|
77
|
|
|
|
75
|
|
|
|
149
|
|
|
|
124
|
|
Other intangibles
amortization
|
|
|
22
|
|
|
|
10
|
|
|
|
44
|
|
|
|
10
|
|
Transaction
costs
|
|
|
11
|
|
|
|
37
|
|
|
|
15
|
|
|
|
40
|
|
Restructuring and
integration costs
|
|
|
20
|
|
|
|
63
|
|
|
|
89
|
|
|
|
75
|
|
Loss on asset
disposals
|
|
|
102
|
|
|
|
1
|
|
|
|
103
|
|
|
|
1
|
|
Total
expenses
|
|
|
2,199
|
|
|
|
1,689
|
|
|
|
4,403
|
|
|
|
2,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
investments in unconsolidated affiliates
|
|
|
3
|
|
|
|
3
|
|
|
|
12
|
|
|
|
(1)
|
|
Investment in
unconsolidated affiliates-related
amortization
|
|
|
(2)
|
|
|
|
-
|
|
|
|
(5)
|
|
|
|
-
|
|
Operating (loss)
income
|
|
|
(61)
|
|
|
|
49
|
|
|
|
(48)
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(100)
|
|
|
|
(72)
|
|
|
|
(192)
|
|
|
|
(83)
|
|
Other non-operating
expense, net
|
|
|
(2)
|
|
|
|
(16)
|
|
|
|
(1)
|
|
|
|
(14)
|
|
Total other
expense, net
|
|
|
(102)
|
|
|
|
(88)
|
|
|
|
(193)
|
|
|
|
(97)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before
provision for income taxes
|
|
|
(163)
|
|
|
|
(39)
|
|
|
|
(241)
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
|
(49)
|
|
|
|
(84)
|
|
|
|
(70)
|
|
|
|
(63)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
|
(114)
|
|
|
|
45
|
|
|
|
(171)
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net
income (loss) attributable to noncontrolling
interests
|
|
|
18
|
|
|
|
(2)
|
|
|
|
17
|
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to McDermott
|
|
$
|
(132)
|
|
|
$
|
47
|
|
|
$
|
(188)
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on
redeemable preferred stock
|
|
|
(10)
|
|
|
|
-
|
|
|
|
(20)
|
|
|
|
-
|
|
Accretion of
redeemable preferred stock
|
|
|
(4)
|
|
|
|
-
|
|
|
|
(8)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to common stockholders
|
|
|
(146)
|
|
|
|
47
|
|
|
|
(216)
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.80)
|
|
|
$
|
0.33
|
|
|
$
|
(1.19)
|
|
|
$
|
0.68
|
|
Diluted
|
|
$
|
(0.80)
|
|
|
$
|
0.33
|
|
|
$
|
(1.19)
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
computation of net (loss) income per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
182
|
|
|
|
144
|
|
|
|
181
|
|
|
|
120
|
|
Diluted
|
|
|
182
|
|
|
|
144
|
|
|
|
181
|
|
|
|
120
|
|
McDERMOTT
INTERNATIONAL, INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
|
|
(In millions,
except per share amounts)
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents ($252 and $146 related to variable interest
entities
("VIEs"))
|
|
$
|
455
|
|
|
$
|
520
|
|
Restricted cash
and cash equivalents
|
|
|
327
|
|
|
|
325
|
|
Accounts
receivable—trade, net ($45 and $29 related to VIEs)
|
|
|
1,002
|
|
|
|
932
|
|
Accounts
receivable—other ($61 and $57 related to VIEs)
|
|
|
235
|
|
|
|
175
|
|
Contracts in
progress ($167 and $144 related to VIEs)
|
|
|
932
|
|
|
|
704
|
|
Project-related
intangible assets, net
|
|
|
94
|
|
|
|
137
|
|
Inventory
|
|
|
42
|
|
|
|
101
|
|
Other current
assets ($31 and $24 related to VIEs)
|
|
|
152
|
|
|
|
139
|
|
Total current
assets
|
|
|
3,239
|
|
|
|
3,033
|
|
Property, plant
and equipment, net
|
|
|
2,054
|
|
|
|
2,067
|
|
Operating lease
right-of-use assets
|
|
|
383
|
|
|
|
-
|
|
Accounts
receivable—long-term retainages
|
|
|
68
|
|
|
|
62
|
|
Investments in
unconsolidated affiliates
|
|
|
446
|
|
|
|
452
|
|
Goodwill
|
|
|
2,704
|
|
|
|
2,654
|
|
Other
intangibles, net
|
|
|
948
|
|
|
|
1,009
|
|
Other
non-current assets
|
|
|
156
|
|
|
|
163
|
|
Total
assets
|
|
$
|
9,998
|
|
|
$
|
9,440
|
|
|
|
|
|
|
|
|
|
|
Liabilities,
Mezzanine Equity and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Revolving credit
facility
|
|
$
|
379
|
|
|
$
|
-
|
|
Short-term
borrowing and current maturities of long-term debt
|
|
|
62
|
|
|
|
30
|
|
Current portion
of long-term lease obligations
|
|
|
96
|
|
|
|
8
|
|
Accounts payable
($307 and $277 related to VIEs)
|
|
|
1,206
|
|
|
|
595
|
|
Advance billings
on contracts ($389 and $717 related to VIEs)
|
|
|
1,438
|
|
|
|
1,954
|
|
Project-related
intangible liabilities, net
|
|
|
38
|
|
|
|
66
|
|
Accrued
liabilities ($76 and $136 related to VIEs)
|
|
|
1,467
|
|
|
|
1,564
|
|
Total current
liabilities
|
|
|
4,686
|
|
|
|
4,217
|
|
Long-term
debt
|
|
|
3,388
|
|
|
|
3,393
|
|
Long-term lease
obligations
|
|
|
379
|
|
|
|
66
|
|
Deferred income
taxes
|
|
|
46
|
|
|
|
47
|
|
Other
non-current liabilities
|
|
|
705
|
|
|
|
664
|
|
Total
liabilities
|
|
|
9,204
|
|
|
|
8,387
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Mezzanine
equity:
|
|
|
|
|
|
|
|
|
Redeemable
preferred stock
|
|
|
257
|
|
|
|
230
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common stock,
par value $1.00 per share, authorized 255 shares;
|
|
|
|
|
|
|
|
|
issued 185 and
183 shares, respectively
|
|
|
185
|
|
|
|
183
|
|
Capital in
excess of par value
|
|
3,549
|
|
|
|
3,539
|
|
Accumulated
deficit
|
|
|
(2,935)
|
|
|
|
(2,719)
|
|
Accumulated
other comprehensive loss
|
|
|
(181)
|
|
|
|
(107)
|
|
Treasury stock,
at cost: 3 and 3 shares, respectively
|
|
|
(96)
|
|
|
|
(96)
|
|
Total McDermott
Stockholders' Equity
|
|
|
522
|
|
|
|
800
|
|
Noncontrolling
interest
|
|
|
15
|
|
|
|
23
|
|
Total
stockholders' equity
|
|
|
537
|
|
|
|
823
|
|
Total
liabilities and stockholders' equity
|
|
$
|
9,998
|
|
|
$
|
9,440
|
|
McDERMOTT
INTERNATIONAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In
millions)
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(171)
|
|
|
$
|
79
|
|
Non-cash items
included in net (loss) income:
|
|
|
|
|
|
|
|
|
Loss on disposal of
APP
|
|
|
101
|
|
|
|
-
|
|
Depreciation and
amortization
|
|
|
137
|
|
|
|
80
|
|
Debt issuance cost
amortization
|
|
|
21
|
|
|
|
17
|
|
Stock-based
compensation charges
|
|
|
11
|
|
|
|
28
|
|
Deferred
taxes
|
|
|
(1)
|
|
|
|
(100)
|
|
Changes in operating
assets and liabilities, net of effects of businesses
acquired:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(164)
|
|
|
|
278
|
|
Contracts in progress,
net of advance billings on contracts
|
|
|
(745)
|
|
|
|
(141)
|
|
Accounts
payable
|
|
|
545
|
|
|
|
129
|
|
Other current and
non-current assets
|
|
|
(71)
|
|
|
|
12
|
|
Investments in
unconsolidated affiliates
|
|
|
-
|
|
|
|
1
|
|
Other current and
non-current liabilities
|
|
|
(112)
|
|
|
|
52
|
|
Total cash (used
in) provided by operating activities
|
|
|
(449)
|
|
|
|
435
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
CB&I
consideration, net of cash of $498 acquired
|
|
|
-
|
|
|
|
(2,374)
|
|
Proceeds from asset
disposals, net
|
|
|
83
|
|
|
|
2
|
|
Purchases of
property, plant and equipment
|
|
|
(33)
|
|
|
|
(43)
|
|
Advances related to
proportionately consolidated consortiums
|
|
|
(234)
|
|
|
|
(45)
|
|
Investments in
unconsolidated affiliates
|
|
|
(1)
|
|
|
|
(3)
|
|
Other
|
|
|
-
|
|
|
|
2
|
|
Total cash used in
investing activities
|
|
|
(185)
|
|
|
|
(2,461)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Revolving credit
facility borrowings
|
|
|
1,699
|
|
|
|
-
|
|
Revolving credit
facility repayments
|
|
|
(1,320)
|
|
|
|
-
|
|
Structured equipment
financing
|
|
|
32
|
|
|
|
-
|
|
Proceeds from
issuance of long-term debt
|
|
|
-
|
|
|
|
3,560
|
|
Repayment of debt and
finance lease obligations
|
|
|
(19)
|
|
|
|
(515)
|
|
Advances related to
equity method joint ventures and proportionately consolidated
consortiums
|
|
|
190
|
|
|
|
(42)
|
|
Debt and letter of
credit issuance costs
|
|
|
-
|
|
|
|
(208)
|
|
Debt extinguishment
costs
|
|
|
-
|
|
|
|
(10)
|
|
Repurchase of common
stock
|
|
|
(4)
|
|
|
|
(14)
|
|
Distribution to joint
venture member
|
|
|
(5)
|
|
|
|
-
|
|
Total cash provided
by financing activities
|
|
|
573
|
|
|
|
2,771
|
|
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash, cash equivalents and restricted
cash
|
|
|
(2)
|
|
|
|
(15)
|
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
|
|
(63)
|
|
|
|
730
|
|
Cash, cash
equivalents and restricted cash at beginning of
period
|
|
|
845
|
|
|
|
408
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
782
|
|
|
$
|
1,138
|
|
|
|
|
|
|
|
|
|
|
McDERMOTT
INTERNATIONAL, INC.
|
|
EARNINGS PER SHARE
COMPUTATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months Ended
June
30
|
|
|
Six months Ended
June 30
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
($ in millions,
except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to McDermott
|
$
|
(132)
|
|
|
$
|
47
|
|
|
$
|
(188)
|
|
|
$
|
82
|
|
Dividends on
redeemable preferred stock
|
|
(10)
|
|
|
|
-
|
|
|
|
(20)
|
|
|
|
-
|
|
Accretion of
redeemable preferred stock
|
|
(4)
|
|
|
|
-
|
|
|
|
(8)
|
|
|
|
-
|
|
Net (loss) income
attributable to common stockholders
|
$
|
(146)
|
|
|
$
|
47
|
|
|
$
|
(216)
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common stock (basic)
|
182
|
|
|
144
|
|
|
181
|
|
|
120
|
|
Weighted average
common stock (diluted)
|
182
|
|
|
|
144
|
|
|
181
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
$
|
(0.80)
|
|
|
$
|
0.33
|
|
|
$
|
(1.19)
|
|
|
$
|
0.68
|
|
Diluted:
|
$
|
(0.80)
|
|
|
$
|
0.33
|
|
|
$
|
(1.19)
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months Ended
Jun
30
|
|
|
Six months Ended
Jun 30
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
($ in
millions)
|
|
Depreciation &
amortization
|
$
|
61
|
|
|
$
|
57
|
|
|
$
|
137
|
|
|
$
|
80
|
|
Capital
expenditures
|
|
15
|
|
|
|
24
|
|
|
|
33
|
|
|
|
43
|
|
Backlog
|
|
20,547
|
|
|
|
10,186
|
|
|
|
20,547
|
|
|
|
10,186
|
|
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 certain Non-GAAP financial measures used in this press
release to comparable GAAP financial measures. Additional
reconciliations are provided in the accompanying tables.
McDERMOTT
INTERNATIONAL, INC.
|
|
RECONCILIATION OF
SEGMENT NON-GAAP TO GAAP FINANCIAL MEASURES
|
|
|
|
|
Three months Ended
June 30, 2019
|
|
|
Segment Operating
Results
|
|
|
|
|
|
|
|
|
|
|
NCSA
|
|
|
EARC
|
|
|
MENA
|
|
|
APAC
|
|
|
TECH
|
|
|
Corporate
|
|
|
Total
|
|
|
($ in
millions)
|
|
Revenues
|
$
|
1,259
|
|
|
$
|
192
|
|
|
$
|
399
|
|
|
$
|
133
|
|
|
$
|
154
|
|
|
-
|
|
|
$
|
2,137
|
|
GAAP Operating
Income (Loss)
|
|
15
|
|
|
|
4
|
|
|
|
29
|
|
|
|
2
|
|
|
|
35
|
|
|
|
(146)
|
|
|
|
(61)
|
|
GAAP Operating
Margin
|
|
1.2
|
%
|
|
|
2.1
|
%
|
|
|
7.3
|
%
|
|
|
1.5
|
%
|
|
|
22.7
|
%
|
|
|
-
|
|
|
|
-2.9
|
%
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring,
Integration &
Transaction Costs1
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
31
|
|
Loss on disposal of
APP
|
|
101
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101
|
|
Total Non-GAAP Adjustments
|
|
102
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
132
|
|
Non-GAAP Operating
Income
(Loss)
|
$
|
117
|
|
|
$
|
4
|
|
|
$
|
29
|
|
|
$
|
2
|
|
|
$
|
35
|
|
|
$
|
(115)
|
|
|
$
|
71
|
|
Non-GAAP Adjusted
Operating
Margin
|
|
9.3
|
%
|
|
|
2.1
|
%
|
|
|
7.3
|
%
|
|
|
1.5
|
%
|
|
|
22.7
|
%
|
|
|
-
|
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
Individual line items may not sum to totals as a result of
rounding.
|
1
|
Restructuring and
integration costs of $20 million, which included costs to implement
our CPI program, change in control, severance, professional fees
and settlement of litigation – as well as $11 million of
transaction costs associated with the ongoing process to sell the
company's non-core storage tank and pipe fabrication businesses
during the three months ended June 30, 2019.
|
McDERMOTT
INTERNATIONAL, INC.
|
RECONCILIATION OF
NON-GAAP TO GAAP FINANCIAL MEASURES
|
|
|
Three months
Ended
|
|
|
Six months
Ended
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
($ in millions,
except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net (Loss)
Income Attributable to Common
Stockholders
|
$
|
(146)
|
|
|
$
|
47
|
|
|
$
|
(216)
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
costs1
|
|
11
|
|
|
|
37
|
|
|
|
15
|
|
|
|
40
|
|
Restructuring and
integration costs2
|
|
20
|
|
|
|
63
|
|
|
|
89
|
|
|
|
75
|
|
Debt extinguishment
costs3
|
|
-
|
|
|
|
14
|
|
|
|
-
|
|
|
|
14
|
|
Tax benefit on
intercompany transfer of IP4
|
|
-
|
|
|
|
(117)
|
|
|
|
-
|
|
|
|
(117)
|
|
Loss on sale of
APP5
|
|
101
|
|
|
|
-
|
|
|
|
101
|
|
|
|
-
|
|
Total Non-GAAP Adjustments
|
|
132
|
|
|
|
(3)
|
|
|
|
205
|
|
|
|
12
|
|
Tax Effect of Non-GAAP
Gains and/or Charges6
|
|
-
|
|
|
|
(4)
|
|
|
|
-
|
|
|
|
(4)
|
|
Total Non-GAAP
Adjustments (After Tax)
|
|
132
|
|
|
|
(7)
|
|
|
|
205
|
|
|
|
8
|
|
Non-GAAP Adjusted
Net (Loss) Income Attributable to
Common Stockholders
|
$
|
(14)
|
|
|
$
|
40
|
|
|
$
|
(11)
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
(Loss) Income
|
$
|
(61)
|
|
|
$
|
49
|
|
|
$
|
(48)
|
|
|
$
|
113
|
|
Non-GAAP
Adjustments7
|
|
132
|
|
|
|
100
|
|
|
|
205
|
|
|
|
115
|
|
Non-GAAP Adjusted
Operating Income
|
$
|
71
|
|
|
$
|
149
|
|
|
$
|
157
|
|
|
$
|
228
|
|
Non-GAAP Adjusted
Operating Margin
|
|
3.3
|
%
|
|
|
8.6
|
%
|
|
|
3.6
|
%
|
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
(Loss) Earnings Per Share
|
$
|
(0.80)
|
|
|
$
|
0.33
|
|
|
$
|
(1.19)
|
|
|
$
|
0.68
|
|
Non-GAAP
Adjustments
|
|
0.73
|
|
|
|
(0.05)
|
|
|
|
1.13
|
|
|
|
0.07
|
|
Non-GAAP Adjusted
(Loss) Earnings Per Share
|
$
|
(0.07)
|
|
|
$
|
0.28
|
|
|
$
|
(0.06)
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
182
|
|
|
|
144
|
|
|
|
181
|
|
|
|
120
|
|
Diluted
|
|
182
|
|
|
|
144
|
|
|
|
181
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
Attributable to Common Stockholders
|
$
|
(146)
|
|
|
$
|
47
|
|
|
$
|
(216)
|
|
|
$
|
82
|
|
Depreciation and
Amortization
|
|
61
|
|
|
|
57
|
|
|
|
137
|
|
|
|
80
|
|
Interest Expense,
Net
|
|
100
|
|
|
|
72
|
|
|
|
192
|
|
|
|
83
|
|
Provision for Income
Taxes
|
|
(49)
|
|
|
|
(84)
|
|
|
|
70
|
|
|
|
(63)
|
|
Accretion and
Dividends on redeemable preferred stock
|
|
14
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
EBITDA8
|
|
(20)
|
|
|
|
92
|
|
|
|
211
|
|
|
|
182
|
|
Non-GAAP
Adjustments
|
|
132
|
|
|
|
(7)
|
|
|
|
205
|
|
|
|
8
|
|
Adjusted
EBITDA8
|
$
|
112
|
|
|
$
|
85
|
|
|
$
|
416
|
|
|
$
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
$
|
(205)
|
|
|
$
|
398
|
|
|
$
|
(449)
|
|
|
$
|
435
|
|
Capital
expenditures
|
|
(15)
|
|
|
|
(24)
|
|
|
|
(33)
|
|
|
|
(43)
|
|
Free cash
flow
|
$
|
(220)
|
|
|
$
|
374
|
|
|
$
|
(482)
|
|
|
$
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
Revenues
|
$
|
2,137
|
|
|
$
|
1,735
|
|
|
$
|
4,348
|
|
|
$
|
2,343
|
|
Note: Individual line
items may not sum to totals as a result of rounding.
|
|
1
|
Transaction costs in
Q2 2019 were associated with the ongoing process to sell our
non-core storage tank and pipe fabrication businesses.
Transaction costs in Q2 2018 were associated with the
Combination.
|
2
|
Restructuring and
integration costs, including costs to achieve the CPI.
|
3
|
As part of financing
of the combination and the establishment of new capital structure,
we recognized expense during the second quarter of 2018 for
prepayment of our prior credit facility and senior secured notes,
including a make-whole premium and the accelerated write-off of
debt issuance costs.
|
4
|
Tax benefit resulting
from the internal transfer of certain intellectual property rights
during the second quarter of 2018 in conjunction with
the combination.
|
5
|
We recognized a $101
million loss on the APP asset disposal in our Statement of
Operations during Q2 2019.
|
6
|
The adjustments to
GAAP Net Income (Loss) have been income tax effected when included
in net income based upon the respective tax jurisdictions the
adjustments were incurred in. No income tax effect has been
taken on Non-GAAP charges incurred in the United States, where we
do not expect to receive income tax benefits.
|
7
|
Includes the non-GAAP
adjustments described in footnotes 1, 2 and 5 above. Adjustments to
operating income do not include non-GAAP adjustments described in
footnotes 3 and 4 above, as those items are not included in the
computation of operating income.
|
8
|
We define EBITDA as
net income plus depreciation and amortization, interest expense,
net, provision for income taxes and accretion and dividends on
redeemable preferred stock. We define adjusted EBITDA as
EBITDA adjusted to exclude significant, non-recurring transactions,
both gains and charges, to our operating income as described in
footnotes 1 through 6 above. We have included EBITDA and
adjusted 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
and because adjusted EBITDA provides a consistent measure of EBITDA
relating to our underlying business. Our management also uses
EBITDA and adjusted EBITDA to monitor and compare the financial
performance of our operations. EBITDA and adjusted EBITDA do
not give effect to the cash that we must use to service our debt or
pay our income taxes, and thus do not reflect the funds actually
available for capital expenditures, dividends or various other
purposes. In addition, our presentation of EBITDA and
adjusted EBITDA may not be comparable to similarly titled measures
in other companies' reports. You should not consider EBITDA or
adjusted EBITDA in isolation from, or as a substitute for, net
income or cash flow measures prepared in accordance with U.S.
GAAP.
|
McDERMOTT
INTERNATIONAL, INC.
|
RECONCILIATION OF
FORECAST NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL
MEASURES
|
|
|
|
Full Year 2019
Guidance Revised
Q2'19
|
|
|
($ in millions,
except per share
amounts or as indicated)
|
Revenues
|
|
~$9.5B
|
|
|
|
Operating
Income
|
|
~$220
|
Operating
Margin
|
|
~2.3%
|
Restructuring,
integration & transaction costs
|
|
~$150
|
Loss on Sale of
APP
|
|
~$100
|
Total Non-GAAP
Adjustments
|
|
~$250
|
Adjusted Operating
Income
|
|
~$470
|
Adjusted
Operating Margin
|
|
~4.9%
|
|
|
|
Net
Loss
|
|
~$(310)
|
Total Non-GAAP
Adjustments
|
|
~$250
|
Tax Impact of
Adjustments
|
|
~$ -
|
Adjusted Net
Loss
|
|
~$(60)
|
Diluted Share
Count
|
|
~188
|
Adjusted Diluted
Loss Per Share
|
|
~$(0.32)
|
|
|
|
Cash Flows from
Operating Activities
|
|
~$(495)
|
Capital
Expenditures
|
|
~$145
|
Free Cash
Flow
|
|
~$(640)
|
|
|
|
GAAP Net Income
(Loss) Attributable to Common Stockholders
|
|
~$(310)
|
Add:
|
|
|
Depreciation and
amortization
|
|
~$274
|
Interest expense,
net
|
|
~$395
|
Provision for
taxes
|
|
~$65
|
Accretion on
Redeemable Preferred Stock
|
|
~$15
|
Dividends on
Redeemable Preferred Stock
|
|
~$36
|
EBITDA
|
|
~$475
|
Restructuring,
integration & transaction costs
|
|
~$150
|
APP Loss on
Sale
|
|
~$100
|
Adjusted
EBITDA
|
|
~$725
|
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SOURCE McDermott International, Inc.