HOUSTON, Nov. 4, 2019 /PRNewswire/ -- McDermott
International, Inc. (NYSE: MDR) today reported revenues of
$2.1 billion, a net loss of
$1.9 billion, or $(10.37) per diluted share, and an operating loss
of $1.7 billion for the third quarter
of 2019. The net loss was due primarily to non-cash
accounting charges of $1.5
billion related to impairments of goodwill and intangible
assets and $256 million of changes in
project gross profit on specified projects identified in a covenant
of our new Superpriority Credit Agreement.
Operationally, four of our five operating segments reported
solid performance during the third quarter, led by the Middle East and North Africa (MENA), which reported operating
income of $69 million and an
operating margin of 13.3%, both sharply improved from the second
quarter of 2019. Additionally, we reported backlog of
$20.1 billion, new awards of
$1.7 billion and a revenue
opportunity pipeline of a near-record $89.1
billion for the third quarter of 2019.
David Dickson, President and
Chief Executive Officer of McDermott, said: "We experienced
continued strong backlog, with several significant customer project
awards, including the Ichthys Phase 2a Gas Field Development
Project in Australia, which we
developed in conjunction with our integrated subsea-solutions
partner, Baker Hughes, as well as a large LNG tank project on the
U.S. Gulf Coast. We also achieved solid operating results in
our MENA, Asia Pacific (APAC),
Europe, Africa, Russia and Caspian (EARC) and Technology segments.
At the same time, our capital structure continues to be pressured
by certain legacy CB&I projects. Our recently announced
$1.7 billion financing agreement with
our lenders signals their confidence in our underlying
business. We continue working with them to achieve a
long-term balance sheet solution as we remain focused on delivering
value for our customers, employees, subcontractors, and
suppliers."
Capital Structure and Liquidity
As announced on October 21, 2019,
we have obtained a $1.7 billion
financing agreement from certain of our first-lien lenders, of
which $650 million has been
accessed.
We elected to enter into the 30-day grace period with respect to
a November 1, 2019 interest payment
on our 10.625% senior notes due in 2024 in order to continue
collaborative discussions with our lenders and noteholders to find
a long-term balance sheet solution.
Third Quarter 2019 Operating Performance
Our adjusted operating loss in the third quarter of 2019 was
$125 million. The solid
performance of our MENA, APAC, EARC and Technology segments was
more than offset by the $256 million
of changes in project gross profit on specified projects identified
in a covenant of our new Superpriority Credit Agreement.
Our operating loss of $1.7 billion
was primarily due to the $1.5 billion
goodwill and intangible assets impairments in addition to the
$256 million of changes in project
gross profit on specified projects. The goodwill impairment of
$1.4 billion primarily resulted from
updates to the 2019 management budget and increases in discount
rate assumptions driven by increases in our cost of capital and
risk premium assumptions associated with forecasted cash flows. The
intangible assets impairment of $0.1
billion primarily resulted from a reduction in the estimated
remaining useful life of the trade names associated with our NCSA
segment, causing a decrease in future attributable cash flow
expectations.
Financial
Highlights
|
|
|
|
|
Three months
Ended
|
|
|
Delta
|
|
|
Nine months
Ended
|
|
|
Delta
|
|
|
Sep 30,
2019
|
|
|
Sep 30,
2018
|
|
|
Qtr-on-Qtr
|
|
|
Sep 30,
2019
|
|
|
Sep 30,
2018
|
|
|
YTD-on-YTD
|
|
|
($ in millions,
except per share amounts)
|
|
Revenues
|
$
|
2,121
|
|
|
$
|
2,289
|
|
|
$
|
(168)
|
|
|
$
|
6,469
|
|
|
$
|
4,632
|
|
|
$
|
1,837
|
|
Operating (Loss)
Income
|
|
(1,684)
|
|
|
|
129
|
|
|
|
(1,813)
|
|
|
|
(1,732)
|
|
|
|
242
|
|
|
|
(1,974)
|
|
Operating
Margin
|
|
-79.4
|
%
|
|
|
5.6
|
%
|
|
|
-85.0
|
%
|
|
|
-26.8
|
%
|
|
|
5.2
|
%
|
|
|
-32.0
|
%
|
Net (Loss)
Income
|
|
(1,887)
|
|
|
|
2
|
|
|
|
(1,889)
|
|
|
|
(2,103)
|
|
|
|
84
|
|
|
|
(2,187)
|
|
Diluted
EPS1
|
|
(10.37)
|
|
|
|
0.01
|
|
|
|
(10.38)
|
|
|
|
(11.62)
|
|
|
|
0.60
|
|
|
|
(12.22)
|
|
Total Intangibles
Amortization2
|
|
31
|
|
|
|
68
|
|
|
|
(37)
|
|
|
|
100
|
|
|
|
90
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
(Loss)
Income3
|
|
(125)
|
|
|
|
232
|
|
|
|
(357)
|
|
|
|
32
|
|
|
|
483
|
|
|
|
(451)
|
|
Adjusted Operating
Margin3
|
|
-5.9
|
%
|
|
|
10.1
|
%
|
|
|
-16.0
|
%
|
|
|
0.5
|
%
|
|
|
10.4
|
%
|
|
|
-9.9
|
%
|
Adjusted Net (Loss)
Income3,4
|
|
(328)
|
|
|
|
89
|
|
|
|
(417)
|
|
|
|
(339)
|
|
|
|
197
|
|
|
|
(536)
|
|
Adjusted Diluted
EPS1,3,4
|
|
(1.80)
|
|
|
|
0.20
|
|
|
|
(2.00)
|
|
|
|
(1.87)
|
|
|
|
1.28
|
|
|
|
(3.15)
|
|
Adjusted
EBITDA3
|
|
(71)
|
|
|
|
275
|
|
|
|
(346)
|
|
|
|
205
|
|
|
|
586
|
|
|
|
(381)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (Used) Provided
by
Operating Activities
|
|
(114)
|
|
|
|
(221)
|
|
|
|
107
|
|
|
|
(563)
|
|
|
|
214
|
|
|
|
(777)
|
|
Capital
Expenditures
|
|
32
|
|
|
|
19
|
|
|
|
13
|
|
|
|
65
|
|
|
|
62
|
|
|
|
3
|
|
Free Cash
Flow3
|
|
(146)
|
|
|
|
(240)
|
|
|
|
94
|
|
|
|
(628)
|
|
|
|
152
|
|
|
|
(780)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
Capital5
|
|
(2,050)
|
|
|
|
(1,915)
|
|
|
|
(135)
|
|
|
|
(2,050)
|
|
|
|
(1,915)
|
|
|
|
(135)
|
|
|
|
1
|
Diluted (Loss)
Earnings Per Share ("EPS") and Adjusted Diluted EPS were calculated
using weighted average diluted shares of 182 million and 181
million for the three months ended September 30, 2019 and 2018,
respectively, and weighted average diluted shares of 181 million
and 141 million for the nine months ended September 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 EPS 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 debt
and project-related intangible liabilities).
|
Asset Sales
We continue to pursue the previously announced strategic
alternatives process for our Lummus Technology business and the
sale process for the remaining portion of our pipe fabrication
business. As previously announced, we decided to terminate
the sale process for our industrial storage tank business.
Cash and Liquidity
Cash used by operating activities in the third quarter of 2019
was $(114) million. Total
unrestricted cash at the end of the third quarter, prior to receipt
of the first tranche of the $1.7
billion financing agreement, was $677
million. As of September 30,
2019, we had approximately $754
million of combined availability under our principal letter
of credit facilities, uncommitted bilateral letter of credit
facilities and surety arrangements. Our uncommitted bilateral
letter of credit and surety arrangements, totaling $724 million of the combined availability at
September 30, 2019, are agreed to by
the facility counterparties on a case by case basis based upon
their consideration of the beneficiary, financial or performance
guarantee amount, and term of the guarantee, among other factors.
Our uncommitted bilateral credit facility and surety bond
providers have no obligation to issue letters of credit or bank
guarantees, or to post surety bonds, on our behalf, and they may be
able to demand that we provide them with cash or other collateral
to backstop these liabilities. Our Credit Agreement, as
amended on October 21, 2019, does not
require testing of any financial covenants for the period ending
September 30, 2019.
Reporting Segment Update
Our segment reporting is presented as: North, Central and
South America, or NCSA;
Europe, Africa, Russia and Caspian, or EARC; Middle East and North Africa, or MENA; Asia Pacific, or APAC; and Technology, or
TECH. We also report results for Corporate. Segment and
Corporate results are summarized below.
Segment Financial
Highlights
|
|
|
Three Months Ended
Sep 30, 2019
|
|
|
Segment Operating
Results
|
|
|
|
|
|
|
|
|
|
|
NCSA
|
|
|
EARC
|
|
|
MENA
|
|
|
APAC
|
|
|
TECH
|
|
|
Corporate
|
|
|
Total
|
|
|
($ in
millions)
|
|
New Orders
|
$
|
581
|
|
|
$
|
-
|
|
|
$
|
446
|
|
|
$
|
468
|
|
|
$
|
164
|
|
|
$
|
-
|
|
|
$
|
1,659
|
|
Backlog1
|
|
7,614
|
|
|
|
3,782
|
|
|
|
6,464
|
|
|
|
1,632
|
|
|
|
592
|
|
|
-
|
|
|
|
20,084
|
|
Revenues
|
|
1,090
|
|
|
|
248
|
|
|
|
520
|
|
|
|
125
|
|
|
|
138
|
|
|
-
|
|
|
|
2,121
|
|
Book-to-Bill
|
|
0.5
|
x
|
|
|
0.0
|
x
|
|
|
0.9
|
x
|
|
|
3.7
|
x
|
|
|
1.2
|
x
|
|
|
-
|
|
|
|
0.8
|
x
|
Operating (Loss)
Income
|
|
(1,405)
|
|
|
|
(250)
|
|
|
|
69
|
|
|
|
1
|
|
|
|
30
|
|
|
|
(129)
|
|
|
|
(1,684)
|
|
Operating
Margin
|
|
-128.9
|
%
|
|
|
-100.8
|
%
|
|
|
13.3
|
%
|
|
|
0.8
|
%
|
|
|
21.7
|
%
|
|
|
-
|
|
|
|
-79.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
(Loss)
Income2
|
|
(152)
|
|
|
|
10
|
|
|
|
69
|
|
|
|
1
|
|
|
|
30
|
|
|
|
(83)
|
|
|
|
(125)
|
|
Adjusted Operating
Margin2
|
|
-13.9
|
%
|
|
|
4.0
|
%
|
|
|
13.3
|
%
|
|
|
0.8
|
%
|
|
|
21.7
|
%
|
|
|
-
|
|
|
|
-5.9
|
%
|
Capex
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
1
|
|
|
|
25
|
|
|
|
32
|
|
|
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
Sep 30, 2019
|
|
|
Offshore
& Subsea
|
|
|
LNG
|
|
|
Downstream
|
|
|
Power
|
|
|
Total
|
|
|
($ in
millions)
|
|
New Orders
|
$
|
956
|
|
|
$
|
390
|
|
|
$
|
292
|
|
|
$
|
21
|
|
|
$
|
1,659
|
|
Backlog
|
|
9,070
|
|
|
|
6,563
|
|
|
|
4,122
|
|
|
|
329
|
|
|
|
20,084
|
|
Revenues
|
|
728
|
|
|
|
334
|
|
|
|
854
|
|
|
|
205
|
|
|
|
2,121
|
|
North, Central and South
America (NCSA)
Revenues of $1.1 billion were
primarily driven by the Cameron LNG, Freeport LNG, Total Ethane
Cracker and Entergy power projects. Additional contributors
were the Golden Pass LNG, Borstar Bay3 petrochemical and BP Cassia
C offshore projects. The operating loss of $1.4 billion was primarily due to the goodwill
and intangible assets impairments of $1.3
billion. The adjusted operating loss of $152 million was impacted by $220 million of changes in project gross profit
on specified NCSA projects identified in a covenant of our new
Superpriority Credit Agreement. Operating results for the
third quarter included $90 million of
incentives recognized on the Cameron project and close-out
improvements and settlements of claims on our substantially
completed projects.
Significant operational achievements and milestones were
achieved during the third quarter. The Freeport LNG project
achieved initial production on Train 1 and has loaded three tankers
to date; substantial completion is expected in the fourth quarter
of 2019. The Cameron LNG project achieved Phase 1 substantial
completion, and Trains 2 and 3 are progressing on schedule,
including Train 2 pipe installation and testing. The Golden
Pass LNG project progress included the commencement of initial
ground preparation. The Total Ethane Cracker project achieved an
important milestone with the installation of all cracking heaters.
The Duke Energy Asheville power project achieved key milestones as
both power blocks have now completed steam blows, and project
completion is estimated to be the middle of the fourth quarter of
2019. Finally, the Abkatun offshore project was accepted by Pemex
in early October, and platform operations have been fully assumed
by the customer.
Europe, Africa, Russia and Caspian (EARC)
Revenues of $248 million were
primarily driven by progress on the Total Tyra, Lukoil, Afipsky,
Tortue and Mozambique LNG projects. The operating loss of
$250 million was primarily due to a
goodwill impairment of $260
million. Adjusted operating income of $10 million was favorably impacted by a scope
amendment on the Afipsky refinery project in Russia.
Early engineering and procurement progress was made during the
third quarter on the Mozambique LNG contract awarded in the second
quarter, and the EPC team has been mobilized to the job
site. We believe our execution of this project will
continue to demonstrate our ability to deliver comprehensive EPC
solutions for world-scale LNG developments. Other key operational
achievements in the third quarter included the Orpic Liwa JV
achieving a safety milestone of 60 million-man hours without a
lost-time incident. In addition, our Brno office completed
its ISO recertification.
Middle East and North Africa (MENA)
MENA reported revenues of $520
million and operating income and margin of $69 million and 13.3%, respectively. Key
contributors to revenues and operating income were primarily the
Saudi Aramco Safaniya Phase 5 and 6, Marjan TP10, NFPS and NFE
jackets, LTA II, 3 CRPOs, QP Bul Hanine, ADNOC Crude Flexibility,
SASREF and Liwa projects.
The ADNOC Crude Flexibility project is on schedule with the
commencement of critical equipment deliveries; isometric production
has started to support the piping program, and teams have mobilized
to the site with first tank courses being erected. The SASREF MMG
Light project has recovered from earlier construction delays, and
start-up of the refinery is expected in November, achieving 3
million man-hours without a lost-time incident. Following the
September 2019 attacks on the Abqaiq
oil processing facility in Saudi
Arabia, we mobilized an emergency response team to assess
requirements and immediately carried out repairs to damaged
spheroid vessels.
Asia Pacific (APAC)
APAC reported revenues of $125
million and operating income and margin of $1 million and 0.8%, respectively. Revenues were
primarily driven by the Pan Malaysia, SVDN, ONGC SURF 98/2 and
Reliance KDG6 projects. Operating income was driven by
progress on various active projects, project closeouts and higher
utilization of engineering offices, partially offset by lower
vessel productivity.
During the third quarter, the DB30 vessel continued its
strong performance, with the execution of various pipelines as well
as the successful completion of the transport, launch and
installation of the Sao Vang Jacket for Idemitsu/PTSC, enabling the
customer to commence drilling work. The Reliance KGD6 and the
ONGC98/2 projects are preparing to mobilize various marine assets
for offshore installation with active utilization through the end
of 2019. The INPEX ICHTHYS project Phase 2a has successfully
commenced with mobilization of key personnel. Fabrication
activities at both Batam, Indonesia and QMW, China continue to intensify, with both
facilities ramping up resources to support international works from
the MENA, NCSA and EARC segments. Onshore activity remained steady,
with the JG Summit Tanks scope being executed in the Philippines. As of the end of the third
quarter of 2019, the project had achieved 1.4 million man-hours
without a lost-time incident, and it remains on schedule to
complete in the third quarter of 2020.
Technology (TECH)
TECH reported revenues of $138
million and operating income and margin of $30 million and 21.7%, respectively.
Revenues were driven by licensing and propriety supply in the
petrochemicals and refining markets, including catalyst. Operating
income was driven by catalyst shipments, execution progress, earned
fees and process performance.
Other key achievements during the third quarter included 1)
being awarded a large master licensor contract by Amiral, including
license, basic engineering package, extended basic engineering,
training, technical services and supply of proprietary equipment,
for what will be one of the world's largest mixed feed crackers; 2)
being nominated as one of the top finalists by Hydrocarbon
Processing magazine as best EPC/Licensor of the Year and best
Petrochemical Technology; 3) remaining on pace for a
potential record year in terms of the number of awarded
projects; 4) continuing to make progress on the potential JDA TC2C™
(Thermal Crude to Chemicals) project with Aramco, with first
implementation award expected in the fourth quarter of 2019
and with additional deployments under study; and 5) receiving a
contract award for TECH's first license sale related to an
alpha-methylstyrene unit, adding another technology to the TECH
portfolio.
Corporate
Corporate expenses include various corporate and other
non-operating activities. Corporate expense in the third quarter of
2019 was $129 million, mainly
attributable to: selling, general, administrative and other
expenses of $20 million; $60 million of unallocated operating costs;
$14 million of restructuring and
integration costs; $14 million of
transaction-related costs associated with the sale process for the
remaining portion of the pipe fabrication business and the
now-terminated effort to sell the storage tank business and fees
paid to external advisors retained to help us evaluate strategic
and capital structure alternatives; and $18
million for vessel and other marine assets impairment due to
underutilization.
Revenue Opportunity Pipeline
Our revenue opportunity pipeline consists of Backlog, Bids &
Change Orders Outstanding and Target Projects, which are those
projects we expect to be awarded in the market in the next five
quarters. We define Backlog as Remaining Performance Obligations
(RPOs) as determined in accordance with GAAP.
At the end of the third quarter of 2019, our revenue opportunity
pipeline was approximately $89.1
billion, primarily driven by MENA and NCSA with continuing
momentum in the offshore/subsea, downstream and LNG markets.
Revenue
Opportunity Pipeline
|
As
of
|
|
|
Sep 30,
2019
|
|
|
Jun 30,
2019
|
|
|
Mar 31,
2019
|
|
|
Dec 31,
2018
|
|
|
Sep 30,
2018
|
|
|
($ in
billions)
|
|
Backlog
|
$
|
20.1
|
|
|
$
|
20.5
|
|
|
$
|
15.4
|
|
|
$
|
10.9
|
|
|
$
|
11.5
|
|
Bids & Change
Orders Outstanding1
|
|
11.8
|
|
|
|
15.6
|
|
|
|
17.7
|
|
|
|
20.3
|
|
|
|
20.7
|
|
Targets2
|
|
57.2
|
|
|
|
54.1
|
|
|
|
58.0
|
|
|
|
61.9
|
|
|
|
48.1
|
|
Total
|
|
89.1
|
|
|
|
90.2
|
|
|
|
91.1
|
|
|
|
93.1
|
|
|
|
80.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
Opportunity Pipeline by
Segment
|
As of Sep 30,
2019
|
|
|
NCSA
|
|
|
EARC
|
|
|
MENA
|
|
|
APAC
|
|
|
TECH
|
|
|
Total
|
|
|
($ in
billions)
|
|
Backlog
|
$
|
7.6
|
|
|
$
|
3.8
|
|
|
$
|
6.5
|
|
|
$
|
1.6
|
|
|
$
|
0.6
|
|
|
$
|
20.1
|
|
Bids & Change
Orders Outstanding1
|
|
2.4
|
|
|
|
4.7
|
|
|
|
1.9
|
|
|
|
2.8
|
|
|
|
-
|
|
|
|
11.8
|
|
Targets2
|
|
17.6
|
|
|
|
3.1
|
|
|
|
26.3
|
|
|
|
8.4
|
|
|
|
1.8
|
|
|
|
57.2
|
|
Total
|
|
27.6
|
|
|
|
11.6
|
|
|
|
34.7
|
|
|
|
12.8
|
|
|
|
2.4
|
|
|
|
89.1
|
|
|
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 us 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 we have 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 us. There is no assurance that target projects will be
awarded to us or at all.
|
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 margin, adjusted net income (loss), 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: achieving a long-term
balance sheet solution with our lenders and noteholders; the
effects of our decision to not pay, when due, the November 1, 2019 interest payment on the 2024
Notes; our ability to deliver comprehensive EPC solution for
world-scale LNG developments; project milestones and percentage of
completion and expected timetables; cost estimates on identified
projects; assessments and beliefs with respect to legacy CB&I
projects (including the Cameron and Freeport LNG projects) and the
Mozambique LNG project; 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; and the contemplated strategic alternatives process
for our Lummus Technology business and sale of our pipe fabrication
business. 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; negotiations with
lenders and noteholders; 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 strategic alternatives process for our
Lummus Technology business and the sale of our pipe
fabrication business; 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
|
Global Media
Relations
|
Scott Lamb
|
Gentry
Brann
|
Vice President,
Investor Relations
|
Senior Vice
President, Communications,
|
+1
832.513.1068
|
Marketing and
Administration
|
scott.lamb@mcdermott.com
|
+1 281 870
5269
|
|
gentry.brann@mcdermott.com
|
START OF APPENDIX
McDERMOTT
INTERNATIONAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(In millions,
except per share amounts)
|
|
Revenues
|
|
$
|
2,121
|
|
|
$
|
2,289
|
|
|
$
|
6,469
|
|
|
$
|
4,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations
|
|
|
2,173
|
|
|
|
1,986
|
|
|
|
6,140
|
|
|
|
3,948
|
|
Project intangibles
and inventory-related amortization
|
|
|
7
|
|
|
|
30
|
|
|
|
27
|
|
|
|
42
|
|
Total cost of
operations
|
|
|
2,180
|
|
|
|
2,016
|
|
|
|
6,167
|
|
|
|
3,990
|
|
Research and
development expenses
|
|
|
9
|
|
|
|
8
|
|
|
|
25
|
|
|
|
13
|
|
Selling, general and
administrative expenses
|
|
|
40
|
|
|
|
64
|
|
|
|
189
|
|
|
|
188
|
|
Other intangibles
amortization
|
|
|
21
|
|
|
|
25
|
|
|
|
65
|
|
|
|
35
|
|
Transaction
costs
|
|
|
14
|
|
|
|
5
|
|
|
|
29
|
|
|
|
45
|
|
Restructuring and
integration costs
|
|
|
14
|
|
|
|
31
|
|
|
|
103
|
|
|
|
106
|
|
Goodwill
impairment
|
|
|
1,370
|
|
|
|
-
|
|
|
|
1,370
|
|
|
|
-
|
|
Intangible assets
impairment
|
|
|
143
|
|
|
|
-
|
|
|
|
143
|
|
|
|
-
|
|
Other asset
impairments
|
|
|
18
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
Loss on asset
disposals
|
|
|
-
|
|
|
|
1
|
|
|
|
103
|
|
|
|
2
|
|
Total
expenses
|
|
|
3,809
|
|
|
|
2,150
|
|
|
|
8,212
|
|
|
|
4,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
investments in unconsolidated affiliates
|
|
|
7
|
|
|
|
3
|
|
|
|
19
|
|
|
|
2
|
|
Investment in
unconsolidated affiliates-related
amortization
|
|
|
(3)
|
|
|
|
(13)
|
|
|
|
(8)
|
|
|
|
(13)
|
|
Operating (loss)
income
|
|
|
(1,684)
|
|
|
|
129
|
|
|
|
(1,732)
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(108)
|
|
|
|
(86)
|
|
|
|
(300)
|
|
|
|
(169)
|
|
Other non-operating
income (expense), net
|
|
|
-
|
|
|
|
1
|
|
|
|
(1)
|
|
|
|
(13)
|
|
Total other expense,
net
|
|
|
(108)
|
|
|
|
(85)
|
|
|
|
(301)
|
|
|
|
(182)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before
provision for income taxes
|
|
|
(1,792)
|
|
|
|
44
|
|
|
|
(2,033)
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
|
72
|
|
|
|
44
|
|
|
|
2
|
|
|
|
(19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
|
(1,864)
|
|
|
|
-
|
|
|
|
(2,035)
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income
(loss) attributable to
noncontrolling interests
|
|
|
9
|
|
|
|
(2)
|
|
|
|
26
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to McDermott
|
|
$
|
(1,873)
|
|
|
$
|
2
|
|
|
$
|
(2,061)
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on
redeemable preferred stock
|
|
|
(10)
|
|
|
|
-
|
|
|
|
(30)
|
|
|
|
-
|
|
Accretion of
redeemable preferred stock
|
|
|
(4)
|
|
|
|
-
|
|
|
|
(12)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to common
stockholders
|
|
|
(1,887)
|
|
|
|
2
|
|
|
|
(2,103)
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(10.37)
|
|
|
$
|
0.01
|
|
|
$
|
(11.62)
|
|
|
$
|
0.60
|
|
Diluted
|
|
$
|
(10.37)
|
|
|
$
|
0.01
|
|
|
$
|
(11.62)
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
computation of net (loss) income
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
182
|
|
|
|
180
|
|
|
|
181
|
|
|
|
140
|
|
Diluted
|
|
|
182
|
|
|
|
181
|
|
|
|
181
|
|
|
|
141
|
|
McDERMOTT
INTERNATIONAL, INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
|
|
(In millions,
except per share
amounts)
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents ($256 and $146 related to variable interest
entities
("VIEs"))
|
|
$
|
677
|
|
|
$
|
520
|
|
Restricted cash
and cash equivalents
|
|
|
333
|
|
|
|
325
|
|
Accounts
receivable—trade, net ($107 and $29 related to VIEs)
|
|
|
935
|
|
|
|
932
|
|
Accounts
receivable—other ($36 and $57 related to VIEs)
|
|
|
209
|
|
|
|
175
|
|
Contracts in
progress ($223 and $144 related to VIEs)
|
|
|
1,063
|
|
|
|
704
|
|
Project-related
intangible assets, net
|
|
|
68
|
|
|
|
137
|
|
Inventory
|
|
|
52
|
|
|
|
101
|
|
Other current
assets ($32 and $24 related to VIEs)
|
|
|
149
|
|
|
|
139
|
|
Total current
assets
|
|
|
3,486
|
|
|
|
3,033
|
|
Property, plant
and equipment, net
|
|
|
2,118
|
|
|
|
2,067
|
|
Operating lease
right-of-use assets
|
|
|
361
|
|
|
|
-
|
|
Accounts
receivable—long-term retainages
|
|
|
49
|
|
|
|
62
|
|
Investments in
unconsolidated affiliates
|
|
|
450
|
|
|
|
452
|
|
Goodwill
|
|
|
1,335
|
|
|
|
2,654
|
|
Other
intangibles, net
|
|
|
790
|
|
|
|
1,009
|
|
Other
non-current assets
|
|
|
165
|
|
|
|
163
|
|
Total
assets
|
|
$
|
8,754
|
|
|
$
|
9,440
|
|
|
|
|
|
|
|
|
|
|
Liabilities,
Mezzanine Equity and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Revolving credit
facility
|
|
$
|
801
|
|
|
$
|
-
|
|
Debt
|
|
|
3,450
|
|
|
|
30
|
|
Lease
obligations
|
|
|
161
|
|
|
|
8
|
|
Accounts payable
($322 and $277 related to VIEs)
|
|
|
1,421
|
|
|
|
595
|
|
Advance billings
on contracts ($497 and $717 related to VIEs)
|
|
|
1,359
|
|
|
|
1,954
|
|
Project-related
intangible liabilities, net
|
|
|
24
|
|
|
|
66
|
|
Accrued
liabilities ($66 and $136 related to VIEs)
|
|
|
1,517
|
|
|
|
1,564
|
|
Total current
liabilities
|
|
|
8,733
|
|
|
|
4,217
|
|
Long-term
debt
|
|
|
-
|
|
|
|
3,393
|
|
Long-term lease
obligations
|
|
|
301
|
|
|
|
66
|
|
Deferred income
taxes
|
|
|
51
|
|
|
|
47
|
|
Other
non-current liabilities
|
|
|
778
|
|
|
|
664
|
|
Total
liabilities
|
|
|
9,863
|
|
|
|
8,387
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Mezzanine
equity:
|
|
|
|
|
|
|
|
|
Redeemable
preferred stock
|
|
|
271
|
|
|
|
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
|
|
3,554
|
|
|
|
3,539
|
|
Accumulated
deficit
|
|
|
(4,822)
|
|
|
|
(2,719)
|
|
Accumulated
other comprehensive loss
|
|
|
(222)
|
|
|
|
(107)
|
|
Treasury stock,
at cost: 3 and 3 shares, respectively
|
|
|
(96)
|
|
|
|
(96)
|
|
Total McDermott
Stockholders' Equity
|
|
|
(1,401)
|
|
|
|
800
|
|
Noncontrolling
interest
|
|
|
21
|
|
|
|
23
|
|
Total
stockholders' equity
|
|
|
(1,380)
|
|
|
|
823
|
|
Total
liabilities and stockholders' equity
|
|
$
|
8,754
|
|
|
$
|
9,440
|
|
McDERMOTT
INTERNATIONAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In
millions)
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(2,035)
|
|
|
$
|
79
|
|
Non-cash items
included in net (loss) income:
|
|
|
|
|
|
|
|
|
Loss on disposal of
APP
|
|
|
101
|
|
|
|
-
|
|
Goodwill
impairment
|
|
|
1,370
|
|
|
|
-
|
|
Intangible assets
impairment
|
|
|
143
|
|
|
|
-
|
|
Other asset
impairment
|
|
|
18
|
|
|
|
-
|
|
Depreciation and
amortization
|
|
|
200
|
|
|
|
187
|
|
Debt issuance cost
amortization
|
|
|
30
|
|
|
|
27
|
|
Stock-based
compensation charges
|
|
|
16
|
|
|
|
36
|
|
Deferred
taxes
|
|
|
4
|
|
|
|
(86)
|
|
Other non-cash
items
|
|
|
-
|
|
|
|
2
|
|
Changes in operating
assets and liabilities, net of effects of businesses
acquired:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(78)
|
|
|
|
130
|
|
Contracts in progress,
net of advance billings on contracts
|
|
|
(955)
|
|
|
|
(318)
|
|
Inventory
|
|
|
(23)
|
|
|
|
4
|
|
Accounts
payable
|
|
|
680
|
|
|
|
123
|
|
Other current and
non-current assets
|
|
|
(42)
|
|
|
|
(52)
|
|
Investments in
unconsolidated affiliates
|
|
|
(7)
|
|
|
|
(2)
|
|
Other current and
non-current liabilities
|
|
|
15
|
|
|
|
84
|
|
Total cash (used
in) provided by operating activities
|
|
|
(563)
|
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Business
combinations, net of cash acquired
|
|
|
(7)
|
|
|
|
(2,374)
|
|
Proceeds from asset
disposals, net
|
|
|
83
|
|
|
|
55
|
|
Purchases of
property, plant and equipment
|
|
|
(65)
|
|
|
|
(62)
|
|
Advances related to
proportionately consolidated consortiums
|
|
|
(277)
|
|
|
|
(155)
|
|
Investments in
unconsolidated affiliates
|
|
|
(3)
|
|
|
|
(14)
|
|
Total cash used in
investing activities
|
|
|
(269)
|
|
|
|
(2,550)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Revolving credit
facility borrowings
|
|
|
2,451
|
|
|
|
-
|
|
Revolving credit
facility repayments
|
|
|
(1,650)
|
|
|
|
-
|
|
Structured equipment
financing
|
|
|
32
|
|
|
|
-
|
|
Proceeds from
issuance of long-term debt
|
|
|
-
|
|
|
|
3,560
|
|
Repayment of debt and
finance lease obligations
|
|
|
(26)
|
|
|
|
(531)
|
|
Advances related to
equity method joint ventures and proportionately consolidated
consortiums
|
|
|
248
|
|
|
|
67
|
|
Debt and letter of
credit issuance costs
|
|
|
(3)
|
|
|
|
(209)
|
|
Debt extinguishment
costs
|
|
|
-
|
|
|
|
(10)
|
|
Repurchase of common
stock
|
|
|
(4)
|
|
|
|
(14)
|
|
Distributions to
joint venture members
|
|
|
(18)
|
|
|
|
-
|
|
Total cash provided
by financing activities
|
|
|
1,030
|
|
|
|
2,863
|
|
|
|
|
|
|
|
|
|
|
Effects of
exchange rate changes on cash, cash equivalents and restricted
cash
|
|
|
(33)
|
|
|
|
(30)
|
|
Net increase in
cash, cash equivalents and restricted cash
|
|
|
165
|
|
|
|
497
|
|
Cash, cash
equivalents and restricted cash at beginning of
period
|
|
|
845
|
|
|
|
408
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
1,010
|
|
|
$
|
905
|
|
McDERMOTT
INTERNATIONAL, INC.
|
|
EARNINGS PER SHARE
COMPUTATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months Ended
September
30,
|
|
|
Nine months Ended
September
30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
(In millions,
except per share amounts)
|
|
Net (loss) income
attributable to McDermott
|
$
|
(1,873)
|
|
|
$
|
2
|
|
|
$
|
(2,061)
|
|
|
$
|
84
|
|
Dividends on
redeemable preferred stock
|
|
(10)
|
|
|
|
-
|
|
|
|
(30)
|
|
|
|
-
|
|
Accretion of
redeemable preferred stock
|
|
(4)
|
|
|
|
-
|
|
|
|
(12)
|
|
|
|
-
|
|
Net (loss) income
attributable to common stockholders
|
$
|
(1,887)
|
|
|
$
|
2
|
|
|
$
|
(2,103)
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common stock (basic)
|
|
182
|
|
|
|
180
|
|
|
|
181
|
|
|
140
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
awards
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
Warrants and preferred
stock
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Weighted average
common stock (diluted)
|
|
182
|
|
|
181
|
|
|
|
181
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
$
|
(10.37)
|
|
|
$
|
0.01
|
|
|
$
|
(11.62)
|
|
|
$
|
0.60
|
|
Diluted:
|
$
|
(10.37)
|
|
|
$
|
0.01
|
|
|
$
|
(11.62)
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months Ended
September
30,
|
|
|
Nine months Ended
September
30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
(In millions,
except per share amounts)
|
|
Depreciation &
amortization
|
$
|
63
|
|
|
$
|
107
|
|
|
$
|
200
|
|
|
$
|
187
|
|
Capital
expenditures
|
|
32
|
|
|
|
19
|
|
|
|
65
|
|
|
|
62
|
|
Backlog
|
|
20,084
|
|
|
|
11,512
|
|
|
|
20,084
|
|
|
|
11,512
|
|
We report our 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
Sep 30, 2019
|
|
|
Segment Operating
Results
|
|
|
|
|
|
|
|
|
|
|
NCSA
|
|
|
EARC
|
|
|
MENA
|
|
|
APAC
|
|
|
TECH
|
|
|
Corporate
|
|
|
Total
|
|
|
($ in
millions)
|
|
Revenues
|
$
|
1,090
|
|
|
$
|
248
|
|
|
$
|
520
|
|
|
$
|
125
|
|
|
$
|
138
|
|
|
-
|
|
|
$
|
2,121
|
|
GAAP Operating
(Loss) Income
|
|
(1,405)
|
|
|
|
(250)
|
|
|
|
69
|
|
|
|
1
|
|
|
|
30
|
|
|
|
(129)
|
|
|
|
(1,684)
|
|
GAAP Operating
Margin
|
|
-128.9
|
%
|
|
|
-100.8
|
%
|
|
|
13.3
|
%
|
|
|
0.8
|
%
|
|
|
21.7
|
%
|
|
|
-
|
|
|
|
-79.4
|
%
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, intangibles
& asset
impairment1
|
|
1,253
|
|
|
|
260
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
|
|
1,531
|
|
Restructuring,
Integration &
Transaction Costs2
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
|
|
28
|
|
Total Non-GAAP Adjustments
|
|
1,253
|
|
|
|
260
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46
|
|
|
|
1,559
|
|
Non-GAAP Operating
(Loss) Income
|
$
|
(152)
|
|
|
$
|
10
|
|
|
$
|
69
|
|
|
$
|
1
|
|
|
$
|
30
|
|
|
$
|
(83)
|
|
|
$
|
(125)
|
|
Non-GAAP Adjusted
Operating Margin
|
|
-13.9
|
%
|
|
|
4.0
|
%
|
|
|
13.3
|
%
|
|
|
0.8
|
%
|
|
|
21.7
|
%
|
|
|
-
|
|
|
|
-5.9
|
%
|
|
Note:
Individual line items may not sum to totals as a result of
rounding.
|
|
|
1
|
The goodwill
impairment of $1.37 billion resulted from updates to the 2019
management budget and increases in our discount rate assumptions
driven by increases in our cost of capital and risk premium
assumptions associated with forecasted cash flows. The intangible
assets impairment of $0.14 billion primarily resulted from a
reduction in the estimated remaining useful life of the trade names
associated with our NCSA segment, causing a decrease in future
attributable cash flow expectations. The vessel impairment of $18
million is due to lack of future utilization plans.
|
2
|
Restructuring,
integration and transactions costs of $28 million, which included
$14 million of office and employee relocation and external
consulting fees. Transaction fees of $14 million are
due to legal fees associated the sale process for the remaining
portion of the pipe fabrication business and the now-terminated
effort to sell the storage tank business as well as fees to
external advisors retained to help us evaluate strategic and
capital structure alternatives.
|
McDERMOTT
INTERNATIONAL, INC.
|
RECONCILIATION OF
NON-GAAP TO GAAP FINANCIAL MEASURES
|
|
|
Three months
Ended
|
|
|
Nine months
Ended
|
|
|
Sep 30,
2019
|
|
|
Sep 30,
2018
|
|
|
Sep 30,
2019
|
|
|
Sep 30,
2018
|
|
|
($ in millions,
except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net (Loss)
Income Attributable to Common
Stockholders
|
$
|
(1,887)
|
|
|
$
|
2
|
|
|
$
|
(2,103)
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of
APP1
|
|
-
|
|
|
|
-
|
|
|
|
101
|
|
|
|
-
|
|
Goodwill
impairment2
|
|
1,370
|
|
|
|
-
|
|
|
|
1,370
|
|
|
|
-
|
|
Intangible assets
impairment3
|
|
143
|
|
|
|
-
|
|
|
|
143
|
|
|
|
-
|
|
Other asset
impairments4
|
|
18
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
Transaction
costs5
|
|
14
|
|
|
|
5
|
|
|
|
29
|
|
|
|
45
|
|
Restructuring and
integration costs6
|
|
14
|
|
|
|
31
|
|
|
|
103
|
|
|
|
105
|
|
Intangibles
amortization7
|
|
-
|
|
|
|
68
|
|
|
|
-
|
|
|
|
90
|
|
Total Non-GAAP Adjustments to Operating (Loss) Income
|
|
1,559
|
|
|
|
104
|
|
|
|
1,764
|
|
|
|
241
|
|
Debt extinguishment
costs8
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14
|
|
Tax benefit on
intercompany transfer of IP9
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(117)
|
|
Tax Effect of Non-GAAP
Gains and/or Charges10
|
|
-
|
|
|
|
(17)
|
|
|
|
-
|
|
|
|
(25)
|
|
Total Non-GAAP Adjustments
|
|
1,559
|
|
|
|
87
|
|
|
|
1,764
|
|
|
|
113
|
|
Non-GAAP Adjusted
Net (Loss) Income Attributable to
Common Stockholders
|
$
|
(328)
|
|
|
$
|
89
|
|
|
$
|
(339)
|
|
|
$
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating
(Loss) Income
|
$
|
(1,684)
|
|
|
$
|
129
|
|
|
$
|
(1,732)
|
|
|
$
|
242
|
|
Non-GAAP Adjustments
to Operating (Loss) Income11
|
|
1,559
|
|
|
|
104
|
|
|
|
1,764
|
|
|
|
241
|
|
Non-GAAP Adjusted
Operating (Loss) Income
|
$
|
(125)
|
|
|
$
|
232
|
|
|
$
|
32
|
|
|
$
|
483
|
|
Non-GAAP Adjusted
Operating Margin
|
|
-5.9
|
%
|
|
|
10.1
|
%
|
|
|
0.5
|
%
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
EPS
|
$
|
(10.37)
|
|
|
$
|
0.01
|
|
|
$
|
(11.62)
|
|
|
$
|
0.60
|
|
Non-GAAP
Adjustments
|
|
8.57
|
|
|
|
0.19
|
|
|
|
9.75
|
|
|
|
0.68
|
|
Non-GAAP Adjusted
Diluted EPS12
|
$
|
(1.80)
|
|
|
$
|
0.20
|
|
|
$
|
(1.87)
|
|
|
$
|
1.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
182
|
|
|
|
180
|
|
|
|
181
|
|
|
|
140
|
|
Diluted
|
|
182
|
|
|
|
181
|
|
|
|
181
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
Attributable to Common Stockholders
|
$
|
(1,887)
|
|
|
$
|
2
|
|
|
$
|
(2,103)
|
|
|
$
|
84
|
|
Depreciation and
Amortization
|
|
63
|
|
|
|
107
|
|
|
|
200
|
|
|
|
187
|
|
Interest Expense,
Net
|
|
108
|
|
|
|
86
|
|
|
|
300
|
|
|
|
169
|
|
Provision for Income
Taxes
|
|
72
|
|
|
|
44
|
|
|
|
2
|
|
|
|
(19)
|
|
Accretion and
Dividends on redeemable preferred stock
|
|
14
|
|
|
|
-
|
|
|
|
42
|
|
|
|
-
|
|
EBITDA13
|
|
(1,630)
|
|
|
|
239
|
|
|
|
(1,559)
|
|
|
|
421
|
|
Non-GAAP Adjustments
effecting EBITDA
|
|
1,559
|
|
|
|
36
|
|
|
|
1,764
|
|
|
|
165
|
|
Adjusted
EBITDA14
|
$
|
(71)
|
|
|
$
|
275
|
|
|
$
|
205
|
|
|
$
|
586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
$
|
(114)
|
|
|
$
|
(221)
|
|
|
$
|
(563)
|
|
|
$
|
214
|
|
Capital
expenditures
|
|
(32)
|
|
|
|
(19)
|
|
|
|
(65)
|
|
|
|
(62)
|
|
Free cash
flow
|
$
|
(146)
|
|
|
$
|
(240)
|
|
|
$
|
(628)
|
|
|
$
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
Revenues
|
$
|
2,121
|
|
|
$
|
2,289
|
|
|
$
|
6,469
|
|
|
$
|
4,632
|
|
|
Note: Individual line
items may not sum to totals as a result of rounding.
|
1
|
Loss on the APP asset
disposal during Q2 2019.
|
2
|
Goodwill impairment
resulting from updates to the 2019 management budget and increases
in our discount rate assumptions driven by increases in our cost of
capital and risk premium assumptions associated with forecasted
cash flows.
|
3
|
Intangible assets
impairment primarily resulted from a reduction in the estimated
remaining useful life of the trade names associated with our NCSA
segment, causing a decrease in future attributable cash flow
expectations.
|
4
|
Marine asset
impairment of one vessel and two offshore diving operations
saturation support systems due to lack of future utilization
plans.
|
5
|
Transaction costs in
Q3 2019 due to legal fees associated the sale process for the
remaining portion of the pipe fabrication business and the
now-terminated effort to sell the storage tank business as well as
fees to external advisors to improve our capital structure by
securing a Superpriority Credit Agreement and the exploration of
strategic alternatives. Transaction costs in Q3 2018
were associated with the Combination.
|
6
|
Restructuring and
integration costs in Q3 2019 related to office and employee
relocation expenses and external consulting fees.
Restructuring and integration costs in Q3 2018 were associated with
as costs to achieve our combination profitability initiative
("CPI") program.
|
7
|
Intangibles
amortization in Q3 2018 includes the amortization of all acquired
intangibles from the Combination, including project-related
intangibles, other intangible assets (including process
technologies, trade names, trademarks and customer relationships,
and amortization in intangibles associated with investments in
unconsolidated affiliates. In Q4 2018, we changed our policy of
considering the amortization of these intangible assets a Non-GAAP
adjustment.
|
8
|
Prepayment of our
prior credit facility and senior secured notes, including a
make-whole premium and the accelerated write-off of debt issuance
costs as part of financing of the combination during Q2
2018.
|
9
|
Tax benefit resulting
from the internal transfer of certain intellectual property rights
during Q2 2018 in conjunction with the combination.
|
10
|
The adjustments to
GAAP Net (Loss) Income 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.
|
11
|
Includes the non-GAAP
adjustments described in footnotes 1 through 7 above. Adjustments
to operating income do not include Non-GAAP adjustments described
in footnotes 8 through 10 above, as those items are not included in
the computation of operating income.
|
12
|
Adjusted EPS includes
the intangibles amortization, net of tax, described in footnote 7
above.
|
13
|
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 and footnote 8 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.
|
14
|
Includes the non-GAAP
adjustments described in footnotes 1 through 6 and footnote 8
above. Adjustments to EBITDA do not include Non-GAAP adjustments
described in footnotes 7, 9 and 10 above, as those items are not
included in the computation of EBITDA.
|
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SOURCE McDermott International, Inc.