UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________________
FORM
8-K
________________________
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 4, 2014
________________________
McDermott International, Inc.
(Exact
name of registrant as specified in its charter)
________________________
REPUBLIC OF PANAMA |
001-08430 |
72-0593134 |
(State or other jurisdiction |
(Commission |
(IRS Employer |
of incorporation) |
File Number) |
Identification No.) |
757 N. Eldridge Parkway Houston, Texas |
77079 |
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s Telephone Number, including Area Code: (281) 870-5000
(Former
name or former address, if changed since last report)
________________________
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
________________________
Item 2.02 Results of Operations and Financial Condition.
On August 4, 2014, we issued a press release announcing our financial results for the quarter ended June 30, 2014. A copy of the press release is furnished as Exhibit 99.1, and the information contained in Exhibit 99.1 is incorporated by reference.
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated August 4, 2014.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
McDERMOTT INTERNATIONAL, INC. |
|||
|
|||
|
By: |
/s/ Perry L. Elders |
|
Perry L. Elders |
|||
Senior Vice President and Chief Financial Officer |
|||
|
|||
August 4, 2014 |
EXHIBIT INDEX
Exhibit Number |
Description |
|
99.1 |
Press Release dated August 4, 2014. |
Exhibit 99.1
McDermott Reports Second Quarter 2014 Financial Results
Turnaround on track
Company to Host Conference Call and Webcast Today at 4:00 p.m. CT
HOUSTON--(BUSINESS WIRE)--August 4, 2014--McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today announced financial results for the quarter ended June 30, 2014. The Company reported a second quarter 2014 net loss of $11 million or $0.05 per fully diluted share, compared to a net loss of $149 million or $0.63 per diluted share in the prior-year quarter. Weighted average common shares outstanding on a fully diluted basis were approximately 237 million and 236 million in the quarters ended June 30, 2014 and June 30, 2013, respectively.
The Company reported second quarter revenues of $476 million, a decrease of 26% compared to revenues of $647 million in the corresponding period of 2013 due to lower marine contribution. Operating income was $28 million in the second quarter 2014 and included $46 million of gains on asset sales and $1 million of restructuring expenses. These results compare to the prior-year operating loss of $150 million, which included $15 million of restructuring expenses.
“The results reflect our efforts to improve execution, and we are pleased to return three legacy projects to profitability and to complete two others,” said David Dickson, President and Chief Executive Officer of McDermott. Dickson added, “I am encouraged by the steps our reorganized management team is taking to promote cultural change as we focus on improving our competitiveness and building quality backlog.”
The Company’s other expense for the second quarter 2014 was $32 million compared to other income of $9 million in the year-ago quarter due to increased interest expense. The second quarter 2014 interest expense included $28 million of expenses related to prior financing arrangements.
Contract Backlog Summary
As of June 30, 2014, the Company’s backlog was $4.1 billion, compared to $4.4 billion at March 31, 2014. Of the June 30, 2014 backlog, approximately 39% related to offshore operations and approximately 61% related to subsea operations. Order intake in the second quarter 2014 totaled $176 million.
At the end of the second quarter, the Company had $8.4 billion in bids and change orders outstanding. The Company is targeting to bid approximately $9.8 billion in projects that are expected to be awarded in the next five quarters. In total, the Company’s revenue pipeline was $22 billion as of June 30, 2014.
Balance Sheet Summary
As of June 30, 2014, McDermott reported total assets of $3.7 billion. Included in this amount is $958 million in cash and cash equivalents, restricted cash and investments. At quarter-end the Company had $904 million in debt outstanding and total equity of $1.6 billion, or 45% of total assets.
Conference Call
McDermott has scheduled a conference call and webcast related to its second quarter 2014 results today at 4:00 p.m. U.S. Central Daylight Time. Interested parties may listen over the Internet through a link posted in the Investor Relations section of the Company’s Web site. The replay will also be available on the Company’s Web site following the end of the call. In addition, a presentation will be available on the Investor Relations section of the Company’s Web site that contains supplemental information on our operations and our business outlook.
About the Company
McDermott is a leading provider of integrated engineering, procurement, construction and installation (EPCI) services for upstream field developments worldwide. The Company delivers fixed and floating production facilities, pipelines and subsea systems from concept to commissioning for complex Offshore and Subsea oil and gas projects to help oil companies safely produce and transport hydrocarbons. Our clients include national and major energy companies. Operating in more than 20 countries across the world, our locally focused and globally integrated resources include approximately 14,000 employees, a diversified fleet of specialty marine construction vessels, fabrication facilities and engineering offices. We are renowned for our extensive knowledge and experience, technological advancements, performance records, superior safety and commitment to deliver. McDermott has served the energy industry since 1923 and is listed on the New York Stock Exchange.
To learn more, please visit our website at www.mcdermott.com
Forward-Looking Statements
In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, McDermott cautions that statements in this press release which are forward-looking, and provide other than historical information, involve risks, contingencies and uncertainties that may impact McDermott's actual results of operations. These forward-looking statements include, but are not limited to, statements about the profitability of legacy projects, backlog, bids and change orders outstanding, projects McDermott expects to bid and the timing of award of such, and revenue pipeline, to the extent these may be viewed as indicators of future revenues or profitability, optimism about steps being taken to promote cultural change and the Company’s focus on improving competitiveness to build quality backlog. Although we believe that the expectations reflected in those forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct. Those statements are made by using various underlying assumptions and are subject to numerous risks, contingencies and uncertainties, including, among others: adverse changes in the markets in which we operate or credit markets, our inability to successfully execute on contracts in backlog, changes in project design or schedules, the availability of qualified personnel, changes in the scope or timing of contracts, and contract cancellations, change orders and other modifications. If one or more of these risks materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those expected. You should not place undue reliance on forward-looking statements. For a more complete discussion of these and other risk factors, please see McDermott's annual and quarterly filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2013 and subsequent quarterly reports on Form 10-Q. This news release reflects management's views as of the date hereof. Except to the extent required by applicable law, McDermott undertakes no obligation to update or revise any forward-looking statement.
McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Unaudited)
(In thousands, except share and per share amounts) |
||||||||||||||||||||
Revenues | $ | 476,083 | $ | 647,250 | $ | 1,079,894 | $ | 1,454,738 | ||||||||||||
Costs and Expenses: | ||||||||||||||||||||
Cost of operations | 432,298 | 723,259 | 1,023,791 | 1,436,073 | ||||||||||||||||
Selling, general and administrative expenses | 56,877 | 52,617 | 112,274 | 104,843 | ||||||||||||||||
Gain on asset disposals | (45,769 | ) | (13 | ) | (52,208 | ) | (14,729 | ) | ||||||||||||
Restructuring expenses | 1,263 | 15,462 | 7,388 | 15,462 | ||||||||||||||||
Total costs and expenses | 444,669 | 791,325 | 1,091,245 | 1,541,649 | ||||||||||||||||
Equity in Loss of Unconsolidated Affiliates | (3,322 | ) | (5,461 | ) | (2,199 | ) | (9,592 | ) | ||||||||||||
Operating Income (Loss) | 28,092 | (149,536 | ) | (13,550 | ) | (96,503 | ) | |||||||||||||
Other Income (Expense): | ||||||||||||||||||||
Interest income (expense)--net |
(38,745 | ) | 428 | (38,684 | ) | 770 | ||||||||||||||
Gain on foreign currency--net |
6,622 | 8,904 | 2,540 | 6,378 | ||||||||||||||||
Other income (expense)--net |
(312 | ) | (31 | ) | (577 | ) | 751 | |||||||||||||
Total other income (expense) | (32,435 | ) | 9,301 | (36,721 | ) | 7,899 | ||||||||||||||
Loss before provision for income taxes and noncontrolling interests | (4,343 | ) | (140,235 | ) | (50,271 | ) | (88,604 | ) | ||||||||||||
Provision for Income Taxes | 4,788 | 5,902 | 8,277 | 33,215 | ||||||||||||||||
Net Loss | (9,131 | ) | (146,137 | ) | (58,548 | ) | (121,819 | ) | ||||||||||||
Less: Net Income Attributable to Noncontrolling Interests | 1,699 | 3,286 | 2,235 | 7,051 | ||||||||||||||||
Net Loss Attributable to McDermott International, Inc. | $ | (10,830 | ) | $ | (149,423 | ) | $ | (60,783 | ) | $ | (128,870 | ) |
|
||||||||||||||||||||
McDERMOTT INTERNATIONAL, INC. EARNINGS PER SHARE COMPUTATION |
||||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||
Net loss attributable to McDermott International, Inc. |
$ |
(10,830 |
) |
$ |
(149,423 |
) |
$ |
(60,783 |
) |
$ | (128,870 | ) | ||||||||
Weighted average common shares (basic) | 237,395,580 | 236,199,438 | 237,178,369 | 236,070,311 | ||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||
Stock options, restricted stock and restricted stock units |
- |
- |
- |
- |
||||||||||||||||
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards (diluted) | 237,395,580 | 236,199,438 | 237,178,369 | 236,070,311 | ||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||
Net loss attributable to McDermott International, Inc. |
(0.05 |
) |
(0.63 |
) |
(0.26 |
) |
(0.55 |
) |
||||||||||||
Diluted earnings per share: | ||||||||||||||||||||
Net loss attributable to McDermott International, Inc. |
(0.05 |
) |
(0.63 |
) |
(0.26 |
) |
(0.55 |
) |
SUPPLEMENTARY DATA |
||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Depreciation & amortization expense | $ | 21,645 | $ | 19,096 | $ | 46,247 | $ | 39,318 | ||||||||
Drydock amortization | $ | 3,020 | $ | 4,381 | $ | 9,966 | $ | 9,931 | ||||||||
Capital expenditures | $ | 117,064 | $ | 106,826 | $ | 154,957 | $ | 144,475 | ||||||||
Backlog | $ | 4,063,900 | $ | 5,090,868 | $ | 4,063,900 | $ | 5,090,868 |
McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||||
June 30, 2014 |
December 31, 2013 |
|||||||||
(Unaudited)
(In thousands, except share |
||||||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents |
$ |
764,034 |
$ | 118,702 | ||||||
Restricted cash and cash equivalents | 189,871 | 23,652 | ||||||||
Accounts receivable--trade, net |
225,459 | 381,858 | ||||||||
Accounts receivable--other |
72,347 | 89,273 | ||||||||
Contracts in progress | 440,345 | 425,986 | ||||||||
Deferred income taxes | 9,092 | 7,091 | ||||||||
Assets held for sale | 1,396 | 1,396 | ||||||||
Other current assets | 43,339 | 32,242 | ||||||||
Total Current Assets | 1,745,883 | 1,080,200 | ||||||||
Property, Plant and Equipment | 2,343,876 | 2,367,686 | ||||||||
Less accumulated depreciation |
(790,871 |
) |
(889,009 |
) |
||||||
Net Property, Plant and Equipment | 1,553,005 | 1,478,677 | ||||||||
Accounts receivable-- long-term retainages |
145,883 | 65,365 | ||||||||
Investments in Unconsolidated Affiliates | 46,111 | 50,536 | ||||||||
Deferred income taxes | 18,220 | 16,766 | ||||||||
Assets held for sale | 10,121 | 12,243 | ||||||||
Investments | 4,219 | 13,511 | ||||||||
Other Assets | 119,757 | 90,073 | ||||||||
Total Assets | $ | 3,643,199 | $ | 2,807,371 | ||||||
Liabilities and Equity | ||||||||||
Current Liabilities: | ||||||||||
Notes payable and current maturities of long-term debt | $ | 26,285 | $ | 39,543 | ||||||
Accounts payable | 347,910 | 398,739 | ||||||||
Accrued liabilities | 326,573 | 365,224 | ||||||||
Advance billings on contracts | 204,536 | 278,929 | ||||||||
Deferred income taxes | 19,564 | 17,892 | ||||||||
Income taxes payable | 15,660 | 20,657 | ||||||||
Total Current Liabilities | 940,528 | 1,120,984 | ||||||||
Long-Term Debt | 878,090 | 49,019 | ||||||||
Self-Insurance | 22,625 | 20,531 | ||||||||
Pension Liability | 15,320 | 15,681 | ||||||||
Non-current Income Taxes | 57,084 | 56,042 | ||||||||
Other Liabilities | 82,009 | 104,770 | ||||||||
Commitments and Contingencies | ||||||||||
Stockholders’ Equity: | ||||||||||
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 244,950,464 and 244,271,365 shares at June 30, 2014 and December 31, 2013, respectively | 244,950 | 244,271 | ||||||||
Capital in excess of par value (including prepaid common stock purchase contracts) | 1,661,543 | 1,414,457 | ||||||||
Retained earnings |
(131,940 |
) |
(71,157 |
) |
||||||
Treasury stock, at cost, 7,316,539 and 7,130,294 shares at June 30, 2014 and December 31, 2013, respectively |
(97,069 |
) |
(97,926 |
) |
||||||
Accumulated other comprehensive loss |
(119,221 |
) |
(140,131 |
) |
||||||
Stockholders’ Equity--McDermott International, Inc. |
1,558,263 | 1,349,514 | ||||||||
Noncontrolling Interests | 89,280 | 90,830 | ||||||||
Total Equity | 1,647,543 | 1,440,344 | ||||||||
Total Liabilities and Equity | $ | 3,643,199 | $ | 2,807,371 |
McDERMOTT INTERNATIONAL, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
Six Months Ended | |||||||||||
June 30, | |||||||||||
2014 | 2013 | ||||||||||
(Unaudited) | |||||||||||
(In thousands) | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net loss | $ |
(58,548 |
) |
$ | (121,819 | ) | |||||
Non-cash items included in net loss: | |||||||||||
Depreciation and amortization | 46,247 | 39,318 | |||||||||
Drydock amortization | 9,966 | 9,931 | |||||||||
Stock-based compensation charges | 10,352 | 10,110 | |||||||||
Net periodic pension benefit cost | 6,164 | (641 | ) | ||||||||
Equity in loss of unconsolidated affiliates | 2,199 | 9,592 | |||||||||
Restructuring activity | (982 | ) | 12,104 | ||||||||
Gain on asset disposals | (52,208 | ) | (14,729 | ) | |||||||
Benefit for deferred taxes | (4,375 | ) | (4,314 | ) | |||||||
Gain on foreign currency | (2,540 | ) | (6,378 | ) | |||||||
Other non-cash items | 374 | 321 | |||||||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | |||||||||||
Accounts receivable | 86,305 | 54,106 | |||||||||
Net contracts in progress and advance billings on contracts | (88,771 | ) | (4,051 | ) | |||||||
Accounts payable | (31,756 | ) | 24,413 | ||||||||
Accrued and other current liabilities | (9,706 | ) | (23,299 | ) | |||||||
Pension liability and accrued postretirement and employee benefits | 9,563 | (25,973 | ) | ||||||||
Derivative instruments and hedging activities | (26,153 | ) | (71,013 | ) | |||||||
Other assets and liabilities | 10,958 | 15,840 | |||||||||
TOTAL CASH USED IN OPERATING ACTIVITIES | (92,911 | ) | (96,482 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Purchases of property, plant and equipment | (154,957 | ) | (144,475 | ) | |||||||
Increase in restricted cash and cash equivalents | (166,219 | ) | (6,370 | ) | |||||||
Purchases of available-for-sale securities | (1,997 | ) | (8,637 | ) | |||||||
Sales and maturities of available-for-sale securities | 11,303 | 34,031 | |||||||||
Proceeds from the sale and disposal of assets | 53,704 | 35,672 | |||||||||
Other investing activities | (5,076 | ) | (6,939 | ) | |||||||
TOTAL CASH USED IN INVESTING ACTIVITIES | (263,242 | ) | (96,718 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Proceeds from 8% senior Notes | 500,000 |
- |
|||||||||
Proceeds from term Loan | 300,000 |
- |
|||||||||
Proceeds from prepaid common stock purchase contracts issuance | 240,044 |
- |
|||||||||
Proceeds from amortizing notes issuance | 47,456 |
- |
|||||||||
Issuance of common stock | 169 | 45 | |||||||||
Payments - long term debt | (35,705 | ) | (7,073 | ) | |||||||
Borrowings - short term debt | 250,000 |
- |
|||||||||
Payments - short term debt | (250,000 | ) |
- |
||||||||
Debt issuance costs | (45,521 | ) |
- |
||||||||
Distributions to noncontrolling interests | (3,754 | ) | (11,243 | ) | |||||||
Other financing activities | (1,413 | ) | (1,083 | ) | |||||||
TOTAL CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 1,001,276 | (19,354 | ) | ||||||||
EFFECTS OF EXCHANGE RATE CHANGES ON CASH | 209 | 118 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 645,332 | (212,436 | ) | ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 118,702 | 640,147 | |||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 764,034 | $ | 427,711 | |||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||
Cash paid during the period for: | |||||||||||
Income taxes (net of refunds) | $ | 17,162 | $ | 72,363 | |||||||
Interest expense (net of amount capitalized) | $ | 10,884 |
- |
||||||||
CONTACT:
McDermott International, Inc.
Investors &
Financial Media
Steve Oldham, 281.870.5147
soldham@mcdermott.com
or
Trade,
General & Local Media
Louise Denly, 281.870.5025
ldenly@mcdermott.com