McDermott (MDR) - Investor Relations Solutions

McDermott (MDR)
Q1 2016
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 presentation which are forward-looking, and provide other than historical information, involve risks, contingencies and
uncertainties that may impact McDermott’s actual performance and results of operations. The forward-looking statements in this
presentation include, but are not limited to, statements about backlog, bids outstanding and target projects, and the anticipated
breakdown and timing of award of the associated contracts and expected backlog roll-off, to the extent these may be viewed as
indicators of future revenues or profitability, market trends and overall expected market size, expectations regarding McDermott’s global
and in-market capabilities, the expected specifications of and operations related to the DLV 2000, expected benefits from our joint
ventures and alliances, the expected scope, execution, timing and value of projects discussed herein, expected benefits and savings
resulting from our cost saving initiatives, including those resulting from the Additional Overhead Reduction (“AOR”) program, focus areas
and priorities for McDermott’s business going forward and McDermott’s earnings and other guidance for 2016. 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, terms or timing of contracts, contract cancellations, change orders and other modifications and actions by our
customers and business partners, difficulties executing on the project, changes in industry norms and adverse outcomes in legal and
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 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, 2015 and subsequent quarterly report
on Form 10-Q. This presentation 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.
|2
Non-GAAP Measures
This presentation 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 U.S. generally
accepted accounting principles, 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 non-GAAP measures we have presented in
this press release include actual and forecast non-GAAP Adjusted Operating Income (Loss), non-GAAP Adjusted
Operating Margin, the total and diluted per share amounts of non-GAAP Adjusted Net Income (Loss) attributable to
the Company, EBITDA, Covenant EBITDA and Free Cash Flow. These non-GAAP financial measures should be
considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in
accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are provided in the
pages titled “Additional Disclosures” in the Appendix to this presentation.
|3
McDermott today
• A vertically integrated
offshore and subsea
engineering,
procurement,
installation and
construction company
• In-market fabrication
yards and a versatile
marine fleet
• Focus on long-term
relationships with
leading energy
customers, building
strong core capabilities
and deepening talent
|4
Today, we will focus on positioning for the future
Capture Value Through
Integrated Capabilities
Deliver Value
Through Execution
Strategic Themes
in Action
Perspective
on the Future
QHSES
Alignment,
Engagement
& Solutions
2016 Outlook
In-market
Capabilities
Priorities
Engineering
Procurement
Offshore
Installation
Construction
People &
Project
Management
Partnerships
|5
Capture Value Through Integrated Capabilities
Engineering
Procurement
Offshore
Installation
Construction
Engineering: Transforming our value
Goal: Engineering as a Differentiator
• Position to Focus on the Broader Picture:
Created Oil and Gas JV and new focus on
Front End Engineering Design (FEED)
• Expertise and Capabilities:
− Leaders in Brownfield; Deep knowledge in
Greenfield
− Simple installation solutions to complex
process design
• Competitive Cost: In-market specialists
supported by high value engineering center,
streamlined process
Driving Design Efficiency and Early Engagement
|7
Procurement: Cost Advantage Transformation
New comprehensive plan has been established to build best in class supply chain function
Best in Class
• Global MSA Agreements: Increase
competitiveness through Global MSA agreements
with key suppliers; $15M MSA Savings in 2016
YTD
Strategic
• Category Management Strategy: Deliver robust
category strategies and sourcing plans to
leverage combined global spend
High
Performance
• Organization and Technology: Build High
Performance Organization Capabilities and
Implement eTools
Procurement Adding Value by Delivering Best in Class Performance and Cost Advantage
|8
Construction: Driving to a global standard of efficiency
Altamira
Jebel Ali / Dammam
•
Global, in-market fabrication facilities with in-house
full control of cost, quality and schedule
•
Instituted fabrication council to drive global process
while streamlining supervision and structure
•
Creating the ability to workshare
•
Optimized processes and procedures
•
JVs providing access to low cost and in-market
solutions
•
A relentless culture of improvement
Batam
Malaysia
China
Control of Fabrication is an EPCI Sustainable Competitive Advantage
|9
Installation: Shallow to deep throughout the lifecycle
• A full solution of shallow water fleet capabilities
with versatile subsea fleet
• Supported by in-market teams
• Expertise in complex brownfield installation,
hook up and commissioning
Anchored Vessel
Dynamically Positioned
Vessel
DLV 2000:
• Class 3 dynamically positioned vessel with a 2,200ton crane and deepwater S-lay pipelay system
• Fast transit speeds make the DLV2000 a global
asset
Hook-up &
Commissioning
Heavy Lift and High-End
Pipelay Vessel
• Scheduled to work in 2016 and 2017 on the INPEX
Ichthys and Woodside Greater Western Flank
Phase II Projects in Australia
Versatile Fleet with Broad Capabilities is a Differentiator
|10
Deliver Value Through Execution
QHSES
People &
Project
Management
Partnerships
Incident Rate
QHSES: Performance is industry leading for the last 5 years
IMCA
IOGP
Taking the Lead with Safety
|12
People and Project Management
Establishing the “McDermott Way” as the industry benchmark for delivering complex, offshore
and subsea capital projects
• Renewed focus on core capabilities and
deepening talent sets a strong foundation
― Established workforce of expertise and
accountability
Contract
Management
Core
Operating
Rhythm
Competency
Strategic
Project
Management
Risk /
Opportunity
Management
Schedule
Assurance
Cost
Optimization
― Continued focus on growing, developing
and expanding upon revitalized
organization and talent
• Created a global project management function
to ensure consistent execution and control
across areas and projects
• Focus on the key 6 dimensions of project
management
― Core operating rhythm based on specific
milestones with clear risk mitigation
strategies
― Maximize opportunities through
contract management
Strong Talent and Core Capabilities Integrating All Aspects of the Project Life Cycle
|13
Partnerships and Alliances: Building capability
Heerema –
INPEX Ichthys
Full Field
Concept and
Feed
Path to
Ownership
NO 105
NO 102
Larsen &
Toubro
High Efficiency
Low Cost
Seamless Partnership Integration to Deliver Customer Projects
|14
Strategic Themes in Action
Alignment,
Engagement
& Solutions
In-market
Capabilities
Our Strategic Themes in Action
• Early Engagement: Full field development
− Increased delivery certainty with early de-risking
of development concept
− Early engagement provides opportunity to secure
EPCI tender following FEED
•
Customer Alignment: Saudi Aramco’s Lump Sum
award under LTA II
−
Largest single award in McDermott’s Middle East
history
−
Full scale EPCI contract utilizing specialized
shallow water installation vessels
• Integrated Solutions: Inpex Ichthys scope of work
− Full engineering to design, with procurement of
over $600M of complex and unique components
− Installation of over 85 mile of rigid flowlines, 35
miles of umbilicals and 16 miles of flexible risers
procured, installed and tested
− Fabrication of 48 structures, total weight >27,000
tons, with In-market execution
Customer Alignment Combined with Integrated Capabilities Generates Differentiator in Market Solutions
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In-market Capabilities: Maintaining the lead in Middle East
Experience: Offshore Structures and Pipelines Installed Since 1980
The Focus
• Deepen customer alignment and
relationships through early engagement and
cultural fit
Kuwait &
Neutral Zone
130
451 mi
23
112 mi
Qatar
Key Clients
Key Client
• National oil companies who remain
committed to production levels and
brownfield and producing basins with
lowest production costs
Region Totals
514 Structures
1,681 total mi of
pipelines
7,500 mi of cable
• Invest in new resource skill sets and
required assets to address the new
customer projects
To Deliver
• Trusted brand and strong customer
relationships
• Evolving capabilities in a robust market
77
422 mi
Saudi Arabia
Key Client
• Project solutions to maintain customer
output
284
696 mi
UAE
Key Clients
Engineering Offices in
Al Khobar and Dubai
Fabrication Facility in
Dubai and Dammam
Unparalleled Company History and Experience in Offshore EPCI
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Driving Financial Performance
Q1 2016 Financial Highlights
$ in millions
Q1’15
Yearover-Year
Delta
Q1’16
Q4’15
Sequential
Delta
Orders
$339
$478
($139)
$698
($359)
Backlog
3,841
4,231
(390)
3,748
93
Revenue
$729
$667
$62
$551
$178
Adjusted P&L Metrics1
Gross Profit2
$113
$98
$15
$75
$38
Gross Profit Margin2
15.5%
14.7%
0.8%
13.6%
1.9%
Operating Income (OI)
$75
$51
$24
$24
$51
OI Margin Percentage
10.2%
7.6%
2.6%
4.3%
5.9%
Net Income
$37
$16
$21
($4)
$41
Diluted EPS
$0.13
$0.06
$0.07
($0.02)
$0.15
EBITDA
$92
$78
$14
$44
$48
Capex
$32
$37
($5)
$24
$8
Cash from Operations
59
61
(2)
(19)
78
Free Cash Flow3
27
24
3
(43)
70
$798
$782
$16
$800
($2)
Ending Cash Balance4
1)
2)
3)
4)
• Q1 2016 Order Intake driven by
Woodside Greater Western
Flank Phase 2 and a Middle East
pipeline related EPCI project
• Q1 2016 Revenue driven by:
– INPEX Ichthys ($351M)
– Aramco 12 Jackets ($100M)
– Aramco Marjan GOSP ($36M)
• All Areas were operationally
profitable on an adjusted basis
• Continued cost management
through Accelerated Overhead
Reduction (AOR) program
• Maintained strong cash position
with significant collection in
Q1’16 from Pemex
Operating Income (and margins), Net Income, Diluted EPS and EBITDA have been adjusted to exclude restructuring charges in the first and fourth quarters of 2015, as well as the first quarter of 2016, mark-to-market pension charges in the fourth quarter
2015 and an asset impairment in the first quarter of 2016. The reconciliation of each adjusted measure to the nearest GAAP measure are provided in the pages entitled “Additional Disclosures.” Also, the number of shares utilized in determining earnings per
share varies based on whether we have generated net income or a net loss for the period. The appropriate number of shares utilized is also listed in the pages entitled, “Additional Disclosures.”
There have been no adjustments made to Gross Profit or Gross Profit Margin.
Free Cash Flow is a Non-GAAP measure. For a reconciliation to the nearest GAAP measure, see the pages entitled, “Additional Disclosures.”
Ending Cash Balance includes Cash and Cash Equivalents and Restricted Cash.
|19
Q1 2016 Backlog and Roll-off
$ in billions
Details of $3.8BN Backlog as of March 31, 2016
Backlog by Business Line
Backlog by Segment
ASA
$1.1
29%
Subsea
$1.1
29%
Offshore
$2.7
71%
AEA
$0.2
5%
Backlog Roll-Off by Year
$1.8
$1.5
$0.5
MEA
$2.5
66%
2016
2017
2018
•
2016 backlog remaining roll-off includes ~$470M from INPEX Ichthys and ~$245M from Saudi
Aramco LTA II Lump Sum
•
Key awards for Q2 2016 represent ~$610M addition to the Q1 2016 backlog
•
Q2 2016 awards represent a backlog roll-off of ~$90 million in 2016 and ~$520 million in 2017
|20
Bids Outstanding and Target Projects1
$ in billions
$18.4 billion as of Q1 2016 compared to $19.6 billion in Q4 2015
Business Line
$14.2
Oil/Gas
$13.4
Greenfield/Brownfield
$11.0
$12.9
$9.6
$8.6 $8.8
$10.8
$6.7 $7.6
$5.4
Offshore
$5.0
Subsea
Oil
Segment
$7.3
Greenfield
Gas
Customer
$7.1
$7.0
$6.5
Brownfield
Contract Scope
$12.4 $12.2
$11.8 $11.4
$5.2
$4.9
$6.5
$6.1
$5.0
$4.8
$1.7 $2.0
AEA
MEA
ASA
NOC
Super major Independent
Q4’15
1)
2)
3)
$0.7
EPCI
$1.4
EPC
Other 3
Q1’16
Includes change orders. There is no assurance that bids outstanding or target projects will be awarded to McDermott.
Target projects are those that we believe fit McDermott’s capabilities and are anticipated to be awarded in the market in the next five quarters.
“Other” category includes T&I, Construction and other types of work.
|21
Perspective on the Future
2016 Outlook
Priorities
2016 Outlook as presented May 5, 2016
Revenues
Adjusted Operating Income2,3
Net Interest Expense4
Income Tax Expense
Adjusted Net Income3
Adjusted Diluted EPS3
Adjusted EBITDA3,5
Restructuring Expense
Cash Interest / DIC Amortization
Interest
Capex4
Ending Cash and Restricted Cash
Ending Gross Debt6
Free Cash Flow5
•
1)
2)
3)
4)
5)
6)
$ in millions, except per share
amounts, or as indicated
Restated Original Guidance
~$2.9B
~$125
~$64
~$55
~$0
~$0.00
~$240
Revised Guidance1
~$2.7B
~$155
~$60
~$60
~$18
~$0.06
~$245
~$10
~$15
~$60 / ~$14
~$60 / ~$13
~$260
~$580
~$840
~($160)
~$265
~$590
~$840
~($150)
Revised guidance driven by expected project sequencing, improvements in recently completed
projects and the impact of the termination of the Agile vessel charter
Our updated guidance does not reflect the range of possible outcomes that may result from our ongoing process of obtaining consents from our term lenders under our Senior Secured Credit Agreement to, among other things, extend the maturity date of the letter of credit
facility commitments under the credit agreement. Those outcomes could include a reduction in our term loan indebtedness in 2016, an increase in the interest rate applicable to our term loan indebtedness and/or a fee payable to the term loan lenders in connection with
those consents.
Initial Guidance for Adjusted Operating Income has been updated to reflect a ~$10M reclassification on our income statement to exclude Income/Loss from Unconsolidated Affiliates from Operating Income.
Items are adjusted for restructuring costs and an asset impairment in the first quarter of 2016. All reconciliations to the nearest GAAP amounts are provided in the pages titled “Additional Disclosures.”
Net Interest Expense has been reduced by ~$10M for initial guidance and updated to ~$13M for updated guidance for capitalized interest included in Capex.
EBITDA and Free Cash Flow reconciliations to the nearest GAAP measure are provided in the pages titled “Additional Disclosures.”
Ending Gross Debt does not include any reduction related to Debt Issuance Cost.
|23
Priorities: Near term action driven by longer term view
Strengthen Through the Cycle
• Maintain Middle East market leader
position
• Focus on the markets where capital is
being invested
• Grow customer alignment and strength
of relationship
• Drive further integration of process and
capabilities in current asset base
• Demonstrate schedule and cost
execution – and continuously improve
cost and liquidity
Prepare for the Upturn
• Pursue new markets in Europe and Africa
• Leverage partnerships to secure pull
through
• Maintain and enhance in-market
capabilities
• Develop knowledge and expertise in
people – grow the bench
• Industry recognition of the “McDermott
Way” and “Taking the Lead”
Current Backlog and Proven Execution Provides a Solid Foundation
|24
Appendix
Additional Disclosures1
Effect of Reclassification of Equity Income (Loss) on Operating Income
2015
December 31
(In millions)
Historial Presentation Operating Income
AEA
MEA
ASA
Corporate
MDR Total
March 31
(20)
33
3
(3)
13
(20)
39
14
(4)
29
5
31
11
(5)
42
15
5
(13)
(1)
6
(2)
(1)
(3)
(2)
(3)
(5)
(1)
(6)
(7)
(1)
(6)
(7)
(18)
33
4
(3)
16
(18)
39
17
(4)
34
6
31
17
(5)
49
16
5
(7)
(1)
13
Non-GAAP Adjustments
AEA
MEA
ASA
Corporate
MDR Total
28
(1)
5
3
35
19
4
23
3
9
3
15
3
1
6
1
11
Non-GAAP New Presentation Operating Income
AEA
MEA
ASA
Corporate
MDR Total
10
32
9
51
1
39
17
57
9
31
26
(2)
64
19
6
(1)
24
Net Effect of Change
AEA
MEA
ASA
Corporate
MDR Total
New Presentation Operating Income
AEA
MEA
ASA
Corporate
MDR Total
1In
For the Three Months Ended
September 30
June 30
first quarter of 2016, we reclassified our Income (Loss) from Unconsolidated Affiliates to exclude it from operating income. See 10Q filed with the SEC for further information on this reclassification.
|26
Additional Disclosures1
Reconciliation of US GAAP to Non-GAAP Financial Measures
March 31, 2016
Three Months Ended
December 31, 2015
March 31, 2015
(In thousands, except share and per share amounts)
GAAP Net Loss Attributable to MDR
$
Less: Adjustments
2
Restructuring charges
3
Impairment Loss
4
Non-cash actuarial loss on benefit plans
Total Non-GAAP Adjustments
(2,172)
$
(18,668)
6,367
32,311
38,678
$
8,693
26,013
34,706
(14,507)
10,389
10,389
Non-GAAP Adjusted Net Income (Loss) Attributable to MDR
$
36,506
$
16,038
$
(4,118)
GAAP Operating Income
Non-GAAP Adjustments
Non-GAAP Adjusted Operating Income
Non-GAAP Adjusted Operating Margin
$
35,993
38,678
74,671
10.2%
$
16,277
34,706
50,983
7.6%
$
13,306
10,389
23,695
4.3%
GAAP Diluted EPS
Non-GAAP Adjustments
5
Non-GAAP Diluted EPS
$
(0.01)
0.14
0.13
$
(0.08)
0.14
0.06
$
$
$
Shares used in computation of loss per share:
Basic
Diluted
Cash flows from operating activities
Capital expenditures
Free cash flow
$
$
239,137,912
280,093,343
$
$
59,280
(31,900)
27,380
$
$
238,670,881
282,701,538
$
$
60,618
(36,733)
23,885
(0.06)
0.04
(0.02)
237,504,719
237,504,719
$
$
(18,539)
(23,972)
(42,511)
1Non-GAAP measures include the total and diluted per share amounts of adjusted net income (loss) attributable to the Company, adjusted operating income and adjusted operating margin, adjusted diluted earnings per share, free cash flow, adjusted gross income and adjusted gross margin, in each case excluding the
impact of certain identified items. We believe that these measures are useful measures for investors to review because they provide a consistent measure of the underlying results of our ongoing business. Furthermore, our management uses these measures as measures of the performance of our operations. However, NonGAAP measures should not 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.
2Restructuring charges are primarily associated with workforce reductions, facility closures, consultant fees, lease terminations and asset impairments.
3 Impairment Loss is related to the impairment of our Agile vessel.
4 Non-cash actuarial loss on benefit plans represents mark-to-market adjustment recorded in the 4th quarter of each respective year.
5 Diluted EPS is calculated using a share count determined by whether the period has a net income or a net loss. In the event of net income, Diluted EPS uses the fully diluted share count; however, in the event of a net loss the potentially dilutes shares are excluded from the share count.
|27
Additional Disclosures1
Reconciliation of US GAAP to Non-GAAP Financial Measures
March 31, 2016
Three Months Ended
December 31, 2015
March 31, 2015
(In thousands)
Net loss attributable to MDR
Add:
Depreciation & amortization expense
Interest Expense, net
Provision for income taxes
EBITDA
EBITDA
Adjustments
Adjusted EBITDA
$
$
$
$
(2,172)
24,542
11,238
19,330
52,938
52,938
38,678
91,616
$
$
$
$
(18,668)
28,389
11,879
21,459
43,059
43,059
34,706
77,765
$
$
$
$
(14,507)
30,599
12,179
4,869
33,140
33,140
10,389
43,529
1) We define EBITDA as net income plus depreciation and amortization, interest expense, net and provision for income taxes. We define Adjusted EBITDA as EBITDA less the adjustments relating to restructuring charges, impairment
loss, and non-cash actuarial gain (loss) on benefit plans detailed on the immediately preceding page. 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.
|28
Additional Disclosures1
Reconciliation of US GAAP to Non-GAAP Financial Measures
Three Months Ended
March 31, 2016
December 31, 2015
(In millions)
Revenues:
AEA
MEA
ASA
Total Revenues
63
270
396
729
134
242
291
667
Operating income (loss):
AEA
MEA
ASA
Corporate
Total Operating Income
(25)
39
25
(3)
36
(18)
33
4
(3)
16
GAAP Operating Margin:
AEA
MEA
ASA
Total Operating Margin
(40%)
14%
6%
5%
(13%)
14%
1%
2%
Adjustments:
AEA
MEA
ASA
Corporate
Total Adjustments
35
1
3
39
28
(1)
5
3
35
Adjusted Operating Income (Loss)
AEA
MEA
ASA
Corporate
Total Adjusted Operating Income
10
39
26
75
10
32
9
51
Adjusted Operating Margin:
AEA
MEA
ASA
Total Adjusted Operating Margin
16%
14%
7%
10%
7%
13%
3%
8%
1Non-GAAP measures include adjusted operating income and operating margin. We believe that these measures are useful measures for investors to review because they provide consistent measures of the underlying results of our ongoing business. Furthermore, our management uses these measures as measures of the
performance of our operations. However, Non-GAAP measures should not considered as substitutes for operating 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.
|29
Additional Disclosures1
Reconciliation of Forecast US GAAP Financials to Non-GAAP Financial Measures
Year Ended
December 31,
2016
(In thousands, except per share amounts)
GAAP Net Loss Attributable to MDR
$
Less: Adjustments
2
Restructuring charges
3
Impairment Loss
Total Non-GAAP Adjustments
(29,000)
15,000
32,000
47,000
Non-GAAP Adjusted Net Loss Attributable to MDR
$
18,000
GAAP Operating Income
Non-GAAP Adjustments
Non-GAAP Adjusted Operating Income
$
108,000
47,000
155,000
GAAP Diluted EPS
Non-GAAP Adjustments
4
Non-GAAP Diluted EPS
$
Cash flows from operating activities
Capital expenditures
Free cash flow
$
GAAP Net Loss Attributable to the Company
Add:
Depreciation and amortization
Interest Expense, Net
Provision for Taxes
EBITDA
EBITDA
Adjustments
Adjusted EBITDA
$
$
(0.12)
0.18
0.06
$
115,000
(265,000)
(150,000)
$
(29,000)
$
107,000
60,000
60,000
198,000
$
$
198,000
47,000
245,000
1Forecast Non-GAAP measures include the
total and diluted per share amounts of adjusted net income (loss) attributable to the Company and adjusted operating income, free cash flow, EBITDA and Adjusted EBITDA, in each case excluding the impact of certain identified items. We define EBITDA as net
income plus depreciation and amortization, interest expense, net and provision for income taxes. 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 shareholder value, such as making acquisitions or other investments. Our management uses free cash flow for that reason. We define Adjusted EBITDA as EBITDA less the adjustments relating to restructuring charges and impairment loss. 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.
2Restructuring charges are primarily associated with workforce reductions, facility closures, consultant fee, lease terminations and asset impairments.
3 Impairment Loss is related to the impairment of our Agile vessel.
4 Non-GAAP Diluted EPS is calculated using the fully diluted share count for the quarters ended March 31, 2016 and December 31, 2015 due to the positive net income. GAAP Diluted EPS calculation excludes the potentially dilutive shares due to the net loss position as the shares would be anti-dilutive.
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INVESTOR
CONTACT
Katherine Murray
Vice President, Treasurer and Investor Relations
281.870.5147
[email protected]
The information contained herein is provided for general information purposes only and is not intended or to be construed as a warranty,
an offer, or any representation of contractual or other legal responsibility. McDermott has a policy of continuous improvement of its
products and services and reserves the right to change information including specifications and processes without notice.
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