McDermott Reports net loss of $1.9b in 3rd Quarter 2019 Results
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.
Source / More : McDermott International, Inc.
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