On Friday, Shares of McDermott International Inc. (NYSE: MDR) showed the bullish trend with a higher momentum of 4.64% to $9.02. The company traded total volume of 2,774,774 shares as contrast to its average volume of 5.08M shares. The company has a market value of $1.55B and about 180.07M shares outstanding.
McDermott International, Inc. (MDR) recently stated revenues of $2.10B and net loss of $(2.8).0B, or $(15.33) per diluted share, for the fourth quarter of 2018.
McDermott's net loss for the fourth-quarter of 2018 was mainly the result of a number of noteworthy non-recurring charges, counting:
- AÂ $2.20BÂ goodwill impairment charge due in part to a change in the Company's cost of capital and risk premium assumptions included in the discount rates utilized to derive the present value of our cash flows.
- AÂ $190.0MÂ reduction in the carrying value of the Company's deferred tax assets, because of the impact of a full valuation allowance against all net deferred tax assets as a result of the goodwill impairment creating a three-year cumulative loss position.
- A non-cash impairment charge of $58.0M on two of the Company's marine vessels, mainly related to lower levels of planned future utilization.
- Annual fourth quarter, non-cash, actuarial mark-to-market adjustment of $47.0M related to the Company's pension obligations.
- Transaction, restructuring and integration costs of $32.0M.
Adjusting for these items, McDermott's net loss for the fourth quarter was $(280.0)M, or $(1.55) per diluted share.
The Company's operating loss for the fourth quarter of 2018 was $(2.5)B. The adjusted operating loss, as shown in an accompanying table, was $(241.0)M.
- AÂ $168.0MÂ change in estimated costs on the Company's Cameron LNG project, as formerly revealed, because of unfavorable labor productivity, and subcontract, commissioning and construction management costs.
- AÂ $31.0MÂ change in estimated costs on the Company's Calpine project.
- $54.0M of expense on the Abkatun-A2 offshore project in Mexico, caused by a plan-driven change in the fabrication plan carrying work offshore, subsequent weather delays and lack of contractually promised accommodations for offshore crew.
- $25.0MÂ of corporate expense stated as unallocated direct operating expense for costs incurred to make alternate arrangements for a third-party vessel charter because the formerly designated vessel was withdrawn from the market.
- $33.0MÂ of increased SG&A expense associated with information technology costs, self-insurance programs and other items.
- $28.0MÂ of additional expense, due in part to an unplanned warranty repair, increased bid expenses and costs associated with beginning of new projects in APAC.
Separately, a $102.0M change in estimate on the Freeport LNG project, due mainly to a reduction in the expected recoveries on a claim related to the impacts of Hurricane Harvey, did not impact the income statement, as the effects were reflected in purchase accounting adjustments.
For the full year 2018, the Company stated a net loss of $(2.7)B, or $(17.94) per diluted share, due mainly to the factors that influenced fourth quarter results as described above. The adjusted net loss for 2018 was $(148.0)M, or $(0.99) per diluted share. Our business combination with Chicago Bridge & Iron Company N.V. (the "Combination") was accomplished on May 10, 2018. Accordingly, results for the full year include legacy McDermott from January 1 through May 10, 2018and the combined McDermott-CB&I organization for the period from May 11, 2018 through December 31, 2018.
Update on Estimated Costs on Selected Projects:
For the fourth quarter of 2018, McDermott recorded a total of $199.0M of changes in estimates on the Cameron LNG and Calpine Gas Turbine Power projects. The changes directly influenced McDermott's income statement for the fourth quarter. Expected completion dates for the projects are unchanged.
Separately, McDermott recorded a change in estimate of $102.0M on the Freeport LNG project in the fourth quarter of 2018. The change in estimate related mainly to McDermott's view of a reduction in the assumed recovery of the claim and liquidated damages estimates that were filed with the customer regarding damages sustained as a result of Hurricane Harvey. That claim was outstanding at the time of the Combination and, as a result, the reduction in the claim has been recorded under the provisions of purchase accounting as a change in intangible assets. As such, the change in estimate did not directly impact McDermott's statements of operations. Expected completion dates for the project are unchanged.
Cash and Liquidity:
McDermott's cash from operating activities during the fourth quarter of 2018 was $(285.0)M, due mostly to the continued funding of formerly declared cost increases on the Cameron, Freeport and Calpine projects. Total cash availability was $1.40B at December 31, 2018, consisting of $520.0M of unrestricted cash and $889.0M of availability under McDermott's revolving credit facility. McDermott had $2.00B of combined availability under its principal letter of credit facilities, uncommitted bilateral credit facilities and surety arrangements. McDermott's cash and liquidity position reflects the receipt of proceeds from the fourth quarter 2018 private placement of $300.0M of redeemable preferred stock and warrants to purchase common stock and reflects a $230.0M increase in its primary letter-of-credit facilities. The Company was in compliance with all financial covenants under its financing arrangements as of December 31, 2018.
Combination Profitability Program (CPI):
McDermott's integration is mostly complete, with mainly IT systems updates remaining. CPI is nearing full implementation with $444.0M of the targeted $475.0M of annualized cost synergies actioned as of December 31, 2018. McDermott's operating results for the three months ended December 31, 2018 include about $62.0M of such savings. The CPI target annualized run rate is expected to be fully actioned by the end of 2019. Associated costs of $29.0M were recognized in the fourth quarter of 2018 and were $134.0M, cumulatively for the year ended December 31, 2018.
The Company offered net profit margin of -40.10% while its gross profit margin was 7.70%. ROE was recorded as -110.90% while beta factor was 2.73. The stock, as of recent close, has shown the weekly upbeat performance of 3.86% which was maintained at 31.80% in this year.
