Oceaneering Reports Fourth Quarter and Full Year 2015 Results

- Reports Fourth Quarter EPS of $0.28 and Adjusted EPS of $0.58

- Reports Full Year EPS of $2.34 and Adjusted EPS of $2.87

- Expects to Maintain Current Quarterly Cash Dividend throughout 2016

Feb 10, 2016, 17:02 ET from Oceaneering International, Inc.

HOUSTON, Feb. 10, 2016 /PRNewswire/ -- Oceaneering International, Inc. ("Oceaneering" or "the Company") (NYSE: OII) today reported net income of $27.5 million, or $0.28 per share, on revenue of $722 million for the three months ended December 31, 2015.  Adjusted net income was $57.4 million, or $0.58 per share, excluding the $45.9 million pre-tax impact of asset write-downs, provisions for certain reserves, restructuring expenses and foreign currency losses recognized during the quarter.  During the fourth quarter of 2014, Oceaneering reported net income of $102 million, or $0.99 per share, on revenue of $919 million

Adjusted pre-tax income, net income, and earnings per share are non-GAAP measures.  Reconciliations to the corresponding GAAP measures are shown in the table Pre-tax Income, Net Income and Diluted Earnings per Share (EPS).  The operating income and operating margin impact of the adjustments by segment is shown in the table Operating Income by Segment.  These tables are included below under the caption Reconciliations of Non-GAAP to GAAP Financial Information. 

For the year 2015, Oceaneering reported net income of $231 million, or $2.34 per share, on revenue of $3.1 billion.  Adjusted net income was $284 million, or $2.87 per share, excluding the $81.1 million pre-tax impact of asset write-downs, provisions for certain reserves, restructuring expenses and foreign currency losses recognized during the year.  This compared to 2014 net income of $428 million, or $4.00 per share, on revenue of $3.7 billion

Summary of Results

(in thousands, except per share amounts)

Three Months Ended

Year Ended

Dec. 31,

Sept. 30,

Dec. 31,

2015

2014

2015

2015

2014

Revenue

$722,066

$918,927

$743,613

$3,062,754

$3,659,624

Gross Margin

106,122

209,640

168,313

605,429

859,201

Income from Operations

45,756

152,239

113,464

373,810

628,330

Net Income

$27,505

$102,471

$68,539

$231,011

$428,329

Diluted Earnings Per Share (EPS)

$0.28

$0.99

$0.70

$2.34

$4.00

 

Despite declining earnings, annual free cash flow (defined as cash provided by operating activities less purchases of property and equipment) increased due to reductions in organic capital expenditures and working capital.  Free cash flow for 2015 of $360 million, or 127% of adjusted net income, exceeded the $335 million generated in 2014.  Reconciliations of annual free cash flow to cash provided by operating activities are shown in the table Free Cash Flow shown below under the caption Reconciliations of  Non-GAAP to GAAP Financial Information.

M. Kevin McEvoy, Oceaneering's Chief Executive Officer, stated, "The severe deterioration in oil prices and the resulting slowdown in deepwater activity since last year impacted our fourth quarter and full year results.  We have undertaken a series of initiatives to align our operations with current and anticipated declining activity and pricing levels.  Unfortunately, these restructuring steps required us to reduce our workforce, incur unusual expenses, and make certain accounting adjustments. 

"Although substantial restructuring progress has been made, we remain focused on organizing more effectively, managing costs, and improving our operational performance, while continuing to provide safe, innovative and cost-effective solutions that improve our customers' returns in a lower commodity price environment.  We believe our liquidity (including $385 million of cash at year-end), demonstrated cash flow generating capabilities, and $500 million revolving credit facility provide us with ample resources to manage our business through the current environment of reduced demand for our services and products. 

"In addition, our financial strength should enable Oceaneering to enhance shareholder value by continuing to invest in our current and adjacent market niches, and returning cash to our shareholders in the form of cash dividends and potential stock buybacks.  While we face a high degree of uncertainty in the offshore markets in which we participate, we are confident in our cash flow generating capabilities.  We presently intend and expect to continue the current quarterly cash dividend of $0.27 per share throughout 2016.  We may, however, revisit our quarterly dividend should market conditions deteriorate to the extent that our projected annual net income would not exceed the current annual dividend. 

"During 2015, we generated adjusted operating income of $417 million on revenue of $3.1 billion.  Compared to 2014, these results represent a 34% drop in operating income on a 16% decline in revenue.  On an adjusted basis, our 2015 consolidated operating margin of 14% compared to the 17% margin achieved in 2014. 

"On an adjusted basis, ROV operating income declined 32% year over year on 24% less revenue, driven by lower demand for drill support services and an 11% reduction in average revenue per day on hire.  Our total ROV days on hire declined by nearly 14,500, or 15%, to about 83,800 days for the year.  During 2015, we put 16 new ROVs into service (4 during the fourth quarter), retired 36 vehicles (25 during the fourth quarter), and transferred 1 to Advanced Technologies.  At year-end, we had 315 vehicles in our ROV fleet. 

"Subsea Products operating income, on an adjusted basis, declined 27% in 2015 relative to 2014, on a 23% reduction of revenue due to lower demand and pricing for tooling and subsea hardware and lower umbilical plant throughput.  Products backlog at the end of 2015 was $652 million, down from $690 million at the end of 2014.  This backlog decline was related to tooling and subsea hardware.  Products book-to-bill ratio for the year was 0.96.

"Considering the oil price environment and the global current oversupply of vessels, Subsea Projects operating income held up relatively well during 2015.  The decline was due to lower deepwater vessel activity and market pricing offshore Angola and in the U.S. Gulf of Mexico.  In 2015, Asset Integrity operating income declined precipitously on lower global demand and pricing for inspection services.  Advanced Technologies operating income for the year was lower due primarily to execution issues on certain theme park projects.  Unallocated Expenses during 2015 were lower mainly as a result of reduced performance-based incentive and deferred compensation expenses as plan targets were not achieved. 

"Total capital allocation spending was $650 million in 2015, compared to $1.1 billion in 2014.  We invested $200 million in organic capital expenditures and $244 million on acquisitions and other investments.  We also paid $106 million of cash dividends and spent $100 million on the repurchase of 2 million shares of our common stock. 

"For 2016, we are expecting lower demand for our services and products, and continued pricing pressure and spending cuts from our customers.  Consequently, we are projecting that all of our oilfield business segments will have lower operating income in 2016 than in 2015.  With our limited market visibility on how weak 2016 may actually be, we are not prepared to quantify the magnitude or duration of the decline or give annual and quarterly EPS guidance ranges. 

"In the current market environment, we intend to continue taking actions to restructure and integrate our service and product offerings to reduce our operating expenses and better serve our customers.  For 2016, we expect our organic capital expenditures to total between $150 million and $200 million, approximately $75 million of which is expected to be maintenance capital expenditure. 

"Longer term, deepwater is still expected to continue to play a critical role in global oil supply growth required to replace depletion and meet projected demand.  Major deepwater projects remain key long-term growth drivers within international oil company portfolios.  In the medium term, we believe there will be an uptick in demand for products and services to extend the producing life of existing offshore fields and to perform decommissioning work.  Consequently, we intend to continue our strategy to maintain or grow our market position and be prepared to expand our services and product line offerings should suitable opportunities arise."

This release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to the expectations, beliefs and future expected business, financial performance and prospects of the Company.  More specifically, the forward-looking statements in this press release include the statements concerning Oceaneering's: belief that its liquidity, demonstrated cash flow generating capabilities, and credit facility provide it with ample resources to manage its business through the current environment of reduced demand for its services and products; belief that its financial strength should enable it to enhance shareholder value by continuing to invest in current and adjacent market niches, and returning cash to shareholders in the form of cash dividends and potential stock buybacks; expectation to continue its current quarterly dividend throughout 2016; expectation that it may revisit its quarterly dividend to the extent that its projected annual net income would not exceed the annual dividend; statements about backlog, to the extent it may be an indicator of future revenue or profitability; expectation for lower demand for its services and products, and continued pricing pressure and spending cuts from its customers; outlook for 2016; intention to continue taking actions to restructure and integrate its service and product offerings to reduce operating expenses and better serve customers; expectations about capital expenditures; expectation of deepwater's continued role in global oil supply growth; belief that, in the medium term, there will be an uptick in demand for products and services to extend the producing life of existing offshore fields and to perform decommissioning work; and intention to maintain or grow its market position and be prepared to expand its services and product line offerings should suitable opportunities arise.  The forward-looking statements included in this release are based on our current expectations and are subject to certain risks, assumptions, trends and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements.  Among the factors that could cause actual results to differ materially include backlog, costs, capital expenditures, future earnings, capital allocation strategies, dividend levels, sustainability of dividend levels, liquidity, competitive position, financial flexibility, debt levels, forecasts or expectations regarding business outlook; growth for Oceaneering as a whole and for each of its segments (and for specific products or geographic areas within each segment); factors affecting the level of activity in the oil and gas industry; supply and demand of drilling rigs; oil and natural gas demand and production growth; oil and natural gas prices; fluctuations in currency markets worldwide; the loss of major contracts or alliances; future global economic conditions; and future results of operations.  For a more complete discussion of these risk factors, please see Oceaneering's latest annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. 

Oceaneering is a global provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications.  Through the use of its applied technology expertise, Oceaneering also serves the defense, entertainment, and aerospace industries.  Oceaneering is publicly traded on the New York Stock Exchange under the symbol "OII."  

For more information on the Company, please visit Oceaneering's website at www.oceaneering.com.

Contact: Suzanne Spera Director, Investor Relations Oceaneering International, Inc. 713-329-4707 investorrelations@oceaneering.com

 

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Dec 31, 2015

Dec 31, 2014

(in thousands)

ASSETS

Current Assets (including cash and cash equivalents of $385,235 and $430,714)

$

1,517,493

$

1,713,550

Net Property and Equipment

1,266,731

1,305,822

Other Assets

645,312

485,568

TOTAL ASSETS

$

3,429,536

$

3,504,940

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

$

615,956

$

679,137

Long-term Debt

795,836

743,469

Other Long-term Liabilities

439,010

424,863

Shareholders' Equity

1,578,734

1,657,471

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

3,429,536

$

3,504,940

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended

For the Year Ended

Dec 31, 2015

Dec 31, 2014

Sep 30, 2015

Dec 31, 2015

Dec 31, 2014

(in thousands, except per share amounts)

Revenue

$

722,066

$

918,927

$

743,613

$

3,062,754

$

3,659,624

Cost of services and products

615,944

709,287

575,300

2,457,325

2,800,423

Gross Margin

106,122

209,640

168,313

605,429

859,201

Selling, general and administrative expense

60,366

57,401

54,849

231,619

230,871

Income from Operations

45,756

152,239

113,464

373,810

628,330

Interest expense, net of interest income

(6,183)

(3,179)

(6,167)

(24,443)

(4,415)

Other income (expense), net

464

96

(7,532)

(13,106)

(438)

Income before Income Taxes

40,037

149,156

99,765

336,261

623,477

Provision for income taxes

12,532

46,685

31,226

105,250

195,148

Net Income

$

27,505

$

102,471

$

68,539

$

231,011

$

428,329

Weighted average diluted shares outstanding

98,268

103,851

98,185

98,808

107,091

Diluted Earnings per Share

$

0.28

$

0.99

$

0.70

$

2.34

$

4.00

The above Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income should be read in conjunction with the Company's latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

 

SEGMENT INFORMATION

For the Three Months Ended

For the Year Ended

Dec 31, 2015

Dec 31, 2014

Sep 30, 2015

Dec 31, 2015

Dec 31, 2014

($ in thousands)

Remotely Operated Vehicles

Revenue

$

173,424

$

259,544

$

198,426

$

807,723

$

1,069,022

Gross Margin

$

25,206

$

89,080

$

60,681

$

227,330

$

361,466

Operating Income

$

16,621

$

79,635

$

52,417

$

192,514

$

320,550

Operating Income %

10

%

31

%

26

%

24

%

30

%

Days available

30,323

30,869

31,025

121,944

117,882

Days utilized

18,760

24,676

21,229

83,838

98,302

Utilization %

62

%

80

%

68

%

69

%

83

%

Subsea Products

Revenue

$

258,889

$

314,739

$

220,039

$

959,714

$

1,238,746

Gross Margin

$

61,445

$

84,667

$

64,078

$

257,755

$

364,760

Operating Income

$

37,206

$

63,796

$

46,079

$

175,585

$

281,239

Operating Income %

14

%

20

%

21

%

18

%

23

%

Backlog at end of period

$

652,000

$

690,000

$

736,000

$

652,000

$

690,000

Subsea Projects

Revenue

$

131,397

$

162,623

$

147,191

$

604,484

$

588,572

Gross Margin

$

15,953

$

38,138

$

34,830

$

114,672

$

124,418

Operating Income

$

10,310

$

34,113

$

28,841

$

92,034

$

107,852

Operating Income %

8

%

21

%

20

%

15

%

18

%

Asset Integrity

Revenue

$

83,346

$

111,115

$

95,609

$

372,957

$

500,237

Gross Margin

$

7,784

$

14,476

$

15,009

$

47,342

$

87,236

Operating Income

$

85

$

5,886

$

8,549

$

18,235

$

55,469

Operating Income %

%

5

%

9

%

5

%

11

%

Advanced Technologies

Revenue

$

75,010

$

70,906

$

82,348

$

317,876

$

263,047

Gross Margin

$

2,715

$

11,647

$

6,974

$

30,034

$

32,410

Operating Income

$

(3,233)

$

7,214

$

1,635

$

9,689

$

13,230

Operating Income %

(4)

%

10

%

2

%

3

%

5

%

Unallocated Expenses

Gross Margin Expenses

$

(6,981)

$

(28,368)

$

(13,259)

$

(71,704)

$

(111,089)

Operating Income Expenses

$

(15,233)

$

(38,405)

$

(24,057)

$

(114,247)

$

(150,010)

TOTAL

Revenue

$

722,066

$

918,927

$

743,613

$

3,062,754

$

3,659,624

Gross Margin

$

106,122

$

209,640

$

168,313

$

605,429

$

859,201

Operating Income

$

45,756

$

152,239

$

113,464

$

373,810

$

628,330

Operating Income %

6

%

17

%

15

%

12

%

17

%

SELECTED CASH FLOW INFORMATION

   Capital expenditures, including acquisitions

$

54,801

$

85,395

$

275,347

$

423,988

$

426,671

      Depreciation and Amortization

$

57,727

$

60,750

$

62,022

$

241,235

$

229,779

 

RECONCILIATIONS OF NON-GAAP TO GAAP FINANCIAL INFORMATION

In addition to financial results determined in accordance with US generally accepted accounting principles (GAAP), this Press Release also includes non-GAAP financial measures (as defined under SEC Regulation G).  The following is a reconciliation of these non-GAAP measures to the comparable GAAP measures:

Pre-tax income, Net Income and Diluted Earnings per Share (EPS)

Three Months Ended December 31, 2015

Pre tax

Tax

Net

EPS

Income before taxes, income taxes, net income and EPS as reported in accordance with GAAP

$

40,037

$

12,532

$

27,505

$

0.28

Adjustments for the effects of:

Inventory write-downs

16,965

5,938

11,027

0.11

Restructuring expenses

13,692

4,792

8,900

0.09

Non-current asset reserve

6,583

2,304

4,279

0.04

Allowance for bad debts

4,851

1,698

3,153

0.03

Fixed asset write-offs

2,911

1,019

1,892

0.02

Adjustments affecting income from operations

45,002

15,751

29,251

0.30

Foreign currency losses

938

328

610

0.01

Total of adjustments

45,940

16,079

29,861

0.30

Adjusted amounts

$

85,977

$

28,611

$

57,366

$

0.58

Year Ended December 31, 2015

Pre tax

Tax

Net

EPS

Income before taxes, income taxes, net income and EPS as reported in accordance with GAAP

$

336,261

$

105,250

$

231,011

$

2.34

Adjustments for the effects of:

Inventory write-downs

25,990

9,097

16,893

0.17

Restructuring expenses

25,404

8,891

16,513

0.17

Non-current asset reserve

6,583

2,304

4,279

0.04

Allowance for bad debts

4,851

1,698

3,153

0.03

Fixed asset write-offs

2,911

1,019

1,892

0.02

Adjustments affecting income from operations

65,739

23,009

42,730

0.43

Foreign currency losses

15,360

5,376

9,984

0.10

Total of adjustments

81,099

28,385

52,714

0.53

Adjusted amounts

$

417,360

$

133,635

$

283,725

$

2.87

The table above presents reconciliations of our results for the three- and twelve-month periods ended December 31, 2015, as reported in accordance with GAAP and as adjusted.  We believe the adjusted amounts are more representative of our ongoing performance.

Notes:

EPS figures may not total due to rounding.

In thousands except EPS figures.

Incremental applicable income tax rate for each adjusting item in each period presented is 35%.

Weighted average number of diluted shares in each period presented is the same for each adjusting item as used in accordance with GAAP for that period.

 

RECONCILIATIONS OF NON-GAAP TO GAAP FINANCIAL INFORMATION

(continued)

Operating Income by Segment

For the Three Months Ended December 31, 2015

Remotely Operated Vehicles

Subsea Products

Subsea Projects

Asset Integrity

Advanced Tech.

Unalloc. Expenses

Total

(in thousands)

Operating income as reported in accordance with GAAP

$

16,621

$

37,206

$

10,310

$

85

$

(3,233)

$

(15,233)

$

45,756

Adjustments for the effects of:

Inventory write-downs

15,705

1,260

16,965

Restructuring expenses

3,130

4,966

1,846

3,670

47

33

13,692

Non-current asset reserve

6,583

6,583

Allowance for bad debts

4,851

4,851

Fixed asset write-offs

2,911

2,911

Total of adjustments

21,746

17,660

1,846

3,670

47

33

45,002

Adjusted amounts

$

38,367

$

54,866

$

12,156

$

3,755

$

(3,186)

$

(15,200)

$

90,758

Revenue

$

173,424

$

258,889

$

131,397

$

83,346

$

75,010

$

722,066

Operating income % as reported in accordance with GAAP

10

%

14

%

8

%

0

%

(4)%

6

%

Operating income % using adjusted amounts

22

%

21

%

9

%

5

%

(4)%

13

%

For the Year Ended December 31, 2015

Remotely Operated Vehicles

Subsea Products

Subsea Projects

Asset Integrity

Advanced Tech.

Unalloc. Expenses

Total

(in thousands)

Operating income as reported in accordance with GAAP

$

192,514

$

175,585

$

92,034

$

18,235

$

9,689

$

(114,247)

$

373,810

Adjustments for the effects of:

Inventory write-downs

15,705

10,285

25,990

Restructuring expenses

7,177

8,672

2,480

6,436

220

419

25,404

Non-current asset reserve

6,583

6,583

Allowance for bad debts

4,851

4,851

Fixed asset write-offs

2,911

2,911

Total of adjustments

25,793

30,391

2,480

6,436

220

419

65,739

Adjusted amounts

$

218,307

$

205,976

$

94,514

$

24,671

$

9,909

$

(113,828)

$

439,549

Revenue

$

807,723

$

959,714

$

604,484

$

372,957

$

317,876

$

3,062,754

Operating income % as reported in accordance with GAAP

24

%

18

%

15

%

5

%

3

%

12

%

Operating income % using adjusted amounts

27

%

21

%

16

%

7

%

3

%

14

%

The table above presents reconciliations of our operating income and operating income % for the three- and twelve-month periods ended December 31, 2015, as reported in accordance with GAAP and as adjusted.  We believe the adjusted amounts are more representative of our ongoing performance.

 

RECONCILIATIONS OF NON-GAAP TO GAAP FINANCIAL INFORMATION

(continued)

Free Cash Flow

For the Year Ended

Dec 31, 2015

Dec 31, 2014

(in thousands)

Net income

$

231,011

$

428,329

Depreciation and amortization

241,235

229,779

Other increases in cash from operating activities

88,162

63,654

Cash flow provided by operating activities

$

560,408

$

721,762

Purchases of  property and equipment

(199,970)

(386,883)

Free Cash Flow

$

360,438

$

334,879

 

Free Cash Flow represents cash flow provided by operating activities less organic capital expenditures (i.e., purchases of property and equipment other than those in business acquisitions).  Management believes that this is an important measure because it represents funds available to reduce debt and pursue opportunities that enhance shareholder value such as making acquisitions, and returning cash to shareholders through dividends or share repurchases.

 

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

For the Three Months Ended

For the Year Ended

Dec 31, 2015

Dec 31, 2014

Sep 30, 2015

Dec 31, 2015

Dec 31, 2014

(in thousands)

Net income

$

27,505

$

102,471

$

68,539

$

231,011

$

428,329

Depreciation and amortization

57,727

60,750

62,022

241,235

229,779

Subtotal

85,232

163,221

130,561

472,246

658,108

Interest expense, net of interest income

6,183

3,179

6,167

24,443

4,415

Amortization included in interest expense

(280)

(266)

(1,077)

Provision for income taxes

12,532

46,685

31,226

105,250

195,148

EBITDA

$

103,667

$

213,085

$

167,688

$

600,862

$

857,671

 

We define EBITDA as net income plus provision for income taxes, interest expense, net, and depreciation and amortization.  EBITDA is a non-GAAP financial measure. We have included 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. Our presentation of EBITDA may not be comparable to similarly titled measures other companies report. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.

 

 

SOURCE Oceaneering International, Inc.



RELATED LINKS

http://www.oceaneering.com