Oceaneering Reports Second Quarter 2016 Results

- Reported EPS of $0.23

- Adjusted EPS of $0.27, in line with consensus

- Ended the quarter with $393 million in cash and an undrawn $500 million revolver

News provided by

Oceaneering International, Inc.

Jul 21, 2016, 05:02 ET

HOUSTON, July 21, 2016 /PRNewswire/ -- Oceaneering International, Inc. ("Oceaneering") (NYSE:OII) today reported net income of $22.3 million, or $0.23 per share, on revenue of $626 million for the three months ended June 30, 2016.  Excluding the impacts of a total of $7.0 million of bad debt expense and foreign currency exchange losses, adjusted net income was $26.8 million, or $0.27 per share.  

During the prior quarter ended March 31, 2016, Oceaneering reported net income of $25.1 million, or $0.26 per share, on revenue of $608 million.  Those results included $5.9 million of pre-tax foreign currency losses, reported in other income and expenses.

The calculations of adjusted net income and earnings per share are shown in the table Adjusted Net Income and Diluted Earnings per Share (EPS), under the caption Reconciliation of Non-GAAP to GAAP Financial Information. 

Summary of Results

(in thousands, except per share amounts)


Three Months Ended

Six Months Ended

Jun 30,

Mar 31,

Jun 30,

2016

2015

2016

2016

2015

Revenue

$625,539

$810,303

$608,344

$1,233,883

$1,597,075

Gross Margin

95,233

167,545

97,480

192,713

330,994

Income from Operations

38,380

107,940

48,099

86,479

214,590

Net Income

$22,309

$65,468

$25,103

$47,412

$134,967










Diluted Earnings Per Share

$0.23

$0.66

$0.26

0.48

$1.36

Sequentially, operating income declined 20% on reduced profit contributions from Subsea Products and Remotely Operated Vehicles ("ROV"), with a slight increase in Subsea Projects and Advanced Technologies, and lower Unallocated Expenses.  Without the impact of $5.8 million of bad debt expense, adjusted operating income was down 8%. 

M. Kevin McEvoy, Chief Executive Officer of Oceaneering, stated, "Despite the ongoing challenging offshore market environment, we are pleased that each of our operating segments remained profitable, excluding the negative impact of the bad debt expense.  Relative to our peers, overall EBITDA margin of 15% is noteworthy. 

"Compared to the first quarter, ROV operating income was down, resulting primarily from a 6% decline in average revenue per day on hire due to lower pricing and a shift in geographic mix.  During the quarter our ROV fleet size of 318 vehicles and utilization of 55% was unchanged from that of the prior quarter.  Our drill support market share during this period was 58% of the 174 floating rigs under contract, essentially flat with the prior quarter.  We remain focused on maintaining our market share of ROVs on contracted rigs and high-specification third-party vessels most likely to return to work when the market recovers, as demonstrated by our recent announcement of our long-term arrangement with Heerema Marine Contractors.

"Subsea Products operating income declined as expected, due to a combination of lower margins realized on umbilical throughput and reduced demand for tooling and installation and workover control systems.  Our Subsea Products backlog at June 30, 2016 was $503 million, compared to our March 31, 2016 backlog of $576 million.  The backlog decline was primarily related to umbilicals.  We continue to expect Subsea Products margins to weaken throughout the year on lower throughput and more competitive pricing for the orders currently in execution.  Our book to bill ratio year-to-date was 0.61. 

"Subsea Projects operating income increased, mainly due to lower regulatory vessel inspection expenses and additional revenue, as the Ocean Alliance returned to work after a scheduled drydocking.  Asset Integrity operating income declined, primarily due to a $3.3 million bad debt provision recognized during the quarter.  Advanced Technologies operating income increased, due to increased engineering services and support for the U.S. Navy.  Unallocated Expenses were lower due to reduced incentive compensation expense, principally related to our long-term plans.

"With continued limited visibility, we are expecting that the second half of 2016 will be weaker than the first half.  We expect lower operating income contributions from Subsea Products and ROVs, partially offset by an increase in Advanced Technologies, while other segment results should be relatively flat on an adjusted basis.  We are continuing to focus our operations on proactively working with our customers to develop cost effective and efficient solutions that may enable more projects to progress despite a low commodity price.

"In navigating this landscape, we remain focused on maintaining our market position while working to preserve Oceaneering's core capabilities for the long term, balanced with the imperative to tailor costs and resources to match our demand profile.  These efforts combined with our liquidity and ability to generate cash leave us well-positioned for the eventual offshore and subsea market cycle recovery."

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: characterization of certain third-party vessels as most likely to return to work when the market recovers; statements about backlog, to the extent it may be an indicator of future revenue or profitability; expectation about Subsea Products' margins; overall outlook for the second half of 2016,and expected contributions of each segment to the operating results for the second half of 2016; and belief that its liquidity and ability to generate cash leave it well-positioned for the eventual offshore and subsea market cycle recovery.  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. 

We define "EBITDA margin" as (1) net income plus provision for income taxes, interest expense, net, and depreciation and amortization divided by (2) total revenue.  EBITDA margin is a non-GAAP financial measure.  We have included EBITDA margin disclosures in this press release because EBITDA margin 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 margin 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.  For a reconciliation of our EBITDA margin amounts to the most directly comparable GAAP financial measures, please see the attached schedule.

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. 

For more information on Oceaneering, please visit www.oceaneering.com.

Contact:
Suzanne Spera
Director, Investor Relations
Oceaneering International, Inc.
713-329-4707
[email protected] 


















OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES




















CONDENSED CONSOLIDATED BALANCE SHEETS





































Jun 30, 2016

Dec 31, 2015















(in thousands)

ASSETS

















Current Assets (including cash and cash equivalents of $393,190 and $385,235)

$

1,415,356

$

1,517,493

Net Property and Equipment





1,210,020

1,266,731

Other Assets










693,828

645,312



TOTAL ASSETS




$

3,319,204

$

3,429,536




















LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities










$

497,595

$

615,956

Long-term Debt










802,338

795,836

Other Long-term Liabilities




427,634

439,010

Shareholders' Equity










1,591,637

1,578,734



TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

3,319,204

$

3,429,536




















CONDENSED CONSOLIDATED STATEMENTS OF INCOME































For the Three Months Ended

For the Six Months Ended











Jun 30, 2016

Jun 30, 2015

Mar 31, 2016

Jun 30, 2016

Jun 30, 2015











(in thousands, except per share amounts)





















Revenue






$

625,539

$

810,303

$

608,344

$

1,233,883

$

1,597,075

Cost of services and products

530,306

642,758

510,864

1,041,170

1,266,081


Gross Margin


95,233

167,545

97,480

192,713

330,994

Selling, general and administrative expense


56,853

59,605

49,381

106,234

116,404


Income from Operations




38,380

107,940

48,099

86,479

214,590

Interest income






1,442

51

295

1,737

207

Interest expense






(6,207)

(6,212)

(6,392)

(12,599)

(12,300)

Equity earnings (losses) of unconsolidated affiliates

263

1

526

789

(254)

Other income (expense), net


(1,405)

(6,484)

(5,988)

(7,393)

(5,784)


Income before Income Taxes


32,473

95,296

36,540

69,013

196,459

Provision for income taxes


10,164

29,828

11,437

21,601

61,492


Net Income


$

22,309

$

65,468

$

25,103

$

47,412

$

134,967




















Weighted average diluted shares outstanding

98,424

98,893

98,286

98,355

99,401

Diluted Earnings per Share


$

0.23

$

0.66

$

0.26

$

0.48

$

1.36




















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 Six Months Ended






Jun 30, 2016

Jun 30, 2015

Mar 31, 2016

Jun 30, 2016

Jun 30, 2015






($ in thousands)











Remotely Operated Vehicles

Revenue

$

139,641

$

216,426

$

147,621

$

287,262

$

435,873

Gross Margin

$

26,925

$

70,132

$

35,322

$

62,247

$

141,443

Operating Income

$

18,020

$

61,294

$

26,987

$

45,007

$

123,476

Operating Income %

13

%

28

%

18

%

16

%

28

%

Days available

28,959

30,465

28,819

57,778

60,596

Days utilized

16,057

21,710

16,005

32,062

43,849

Utilization %

55

%

71

%

56

%

55

%

72

%















Subsea Products

Revenue

$

190,897

$

240,057

$

194,812

$

385,709

$

480,786

Gross Margin

$

42,728

$

62,465

$

56,136

$

98,864

$

132,232

Operating Income

$

25,121

$

42,286

$

40,640

$

65,761

$

92,300

Operating Income %

13

%

18

%

21

%

17

%

19

%

Backlog at end of period

$

503,000

$

703,000

$

576,000

$

503,000

$

703,000















Subsea Projects

Revenue

$

138,662

$

172,324

$

129,422

$

268,084

$

325,896

Gross Margin

$

14,317

$

36,989

$

11,509

$

25,826

$

63,889

Operating Income

$

10,237

$

30,607

$

6,789

$

17,026

$

52,883

Operating Income %

7

%

18

%

5

%

6

%

16

%















Asset Integrity

Revenue

$

73,864

$

95,509

$

69,600

$

143,464

$

194,002

Gross Margin

$

10,096

$

11,750

$

7,343

$

17,439

$

24,549

Operating Income

$

(805)

$

4,576

$

434

$

(371)

$

9,601

Operating Income %

(1)

%

5

%

1

%

—

%

5

%















Advanced Technologies

Revenue

$

82,475

$

85,987

$

66,889

$

149,364

$

160,518

Gross Margin

$

10,600

$

10,945

$

5,827

$

16,427

$

20,345

Operating Income

$

5,528

$

6,267

$

593

$

6,121

$

11,287

Operating Income %

7

%

7

%

1

%

4

%

7

%















Unallocated Expenses










Gross Margin

$

(9,433)

$

(24,736)

$

(18,657)

$

(28,090)

$

(51,464)

Operating Income

$

(19,721)

$

(37,090)

$

(27,344)

$

(47,065)

$

(74,957)













TOTAL

Revenue

$

625,539

$

810,303

$

608,344

$

1,233,883

$

1,597,075

Gross Margin

$

95,233

$

167,545

$

97,480

$

192,713

$

330,994

Operating Income

$

38,380

$

107,940

$

48,099

$

86,479

$

214,590

Operating Income %

6

%

13

%

8

%

7

%

13

%















SELECTED CASH FLOW INFORMATION

















For the Three Months Ended

For the Six Months Ended






Jun 30, 2016

Jun 30, 2015

Mar 31, 2016

Jun 30, 2016

Jun 30, 2015






($ in thousands)












Capital expenditures, including acquisitions

$

31,738

$

275,347

$

21,206

$

52,944

$

324,759












Depreciation and Amortization:










Oilfield












Remotely Operated Vehicles

$

34,026

$

35,661

$

33,684

$

67,710

$

72,142

Subsea Products

12,952

13,498

12,807

25,759

25,566

Subsea Projects

8,353

9,707

8,519

16,872

14,358

Asset Integrity

2,843

2,696

2,913

5,756

5,559

Total Oilfield


58,174

61,562

57,923

116,097

117,625

Advanced Technologies

806

619

734

1,540

1,261

Unallocated Expenses

999

1,302

1,124

2,123

2,600






$

59,979

$

63,483

$

59,781

$

119,760

$

121,486















RECONCILIATION 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).  We believe the adjusted amounts are more representative of our ongoing performance.  The following is a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures:















Adjusted Operating Income










For the Three Months Ended










Jun 30, 2016

Jun 30, 2015

Mar 31, 2016










(in thousands)















Operating income as reported in accordance with GAAP




$

38,380

$

107,940

$

48,099

Adjustments for the effects of:











Inventory write-down






—

9,025

—


Bad debt expense






5,757

—

—

Adjusted operating income




$

44,137

$

116,965

$

48,099











Adjusted Net Income and Diluted Earnings per Share (EPS)















For the Three Months Ended




Jun 30, 2016

Jun 30, 2015




Net Income

Diluted EPS

Net Income

Diluted EPS




(in thousands, except per share amounts)









Net Income and Diluted EPS as reported in accordance with GAAP

$

22,309

$

0.23

$

65,468

$

0.66

Adjustments for the effects of:











Inventory write down


—



9,025




Bad debt expense


5,757



—




Foreign currency losses


1,218



5,978


Total pre tax adjustments


6,975



15,003




Tax effect


2,441



5,251


Total adjustments after tax


4,534



9,752




Adjusted amounts




$

26,843

$

0.27

$

75,220

$

0.76













Notes:







Incremental applicable income tax rate used for 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.












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



















For the Three Months Ended

For the Six Months Ended

For the Year Ended




Jun 30, 2016

Jun 30, 2015

Mar 31, 2016

Jun 30, 2016

Jun 30, 2015

Dec 31, 2015




($ in thousands)















Net Income

$

22,309

$

65,468

$

25,103

$

47,412

$

134,967

$

231,011

Depreciation and Amortization

59,979

63,483

59,781

119,760

121,486

241,235


Subtotal

82,288

128,951

84,884

167,172

256,453

472,246

Interest Expense, net of Interest Income

4,765

6,161

6,097

10,862

12,093

24,443

Amortization included in Interest Expense

(286)

(265)

(287)

(573)

(531)

(1,077)

Provision for Income Taxes

10,164

29,828

11,437

21,601

61,492

105,250


EBITDA

$

96,931

$

164,675

$

102,131

$

199,062

$

329,507

$

600,862















Revenue

$

625,539

$

810,303

$

608,344

$

1,233,883

$

1,597,075

$

3,062,754















EBITDA margin %

15

%

20

%

17

%

16

%

21

%

20

%















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

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