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Oceaneering International, Inc. (OII) today reported record earnings for the third quarter ended September 30, 2012. On revenue of $734 million, Oceaneering generated net income of $84.4 million, or $0.78 per share.
For the third quarter of 2011, Oceaneering reported revenue of $602 million and net income of $78.6 million, or $0.72 per share. The 2011 results included an $18.3 million pre-tax gain in Subsea Projects, $11.9 million after tax using an incremental tax rate of 35%, on the sale of a mobile offshore production system and $4.9 million of tax benefits principally related to prior years. For the second quarter of 2012, Oceaneering reported revenue of $673 million and net income of $72.6 million, or $0.67 per share.
Summary of Results
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2012 2011 2012 2012 2011
Revenue $734,217 $602,208 $672,545 $2,001,655 $1,618,466
Gross Profit 170,869 153,096 161,158 455,330 378,013
Income from Operations 123,813 109,622 110,047 309,847 252,363
Net Income $84,406 $78,578 $72,554 $208,415 $177,341
Diluted Earnings Per Share $0.78 $0.72 $0.67 $1.92 $1.63
Sequentially, quarterly earnings were higher on record operating income from Remotely Operated Vehicles (ROV) and Subsea Products. Year over year, earnings increased on operating income improvements from ROV, Subsea Products, and Asset Integrity.
M. Kevin McEvoy, President and Chief Executive Officer, stated, "Our quarterly performance demonstrates the rising demand we are experiencing for our subsea services and products. Overall, our operations performed within expectations and we remain on track to achieve record EPS for the year.
"Compared to the second quarter of 2012, ROV operating income increased on the strength of higher global demand to provide drill support and vessel-based services. Our ROV days on hire for the quarter increased to an all-time high of over 21,000. Subsea Products operating income improved on increased profit contributions from all of our major product line categories, led by Installation and Workover Control System (IWOCS) services and subsea hardware. Products operating margin for the quarter rose to a record 24%, due to higher profitability on IWOCS services and sales of subsea hardware and umbilicals. Subsea Products backlog at quarter-end was $619 million, comparable to our June 30 backlog of $621 million and up from $403 million one year ago.
"We are narrowing our 2012 EPS guidance range to $2.60 to $2.65, up slightly at the midpoint from last quarter. For the fourth quarter of 2012 we are projecting EPS of $0.68 to $0.73.
"We are initiating 2013 EPS guidance with a range of $3.00 to $3.25, up nearly 20% at the midpoint over our expectation for 2012. For our services and products, we anticipate continued global demand growth to support deepwater drilling, field development, and inspection, maintenance, and repair activities. This market outlook is supported by industry observations and assessments that deepwater drilling is increasing, subsea equipment orders are escalating, and backlog to perform offshore construction projects are at a record high level.
"Compared to 2012, we anticipate all of our segments will have higher operating income in 2013: ROV on greater service demand to support drilling and vessel-based projects; Subsea Products on higher subsea hardware and tooling sales, and increased throughput at our umbilical plants; and Subsea Projects on a full year of work on the field support services contract for BP offshore Angola.
"Our liquidity and projected cash flow provide us with ample resources to invest in Oceaneering’s growth. At the end of the quarter, our balance sheet remained conservatively capitalized with $104 million of cash, $120 million of debt, and $1.7 billion of equity. We generated EBITDA of $169 million during the quarter and $433 million year to date. For 2012 and 2013, we anticipate generating EBITDA of at least $590 million and $670 million, respectively.
"Looking beyond 2013, our belief that the oil and gas industry will continue to invest in deepwater projects remains unchanged. Deepwater remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs. With our existing assets, we are well positioned to supply a wide range of the services and products required to support safe deepwater efforts of our customers."
Statements in this press release that express a belief, expectation, or intention are forward looking. The forward-looking statements in this press release include the statements concerning Oceaneering’s: track to achieve record EPS for 2012; statements about backlog, to the extent backlog may be an indicator of future revenue or profitability; 2012 EPS guidance range; projected fourth quarter 2012 EPS; 2013 EPS guidance range; anticipated continued global demand growth for its services and products; anticipated operating income growth for all of its segments in 2013 relative to 2012, and the basis for such growth in ROVs, Subsea Products, and Subsea Projects; anticipated 2012 and 2013 EBITDA; belief that the oil and gas industry will continue to invest in deepwater projects; and belief that deepwater remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on current information and expectations of Oceaneering that involve a number of risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. For a more complete discussion of these risk factors, please see Oceaneering’s latest annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.
We define EBITDA as net income plus provision for income taxes, interest income/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. For a reconciliation of these EBITDA amounts to the most directly comparable GAAP financial measures, please see the attached schedules.
Oceaneering is a global oilfield 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 and aerospace industries.
For further information, please contact Jack Jurkoshek, Director Investor Relations, Oceaneering International, Inc., 11911 FM 529, Houston, Texas 77041; Telephone 713-329-4670; E--Mail investorrelations@oceaneering.com. A live webcast of the company’s earnings release conference call, scheduled for Tuesday, October 30, 2012 at 11:00 a.m. Eastern, can be accessed at www.oceaneering.com/investor-relations/.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 30, 2012 Dec. 31, 2011
(in thousands)
ASSETS
Current Assets (including cash and cash equivalents of $103,638
and $106,142) $ 1,176,845 $ 984,122
Net Property and Equipment 989,356 893,308
Other Assets 530,651 523,114
TOTAL ASSETS $ 2,696,852 $ 2,400,544
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities $ 615,353 $ 501,375
Long-term Debt 120,000 120,000
Other Long-term Liabilities 227,263 221,207
Shareholders’ Equity 1,734,236 1,557,962
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,696,852 $ 2,400,544
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Nine Months Ended
Sept. 30, Sept. 30, Jun. 30, Sept. 30, Sept. 30,
2012 2011 2012 2012 2011
(in thousands, except per share amounts)
Revenue $ 734,217 $ 602,208 $ 672,545 $ 2,001,655 $ 1,618,466
Cost of services and products 563,348 449,112 511,387 1,546,325 1,240,453
Gross Profit 170,869 153,096 161,158 455,330 378,013
Selling, general and administrative expense 47,056 43,474 51,111 145,483 125,650
Income from Operations 123,813 109,622 110,047 309,847 252,363
Interest income 824 204 194 1,362 460
Interest expense (1,282) (387) (1,256) (3,083) (746)
Equity earnings of unconsolidated affiliates 418 1,042 119 1,341 2,942
Other expense, net (553) (1,973) (3,186) (5,212) (2,331)
Income before Income Taxes 123,220 108,508 105,918 304,255 252,688
Provision for income taxes 38,814 29,930 33,364 95,840 75,347
Net Income $ 84,406 $ 78,578 $ 72,554 $ 208,415 $ 177,341
Weighted Average Number of Diluted Common Shares 108,500 108,928 108,663 108,637 109,114
Diluted Earnings per Share $0.78 $0.72 $0.67 $1.92 $1.63
The above Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income should be read in conjunction with the Company’s latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q.
SEGMENT INFORMATION
For the Three Months Ended For the Nine Months Ended
Sept. 30, Sept. 30, Jun. 30, Sept. 30, Sept. 30,
2012 2011 2012 2012 2011
($ in thousands)
Remotely Operated Vehicles Revenue $ 224,649 $ 200,927 $ 208,802 $ 627,422 $ 554,352
Gross Profit $ 76,524 $ 69,052 $ 74,177 $ 217,093 $ 190,989
Operating Income $ 66,724 $ 60,054 $ 64,168 $ 187,825 $ 165,605
Operating margin 30% 30% 31% 30% 30%
Days available 26,198 23,719 25,182 75,626 70,722
Utilization 81% 80% 81% 81% 76%
Subsea Products Revenue $ 215,617 $ 220,107 $ 191,783 $ 579,481 $ 573,225
Gross Profit $ 67,651 $ 57,798 $ 54,612 $ 169,044 $ 154,519
Operating Income $ 50,841 $ 41,489 $ 36,742 $ 117,093 $ 105,441
Operating margin 24% 19% 19% 20% 18%
Backlog $ 619,000 $ 403,000 $ 621,000 $ 619,000 $ 403,000
Subsea Projects Revenue $ 101,719 $ 49,912 $ 90,448 $ 264,843 $ 122,214
Gross Profit $ 22,202 $ 23,326 $ 20,149 $ 54,262 $ 32,896
Operating Income $ 17,765 $ 20,983 $ 15,969 $ 41,301 $ 25,893
Operating margin 17% 42% 18% 16% 21%
Asset Integrity Revenue $ 113,588 $ 71,633 $ 113,660 $ 320,704 $ 199,751
Gross Profit $ 20,457 $ 12,879 $ 23,948 $ 56,635 $ 35,221
Operating Income $ 14,556 $ 8,858 $ 16,444 $ 37,538 $ 24,087
Operating margin 13% 12% 14% 12% 12%
Advanced Technologies Revenue $ 78,644 $ 59,629 $ 67,852 $ 209,205 $ 168,924
Gross Profit $ 9,753 $ 10,517 $ 10,926 $ 28,402 $ 24,086
Operating Income $ 5,393 $ 5,769 $ 6,645 $ 15,547 $ 11,446
Operating margin 7% 10% 10% 7% 7%
Unallocated Expenses Gross Profit $ (25,718) $ (20,476) $ (22,654) $ (70,106) $ (59,698)
Operating Income $ (31,466) $ (27,531) $ (29,921) $ (89,457) $ (80,109)
TOTAL Revenue $ 734,217 $ 602,208 $ 672,545 $ 2,001,655 $ 1,618,466
Gross Profit $ 170,869 $ 153,096 $ 161,158 $ 455,330 $ 378,013
Operating Income $ 123,813 $ 109,622 $ 110,047 $ 309,847 $ 252,363
Operating margin 17% 18% 16% 15% 16%
SELECTED CASH FLOW INFORMATION
Capital expenditures, including acquisitions $ 64,957 $ 49,885 $ 68,174 $ 225,808 $ 217,647
Depreciation and Amortization $ 44,839 $ 39,603 $ 41,646 $ 127,073 $ 112,748
The above should be read in conjunction with the Company’s latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q.
RECONCILIATION of GAAP to NON-GAAP FINANCIAL INFORMATION
For the Three Months Ended For the Nine Months Ended
Sept. 30, Sept. 30, Jun. 30, Sept. 30, Sept. 30,
2012 2011 2012 2012 2011
($ in thousands)
Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA)
Net Income $ 84,406 $ 78,578 $ 72,554 $ 208,415 $ 177,341
Depreciation and Amortization 44,839 39,603 41,646 127,073 112,748
Subtotal 129,245 118,181 114,200 335,488 290,089
Interest Income/Expense, Net 458 183 1,062 1,721 286
Provision for Income Taxes 38,814 29,930 33,364 95,840 75,347
EBITDA $ 168,517 $ 148,294 $ 148,626 $ 433,049 $ 365,722
2012 Estimates 2013 Estimates
Low High Low High
($ in thousands) ($ in thousands)
Net Income $ 285,000 $ 290,000 $ 325,000 $ 355,000
Depreciation and Amortization 175,000 175,000 195,000 205,000
Subtotal 460,000 465,000 520,000 560,000
Interest Income/Expense, Net - - - -
Provision for Income Taxes 130,000 135,000 150,000 165,000
EBITDA $ 590,000 $ 600,000 $ 670,000 $ 725,000
SOURCE Oceaneering International, Inc.
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