McDermott International, Inc. (NYSE:MDR) (�McDermott� or the
�Company�) today provided a preview of the Company�s expected
financial results for the fourth quarter of 2008. Additionally, the
Company announced its participation in an upcoming investor
conference and has scheduled its fourth quarter 2008 earning
release and conference call dates.
� � � � � �
Expected Results � 4Q08
Revenue Range
Segment Income Range
� �
($ in millions,
unaudited)
Offshore Oil & Gas Construction $ 820 - 850 $10-15 Power
Generation Systems $ 575 - 605 $45-50 Government Operations $ 205 -
215 $33-36 Unallocated Corporate � -
($8)-(10
)
Consolidated Revenue & Operating Income $ 1,600-1,670 $78-93 �
McDermott expects that based upon the preceding estimated
operating income range, combined with an �other expense� of
approximately $7 million (primarily about $10 million of non-cash
foreign currency translation losses), a consolidated tax rate of
approximately 50 percent during the quarter and approximately 230
million of diluted common shares outstanding, that the Company�s
GAAP net income will range between $36-43 million, or approximately
$0.16-0.19 per diluted share, in the fourth quarter of 2008. These
expected results include an approximate $57 million after tax net
charge from certain items. See Table 1 and the Discussion &
Outlook section for additional detail and calculations.
�Including these expectations for the fourth quarter, fiscal
2008 should prove to be the second best year for consolidated net
income in Company history, behind 2007,� said John A. Fees, Chief
Executive Officer of McDermott. �Although the trend line was
largely downward on a quarterly basis through much of the year, we
expect it to bottom in the first quarter and then reverse trend
throughout the remainder of 2009. Though wide, we view the current
range of analyst�s EPS estimates for the full year of 2009 (i.e.
$1.35 to $2.14) as reasonable bookends at this time, based on our
current 2009 forecast and business conditions.�
Discussion &
Outlook
The Offshore Oil & Gas Construction segment, expected to
report over $140 million in segment income for full year 2008, has
several major items affecting its expected results for the fourth
quarter of 2008, specifically: downtime experienced and forecasted
on certain Middle East pipeline projects in excess of the September
30, 2008 forecast, increased experienced and expected costs for
certain procured items, partially offset by an approximate $35
million benefit from the resolution of a claim. Together, the net
impact from these items for the period is expected to be an expense
of approximately $35 million in the fourth quarter of 2008.
During the fourth quarter, approximately 60% of available
working days for the major construction vessels working on the
Middle East pipeline projects were unproductive, primarily due to
weather, which exceeded management�s forecast at September 30,
2008. More significantly, the Company increased its forecasted
downtime expected during 2009 in its estimated cost-to-complete for
these projects, which is included in the expected fourth quarter
expense above. Should these projects be completed according to the
revised forecast, the gross margin realized for the remainder of
the projects will be break-even. During the month of January 2009,
the Company�s productivity and downtime was slightly ahead of this
revised schedule. Based upon discussions with the respective
customers, no additional liquidated damages are currently
forecasted on these projects as probable in the fourth quarter as
negotiations are continuing. Bookings during the last quarter of
2008 were light in this segment; however management is expecting
new awards exceeding $1 billion over the next few months.
The Power Generation Systems segment is expected to report
fourth quarter 2008 results within management�s previously
discussed 7-10% operating margin range, and is expected to earn
over $300 million of segment income for the full-year of 2008,
which would be a segment record. The expected results for the
fourth quarter include approximately $15 million of certain
expenses for items, such as inventory and material write-downs.
Bookings during the fourth quarter were below recent quarters as
the current credit and economic environment, as well as short-term
uncertainty regarding environmental regulations, has affected
utilities more than McDermott�s other customers at this time in
management�s view.
The Government Operations segment is expected to achieve a
record level of segment income for 2008 of approximately $150
million and had its highest single period of bookings in its
history during the fourth quarter, led by the recent announcement
of new awards exceeding $1 billion and the completed acquisition of
Nuclear Fuel Services.
Net interest income is forecast to be approximately $3 million,
but is expected to be more than offset by approximately $10 million
of non-cash foreign currency translation losses. The Company�s
consolidated tax rate is anticipated to be at a level above recent
history due to a larger mix of income in higher tax jurisdictions
and losses incurred in lower tax jurisdictions, including regions
where no tax benefit is available.
Consolidated Backlog &
Liquidity
With additions in excess of $2.0 billion in the fourth quarter,
the Company expects that consolidated year-end 2008 backlog will be
approximately $9.8 billion. At December 31, 2008, McDermott had
cash and equivalents, restricted cash and investments of
approximately $1.1 billion after its purchase of Nuclear Fuel
Services, in addition to over $750 million of current capacity
under the Company�s credit facilities and virtually no funded
long-term debt.
John Fees concluded, �McDermott�s financial position remains
strong. Although our 2008 results were hampered by certain project
costs, both current and future, the Company remained solidly
profitable which allowed McDermott to enter 2009 with a solid
balance sheet. Combined with the diversity of our contracts,
customers, and energy markets served, we are well-positioned for
the future.�
Conference
Participation
The Company also announced today that Michael S. Taff, Senior
Vice President and Chief Financial Officer of McDermott, will
present at the Barclays Capital Industrial Select Conference in
Miami on Tuesday, February 10, 2009 at 3:45 p.m. Eastern Time.
McDermott invites shareholders and other interested parties to
listen to the presentation live or to the replay, available over
the internet at www.mcdermott.com in the investor relations
section.
Earnings Release and
Conference Call Dates for Fourth Quarter 2008
The Company plans to release its financial results for the
fourth quarter and full-year of 2008 during the evening of Monday,
March 2, 2009. McDermott will host its quarterly conference call
with the financial community the following morning, Tuesday, March
3, at 10:00 a.m. (ET). The Company invites investors and other
interested individuals to listen to the call live or to the replay,
both available at www.mcdermott.com in the investor relations
section.
OTHER INFORMATION
About the
Company
McDermott is an engineering and construction company, with
specialty manufacturing and service capabilities, focused on energy
infrastructure. McDermott�s customers are predominantly utilities
and other power generators, major and national oil companies, and
the United States Government. With its global operations, McDermott
operates in over 20 countries with more than 25,000 employees.
Forward Looking
Statements
In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, McDermott cautions that
statements in this press release, which are forward-looking and
provide other than historical information, involve risks and
uncertainties that may impact the Company�s actual results of
operations. The forward-looking statements in this release speak to
conditions as of the date of this presentation and include
statements relating to the Company�s and its segments� revenues,
income and results of operation for the fourth quarter and full
year 2008 and factors contributing to those results as well as
statements related to the Company�s expectations about backlog,
liquidity, our position for the future and outlook and trends for
2009, including expectations about current analysts� EPS estimates
and new awards. Although we believe that the expectations reflected
in those forward-looking statements are reasonable, we can give no
assurance that those expectations will prove to have been correct.
Those statements are made by using various underlying assumptions
and are subject to numerous uncertainties and risks, including
audit adjustments, adverse changes in the markets in which we
operate, adverse changes in our tax rate, that our assumptions in
the 2009 forecast prove to be incorrect, our inability to
successfully execute on contracts in backlog or that awards and
contracts in backlog may not otherwise result in the expected
revenues. If one or more of these risks materialize, or if
underlying assumptions prove incorrect, actual results may vary
materially from those expected. For a more complete discussion of
these and other risk factors, please see McDermott�s annual and
quarterly filings with the Securities and Exchange Commission,
including its report on Form 10-K for the year ended December 31,
2007. We do not undertake any obligation to update the
forward-looking statements included in this press release to
reflect events or circumstances after the date of this press
release, unless we are required by applicable securities laws to do
so.
� � � � � � � Table 1 Expected Items identified in Fourth Quarter
2008 Preview Included in GAAP Estimated Range As of February 2,
2008 (In millions, unaudited and preliminary) � �
Disclosed
Tax
Item
Expense
Impact
After-tax
� Net Expenses, Offshore O&G Const. $ 35.0 $ 5.0 $ 40.0
Identified Items, Power Generation $ 15.0 ($6.0 ) $ 9.0 Foreign
Currency, Other Expense $ 10.0 � ($2.0 ) $ 8.0 � Total $ 60.0 $ 3.0
$ 57.0
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