McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today reported net income from continuing operations of
$60.8 million, or $0.26 per diluted share, for the 2010 third
quarter. Included in the 2010 third quarter continuing results is
approximately $43.9 million of non-cash impairment and related
expenses, or 19 cents per diluted share. The results of the 2010
third quarter compare to net income from continuing operations of
$76.1 million, or $0.32 per diluted share, in the corresponding
period of 2009. Both periods exclude the results of The Babcock
& Wilcox Company (“B&W”), which was spun-off to McDermott
shareholders on July 30, 2010, as well as the operations of
McDermott’s charter fleet business, which were obtained in the 2007
Secunda asset acquisition and are classified as held for sale.
Weighted average common shares outstanding on a fully diluted basis
were approximately 236.3 million and 234.3 million in the quarters
ended September 30, 2010 and September 30, 2009, respectively.
McDermott’s revenues for the 2010 third quarter were $732.1
million, compared to $1,012.5 million in the corresponding period
of 2009. The year-over-year decrease in revenues was primarily due
to a $259 million reduction in revenues in the Middle East segment,
which reflects lower fabrication activity and construction vessel
utilization.
The Company’s operating income was $84.3 million in the 2010
third quarter, compared to $97.6 million in the 2009 third quarter.
The year-over-year decrease was primarily due to the $43.9 million
of non-cash impairment and related charges associated with the
write-down of certain multi-service vessels to market value, and
the decision to terminate a contract relating to a previously
proposed development of a new fabrication facility in Kazakhstan.
These charges were largely offset by project improvements in the
Middle East segment, including contract change orders and
close-outs.
“McDermott’s operating performance in the third quarter of 2010
was outstanding, although somewhat muted by the non-cash impairment
charges,” said Stephen M. Johnson, President and Chief Executive
Officer of McDermott. “New awards during the three month period
ended September 30, 2010 were light. However, we are pleased to
report that in the month of October 2010, McDermott recognized
bookings of approximately $1.2 billion. As such, we believe the
market we serve continues to be robust and that the outlook for our
business remains strong, particularly in the Middle East and Asia
Pacific segments.”
The Company’s other expense for the third quarter of 2010 was
$3.5 million, compared to $0.3 million in the third quarter of
2009. The $3.2 million increase in other expense was primarily due
to a $1.3 million reduction in interest income/expense-net, as well
as increased foreign currency translation expenses.
At September 30, 2010, the Company’s backlog was $3.6 billion,
compared to $4.2 billion and $3.8 billion at June 30, 2010 and
September 30, 2009, respectively. The third quarter 2010 backlog
amount does not include $1.2 billion of new bookings received in
October 2010 which will be incorporated in fourth quarter bookings
and year-end backlog.
Balance Sheet Summary
As of September 30, 2010, McDermott reported total assets of
$2.3 billion. Included in this amount was approximately $719.8
million of cash and investments. Net working capital, calculated as
current assets less current liabilities, was $429.6 million.
Additionally, total equity was approximately $1.5 billion, or 63%
of total assets, with total debt of $54.0 million.
Discontinued Operations
In the third quarter of 2010, McDermott recorded a net loss from
discontinued operations of $40.0 million, or $0.17 per diluted
share, compared to net income from discontinued operations of $42.1
million, or $0.18 per diluted share, in the corresponding period of
2009. Included in discontinued operations for both periods are the
results of B&W, which was spun-off to McDermott’s shareholders
on July 30, 2010, the Secunda charter fleet business, which is held
for sale, as well as transaction related costs associated with the
spin-off of B&W and impairment charges associated with the
charter fleet business.
Upcoming Investor Events
McDermott plans to attend two upcoming investor conferences next
week. On November 16, 2010, McDermott will participate in the
Barclays Capital Energy, Engineering and Construction One-Day Forum
in Dallas. The following day, November 17, 2010, McDermott will
participate in the 2010 KeyBanc Capital Markets Engineering,
Construction and Utilities Conference in New York City.
The presentations to be used during both of these meetings will
be available for a limited time over the Internet at
www.mcdermott.com in the investor relations section on the morning
of the respective events.
OTHER INFORMATION
About the Company
McDermott is a leading engineering, procurement, construction
and installation (“EPCI”) company focused on executing complex
offshore oil and gas projects worldwide. Providing fully integrated
EPCI services for upstream field developments, the Company delivers
fixed and floating production facilities, pipelines and subsea
systems from concept to commissioning. McDermott’s customers
include national and major energy companies. Operating in more than
20 countries across the Atlantic, Middle East and Asia Pacific, the
Company’s integrated resources include more than 16,000 employees
and a diversified fleet of marine vessels, fabrication facilities
and engineering offices. McDermott has served the energy industry
since 1923. To learn more, please visit McDermott’s website on the
Internet at www.mcdermott.com.
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 McDermott’s actual results of
operations. These forward-looking statements include statements
about backlog, to the extent backlog may be viewed as an indicator
of future revenues, and our belief that the market we serve
continues to be robust and the outlook for our business remains
strong. 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
adverse changes in the markets in which we operate or credit
markets and our inability to successfully execute on contracts in
backlog. 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 annual report on Form 10-K for the year ended
December 31, 2009 and subsequent quarterly reports on Form 10-Q.
This news release reflects management’s views as of the date
hereof. Except to the extent required by applicable law, McDermott
undertakes no obligation to update or revise any forward-looking
statement.
In addition to the Company's results prepared in accordance with
generally accepted accounting principles ("GAAP"), McDermott has
provided Non-GAAP financial measures that present its Condensed
Consolidated Statements of Income, including net income
attributable to McDermott and net income per share, for the
three-months ended September 30, 2010 on a basis that excludes
certain income and expenses. Details of these excluded items are
presented in the table below titled "Non-GAAP Earnings
Reconciliation," which reconciles the GAAP results to Non-GAAP
financial measures described above.
Conference Call to Discuss Third
Quarter 2010 Earnings Release
Date: Tuesday, November 9, 2010, at 10:00 a.m. ET (9:00
a.m. CT)
Live Webcast: Investor Relations section of Web site at
www.mcdermott.com
Replay: Available for 2 weeks in the investor relations
section of www.mcdermott.com
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
2010
2009
2010
2009
(As adjusted) (As adjusted) (Unaudited) (In
thousands, except share and per share amounts) Revenues
$ 732,095 $ 1,012,474 $
1,864,121 $ 2,524,992 Costs and
Expenses: Cost of operations 565,996 855,235 1,421,041 2,167,526
Loss (gain) on asset disposals and impairments – net 24,336 (121 )
22,030 (1,179 ) Selling, general and administrative expenses
56,099 59,175
159,911 167,354 Total costs and
expenses 646,431 914,289
1,602,982 2,333,701
Equity in Losses of Investees (1,361 )
(596 ) (5,507 ) (2,797 )
Operating Income 84,303 97,589
255,632 188,494
Other income (expense): Interest income (expense) – net (78
) 1,230 (1,532 ) 7,284 Other income (expense) – net
(3,460 ) (1,554 ) (4,188 )
(11,009 ) Total other income (expense) (3,538
) (324 ) (5,720 ) (3,725
)
Income from continuing operations before
provision for income taxes and noncontrolling
interest
80,765 97,265 249,912 184,769 Provision for Income Taxes
10,085 19,300
35,229 44,106 Income from
continuing operations before noncontrolling interest
70,680 77,965 214,683
140,663 Income (loss) from discontinued
operations, net of tax (40,030 ) 42,051 (34,308 ) 155,555
Net Income 30,650 120,016
180,375 296,218
Less: Net Income Attributable to Noncontrolling Interests
(9,847 ) (1,909 ) (23,597 )
(7,864 ) Net Income Attributable to McDermott
International, Inc. $ 20,803 $ 118,107
$ 156,778 $ 288,354
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months Ended Nine Months Ended
September 30, September 30,
2010
2009
2010
2009
(Unaudited) (In thousands, except share and per share
amounts)
Income from continuing operations less
noncontrollinginterest
$ 60,833 $ 76,056 $ 191,086 $ 132,799 Income (loss) from
discontinued operations, net of tax (40,030 )
42,051 (34,308 ) 155,555 Net
Income $ 20,803 $ 118,107 $ 156,778
$ 288,354 Weighted average common shares
(basic) 232,670,579 229,989,368
231,780,675 229,192,531 Effect
of dilutive securities:
Stock options, restricted stock and
restricted stock units
3,600,832 4,325,251
3,368,656 4,143,074
Adjusted weighted average common shares
and assumed exercises of stock options and
vesting of stock awards
236,271,411 234,314,619
235,149,331 233,335,605
Basic earnings per share:
Income from continuing operations less
noncontrollinginterest
0.26 0.33 0.82 0.58 Income (loss) from discontinued operations, net
of tax (0.17 ) 0.18 (0.15
) 0.68 Net Income 0.09
0.51 0.67 1.26
Diluted earnings per share:
Income from continuing operations less
noncontrollinginterest
0.26 0.32 0.81 0.57 Income (loss) from discontinued operations, net
of tax (0.17 ) 0.18 (0.14
) 0.67 Net Income 0.09
0.50 0.67 1.24
SUPPLEMENTARY DATA (1)
Three Months Ended Nine Months Ended
September 30, September 30, 2010
2009 2010 2009
(Unaudited) (In thousands) Pension expense $ 2,980 $
4,126 $ 16,282 $ 12,377 Depreciation & amortization
expense $ 21,824 $ 25,647 $ 64,373 $ 67,056 Capital expenditures $
44,401 $ 39,364 $ 129,435 $ 125,319
Backlog (2)
$ 3,599,957 $ 3,831,126 $ 3,599,957 $ 3,831,126
(1)
Above metrics represents McDermott’s continuing operations
only and thus excludes B&W and the Secunda charter business.
(2)
Backlog figures for 2010 do not include approximately $1.2 billion
of new bookings that occurred in October 2010.
MCDERMOTT INTERNATIONAL, INC.
NON-GAAP EARNINGS
RECONCILIATION
Three Months Ended September 30, 2010
GAAP
Results
Less
Non-GAAP
Notes
Non-GAAP
Results
Adjustments
(Unaudited) (In thousands, except per share amounts)
Revenues $ 732,095
$ 732,095 Costs and Expenses: Cost of operations
565,996 19,527 [1] 546,469 Loss on asset disposals and impairments
– net 24,336 24,336 [2] - Selling, general and administrative
expenses 56,099
56,099 Total costs and expenses
646,431 43,863 602,568
Equity in Losses of Investees (1,361 )
(1,361 ) Operating Income
84,303 43,863
128,166 Other income (expense): Interest income (expense) –
net (78 ) (78 ) Other expense – net (3,460 )
(3,460 ) Total other income
(expense) (3,538 )
(3,538 )
Income from continuing operations before
provision for income Taxes and noncontrolling
interest
80,765 43,863 124,628 Provision for Income Taxes
10,085 10,085
Income from continuing operations before noncontrolling
interest 70,680 43,863
114,543 Income (loss) from discontinued
operations, net of tax (40,030 ) 40,030 [3] - Net Income
30,650 83,893
114,543 Less: Net Income Attributable to Noncontrolling
Interests (9,847 )
(9,847 ) Net Income Attributable to McDermott
International, Inc. $ 20,803 83,893
$ 104,696 Earnings per Share: Basic:
Income from continuing operations, less noncontrolling interest
0.26 0.19 0.45 Income (loss) from discontinued operations, net of
tax (0.17 ) 0.17 -
Net Income 0.09 0.36
0.45 Diluted: Income from
continuing operations, less noncontrolling interest 0.26 0.19 0.44
Income (loss) from discontinued operations, net of tax
(0.17 ) 0.17 - Net
Income 0.09 0.36
0.44
[1]
Represents impairment and related expenses associated with a
contract termination for the development of a new fabrication
facility in Kazakhstan.
[2]
Eliminates net loss on asset disposals and impairments-net,
including a $24.4 million impairment on 2 multi-service vessels.
[3]
Excludes the results of McDermott’s discontinued operations,
including B&W & the Secunda charter business.
Presented above is a reconciliation
between GAAP net income and non-GAAP net income, on a total and per
share basis, excluding impairment and related charges. The non-GAAP
measures are based upon our unaudited condensed consolidated
statements of income for the period shown, with certain adjustments
shown above. McDermott is providing non-GAAP information to
supplement the results provided in accordance with GAAP and it
should not be considered superior to, or as a substitute for, the
comparable GAAP measures. However, McDermott believes these
non-GAAP measures provide meaningful insight into its ongoing
operational performance and, therefore, uses the non-GAAP
information internally to evaluate McDermott's operations for
purposes of review, planning and performance goals. McDermott has
chosen to provide this supplemental non-GAAP information to
investors to enable them to perform additional comparisons of
operating results and as a means to emphasize the results of
ongoing operations absent certain expenses considered by management
to be outside of McDermott's ongoing business.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
ASSETS
September 30, December 31, 2010
2009 (Unaudited) (In
thousands) Current Assets: Cash and cash equivalents $
424,799 $ 969,190 Investments 216,451 12 Accounts receivable – net
279,166 716,836 Contracts in progress 116,181 400,831 Inventories
1,675 101,494 Deferred income taxes 12,121 100,828 Assets held for
sale 18,525 - Other current assets
40,794 68,730 Total Current
Assets
1,109,712
2,357,921 Property, Plant and Equipment 1,660,293
2,608,740 Less: Accumulated depreciation
(789,633 ) (1,271,135 ) Net Property,
Plant and Equipment
870,660
1,337,605 Assets held for sale
75,054 -
Investments
78,516
228,706 Goodwill
40,633
306,497 Deferred Income Taxes
- 275,567
Investments in Unconsolidated Affiliates
27,297 86,932
Other Assets
146,295
255,882 TOTAL
$ 2,348,167
$ 4,849,110
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
LIABILITIES AND EQUITY
September 30, December 31, 2010
2009 (Unaudited) (In
thousands, except share amounts) Current Liabilities:
Notes payable and current maturities of long-term debt $ 8,567 $
16,270 Accounts payable 201,388 471,858 Accrued employee benefits
69,663 217,178 Accrued pension liability – current portion 8,630
173,271 Accrued liabilities – other 97,600 155,773 Accrued contract
cost 70,634 103,041 Advance billings on contracts 147,182 689,334
Accrued warranty 50 118,278 Liabilities associated with assets held
for sale 19,415 - Deferred tax liabilities 11,692 4,735 Income
taxes payable 45,319 59,294
Total Current Liabilities 680,140
2,009,032 Long-Term Debt
45,466 56,714 Accumulated
Postretirement Benefit Obligation 5,192
105,605 Self-Insurance 37,523
87,222 Pension Liability
31,527 610,166 Other
Liabilities 75,277 147,271
Commitments and Contingencies Stockholders’
Equity:
Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued 240,420,420 and
236,919,404 shares at September 30, 2010 and December
31, 2009, respectively
240,420 236,919 Capital in excess of par value 1,349,839 1,300,998
Retained earnings 55,485 951,647
Treasury stock at cost, 6,898,139 and
6,168,705 shares atSeptember 30, 2010 and December 31, 2009,
respectively
(85,551 ) (69,370 ) Accumulated other comprehensive loss
(148,166 ) (612,997 ) Stockholders’ Equity –
McDermott International, Inc. 1,412,027 1,807,197 Noncontrolling
interest 61,015 25,903
Total Equity 1,473,042 1,833,100
TOTAL $ 2,348,167 $ 4,849,110
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
Nine Months Ended September 30,
2010
2009
(Unaudited) (In thousands) CASH FLOWS FROM OPERATING
ACTIVITIES: Net Income $ 180,375 $ 296,218
Adjustments to reconcile earnings from continuing
operations: Non-cash items included in net income: Depreciation and
amortization 101,844 118,871 Income (loss) of investees, less
dividends 5,507 (11,458 ) Loss (gain) on asset disposals and
impairments – net 22,030 (333 ) Provision for deferred taxes
366,498 43,264 Amortization of pension and postretirement costs
57,991 68,877 Tax benefits (expense) from stock-based compensation
(2,192 ) 2,458 Other, net 32,346 36,736 Changes in assets and
liabilities, net of effects of acquisitions and divestitures:
Accounts receivable 86,951 62,932 Income tax receivable 17,492
57,169 Net contracts in progress and advance billings on contracts
(121,338 ) (442,373 ) Accounts payable (99,095 ) (22,099 ) Income
taxes (130,168 ) 10,571 Accrued and other current liabilities 4,628
(1,461 )
Pension liability, accumulated
postretirement benefit obligation and accrued
employee benefits
(187,189 ) 13,961 Other, net (241,548 )
(35,925 ) Net cash provided by operating activities
94,132 197,408 CASH FLOWS FROM
INVESTING ACTIVITIES: Increase in restricted cash and cash
equivalents (81,126 ) (13,514 ) Purchases of property, plant and
equipment (168,027 ) (190,207 ) Acquisition of businesses, net of
cash acquired (31,705 ) (8,497 ) Net (increase) decrease in
available-for-sale securities (156,771 ) 208,435 Proceeds from
asset disposals 4,837 2,724 Investments in unconsolidated affiliate
(14,200 ) - Other, net 600
(2,676 ) Net cash used in investing activities
(446,392 ) (3,735 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Payment of long-term debt (7,737 ) (5,652 ) Increase in
short-term borrowings - 1,606 Issuance of common stock 691 713
Payment of debt issuance costs (5,763 ) (56 ) Cash distributed to
The Babcock & Wilcox Company (250,388 ) - Tax benefits
(expense) from stock-based compensation 2,192 (2,458 ) Other, net
(14 ) (109 ) Net cash used in financing
activities (261,019 ) (5,956 ) Effects
of exchange rate changes on cash 302
10,097 NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (612,977 ) 197,814 CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 899,270
586,649 CASH AND CASH EQUIVALENTS AT END OF PERIOD $
286,293 $ 784,463 SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period
for: Interest (net of amount capitalized) $ 3,578 $ 1,855 Income
taxes (net of refunds) $ 49,661 $ 93 Non-cash dividend in
connection with the B&W spin-off $ 1,052,940 $ -
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