MDR McDermott International Inc

McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported income from continuing operations of $68.8 million, or $0.29 per diluted share, for the 2011 first quarter. The results of the 2011 first quarter compare to income from continuing operations of $51.6 million, or $0.22 per diluted share, in the corresponding period of 2010. The results of McDermott’s charter fleet business and The Babcock & Wilcox Company (“B&W”), which was spun-off to McDermott shareholders on July 30, 2010, are excluded from both periods and are classified as discontinued operations. Weighted average common shares outstanding on a fully diluted basis were approximately 236.7 million and 234.8 million in the quarters ended March 31, 2011 and March 31, 2010, respectively.

McDermott’s revenues for the 2011 first quarter were $899.2 million, an increase of 78 percent, compared to $504.9 million in the corresponding period of 2010. The year-over-year increase was primarily due to significant increases in the Asia Pacific and Middle East segments as a result of higher marine activity on large engineering, procurement, construction and installation (“EPCI”) projects, partially offset by lower revenues in the Atlantic segment.

The Company’s operating income was $100.3 million in the 2011 first quarter, compared to $73.2 million in the 2010 first quarter. The year-over-year increase was due to a 148 percent increase in the Middle East segment, partially offset by reduced levels of operating income in the Asia Pacific and Atlantic segments. Although higher revenues provided an overall increase in operating income, the improvement was moderated as McDermott recognized significantly less income from change orders, settlements and close-outs in the first quarter of 2011 as compared to the 2010 period.

“McDermott delivered solid results in the 2011 first quarter which represents a positive start to the year,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “The offshore EPCI markets we serve continue to be robust, our backlog remains strong, we’ve executed well and our healthy balance sheet provides a firm foundation to pursue growth.”

The Company’s other expense for the first quarter of 2011 increased to $5.0 million, from $1.1 million in the first quarter of 2010, primarily due to non-cash foreign currency expense.

At March 31, 2011, the Company’s backlog was $4.8 billion, compared to $4.1 billion and $5.0 billion at March 31, 2010 and December 31, 2010, respectively.

Balance Sheet Summary

As of March 31, 2011, McDermott reported total assets of almost $2.6 billion. Included in this amount was approximately $741.4 million of cash, restricted cash and investments. Net working capital, calculated as current assets less current liabilities, was $483.8 million. Additionally, total equity was over $1.6 billion, or 62% of total assets, with total debt of $65.1 million.

Discontinued Operations

For the first quarter of 2011, McDermott recorded net income from discontinued operations of $1.7 million, or $0.01 per diluted share, derived from its charter fleet business which is held for sale. Including the results of discontinued operations, total net income attributable to McDermott was $70.4 million, or $0.30 per diluted share, for the 2011 first quarter.

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 approximately 20 countries across the Atlantic, Middle East and Asia Pacific, the Company’s integrated resources include more than 15,000 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, the conditions of the EPCI markets and future growth. 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, our inability to successfully execute on contracts in backlog and changes in the scope or timing of contracts. 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, 2010 and 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.

Conference Call to Discuss First Quarter 2011 Earnings Release

Date: Wednesday, May 11, 2011, 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 EndedMarch 31,   2011     2010   (Unaudited)

(In thousands, except share and per shareamounts)

  Revenues $ 899,240   $ 504,882       Costs and Expenses: Cost of operations 747,225 379,206 Gain on asset disposals and impairments – net (225 ) (2,080 ) Selling, general and administrative expenses   55,369     51,138     Total costs and expenses   802,369     428,264       Equity in Income (Loss) of Unconsolidated Affiliates   3,427     (3,431 )     Operating Income   100,298     73,187       Other Income (Expense): Interest income 449 490 Interest expense — (162 ) Other expense – net   (5,403 )   (1,450 )   Total other expense – net   (4,954 )   (1,122 )    

Income from continuing operations before provision for income taxes and   noncontrolling interest

  95,344     72,065       Provision for Income Taxes   22,579     12,239       Income from continuing operations before noncontrolling interest   72,765     59,826     Loss on disposal of discontinued operations — (24,202 ) Income from discontinued operations, net of tax   1,662     32,581     Total income from discontinued operations, net of tax   1,662     8,379       Net Income   74,427     68,205       Less net income attributable to noncontrolling interest   (4,007 )   (8,264 )     Net Income Attributable to McDermott International, Inc. $ 70,420   $ 59,941      

McDERMOTT INTERNATIONAL, INC.

EARNINGS PER SHARE COMPUTATION

 

Three Months EndedMarch 31,

2011 2010

(Unaudited)

(In thousands, except shares andper share amounts)

Basic: Income from continuing operations less noncontrolling interest

$

68,758

$ 51,562 Income from discontinued operations, net of tax   1,662   8,379   Net income attributable to McDermott International, Inc. $ 70,420 $ 59,941   Weighted average common shares   233,841,075   230,824,301   Basic earnings per common share: Income from continuing operations less noncontrolling interest $ 0.29 $ 0.22 Income from discontinued operations, net of tax $ 0.01 $ 0.04 Net income attributable to McDermott International, Inc. $ 0.30 $ 0.26   Diluted: Weighted average common shares (basic)   233,841,075   230,824,301   Effect of dilutive securities: Stock options, restricted stock and performance shares   2,904,503   3,928,734   Adjusted weighted average common shares   236,745,578   234,753,035   Diluted earnings per common share: Income from continuing operations less noncontrolling interest $ 0.29 $ 0.22 Income from discontinued operations, net of tax $ 0.01 $ 0.04 Net income attributable to McDermott International, Inc. $ 0.30 $ 0.26    

SUPPLEMENTARY DATA

    Three Months EndedMarch 31,   2011   2010 (Unaudited)

(In thousands)

Pension expense $ 6,153 $ 6,473

Depreciation & amortization expense                                        

20,525 18,787 Capital expenditures 63,986 48,412 Backlog $ 4,764,005 $ 4,092,566    

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

  March 31, December 31,   2011     2010   (Unaudited) (In thousands) Assets Current Assets: Cash and cash equivalents $ 209,207 $ 403,463 Restricted cash and cash equivalents 206,354 197,861 Investments 257,584 209,463 Accounts receivable—trade, net 297,269

323,497

Accounts receivable—other

37,607

28,447 Contracts in progress 122,198 65,853 Deferred income taxes 12,426 10,323 Assets held for sale 14,220 10,161 Other current assets   47,972     36,570     Total Current Assets   1,204,837     1,285,638     Property, Plant and Equipment 1,789,093 1,720,040 Less accumulated depreciation   824,107     804,471     Net Property, Plant and Equipment   964,986     915,569     Assets Held for Sale   78,148     77,150     Investments   68,211     75,742     Goodwill   41,202     41,202     Investments in Unconsolidated Affiliates   48,459     45,016     Other Assets   164,508     158,371     Total Assets $ 2,570,351   $ 2,598,688       Liabilities and Equity Current Liabilities: Notes payable and current maturities of long-term debt $ 8,001 $ 8,547 Accounts payable 281,331 252,974 Accrued liabilities 280,956 286,831 Advance billings on contracts 62,336 250,053 Deferred income taxes 14,971 12,849 Income taxes payable 50,370 32,851 Liabilities associated with assets held for sale   23,028     20,902     Total Current Liabilities   720,993     865,007     Long-Term Debt   57,091     46,748     Self-Insurance   36,179     35,655     Pension Liability   54,598     52,831     Other Liabilities   97,862     86,180     Commitments and Contingencies   Stockholders’ Equity:

Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 241,912,337 and240,791,473 shares at March 31, 2011 and December 31, 2010, respectively

241,912 240,791 Capital in excess of par value 1,363,335 1,357,316 Retained earnings 170,793 100,373

Treasury stock, at cost, 7,159,192 and 6,906,262 shares at March 31, 2011 and December 31, 2010,respectively

(92,218 ) (85,735 ) Accumulated other comprehensive loss   (148,559 )   (163,717 )   Stockholders’ Equity—McDermott International, Inc. 1,535,263 1,449,028 Noncontrolling interest   68,365     63,239     Total Equity   1,603,628     1,512,267     Total Liabilities and Equity $ 2,570,351   $ 2,598,688          

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three Months Ended March 31,

2011 2010 (Unaudited) (In thousands) Cash Flows From Operating Activities: Net income $ 74,427 $ 68,205 Income from discontinued operations, net of tax   (1,662 )  

(8,379

)

  Income from continuing operations 72,765 59,826 Non-cash items included in net income: Depreciation and amortization 20,525 18,787 Equity in (income) loss of unconsolidated affiliates (3,427 ) 3,431 Gains on asset disposals and impairments—net (225 )

(2,080

)

Benefit from deferred taxes (6,929 ) (2,497 ) Pension costs 6,153 6,473 Other non-cash items 4,368 13,084 Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable 17,045 62,206 Net contracts in progress and advance billings on contracts (244,062 )

(25,758

)

Accounts payable 23,947

(104,169

)

Accrued and other current liabilities 39,311 3,863 Pension liability and accrued postretirement and employee benefits

(41,546

)

(55,295 ) Other   20,038     (16,590 )   Net Cash Used In Operating Activities—Continuing Operations   (92,037 )   (38,719 )   Cash Flows From Investing Activities: Increase in restricted cash and cash equivalents

(8,493

)

(23,498

)

Purchases of property, plant and equipment

(63,986

)

(48,412

)

Net (increase) decrease in available-for-sale securities

(39,808

)

48,408 Other investing activities, net   218     2,459     Net Cash Used In Investing Activities—Continuing Operations   (112,069 )  

(21,043

)

  Cash Flows From Financing Activities: Payment of debt

(2,158

)

(2,176 ) Increase in debt 11,837

-

Other financing activities, net   57     1,246     Net Cash Provided By (Used In) Financing Activities—Continuing Operations   9,736     (930 )   Effects of exchange rate changes on cash and cash equivalents   114     435     Net decrease in cash and cash equivalents  

(194,256

)

  (60,257 )   Cash and cash equivalents at beginning of period   403,463     428,298     Cash and cash equivalents at end of period—Continuing Operations

$

209,207

  $ 368,041