McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today reported income from continuing operations of $9.8
million, or $0.04 per diluted share, for the 2011 third quarter.
The results of the 2011 third quarter compare to income from
continuing operations of $60.8 million, or $0.26 per diluted share,
in the corresponding period of 2010. Classified as discontinued
operations, the results of McDermott’s charter fleet business are
excluded from both periods and The Babcock & Wilcox Company,
which was spun-off to McDermott shareholders last year on July 30,
is excluded from the 2010 period. Weighted average common shares
outstanding on a fully diluted basis were approximately 236.9
million and 236.3 million in the quarters ended September 30, 2011
and September 30, 2010, respectively.
McDermott’s revenues were $879.9 million for the 2011 third
quarter, an increase of over 20 percent, compared to $732.1 million
in the corresponding period of 2010. The year-over-year increase
was primarily due to a 91 percent increase in revenues in the Asia
Pacific segment as a result of expanded scope and marine activity
on a large engineering, procurement, construction and installation
project, partially offset by a 34 percent decline in Middle East
segment revenues.
The Company’s operating income in the 2011 third quarter was
$35.2 million, compared to $84.3 million in the 2010 third quarter.
Operating income in the 2011 third quarter was negatively affected
by previously announced project losses of approximately $50
million, primarily within the Atlantic segment, which more than
offset a 95 percent increase in the Asia Pacific segment’s
operating income, as compared to the 2010 third quarter. In the
2010 third quarter, McDermott’s operating income was negatively
affected by approximately $44 million of non-cash impairment and
related charges, which was largely offset by approximately $36
million in project improvements on certain Qatar projects.
The Company’s other income for the third quarter of 2011 was
$373 thousand, an improvement of $3.9 million compared to the other
expense in the third quarter of 2010, primarily due to higher
foreign currency gains.
At September 30, 2011, the Company’s backlog was $4.3 billion,
compared to $3.6 billion and $4.7 billion at September 30, 2010 and
June 30, 2011, respectively. Of the September 30, 2011 backlog,
approximately $335 million is from projects currently in a loss
position whereby future revenues are expected to equal costs when
recognized.
Balance Sheet Summary
As of September 30, 2011, McDermott reported total assets of
approximately $2.8 billion.
Included in this amount was $618.8 million of cash, restricted
cash and investments. Net working capital, calculated as current
assets less current liabilities, was $493.4 million. Additionally,
total equity was $1.7 billion, or approximately 62% of total
assets, with total debt of $89.1 million.
Discontinued Operations
For the third quarter of 2011, McDermott recorded net income
from discontinued operations of $1.2 million, or $0.01 per diluted
share. Including the results of discontinued operations, total net
income attributable to McDermott was $11.0 million, or $0.05 per
diluted share, for the 2011 third 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
approximately 14,000 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. 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 without limitation our inability to successfully execute
on contracts in backlog, changes in project design or schedules,
changes in the scope or timing of contracts, contract cancellations
and change orders and other modifications. 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 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.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2011 2010 2011
2010 (In thousands) Revenues $ 879,894
$ 732,095 $ 2,628,935 $ 1,864,121 Costs and
Expenses: Cost of operations 802,951 565,996 2,253,981 1,421,041
Selling, general and administrative expenses 48,046 56,099 163,827
159,911 Loss on asset impairments
-
24,444
-
24,444 Gain on asset disposals
(7,811
)
(108
)
(8,107
)
(2,414
)
Total costs and expenses 843,186 646,431
2,409,701 1,602,982
Equity in Income (Loss) of Unconsolidated Affiliates
(1,492
)
(1,361
)
59
(5,507
)
Operating Income 35,216 84,303
219,293 255,632 Other Income (Expense):
Interest income 319 314 1,060 1,139 Interest expense
(152
)
(392
)
(415
)
(2,671
)
Other income (expense) – net 206
(3,460
)
(3,942
)
(4,188
)
Total other income (expense) 373
(3,538
)
(3,297
)
(5,720
)
Income from continuing operations before provision for
income taxes and noncontrolling interests 35,589 80,765 215,996
249,912 Provision for Income Taxes 20,535
10,085 60,351 35,229 Income from
continuing operations before noncontrolling interests 15,054
70,680 155,645 214,683
Loss on disposal of discontinued operations
-
(32,936
)
-
(123,356
)
Income (loss) from discontinued operations, net of tax 1,187
(7,094
)
6,459 89,048 Total income (loss) from
discontinued operations, net of tax 1,187
(40,030
)
6,459
(34,308
)
Net Income 16,241 30,650 162,104 180,375
Less: Net Income Attributable to
Noncontrolling
Interests 5,290 9,847 13,405
23,597 Net Income Attributable to McDermott
International, Inc. $ 10,951 $ 20,803 $ 148,699
$ 156,778
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months EndedSeptember 30, Nine Months
Ended
September 30,
2011 2010 2011 2010 (In thousands,
except share and per share amounts) Basic: Income
from continuing operations less noncontrolling interests $ 9,764 $
60,833 $ 142,240 $ 191,086 Income (loss) from discontinued
operations, net of tax 1,187
(40,030
)
6,459
(34,308
)
Net income attributable to McDermott International, Inc. $ 10,951 $
20,803 $ 148,699 $ 156,778 Weighted average
common shares 234,940,184 232,670,579
234,451,430 231,780,675 Income from continuing
operations less noncontrolling interests 0.04 0.26 0.61 0.82 Income
(loss) from discontinued operations, net of tax 0.01
(0.17
)
0.03
(0.15
)
Net income attributable to McDermott International, Inc. 0.05 0.09
0.63 0.67
Diluted: Income from continuing
operations less noncontrolling interests $ 9,764 $ 60,833 $ 142,240
$ 191,086 Income (loss) from discontinued operations, net of tax
1,187
(40,030
)
6,459
(34,308
)
Net income attributable to McDermott International, Inc. $ 10,951 $
20,803 $ 148,699 $ 156,778 Weighted average
common shares (basic) 234,940,184 232,670,579 234,451,430
231,780,675 Effect of dilutive securities: Stock options,
restricted stock and restricted stock units 2,007,479
3,600,832 2,627,875 3,368,656 Adjusted
weighted average common shares and assumed exercises of stock
options and vesting of stock awards 236,947,663
236,271,411 237,079,305 235,149,331
Income from continuing operations less noncontrolling
interests 0.04 0.26 0.60 0.81 Income (loss) from discontinued
operations, net of tax 0.01
(0.17
)
0.03
(0.14
)
Net income attributable to McDermott International, Inc. 0.05 0.09
0.63 0.67
SUPPLEMENTARY DATA
Three Months EndedSeptember 30, Nine Months
Ended
September 30,
2011 2010 2011 2010 (In
thousands) Pension expense $ 3,779 $ 2,981 $ 15,367 $ 16,282
Depreciation & amortization expense $ 19,801 $ 19,601 $ 59,900
$ 57,424 Capital expenditures $ 90,190 $ 38,939 $ 231,872 $ 136,555
Backlog $ 4,255,432 $ 3,591,416
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
September 30,2011 December
31,2010
(In thousands, except share and
per share amounts)
Assets Current Assets: Cash and cash equivalents $ 403,589 $
403,463 Restricted cash and cash equivalents 14,297 197,861
Investments 159,086 209,463
Accounts receivable--trade, net
296,303 323,497
Accounts receivable--other
36,354 28,447
Contracts in progress
300,331 65,853 Deferred income taxes 13,102 10,323 Assets held for
sale 20,630 10,161 Other current assets 44,071
36,570 Total Current Assets 1,287,763
1,285,638 Property, Plant and Equipment
1,923,733 1,720,040 Less accumulated depreciation
(840,365
)
(804,471
)
Net Property, Plant and Equipment 1,083,368 915,569 Assets
Held for Sale 76,315 77,150 Investments 41,860 75,742 Goodwill
41,202 41,202 Investments in Unconsolidated Affiliates 45,505
45,016 Other Assets 183,788 158,371
Total Assets $ 2,759,801 $ 2,598,688
Liabilities and Equity Current Liabilities: Notes payable
and current maturities of long-term debt $ 6,615 $ 8,547 Accounts
payable 299,535 252,974 Accrued liabilities 311,021 286,831 Advance
billings on contracts 103,896 250,053 Deferred income taxes 3,969
12,849 Income taxes payable 46,034 32,851 Liabilities associated
with assets held for sale 23,288 20,902
Total Current Liabilities 794,358
865,007 Long-Term Debt 82,478 46,748 Self-Insurance
39,040 35,655 Pension Liability 43,488 52,831 Other Liabilities
99,342 86,180 Commitments and Contingencies Stockholders’ Equity:
Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued 242,251,921 and
240,791,473 shares at September 30, 2011
and December 31, 2010, respectively
242,252 240,791 Capital in excess of par value 1,372,968 1,357,316
Retained earnings 249,072 100,373 Treasury stock, at cost,
7,308,140 and 6,906,262 shares at September 30, 2011 and December
31, 2010, respectively (95,261 ) (85,735 ) Accumulated other
comprehensive loss
(142,980
)
(163,717
)
Stockholders’ Equity—McDermott International, Inc. 1,626,051
1,449,028 Noncontrolling Interests 75,044
63,239 Total Equity 1,701,095
1,512,267 Total Liabilities and Equity $ 2,759,801
$ 2,598,688
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
Nine Months EndedSeptember 30, 2011
2010 (In thousands) Cash Flows From Operating
Activities: Net income $ 162,104 $ 180,375 Less: Income (loss)
from discontinued operations, net of tax 6,459
(34,308
)
Income from continuing operations $ 155,645 $ 214,683 Non-cash
items included in net income: Depreciation and amortization 59,900
57,424 Equity in (income) loss of unconsolidated affiliates
(59
)
5,507 Loss on asset impairments
-
24,444 Gain on asset disposals
(8,107
)
(2,414
)
Benefit from deferred taxes
(2,910
)
(4,272
)
Pension costs 15,367 16,282 Other non-cash items 14,249 21,921
Changes in assets and liabilities: Accounts receivable 26,238
64,415 Net contracts in progress and advance billings on contracts
(380,635
)
29,306 Accounts payable 44,667
(88,778
)
Accrued and other current liabilities 71,148 10,055 Pension
liability and accrued postretirement and employee benefits
(51,041
)
(138,783
)
Other
(15,327
)
(71,992
)
Net Cash Provided By (Used In) Operating
Activities--Continuing Operations
(70,865
)
137,798
Cash Flows From Investing
Activities: Purchases of property, plant and equipment
(231,872
)
(136,555
)
(Increase) decrease in restricted cash and cash equivalents 183,564
(83,498
)
Purchases of available-for-sale securities
(516,628
)
(844,103
)
Sales and maturities of available-for-sale securities 601,128
706,234 Proceeds from asset disposals 8,483 4,563 Other investing
activities, net
(16
)
(15,647
)
Net Cash Provided By (Used In) Investing
Activities--Continuing Operations
44,659 (369,006 )
Cash Flows From
Financing Activities: Payment of debt
(6,473
)
(6,398 ) Debt issuance costs
(4,824
)
(13,247
)
Increase in debt 40,212
-
Dividend received from B&W
-
100,000 Other financing activities, net
(2,059
)
2,177
Net Cash Provided By Financing
Activities--Continuing Operations
26,856 82,532 Effects of exchange rate changes on cash and cash
equivalents
(524
)
(183
)
Net increase (decrease) in cash and cash equivalents 126
(148,859
)
Cash and cash equivalents at beginning of period 403,463
428,298
Cash and cash equivalents at end of
period--Continuing Operations
$ 403,589 $ 279,439
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