McDermott International, Inc. (NYSE:MDR) (�McDermott� or the
�Company�) today reported net income of $160.0 million, or $0.70
per diluted share, for the 2007 fourth quarter, compared to net
income of $125.5 million, or $0.55 per diluted share, for the
corresponding period in 2006. As disclosed a year ago, fourth
quarter 2006 net income benefited by approximately $57.2 million,
net from certain identified items. This net benefit for the fourth
quarter of 2006 was subsequently reduced by approximately $16
million as a result of a required accounting pronouncement adopted
in 2007. Weighted average common shares outstanding on a fully
diluted basis were approximately 229.8 million and 228.7 million in
the quarters ended December 31, 2007 and December 31, 2006,
respectively. For 2006, the Company�s common shares outstanding and
earnings per share are adjusted to reflect the 2-for-1 stock split
effected in September 2007. McDermott�s revenues in the fourth
quarter of 2007 were $1,526.0 million, an increase of 16.7 percent
compared to $1,308.0 million in the corresponding period in 2006.
The $218 million improvement in Company revenues, compared to a
year ago, was a result of the Offshore Oil & Gas Construction
segment which increased revenues by approximately $257 million, or
54.1 percent. Operating income was $186.8 million in the 2007
fourth quarter, an improvement of 115.2 percent, compared to $86.8
million in the 2006 fourth quarter. The $100 million increase in
operating income is attributable to heightened year-over-year
increases in each of the Company�s operating segments. �McDermott
completed a record-setting, full-year 2007 with strong fourth
quarter results,� said Bruce W. Wilkinson, Chairman of the Board
and Chief Executive Officer of McDermott. �The Company reported its
highest quarterly level of net income of the year, and our recorded
bookings of over $2 billion resulted in the fourth consecutive
quarter of sequential backlog growth.� At December 31, 2007,
McDermott�s consolidated backlog was $9.8 billion, compared to $7.6
billion and $9.3 billion at December 31, 2006 and September 30,
2007, respectively. For the year-ended December 31, 2007, McDermott
reported consolidated revenues of $5.6 billion, producing operating
income of $716.2 million and net income of $607.8 million, or $2.66
per diluted share. RESULTS OF OPERATIONS 2007 Fourth Quarter
Compared to 2006 Fourth Quarter Offshore Oil & Gas Construction
Segment Revenues in the Offshore Oil & Gas Construction segment
were $733.3 million in the 2007 fourth quarter, compared to $475.9
million for the same period a year ago. The year-over-year increase
in revenues resulted from a higher workload in worldwide marine
activities, including revenues from Secunda International Limited
whose assets were acquired in July 2007, and from increased
activities within the Caspian, Middle East and Americas regions.
Segment income for the 2007 fourth quarter was $100.0 million,
compared to $49.1 million in the 2006 fourth quarter. Major areas
contributing to fourth quarter 2007 segment income include
activities in the Caspian, Middle East and Asia Pacific regions. At
December 31, 2007, segment backlog was $4.8 billion, compared to
backlog of $4.1 billion and $4.9 billion at December 31, 2006 and
September 30, 2007, respectively. Power Generation Systems Segment
Revenues in the Power Generation Systems segment for the fourth
quarter 2007 were $608.0 million, compared to $676.8 million
reported in the fourth quarter of 2006. The year-over-year
reduction in revenues resulted from lower activities on new fossil
utility steam systems and retrofits of existing facilities compared
to a year ago, partially offset by higher levels of replacement
parts and increased activity on nuclear steam generators. Segment
income for the 2007 fourth quarter was $65.9 million, compared to
$24.9 million in the 2006 fourth quarter. Major areas contributing
to fourth quarter 2007 segment income include utility steam system
fabrication, replacement nuclear steam generators, industrial
boilers and parts and service activities. In the 2006 fourth
quarter, the Company recorded approximately $27 million in
previously announced settlement, insurance and warranty charges. At
December 31, 2007, segment backlog was $3.3 billion, compared to
backlog of $2.2 billion and $3.0 billion at December 31, 2006 and
September 30, 2007, respectively. Government Operations Segment
Revenues in the Government Operations segment were $187.7 million
in the 2007 fourth quarter, compared to $158.3 million for the same
period a year ago. The improvement was primarily due to higher
volumes in the manufacture of nuclear components for certain U.S.
Government programs, including revenues from Marine Mechanical
Corporation which was acquired in April 2007. Segment income for
the 2007 fourth quarter was $33.3 million, compared to $19.9
million in the 2006 fourth quarter. Major items contributing to the
fourth quarter 2007 segment income include the manufacture of
nuclear components for certain U.S. Government programs and the
management and operations of various U.S. Government sites. At
December 31, 2007, segment backlog was $1.8 billion, compared to
backlog of $1.3 billion and $1.4 billion at December 31, 2006 and
September 30, 2007, respectively. Corporate Unallocated corporate
expenses were $12.4 million in the 2007 fourth quarter, compared to
$7.0 million in the 2006 fourth quarter. The year-over-year
increase was primarily related to increased general corporate
expenses, including higher stock-based compensation expenses due to
McDermott�s 9.2 percent stock price increase during the fourth
quarter of 2007. Other Income and Expense The Company�s other
income for the fourth quarter of 2007 was $7.3 million, compared to
other expense of $4.2 million in the fourth quarter of 2006. The
year-over-year improvement was primarily related to lower interest
expense and the loss on early retirement of debt incurred during
the fourth quarter of 2006. 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 20,000 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. 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, but not limited to, adverse
changes in the markets in which we operate, 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. Conference Call to Discuss 2007 Fourth Quarter Earnings
Release Date: Thursday, February 28, 2008, at 10:00 a.m. EST (9:00
a.m. CST) Live Webcast: Investor Relations section of Web site at
www.mcdermott.com Replay: Available for two weeks in the investor
relations section of www.mcdermott.com McDERMOTT INTERNATIONAL,
INC. CONSOLIDATED STATEMENTS OF INCOME � � � Three Months Ended
December 31, Twelve Months EndedDecember 31, 2007 2006 2007 2006
(Unaudited) � (In thousands, except shares and per share amounts)
Revenues $ 1,526,016 � � $ 1,308,044 � � $5,631,610 � � $ 4,120,141
� Costs and Expenses: Cost of operations 1,222,842 1,117,878
4,500,897 3,362,758 (Gains) losses on asset disposals and
impairments � net (5,991 ) 93 (8,371 ) 15,042 Selling, general
andadministrative expenses � 137,086 � � � 115,598 � � 464,611 � �
� 388,524 � � � 1,353,937 � � � 1,233,569 � � 4,957,137 � � �
3,766,324 � � Equity in Income of Investees � 14,698 � � � 12,327 �
� 41,724 � � � 37,524 � � Operating Income � 186,777 � � � 86,802 �
� 716,197 � � � 391,341 � � Other Income (Expense): Interest income
16,569 16,916 61,980 53,562 Interest expense (4,089 ) (7,945 )
(22,520 ) (30,348 ) IRS interest expense adjustment - (5,292 ) -
5,719 Loss on early retirement of debt - (4,692 ) - (53,708 ) Other
expense � net � (5,142 ) � � (3,142 ) � (10,192 ) � � (13,750 ) � �
7,338 � � � (4,155 ) � 29,268 � � � (38,525 ) � Income from
Continuing Operations before Provision for Income Taxes 194,115
82,647 745,465 352,816 � Provision for (Benefit from) Income Taxes
� 34,130 � � � (42,864 ) � 137,637 � � � 35,195 � � Income from
Continuing Operations 159,985 125,511 607,828 317,621 � Income from
Discontinued Operations � - � � � - � � - � � � 12,894 � � Net
Income $ 159,985 � � $ 125,511 � � $607,828 � � $ 330,515 � �
Earnings per Common Share: Basic: Income from Continuing Operations
$ 0.71 $ 0.57 $2.72 $ 1.46 Income from Discontinued Operations $
0.00 $ 0.00 $0.00 $ 0.06 Net Income $ 0.71 $ 0.57 $2.72 $ 1.52
Diluted: Income from Continuing Operations $ 0.70 $ 0.55 $2.66 $
1.39 Income from Discontinued Operations $ 0.00 $ 0.00 $0.00 $ 0.06
Net Income $ 0.70 � � $ 0.55 � � $2.66 � � $ 1.45 � � Shares used
in the computation of earnings per share: Basic 225,213,119
220,031,152 223,511,880 217,752,454 Diluted � 229,762,318 � � �
228,711,250 � � 228,742,522 � � � 227,718,784 � McDERMOTT
INTERNATIONAL, INC. SELECTED SEGMENT INFORMATION � � � Three Months
Ended Twelve Months Ended December 31, December 31, 2007 2006 2007
2006 (Unaudited) (In thousands) REVENUES Offshore Oil and Gas
Construction $ 733,261 $ 475,856 $ 2,445,675 $ 1,610,307 Government
Operations 187,684 158,251 694,024 630,067 Power Generation Systems
608,047 676,829 2,504,225 1,888,636 Adjustments and Eliminations �
(2,976 ) � � (2,892 ) � � (12,314 ) � � (8,869 ) TOTAL $ 1,526,016
� � $ 1,308,044 � � $ 5,631,610 � � $ 4,120,141 � � SEGMENT INCOME
Offshore Oil and Gas Construction $ 100,000 $ 49,105 $ 400,402 $
195,048 Government Operations 33,306 19,862 122,941 111,635 Power
Generation Systems � 65,864 � � � 24,857 � � � 234,068 � � �
114,607 � � � 199,170 � � � 93,824 � � � 757,411 � � � 421,290 �
Unallocated Corporate � (12,393 ) � � (7,022 ) � � (41,214 ) � �
(29,949 ) OPERATING INCOME $ 186,777 � � $ 86,802 � � $ 716,197 � �
$ 391,341 � � EQUITY IN INCOME (LOSS) OF INVESTEES (1) Offshore Oil
and Gas Construction $ (985 ) $ (824 ) $ (3,923 ) $ (2,882 )
Government Operations 11,681 8,805 31,288 27,768 Power Generation
Systems � 4,002 � � � 4,346 � � � 14,359 � � � 12,638 � TOTAL $
14,698 � � $ 12,327 � � $ 41,724 � � $ 37,524 � � DEPRECIATION
& AMORTIZATION (1) Offshore Oil and Gas Construction $ 17,262 $
8,717 $ 54,318 $ 28,515 Government Operations 5,636 4,740 19,269
14,833 Power Generation Systems 5,702 4,896 21,266 16,342 Corporate
� 281 � � � 584 � � � 1,136 � � � 1,310 � TOTAL $ 28,881 � � $
18,937 � � $ 95,989 � � $ 61,000 � � CAPITAL EXPENDITURES Offshore
Oil and Gas Construction $ 35,651 $ 19,638 $ 172,580 $ 89,501
Government Operations 6,385 5,486 14,117 16,608 Power Generation
Systems 8,949 5,733 40,218 23,718 Corporate � 501 � � � 100 � � �
6,374 � � � 2,877 � TOTAL $ 51,486 � � $ 30,957 � � $ 233,289 � � $
132,704 � � BACKLOG Offshore Oil and Gas Construction $ 4,752,794 $
4,138,545 $ 4,752,794 $ 4,138,545 Government Operations 1,790,686
1,269,328 1,790,686 1,269,328 Power Generation Systems � 3,276,129
� � � 2,225,149 � � � 3,276,129 � � � 2,225,149 � TOTAL $ 9,819,609
� � $ 7,633,022 � � $ 9,819,609 � � $ 7,633,022 � � (1) Included in
Segment Income Above McDERMOTT INTERNATIONAL, INC. CONSOLIDATED
BALANCE SHEETS � December 31, 2007 2006 (In thousands) � ASSETS
Current Assets: Cash and cash equivalents $ 1,001,394 $ 600,843
Restricted cash and cash equivalents 64,786 106,674 Investments
300,092 172,171 Accounts receivable � trade, net 770,024 668,310
Accounts and notes receivable � unconsolidated affiliates 2,303
29,825 Accounts receivable � other 71,162 48,041 Contracts in
progress 194,292 230,146 Inventories 95,208 77,769 Deferred income
taxes 160,783 180,234 Other current assets � 97,456 � � 39,461 �
Total Current Assets � 2,757,500 � � 2,153,474 � Property, Plant
and Equipment 2,004,138 1,525,187 Less accumulated depreciation �
1,090,400 � � 1,011,693 � Net Property, Plant and Equipment �
913,738 � � 513,494 � Investments � 162,069 � � 121,914 � Goodwill
� 158,533 � � 89,226 � Deferred Income Taxes � 134,292 � � 260,341
� Long-Term Income Tax Receivable � 8,745 � � 299,786 � Investments
in Unconsolidated Affiliates � 62,241 � � 52,801 � Other Assets �
214,368 � � 142,726 � TOTAL $ 4,411,486 � $ 3,633,762 McDERMOTT
INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS � December 31, 2007
2006 (In thousands) � LIABILITIES AND STOCKHOLDERS� EQUITY Current
Liabilities: Notes payable and current maturities of long-term debt
$ 6,599 $ 257,492 Accounts payable 455,659 407,094 Accrued employee
benefits 343,812 246,182 Accrued liabilities � other 175,557
185,762 Accrued contract cost 93,281 110,992 Advance billings on
contracts 1,463,223 1,116,118 Accrued warranty expense 101,330
79,077 Income taxes payable � 57,071 � � � 58,557 � � Total Current
Liabilities � 2,696,532 � � � 2,461,274 � � Long-Term Debt � 10,609
� � � 15,242 � � Accumulated Postretirement Benefit Obligation �
96,253 � � � 100,316 � � Self-Insurance � 82,525 � � � 84,704 � �
Pension Liability � 188,748 � � � 372,504 � � Other Liabilities �
169,814 � � � 156,621 � � Commitments and Contingencies �
Stockholders� Equity: Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued 231,722,659 and 227,794,618
at December 31, 2007 and 2006, respectively 231,723 227,795 Capital
in excess of par value 1,145,829 1,100,384 Accumulated earnings
(deficit) 135,289 (458,886 ) Treasury stock at cost, 5,852,248 and
6,025,418 at December 31, 2007 and 2006, respectively (63,903 )
(60,581 ) Accumulated other comprehensive loss � (281,933 ) � �
(365,611 ) � Total Stockholders� Equity � 1,167,005 � � � 443,101 �
� TOTAL $ 4,411,486 � � $ 3,633,762 � McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS � Year Ended December 31,
2007 2006 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net
Income $ 607,828 $ 330,515 Non-cash items included in net income:
Depreciation and amortization 95,989 61,000 (Income) loss of
investees, net of dividends 120 1,644 (Gains) losses on asset
disposals and impairments � net (8,371 ) 15,042 Gain on sale of
business - (13,786 ) Premium on early retirement of debt - 37,438
Provision for (benefit from) deferred taxes 89,624 179,467
Amortization of pension and postretirement costs 50,957 - Loss on
Babcock & Wilcox Power Generation Group, Inc. (�B&W PGG�)
bankruptcy settlement - - Excess tax benefits from FAS 123(R)
stock-based compensation (877 ) (20,113 ) Other, net 21,726 14,660
Changes in assets and liabilities, net of effects from acquisition
and divestitures: Accounts receivable (82,105 ) (49,858 ) Income
taxes receivable 255,165 (284,494 ) Accounts payable 40,384 65,157
Net contracts in progress and advance billings 382,184 330,996
Income taxes (13,216 ) 139,497 Accrued and other current
liabilities (14,305 ) 81,060 Pension liability and accrued
postretirement and employee benefits (74,365 ) (119,114 ) Payment
of the B&W PGG bankruptcy settlement - (605,000 ) Other, net �
(33,790 ) � � 64,031 � NET CASH PROVIDED BY OPERATING ACTIVITIES �
1,316,948 � � � 228,142 � CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents 41,888 48,298
Purchases of property, plant and equipment (233,289 ) (132,704 )
Acquisition of businesses, net of cash acquired (334,457 ) - Net
(increase) decrease in available-for-sale securities (159,350 )
212,082 Proceeds from asset disposals 11,223 21,712 Cash acquired
from the reconsolidation of B&W PGG - 164,200 Other, net �
(4,696 ) � � (3,193 ) NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES � (678,681 ) � � 310,395 � CASH FLOWS FROM FINANCING
ACTIVITIES: Issuance of long-term debt - 250,000 Payment of
long-term debt (255,749 ) (238,615 ) Payment of debt issuance costs
(3,625 ) (10,170 ) Issuance of common stock 15,219 19,647 Excess
tax benefits from FAS 123(R) stock-based compensation 877 20,113
Other, net � 4 � � � 2,718 � NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES � (243,274 ) � � 43,693 � EFFECTS OF EXCHANGE
RATE CHANGES ON CASH � 5,558 � � � (650 ) NET INCREASE IN CASH AND
CASH EQUIVALENTS � 400,551 � � � 581,580 � CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD � 600,843 � � � 19,263 � CASH
AND CASH EQUIVALENTS AT END OF PERIOD $ 1,001,394 � � $ 600,843 � �
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during
the period for: Interest (net of amount capitalized) $ 28,066 $
28,588 Income taxes (net of refunds) $ (208,194 ) � $ 63,357 �
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