McDermott International, Inc. (NYSE: MDR) (�McDermott� or the
�Company�) today reported net income of $43.0 million, or $0.19 per
diluted share, for the 2008 fourth quarter, compared to net income
of $160.0 million, or $0.70 per diluted share, for the
corresponding period in 2007. Fourth quarter 2008 net income
included approximately $57 million, after-tax, of certain
previously announced net expenses. Weighted average common shares
outstanding on a fully diluted basis were approximately 230.6
million and 229.8 million in the quarters ended December 31, 2008
and December 31, 2007, respectively.
McDermott�s revenues in the fourth quarter of 2008 were $1,664.5
million, an increase of 9.1 percent compared to $1,526.0 million in
the corresponding period in 2007. The Company�s $138.5 million
growth in revenues was provided by a 15.7% and 13.1% increase in
the Offshore Oil & Gas Construction and Government Operations
segments, respectively.
The Company�s operating income was $89.7 million in the 2008
fourth quarter, compared to $186.8 million in the 2007 fourth
quarter. As previously announced, the 2008 fourth quarter included
approximately $50 million of certain net expenses from the Offshore
Oil & Gas Construction and Power Generation Systems
segments.
�McDermott�s fourth quarter results generally came in at the
upper end of the Company�s pre-announced range from early
February,� said John A. Fees, Chief Executive Officer of McDermott.
�Although we�re not satisfied with our consolidated results for the
second half of 2008, we are pleased that McDermott�s backlog
remained near record levels, the industries we serve have continued
demand for our offerings, our liquidity position at year end
provides continued financial flexibility and consolidated bookings
and bids remained robust. While we recognize the overall business
environment remains in flux, we believe McDermott remains
well-positioned in the industries we serve.�
At December 31, 2008, McDermott�s consolidated backlog was $9.8
billion, compared to $9.8 billion and $9.4 billion at December 31,
2007 and September 30, 2008, respectively.
For the year-ended December 31, 2008, the Company reported
consolidated revenues of $6.6 billion, producing operating income
of $569.9 million and net income of $429.3 million, or $1.86 per
diluted share, the second best year for net income in McDermott�s
history.
RESULTS OF OPERATIONS
2008 Fourth Quarter Compared to 2007 Fourth Quarter
Offshore Oil & Gas
Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were
$848.3 million in the 2008 fourth quarter, compared to $733.3
million for the same period a year ago. The year-over-year growth
in revenues resulted from increased activities in the Middle East,
Asia Pacific and Americas regions, partially offset by reduced
activities in the Caspian region.
Segment income for the 2008 fourth quarter was $14.9 million,
compared to $100.0 million in the 2007 fourth quarter. As
previously disclosed, the 2008 fourth quarter includes
approximately $70 million of incurred and expected cost increases
recognized during the period on certain Middle East pipeline
projects and other procured items, partially offset by a $36
million benefit from the resolution of an outstanding claim.
At December 31, 2008, segment backlog was $4.5 billion, compared
to backlog of $4.8 billion and $5.0 billion at December 31, 2007
and September 30, 2008, respectively.
Power Generation Systems
Segment
Revenues in the Power Generation Systems segment for the fourth
quarter of 2008 were $605.5 million, compared to $608.0 million in
the fourth quarter of 2007.
Segment income for the 2008 fourth quarter was $48.7 million,
compared to $65.9 million in the 2007 fourth quarter. Major
activities contributing to fourth quarter 2008 segment income
include the supply and construction of new boilers and
environmental equipment, retrofit projects of existing facilities,
and related parts and services. In addition, the 2008 fourth
quarter included approximately $15 million of the write-down of
certain inventories and increased warranty reserves.
At December 31, 2008, segment backlog was $2.5 billion, compared
to backlog of $3.3 billion and $2.8 billion at December 31, 2007
and September 30, 2008, respectively.
Government Operations
Segment
Revenues in the Government Operations segment were $212.2
million in the 2008 fourth quarter, compared to $187.7 million for
the same period a year ago. The improvement was primarily due to
increased volumes in the manufacture of nuclear components for
certain U.S. Government programs and for a commercial uranium
enrichment project.
Segment income for the 2008 fourth quarter was $35.2 million,
compared to $33.3 million in the 2007 fourth quarter. Major items
contributing to fourth quarter 2008 segment income include the
manufacture of nuclear components for certain U.S. Government
programs, the manufacture of nuclear components for a commercial
uranium enrichment project, and the management and operations of
various U.S. Government sites.
At December 31, 2008, segment backlog was $2.9 billion, compared
to backlog of $1.8 billion and $1.6 billion at December 31, 2007
and September 30, 2008, respectively.
Corporate & Other Income
and Expense
Unallocated corporate expenses were $9.2 million in the 2008
fourth quarter, compared to $12.4 million in the 2007 fourth
quarter. The Company�s other expense for the fourth quarter of 2008
was $7.1 million, compared to other income of $7.3 million in the
fourth quarter of 2007, due to a year-over-year decline in interest
income and an approximate $10 million non-cash foreign currency
translation expense.
Balance Sheet
Items
At December 31, 2008, total assets were approximately $4.6
billion, a 4.3% increase from year-end 2007. McDermott had
approximately $1.1 billion in cash, restricted cash, cash
equivalents and investments at year-end 2008, approximately $440
million below year-end 2007 levels as a result of approximately
$450 million spent on capital expenditures and acquisitions as well
as an almost $500 million reduction in current liabilities during
the 2008 year. Long-term debt, notes payable and current maturities
ended 2008 at approximately $15 million, with over $750 million of
credit capacity also available at December 31, 2008. McDermott�s
pension liability increased approximately $380 million from
year-end 2007, primarily resulting from a nearly 20% full-year
decline in the market value of pension assets, which will result in
approximately $135 million of pension expense expected for 2009, a
$90 million increase from 2008. Shareholder�s equity increased
approximately $150 million during 2008, to end the year at $1.3
billion.
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. These forward-looking statements include statements
about backlog, to the extent backlog may be viewed as an indicator
of future revenues, our expected 2009 pension expense and our
belief that we are well positioned in the industries we serve.
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 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.
Conference Call to Discuss Fourth Quarter
2008 Earnings Release
�
Date:
� Tuesday, March 3, 2009, at 10:00 a.m. EDT (9:00 a.m. CDT)
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 Ended
December 31,
2008
2007
2008
2007
(Unaudited) (In thousands, except shares and per share
amounts) Revenues � $ 1,664,500 � $ 1,526,016 � $ 6,572,423 � $
5,631,610 � Costs and Expenses: Cost of operations 1,452,646
1,222,842 5,519,827 4,500,897
(Gains) losses on asset disposals
and impairments � net
(880 ) (5,991 ) (12,202 ) (8,371 ) Selling, general and
administrative expenses � � 138,749 � � 137,086 � � 543,047 � �
464,611 � � � � 1,590,515 � � 1,353,937 � � 6,050,672 � � 4,957,137
� � Equity in Income of Investees � � 15,688 � � 14,698 � � 48,131
� � 41,724 � � Operating Income � � 89,673 � � 186,777 � � 569,882
� � 716,197 � � Other Income (Expense): Interest income 4,812
16,569 34,353 61,980 Interest expense (1,631 ) (4,089 ) (7,380 )
(22,520 ) Other expense � net � � (10,293 ) � (5,142 ) � (9,741 ) �
(10,192 ) � � � (7,112 ) � 7,338 � � 17,232 � � 29,268 � � Income
from Continuing Operations before Provision for Income Taxes 82,561
194,115 587,114 745,465 � Provision for Income Taxes � � 39,559 � �
34,130 � � 157,812 � � 137,637 � � Net Income � $ 43,002 � $
159,985 � $ 429,302 � $ 607,828 � � Earnings per Common Share:
Basic: Income from Continuing Operations $ 0.19 $ 0.71 $ 1.89 $
2.72 Net Income $ 0.19 $ 0.71 $ 1.89 $ 2.72 Diluted: Income from
Continuing Operations $ 0.19 $ 0.70 $ 1.86 $ 2.66 Net Income � $
0.19 � $ 0.70 � $ 1.86 � $ 2.66 � � Shares used in the computation
of earnings per share: Basic 227,739,578 225,213,119 226,918,776
223,511,880 Diluted � � 230,589,855 � � 229,762,318 � � 230,393,782
� � 228,742,522 �
McDERMOTT INTERNATIONAL,
INC.
SELECTED SEGMENT
INFORMATION
� � � �
Three Months Ended Twelve Months Ended
December 31, December 31,
2008
2007
2008
2007
(Unaudited) (In thousands)
REVENUES
Offshore Oil and Gas Construction $ 848,320 $ 733,261 $ 3,181,238 $
2,445,675 Government Operations 212,227 187,684 851,019 694,024
Power Generation Systems 605,530 608,047 2,550,854 2,504,225
Adjustments and Eliminations � � (1,577 ) � � (2,976 ) � � (10,688
) � � (12,314 ) TOTAL � $ 1,664,500 � � $ 1,526,016 � � $ 6,572,423
� � $ 5,631,610 � � SEGMENT INCOME Offshore Oil and Gas
Construction $ 14,932 $ 100,000 $ 146,180 $ 400,402 Government
Operations 35,228 33,306 150,232 122,941 Power Generation Systems �
� 48,670 � � � 65,864 � � � 315,362 � � � 234,068 � � � � 98,830 �
� � 199,170 � � � 611,774 � � � 757,411 � Unallocated Corporate � �
(9,157 ) � � (12,393 ) � � (41,892 ) � � (41,214 ) OPERATING INCOME
� $ 89,673 � � $ 186,777 � � $ 569,882 � � $ 716,197 � � EQUITY IN
INCOME (LOSS) OF INVESTEES (1) Offshore Oil and Gas Construction $
(990 ) $ (985 ) $ (3,661 ) $ (3,923 ) Government Operations 13,868
11,681 41,381 31,288 Power Generation Systems � � 2,810 � � � 4,002
� � � 10,411 � � � 14,359 � TOTAL � $ 15,688 � � $ 14,698 � � $
48,131 � � $ 41,724 � � DEPRECIATION & AMORTIZATION (1)
Offshore Oil and Gas Construction $ 19,379 $ 17,262 $ 80,148 $
54,318 Government Operations 5,634 5,636 22,445 19,269 Power
Generation Systems 5,513 5,702 22,080 21,266 Corporate � � 548 � �
� 281 � � � 1,460 � � � 1,136 � TOTAL � $ 31,074 � � $ 28,881 � � $
126,133 � � $ 95,989 � � CAPITAL EXPENDITURES Offshore Oil and Gas
Construction $ 44,208 $ 35,651 $ 193,736 $ 172,580 Government
Operations 7,864 6,385 16,348 14,117 Power Generation Systems
13,191 8,949 33,896 40,218 Corporate � � 1,044 � � � 501 � � �
11,711 � � � 6,374 � TOTAL � $ 66,307 � � $ 51,486 � � $ 255,691 �
� $ 233,289 � � BACKLOG Offshore Oil and Gas Construction $
4,456,951 $ 4,752,794 $ 4,456,951 $ 4,752,794 Government Operations
2,882,895 1,790,686 2,882,895 1,790,686 Power Generation Systems �
� 2,476,435 � � � 3,276,129 � � � 2,476,435 � � � 3,276,129 � TOTAL
� $ 9,816,281 � � $ 9,819,609 � � $ 9,816,281 � � $ 9,819,609 � �
(1) Included in Segment Income Above
McDERMOTT INTERNATIONAL,
INC.
CONSOLIDATED BALANCE
SHEETS
� � �
December 31, 2008 2007 (In
thousands) ASSETS Current Assets: Cash and cash equivalents $
586,649 $ 1,001,394 Restricted cash and cash equivalents 50,536
64,786 Investments 131,515 300,092 Accounts receivable � trade, net
712,055 770,024 Accounts and notes receivable � unconsolidated
affiliates 1,504 2,303 Accounts receivable � other 139,062 116,744
Contracts in progress 311,713 194,292 Inventories 128,383 95,208
Deferred income taxes 97,069 160,783 Other current assets � �
58,499 � � � 51,874 � Total Current Assets � � 2,216,985 � � �
2,757,500 � Property, Plant and Equipment 2,234,050 2,004,138 Less
accumulated depreciation � � 1,155,191 � � � 1,090,400 � Net
Property, Plant and Equipment � � 1,078,859 � � � 913,738 �
Investments � � 319,170 � � � 162,069 � Goodwill � � 298,265 � � �
158,533 � Deferred Income Taxes � � 335,877 � � � 134,292 �
Investments in Unconsolidated Affiliates � � 70,304 � � � 62,241 �
Other Assets � � 282,233 � � � 223,113 � TOTAL � $ 4,601,693 � � $
4,411,486
McDERMOTT INTERNATIONAL,
INC.
CONSOLIDATED BALANCE
SHEETS
�
December 31, 2008 2007 (In thousands)
LIABILITIES AND STOCKHOLDERS� EQUITY Current Liabilities: Notes
payable and current maturities of long-term debt $ 9,021 $ 6,599
Accounts payable 551,435 455,659 Accrued employee benefits 159,541
184,211 Accrued pension liability � current portion 45,980 159,601
Accrued contract cost 97,041 93,281 Advance billings on contracts
951,895 1,463,223 Accrued warranty expense 120,237 101,330 Income
taxes payable 55,709 57,071 Accrued liabilities � other � 217,486 �
� � 175,557 � � Total Current Liabilities � 2,208,345 � � �
2,696,532 � � Long-Term Debt � 6,109 � � � 10,609 � � Accumulated
Postretirement Benefit Obligation � 107,567 � � � 96,253 � �
Self-Insurance � 88,312 � � � 82,525 � � Pension Liability �
682,624 � � � 188,748 � � Other Liabilities � 192,564 � � � 169,814
� � Commitments and Contingencies � Stockholders� Equity: Common
stock, par value $1.00 per share, authorized 400,000,000 shares;
issued 234,174,088 and 231,722,659 at December 31, 2008 and 2007,
respectively 234,174 231,723 Capital in excess of par value
1,252,848 1,145,829 Retained earnings 564,591 135,289 Treasury
stock at cost, 5,840,314 and 5,852,248 at December 31, 2008 and
2007, respectively (63,026 ) (63,903 ) Accumulated other
comprehensive loss � (672,415 ) � � (281,933 ) � Total
Stockholders� Equity � 1,316,172 � � � 1,167,005 � � TOTAL $
4,601,693 � � $ 4,411,486 �
McDERMOTT INTERNATIONAL,
INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
� �
Year Ended December 31,
2008
2007
(In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net
Income $ 429,302 $ 607,828 Non-cash items included in net income:
Depreciation and amortization 126,133 95,989 (Income) loss of
investees, net of dividends 1,545 120 (Gains) losses on asset
disposals and impairments � net (12,202 ) (8,371 ) Gain on sale of
business - - Premium on early retirement of debt - - Provision for
deferred taxes 35,063 89,624 Amortization of pension and
postretirement costs 38,131 50,957 Excess tax benefits from FAS
123(R) stock-based compensation (60,901 ) (877 ) Other, net 38,372
21,726 Changes in assets and liabilities, net of effects from
acquisition and divestitures: Accounts receivable 71,142 (82,105 )
Income taxes receivable (11,476 ) 255,165 Accounts payable 86,069
40,384 Net contracts in progress and advance billings (630,481 )
382,184 Income taxes 13,046 (13,216 ) Accrued and other current
liabilities 18,142 (14,305 ) Pension liability and accrued
postretirement and employee benefits (205,345 ) (74,365 ) Payment
of the B&W PGG bankruptcy settlement - - Other, net � � 14,493
� � � (33,790 ) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
� � (48,967 ) � � 1,316,948 � CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents 14,250 41,888
Purchases of property, plant and equipment (255,691 ) (233,289 )
Acquisition of businesses, net of cash acquired (191,940 ) (334,457
) Net (increase) decrease in available-for-sale securities 2,009
(159,350 ) Proceeds from asset disposals 13,996 11,223 Cash
acquired from the reconsolidation of B&W PGG - - Other, net � �
(2,996 ) � � (4,696 ) NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES � � (420,372 ) � � (678,681 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Issuance of long-term debt - - Payment of long-term
debt (4,768 ) (255,749 ) Payment of debt issuance costs (1,756 )
(3,625 ) Increase in short-term borrowing 1,460 - Issuance of
common stock 9,624 15,219 Excess tax benefits from FAS 123(R)
stock-based compensation 60,901 877 Other, net � � (2 ) � � 4 � NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES � � 65,459 � � �
(243,274 ) EFFECTS OF EXCHANGE RATE CHANGES ON CASH � � (10,865 ) �
� 5,558 � NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS � �
(414,745 ) � � 400,551 � CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD � � 1,001,394 � � � 600,843 � CASH AND CASH EQUIVALENTS AT
END OF PERIOD � $ 586,649 � � $ 1,001,394 � � SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during
the period for: Interest (net of amount capitalized) $ 11,978 $
28,066 Income taxes (net of refunds) � $ 68,637 � � $ (208,194 )
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