McDermott International, Inc. (NYSE: MDR) (�McDermott� or the
�Company�) today reported net income of $77.7 million, or $0.33 per
diluted share, for the 2009 first quarter, compared to net income
of $123.2 million, or $0.54 per diluted share, for the
corresponding period in 2008. Weighted average common shares
outstanding on a fully diluted basis were approximately 232.6
million and 230.1 million in the quarters ended March 31, 2009 and
March 31, 2008, respectively.
McDermott�s revenues in the first quarter of 2009 were $1,493.3
million, an increase of 3.0 percent compared to $1,450.4 million in
the corresponding period in 2008. The increase in consolidated
revenues was due to a higher level of activity in the Offshore Oil
& Gas Construction and Government Operations segments,
partially offset by lower revenues in the Power Generation Systems
segment.
The Company�s operating income in the 2009 first quarter was
$131.2 million, compared to $157.1 million in the 2008 first
quarter. A year-over-year increase of $21.8 million in consolidated
pension plan expense, which was predominantly a non-cash expense,
combined with a $12.7 million reduction in gains on asset sales,
were the primary factors in the variance between the two
periods.
�Considering the ongoing state of uncertainty in the global
economy and that we continue to work through the Middle East
pipeline projects in the Offshore Oil & Gas Construction
segment, I am quite pleased with the results McDermott produced in
the quarter,� said John A. Fees, Chief Executive Officer of
McDermott. �The Company�s backlog is near record levels at $10
billion; we see the end to the problematic pipeline projects later
this year, and our financial position remains solid. Clearly, the
Company has work to do, and near-term challenges still exist, but I
am confident McDermott is well-positioned and progressing in this
environment.�
At March 31, 2009, McDermott�s consolidated backlog was $10.0
billion, compared to $10.2 billion and $9.8 billion at March 31,
2008 and December 31, 2008, respectively.
RESULTS OF OPERATIONS
2009 First Quarter Compared to 2008 First Quarter
Offshore Oil & Gas
Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were
$708.5 million in the 2009 first quarter, compared to $645.9
million for the same period a year ago. The year-over-year
improvement in revenues resulted from increased activities in the
Middle East and Americas regions, partially offset by a decline in
the Caspian region.
Segment income for the 2009 first quarter was $45.0 million,
compared to $52.9 million in the 2008 first quarter. Major areas
contributing to first quarter 2009 segment income include the
Middle East, Asia Pacific, Caspian and Americas regions. During the
first quarter of 2009, the Company substantially completed the
marine pipeline installation portion on one of its three Qatar
projects. The remaining two Qatar projects recently commenced
pipeline installation activities during the second quarter of
2009.
At March 31, 2009, segment backlog was $5.0 billion, compared to
backlog of $5.3 billion and $4.5 billion at March 31, 2008 and
December 31, 2008, respectively.
Power Generation Systems
Segment
Revenues in the Power Generation Systems segment for the first
quarter of 2009 were $528.6 million, compared to $616.3 million in
the first quarter of 2008.
Segment income for the 2009 first quarter was $58.2 million,
compared to $76.3 million in the 2008 first quarter. Major
activities contributing to first quarter 2009 segment income
include the supply and construction of new boilers and
environmental equipment, retrofit projects of existing facilities,
and related parts and services.
At March 31, 2009, segment backlog was $2.2 billion, compared to
backlog of $3.2 billion and $2.5 billion at March 31, 2008 and
December 31, 2008, respectively.
Government Operations
Segment
Revenues in the Government Operations segment were $257.1
million in the 2009 first quarter, compared to $190.6 million for
the same period a year ago. The improvement was primarily due to
activities in the manufacture of nuclear components and nuclear
fuels for certain U.S. Government programs, including revenues from
Nuclear Fuel Services which was acquired in December 2008, and in
the manufacture of nuclear components for a commercial uranium
enrichment project.
Segment income for the 2009 first quarter was $45.8 million,
compared to $38.0 million in the 2008 first quarter. Major items
contributing to first quarter 2009 segment income include the
manufacture of nuclear components and nuclear fuels 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 March 31, 2009, segment backlog was $2.7 billion, compared to
backlog of $1.7 billion and $2.9 billion at March 31, 2008 and
December 31, 2008, respectively.
Corporate & Other Income
and Expense
Unallocated corporate expenses were $17.7 million in the 2009
first quarter, compared to $10.0 million in the 2008 first
quarter.
The Company�s other expense-net for the first quarter of 2009
was $9.6 million, compared to other income-net of $6.5 million in
the first quarter of 2008. The $16.1 million decline was
predominantly due to a year-over-year decline in interest income
and approximately $9.4 million of non-cash charges related to
foreign currency hedging activity, compared to $2.4 million in the
corresponding period a year ago.
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, the expected timing of the completion of the
problematic pipeline projects and our belief that we are
well-positioned and progressing in the current environment.
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 First Quarter 2009
Earnings Release
�
Date:
Tuesday, May 12, 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.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
�
Three Months Ended March 31,
2009
�
2008
(Unaudited)
(In thousands, except shares
and pershare amounts)
� Revenues � $ 1,493,263 � � $ 1,450,426 � Costs and Expenses: Cost
of operations 1,228,622 1,188,696 (Gains) losses on asset disposals
and impairments � net 1,241 (11,443 ) Selling, general and
administrative expenses � � 141,394 � � � 126,731 � Total Costs and
Expenses � � 1,371,257 � � � 1,303,984 � � Equity in Income of
Investees � � 9,200 � � � 10,670 � � Operating Income � � 131,206 �
� � 157,112 � � Other Income (Expense): Interest income 2,813
13,395 Interest expense (956 ) (2,940 ) Other expense � net � �
(11,493 ) � � (3,997 ) Total Other Income (Expense) � � (9,636 ) �
� 6,458 � � Income before Provision for Income Taxes 121,570
163,570 � Provision for Income Taxes � � 43,878 � � � 40,380 � �
Net Income � $ 77,692 � � $ 123,190 � � Earnings per Share: Basic $
0.34 $ 0.55 Diluted � $ 0.33 � � $ 0.54 � � Shares used in the
computation of earnings per share: Basic 228,314,785 225,632,169
Diluted � � 232,586,245 � � � 230,112,858 � �
McDERMOTT INTERNATIONAL,
INC.
SELECTED SEGMENT
INFORMATION
�
Three Months Ended March 31,
2009
�
2008
REVENUES
(Unaudited) Offshore Oil and Gas Construction $
708,524 $ 645,949 Government Operations 257,105 190,594 Power
Generation Systems 528,573 616,298 Adjustments and Eliminations � �
(939 ) � � (2,415 ) TOTAL � $ 1,493,263 � � $ 1,450,426 � � SEGMENT
INCOME Offshore Oil and Gas Construction $ 45,038 $ 52,925
Government Operations 45,752 37,950 Power Generation Systems � �
58,159 � � � 76,258 � 148,949 167,133 Corporate � � (17,743 ) � �
(10,021 ) TOTAL � $ 131,206 � � $ 157,112 � � EQUITY IN INCOME
(LOSS) OF INVESTEES (1) Offshore Oil and Gas Construction $ (1,145
) $ (754 ) Government Operations 8,702 8,749 Power Generation
Systems � � 1,643 � � � 2,675 � TOTAL � $ 9,200 � � $ 10,670 �
PENSION EXPENSE (1)
Offshore Oil and Gas Construction $ 2,177 $ 1,665 Government
Operations 12,158 4,061 Power Generation Systems 15,315 6,026
Corporate � � 4,598 � � � 733 � TOTAL � $ 34,248 � � $ 12,485 � �
DEPRECIATION & AMORTIZATION (1) Offshore Oil and Gas
Construction $ 19,760 $ 19,963 Government Operations 11,243 5,566
Power Generation Systems 4,335 5,497 Corporate � � 684 � � � 285 �
TOTAL � $ 36,022 � � $ 31,311 � � RESEARCH & DEVELOPMENT, NET
(1) $ 10,240 $ 9,008 �
CAPITAL EXPENDITURES
Offshore Oil and Gas Construction $ 41,359 $ 47,237 Government
Operations 5,246 1,511 Power Generation Systems 12,333 7,204
Corporate � � 2,450 � � � 3,334 � TOTAL � $ 61,388 � � $ 59,286 � �
BACKLOG Offshore Oil and Gas Construction $ 5,043,788 $ 5,320,839
Government Operations 2,698,580 1,676,766 Power Generation Systems
� � 2,220,517 � � � 3,179,244 � TOTAL � $ 9,962,885 � � $
10,176,849 � � � � � � (1) Included in Segment Income Above �
McDERMOTT INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
�
�
ASSETS
� �
March 31, December 31, 2009 2008
(Unaudited) (In thousands) Current Assets: Cash and
cash equivalents $ 528,624 $ 586,649 Restricted cash and cash
equivalents 59,026 50,536 Investments 81,912 131,515 Accounts
receivable � trade, net 613,537 712,055 Accounts and notes
receivable � unconsolidated affiliates 4,569 1,504 Accounts
receivable � other 141,021 139,062 Contracts in progress 400,305
311,713 Inventories 113,273 128,383 Deferred income taxes 100,364
97,069 Other current assets � � 63,670 � � 58,499 � Total Current
Assets � � 2,106,301 � � 2,216,985 � Property, Plant and Equipment
2,276,138 2,234,050 Less accumulated depreciation � � 1,172,208 � �
1,155,191 � Net Property, Plant and Equipment � � 1,103,930 � �
1,078,859 � Investments � � 317,292 � � 319,170 � Goodwill � �
297,525 � � 298,265 � Deferred Income Taxes � � 288,804 � � 335,877
� Investments in Unconsolidated Affiliates � � 73,001 � � 70,304 �
Other Assets � � 274,416 � � 282,233 � TOTAL � $ 4,461,269 � $
4,601,693 �
McDERMOTT INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
�
�
LIABILITIES AND STOCKHOLDERS'
EQUITY
� �
March 31, December 31, 2009 2008
(Unaudited) (In thousands) � Current Liabilities:
Notes payable and current maturities of long-term debt $ 4,161 $
9,021 Accounts payable 464,875 551,435 Accrued employee benefits
181,264 205,521 Accrued contract cost 92,896 97,041 Advance
billings on contracts 828,610 951,895 Accrued warranty expense
119,708 120,237 Income taxes payable 40,603 55,709 Accrued
liabilities � other � � 249,883 � � � 217,486 � � Total Current
Liabilities � � 1,982,000 � � � 2,208,345 � � Long-Term Debt � �
5,915 � � � 6,109 � � Accumulated Postretirement Benefit Obligation
� � 106,431 � � � 107,567 � � Self-Insurance � � 91,637 � � �
88,312 � � Pension Liability � � 665,518 � � � 682,624 � � Other
Liabilities � � 197,028 � � � 192,564 � � Contingencies and
Commitments � Stockholders� Equity: Common stock, par value $1.00
per share 234,544 234,174 Capital in excess of par value 1,264,556
1,252,848 Retained earnings 642,283 564,591 Treasury stock at cost,
5,854,959 and 5,840,314 shares at March 31, 2009 and December 31,
2008, respectively (63,166 ) (63,026 ) Accumulated other
comprehensive loss � � (665,477 ) � � (672,415 ) � Total
Stockholders� Equity � � 1,412,740 � � � 1,316,172 � � TOTAL � $
4,461,269 � � $ 4,601,693 � �
McDERMOTT INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
�
Three Months Ended March 31,
2009
�
2008
(Unaudited) (In thousands) CASH FLOWS FROM OPERATING
ACTIVITIES: Net Income � $ 77,692 � � $ 123,190 � Non-cash items
included in net income: Depreciation and amortization 36,022 31,311
Income of investees, less dividends (1,142 ) (3,057 ) (Gains)
losses on asset disposals and impairments � net 1,241 (11,443 )
Provision for deferred taxes 38,407 16,063 Amortization of pension
and postretirement costs 21,970 10,137 Excess tax benefits from FAS
123(R) stock-based compensation (134 ) (5,346 ) Other, net 13,159
10,727 Changes in assets and liabilities, net of effects of
acquisitions and divestitures: Accounts receivable 90,367 (75,109 )
Net contracts in progress and advance billings on contracts
(208,063 ) (103,241 ) Accounts payable (85,830 ) 7,754 Income taxes
(16,717 ) 2,150 Accrued and other current liabilities 29,767 77,316
Pension liability, accumulated postretirement benefit obligation
and accrued employee benefits (43,281 ) (107,488 ) Other, net � �
19,629 � � � (25,891 ) NET CASH USED IN OPERATING ACTIVITIES � �
(26,913 ) � � (52,927 ) CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents (8,490 ) (14,561 )
Purchases of property, plant and equipment (61,388 ) (59,286 ) Net
(increase) decrease in available-for-sale securities 49,007 (88,633
) Proceeds from asset disposals 279 11,921 Other, net � � (1,055 )
� � (820 ) NET CASH USED IN INVESTING ACTIVITIES � � (21,647 ) � �
(151,379 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of
long-term debt (4,825 ) (4,385 ) Issuance of common stock 160 2,845
Payment of debt issuance costs (19 ) (164 ) Excess tax benefits
from FAS 123(R) stock-based compensation 134 5,346 Other � � 943 �
� � - � NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES � �
(3,607 ) � � 3,642 � EFFECTS OF EXCHANGE RATE CHANGES ON CASH � �
(5,858 ) � � (130 ) NET DECREASE IN CASH AND CASH EQUIVALENTS
(58,025 ) (200,794 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD � � 586,649 � � � 1,001,394 � CASH AND CASH EQUIVALENTS AT
END OF PERIOD � $ 528,624 � � $ 800,600 � SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION: Cash paid during the period for: Interest
(net of amount capitalized) $ 1,124 $ 3,139 Income taxes (net of
refunds) � $ 19,786 � � $ 30,058 �
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