McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today reported net income of $98.7 million, or $0.42 per
diluted share, for the 2009 fourth quarter, compared to $43.0
million, or $0.19 per diluted share, in the corresponding period of
2008. Weighted average common shares outstanding on a fully diluted
basis were approximately 234.5 million and 230.6 million in the
quarters ended December 31, 2009 and December 31, 2008,
respectively.
McDermott’s revenues in the fourth quarter of 2009 were $1,459.1
million, compared to $1,664.5 million in the corresponding period
in 2008. The year-over-year decrease was due to a 28 percent
decline, or $170.3 million, in the Power Generation Systems segment
and a 9 percent decline, or $77.8 million, in the Offshore Oil
& Gas Construction segment. Partially offsetting these
declines, revenues increased approximately 20 percent, or $41.5
million, in the Government Operations segment.
The Company’s operating income was $122.8 million in the 2009
fourth quarter, compared to $89.7 million in the 2008 fourth
quarter. Segment income increased $82.7 million in the Offshore Oil
& Gas Construction segment compared to the 2008 fourth quarter,
which more than offset the year-over-year decline in the Power
Generation Systems’ segment income and the $25.0 million increase
in pension expense, which was predominantly non-cash.
“We are pleased with our results for the final quarter of 2009.
These results highlight the resiliency of our businesses in what
still remains a challenging economic environment. Despite about
$150 million of our Offshore Oil & Gas Construction segment’s
revenues coming from zero margin projects, this segment delivered
strong segment income, exceeding our expectations,” said John A.
Fees, Chief Executive Officer of McDermott. “While we incurred
about $7 million of expenses unique to the transaction during the
2009 fourth quarter, we are making substantial progress on the
previously announced spin-off of The Babcock & Wilcox Company
and we anticipate filing a first draft of the Form 10 registration
statement later this month.”
At December 31, 2009, the Company’s consolidated backlog was
$8.1 billion, compared to $9.8 billion and $8.5 billion at December
31, 2008 and September 30, 2009, respectively.
For the year-ended December 31, 2009, McDermott reported
consolidated revenues of $6.2 billion, generating operating income
of $546.5 million and net income of $387.1 million, or $1.66 per
diluted share.
RESULTS OF OPERATIONS
2009 Fourth Quarter Compared to 2008 Fourth Quarter
Offshore Oil & Gas
Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were
$770.6 million in the 2009 fourth quarter, compared to $848.3
million for the same period a year ago. Increased revenues in the
Middle East were more than offset by reduced levels in other
regions. Approximately 20 percent of this segment’s 2009 fourth
quarter revenues were derived from contracts in or near loss
positions.
Segment income for the 2009 fourth quarter was $97.6 million,
compared to $14.9 million in the 2008 fourth quarter. Major areas
contributing to fourth quarter 2009 segment income include the
Middle East and Asia Pacific regions.
At December 31, 2009, segment backlog was $3.4 billion, compared
to backlog of $4.5 billion and $3.9 billion at December 31, 2008
and September 30, 2009, respectively.
Power Generation Systems
Segment
Revenues in the Power Generation Systems segment for the fourth
quarter of 2009 were $435.2 million, compared to $605.5 million in
the fourth quarter of 2008. The year-over-year decrease was
predominantly due to reduced activity on customers’ major capital
projects, including new power plant construction and retrofits of
existing power plants.
Segment income for the 2009 fourth quarter was $21.7 million,
compared to $48.7 million in the 2008 fourth quarter. Major
activities contributing to fourth quarter 2009 segment income
include the supply and construction of new boilers and
environmental equipment, retrofit projects of existing facilities,
inspection and maintenance, and related aftermarket parts and
services. Included in the 2009 fourth quarter’s segment income were
approximately $6.5 million in one-time severance costs and about
$8.9 million in increased research & development expenses,
primarily associated with B&W’s mPowerTM modular nuclear
reactor initiative.
At December 31, 2009, segment backlog was $2.0 billion, compared
to backlog of $2.5 billion and $2.1 billion at December 31, 2008
and September 30, 2009, respectively.
Government Operations
Segment
Revenues in the Government Operations segment were $253.8
million in the 2009 fourth quarter, compared to $212.2 million for
the same period a year ago. The increase in revenues, as compared
to the same period a year ago, was primarily due to activities in
the manufacture of nuclear components and nuclear fuels for certain
U.S. Government programs, including the revenues from Nuclear Fuel
Services, Inc., which was acquired on December 31, 2008.
Segment income for the 2009 fourth quarter was $31.5 million,
compared to $35.2 million in the 2008 fourth quarter. Major items
contributing to fourth quarter 2009 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. During the 2009 fourth quarter, approximately
$14.3 million in expenses were recognized primarily related to the
ongoing temporary suspension of certain operations and the
implementation of various enhanced safety controls and processes at
Nuclear Fuel Services’ Erwin, Tennessee manufacturing facility. The
Company currently expects that the production line will resume
operations by the end of March 2010.
At December 31, 2009, segment backlog was $2.8 billion, compared
to backlog of $2.9 billion and $2.5 billion at December 31, 2008
and September 30, 2009, respectively.
Corporate & Other Income
and Expense
Unallocated corporate expenses were $28.0 million in the 2009
fourth quarter, compared to $9.2 million in the 2008 fourth
quarter. The year-over-year increase was largely due to
approximately $6.6 million of costs in connection with the proposed
spin-off of The Babcock & Wilcox Company and $4.2 million
related to increased pension expense, as well as increased
compensation and information technology expenses.
The Company’s other expense for the fourth quarter of 2009 was
$9.0 million, compared to $7.1 million in the fourth quarter of
2008. The increased expense was due to higher net interest expense,
partially offset by lower foreign currency exchange losses.
Research & Development
Expense
Research & Development expense, net, was $20.3 million in
the 2009 fourth quarter, compared to $11.4 million in the 2008
fourth quarter. Charged to cost of operations and predominantly in
McDermott’s Power Generation Systems segment, this expense includes
costs related to The Babcock & Wilcox Company’s modular and
scalable nuclear reactor initiative, known as mPowerTM, and the
continued development of carbon capture and sequestration
technologies. For the year ending December 31, 2009, net R&D
expenses were $54.2 million compared to $40 million in 2008.
Upcoming Investor
Events
Members of McDermott’s management team will participate in
Davenport & Co.’s Industrials Conference on March 4, 2010 in
New York City and will be in Boston the following week on March 11,
2010 for UBS’ Engineering & Construction Conference. The
presentation to be used during these meetings will be available for
a limited time over the internet at www.mcdermott.com in the
investor relations section on the morning of the conference.
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, and the anticipated filing of the Form 10
registration statement. 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, changes in the scope or timing of contracts in backlog
and changes in laws and regulations. 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 2009 Earnings Release
Date: Tuesday, March 2, 2010, 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 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,
2009 2008
2009 2008
(Unaudited) (In thousands, except shares and per share
amounts) Revenues $1,459,137 $1,664,500
$6,193,077 $6,572,423 Costs and Expenses: Cost of operations
1,183,710 1,452,646 5,070,436 5,519,827 (Gains) losses on asset
disposals and impairments – net 1,655 (880) 1,322 (12,202) Selling,
general and administrative expenses 171,206 138,749
626,360 543,047 Total Costs and Expenses
1,356,571 1,590,515 5,698,118 6,050,672
Equity in Income of Investees 20,190 15,688
51,537 48,131 Operating Income 122,756
89,673 546,496 569,882 Other Income (Expense):
Interest income 910 4,812 7,281 34,353 Interest expense (2,690)
(1,631) (38) (7,380) Other expense – net (7,187)
(10,302) (31,285) (9,454) Total Other Income
(Expense) (8,967) (7,121) (24,042)
17,519 Income before Provision for Income Taxes 113,789
82,552 522,454 587,401 Provision for Income Taxes
19,530 39,559 131,846 157,812 Net
Income 94,259 42,993 $390,608 $429,589
Less: Net Income attributable to Noncontrolling Interest
4,443 9 (3,552) (287) Net Income Attributable to McDermott
International, Inc. $98,702 $43,002 $387,056
$429,302 Earnings per Common Share: Basic: Net Income
Attributable to McDermott International, Inc. $0.43 $0.19 $1.69
$1.89 Diluted: Net Income Attributable to McDermott International,
Inc. $0.42 $0.19 $1.66 $1.86
Shares used in the computation of earnings per share: Basic
230,306,488 227,739,578 229,471,020 226,918,776 Diluted
234,500,686 230,589,855 233,626,876
230,393,782
McDERMOTT INTERNATIONAL,
INC.SELECTED SEGMENT INFORMATION
Three Months Ended Twelve Months Ended
December 31, December 31, 2009
2008 2009
2008 (Unaudited); (In thousands)
REVENUES Offshore Oil and Gas Construction $ 770,564 $ 848,320 $
3,338,488 $ 3,181,238 Government Operations 253,769 212,227
1,032,023 851,019 Power Generation Systems 435,238 605,530
1,825,040 2,550,854 Adjustments and Eliminations (434)
(1,577) (2,474) (10,688) TOTAL $
1,459,137 $ 1,664,500 $ 6,193,077 $6,572,423
SEGMENT INCOME Offshore Oil and Gas Construction $ 97,600 $
14,932 $ 316,965 $ 146,180 Government Operations 31,519 35,228
154,542 150,232 Power Generation Systems 21,669
48,670 157,896 315,362 $ 150,788
$ 98,830 $ 629,403 $ 611,774 Corporate
(28,032) (9,157) (82,907) (41,892) OPERATING
INCOME $ 122,756 $ 89,673 $ 546,496 $
569,882 EQUITY IN INCOME (LOSS) OF INVESTEES (1) Offshore
Oil and Gas Construction $ (760) $ (990) $ (3,557) $ (3,661)
Government Operations 14,616 13,868 41,051 41,381 Power Generation
Systems 6,334 2,810 14,043 10,411 TOTAL
$ 20,190 $ 15,688 $ 51,537 $ 48,131
PENSION EXPENSE (1)
Offshore Oil and Gas Construction $ 2,188 $ 1,668 $ 8,749 $ 6,663
Government Operations 12,553 2,798 50,217 10,713 Power Generation
Systems 16,180 5,719 63,597 23,411 Corporate 4,871
632 19,062 2,764 TOTAL $ 35,792 $
10,817 $ 141,625 $ 43,551 DEPRECIATION &
AMORTIZATION (1) Offshore Oil and Gas Construction $ 20,025 $
19,379 $ 84,706 $ 80,148 Government Operations 13,171 5,634 51,588
22,445 Power Generation Systems 4,461 5,513 17,859 22,080 Corporate
891 548 3,266 1,460 TOTAL $
38,548 $ 31,074 $ 157,419 $126,133
RESEARCH & DEVELOPMENT, NET (1) $ 20,295 $ 11,406
$54,229 $ 40,077
CAPITAL EXPENDITURES
Offshore Oil and Gas Construction $ 46,451 $ 44,208 $ 170,004 $
193,736 Government Operations 19,355 7,864 45,062 16,348 Power
Generation Systems 6,946 13,191 32,147 33,896 Corporate 769
1,044 16,515 11,711 TOTAL $ 73,521
$ 66,307 $ 263,728 $ 255,691 BACKLOG
Offshore Oil and Gas Construction $ 3,370,785 $ 4,456,951 $
3,370,785 $4,456,951 Government Operations 2,766,445 2,882,895
2,766,445 2,882,895 Power Generation Systems 1,973,615
2,476,435 1,973,615 2,476,435 TOTAL $
8,110,845 $ 9,816,281 $ 8,110,845 $9,816,281
(1) Included in Segment Income Above
McDERMOTT INTERNATIONAL,
INC.CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2009
2008 (In thousands) Current Assets: Cash
and cash equivalents $899,270 $586,649 Restricted cash and cash
equivalents 69,920 50,536 Investments 12 131,515 Accounts
receivable – trade, net 642,995 712,055 Accounts and notes
receivable – unconsolidated affiliates 5,806 1,504 Accounts
receivable – other 68,035 139,062 Contracts in progress 400,831
311,713 Inventories 101,494 128,383 Deferred income taxes 100,828
97,069 Other current assets 68,730 58,499
Total Current Assets 2,357,921 2,216,985
Property, Plant and Equipment 2,608,740 2,234,050 Less accumulated
depreciation 1,271,135 1,155,191 Net Property,
Plant and Equipment 1,337,605 1,078,859
Investments 228,706 319,170 Goodwill
306,497 298,265 Deferred Income Taxes 275,567
335,877 Investments in Unconsolidated Affiliates
86,932 70,304 Other Assets 255,882
282,233 TOTAL $4,849,110 $4,601,693
McDERMOTT INTERNATIONAL,
INC.CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS'
EQUITY
December 31, 2009 2008 (In
thousands) Current Liabilities: Notes payable and current
maturities of long-term debt $ 16,270 $ 9,021 Accounts payable
471,858 551,435 Accrued employee benefits 217,178 159,541 Accrued
pension liability – current portion 173,271 45,980 Accrued
liabilities – other 155,773 217,486 Accrued contract cost 103,041
97,041 Advance billings on contracts 689,334 951,895 Accrued
warranty expense 118,278 120,237 Income taxes payable 64,029
55,709 Total Current Liabilities 2,009,032
2,208,345 Long-Term Debt 56,714 6,109
Accumulated Postretirement Benefit Obligation 105,605
107,567 Self-Insurance 87,222 88,312
Pension Liability 610,166 682,624 Other
Liabilities 147,271 192,223 Commitments and
Contingencies Stockholders’ Equity: Common stock, par value
$1.00 per share, authorized 400,000,000 shares; issued 236,919,404
and 234,174,088 shares at December 31, 2009 and December 31, 2008,
respectively 236,919 234,174 Capital in excess of par value
1,300,998 1,252,848 Retained earnings 951,647 564,591 Treasury
stock at cost, 6,168,705 and 5,840,314 shares at December 31, 2009
and December 31, 2008, respectively (69,370) (63,026) Accumulated
other comprehensive loss (612,997) (672,415)
Stockholders’ Equity – McDermott International, Inc. 1,807,197
1,316,172 Noncontrolling interest 25,903 341 Total
Stockholders’ Equity 1,833,100 1,316,513 TOTAL
$ 4,849,110 $ 4,601,693
McDERMOTT INTERNATIONAL,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 2009
2008 (In thousands) CASH FLOWS
FROM OPERATING ACTIVITIES: Net Income $390,608 $429,589 Non-cash
items included in net income: Depreciation and amortization 157,419
126,133 (Income) loss of investees, net of dividends (893) 1,545
(Gains) losses on asset disposals and impairments – net 1,322
(12,202) Provision for deferred taxes 43,904 35,063 Amortization of
pension and postretirement costs 92,190 38,131 Excess tax benefits
from FAS 123(R) stock-based compensation 2,324 (60,901) Other
40,014 38,372 Changes in assets and liabilities, net of effects
from acquisitions: Accounts receivable 97,472 71,142 Income taxes
receivable 53,025 (11,476) Accounts payable (98,656) 86,069 Net
contracts in progress and advance billings (358,989) (630,481)
Income taxes 16,896 13,046 Accrued and other current liabilities
(70,346) 18,142 Pension liability and accrued postretirement and
employee benefits 42,023 (205,345) Other 9,761 14,206
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 418,074
(48,967) CASH FLOWS FROM INVESTING ACTIVITIES: (Increase)
decrease in restricted cash and cash equivalents (19,384) 14,250
Purchases of property, plant and equipment (263,728) (255,691)
Acquisition of businesses, net of cash acquired (36,790) (191,940)
Net (increase) decrease in available-for-sale securities 222,367
2,009 Proceeds from asset disposals 3,006 13,996 Investments in
unconsolidated affiliates (16,184) (4,000) Other (134)
1,004 NET CASH USED IN INVESTING ACTIVITIES (110,847)
(420,372) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of
long-term debt (6,010) (4,768) Payment of debt issuance costs (105)
(1,756) Increase in short-term borrowing 1,606 1,460 Issuance of
common stock 1,042 9,624 Excess tax benefits from FAS 123(R)
stock-based compensation (2,324) 60,901 Other (145)
(2) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
(5,936) 65,459 EFFECTS OF EXCHANGE RATE CHANGES ON CASH
11,330 (10,865) NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 312,621 (414,745) CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD 586,649 1,001,394
CASH AND CASH EQUIVALENTS AT END OF PERIOD $899,270
$586,649 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for: Interest (net of amount
capitalized) $4,535 $11,978 Income taxes (net of refunds)
$31,879 $68,637
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