McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today reported net income of $76.0 million, or $0.32 per
diluted share, for the 2010 second quarter on consolidated revenues
of $1.3 billion. The results of the 2010 second quarter compare to
net income of $92.6 million, or $0.40 per diluted share, on
revenues of $1.6 billion in the corresponding period of 2009. Both
periods include the results of The Babcock & Wilcox Company
(“B&W”), which was spun-off to McDermott shareholders on July
30, 2010. Additionally, the 2010 second quarter net income included
approximately $66.2 million in after-tax expenses related to the
spin-off ($0.28 per diluted share). Weighted average common shares
outstanding on a fully diluted basis were approximately 234.4
million and 233.1 million in the quarters ended June 30, 2010 and
June 30, 2009, respectively.
With McDermott’s spin-off of B&W now complete, the past
results of B&W, as well as the costs of the spin-off, will be
accounted for as discontinued operations in McDermott’s future
reporting periods. As a result, the remainder of this release will
reference McDermott’s continuing operations as reflected in the
unaudited pro forma financial statements, included in the tables
below and filed with the U.S. Securities and Exchange Commission on
Forms 8-K and 8-K/A, which adjust McDermott’s consolidated results
for the spin-off of B&W and the related costs.
On this pro forma basis, McDermott’s net income was $81.3
million, or $0.35 per diluted share, for the second quarter of 2010
on consolidated revenues of $645.1 million. The results of the 2010
second quarter compare to pro forma net income of $34.4 million, or
$0.15 per diluted share, on revenues of $832.9 million in the
corresponding period of 2009. The year-over-year decrease in
revenues was due to reduced level of activities primarily in the
Middle East and Asia Pacific regions.
The Company’s pro forma operating income was $102.7 million in
the 2010 second quarter, compared to $55.7 million in the 2009
second quarter. The year-over-year increase in the 2010 second
quarter, as compared to the corresponding period of 2009, was due
to improved project performance, primarily in our Middle East
operations.
“McDermott’s performance in the second quarter of 2010 was an
excellent beginning as the Company moves forward post-spin,” said
Stephen M. Johnson, President and Chief Executive Officer of
McDermott. “During the quarter, we recognized about $720 million of
new bookings, which grew backlog sequentially to $4.3 billion. The
Company’s operating margins for the quarter were exceptional at
nearly 16% and the pro forma balance sheet provides a strong
foundation to pursue growth. Our new leadership team is excited
about our long-term prospects as an engineering and construction
company exclusively focused on the offshore oil and gas
industry.”
The Company’s other expense for the second quarter of 2010 was
$2.3 million, compared to other income of $2.2 million in the
second quarter of 2009. The $4.5 million negative variance was
primarily due to the write-off of unamortized debt issuance costs,
lower interest income combined with higher interest expense, and
the amortization of fees associated with new credit facilities.
At June 30, 2010, the Company’s pro forma backlog was $4.3
billion, compared to $4.2 billion and $4.7 billion at March 31,
2010 and June 30, 2009, respectively.
Balance Sheet
Summary
McDermott has included a pro forma balance sheet which reflects
the accounts of the Company excluding B&W. As of June 30, 2010,
as adjusted, McDermott had total assets of $2.3 billion. Included
in this amount was approximately $764.3 million of cash, cash
equivalents and investments. Net working capital, calculated as
current assets less current liabilities, was $383.2 million.
Additionally, shareholders’ equity was approximately $1.4 billion,
or 62% of total assets, with total debt of $55.8 million.
Upcoming Investor
Events
McDermott plans to attend two upcoming investor conferences
later this week. On August 11, 2010, members of McDermott’s senior
management will participate in UBS’ E&C 1X1 Conference in
Chicago. The following day, August 12, 2010, McDermott will
participate in Jefferies’ Industrials Conference in New York City,
with Steve Johnson presenting at 2:00 pm ET.
The presentations to be used during both of 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 respective events. In addition, Mr. Johnson’s presentation
on August 12, 2010 will be webcast live, and a replay will be
available for a limited time, at www.mcdermott.com.
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 more than
20 countries across the Atlantic, Middle East and Asia Pacific, the
Company’s integrated resources include more than 16,000 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 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 pursuit of growth. 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 and our inability to
successfully execute on 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 and 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.
Conference Call to Discuss
Second Quarter 2010 Earnings Release
Date: Tuesday, August 10, 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 2 weeks in the investor relations
section of www.mcdermott.com
McDERMOTT INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
Three Months Ended Six Months Ended June
30, June 30,
2010
2009
2010
2009
(Unaudited) (In thousands, except share and per share
amounts) Revenues $ 1,333,562 $
1,564,999 $ 2,515,492 $ 3,058,262
Costs and Expenses: Cost of operations 1,006,733
1,275,058 1,941,584 2,503,680 Gains on asset disposals – net (165 )
(1,897 ) (2,258 ) (656 ) Costs to spin-off B&W 66,218 - 90,420
- Selling, general and administrative expenses
154,203 153,195 297,953
294,589 Total Costs and Expenses
1,226,989 1,426,356
2,327,699 2,797,613
Equity in Income of Investees 16,719
9,097 27,307
18,297 Operating Income 123,292
147,740 215,100
278,946 Other Income (Expense): Interest
income (expense) – net (3,333 ) 4,987 (3,034 ) 6,844 Other income
(expense) – net (4,494 ) (10,201 )
(8,711 ) (20,971 ) Total Other Income
(Expense) (7,827 ) (5,214 )
(11,745 ) (14,127 ) Income before
Provision for Income Taxes 115,465 142,526 203,355 264,819
Provision for Income Taxes 33,872
44,645 53,544
88,523 Net Income 81,593
97,881 149,811
176,296 Less: Net Income Attributable to
Noncontrolling Interest (5,559 ) (5,326
) (13,836 ) (6,049 ) Net Income
Attributable to McDermott International, Inc. $ 76,034
$ 92,555 $ 135,975 $
170,247 Earnings per Share: Basic: Net Income
Attributable to McDermott International, Inc. $ 0.33 $ 0.40 $ 0.59
$ 0.74 Diluted: Net Income Attributable to McDermott International,
Inc. $ 0.32 $ 0.40 $ 0.58
$ 0.73 Shares used in the computation of
earnings per share: Basic 231,847,145 229,273,441 231,335,723
228,794,113 Diluted 234,423,546 233,105,949 234,588,291 232,846,098
McDERMOTT INTERNATIONAL,
INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended June 30, 2010
As Reported
Pro
FormaAdjustments
Pro Forma
(In thousands) Revenues $ 1,333,562
$ (688,496 ) $ 645,066
Costs and Expenses: Cost of operations 1,006,733 (518,369 ) 488,364
Gains on asset disposals and impairments – net (165 ) (61 ) (226 )
Costs to spin-off B&W 66,218 (66,218 ) - Selling, general and
administrative expenses 154,203
(100,664 ) 53,539 Total
Costs and Expenses 1,226,989
(685,312 ) 541,677
Equity in Income (Loss) of Investees 16,719
(17,435 ) (716 )
Operating Income 123,292
(20,619 ) 102,673
Other Income (Expense): Interest income (expense) – net (3,333 )
1,553 (1,780 ) Other expense – net (4,494 )
3,945 (549 ) Total
Other Income (Expense) (7,827 )
5,498 (2,329 ) Income
before Provision for Income Taxes 115,465 (15,121 ) 100,344
Provision for Income Taxes 33,872
(20,341 ) 13,531
Net Income 81,593
5,220 86,813 Less:
Net Income Attributable to Noncontrolling Interest
(5,559 ) 72
(5,487 ) Net Income Attributable to McDermott Intl, Inc.
$ 76,034 $ 5,292
$ 81,326 Earnings per Share:
Basic:
Net Income Attributable to
McDermott Intl, Inc.
$ 0.33 $ 0.35
Diluted:
Net Income Attributable to
McDermott Intl, Inc.
$ 0.32 $
0.35 Shares used in the computation of Earnings per
Share: Basic 231,847,145 231,847,145 Diluted 234,423,546
234,423,546
McDERMOTT INTERNATIONAL,
INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended June 30, 2009
As Reported
Pro
FormaAdjustments
Pro Forma
(In thousands) Revenues $ 1,564,999
$ (732,069 ) $ 832,930 Costs and
Expenses: Cost of operations 1,275,058 (553,489 ) 721,569 Gains on
asset disposals and impairments – net (1,897 ) 30 (1,867 ) Selling,
general and administrative expenses 153,195
(96,745 ) 56,450
Total Costs and Expenses 1,426,356
(650,204 ) 776,152
Equity in Income (Loss) of Investees 9,097
(10,153 ) (1,056 )
Operating Income 147,740
(92,018 ) 55,722 Other Income
(Expense): Interest income (expense) – net 4,987 (112 ) 4,875 Other
expense – net (10,201 ) 7,503
(2,698 ) Total Other Income (Expense)
(5,214 ) 7,391
2,177 Income before Provision for
Income Taxes 142,526 (84,627 ) 57,899 Provision for Income
Taxes 44,645 (26,408 )
18,237 Net Income
97,881 (58,219 )
39,662 Less: Net Income Attributable to
Noncontrolling Interest (5,326 )
43 (5,283 ) Net Income
Attributable to McDermott Intl, Inc. $ 92,555
$ (58,176 ) $ 34,379 Earnings
per Share:
Basic:
Net Income Attributable to
McDermott Intl, Inc.
$ 0.40 $ 0.15
Diluted:
Net Income Attributable to
McDermott Intl, Inc.
$ 0.40 $ 0.15
Shares used in the computation of Earnings per Share:
Basic 229,273,441 229,273,441 Diluted 233,105,949 233,105,949
McDERMOTT INTERNATIONAL,
INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
For the Six Months Ended June 30, 2010
As Reported
Pro
FormaAdjustments
Pro Forma
(In thousands) Revenues $ 2,515,492
$ (1,350,884 ) $ 1,164,608 Costs
and Expenses: Cost of operations 1,941,584 (1,063,320 ) 878,264
Gains on asset disposals and impairments – net (2,258 ) (48 )
(2,306 ) Costs to spin-off B&W 90,420 (90,420 ) - Selling,
general and administrative expenses 297,953
(192,129 ) 105,824
Total Costs and Expenses 2,327,699
(1,345,917 ) 981,782
Equity in Income (Loss) of Investees 27,307
(31,454 ) (4,147 )
Operating Income 215,100
(36,421 ) 178,679 Other
Income (Expense): Interest income (expense) – net (3,034 ) 1,582
(1,452 ) Other expense – net (8,711 )
7,035 (1,676 ) Total Other
Income (Expense) (11,745 ) 8,617
(3,128 ) Income before Provision
for Income Taxes 203,355 (27,804 ) 175,551 Provision for
Income Taxes 53,544
(26,662 ) 26,882 Net Income
149,811 (1,142 )
148,669 Less: Net Income Attributable
to Noncontrolling Interest (13,836 )
85 (13,751 ) Net Income
Attributable to McDermott Intl, Inc. $ 135,975
$ (1,057 ) $ 134,918 Earnings
per Share:
Basic:
Net Income Attributable to
McDermott Intl, Inc.
$ 0.59 $ 0.58
Diluted:
Net Income Attributable to
McDermott Intl, Inc.
$ 0.58 $ 0.58
Shares used in the computation of Earnings per Share:
Basic 231,335,723 231,335,723 Diluted 234,588,291 234,588,291
McDERMOTT INTERNATIONAL,
INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
For the Six Months Ended June 30, 2009 As
Reported
Pro Forma
Adjustments
Pro Forma
(In thousands) Revenues $ 3,058,262
$ (1,517,122 ) $ 1,541,140 Costs and
Expenses: Cost of operations 2,503,680 (1,164,403 ) 1,339,277 Gains
on asset disposals and impairments – net (656 ) (177 ) (833 )
Selling, general and administrative expenses
294,589 (184,412 ) 110,177
Total Costs and Expenses 2,797,613
(1,348,992 ) 1,448,621
Equity in Income (Loss) of Investees
18,297 (20,498 ) (2,201 )
Operating Income 278,946
(188,628 ) 90,318 Other Income
(Expense): Interest income (expense) – net 6,844 (789 ) 6,055 Other
expense – net (20,971 ) 9,543
(11,428 ) Total Other Income (Expense)
(14,127 ) 8,754
(5,373 ) Income before Provision for Income Taxes 264,819
(179,874 ) 84,945 Provision for Income Taxes
88,523 (61,618 ) 26,905
Net Income 176,296
(118,256 ) 58,040 Less: Net
Income attributable to Noncontrolling Interest
(6,049
)
95
(5,954
)
Net Income Attributable to McDermott Intl, Inc.
$ 170,247 $ (118,161 ) $ 52,086
Earnings per Share: Basic: Net Income Attributable to
McDermott Intl, Inc $ 0.74 $ 0.23 Diluted: Net Income Attributable
to McDermott Intl, Inc $ 0.73
$ 0.22 Shares used in the computation of
Earnings per Share: Basic 228,794,113 228,794,113 Diluted
232,846,098 232,846,098
McDERMOTT INTERNATIONAL,
INC.
SUPPLEMENTAL PRO FORMA
INFORMATION
Three Months Ended Six Months Ended June
30, June 30,
2010
2009
2010
2009
(Unaudited); (In thousands) EQUITY IN INCOME (LOSS)
OF INVESTEES (1) (716 ) (1,056 ) (4,147 ) (2,201 )
GAIN/(LOSS) ON SALE OF ASSETS (1) 226 1,867 2,306 833
PENSION EXPENSE (1) 1,958 2,180 3,910 4,368 DEPRECIATION
& AMORTIZATION (1) 20,369 20,214 40,419 39,973 CAPITAL
EXPENDITURES 47,514 47,774 95,059 89,133 BACKLOG 4,265,714
4,688,467 4,265,714 4,688,467
(1) Included in Segment Income
Above
McDERMOTT INTERNATIONAL,
INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
As of June 30, 2010 As Reported
Pro Forma
Adjustments
Pro Forma
(In thousands) ASSETS Current Assets: Cash and cash
equivalents $ 777,554 $ 240,347 $ 537,207 Restricted cash and cash
equivalents 150,708 19,196 131,512 Accounts receivable – trade, net
568,515 323,697 244,818 Accounts and notes receivable –
unconsolidated affiliates
13,657
7,941
5,716
Accounts receivable – other 64,829 42,317 22,512 Contracts in
progress 351,923 288,154 63,769 Inventories 100,636 97,863 2,773
Deferred income taxes 90,702 84,343 6,359 Other current assets
99,890 48,345 51,545
Total Current Assets 2,218,414 1,152,203
1,066,211 Property, Plant and Equipment
2,691,060 948,915 1,742,145 Less accumulated depreciation
1,312,985 524,839 788,146 Net
Property, Plant and Equipment 1,378,075
424,076 953,999 Investments 168,195
72,600 95,595 Goodwill
334,649 279,904 54,745 Deferred
Income Taxes 242,826 242,826 -
Investments in Unconsolidated Affiliates 101,228
86,770 14,458 Other Assets
271,262 147,443 123,819
TOTAL $ 4,714,649 $ 2,405,822 $ 2,308,827
McDERMOTT INTERNATIONAL,
INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
As of June 30, 2010 As Reported
Pro Forma
Adjustments
Pro Forma
(In thousands) LIABILITIES AND EQUITY Current
Liabilities: Notes payable and current maturities of long-term debt
$ 15,067 $ 7,525 $ 7,542 Accounts payable 425,170 187,407 237,763
Accrued contract costs 86,599 445 86,154 Accrued employee benefits
146,147 95,109 51,038 Accrued pension liability – current portion
130,914 123,770 7,144 Accrued liabilities – other 162,052 73,111
88,941 Advance billings on contracts 595,410 439,312 156,098
Accrued warranty expense 117,213 114,780 2,433 Income taxes payable
59,617 2,074
57,543 Total Current Liabilities
1,738,189 1,043,533
694,656 Long-Term Debt 49,218
953 48,265
Accumulated Postretirement Benefit Obligation 105,270
105,136 134
Self-Insurance 91,247 55,487
35,760 Pension Liability
547,031 525,392
21,639 Other Liabilities 152,413
90,216 62,197
Commitments and Contingencies
Equity Common stock par value 239,264 - 239,264
Capital in excess of par value 1,343,787 - 1,343,787 Retained
earnings 1,087,622 1,017,058 70,564 Treasury stock (83,284 ) -
(83,284 ) Accumulated other comprehensive loss
(598,441 ) (432,454 ) (165,987 )
Stockholders’ Equity – McDermott Intl, Inc. 1,988,948
584,604 1,404,344
Noncontrolling interest 42,333
501 41,832 Total Equity
2,031,281 585,105
1,446,176 TOTAL $ 4,714,649 $
2,405,822 $ 2,308,827
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