MDR McDermott International Inc

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