MDR McDermott International Inc

McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported income from continuing operations of $63.7 million, or $0.27 per diluted share, for the 2011 second quarter. The results of the 2011 second quarter compare to income from continuing operations of $78.7 million, or $0.34 per diluted share, in the corresponding period of 2010. Classified as discontinued operations, the results of McDermott’s charter fleet business are excluded from both periods and The Babcock & Wilcox Company, which was spun-off to McDermott shareholders last year on July 30, is excluded from the 2010 period. Weighted average common shares outstanding on a fully diluted basis were approximately 237.5 million and 234.4 million in the quarters ended June 30, 2011 and June 30, 2010, respectively.

McDermott’s revenues for the 2011 second quarter were $849.8 million, an increase of over 35 percent, compared to $627.1 million in the corresponding period of 2010. The year-over-year increase was primarily due to a 144 percent increase in revenues in the Asia Pacific segment as a result of expanded scope on a large engineering, procurement, construction and installation project as well as higher marine activity, partially offset by a 30 percent decline in revenues within the Middle East segment.

The Company’s operating income was $83.8 million in the 2011 second quarter, compared to $98.1 million in the 2010 second quarter. The year-over-year decline was primarily due to lower revenues in the Middle East segment, primarily due to lower marine activity and the prior completion of certain projects that were active in the 2010 second quarter, partially offset by substantial improvement in the operating results of the Asia Pacific segment and reduced losses in the Atlantic segment.

“During the second quarter, McDermott delivered solid bookings in excess of $800 million which kept backlog at a strong level. Importantly, the amount of bids outstanding increased over 50 percent sequentially from the first quarter of 2011, providing confidence that the markets we serve continue to be active,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “Considering our pipeline of potential work is robust, our approach will remain disciplined, which we believe serves our stakeholders well. In addition, the Company’s balance sheet has remained strong, our backlog is solid and earnings have been healthy, together providing the foundation for growth.”

The Company’s other income for the second quarter of 2011 was $1.3 million, an improvement compared to the $1.1 million other expense in the second quarter of 2010, primarily due to lower interest expense and higher foreign currency gains.

At June 30, 2011, the Company’s backlog was $4.7 billion, compared to $4.2 billion and $4.8 billion at June 30, 2010 and March 31, 2011, respectively.

Balance Sheet Summary

As of June 30, 2011, McDermott reported total assets of approximately $2.7 billion.

Included in this amount was approximately $700 million of cash, restricted cash and investments. Net working capital, calculated as current assets less current liabilities, was $534.2 million. Additionally, total equity was approximately $1.7 billion, or 63% of total assets, with total debt of $81.9 million.

Discontinued Operations

For the second quarter of 2011, McDermott recorded net income from discontinued operations of $3.6 million, or $0.02 per diluted share. Including the results of discontinued operations, total net income attributable to McDermott was $67.3 million, or $0.28 per diluted share, for the 2011 second quarter.

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 approximately 20 countries across the Atlantic, Middle East and Asia Pacific, the Company’s integrated resources include more than 15,000 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 McDermott’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 markets McDermott serves continuing to be active and future 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, our inability to successfully execute on contracts in backlog and changes in the scope or timing of contracts. 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 for the year ended December 31, 2010 and subsequent 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 2011 Earnings Release

Date: Thursday, August 4, 2011, 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, 2011 2010 2011 2010 (Unaudited)

(In thousands)

  Revenues $ 849,801   $ 627,144   $ 1,749,041   $ 1,132,026     Costs and Expenses: Cost of operations 703,805 475,839 1,451,030 855,045 Gain on asset disposals and impairments – net (71 ) (226 ) (296 ) (2,306 ) Selling, general and administrative expenses   60,412     52,674     115,781     103,812     Total costs and expenses   764,146     528,287     1,566,515     956,551     Equity in Income (Loss) of Unconsolidated Affiliates   (1,876 )   (715 )   1,551     (4,146 )   Operating Income   83,779     98,142     184,077     171,329     Other Income (Expense): Interest income 292 335 741 825 Interest expense (263 ) (2,117 ) (263 ) (2,279 ) Other income (expense) – net   1,255     722     (4,148 )   (728 )   Total other income (expense)   1,284     (1,060 )   (3,670 )   (2,182 )   Income from continuing operations before provision for income taxes and noncontrolling interests   85,063     97,082     180,407     169,147     Provision for Income Taxes   17,237     12,905     39,816     25,144     Income from continuing operations before noncontrolling interests   67,826     84,177     140,591     144,003     Loss on disposal of discontinued operations — (66,218 ) — (90,420 ) Income from discontinued operations, net of tax   3,610     63,561     5,272     96,142     Total income (loss) from discontinued operations, net of tax   3,610     (2,657 )   5,272     5,722     Net Income   71,436     81,520     145,863     149,725     Less: Net Income Attributable to Noncontrolling Interests   4,108     5,486     8,115     13,750     Net Income Attributable to McDermott International, Inc. $ 67,328   $ 76,034   $ 137,748   $ 135,975            

McDERMOTT INTERNATIONAL, INC.

EARNINGS PER SHARE COMPUTATION

  Three Months Ended Six Months Ended June 30, June 30, 2011 2010 2011 2010 (Unaudited) (In thousands, except share and per share amounts) Basic:   Income from continuing operations less noncontrolling interests $ 63,718 $ 78,691 $ 132,476 $ 130,253 Income (loss) from discontinued operations, net of tax   3,610   (2,657 )   5,272   5,722   Net income attributable to McDermott International, Inc. $ 67,328 $ 76,034   $ 137,748 $ 135,975   Weighted average common shares   234,573,031   231,847,145     234,207,053   231,335,723   Income from continuing operations less noncontrolling interests 0.27 0.34 0.57 0.56 Income (loss) from discontinued operations, net of tax 0.02 (0.01 ) 0.02 0.02 Net income attributable to McDermott International, Inc. 0.29 0.33 0.59 0.59   Diluted:   Income from continuing operations less noncontrolling interests $ 63,718 $ 78,691 $ 132,476 $ 130,253 Income (loss) from discontinued operations, net of tax   3,610   (2,657 )   5,272   5,722   Net income attributable to McDermott International, Inc. $ 67,328 $ 76,034   $ 137,748 $ 135,975   Weighted average common shares (basic) 234,573,031 231,847,145 234,207,053 231,335,723 Effect of dilutive securities: Stock options, restricted stock and restricted stock units(1)   2,971,643   2,576,401     2,938,073   3,252,568   Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards   237,544,674   234,423,546     237,145,126   234,588,291   Income from continuing operations less noncontrolling interests 0.27 0.34 0.56 0.56 Income (loss) from discontinued operations, net of tax 0.02 (0.01 ) 0.02 0.02 Net income attributable to McDermott International, Inc. 0.28 0.32 0.58 0.58                                

SUPPLEMENTARY DATA

 

Three Months EndedJune 30,

Six Months Ended

June 30,

2011 2010 2011 2010 (Unaudited) (In thousands) Pension expense $ 5,435 $ 6,828 $ 11,588 $ 13,301 Depreciation & amortization expense $ 19,574 $ 19,036 $ 40,099 $ 37,823 Capital expenditures $ 77,696 $ 49,204 $ 141,682 $ 97,616 Backlog $ 4,715,590 $ 4,175,448          

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

  June 30,2011 December 31,2010

(Unaudited) (In thousands, except share and per share amounts)

Assets Current Assets: Cash and cash equivalents $ 301,895 $ 403,463 Restricted cash and cash equivalents 157,911 197,861 Investments 173,469 209,463 Accounts receivable—trade, net

357,242

323,497 Accounts receivable—other 52,291 28,447 Contracts in progress 165,603 65,853 Deferred income taxes 20,170 10,323 Assets held for sale 13,875 10,161 Other current assets   42,889     36,570   Total Current Assets   1,285,345     1,285,638   Property, Plant and Equipment 1,863,865 1,720,040 Less accumulated depreciation   (842,930 )   (804,471 ) Net Property, Plant and Equipment   1,020,935     915,569   Assets Held for Sale   78,110     77,150   Investments   65,151     75,742   Goodwill   41,202     41,202   Investments in Unconsolidated Affiliates   46,524     45,016   Other Assets   170,030     158,371   Total Assets $ 2,707,297   $ 2,598,688     Liabilities and Equity Current Liabilities: Notes payable and current maturities of long-term debt $ 7,357 $ 8,547 Accounts payable 280,450 252,974 Accrued liabilities 287,983 286,831 Advance billings on contracts 92,422 250,053 Deferred income taxes 3,479 12,849 Income taxes payable 56,591 32,851 Liabilities associated with assets held for sale   22,912     20,902     Total Current Liabilities   751,194     865,007   Long-Term Debt   74,505     46,748   Self-Insurance   37,590     35,655   Pension Liability   44,495     52,831   Other Liabilities   102,445     86,180   Commitments and Contingencies Stockholders’ Equity: Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 242,152,460 and 240,791,473 shares at June 30, 2011 and December 31, 2010, respectively 242,152 240,791 Capital in excess of par value 1,368,570 1,357,316 Retained earnings 238,121 100,373 Treasury stock, at cost, 7,185,432 and 6,906,262 shares at June 30, 2011 and December 31, 2010, respectively (92,770 ) (85,735 ) Accumulated other comprehensive loss   (129,369 )   (163,717 ) Stockholders’ Equity—McDermott International, Inc. 1,626,704 1,449,028 Noncontrolling Interests   70,364     63,239   Total Equity   1,697,068     1,512,267   Total Liabilities and Equity $ 2,707,297   $ 2,598,688      

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

  Six Months EndedJune 30, 2011     2010 (Unaudited) (In thousands) Cash Flows From Operating Activities: Net income $ 145,863 $ 149,725 Less: Income from discontinued operations, net of tax   5,272     5,722   Income from continuing operations $ 140,591 $ 144,003 Non-cash items included in net income: Depreciation and amortization 40,099 37,823 Equity in (income) loss of unconsolidated affiliates

(1,551

)

4,146

Gain on asset disposals and impairments-net

(296

)

(2,306

)

Provision (benefit) from deferred taxes

(11,648

)

29,667 Pension costs 11,588 13,301 Other non-cash items 10,369 26,379 Changes in assets and liabilities: Accounts receivable

(54,481

)

69,764 Net contracts in progress and advance billings on contracts

(257,381

)

88,602 Accounts payable 27,589

(25,870

)

Accrued and other current liabilities 40,505 9,265 Pension liability and accrued postretirement and employee benefits

(42,067

)

(146,916

)

Other   24,907    

(108,250

)

 

Net Cash Provided By (Used In) Operating Activities-Continuing Operations

 

(71,776

)

  139,608       Cash Flows From Investing Activities: Purchases of property, plant and equipment

(141,682

)

(97,616

)

(Increase) decrease in restricted cash and cash equivalents 39,950

(76,504

)

Net decrease in available-for-sale securities 47,434 60,671 Other investing activities, net   303     2,985    

Net Cash Used In Investing Activities-Continuing Operations

 

(53,995

)

 

(110,464

)

    Cash Flows From Financing Activities: Payment of debt

(4,288

)

(4,317

)

Debt issuance costs

(261

)

(12,851

)

Increase in debt 30,745

-

Dividend received from B&W

-

100,000 Other financing activities, net  

(2,100

)

  290    

Net Cash Provided By Financing Activities-Continuing Operations

  24,096     83,122   Effects of exchange rate changes on cash and cash equivalents   107     20   Net increase (decrease) in cash and cash equivalents  

(101,568

)

  112,286   Cash and cash equivalents at beginning of period   403,463     428,298  

Cash and cash equivalents at end of period-Continuing Operations

$ 301,895   $ 540,584