McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today previewed its 2011 third quarter by providing its
current expectations for certain financial categories of the
Company’s continuing operations, based upon management’s recent
operating reviews.
Financial Metric
3Q11 Expected Range/Amount Revenues $870-$880 million
Operating Income $30-$38 million Net Income $6-$12 million EPS 3-5
cents per diluted share Project Losses $50 million Bids
Outstanding $5.0 billion Bookings $420 million Backlog $4.3 billion
McDermott also announced today that it will report its actual
third quarter 2011 financial results during the evening of November
8, 2011.
Discussion of Third Quarter 2011
Preview
McDermott expects revenues for the 2011 third quarter to exceed
$870 million. The Middle East and Asia Pacific segments should
represent over 90 percent of total revenues, and these segments
continue to represent the majority of the Company’s backlog and
bids outstanding.
The Company expects third quarter 2011 operating income to be in
the range of $30-$38 million, including approximately $50 million
of project losses. Two marine projects in the Atlantic segment, in
particular, are expected to represent about 75 percent of the total
project losses, which should be partially offset by about $7
million from a gain on sale of non-strategic assets. Although the
root causes of many of the forecast project charges are still under
review, McDermott believes some amount may merit submitting claims
or change orders. However, the amount for potential submission is
not yet quantifiable.
“Clearly, we are disappointed with the operating and net income
expected for the 2011 third quarter. In our business, quarterly
results can be significantly affected by recording in one period
the changes in our expectations for the final profit or loss on
multi-year projects at completion. As such, it should be made clear
that this quarter’s expected results are not indicative of our
outlook for the future,” said Stephen M. Johnson, Chairman of the
Board, President and Chief Executive Officer of McDermott. “We have
been, and will continue to be, actively addressing the items within
our control, and we remain very encouraged by the overall
marketplace. Although bookings were moderate during the quarter at
approximately $420 million, bidding activity remained strong, and,
as a result, bids outstanding grew to a very high level of $5
billion – an improvement of over 50 percent as compared to the 2011
second quarter.”
McDermott anticipates that, as a result of limited tax benefits
associated with the majority of the forecast project charges, the
Company’s reported tax rate for the 2011 third quarter will appear
higher, relative to recent periods, at above 50 percent of pre-tax
income.
In consideration of these items, the Company anticipates that
its 2011 third quarter net income will be between $6-12 million, or
in the range of 3 to 5 cents per diluted share.
Preliminary 2012 Outlook
McDermott has not traditionally provided, and does not expect to
provide, specific earnings guidance, since its financial results
can and do vary substantially quarter-to-quarter and year-to-year.
However, in an effort to assist the financial community, the
Company is sharing its preliminary outlook for 2012.
Based upon current contracts in backlog, combined with an
evaluation of the bids outstanding, McDermott currently believes
that attaining full-year 2012 revenues that are essentially equal
to expected full-year 2011 revenues is achievable, but will be
dependent upon, among other things, which bids are awarded to
McDermott and the timing of the associated work.
While the Company’s long-term operating margin target range
remains unchanged, McDermott currently expects operating margins
for 2012 to be in a range of 7-10 percent. This results from the
Company’s expectation for next year of substantially fewer marine
barge workdays and a lower level of fabrication manhours in one
segment, as compared to 2011. With lower expected asset utilization
as compared to 2011, the Company currently expects to incur an
increased level of costs in 2012 which will not be allocated to
projects, resulting in lower consolidated operating income
margins.
“We continue to believe in the strong industry fundamentals of
the offshore oil & gas construction market,” continued Johnson.
“Our expectations for meaningful long-term growth remain firm.”
As indicated under “Forward-Looking Statements” below, the
current beliefs in this section are based on expectations about
future events and circumstances, including weather conditions and
other factors outside our control, and the Company is not
undertaking any obligation to update or revise its forward-looking
statements, except to the extent it is required to do so by
applicable law.
Conference Call
McDermott will host a conference call with the financial
community tomorrow at 7:00 a.m. (Central Time) to discuss this 2011
third quarter earnings preview. To participate in the call, the
financial community can call 866.788.0547 and enter the password
54068008. Alternatively, investors can listen to the call live or
to a replay in the investor relations section of
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
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 McDermott’s expectations for its operating and financial
results for the quarter ended September 30, 2011 and the year
ending December 31, 2012. 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, additional
project losses and the potential submission of and recovery on
change orders and claims. The statements about McDermott’s
operating and financial results for the quarter ended September 30,
2011 are also subject to the closing of McDermott’s books for the
quarter ended September 30, 2011 and the risk that, given the
preliminary nature of those statements and the underlying
assumptions and associated risks related to those assumptions,
McDermott’s actual results of operations for that period may differ
from the expected results set forth herein. 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.
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