MDR McDermott International Inc

McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported income of $50.6 million, or $0.21 per diluted share, for the 2012 third quarter. The results of the 2012 third quarter compare to income from continuing operations of $9.8 million, or $0.04 per diluted share, in the corresponding period of 2011. Weighted average common shares outstanding on a fully diluted basis were approximately 237.9 million and 236.9 million in the quarters ended September 30, 2012 and September 30, 2011, respectively.

McDermott’s revenues were $1,028.7 million for the 2012 third quarter compared to $879.9 million in the corresponding period of 2011. The year-over-year increase was attributable to the Middle East and Atlantic segments, primarily due to increased fabrication and marine activity. The increase from these segments was partially offset by lower revenues in the Asia Pacific segment due to lower marine activity.

The Company’s operating income in the 2012 third quarter was $82.5 million compared to $35.2 million in the 2011 third quarter. The increase in operating income was primarily due to approximately $50 million in project losses recognized in the 2011 third quarter, in addition to higher fabrication and marine activity in the Middle East and Atlantic segments and additional change order activity in the Asia Pacific segment in the 2012 third quarter.

“The positive results of our 2012 third quarter keep us on track for a solid 2012 financial performance,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “We see continued strength in our end markets and are encouraged by the significant level of bids and targeted market opportunities.”

The Company’s other income for the third quarter of 2012 was $1.7 million, which represents an improvement of $1.3 million as compared to other income of $0.4 million in the third quarter of 2011 primarily attributable to increased interest income.

At September 30, 2012, the Company’s backlog was approximately $5.3 billion, compared to $5.7 billion and $4.3 billion at June 30, 2012 and September 30, 2011, respectively.

Balance Sheet Summary

As of September 30, 2012, McDermott reported total assets of approximately $3.4 billion. Included in this amount was $720.7 million of cash and cash equivalents, restricted cash and investments. Net working capital, calculated as current assets less current liabilities, was $679.4 million. Additionally, total equity was over $1.9 billion, or approximately 57% of total assets, with total debt of $108.3 million.

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 approximately 13,500 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, McDermott remaining on track for a solid 2012 financial performance and the continued strength in McDermott’s end markets. 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 project design or schedules, changes in the scope or timing of contracts, and contract cancellations, change orders and other modifications. 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, 2011 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.

         

McDERMOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

  Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2012 2011 2012 2011 (In thousands, except share and per share amounts)   Revenues $ 1,028,745   $ 879,894   $ 2,645,671   $ 2,628,935     Costs and Expenses: Cost of operations 889,823 802,951 2,246,961 2,253,981 Selling, general and administrative expenses 51,834 48,046 145,927 163,827

Gain on asset disposals

  (85 )  

(7,811

)

 

(282

)

  (8,107 )   Total costs and expenses   941,572     843,186     2,392,606     2,409,701       Equity in Income (Loss) of Unconsolidated Affiliates   (4,692 )  

(1,492

)

  (11,026 )   59     Operating Income   82,481     35,216     242,039     219,293     Other Income (Expense): Interest income 996 319 4,215 1,060 Interest expense

-

(152

)

-

(415 )

Gain (loss) on foreign currency--net

488 504 11,185 (2,356 )

Other income (expense)--net

  242     (298 )   (288 )  

(1,586

)

  Total other income (expense)   1,726     373     15,112    

(3,297

)

  Income from continuing operations before provision for income taxes and noncontrolling interests   84,207     35,589     257,151     215,996     Provision for Income Taxes   29,916     20,535     87,004     60,351     Income from continuing operations before noncontrolling interests   54,291     15,054     170,147     155,645     Total income from discontinued operations, net of tax  

-

    1,187     3,497     6,459     Net Income   54,291     16,241     173,644     162,104     Less: Net Income Attributable to NoncontrollingInterests   3,679     5,290     7,535     13,405     Net Income Attributable to McDermott International, Inc. $ 50,612   $ 10,951   $ 166,109   $ 148,699            

McDERMOTT INTERNATIONAL, INC.

EARNINGS PER SHARE COMPUTATION

  Three Months EndedSeptember 30, Nine Months Ended

September 30,

2012 2011 2012 2011 (In thousands, except share and per share amounts)   Income from continuing operations less noncontrolling interests $ 50,612 $ 9,764 $ 162,612 $ 142,240 Income from discontinued operations, net of tax  

-

  1,187   3,497   6,459   Net income attributable to McDermott International, Inc. $ 50,612 $ 10,951 $ 166,109 $ 148,699     Weighted average common shares (basic) 235,817,203 234,940,184 235,568,889 234,451,430 Effect of dilutive securities: Stock options, restricted stock and restricted stock units   2,049,797   2,007,479   1,984,574   2,627,875   Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards (diluted)   237,867,000   236,947,663   237,553,463   237,079,305     Basic earnings per share: Income from continuing operations less noncontrolling interests 0.21 0.04 0.69 0.61 Income from discontinued operations, net of tax

-

0.01 0.01 0.03 Net income attributable to McDermott International, Inc. 0.21 0.05 0.70 0.63   Diluted earnings per share: Income from continuing operations less noncontrolling interests 0.21 0.04 0.68 0.60 Income from discontinued operations, net of tax

-

0.01 0.01 0.03 Net income attributable to McDermott International, Inc. 0.21 0.05 0.69 0.63                    

SUPPLEMENTARY DATA

  Three Months EndedSeptember 30, Nine Months Ended

September 30,

2012     2011 2012     2011 (In thousands) Depreciation and amortization $ 20,082 $ 19,801 $ 65,956 $ 59,900 Drydock amortization $ 7,999 $ 6,037 $ 21,606 $ 18,336 Capital expenditures $ 47,623 $ 90,190 $ 179,284 $ 231,872 Backlog $ 5,339,755 $ 4,255,432 $ 5,339,755 $ 4,255,432          

McDERMOTT INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

  September 30,2012

December 31, 2011

(In thousands, except share and per share amounts) Assets Current Assets: Cash and cash equivalents $ 638,794 $ 570,854 Restricted cash and cash equivalents 23,074 21,962 Investments 28,737 109,522

Accounts receivable--trade, net

548,068 445,808

Accounts receivable--other

63,774 53,386 Contracts in progress 499,339 287,390 Deferred income taxes 11,580 11,931 Other current assets   41,155     36,332     Total Current Assets   1,854,521     1,537,185     Property, Plant and Equipment 2,018,481 1,958,877 Less accumulated depreciation   (819,645 )  

(857,012

)

  Net Property, Plant and Equipment 1,198,836 1,101,865 Assets Held for Sale 28,724 55,571 Investments 30,097 29,484 Goodwill 41,202 41,202 Investments in Unconsolidated Affiliates 35,430 42,659 Other Assets   175,233     184,848     Total Assets $ 3,364,043   $ 2,992,814     Liabilities and Equity Current Liabilities: Notes payable and current maturities of long-term debt $ 14,146 $ 8,941 Accounts payable 375,954 315,514 Accrued liabilities 395,234 309,515 Advance billings on contracts 307,144 320,438 Deferred income taxes 13,213 13,187 Income taxes payable   69,383     54,181     Total Current Liabilities   1,175,074     1,021,776     Long-Term Debt 94,140 84,794 Self-Insurance 27,867 23,585 Pension Liability 19,292 21,295 Other Liabilities 124,979 107,652 Commitments and Contingencies Stockholders’ Equity: Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 243,419,194 and 242,416,424 shares at September 30, 2012 and December 31, 2011, respectively 243,419 242,416 Capital in excess of par value 1,387,311 1,375,976 Retained earnings 405,212 239,103 Treasury stock, at cost, 7,574,903 and 7,359,983 shares at September 30, 2012 and December 31, 2011, respectively (98,725 )

(95,827

)

Accumulated other comprehensive loss  

(80,508

)

 

(102,030

)

 

Stockholders’ Equity--McDermott International, Inc.

1,856,709 1,659,638 Noncontrolling Interests   65,982     74,074     Total Equity   1,922,691     1,733,712     Total Liabilities and Equity $ 3,364,043   $ 2,992,814          

McDERMOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

  Nine Months EndedSeptember 30, 2012 2011 (In thousands) Cash Flows From Operating Activities: Net income $ 173,644 $ 162,104 Less: Income from discontinued operations, net of tax   3,497   6,459     Income from continuing operations $ 170,147 $ 155,645 Non-cash items included in net income: Depreciation and amortization 65,956 59,900 Drydock amortization 21,606 18,336 Equity in (income) loss of unconsolidated affiliates 11,026

(59

)

Gain on asset disposals and impairments--net

(282

)

(8,107

)

Provision (benefit) from deferred taxes 3,929

(2,910

)

Stock-based compensation charges 11,449 8,340 Pension costs 1,152 15,367 Other non-cash items 5,178 5,909 Changes in assets and liabilities, net of effects from dispositions: Accounts receivable

(113,460

)

26,238 Net contracts in progress and advance billings on contracts

(225,340

)

(380,635

)

Accounts payable 58,675 44,667 Accrued and other current liabilities 66,125 71,148 Pension liability and accrued postretirement and employee benefits 17,322

(51,041

)

Other assets and liabilities   16,166  

(33,663

)

 

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

109,649

(70,865

)

Net Cash Used In Operating Activities--Discontinued Operations

 

-

  (211 )   Total Cash Provided By (Used In) Operating Activities   109,649    

(71,076

)

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

(179,284

)

(231,872

)

(Increase) decrease in restricted cash and cash equivalents

(1,112

)

183,564 Purchases of available-for-sale securities

(82,735

)

(516,628

)

Sales and maturities of available-for-sale securities 164,807 601,128 Proceeds from asset disposals 405 8,483 Other investing activities, net   (2,305 ) (16 )  

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

(100,224

)

44,659

Net Cash Provided By Investing Activities--Discontinued Operations

  60,671  

-

   

Total Cash Provided By (Used In) Investing Activities

 

(39,553

)

44,659     Cash Flows From Financing Activities: Increase in debt 19,033 40,212 Payment of debt

(4,482

)

(6,473

)

Debt issuance costs 64

(4,824

)

Distributions to noncontrolling interests

(15,728

)

-

Other financing activities, net  

(2,706

)

(2,059

)

 

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

 

(3,819

)

26,856     Effects of exchange rate changes on cash and cash equivalents   1,663   (313 )  

Net increase in cash and cash equivalents

  67,940   126     Cash and cash equivalents at beginning of period   570,854   403,463    

Cash and cash equivalents at end of period--Continuing Operations

$ 638,794   $ 403,589