McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today reported net income of $40.5 million, or $0.17 per
diluted share, for the 2012 fourth quarter. The results of the 2012
fourth quarter compare to income from continuing operations of $9.3
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 237.8 million and 236.9 million in the
quarters ended December 31, 2012 and 2011, respectively.
McDermott’s revenues were $996.0 million for the 2012 fourth
quarter, an increase of 22 percent compared to $816.2 million in
the corresponding period of 2011. The year-over-year increase was
primarily due to a 36 percent increase in revenues in the Asia
Pacific segment as a result of increased marine activity on a
subsea project, coupled with increased revenues in the Middle East
and Atlantic segments.
The Company’s operating income in the 2012 fourth quarter was
$77.3 million, an increase of 146 percent compared to $31.4 million
in the 2011 fourth quarter. Results in the fourth quarter 2011
included approximately $66 million in pretax and after-tax charges
primarily related to loss projects in Mexico and Brazil. The fourth
quarter 2012 results were negatively affected by an aggregate of
approximately $32 million of project losses and increased costs on
certain projects, including approximately $23 million in the Asia
Pacific segment as a result of incremental costs associated with
anticipated productivity and project delays on one subsea project,
which is expected to complete in late 2013. The Atlantic segment
also was impacted by increased cost estimates relating to two
fabrication projects totaling approximately $9 million, due to
lower than expected productivity, which are expected to complete in
mid-2013.
The Company’s other income for the fourth quarter of 2012 was
$8.7 million, an improvement of $4.8 million compared to other
income of $3.9 million in the fourth quarter of 2011, primarily due
to higher foreign currency gains.
At December 31, 2012, the Company’s backlog was $5.1 billion,
compared to $3.9 billion and $5.3 billion at December 31, 2011 and
September 30, 2012, respectively. Of the December 31, 2012 backlog,
approximately $545 million is from six projects currently in a loss
position, primarily relating to the recently commenced project in
the Asia Pacific segment and a five-year charter in Brazil, where
future revenues are expected to equal costs when recognized. In
addition, the backlog includes approximately $162 million for one
project under deferred profit recognition.
“There were a number of positives during the quarter as fourth
quarter bookings, combined with awards received in the first
quarter 2013, maintained a strong backlog and improved revenue
visibility for the coming year,” said Stephen M. Johnson, Chairman
of the Board, President and Chief Executive Officer of McDermott.
“We expect to recognize $2.6 billion in revenue in 2013 from our
existing backlog and recent awards. With this revenue, combined
with additional short-term work that we typically accrue throughout
the year, we expect to see total revenues in the range of $3
billion in 2013. With increased bidding activity and the company’s
continued balance sheet strength, we believe McDermott is well
positioned to meet the growing customer demand in each of our
market segments.”
Balance Sheet Summary
As of December 31, 2012, McDermott reported total assets of
approximately $3.3 billion. Included in this amount was $704.3
million of cash and cash equivalents, restricted cash and
investments. Net working capital, calculated as current assets less
current liabilities, was $676.8 million. Additionally, total equity
was $2.0 billion, or approximately 61% of total assets, with total
debt of $102.7 million.
Full-year 2012 Overview
For the year ended December 31, 2012, McDermott reported
revenues of $3.6 billion, with operating income of $319.3 million
and net income of $206.7 million, or $0.87 per fully diluted share.
Operating income for 2012 in the Asia Pacific segment benefited
significantly from lower expected costs to complete the marine
campaign on an engineering, procurement, construction and
installation project, which is expected to complete in early 2013.
These gains were partially offset by project losses across each
segment totaling approximately $52.0 million.
OTHER INFORMATION
Conference Call
McDermott has scheduled a conference call and webcast related to
its fourth quarter and full year 2012 results on Friday, March 1,
2013, at 9:00 a.m. U.S. Central Standard Time. Interested parties
may listen over the Internet through a link posted in the Investor
Relations section of the Company's website. The replay will also be
available on the Company's website following the end of the live
call.
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, major integrated and other energy companies.
Operating in approximately 20 countries across the Atlantic, Middle
East and Asia Pacific, the Company’s integrated resources include
approximately 14,000 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, McDermott’s improved revenue visibility for
2013, including our expectation for total revenue in the range of
$3 billion in 2013, our expectation that McDermott will recognize
$2.6 billion in revenue in 2013 from existing backlog and recent
awards, the expected timing for completion of certain projects,
McDermott’s increased bidding activity and continued balance sheet
strength, and our belief that McDermott is well positioned to meet
growing customer demand in each of our market segments. 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, 2012.
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 EndedDecember 31, Year
EndedDecember 31, 2012 2011 2012
2011 (In thousands) Revenues $ 995,953
$ 816,175 $ 3,641,624 $ 3,445,110 Costs
and Expenses: Cost of operations 853,048 726,409 3,100,009
2,980,390 Selling, general and administrative expenses 60,047
48,175 205,974 212,002 Loss on asset impairments
-
5,488
-
5,488 (Gain) loss on asset disposals (123 ) (371 )
(405 ) (8,478 ) Total Costs and Expenses
912,972 779,701 3,305,578
3,189,402 Equity in Loss of Unconsolidated
Affiliates (5,693 ) (5,044 ) (16,719 )
(4,985 ) Operating Income 77,288
31,430 319,327 250,723
Other Income (Expense): Interest income 441 788 4,656 1,848
Interest expense
-
(114 )
-
(529 ) Gain (loss) on foreign currency–net 8,957 3,591 20,142 1,234
Other expense–net (707 ) (400 ) (995 )
(1,985 ) Total other income (expense) 8,691
3,865 23,803 568
Income from continuing operations before provision for
income taxes, discontinued operations and noncontrolling interest
85,979 35,295 343,130 251,291 Provision for Income Taxes
42,200 26,773 129,204
87,124 Income from continuing operations before
discontinued operations and noncontrolling interest 43,779 8,522
213,926 164,167 Total income (loss) from discontinued operations,
net of tax
-
(19,271 ) 3,497 (12,812 )
Net Income 43,779 (10,749 ) 217,423
151,355
Less: net income attributable to
noncontrolling interests
3,235 780 10,770
12,625
Net Income Attributable to McDermott International,
Inc. $ 40,544 $ (9,969 ) $ 206,653 $ 138,730
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months EndedDecember 31, Year
Ended
December 31,
2012 2011 2012 2011 (In
thousands, except share and per share amounts) Income
from continuing operations less noncontrolling interests $ 40,544 $
9,302 $ 203,156 $ 151,542 Income (loss) from discontinued
operations, net of tax
-
(19,271 ) 3,497 (12,812 ) Net income
(loss) attributable to McDermott International, Inc. $ 40,544 $
(9,969 ) $ 206,653 $ 138,730 Weighted average
common shares 235,847,019 235,041,313 235,638,422 234,598,901
Effect of dilutive securities: Stock options, restricted stock and
restricted stock units 1,971,339 1,882,795
1,981,266 2,441,606 Adjusted weighted
average common shares and assumed exercises of stock options and
vesting of stock awards 237,818,358 236,924,108
237,619,688 237,040,507
Basic earnings per share: Income from continuing operations
less noncontrolling interests 0.17 0.04 0.86 0.65 Income (loss)
from discontinued operations, net of tax
-
(0.08 ) 0.01 (0.05 ) Net income (loss) attributable to McDermott
International, Inc. 0.17 (0.04 ) 0.88 0.59
Diluted
earnings per share: Income from continuing operations less
noncontrolling interests 0.17 0.04 0.86 0.64 Income (loss) from
discontinued operations, net of tax
-
(0.08 ) 0.01 (0.05 ) Net income (loss) attributable to McDermott
International, Inc. 0.17 (0.04 ) 0.87 0.59
SUPPLEMENTARY DATA
Three Months EndedDecember 31, Year
Ended
December 31,
2012 2011 2012
2011 (In thousands) Pension expense $ 378 $
4,125 $ 1,530 $ 19,492 Depreciation & amortization expense $
20,484 $ 22,491 $ 86,440 $ 82,391 Drydock amortization expense $
3,939 $ 6,231 $ 25,545 $ 24,567 Capital expenditures $ 107,026 $
50,749 $ 286,310 $ 282,621 Backlog $ 5,067,164 $ 3,881,063 $
5,067,164 $ 3,881,063
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2012 2011
(In thousands, exceptshare and
per shareamounts)
Assets Current Assets: Cash and cash equivalents $ 640,147 $
570,854 Restricted cash and cash equivalents 18,116 21,962
Investments 19,242 109,522
Accounts receivable--trade, net
428,800 445,808
Accounts receivable--other
75,461 53,386 Contracts in progress 560,154 287,390 Deferred income
taxes 9,765 11,931 Assets held for sale 2,679 3,197 Other current
assets 35,425 33,135 Total Current
Assets 1,789,789 1,537,185 Property,
Plant and Equipment 2,115,176 1,958,877 Less accumulated
depreciation
(833,385
)
(857,012
)
Net Property, Plant and Equipment 1,281,791 1,101,865 Assets Held
for Sale 26,758 55,571 Investments 26,750 29,484 Goodwill 41,202
41,202 Investments in Unconsolidated Affiliates 37,435 42,659 Other
Assets 129,902 184,848 Total Assets $
3,333,627 $ 2,992,814
Liabilities and
Equity Current Liabilities: Notes payable and current
maturities of long-term debt $ 14,146 $ 8,941 Accounts payable
400,007 315,514 Accrued liabilities 108,963 116,051 Accrued
employee-related benefits 57,391 29,072 Accrued contract costs
203,064 164,392 Advance billings on contracts 241,696 320,438
Deferred income taxes 10,758 13,187 Income taxes payable
76,986 54,181 Total Current Liabilities
1,113,011 1,021,776 Long-Term Debt 88,562
84,794 Self-Insurance 22,641 23,585 Pension Liability 25,069 21,295
Other Liabilities 132,239 107,652 Commitments and Contingencies
Stockholders’ Equity:
Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued and outstanding 243,442,156
and 242,416,424 shares at December 31, 2012 and December 31, 2011,
respectively
243,442 242,416 Capital in excess of par value 1,391,271 1,375,976
Retained earnings 445,756 239,103
Treasury stock, at cost, 7,574,903 and
7,359,983 shares at December 31, 2012 and December 31, 2011,
respectively
(98,725
)
(95,827
)
Accumulated other comprehensive loss
(94,413
)
(102,030
)
Stockholders’ Equity--McDermott
International, Inc.
1,887,331 1,659,638 Noncontrolling Interests 64,774
74,074 Total Equity 1,952,105
1,733,712 Total Liabilities and Equity $ 3,333,627 $
2,992,814
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Year Ended December 31, 2012 2011
2010
(In thousands) CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 217,423 $ 151,355 $ 227,712 (Income) loss from
discontinued operations, net of tax (3,497 ) 12,812
34,900 Income from continuing operations
213,926 164,167 262,612 Non-cash items included in net income:
Depreciation and amortization 86,440 82,391 76,452 Drydock
amortization 25,545 24,567 26,205 Equity in loss of unconsolidated
affiliates 16,719 4,985 7,594 Gains on asset disposals (405 )
(8,478 ) (2,440 ) Loss on asset impairments
-
5,488 24,660 Provision for deferred taxes 3,847 1,650 1,830
Stock-based compensation charges 15,369 17,825 16,458 Other
non-cash items 8,367 18,096 13,307 Changes in assets and
liabilities, net of effects from acquisitions: Accounts receivable
(5,920
)
(152,840
)
(6,457 ) Net contracts in progress and advance billings on
contracts (351,604 )
(151,157
)
182,472 Accounts payable 84,430 71,291 (38,536 ) Accrued and other
current liabilities 36,922 56,049 40,110 Income taxes 22,832 17,138
84,269 Pension liability and accrued postretirement and employee
benefits 36,897 (83,263 ) (106,338 ) Other 16,419
29,537 (197,871 )
NET CASH PROVIDED BY OPERATING
ACTIVITIES--CONTINUING OPERATIONS
209,784 97,446 384,327
NET CASH USED IN OPERATING
ACTIVITIES--DISCONTINUED OPERATIONS
-
(1,426 ) (44,153 )
TOTAL CASH PROVIDED BY
OPERATING ACTIVITIES 209,784
96,020 340,174 CASH
FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant
and equipment (286,310 ) (282,621 ) (186,862 ) (Increase) decrease
in restricted cash and cash equivalents 3,846 175,899 (142,853 )
Purchases of available-for-sale securities
(95,964
)
(546,822 ) (1,491,329 ) Sales and maturities of available-for-sale
securities 191,298 693,424 1,363,803 Investments in unconsolidated
affiliates
(5,084
)
(1,058 ) (32,550 ) Proceeds from asset dispositions and other
investing activities 3,291 9,943
2,870
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES--CONTINUING OPERATIONS
(188,923
)
48,765 (486,921 )
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES--DISCONTINUED OPERATIONS
60,671
-
(65,084 )
TOTAL CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (128,252 )
48,765 (552,005 ) CASH
FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt 19,034
46,987 3,423 Payment of debt (10,061 ) (8,606 ) (8,540 ) Purchase
of treasury shares (2,898 ) (10,092 ) (15,715 ) Cash contribution
from The Babcock & Wilcox Company
-
-
100,000 Distributions to NCI (20,135 ) (2,524 )
-
Debt issuance costs and other financing activities 267
(4,476 ) (3,076 )
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES--CONTINUING OPERATIONS
(13,793 ) 21,289 76,092
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES--DISCONTINUED OPERATIONS
-
1,426 (109,600 )
TOTAL CASH PROVIDED
BY (USED IN) FINANCING ACTIVITIES (13,793
) 22
,715 (33,508 )
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 1,554 (109 )
(80 ) TRANSFER OF CASH TO THE BABCOCK & WILCOX COMPANY
-
-
(250,388 )
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 69,293
167,391 (495,807 ) CASH AND
CASH EQUIVALENTS AT BEGINNING OF PERIOD 570,854
403,463 899,270
CASH AND CASH EQUIVALENTS AT END OF PERIOD $
640,147 $ 570,854 $
403,463
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