MDR McDermott International Inc

McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported income from continuing operations of $9.8 million, or $0.04 per diluted share, for the 2011 third quarter. The results of the 2011 third quarter compare to income from continuing operations of $60.8 million, or $0.26 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 236.9 million and 236.3 million in the quarters ended September 30, 2011 and September 30, 2010, respectively.

McDermott’s revenues were $879.9 million for the 2011 third quarter, an increase of over 20 percent, compared to $732.1 million in the corresponding period of 2010. The year-over-year increase was primarily due to a 91 percent increase in revenues in the Asia Pacific segment as a result of expanded scope and marine activity on a large engineering, procurement, construction and installation project, partially offset by a 34 percent decline in Middle East segment revenues.

The Company’s operating income in the 2011 third quarter was $35.2 million, compared to $84.3 million in the 2010 third quarter. Operating income in the 2011 third quarter was negatively affected by previously announced project losses of approximately $50 million, primarily within the Atlantic segment, which more than offset a 95 percent increase in the Asia Pacific segment’s operating income, as compared to the 2010 third quarter. In the 2010 third quarter, McDermott’s operating income was negatively affected by approximately $44 million of non-cash impairment and related charges, which was largely offset by approximately $36 million in project improvements on certain Qatar projects.

The Company’s other income for the third quarter of 2011 was $373 thousand, an improvement of $3.9 million compared to the other expense in the third quarter of 2010, primarily due to higher foreign currency gains.

At September 30, 2011, the Company’s backlog was $4.3 billion, compared to $3.6 billion and $4.7 billion at September 30, 2010 and June 30, 2011, respectively. Of the September 30, 2011 backlog, approximately $335 million is from projects currently in a loss position whereby future revenues are expected to equal costs when recognized.

Balance Sheet Summary

As of September 30, 2011, McDermott reported total assets of approximately $2.8 billion.

Included in this amount was $618.8 million of cash, restricted cash and investments. Net working capital, calculated as current assets less current liabilities, was $493.4 million. Additionally, total equity was $1.7 billion, or approximately 62% of total assets, with total debt of $89.1 million.

Discontinued Operations

For the third quarter of 2011, McDermott recorded net income from discontinued operations of $1.2 million, or $0.01 per diluted share. Including the results of discontinued operations, total net income attributable to McDermott was $11.0 million, or $0.05 per diluted share, for the 2011 third 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 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. 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 without limitation our inability to successfully execute on contracts in backlog, changes in project design or schedules, changes in the scope or timing of contracts, contract cancellations and 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, 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.

         

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

  Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2011 2010 2011 2010 (In thousands)   Revenues $ 879,894   $ 732,095   $ 2,628,935   $ 1,864,121   Costs and Expenses: Cost of operations 802,951 565,996 2,253,981 1,421,041 Selling, general and administrative expenses 48,046 56,099 163,827 159,911 Loss on asset impairments

-

24,444

-

24,444 Gain on asset disposals  

(7,811

)

 

(108

)

 

(8,107

)

 

(2,414

)

Total costs and expenses   843,186     646,431     2,409,701     1,602,982     Equity in Income (Loss) of Unconsolidated Affiliates  

(1,492

)

 

(1,361

)

  59    

(5,507

)

  Operating Income   35,216     84,303     219,293     255,632   Other Income (Expense): Interest income 319 314 1,060 1,139 Interest expense

(152

)

(392

)

(415

)

(2,671

)

Other income (expense) – net   206    

(3,460

)

 

(3,942

)

 

(4,188

)

Total other income (expense)   373    

(3,538

)

 

(3,297

)

 

(5,720

)

  Income from continuing operations before provision for income taxes and noncontrolling interests 35,589 80,765 215,996 249,912 Provision for Income Taxes   20,535     10,085     60,351     35,229   Income from continuing operations before noncontrolling interests   15,054     70,680     155,645     214,683     Loss on disposal of discontinued operations

-

(32,936

)

-

(123,356

)

Income (loss) from discontinued operations, net of tax   1,187    

(7,094

)

  6,459     89,048   Total income (loss) from discontinued operations, net of tax   1,187    

(40,030

)

  6,459    

(34,308

)

  Net Income 16,241 30,650 162,104 180,375

Less: Net Income Attributable to Noncontrolling

Interests   5,290     9,847     13,405     23,597   Net Income Attributable to McDermott International, Inc. $ 10,951   $ 20,803   $ 148,699   $ 156,778            

McDERMOTT INTERNATIONAL, INC.

EARNINGS PER SHARE COMPUTATION

  Three Months EndedSeptember 30, Nine Months Ended

September 30,

2011 2010 2011 2010 (In thousands, except share and per share amounts) Basic:   Income from continuing operations less noncontrolling interests $ 9,764 $ 60,833 $ 142,240 $ 191,086 Income (loss) from discontinued operations, net of tax   1,187  

(40,030

)

  6,459  

(34,308

)

Net income attributable to McDermott International, Inc. $ 10,951 $ 20,803   $ 148,699 $ 156,778     Weighted average common shares   234,940,184   232,670,579     234,451,430   231,780,675     Income from continuing operations less noncontrolling interests 0.04 0.26 0.61 0.82 Income (loss) from discontinued operations, net of tax 0.01

(0.17

)

0.03

(0.15

)

Net income attributable to McDermott International, Inc. 0.05 0.09 0.63 0.67   Diluted:   Income from continuing operations less noncontrolling interests $ 9,764 $ 60,833 $ 142,240 $ 191,086 Income (loss) from discontinued operations, net of tax   1,187  

(40,030

)

  6,459  

(34,308

)

Net income attributable to McDermott International, Inc. $ 10,951 $ 20,803   $ 148,699 $ 156,778     Weighted average common shares (basic) 234,940,184 232,670,579 234,451,430 231,780,675 Effect of dilutive securities: Stock options, restricted stock and restricted stock units   2,007,479   3,600,832     2,627,875   3,368,656   Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards   236,947,663   236,271,411     237,079,305   235,149,331     Income from continuing operations less noncontrolling interests 0.04 0.26 0.60 0.81 Income (loss) from discontinued operations, net of tax 0.01

(0.17

)

0.03

(0.14

)

Net income attributable to McDermott International, Inc. 0.05 0.09 0.63 0.67                    

SUPPLEMENTARY DATA

  Three Months EndedSeptember 30, Nine Months Ended

September 30,

2011 2010 2011 2010 (In thousands) Pension expense $ 3,779 $ 2,981 $ 15,367 $ 16,282 Depreciation & amortization expense $ 19,801 $ 19,601 $ 59,900 $ 57,424 Capital expenditures $ 90,190 $ 38,939 $ 231,872 $ 136,555 Backlog $ 4,255,432 $ 3,591,416            

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

  September 30,2011 December 31,2010

(In thousands, except share and per share amounts)

Assets Current Assets: Cash and cash equivalents $ 403,589 $ 403,463 Restricted cash and cash equivalents 14,297 197,861 Investments 159,086 209,463

Accounts receivable--trade, net

296,303 323,497

Accounts receivable--other

36,354 28,447

Contracts in progress

300,331 65,853 Deferred income taxes 13,102 10,323 Assets held for sale 20,630 10,161 Other current assets   44,071     36,570     Total Current Assets   1,287,763     1,285,638     Property, Plant and Equipment 1,923,733 1,720,040 Less accumulated depreciation  

(840,365

)

 

(804,471

)

  Net Property, Plant and Equipment 1,083,368 915,569 Assets Held for Sale 76,315 77,150 Investments 41,860 75,742 Goodwill 41,202 41,202 Investments in Unconsolidated Affiliates 45,505 45,016 Other Assets   183,788     158,371     Total Assets $ 2,759,801   $ 2,598,688     Liabilities and Equity Current Liabilities: Notes payable and current maturities of long-term debt $ 6,615 $ 8,547 Accounts payable 299,535 252,974 Accrued liabilities 311,021 286,831 Advance billings on contracts 103,896 250,053 Deferred income taxes 3,969 12,849 Income taxes payable 46,034 32,851 Liabilities associated with assets held for sale   23,288     20,902     Total Current Liabilities   794,358     865,007     Long-Term Debt 82,478 46,748 Self-Insurance 39,040 35,655 Pension Liability 43,488 52,831 Other Liabilities 99,342 86,180 Commitments and Contingencies Stockholders’ Equity:

Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 242,251,921 and

240,791,473 shares at September 30, 2011 and December 31, 2010, respectively

242,252 240,791 Capital in excess of par value 1,372,968 1,357,316 Retained earnings 249,072 100,373 Treasury stock, at cost, 7,308,140 and 6,906,262 shares at September 30, 2011 and December 31, 2010, respectively (95,261 ) (85,735 ) Accumulated other comprehensive loss  

(142,980

)

 

(163,717

)

  Stockholders’ Equity—McDermott International, Inc. 1,626,051 1,449,028 Noncontrolling Interests   75,044     63,239     Total Equity   1,701,095     1,512,267     Total Liabilities and Equity $ 2,759,801   $ 2,598,688                

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

  Nine Months EndedSeptember 30, 2011 2010 (In thousands) Cash Flows From Operating Activities: Net income $ 162,104 $ 180,375 Less: Income (loss) from discontinued operations, net of tax   6,459    

(34,308

)

Income from continuing operations $ 155,645 $ 214,683 Non-cash items included in net income: Depreciation and amortization 59,900 57,424 Equity in (income) loss of unconsolidated affiliates

(59

)

5,507 Loss on asset impairments

-

24,444 Gain on asset disposals

(8,107

)

(2,414

)

Benefit from deferred taxes

(2,910

)

(4,272

)

Pension costs 15,367 16,282 Other non-cash items 14,249 21,921 Changes in assets and liabilities: Accounts receivable 26,238 64,415 Net contracts in progress and advance billings on contracts

(380,635

)

29,306 Accounts payable 44,667

(88,778

)

Accrued and other current liabilities 71,148 10,055 Pension liability and accrued postretirement and employee benefits

(51,041

)

(138,783

)

Other  

(15,327

)

 

(71,992

)

 

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

 

(70,865

)

  137,798     Cash Flows From Investing Activities: Purchases of property, plant and equipment

(231,872

)

(136,555

)

(Increase) decrease in restricted cash and cash equivalents 183,564

(83,498

)

Purchases of available-for-sale securities

(516,628

)

(844,103

)

Sales and maturities of available-for-sale securities 601,128 706,234 Proceeds from asset disposals 8,483 4,563 Other investing activities, net  

(16

)

 

(15,647

)

 

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

  44,659     (369,006 )   Cash Flows From Financing Activities: Payment of debt

(6,473

)

(6,398 ) Debt issuance costs

(4,824

)

(13,247

)

Increase in debt 40,212

-

Dividend received from B&W

-

100,000 Other financing activities, net  

(2,059

)

  2,177    

Net Cash Provided By Financing Activities--Continuing Operations

26,856 82,532 Effects of exchange rate changes on cash and cash equivalents

(524

)

(183

)

Net increase (decrease) in cash and cash equivalents 126

(148,859

)

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

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

$ 403,589   $ 279,439