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Share Name | Share Symbol | Market | Type |
---|---|---|---|
McDermott International Inc | NYSE:MDR | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.7032 | 0 | 01:00:00 |
McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported net income from continuing operations of $60.8 million, or $0.26 per diluted share, for the 2010 third quarter. Included in the 2010 third quarter continuing results is approximately $43.9 million of non-cash impairment and related expenses, or 19 cents per diluted share. The results of the 2010 third quarter compare to net income from continuing operations of $76.1 million, or $0.32 per diluted share, in the corresponding period of 2009. Both periods exclude the results of The Babcock & Wilcox Company (“B&W”), which was spun-off to McDermott shareholders on July 30, 2010, as well as the operations of McDermott’s charter fleet business, which were obtained in the 2007 Secunda asset acquisition and are classified as held for sale. Weighted average common shares outstanding on a fully diluted basis were approximately 236.3 million and 234.3 million in the quarters ended September 30, 2010 and September 30, 2009, respectively.
McDermott’s revenues for the 2010 third quarter were $732.1 million, compared to $1,012.5 million in the corresponding period of 2009. The year-over-year decrease in revenues was primarily due to a $259 million reduction in revenues in the Middle East segment, which reflects lower fabrication activity and construction vessel utilization.
The Company’s operating income was $84.3 million in the 2010 third quarter, compared to $97.6 million in the 2009 third quarter. The year-over-year decrease was primarily due to the $43.9 million of non-cash impairment and related charges associated with the write-down of certain multi-service vessels to market value, and the decision to terminate a contract relating to a previously proposed development of a new fabrication facility in Kazakhstan. These charges were largely offset by project improvements in the Middle East segment, including contract change orders and close-outs.
“McDermott’s operating performance in the third quarter of 2010 was outstanding, although somewhat muted by the non-cash impairment charges,” said Stephen M. Johnson, President and Chief Executive Officer of McDermott. “New awards during the three month period ended September 30, 2010 were light. However, we are pleased to report that in the month of October 2010, McDermott recognized bookings of approximately $1.2 billion. As such, we believe the market we serve continues to be robust and that the outlook for our business remains strong, particularly in the Middle East and Asia Pacific segments.”
The Company’s other expense for the third quarter of 2010 was $3.5 million, compared to $0.3 million in the third quarter of 2009. The $3.2 million increase in other expense was primarily due to a $1.3 million reduction in interest income/expense-net, as well as increased foreign currency translation expenses.
At September 30, 2010, the Company’s backlog was $3.6 billion, compared to $4.2 billion and $3.8 billion at June 30, 2010 and September 30, 2009, respectively. The third quarter 2010 backlog amount does not include $1.2 billion of new bookings received in October 2010 which will be incorporated in fourth quarter bookings and year-end backlog.
Balance Sheet Summary
As of September 30, 2010, McDermott reported total assets of $2.3 billion. Included in this amount was approximately $719.8 million of cash and investments. Net working capital, calculated as current assets less current liabilities, was $429.6 million. Additionally, total equity was approximately $1.5 billion, or 63% of total assets, with total debt of $54.0 million.
Discontinued Operations
In the third quarter of 2010, McDermott recorded a net loss from discontinued operations of $40.0 million, or $0.17 per diluted share, compared to net income from discontinued operations of $42.1 million, or $0.18 per diluted share, in the corresponding period of 2009. Included in discontinued operations for both periods are the results of B&W, which was spun-off to McDermott’s shareholders on July 30, 2010, the Secunda charter fleet business, which is held for sale, as well as transaction related costs associated with the spin-off of B&W and impairment charges associated with the charter fleet business.
Upcoming Investor Events
McDermott plans to attend two upcoming investor conferences next week. On November 16, 2010, McDermott will participate in the Barclays Capital Energy, Engineering and Construction One-Day Forum in Dallas. The following day, November 17, 2010, McDermott will participate in the 2010 KeyBanc Capital Markets Engineering, Construction and Utilities Conference in New York City.
The presentations to be used during both of these meetings will be available for a limited time over the Internet at www.mcdermott.com in the investor relations section on the morning of the respective events.
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 more than 20 countries across the Atlantic, Middle East and Asia Pacific, the Company’s integrated resources include more than 16,000 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, and our belief that the market we serve continues to be robust and the outlook for our business remains strong. 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 and our inability to successfully execute on contracts in backlog. 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, 2009 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.
In addition to the Company's results prepared in accordance with generally accepted accounting principles ("GAAP"), McDermott has provided Non-GAAP financial measures that present its Condensed Consolidated Statements of Income, including net income attributable to McDermott and net income per share, for the three-months ended September 30, 2010 on a basis that excludes certain income and expenses. Details of these excluded items are presented in the table below titled "Non-GAAP Earnings Reconciliation," which reconciles the GAAP results to Non-GAAP financial measures described above.
Conference Call to Discuss Third Quarter 2010 Earnings Release
Date: Tuesday, November 9, 2010, 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 Nine Months Ended September 30, September 30,2010
2009
2010
2009
(As adjusted) (As adjusted) (Unaudited) (In thousands, except share and per share amounts) Revenues $ 732,095 $ 1,012,474 $ 1,864,121 $ 2,524,992 Costs and Expenses: Cost of operations 565,996 855,235 1,421,041 2,167,526 Loss (gain) on asset disposals and impairments – net 24,336 (121 ) 22,030 (1,179 ) Selling, general and administrative expenses 56,099 59,175 159,911 167,354 Total costs and expenses 646,431 914,289 1,602,982 2,333,701 Equity in Losses of Investees (1,361 ) (596 ) (5,507 ) (2,797 ) Operating Income 84,303 97,589 255,632 188,494 Other income (expense): Interest income (expense) – net (78 ) 1,230 (1,532 ) 7,284 Other income (expense) – net (3,460 ) (1,554 ) (4,188 ) (11,009 ) Total other income (expense) (3,538 ) (324 ) (5,720 ) (3,725 )Income from continuing operations before provision for income taxes and noncontrolling interest
80,765 97,265 249,912 184,769 Provision for Income Taxes 10,085 19,300 35,229 44,106 Income from continuing operations before noncontrolling interest 70,680 77,965 214,683 140,663 Income (loss) from discontinued operations, net of tax (40,030 ) 42,051 (34,308 ) 155,555 Net Income 30,650 120,016 180,375 296,218 Less: Net Income Attributable to Noncontrolling Interests (9,847 ) (1,909 ) (23,597 ) (7,864 ) Net Income Attributable to McDermott International, Inc. $ 20,803 $ 118,107 $ 156,778 $ 288,354
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months Ended Nine Months Ended September 30, September 30,2010
2009
2010
2009
(Unaudited) (In thousands, except share and per share amounts)Income from continuing operations less noncontrollinginterest
$ 60,833 $ 76,056 $ 191,086 $ 132,799 Income (loss) from discontinued operations, net of tax (40,030 ) 42,051 (34,308 ) 155,555 Net Income $ 20,803 $ 118,107 $ 156,778 $ 288,354 Weighted average common shares (basic) 232,670,579 229,989,368 231,780,675 229,192,531 Effect of dilutive securities:Stock options, restricted stock and restricted stock units
3,600,832 4,325,251 3,368,656 4,143,074Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards
236,271,411 234,314,619 235,149,331 233,335,605Basic earnings per share:
Income from continuing operations less noncontrollinginterest
0.26 0.33 0.82 0.58 Income (loss) from discontinued operations, net of tax (0.17 ) 0.18 (0.15 ) 0.68 Net Income 0.09 0.51 0.67 1.26Diluted earnings per share:
Income from continuing operations less noncontrollinginterest
0.26 0.32 0.81 0.57 Income (loss) from discontinued operations, net of tax (0.17 ) 0.18 (0.14 ) 0.67 Net Income 0.09 0.50 0.67 1.24SUPPLEMENTARY DATA (1)
Three Months Ended Nine Months Ended September 30, September 30, 2010 2009 2010 2009 (Unaudited) (In thousands) Pension expense $ 2,980 $ 4,126 $ 16,282 $ 12,377 Depreciation & amortization expense $ 21,824 $ 25,647 $ 64,373 $ 67,056 Capital expenditures $ 44,401 $ 39,364 $ 129,435 $ 125,319Backlog (2)
$ 3,599,957 $ 3,831,126 $ 3,599,957 $ 3,831,126(1)
Above metrics represents McDermott’s continuing operations only and thus excludes B&W and the Secunda charter business.(2)
Backlog figures for 2010 do not include approximately $1.2 billion of new bookings that occurred in October 2010.
MCDERMOTT INTERNATIONAL, INC.
NON-GAAP EARNINGS RECONCILIATION
Three Months Ended September 30, 2010 GAAPResults
LessNon-GAAP
Notes
Non-GAAPResults
Adjustments (Unaudited) (In thousands, except per share amounts) Revenues $ 732,095 $ 732,095 Costs and Expenses: Cost of operations 565,996 19,527 [1] 546,469 Loss on asset disposals and impairments – net 24,336 24,336 [2] - Selling, general and administrative expenses 56,099 56,099 Total costs and expenses 646,431 43,863 602,568 Equity in Losses of Investees (1,361 ) (1,361 ) Operating Income 84,303 43,863 128,166 Other income (expense): Interest income (expense) – net (78 ) (78 ) Other expense – net (3,460 ) (3,460 ) Total other income (expense) (3,538 ) (3,538 )Income from continuing operations before provision for income Taxes and noncontrolling interest
80,765 43,863 124,628 Provision for Income Taxes 10,085 10,085 Income from continuing operations before noncontrolling interest 70,680 43,863 114,543 Income (loss) from discontinued operations, net of tax (40,030 ) 40,030 [3] - Net Income 30,650 83,893 114,543 Less: Net Income Attributable to Noncontrolling Interests (9,847 ) (9,847 ) Net Income Attributable to McDermott International, Inc. $ 20,803 83,893 $ 104,696 Earnings per Share: Basic: Income from continuing operations, less noncontrolling interest 0.26 0.19 0.45 Income (loss) from discontinued operations, net of tax (0.17 ) 0.17 - Net Income 0.09 0.36 0.45 Diluted: Income from continuing operations, less noncontrolling interest 0.26 0.19 0.44 Income (loss) from discontinued operations, net of tax (0.17 ) 0.17 - Net Income 0.09 0.36 0.44[1]
Represents impairment and related expenses associated with a contract termination for the development of a new fabrication facility in Kazakhstan.[2]
Eliminates net loss on asset disposals and impairments-net, including a $24.4 million impairment on 2 multi-service vessels.[3]
Excludes the results of McDermott’s discontinued operations, including B&W & the Secunda charter business.Presented above is a reconciliation between GAAP net income and non-GAAP net income, on a total and per share basis, excluding impairment and related charges. The non-GAAP measures are based upon our unaudited condensed consolidated statements of income for the period shown, with certain adjustments shown above. McDermott is providing non-GAAP information to supplement the results provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. However, McDermott believes these non-GAAP measures provide meaningful insight into its ongoing operational performance and, therefore, uses the non-GAAP information internally to evaluate McDermott's operations for purposes of review, planning and performance goals. McDermott has chosen to provide this supplemental non-GAAP information to investors to enable them to perform additional comparisons of operating results and as a means to emphasize the results of ongoing operations absent certain expenses considered by management to be outside of McDermott's ongoing business.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31, 2010 2009 (Unaudited) (In thousands) Current Assets: Cash and cash equivalents $ 424,799 $ 969,190 Investments 216,451 12 Accounts receivable – net 279,166 716,836 Contracts in progress 116,181 400,831 Inventories 1,675 101,494 Deferred income taxes 12,121 100,828 Assets held for sale 18,525 - Other current assets 40,794 68,730 Total Current Assets 1,109,712 2,357,921 Property, Plant and Equipment 1,660,293 2,608,740 Less: Accumulated depreciation (789,633 ) (1,271,135 ) Net Property, Plant and Equipment 870,660 1,337,605 Assets held for sale 75,054 - Investments 78,516 228,706 Goodwill 40,633 306,497 Deferred Income Taxes - 275,567 Investments in Unconsolidated Affiliates 27,297 86,932 Other Assets 146,295 255,882 TOTAL $ 2,348,167 $ 4,849,110
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, December 31, 2010 2009 (Unaudited) (In thousands, except share amounts) Current Liabilities: Notes payable and current maturities of long-term debt $ 8,567 $ 16,270 Accounts payable 201,388 471,858 Accrued employee benefits 69,663 217,178 Accrued pension liability – current portion 8,630 173,271 Accrued liabilities – other 97,600 155,773 Accrued contract cost 70,634 103,041 Advance billings on contracts 147,182 689,334 Accrued warranty 50 118,278 Liabilities associated with assets held for sale 19,415 - Deferred tax liabilities 11,692 4,735 Income taxes payable 45,319 59,294 Total Current Liabilities 680,140 2,009,032 Long-Term Debt 45,466 56,714 Accumulated Postretirement Benefit Obligation 5,192 105,605 Self-Insurance 37,523 87,222 Pension Liability 31,527 610,166 Other Liabilities 75,277 147,271 Commitments and Contingencies Stockholders’ Equity:Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 240,420,420 and 236,919,404 shares at September 30, 2010 and December 31, 2009, respectively
240,420 236,919 Capital in excess of par value 1,349,839 1,300,998 Retained earnings 55,485 951,647Treasury stock at cost, 6,898,139 and 6,168,705 shares atSeptember 30, 2010 and December 31, 2009, respectively
(85,551 ) (69,370 ) Accumulated other comprehensive loss (148,166 ) (612,997 ) Stockholders’ Equity – McDermott International, Inc. 1,412,027 1,807,197 Noncontrolling interest 61,015 25,903 Total Equity 1,473,042 1,833,100 TOTAL $ 2,348,167 $ 4,849,110
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,2010
2009
(Unaudited) (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 180,375 $ 296,218 Adjustments to reconcile earnings from continuing operations: Non-cash items included in net income: Depreciation and amortization 101,844 118,871 Income (loss) of investees, less dividends 5,507 (11,458 ) Loss (gain) on asset disposals and impairments – net 22,030 (333 ) Provision for deferred taxes 366,498 43,264 Amortization of pension and postretirement costs 57,991 68,877 Tax benefits (expense) from stock-based compensation (2,192 ) 2,458 Other, net 32,346 36,736 Changes in assets and liabilities, net of effects of acquisitions and divestitures: Accounts receivable 86,951 62,932 Income tax receivable 17,492 57,169 Net contracts in progress and advance billings on contracts (121,338 ) (442,373 ) Accounts payable (99,095 ) (22,099 ) Income taxes (130,168 ) 10,571 Accrued and other current liabilities 4,628 (1,461 )Pension liability, accumulated postretirement benefit obligation and accrued employee benefits
(187,189 ) 13,961 Other, net (241,548 ) (35,925 ) Net cash provided by operating activities 94,132 197,408 CASH FLOWS FROM INVESTING ACTIVITIES: Increase in restricted cash and cash equivalents (81,126 ) (13,514 ) Purchases of property, plant and equipment (168,027 ) (190,207 ) Acquisition of businesses, net of cash acquired (31,705 ) (8,497 ) Net (increase) decrease in available-for-sale securities (156,771 ) 208,435 Proceeds from asset disposals 4,837 2,724 Investments in unconsolidated affiliate (14,200 ) - Other, net 600 (2,676 ) Net cash used in investing activities (446,392 ) (3,735 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt (7,737 ) (5,652 ) Increase in short-term borrowings - 1,606 Issuance of common stock 691 713 Payment of debt issuance costs (5,763 ) (56 ) Cash distributed to The Babcock & Wilcox Company (250,388 ) - Tax benefits (expense) from stock-based compensation 2,192 (2,458 ) Other, net (14 ) (109 ) Net cash used in financing activities (261,019 ) (5,956 ) Effects of exchange rate changes on cash 302 10,097 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (612,977 ) 197,814 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 899,270 586,649 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 286,293 $ 784,463 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 3,578 $ 1,855 Income taxes (net of refunds) $ 49,661 $ 93 Non-cash dividend in connection with the B&W spin-off $ 1,052,940 $ -
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