McDermott Reports Third Quarter 2013 Financial Results

  McDermott Reports Third Quarter 2013 Financial Results

Business Wire

HOUSTON -- November 4, 2013

McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today
reported a net loss of $64.1 million, or $0.27 per fully diluted share, for
the quarter ended September 30, 2013. These results compared to income of
$50.6 million, or $0.21 per fully diluted share, in the corresponding period
of 2012. Weighted average common shares outstanding on a fully diluted basis
were approximately 236.3 million and 237.9 million in the quarters ended
September 30, 2013 and 2012, respectively.

McDermott’s revenues were $686.9 million for the 2013 third quarter compared
to $1,028.7 million in the corresponding period of 2012. The year-over-year
decrease was primarily due to the completion of several significant projects
that were active in the 2012 third quarter. The Company’s operating loss in
the 2013 third quarter was $52.7 million compared to operating income of $82.5
million in the 2012 third quarter.

“I am pleased to see our Middle East segment return to profitability this
quarter as we demonstrated improved consistency in performance,” said Stephen
M. Johnson, Chairman of the Board, President and Chief Executive Officer of
McDermott. “Despite our recent challenges, I am optimistic about the future of
the Company and the foundation that we have built to address the subsea
market.”

Operational Update

In the third quarter, all projects in the Middle East segment contributed to
gross profit and were in a profitable position. In October, the Company
reached a significant milestone on a previously discussed project in Saudi
Arabia and demobilized the major workboats used for the hookup campaign, with
the remaining commissioning scheduled for completion in the second quarter of
2014.

On a deepwater Malaysian project in the Asia Pacific segment, the Company
experienced vessel mechanical downtime that contributed to $66.0 million of
additional project costs. The Company reached a commercial agreement with its
customer totaling $33.0 million, partially offsetting the charge, which
mitigates weather risk and late delivery penalties. As a result, the Company
intends to maintain continuous operations through the monsoon season to
install production-critical aspects of the project in 2013. The first of the
four installation campaigns was completed in October and project completion is
expected in the first half of 2014.

In the Atlantic segment, a loss project at the Company’s Morgan City yard
performed ahead of prior quarter estimates and is expected to be completed in
the fourth quarter. A fabrication project in Mexico experienced estimated cost
increases related to scope growth and schedule extensions during the quarter,
resulting in a project loss of $9.0 million.

The third quarter results include approximately $4.0 million of restructuring
costs, for a cumulative total of $19.5 million. The Company expects to incur
the majority of the remaining $35.5 to $45.5 million in planned restructuring
and management charges in the next two quarters.

Contract Backlog Summary

At September 30, 2013, the Company’s backlog was approximately $4.6 billion,
compared to $5.1 billion at June 30, 2013. Of the September 30, 2013 backlog,
approximately $564.6 million was derived from four projects that are currently
in a loss position. In addition, the backlog includes approximately $151.3
million for one project under deferred profit recognition.

At the end of the third quarter, the Company had $9.0 billion in bids
outstanding and is targeting approximately $8.9 billion in projects that the
Company expects to bid within the next five quarters.

Balance Sheet Summary

As of September 30, 2013, McDermott reported total assets of approximately
$3.2 billion. Included in this amount was $318.1 million of cash and cash
equivalents, restricted cash and investments. Net working capital, calculated
as current assets less current liabilities, was $226.6 million. In addition,
total equity was $1.7 billion, or approximately 55% of total assets, with
total debt of $94.1 million.

OTHER INFORMATION

Conference Call

McDermott has scheduled a conference call and webcast related to its third
quarter 2013 results on Tuesday, November 5, 2013, at 9:00 a.m. U.S. Central
Standard Time. Interested parties may listen over the Internet and download
supplemental slides 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, bids outstanding, and projects McDermott expects to
bid, to the extent such may be viewed as indicators of future revenues,
optimism about the future of McDermott and its foundation for the subsea
market, expectations on the timing of the execution and completion of existing
projects, and the expected range of costs and timing for the recognition of
costs related to the Atlantic restructuring and management charges. 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, the availability of qualified personnel, 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 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 (LOSS)
                                                                 
                   Three Months Ended            Nine Months Ended
                   September 30,                 September 30,
                   2013          2012            2013            2012
                   (In thousands)
Revenues           $ 686,856    $ 1,028,745    $ 2,141,594    $ 2,645,671 
                                                                 
Costs and
Expenses:
Cost of              686,415       889,823         2,122,488       2,246,961
operations
Selling, general
and                  46,443        51,834          151,286         145,927
administrative
expenses
Gain on asset        (763    )     (85       )     (15,492   )     (282      )
disposals
Restructuring       4,040       -             19,502        -         
charges
                                                                 
Total costs and     736,135     941,572       2,277,784     2,392,606 
expenses
                                                                 
Equity in Loss
of                  (3,375  )    (4,692    )    (12,967   )    (11,026   )
Unconsolidated
Affiliates
                                                                 
Operating Income    (52,654 )    82,481        (149,157  )    242,039   
(Loss)
                                                                 
Other Income:
Interest income,     363           996             1,133           4,215
net
Gain on foreign      4,460         488             10,838          11,185
currency-net
Other income        1,062       242           1,813         (288      )
(expense)-net
                                                                 
Total other         5,885       1,726         13,784        15,112    
income
                                                                 
Income (loss)
from continuing
operations
before provision    (46,769 )    84,207        (135,373  )    257,151   
for income taxes
and
noncontrolling
interests
                                                                 
Provision for       12,278      29,916        45,493        87,004    
Income Taxes
                                                                 
Income (loss)
from continuing
operations          (59,047 )    54,291        (180,866  )    170,147   
before
noncontrolling
interests
                                                                 
Total income
from
discontinued        -           -             -             3,497     
operations, net
of tax
                                                                 
Net Income          (59,047 )    54,291        (180,866  )    173,644   
(Loss)
                                                                 
Less: Net Income
Attributable to     5,023       3,679         12,074        7,535     
Noncontrolling
Interests
                                                                 
Net Income
(Loss)
Attributable to    $ (64,070 )   $ 50,612       $ (192,940  )   $ 166,109   
McDermott
International,
Inc.

                                                                
McDERMOTT INTERNATIONAL, INC.

EARNINGS PER SHARE COMPUTATION
                                                                     
                 Three Months Ended                Nine Months Ended
                 September 30,                     September 30,
                 2013              2012            2013              2012
                 (In thousands, except share and per share amounts)
                                                                     
Income (loss)
from
continuing
operations       $ (64,070     )   $ 50,612        $ (192,940    )   $ 162,612
less
noncontrolling
interests
Total income
from
discontinued      -               -              -               3,497
operations,
net of tax
                                                                     
Net income
(loss)

attributable     $ (64,070     )   $ 50,612        $ (192,940    )   $ 166,109
to McDermott
International,
Inc.
                                                                     
                                                                     
Weighted
average common     236,257,920       235,817,203     236,132,847       235,568,889
shares (basic)
Effect of
dilutive
securities:
Stock options,
restricted
stock and         -               2,049,797      -               1,984,574
restricted
stock units
                                                                     
Adjusted
weighted
average common
shares and
assumed           236,257,920     237,867,000    236,132,847     237,553,463
exercises of
stock options
and vesting of
stock awards
(diluted)
                                                                     
                                                                     
Basic earnings
per share:
Income (loss)
from
continuing
operations         (0.27       )     0.21            (0.82       )     0.69
less
noncontrolling
interests
Income from
discontinued       -                 -               -                 0.01
operations,
net of tax
Net income
(loss)
attributable       (0.27       )     0.21            (0.82       )     0.70
to McDermott
International,
Inc.
                                                                     
Diluted
earnings per
share:
Income (loss)
from
continuing
operations         (0.27       )     0.21            (0.82       )     0.68
less
noncontrolling
interests
Income from
discontinued       -                 -               -                 0.01
operations,
net of tax
Net income
(loss)
attributable       (0.27       )     0.21            (0.82       )     0.69
to McDermott
International,
Inc.


SUPPLEMENTARY DATA

                 Three Months Ended            Nine Months Ended
                   September 30,                   September 30,
                   2013          2012            2013          2012
                   (In thousands)
Depreciation &
amortization       $ 20,796        $ 20,082        $ 60,114        $ 65,956
expense
Drydock            $ 4,248         $ 7,999         $ 14,179        $ 21,606
amortization
Capital            $ 80,922        $ 47,623        $ 225,397       $ 179,284
expenditures
Backlog            $ 4,610,675     $ 5,339,755     $ 4,610,675     $ 5,339,755

                                                        
McDERMOTT INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
                                                             
                                     September 30,           December 31,
                                     2013                    2012
                                     (In thousands, except share and per share
                                     amounts)
Assets
Current Assets:
Cash and cash equivalents            $   282,370             $   640,147
Restricted cash and cash                 18,488                  18,116
equivalents
Accounts receivable-trade, net           341,458                 428,800
Accounts receivable-other                110,252                 75,461
Contracts in progress                    586,120                 560,154
Deferred income taxes                    11,184                  9,765
Assets held for sale                     1,396                   2,679
Other current assets                    40,959                54,667     
                                                             
Total Current Assets                    1,392,227             1,789,789  
                                                             
Property, Plant and Equipment            2,337,706               2,115,176
Less accumulated depreciation           (865,897    )          (833,385   )
                                                             
Net Property, Plant and Equipment        1,471,809               1,281,791
Investments                              17,282                  26,750
Goodwill                                 41,202                  41,202
Investments in Unconsolidated            26,753                  37,435
Affiliates
Assets Held for Sale                     12,243                  26,758
Other Assets                            195,765               129,902    
                                                             
Total Assets                         $   3,157,281          $   3,333,627  
                                                             
Liabilities and Equity
Current Liabilities:
Notes payable and current            $   41,037              $   14,146
maturities of long-term debt
Accounts payable                         371,674                 400,007
Accrued liabilities                      393,024                 369,418
Advance billings on contracts            312,268                 241,696
Deferred income taxes                    18,119                  10,758
Income taxes payable                    29,530                76,986     
                                                             
Total Current Liabilities               1,165,652             1,113,011  
                                                             
Long-Term Debt                           53,104                  88,562
Self-Insurance                           26,696                  22,641
Pension Liability                        24,057                  25,069
Other Liabilities                        149,320                 132,239
Commitments and Contingencies
Stockholders’ Equity:
Common stock, par value $1.00 per
share, authorized 400,000,000
shares; issued 243,941,008 and           243,941                 243,442
243,442,156 shares at September
30, 2013 and December 31, 2012,
respectively
Capital in excess of par value           1,405,289               1,391,271
Retained earnings                        252,816                 445,756
Treasury stock, at cost, 7,665,632
and 7,574,903 shares at September        (98,690     )           (98,725    )
30, 2013 and December 31,
2012, respectively
Accumulated other comprehensive         (129,235    )          (94,413    )
loss
                                                             
Stockholders’ Equity—McDermott           1,674,121               1,887,331
International, Inc.
Noncontrolling Interests                64,331                64,774     
                                                             
Total Equity                            1,738,452             1,952,105  
                                                             
Total Liabilities and Equity         $   3,157,281          $   3,333,627  


McDERMOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                               
                                                   Nine Months Ended
                                                   September 30,
                                                   2013           2012
                                                   (In thousands)
Cash Flows From Operating Activities:
Net income (loss)                                  $ (180,866 )   $ 173,644
Less: Income from discontinued operations, net      -            3,497    
of tax
                                                                  
Income (loss) from continuing operations           $ (180,866 )   $ 170,147
Non-cash items included in net income:
Depreciation and amortization                        60,114         65,956
Drydock amortization                                 14,179         21,606
Equity in loss of unconsolidated affiliates          12,967         11,026
Gain on asset disposals and impairments-net          (15,492  )     (282     )
Restructuring charges                                12,940         -
Provision (benefit) from deferred taxes              (3,761   )     3,929
Other non-cash items                                 14,817         17,779
Changes in assets and liabilities, net of
effects from dispositions:
Accounts receivable                                  50,206         (113,460 )
Net contracts in progress and advance billings       44,601         (225,340 )
on contracts
Accounts payable                                     (27,953  )     58,675
Accrued and other current liabilities                3,038          66,125
Pension liability and accrued postretirement and     (29,196  )     17,322
employee benefits
Derivative instruments and hedging activities        (46,270  )     (4,880   )
Other assets and liabilities                        (77,434  )    21,046   
                                                                  
Net Cash Provided By (Used In) Operating            (168,110 )    109,649  
Activities-Continuing Operations
                                                                  
Cash Flows From Investing Activities:
Purchases of property, plant and equipment           (225,397 )     (179,284 )
Increase in restricted cash and cash equivalents     (372     )     (1,112   )
Purchases of available-for-sale securities           (9,886   )     (82,735  )
Sales and maturities of available-for-sale           39,210         164,807
securities
Proceeds from the sale and disposal of assets        37,189         405
Other investing activities, net                     (8,503   )    (2,305   )
                                                                  
Net Cash Used In Investing Activities-Continuing     (167,759 )     (100,224 )
Operations
Net Cash Provided By Investing                      -            60,671   
Activities-Discontinued Operations
                                                                  
Total Cash Used In Investing Activities             (167,759 )    (39,553  )
                                                                  
Cash Flows From Financing Activities:
Increase in debt                                     80,000         19,033
Payment of debt                                      (88,567  )     (4,482   )
Noncontrolling interests distributions and other     (12,493  )     (15,728  )
Other financing activities, net                     (1,033   )    (2,642   )
                                                                  
Net Cash Used In Financing Activities-Continuing    (22,093  )    (3,819   )
Operations
                                                                  
Effects of exchange rate changes on cash and        185          1,663    
cash equivalents
                                                                  
Net increase (decrease) in cash and cash             (357,777 )     67,940
equivalents
Cash and cash equivalents at beginning of period    640,147      570,854  
                                                                  
Cash and cash equivalents at end of                $ 282,370     $ 638,794  
period-Continuing Operations

Contact:

McDermott International, Inc.
Investors, Analysts and Financial Media:
Steven D. Oldham, (281) 870-5147
Vice President, Treasurer and Investor Relations
soldham@mcdermott.com
or
Trade and General Media:
Louise Denly, (281) 870-5025
Director, Corporate Communications
ldenly@mcdermott.com
 
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