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 email@example.com or Trade and General Media: Louise Denly, (281) 870-5025 Director, Corporate Communications firstname.lastname@example.org
McDermott Reports Third Quarter 2013 Financial Results
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