Exhibit 99.1
McDermott reports Fourth Quarter 2008 Results;
Net Income of $43.0 million, $0.19 per fully diluted share
$2 Billion of 4th Quarter Bookings Increase Year-End Backlog to $9.8 Billion
HOUSTON--(BUSINESS WIRE)--March 2, 2009--McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported net income of $43.0 million, or $0.19 per diluted share, for the 2008 fourth quarter, compared to net income of $160.0 million, or $0.70 per diluted share, for the corresponding period in 2007. Fourth quarter 2008 net income included approximately $57 million, after-tax, of certain previously announced net expenses. Weighted average common shares outstanding on a fully diluted basis were approximately 230.6 million and 229.8 million in the quarters ended December 31, 2008 and December 31, 2007, respectively.
McDermott’s revenues in the fourth quarter of 2008 were $1,664.5 million, an increase of 9.1 percent compared to $1,526.0 million in the corresponding period in 2007. The Company’s $138.5 million growth in revenues was provided by a 15.7% and 13.1% increase in the Offshore Oil & Gas Construction and Government Operations segments, respectively.
The Company’s operating income was $89.7 million in the 2008 fourth quarter, compared to $186.8 million in the 2007 fourth quarter. As previously announced, the 2008 fourth quarter included approximately $50 million of certain net expenses from the Offshore Oil & Gas Construction and Power Generation Systems segments.
“McDermott’s fourth quarter results generally came in at the upper end of the Company’s pre-announced range from early February,” said John A. Fees, Chief Executive Officer of McDermott. “Although we’re not satisfied with our consolidated results for the second half of 2008, we are pleased that McDermott’s backlog remained near record levels, the industries we serve have continued demand for our offerings, our liquidity position at year end provides continued financial flexibility and consolidated bookings and bids remained robust. While we recognize the overall business environment remains in flux, we believe McDermott remains well-positioned in the industries we serve.”
At December 31, 2008, McDermott’s consolidated backlog was $9.8 billion, compared to $9.8 billion and $9.4 billion at December 31, 2007 and September 30, 2008, respectively.
For the year-ended December 31, 2008, the Company reported consolidated revenues of $6.6 billion, producing operating income of $569.9 million and net income of $429.3 million, or $1.86 per diluted share, the second best year for net income in McDermott’s history.
RESULTS OF OPERATIONS
2008 Fourth Quarter Compared to 2007 Fourth Quarter
Offshore Oil & Gas Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were $848.3 million in the 2008 fourth quarter, compared to $733.3 million for the same period a year ago. The year-over-year growth in revenues resulted from increased activities in the Middle East, Asia Pacific and Americas regions, partially offset by reduced activities in the Caspian region.
Segment income for the 2008 fourth quarter was $14.9 million, compared to $100.0 million in the 2007 fourth quarter. As previously disclosed, the 2008 fourth quarter includes approximately $70 million of incurred and expected cost increases recognized during the period on certain Middle East pipeline projects and other procured items, partially offset by a $36 million benefit from the resolution of an outstanding claim.
At December 31, 2008, segment backlog was $4.5 billion, compared to backlog of $4.8 billion and $5.0 billion at December 31, 2007 and September 30, 2008, respectively.
Power Generation Systems Segment
Revenues in the Power Generation Systems segment for the fourth quarter of 2008 were $605.5 million, compared to $608.0 million in the fourth quarter of 2007.
Segment income for the 2008 fourth quarter was $48.7 million, compared to $65.9 million in the 2007 fourth quarter. Major activities contributing to fourth quarter 2008 segment income include the supply and construction of new boilers and environmental equipment, retrofit projects of existing facilities, and related parts and services. In addition, the 2008 fourth quarter included approximately $15 million of the write-down of certain inventories and increased warranty reserves.
At December 31, 2008, segment backlog was $2.5 billion, compared to backlog of $3.3 billion and $2.8 billion at December 31, 2007 and September 30, 2008, respectively.
Government Operations Segment
Revenues in the Government Operations segment were $212.2 million in the 2008 fourth quarter, compared to $187.7 million for the same period a year ago. The improvement was primarily due to increased volumes in the manufacture of nuclear components for certain U.S. Government programs and for a commercial uranium enrichment project.
Segment income for the 2008 fourth quarter was $35.2 million, compared to $33.3 million in the 2007 fourth quarter. Major items contributing to fourth quarter 2008 segment income include the manufacture of nuclear components for certain U.S. Government programs, the manufacture of nuclear components for a commercial uranium enrichment project, and the management and operations of various U.S. Government sites.
At December 31, 2008, segment backlog was $2.9 billion, compared to backlog of $1.8 billion and $1.6 billion at December 31, 2007 and September 30, 2008, respectively.
Corporate & Other Income and Expense
Unallocated corporate expenses were $9.2 million in the 2008 fourth quarter, compared to $12.4 million in the 2007 fourth quarter. The Company’s other expense for the fourth quarter of 2008 was $7.1 million, compared to other income of $7.3 million in the fourth quarter of 2007, due to a year-over-year decline in interest income and an approximate $10 million non-cash foreign currency translation expense.
Balance Sheet Items
At December 31, 2008, total assets were approximately $4.6 billion, a 4.3% increase from year-end 2007. McDermott had approximately $1.1 billion in cash, restricted cash, cash equivalents and investments at year-end 2008, approximately $440 million below year-end 2007 levels as a result of approximately $450 million spent on capital expenditures and acquisitions as well as an almost $500 million reduction in current liabilities during the 2008 year. Long-term debt, notes payable and current maturities ended 2008 at approximately $15 million, with over $750 million of credit capacity also available at December 31, 2008. McDermott’s pension liability increased approximately $380 million from year-end 2007, primarily resulting from a nearly 20% full-year decline in the market value of pension assets, which will result in approximately $135 million of pension expense expected for 2009, a $90 million increase from 2008. Shareholder’s equity increased approximately $150 million during 2008, to end the year at $1.3 billion.
OTHER INFORMATION
About the Company
McDermott is an engineering and construction company, with specialty manufacturing and service capabilities, focused on energy infrastructure. McDermott’s customers are predominantly utilities and other power generators, major and national oil companies, and the United States Government. With its global operations, McDermott operates in over 20 countries with more than 25,000 employees.
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 the Company’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, our expected 2009 pension expense and our belief that we are well positioned in the industries we serve. 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 and changes in the scope or timing of 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.
Conference Call to Discuss Fourth Quarter 2008 Earnings Release |
| |
Date: | | Tuesday, March 3, 2009, at 10:00 a.m. EDT (9:00 a.m. CDT) |
Live Webcast: | | Investor Relations section of Web site at www.mcdermott.com |
Replay: | | Available for two weeks in the investor relations section of www.mcdermott.com |
McDERMOTT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME |
| | | | | |
| | Three Months Ended December 31, | Twelve Months Ended
December 31, |
| | 2008 | 2007 | 2008 | 2007 |
| | (Unaudited) | | |
| | (In thousands, except shares and per share amounts) |
| Revenues | | $ | 1,664,500 | | $ | 1,526,016 | | $ | 6,572,423 | | $ | 5,631,610 | |
| Costs and Expenses: | | | | | |
| Cost of operations | | | 1,452,646 | | | 1,222,842 | | | 5,519,827 | | | 4,500,897 | |
(Gains) losses on asset disposals and impairments – net | | | (880 | ) | | (5,991 | ) | | (12,202 | ) | | (8,371 | ) |
| Selling, general and administrative expenses | | | 138,749 | | | 137,086 | | | 543,047 | | | 464,611 | |
| | | | 1,590,515 | | | 1,353,937 | | | 6,050,672 | | | 4,957,137 | |
| | | | | |
| Equity in Income of Investees | | | 15,688 | | | 14,698 | | | 48,131 | | | 41,724 | |
| | | | | |
| Operating Income | | | 89,673 | | | 186,777 | | | 569,882 | | | 716,197 | |
| | | | | |
| Other Income (Expense): | | | | | |
| Interest income | | | 4,812 | | | 16,569 | | | 34,353 | | | 61,980 | |
| Interest expense | | | (1,631 | ) | | (4,089 | ) | | (7,380 | ) | | (22,520 | ) |
| Other expense – net | | | (10,293 | ) | | (5,142 | ) | | (9,741 | ) | | (10,192 | ) |
| | | | (7,112 | ) | | 7,338 | | | 17,232 | | | 29,268 | |
| | | | | |
| Income from Continuing Operations before Provision for Income Taxes | | | 82,561 | | | 194,115 | | | 587,114 | | | 745,465 | |
| | | | | |
| Provision for Income Taxes | | | 39,559 | | | 34,130 | | | 157,812 | | | 137,637 | |
| | | | | |
| Net Income | | $ | 43,002 | | $ | 159,985 | | $ | 429,302 | | $ | 607,828 | |
| | | | | |
| Earnings per Common Share: | | | | | |
| Basic: | | | | | |
| Income from Continuing Operations | | $ | 0.19 | | $ | 0.71 | | $ | 1.89 | | $ | 2.72 | |
| Net Income | | $ | 0.19 | | $ | 0.71 | | $ | 1.89 | | $ | 2.72 | |
| Diluted: | | | | | |
| Income from Continuing Operations | | $ | 0.19 | | $ | 0.70 | | $ | 1.86 | | $ | 2.66 | |
| Net Income | | $ | 0.19 | | $ | 0.70 | | $ | 1.86 | | $ | 2.66 | |
| | | | | |
| Shares used in the computation of earnings per share: | | | | | |
| Basic | | | 227,739,578 | | | 225,213,119 | | | 226,918,776 | | | 223,511,880 | |
| Diluted | | | 230,589,855 | | | 229,762,318 | | | 230,393,782 | | | 228,742,522 | |
McDERMOTT INTERNATIONAL, INC. SELECTED SEGMENT INFORMATION |
| | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | (Unaudited) | | | | |
| | (In thousands) |
REVENUES | | | | | | | | |
| Offshore Oil and Gas Construction | | $ | 848,320 | | | $ | 733,261 | | | $ | 3,181,238 | | | $ | 2,445,675 | |
| Government Operations | | | 212,227 | | | | 187,684 | | | | 851,019 | | | | 694,024 | |
| Power Generation Systems | | | 605,530 | | | | 608,047 | | | | 2,550,854 | | | | 2,504,225 | |
| Adjustments and Eliminations | | | (1,577 | ) | | | (2,976 | ) | | | (10,688 | ) | | | (12,314 | ) |
| TOTAL | | $ | 1,664,500 | | | $ | 1,526,016 | | | $ | 6,572,423 | | | $ | 5,631,610 | |
| | | | | | | | |
| SEGMENT INCOME | | | | | | | | |
| Offshore Oil and Gas Construction | | $ | 14,932 | | | $ | 100,000 | | | $ | 146,180 | | | $ | 400,402 | |
| Government Operations | | | 35,228 | | | | 33,306 | | | | 150,232 | | | | 122,941 | |
| Power Generation Systems | | | 48,670 | | | | 65,864 | | | | 315,362 | | | | 234,068 | |
| | | | 98,830 | | | | 199,170 | | | | 611,774 | | | | 757,411 | |
| Unallocated Corporate | | | (9,157 | ) | | | (12,393 | ) | | | (41,892 | ) | | | (41,214 | ) |
| OPERATING INCOME | | $ | 89,673 | | | $ | 186,777 | | | $ | 569,882 | | | $ | 716,197 | |
| | | | | | | | |
| EQUITY IN INCOME (LOSS) OF INVESTEES (1) | | | | | | | | |
| Offshore Oil and Gas Construction | | $ | (990 | ) | | $ | (985 | ) | | $ | (3,661 | ) | | $ | (3,923 | ) |
| Government Operations | | | 13,868 | | | | 11,681 | | | | 41,381 | | | | 31,288 | |
| Power Generation Systems | | | 2,810 | | | | 4,002 | | | | 10,411 | | | | 14,359 | |
| TOTAL | | $ | 15,688 | | | $ | 14,698 | | | $ | 48,131 | | | $ | 41,724 | |
| | | | | | | | |
| DEPRECIATION & AMORTIZATION (1) | | | | | | | | |
| Offshore Oil and Gas Construction | | $ | 19,379 | | | $ | 17,262 | | | $ | 80,148 | | | $ | 54,318 | |
| Government Operations | | | 5,634 | | | | 5,636 | | | | 22,445 | | | | 19,269 | |
| Power Generation Systems | | | 5,513 | | | | 5,702 | | | | 22,080 | | | | 21,266 | |
| Corporate | | | 548 | | | | 281 | | | | 1,460 | | | | 1,136 | |
| TOTAL | | $ | 31,074 | | | $ | 28,881 | | | $ | 126,133 | | | $ | 95,989 | |
| | | | | | | | |
| CAPITAL EXPENDITURES | | | | | | | | |
| Offshore Oil and Gas Construction | | $ | 44,208 | | | $ | 35,651 | | | $ | 193,736 | | | $ | 172,580 | |
| Government Operations | | | 7,864 | | | | 6,385 | | | | 16,348 | | | | 14,117 | |
| Power Generation Systems | | | 13,191 | | | | 8,949 | | | | 33,896 | | | | 40,218 | |
| Corporate | | | 1,044 | | | | 501 | | | | 11,711 | | | | 6,374 | |
| TOTAL | | $ | 66,307 | | | $ | 51,486 | | | $ | 255,691 | | | $ | 233,289 | |
| | | | | | | | |
| BACKLOG | | | | | | | | |
| Offshore Oil and Gas Construction | | $ | 4,456,951 | | | $ | 4,752,794 | | | $ | 4,456,951 | | | $ | 4,752,794 | |
| Government Operations | | | 2,882,895 | | | | 1,790,686 | | | | 2,882,895 | | | | 1,790,686 | |
| Power Generation Systems | | | 2,476,435 | | | | 3,276,129 | | | | 2,476,435 | | | | 3,276,129 | |
| TOTAL | | $ | 9,816,281 | | | $ | 9,819,609 | | | $ | 9,816,281 | | | $ | 9,819,609 | |
| | | | | | | | |
| (1) Included in Segment Income Above |
McDERMOTT INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS |
| | | | | |
| | December 31, |
| | 2008 | | | 2007 |
| | (In thousands) |
| ASSETS | | | | | |
| Current Assets: | | | | | |
| Cash and cash equivalents | | $ | 586,649 | | | $ | 1,001,394 |
| Restricted cash and cash equivalents | | | 50,536 | | | | 64,786 |
| Investments | | | 131,515 | | | | 300,092 |
| Accounts receivable – trade, net | | | 712,055 | | | | 770,024 |
| Accounts and notes receivable – unconsolidated affiliates | | | 1,504 | | | | 2,303 |
| Accounts receivable – other | | | 139,062 | | | | 116,744 |
| Contracts in progress | | | 311,713 | | | | 194,292 |
| Inventories | | | 128,383 | | | | 95,208 |
| Deferred income taxes | | | 97,069 | | | | 160,783 |
| Other current assets | | | 58,499 | | | | 51,874 |
| | | | | |
| Total Current Assets | | | 2,216,985 | | | | 2,757,500 |
| | | | | |
| Property, Plant and Equipment | | | 2,234,050 | | | | 2,004,138 |
| Less accumulated depreciation | | | 1,155,191 | | | | 1,090,400 |
| | | | | |
| Net Property, Plant and Equipment | | | 1,078,859 | | | | 913,738 |
| | | | | |
| Investments | | | 319,170 | | | | 162,069 |
| | | | | |
| Goodwill | | | 298,265 | | | | 158,533 |
| | | | | |
| Deferred Income Taxes | | | 335,877 | | | | 134,292 |
| | | | | |
| Investments in Unconsolidated Affiliates | | | 70,304 | | | | 62,241 |
| | | | | |
| Other Assets | | | 282,233 | | | | 223,113 |
| | | | | |
| TOTAL | | $ | 4,601,693 | | | $ | 4,411,486 |
McDERMOTT INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS |
| | | |
| December 31, |
| 2008 | | 2007 |
| (In thousands) |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current Liabilities: | | | |
| Notes payable and current maturities of long-term debt | $ | 9,021 | | | $ | 6,599 | |
| Accounts payable | | 551,435 | | | | 455,659 | |
| Accrued employee benefits | | 159,541 | | | | 184,211 | |
| Accrued pension liability – current portion | | 45,980 | | | | 159,601 | |
| Accrued contract cost | | 97,041 | | | | 93,281 | |
| Advance billings on contracts | | 951,895 | | | | 1,463,223 | |
| Accrued warranty expense | | 120,237 | | | | 101,330 | |
| Income taxes payable | | 55,709 | | | | 57,071 | |
| Accrued liabilities – other | | 217,486 | | | | 175,557 | |
| | | |
| Total Current Liabilities | | 2,208,345 | | | | 2,696,532 | |
| | | |
| Long-Term Debt | | 6,109 | | | | 10,609 | |
| | | |
| Accumulated Postretirement Benefit Obligation | | 107,567 | | | | 96,253 | |
| | | |
| Self-Insurance | | 88,312 | | | | 82,525 | |
| | | |
| Pension Liability | | 682,624 | | | | 188,748 | |
| | | |
| Other Liabilities | | 192,564 | | | | 169,814 | |
| | | |
| Commitments and Contingencies | | | |
| | | |
| Stockholders’ Equity: | | | |
| Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 234,174,088 and 231,722,659 at December 31, 2008 and 2007, respectively | | 234,174 | | | | 231,723 | |
| Capital in excess of par value | | 1,252,848 | | | | 1,145,829 | |
| Retained earnings | | 564,591 | | | | 135,289 | |
| Treasury stock at cost, 5,840,314 and 5,852,248 at December 31, 2008 and 2007, respectively | | (63,026 | ) | | | (63,903 | ) |
| Accumulated other comprehensive loss | | (672,415 | ) | | | (281,933 | ) |
| | | |
| Total Stockholders’ Equity | | 1,316,172 | | | | 1,167,005 | |
| | | |
| TOTAL | $ | 4,601,693 | | | $ | 4,411,486 | |
McDERMOTT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | |
| | Year Ended December 31, |
| | 2008 | | 2007 |
| | (In thousands) |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
| Net Income | | $ | 429,302 | | | $ | 607,828 | |
| Non-cash items included in net income: | | | | |
| Depreciation and amortization | | | 126,133 | | | | 95,989 | |
| (Income) loss of investees, net of dividends | | | 1,545 | | | | 120 | |
| (Gains) losses on asset disposals and impairments – net | | | (12,202 | ) | | | (8,371 | ) |
| Gain on sale of business | | | - | | | | - | |
| Premium on early retirement of debt | | | - | | | | - | |
| Provision for deferred taxes | | | 35,063 | | | | 89,624 | |
| Amortization of pension and postretirement costs | | | 38,131 | | | | 50,957 | |
| Excess tax benefits from FAS 123(R) stock-based compensation | | | (60,901 | ) | | | (877 | ) |
| Other, net | | | 38,372 | | | | 21,726 | |
| Changes in assets and liabilities, net of effects from acquisition and divestitures: | | | | |
| Accounts receivable | | | 71,142 | | | | (82,105 | ) |
| Income taxes receivable | | | (11,476 | ) | | | 255,165 | |
| Accounts payable | | | 86,069 | | | | 40,384 | |
| Net contracts in progress and advance billings | | | (630,481 | ) | | | 382,184 | |
| Income taxes | | | 13,046 | | | | (13,216 | ) |
| Accrued and other current liabilities | | | 18,142 | | | | (14,305 | ) |
| Pension liability and accrued postretirement and employee benefits | | | (205,345 | ) | | | (74,365 | ) |
| Payment of the B&W PGG bankruptcy settlement | | | - | | | | - | |
| Other, net | | | 14,493 | | | | (33,790 | ) |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | | | (48,967 | ) | | | 1,316,948 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
| Decrease in restricted cash and cash equivalents | | | 14,250 | | | | 41,888 | |
| Purchases of property, plant and equipment | | | (255,691 | ) | | | (233,289 | ) |
| Acquisition of businesses, net of cash acquired | | | (191,940 | ) | | | (334,457 | ) |
| Net (increase) decrease in available-for-sale securities | | | 2,009 | | | | (159,350 | ) |
| Proceeds from asset disposals | | | 13,996 | | | | 11,223 | |
| Cash acquired from the reconsolidation of B&W PGG | | | - | | | | - | |
| Other, net | | | (2,996 | ) | | | (4,696 | ) |
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | | | (420,372 | ) | | | (678,681 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Issuance of long-term debt | | | - | | | | - | |
| Payment of long-term debt | | | (4,768 | ) | | | (255,749 | ) |
| Payment of debt issuance costs | | | (1,756 | ) | | | (3,625 | ) |
| Increase in short-term borrowing | | | 1,460 | | | | - | |
| Issuance of common stock | | | 9,624 | | | | 15,219 | |
| Excess tax benefits from FAS 123(R) stock-based compensation | | | 60,901 | | | | 877 | |
| Other, net | | | (2 | ) | | | 4 | |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | | | 65,459 | | | | (243,274 | ) |
| EFFECTS OF EXCHANGE RATE CHANGES ON CASH | | | (10,865 | ) | | | 5,558 | |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | (414,745 | ) | | | 400,551 | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 1,001,394 | | | | 600,843 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 586,649 | | | $ | 1,001,394 | |
| | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest (net of amount capitalized) | | $ | 11,978 | | | $ | 28,066 | |
| Income taxes (net of refunds) | | $ | 68,637 | | | $ | (208,194 | ) |
CONTACT:
McDermott Investor Relations & Corporate Communications
Vice President
Jay Roueche, 281-870-5462
jroueche@mcdermott.com
or
Director
Robby Bellamy, 281-870-5165
rbellamy@mcdermott.com
