Exhibit 99.1
McDermott reports First Quarter 2009 Results;
Net Income of $77.7 million, $0.33 per fully diluted share
Sequential Income Improvement in Each Segment; Near-Record Consolidated Backlog of $10 Billion
HOUSTON--(BUSINESS WIRE)--May 11, 2009--McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported net income of $77.7 million, or $0.33 per diluted share, for the 2009 first quarter, compared to net income of $123.2 million, or $0.54 per diluted share, for the corresponding period in 2008. Weighted average common shares outstanding on a fully diluted basis were approximately 232.6 million and 230.1 million in the quarters ended March 31, 2009 and March 31, 2008, respectively.
McDermott’s revenues in the first quarter of 2009 were $1,493.3 million, an increase of 3.0 percent compared to $1,450.4 million in the corresponding period in 2008. The increase in consolidated revenues was due to a higher level of activity in the Offshore Oil & Gas Construction and Government Operations segments, partially offset by lower revenues in the Power Generation Systems segment.
The Company’s operating income in the 2009 first quarter was $131.2 million, compared to $157.1 million in the 2008 first quarter. A year-over-year increase of $21.8 million in consolidated pension plan expense, which was predominantly a non-cash expense, combined with a $12.7 million reduction in gains on asset sales, were the primary factors in the variance between the two periods.
“Considering the ongoing state of uncertainty in the global economy and that we continue to work through the Middle East pipeline projects in the Offshore Oil & Gas Construction segment, I am quite pleased with the results McDermott produced in the quarter,” said John A. Fees, Chief Executive Officer of McDermott. “The Company’s backlog is near record levels at $10 billion; we see the end to the problematic pipeline projects later this year, and our financial position remains solid. Clearly, the Company has work to do, and near-term challenges still exist, but I am confident McDermott is well-positioned and progressing in this environment.”
At March 31, 2009, McDermott’s consolidated backlog was $10.0 billion, compared to $10.2 billion and $9.8 billion at March 31, 2008 and December 31, 2008, respectively.
RESULTS OF OPERATIONS
2009 First Quarter Compared to 2008 First Quarter
Offshore Oil & Gas Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were $708.5 million in the 2009 first quarter, compared to $645.9 million for the same period a year ago. The year-over-year improvement in revenues resulted from increased activities in the Middle East and Americas regions, partially offset by a decline in the Caspian region.
Segment income for the 2009 first quarter was $45.0 million, compared to $52.9 million in the 2008 first quarter. Major areas contributing to first quarter 2009 segment income include the Middle East, Asia Pacific, Caspian and Americas regions. During the first quarter of 2009, the Company substantially completed the marine pipeline installation portion on one of its three Qatar projects. The remaining two Qatar projects recently commenced pipeline installation activities during the second quarter of 2009.
At March 31, 2009, segment backlog was $5.0 billion, compared to backlog of $5.3 billion and $4.5 billion at March 31, 2008 and December 31, 2008, respectively.
Power Generation Systems Segment
Revenues in the Power Generation Systems segment for the first quarter of 2009 were $528.6 million, compared to $616.3 million in the first quarter of 2008.
Segment income for the 2009 first quarter was $58.2 million, compared to $76.3 million in the 2008 first quarter. Major activities contributing to first quarter 2009 segment income include the supply and construction of new boilers and environmental equipment, retrofit projects of existing facilities, and related parts and services.
At March 31, 2009, segment backlog was $2.2 billion, compared to backlog of $3.2 billion and $2.5 billion at March 31, 2008 and December 31, 2008, respectively.
Government Operations Segment
Revenues in the Government Operations segment were $257.1 million in the 2009 first quarter, compared to $190.6 million for the same period a year ago. The improvement was primarily due to activities in the manufacture of nuclear components and nuclear fuels for certain U.S. Government programs, including revenues from Nuclear Fuel Services which was acquired in December 2008, and in the manufacture of nuclear components for a commercial uranium enrichment project.
Segment income for the 2009 first quarter was $45.8 million, compared to $38.0 million in the 2008 first quarter. Major items contributing to first quarter 2009 segment income include the manufacture of nuclear components and nuclear fuels 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 March 31, 2009, segment backlog was $2.7 billion, compared to backlog of $1.7 billion and $2.9 billion at March 31, 2008 and December 31, 2008, respectively.
Corporate & Other Income and Expense
Unallocated corporate expenses were $17.7 million in the 2009 first quarter, compared to $10.0 million in the 2008 first quarter.
The Company’s other expense-net for the first quarter of 2009 was $9.6 million, compared to other income-net of $6.5 million in the first quarter of 2008. The $16.1 million decline was predominantly due to a year-over-year decline in interest income and approximately $9.4 million of non-cash charges related to foreign currency hedging activity, compared to $2.4 million in the corresponding period a year ago.
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, the expected timing of the completion of the problematic pipeline projects and our belief that we are well-positioned and progressing in the current environment. 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 First Quarter 2009 Earnings Release | ||
Date: | Tuesday, May 12, 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
(In thousands, except shares and per | ||||||||
Revenues | $ | 1,493,263 | $ | 1,450,426 | ||||
Costs and Expenses: | ||||||||
Cost of operations | 1,228,622 | 1,188,696 | ||||||
(Gains) losses on asset disposals and impairments – net | 1,241 | (11,443 | ) | |||||
Selling, general and administrative expenses | 141,394 | 126,731 | ||||||
Total Costs and Expenses | 1,371,257 | 1,303,984 | ||||||
Equity in Income of Investees | 9,200 | 10,670 | ||||||
Operating Income | 131,206 | 157,112 | ||||||
Other Income (Expense): | ||||||||
Interest income | 2,813 | 13,395 | ||||||
Interest expense | (956 | ) | (2,940 | ) | ||||
Other expense – net | (11,493 | ) | (3,997 | ) | ||||
Total Other Income (Expense) | (9,636 | ) | 6,458 | |||||
Income before Provision for Income Taxes | 121,570 | 163,570 | ||||||
Provision for Income Taxes | 43,878 | 40,380 | ||||||
Net Income | $ | 77,692 | $ | 123,190 | ||||
Earnings per Share: | ||||||||
Basic | $ | 0.34 | $ | 0.55 | ||||
Diluted | $ | 0.33 | $ | 0.54 | ||||
Shares used in the computation of earnings per share: | ||||||||
Basic | 228,314,785 | 225,632,169 | ||||||
Diluted | 232,586,245 | 230,112,858 | ||||||
McDERMOTT INTERNATIONAL, INC. SELECTED SEGMENT INFORMATION | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
REVENUES | (Unaudited) | |||||||
Offshore Oil and Gas Construction | $ | 708,524 | $ | 645,949 | ||||
Government Operations | 257,105 | 190,594 | ||||||
Power Generation Systems | 528,573 | 616,298 | ||||||
Adjustments and Eliminations | (939 | ) | (2,415 | ) | ||||
TOTAL | $ | 1,493,263 | $ | 1,450,426 | ||||
SEGMENT INCOME | ||||||||
Offshore Oil and Gas Construction | $ | 45,038 | $ | 52,925 | ||||
Government Operations | 45,752 | 37,950 | ||||||
Power Generation Systems | 58,159 | 76,258 | ||||||
148,949 | 167,133 | |||||||
Corporate | (17,743 | ) | (10,021 | ) | ||||
TOTAL | $ | 131,206 | $ | 157,112 | ||||
EQUITY IN INCOME (LOSS) OF INVESTEES (1) | ||||||||
Offshore Oil and Gas Construction | $ | (1,145 | ) | $ | (754 | ) | ||
Government Operations | 8,702 | 8,749 | ||||||
Power Generation Systems | 1,643 | 2,675 | ||||||
TOTAL | $ | 9,200 | $ | 10,670 | ||||
PENSION EXPENSE (1) | ||||||||
Offshore Oil and Gas Construction | $ | 2,177 | $ | 1,665 | ||||
Government Operations | 12,158 | 4,061 | ||||||
Power Generation Systems | 15,315 | 6,026 | ||||||
Corporate | 4,598 | 733 | ||||||
TOTAL | $ | 34,248 | $ | 12,485 | ||||
DEPRECIATION & AMORTIZATION (1) | ||||||||
Offshore Oil and Gas Construction | $ | 19,760 | $ | 19,963 | ||||
Government Operations | 11,243 | 5,566 | ||||||
Power Generation Systems | 4,335 | 5,497 | ||||||
Corporate | 684 | 285 | ||||||
TOTAL | $ | 36,022 | $ | 31,311 | ||||
RESEARCH & DEVELOPMENT, NET (1) | $ | 10,240 | $ | 9,008 | ||||
CAPITAL EXPENDITURES | ||||||||
Offshore Oil and Gas Construction | $ | 41,359 | $ | 47,237 | ||||
Government Operations | 5,246 | 1,511 | ||||||
Power Generation Systems | 12,333 | 7,204 | ||||||
Corporate | 2,450 | 3,334 | ||||||
TOTAL | $ | 61,388 | $ | 59,286 | ||||
BACKLOG | ||||||||
Offshore Oil and Gas Construction | $ | 5,043,788 | $ | 5,320,839 | ||||
Government Operations | 2,698,580 | 1,676,766 | ||||||
Power Generation Systems | 2,220,517 | 3,179,244 | ||||||
TOTAL | $ | 9,962,885 | $ | 10,176,849 | ||||
(1) Included in Segment Income Above | ||||||||
McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS | ||||||
March 31, | December 31, | |||||
2009 | 2008 | |||||
(Unaudited) | ||||||
(In thousands) | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 528,624 | $ | 586,649 | ||
Restricted cash and cash equivalents | 59,026 | 50,536 | ||||
Investments | 81,912 | 131,515 | ||||
Accounts receivable – trade, net | 613,537 | 712,055 | ||||
Accounts and notes receivable – unconsolidated affiliates | 4,569 | 1,504 | ||||
Accounts receivable – other | 141,021 | 139,062 | ||||
Contracts in progress | 400,305 | 311,713 | ||||
Inventories | 113,273 | 128,383 | ||||
Deferred income taxes | 100,364 | 97,069 | ||||
Other current assets | 63,670 | 58,499 | ||||
Total Current Assets | 2,106,301 | 2,216,985 | ||||
Property, Plant and Equipment | 2,276,138 | 2,234,050 | ||||
Less accumulated depreciation | 1,172,208 | 1,155,191 | ||||
Net Property, Plant and Equipment | 1,103,930 | 1,078,859 | ||||
Investments | 317,292 | 319,170 | ||||
Goodwill | 297,525 | 298,265 | ||||
Deferred Income Taxes | 288,804 | 335,877 | ||||
Investments in Unconsolidated Affiliates | 73,001 | 70,304 | ||||
Other Assets | 274,416 | 282,233 | ||||
TOTAL | $ | 4,461,269 | $ | 4,601,693 | ||
McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
March 31, | December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Current Liabilities: | ||||||||
Notes payable and current maturities of long-term debt | $ | 4,161 | $ | 9,021 | ||||
Accounts payable | 464,875 | 551,435 | ||||||
Accrued employee benefits | 181,264 | 205,521 | ||||||
Accrued contract cost | 92,896 | 97,041 | ||||||
Advance billings on contracts | 828,610 | 951,895 | ||||||
Accrued warranty expense | 119,708 | 120,237 | ||||||
Income taxes payable | 40,603 | 55,709 | ||||||
Accrued liabilities – other | 249,883 | 217,486 | ||||||
Total Current Liabilities | 1,982,000 | 2,208,345 | ||||||
Long-Term Debt | 5,915 | 6,109 | ||||||
Accumulated Postretirement Benefit Obligation | 106,431 | 107,567 | ||||||
Self-Insurance | 91,637 | 88,312 | ||||||
Pension Liability | 665,518 | 682,624 | ||||||
Other Liabilities | 197,028 | 192,564 | ||||||
Contingencies and Commitments | ||||||||
Stockholders’ Equity: | ||||||||
Common stock, par value $1.00 per share | 234,544 | 234,174 | ||||||
Capital in excess of par value | 1,264,556 | 1,252,848 | ||||||
Retained earnings | 642,283 | 564,591 | ||||||
Treasury stock at cost, 5,854,959 and 5,840,314 shares at March 31, | ||||||||
2009 and December 31, 2008, respectively | (63,166 | ) | (63,026 | ) | ||||
Accumulated other comprehensive loss | (665,477 | ) | (672,415 | ) | ||||
Total Stockholders’ Equity | 1,412,740 | 1,316,172 | ||||||
TOTAL | $ | 4,461,269 | $ | 4,601,693 | ||||
McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 77,692 | $ | 123,190 | ||||
Non-cash items included in net income: | ||||||||
Depreciation and amortization | 36,022 | 31,311 | ||||||
Income of investees, less dividends | (1,142 | ) | (3,057 | ) | ||||
(Gains) losses on asset disposals and impairments – net | 1,241 | (11,443 | ) | |||||
Provision for deferred taxes | 38,407 | 16,063 | ||||||
Amortization of pension and postretirement costs | 21,970 | 10,137 | ||||||
Excess tax benefits from FAS 123(R) stock-based compensation | (134 | ) | (5,346 | ) | ||||
Other, net | 13,159 | 10,727 | ||||||
Changes in assets and liabilities, net of effects of acquisitions and divestitures: | ||||||||
Accounts receivable | 90,367 | (75,109 | ) | |||||
Net contracts in progress and advance billings on contracts | (208,063 | ) | (103,241 | ) | ||||
Accounts payable | (85,830 | ) | 7,754 | |||||
Income taxes | (16,717 | ) | 2,150 | |||||
Accrued and other current liabilities | 29,767 | 77,316 | ||||||
Pension liability, accumulated postretirement benefit obligation and accrued | ||||||||
employee benefits | (43,281 | ) | (107,488 | ) | ||||
Other, net | 19,629 | (25,891 | ) | |||||
NET CASH USED IN OPERATING ACTIVITIES | (26,913 | ) | (52,927 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Increase in restricted cash and cash equivalents | (8,490 | ) | (14,561 | ) | ||||
Purchases of property, plant and equipment | (61,388 | ) | (59,286 | ) | ||||
Net (increase) decrease in available-for-sale securities | 49,007 | (88,633 | ) | |||||
Proceeds from asset disposals | 279 | 11,921 | ||||||
Other, net | (1,055 | ) | (820 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (21,647 | ) | (151,379 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payment of long-term debt | (4,825 | ) | (4,385 | ) | ||||
Issuance of common stock | 160 | 2,845 | ||||||
Payment of debt issuance costs | (19 | ) | (164 | ) | ||||
Excess tax benefits from FAS 123(R) stock-based compensation | 134 | 5,346 | ||||||
Other | 943 | - | ||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (3,607 | ) | 3,642 | |||||
EFFECTS OF EXCHANGE RATE CHANGES ON CASH | (5,858 | ) | (130 | ) | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (58,025 | ) | (200,794 | ) | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 586,649 | 1,001,394 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 528,624 | $ | 800,600 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Interest (net of amount capitalized) | $ | 1,124 | $ | 3,139 | ||||
Income taxes (net of refunds) | $ | 19,786 | $ | 30,058 |
CONTACT:
McDermott Investor Relations & Corporate Communications
Jay Roueche, 281-870-5462
Vice President
jroueche@mcdermott.com
or
Robby Bellamy, 281-870-5165
Director
rbellamy@mcdermott.com