MCDERMOTT INTERNATIONAL INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - MCDERMOTT INTERNATIONAL, INC. 8-K - MCDERMOTT INTERNATIONAL INC	a6630515.htm
EX-99.2 - EXHIBIT 99.2 - MCDERMOTT INTERNATIONAL INC	a6630515ex99_2.htm

Exhibit 99.1

McDermott Reports Net Income from Continuing Operations of $45.5 Million, $0.19 Per Fully Diluted Share for the 2010 Fourth Quarter

Strong Quarterly Bookings of almost $2 Billion; Backlog Grows to Over $5 Billion

High Level of Change Orders Benefits the Future but Reduced Fourth Quarter Revenue and Earnings

HOUSTON--(BUSINESS WIRE)--March 1, 2011--McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today reported net income from continuing operations of $45.5 million, or $0.19 per diluted share, for the 2010 fourth quarter. The results of the 2010 fourth quarter compare to net income from continuing operations of $73.4 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 is classified as held for sale. Weighted average common shares outstanding on a fully diluted basis were approximately 237.0 million and 234.5 million in the quarters ended December 31, 2010 and December 31, 2009, respectively.

McDermott’s revenues for the 2010 fourth quarter were $539.6 million, compared to $756.8 million in the corresponding period of 2009. The year-over-year decrease was primarily due to lower revenues of $126.6 million in the Asia Pacific segment and $96.2 million in the Middle East segment. The lower revenues in the Asia Pacific segment were due to significant customer-approved change orders that were recorded in the 2010 fourth quarter which, as a result of the added scope, reduced the percentage complete of two major projects and lowered the revenue and income recognized in the period. However, the overriding impact of the change orders is that the contract values have increased and the combined expected profit at completion improved for these projects during the quarter. Within the Middle East segment, the reduced revenues were primarily due to fewer barge days on our major construction vessels as a result of the substantial completion of the Qatar pipeline projects.

The Company’s operating income was $59.3 million in the 2010 fourth quarter, compared to $90.9 million in the 2009 fourth quarter. The year-over-year decrease was primarily due to lower revenues in the Asia Pacific segment and the associated profit impact of the percentage complete reduction discussed above, as well as less activity for the Company’s major construction vessels.

“I am very pleased with McDermott’s operating and financial results for 2010. We had exceptional bookings of $4.2 billion during the year, including almost $2 billion in the fourth quarter, which provides a strong ending backlog and a solid foundation for the future,” said Stephen M. Johnson, President and Chief Executive Officer of McDermott. “During the fourth quarter, our productivity was largely as expected, however the percentage complete on a couple of projects declined as a result of significant scope growth, resulting in lower revenues and profits being recognized for the period as compared to our prior expectations. Nonetheless, the additional work is a positive development, and the overall contract size, as well as the current embedded profit, has increased on these projects.”

The Company’s other expense for the fourth quarter of 2010 was $5.4 million, compared to $5.5 million in the fourth quarter of 2009, which consists primarily of interest income, interest expense and foreign currency translation expenses.

At December 31, 2010, the Company’s backlog was $5.0 billion, compared to $3.6 billion and $3.3 billion at September 30, 2010 and December 31, 2009, respectively.

For the year ended December 31, 2010, McDermott reported from continuing operations revenues of $2.4 billion, operating income of $314.9 million and net income of $236.6 million, or $1.00 per fully diluted share. Included in the full year results are approximately $46 million of impairment and facility closure costs.

Balance Sheet Summary

As of December 31, 2010, McDermott reported total assets of $2.6 billion. Included in this amount was approximately $886.5 million of cash and investments. Net working capital, calculated as current assets less current liabilities, was $420.6 million. Additionally, total equity was approximately $1.5 billion, or 58% of total assets, with total debt of $55.3 million.

Discontinued Operations

For the fourth quarter of 2010, McDermott recorded a net loss from discontinued operations of $0.6 million, compared to net income from discontinued operations of $25.3 million in the corresponding period of 2009. Included in discontinued operations are the results of B&W, which was spun-off to McDermott’s shareholders on July 30, 2010, the charter fleet business, which is held for sale, as well as transaction-related costs.

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 approximately 20 countries across the Atlantic, Middle East and Asia Pacific, the Company’s integrated resources include more than 15,000 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 the expected profit at completion of projects in our Asia Pacific segment. 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. 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, 2010. 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.

Conference Call to Discuss Fourth Quarter 2010 Earnings Release

Date: Wednesday, March 2, 2011, 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. CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						Year Ended
	December 31,						December 31,
	2010			2009			2010			2009
				(As adjusted)						(As adjusted)
	(Unaudited)
	(In thousands)

Revenues	$	539,622		$	756,798		$	2,403,743		$	3,281,790

Costs and Expenses:
Cost of operations		421,220			614,209			1,842,261			2,781,735
(Gain) loss on asset disposals and impairments – net		190			265			22,220			(914	)
Selling, general and administrative expenses		56,852			50,709			216,763			218,063
Total costs and expenses		478,262			665,183			2,081,244			2,998,884

Equity in Loss of Unconsolidated Affiliates		(2,087	)		(760	)		(7,594	)		(3,557	)

Operating Income		59,273			90,855			314,905			279,349

Other Income (Expense):
Interest income (expense) – net		443			(1,263	)		(1,089	)		6,021
Other income (expense) – net		(5,834	)		(4,248	)		(10,022	)		(15,257	)
Total Other Income (Expense)		(5,391	)		(5,511	)		(11,111	)		(9,236	)

Income from continuing operations before provision for income taxes and noncontrolling interest		53,882			85,344			303,794			270,113

Provision for Income Taxes		5,953			16,455			41,182			60,561

Income from continuing operations before noncontrolling interest		47,929			68,889			262,612			209,552
Income (loss) from discontinued operations, net of tax		(592	)		25,343			(34,900	)		180,898

Net Income		47,337			94,232			227,712			390,450

Less: Net income attributable to noncontrolling interests		(2,449	)		4,470			(26,046	)		(3,394	)

Net Income Attributable to McDermott International, Inc.	$	44,888		$	98,702		$	201,666		$	387,056


McDERMOTT INTERNATIONAL, INC. EARNINGS PER SHARE COMPUTATION

	Three Months Ended					Year Ended
	December 31,					December 31,
	2010			2009		2010			2009
	(Unaudited)
	(In thousands, except share and per share amounts)

Income from continuing operations less noncontrolling interest	$	45,480		$	73,359	$	236,566		$	206,158
Income (loss) from discontinued operations, net of tax		(592	)		25,343		(34,900	)		180,898
Net Income Attributable to McDermott, Inc.	$	44,888		$	98,702	$	201,666		$	387,056

Weighted average common shares (basic)		233,351,424			230,306,488		232,173,362			229,471,020
Effect of dilutive securities:
Stock options, restricted stock and restricted stock units		3,688,702			4,194,198		3,448,667			4,155,856
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards		237,040,126			234,500,686		235,622,029			233,626,876
Basic earnings per share:

Income from continuing operations less noncontrolling interest		0.20			0.32		1.02			0.90
Income (loss) from discontinued operations, net of tax		-			0.11		(0.15	)		0.79
Net Income		0.19			0.43		0.87			1.69

Diluted earnings per share:

Income from continuing operations less noncontrolling interest		0.19			0.32		1.00			0.88
Income (loss) from discontinued operations, net of tax		-			0.11		(0.15	)		0.78
Net Income		0.19			0.43		0.85			1.66


SUPPLEMENTARY DATA ⁽¹⁾

	Three Months Ended				Year Ended
	December 31,				December 31,
	2010		2009		2010		2009
		(Unaudited) (In thousands)
Pension and post retirement expense	$	5,532	$	14,975	$	21,814	$	27,352
Depreciation & amortization expense	$	19,035	$	20,153	$	76,452		79,867
Capital expenditures	$	59,321	$	47,219	$	186,862	$	186,518
Backlog	$	5,038,988	$	3,260,834	$	5,038,988	$	3,260,834

(1) Above metrics for all periods represents McDermott’s continuing operations only and thus excludes B&W and the charter fleet business.


McDERMOTT INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS ASSETS

	December 31,
	2010		2009
	(In thousands)

Current Assets:
Cash and cash equivalents	$	403,463	$	899,270
Restricted cash and cash equivalents		197,861		69,920
Investments		209,463		12
Accounts receivable – trade, net		323,497		642,995
Accounts and notes receivable – unconsolidated affiliates		2,960		5,806
Accounts receivable – other		25,487		68,035
Contracts in progress		65,853		400,831
Inventories		1,675		101,494
Deferred income taxes		10,323		100,828
Assets held for sale		10,161		-
Other current assets		34,895		68,730

Total Current Assets		1,285,638		2,357,921

Property, Plant and Equipment		1,720,040		2,608,740
Less: accumulated depreciation		804,471		1,271,135

Net Property, Plant and Equipment		915,569		1,337,605

Assets Held for Sale		77,150		-

Investments		75,742		228,706

Goodwill		41,202		306,497

Deferred Income Taxes		-		275,567

Investments in Unconsolidated Affiliates		45,016		86,932

Other Assets		158,371		255,882

TOTAL	$	2,598,688	$	4,849,110


McDERMOTT INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND EQUITY

	December 31,
	2010			2009
	(In thousands, except share amounts)

Current Liabilities:
Notes payable and current maturities of long-term debt	$	8,547		$	16,270
Accounts payable		252,974			471,858
Accrued employee benefits		80,585			217,178
Accrued pension liability – current portion		8,797			173,271
Accrued liabilities – other		107,511			155,773
Accrued contract cost		89,888			103,041
Advance billings on contracts		250,053			689,334
Deferred Income Tax		12,849			4,735
Income taxes		32,851			59,294
Accrued warranty		50			118,278
Liabilities associated with assets held for sale		20,902			-

Total Current Liabilities		865,007			2,009,032

Long-Term Debt		46,748			56,714

Accumulated Postretirement Benefit Obligation		5,258			105,605

Self-Insurance		35,655			87,222

Pension Liability		52,831			610,166

Other Liabilities		80,922			147,271

Commitments and Contingencies

Stockholders’ Equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 240,791,473 and 236,919,404 shares at December 31, 2010 and December 31, 2009, respectively		240,791			236,919
Capital in excess of par value		1,357,316			1,300,998
Retained earnings		100,373			951,647
Treasury stock at cost, 6,906,262 and 6,168,705 shares at December 31, 2010 and December 31, 2009, respectively		(85,735	)		(69,370	)
Accumulated other comprehensive loss		(163,717	)		(612,997	)
Stockholders’ Equity – McDermott International, Inc.		1,449,028			1,807,197
Noncontrolling interest		63,239			25,903
Total Equity		1,512,267			1,833,100

TOTAL	$	2,598,688		$	4,849,110


McDERMOTT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	December 31,
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	227,712		$	390,450
(Income) loss from discontinued operations, net of tax		34,900			(180,898	)
Income from continuing operations		262,612			209,552
Non-cash items included in net income:
Depreciation and amortization		76,452			79,867
Loss of investees		7,594			3,557
(Gains) losses on asset disposals and impairments – net		22,220			(914	)
Provision for deferred taxes		1,830			5,252
Amortization of pension and postretirement costs		21,814			27,352
Tax expense (benefits) from stock-based compensation		(1,393	)		912
Other		9,344			44,226
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable		(6,457	)		25,871
Net contracts in progress and advance billings on contracts		182,472			(295,110	)
Accounts payable		(38,536	)		(8,054	)
Income taxes		84,269			5,882
Accrued and other current liabilities		40,110			(57,311	)
Pension liability, and accrued postretirement and employee benefits		(106,338	)		41,101
Other		(171,666	)		103,450
Net cash provided by (used in) operating activities – continuing operations		384,327			185,633
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in restricted cash and cash equivalents		(142,853	)		(10,718	)
Purchases of property, plant and equipment		(186,862	)		(186,518	)
Net (increase) decrease of short and long-term investments		(127,526	)		177,137
Proceeds from asset disposals		4,824			2,761
Investments in unconsolidated affiliate		(32,550	)		(13,484	)
Acquisition of businesses, net of cash acquired		(1,954	)		(28,293	)
Other		-			(134	)
Net cash used in investing activities – continuing operations		(486,921	)		(59,249	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt		(8,540	)		(4,106	)
Debt issuance costs		(17,881	)		(105	)
Issuance of common stock		1,040			1,042
Tax (expense) benefits from stock-based compensation		1,393			(912	)
Cash contribution from The Babcock & Wilcox Company		100,000			-
Other		80			(127	)
Net cash provided by (used in) financing activities – continuing operations		76,092			(4,208	)
Effects of exchange rate changes on cash		498			1,096
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(26,004	)		123,372
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		429,467			306,195
CASH AND CASH EQUIVALENTS AT END OF PERIOD – CONTINUING OPERATIONS	$	403,463		$	429,467


CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash provided by (used in) operating activities	$	(44,153	)	$	232,441
Net cash used in investing activities		(65,084	)		(51,598	)
Net cash provided by (used in) financing activities		(109,600	)		(1,728	)
Effects of exchange rate changes on cash		(578	)		10,234
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(219,415	)		189,349
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		469,803			280,454
Transfer of Cash Attributable to B&W		250,388			-
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	-		$	469,803

CONTACT:
McDermott International, Inc.
Investors, Analysts and Financial Media:
Jay Roueche, 281-870-5462
Vice President
jroueche@mcdermott.com
or
Robby Bellamy, 281-870-5165
Director
rbellamy@mcdermott.com
or
Trade and General Media:
Louise Denly, 281-870-5025
Director, Corporate Communications
ldenly@mcdermott.com

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