(Source: Business Wire)
McDermott International, Inc. (NYSE:MDR) ("McDermott" or the "Company") today reported net income of $92.6 million, or $0.40 per diluted share, for the 2009 second quarter, compared to its record quarter of $177.5 million, or $0.77 per diluted share, in the corresponding period of 2008. Weighted average common shares outstanding on a fully diluted basis were approximately 233.1 million and 230.4 million in the quarters ended June 30, 2009 and June 30, 2008, respectively.
McDermott's revenues in the second quarter of 2009 were $1,565.0 million, compared to $1,792.6 million in the corresponding period in 2008. The decrease in consolidated revenues was primarily due to a lower level of activity in the Power Generation Systems segment, partially offset by increased revenues in the Government Operations segment.
The Company's operating income in the 2009 second quarter was $147.7 million, compared to $231.1 million in the 2008 second quarter. Notwithstanding a 35.2 percent year-over-year increase in Government Operations' segment income, McDermott's 2009 second quarter operating income declined compared to a year ago due to a predominantly non-cash increase of $21.9 million in consolidated pension plan expense and reduced levels of segment income from both Power Generation Systems and Offshore Oil & Gas Construction.
"McDermott delivered solid results in the 2009 second quarter and produced the highest level of quarterly income since the second quarter of 2008," said John A. Fees, Chief Executive Officer of McDermott. "While the markets we serve lack conviction due to worldwide economic conditions, the Company's bidding activity remains good, particularly in oil and gas, our liquidity improved sequentially to over $1 billion, and McDermott's backlog remains strong."
At June 30, 2009, McDermott's consolidated backlog was $9.5 billion, compared to $9.8 billion and $10.0 billion at June 30, 2008 and March 31, 2009, respectively.
RESULTS OF OPERATIONS
2009 Second Quarter Compared to 2008 Second Quarter
Offshore Oil & Gas Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were $832.7 million in the 2009 second quarter, compared to $872.3 million for the same period a year ago. Increased revenues in the Middle East region were more than offset by reduced levels in other regions. Approximately 40 percent of the total 2009 second quarter revenues were derived from the Middle East projects in Qatar.
Segment income for the 2009 second quarter was $67.8 million, compared to $98.0 million in the 2008 second quarter. Major areas contributing to second quarter 2009 segment income include the Middle East, Asia Pacific and Americas regions.
At June 30, 2009, segment backlog was $4.7 billion, compared to backlog of $5.3 billion and $5.0 billion at June 30, 2008 and March 31, 2009, respectively.
Power Generation Systems Segment
Revenues in the Power Generation Systems segment for the second quarter of 2009 were $471.6 million, compared to $698.1 million in the second quarter of 2008. The year-over-year decrease was predominantly due to reduced activity on customers' major capital projects including new power plant construction and retrofits of existing power plants.
Segment income for the 2009 second quarter was $43.9 million, compared to $106.0 million in the 2008 second quarter. Major activities contributing to second quarter 2009 segment income include the supply and construction of new boilers and environmental equipment, commercial nuclear manufacturing, inspection and maintenance, retrofit projects of existing facilities, and related parts and services.
At June 30, 2009, segment backlog was $2.2 billion, compared to backlog of $3.0 billion and $2.2 billion at June 30, 2008 and March 31, 2009, respectively.
Government Operations Segment
Revenues in the Government Operations segment were $261.4 million in the 2009 second quarter, compared to $225.8 million for the same period a year ago. The increase in revenues, as compared to the same period a year ago, was primarily due to activities in the manufacture of nuclear components and nuclear fuels for certain U.S. Government programs, including the revenues from Nuclear Fuel Services which was acquired in December 2008.
Segment income for the 2009 second quarter was $57.5 million, compared to $42.5 million in the 2008 second quarter. Major items contributing to second quarter 2009 segment income include contracts for the downblending of high-enriched uranium, 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 June 30, 2009, segment backlog was $2.6 billion, compared to backlog of $1.5 billion and $2.7 billion at June 30, 2008 and March 31, 2009, respectively.
Corporate & Other Income and Expense
Unallocated corporate expenses were $21.4 million in the 2009 second quarter, compared to $15.4 million in the 2008 second quarter. The year-over-year increase is predominantly due to increased pension expense.
The Company's other expense for the second quarter of 2009 was $5.2 million, compared to other income of $10.0 million in the second quarter of 2008. The $15.2 million decline was predominantly due to increased non-cash, foreign currency translation charges, as well as reduced net interest income.
Upcoming Investor Events
Members of the Company's management will be in Chicago later this week to participate at the Jefferies & Co. Fifth Annual Industrial CEO Summit on Wednesday, August 12, 2009 and the UBS Engineering & Construction One-on-One Conference on Thursday, August 13, 2009. The presentation to be used during these meetings will be available for a limited time over the internet at www.mcdermott.com in the investor relations section on the morning of August 12, 2009.
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. 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 Second Quarter 2009 Earnings Release
Date: Tuesday, August 11, 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 Six Months Ended June 30, June 30, 2009 2008 2009 2008 (Unaudited) (In thousands, except share and per share amounts) Revenues $ 1,564,999 $ 1,792,646 $ 3,058,262 $ 3,243,072 Costs and Expenses: Cost of operations 1,275,058 1,432,736 2,503,680 2,621,432 Gains on asset disposals -- net (1,897 ) (17 ) (656 ) (11,460 ) Selling, general and administrative expenses 153,195 138,055 294,589 264,786 Total Costs and Expenses 1,426,356 1,570,774 2,797,613 2,874,758 Equity in Income of Investees 9,097 9,252 18,297 19,922 Operating Income 147,740 231,124 278,946 388,236 Other Income (Expense): Interest income (expense) - net 4,987 8,186 6,844 18,641 Other income (expense) -- net (10,201 ) 1,843 (20,971 ) (2,097 ) Total Other Income (5,214 ) 10,029 (14,127 ) 16,544 Income before Provision for Income Taxes 142,526 241,153 264,819 404,780 Provision for Income Taxes 44,645 63,602 88,523 103,982 Net Income 97,881 177,551 176,296 300,798 Less: Net Income Attributable to Noncontrolling Interest (5,326 ) (12 ) (6,049 ) (69 ) Net Income Attributable to McDermott International, Inc.
