McDermott Announces Third Quarter 2011 Preview and Preliminary 2012 Outlook (USA)

McDermott International, Inc. previewed its 2011 third quarter by providing its current expectations for certain financial categories of the Company’s continuing operations, based upon management’s recent operating reviews.

McDermott also announced that it will report its actual third quarter 2011 financial results during the evening of November 8, 2011.

Discussion of Third Quarter 2011 Preview

McDermott expects revenues for the 2011 third quarter to exceed $870 million. The Middle East and Asia Pacific segments should represent over 90 percent of total revenues, and these segments continue to represent the majority of the Company’s backlog and bids outstanding.

The Company expects third quarter 2011 operating income to be in the range of $30-$38 million, including approximately $50 million of project losses. Two marine projects in the Atlantic segment, in particular, are expected to represent about 75 percent of the total project losses, which should be partially offset by about $7 million from a gain on sale of non-strategic assets. Although the root causes of many of the forecast project charges are still under review, McDermott believes some amount may merit submitting claims or change orders. However, the amount for potential submission is not yet quantifiable.

“Clearly, we are disappointed with the operating and net income expected for the 2011 third quarter. In our business, quarterly results can be significantly affected by recording in one period the changes in our expectations for the final profit or loss on multi-year projects at completion. As such, it should be made clear that this quarter’s expected results are not indicative of our outlook for the future,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “We have been, and will continue to be, actively addressing the items within our control, and we remain very encouraged by the overall marketplace. Although bookings were moderate during the quarter at approximately $420 million, bidding activity remained strong, and, as a result, bids outstanding grew to a very high level of $5 billion – an improvement of over 50 percent as compared to the 2011 second quarter.”

McDermott anticipates that, as a result of limited tax benefits associated with the majority of the forecast project charges, the Company’s reported tax rate for the 2011 third quarter will appear higher, relative to recent periods, at above 50 percent of pre-tax income.

In consideration of these items, the Company anticipates that its 2011 third quarter net income will be between $6-12 million, or in the range of 3 to 5 cents per diluted share.

Preliminary 2012 Outlook

McDermott has not traditionally provided, and does not expect to provide, specific earnings guidance, since its financial results can and do vary substantially quarter-to-quarter and year-to-year. However, in an effort to assist the financial community, the Company is sharing its preliminary outlook for 2012.

Based upon current contracts in backlog, combined with an evaluation of the bids outstanding, McDermott currently believes that attaining full-year 2012 revenues that are essentially equal to expected full-year 2011 revenues is achievable, but will be dependent upon, among other things, which bids are awarded to McDermott and the timing of the associated work.

While the Company’s long-term operating margin target range remains unchanged, McDermott currently expects operating margins for 2012 to be in a range of 7-10 percent. This results from the Company’s expectation for next year of substantially fewer marine barge workdays and a lower level of fabrication manhours in one segment, as compared to 2011. With lower expected asset utilization as compared to 2011, the Company currently expects to incur an increased level of costs in 2012 which will not be allocated to projects, resulting in lower consolidated operating income margins.

“We continue to believe in the strong industry fundamentals of the offshore oil & gas construction market,” continued Johnson. “Our expectations for meaningful long-term growth remain firm.”

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Source: McDermott , October 27 , 2011