USA: McDermott Reports Increase in Fourth Quarter Financial Results

McDermott International, Inc. reported net income of $40.5 million, or $0.17 per diluted share, for the 2012 fourth quarter. The results of the 2012 fourth quarter compare to income from continuing operations of $9.3 million, or $0.04 per diluted share, in the corresponding period of 2011.

Weighted average common shares outstanding on a fully diluted basis were approximately 237.8 million and 236.9 million in the quarters ended December 31, 2012 and 2011, respectively.

McDermott’s revenues were $996.0 million for the 2012 fourth quarter, an increase of 22 percent compared to $816.2 million in the corresponding period of 2011. The year-over-year increase was primarily due to a 36 percent increase in revenues in the Asia Pacific segment as a result of increased marine activity on a subsea project, coupled with increased revenues in the Middle East and Atlantic segments.

The Company’s operating income in the 2012 fourth quarter was $77.3 million, an increase of 146 percent compared to $31.4 million in the 2011 fourth quarter. Results in the fourth quarter 2011 included approximately $66 million in pretax and after-tax charges primarily related to loss projects in Mexico and Brazil. The fourth quarter 2012 results were negatively affected by an aggregate of approximately $32 million of project losses and increased costs on certain projects, including approximately $23 million in the Asia Pacific segment as a result of incremental costs associated with anticipated productivity and project delays on one subsea project, which is expected to complete in late 2013. The Atlantic segment also was impacted by increased cost estimates relating to two fabrication projects totaling approximately $9 million, due to lower than expected productivity, which are expected to complete in mid-2013.

The Company’s other income for the fourth quarter of 2012 was $8.7 million, an improvement of $4.8 million compared to other income of $3.9 million in the fourth quarter of 2011, primarily due to higher foreign currency gains.

At December 31, 2012, the Company’s backlog was $5.1 billion, compared to $3.9 billion and $5.3 billion at December 31, 2011 and September 30, 2012, respectively. Of the December 31, 2012 backlog, approximately $545 million is from six projects currently in a loss position, primarily relating to the recently commenced project in the Asia Pacific segment and a five-year charter in Brazil, where future revenues are expected to equal costs when recognized. In addition, the backlog includes approximately $162 million for one project under deferred profit recognition.

“There were a number of positives during the quarter as fourth quarter bookings, combined with awards received in the first quarter 2013, maintained a strong backlog and improved revenue visibility for the coming year,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “We expect to recognize $2.6 billion in revenue in 2013 from our existing backlog and recent awards. With this revenue, combined with additional short-term work that we typically accrue throughout the year, we expect to see total revenues in the range of $3 billion in 2013. With increased bidding activity and the company’s continued balance sheet strength, we believe McDermott is well positioned to meet the growing customer demand in each of our market segments.”

Balance Sheet Summary

As of December 31, 2012, McDermott reported total assets of approximately $3.3 billion. Included in this amount was $704.3 million of cash and cash equivalents, restricted cash and investments. Net working capital, calculated as current assets less current liabilities, was $676.8 million. Additionally, total equity was $2.0 billion, or approximately 61% of total assets, with total debt of $102.7 million.

Full-year 2012 Overview

For the year ended December 31, 2012, McDermott reported revenues of $3.6 billion, with operating income of $319.3 million and net income of $206.7 million, or $0.87 per fully diluted share. Operating income for 2012 in the Asia Pacific segment benefited significantly from lower expected costs to complete the marine campaign on an engineering, procurement, construction and installation project, which is expected to complete in early 2013. These gains were partially offset by project losses across each segment totaling approximately $52.0 million.

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Press Release , March 01 , 2013