McDermott International, Inc. reported net income of $20.6 million, or $0.09 per fully diluted share, for the quarter ended March 31, 2013.
The results for the first quarter 2013 dropped compared to income from continuing operations of $61.9 million, or $0.25 per fully diluted share, in the corresponding period of 2012. Weighted average common shares outstanding on a fully diluted basis were approximately 239.2 million and 237.3 million in the quarters ended March 31, 2013 and 2012, respectively.
McDermott’s revenues were $807.5 million for the first quarter 2013, an increase of 11 percent compared to $727.7 million in the corresponding period of 2012. The year-over-year increase was primarily due to an approximately $48.6 million increase in revenues in the Atlantic segment as a result of increased fabrication activity, coupled with increased revenues in the Asia Pacific and Middle East segments.
The Company’s operating income in the first quarter 2013 was $53.0 million, a decrease of $27.2 million compared to $80.2 million in the first quarter 2012. The first quarter 2013 results were affected by operating losses in the Middle East and Atlantic segments, partially offset by stronger operating income in the Asia Pacific segment. In the first quarter 2013, operating losses in the Middle East segment totaled approximately $18.5 million compared to operating income of $34.7 million for the corresponding prior year period, a decline primarily attributable to execution plan changes on a project at an advanced stage of completion, which resulted in cost increases associated with hook-up activities and the use of third-party vessels. In addition, the decline in operating income was due to lower asset utilization and project activity compared to the prior year. The operating loss for the Atlantic segment changed by approximately $4.4 million to a loss of approximately $16.4 million due to increased support costs associated with lower marine asset utilization.
Operating income in the Asia Pacific segment increased approximately $30.5 million to $88.0 million in the first quarter 2013, primarily due to the successful execution and change orders on a key project as well as cost savings on other projects offset by approximately $4.1 million in increased costs estimates for one of the marine subsea projects. In addition, an approximately $12.3 million or $0.05 per diluted share gain on the sale of the DB 26 was recognized during the quarter for the segment.
The Company’s other expense for the first quarter 2013 was $1.4 million, a reduction of $11.9 million compared to other income of $10.5 million in the first quarter 2012, primarily due to net losses on foreign currency related items.
During the quarter, the Company booked approximately $1.0 billion in new orders including two projects in the Arabian Gulf. In addition, at March 31, 2013 the Company had approximately $5.6 billion in bids and change orders outstanding. The Company has also identified $10.1 billion in target project opportunities that the Company expects to bid in the next five quarters.
At March 31, 2013, the Company’s backlog was $5.3 billion, compared to $5.8 billion and $5.1 billion at March 31, 2012 and December 31, 2012, respectively. Of the March 31, 2013 backlog, approximately $428.9 million was derived from five projects currently in a loss position, of which 93 percent relate to a project in the Asia Pacific segment and the five-year charter in Brazil. In addition, the backlog includes approximately $165.6 million for one project under deferred profit recognition.
“Although the final phases of an otherwise well-executed project in the Middle East challenged us this quarter, I am pleased with our successful completion of a key project in the Asia Pacific segment,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “With the sale of the DB 26 and our expansion of our subsea engineering talent through the acquisition of DeepSea group, McDermott is making steady progress on its strategic transformation. We remain focused on winning work for which we can provide a cost-effective solution and execute successfully for our customers and for our shareholders.”
Press Release, May 9, 2013