McDermott International, Inc. today reported a net loss of $64.1 million, or $0.27 per fully diluted share, for the quarter ended September 30, 2013. These results compared to income of $50.6 million, or $0.21 per fully diluted share, in the corresponding period of 2012. Weighted average common shares outstanding on a fully diluted basis were approximately 236.3 million and 237.9 million in the quarters ended September 30, 2013 and 2012, respectively.
McDermott’s revenues were $686.9 million for the 2013 third quarter compared to $1,028.7 million in the corresponding period of 2012. The year-over-year decrease was primarily due to the completion of several significant projects that were active in the 2012 third quarter. The Company’s operating loss in the 2013 third quarter was $52.7 million compared to operating income of $82.5 million in the 2012 third quarter.
“I am pleased to see our Middle East segment return to profitability this quarter as we demonstrated improved consistency in performance,” said Stephen M. Johnson, Chairman of the Board, President and Chief Executive Officer of McDermott. “Despite our recent challenges, I am optimistic about the future of the Company and the foundation that we have built to address the subsea market.”
In the third quarter, all projects in the Middle East segment contributed to gross profit and were in a profitable position. In October, the Company reached a significant milestone on a previously discussed project in Saudi Arabia and demobilized the major workboats used for the hookup campaign, with the remaining commissioning scheduled for completion in the second quarter of 2014.
On a deepwater Malaysian project in the Asia Pacific segment, the Company experienced vessel mechanical downtime that contributed to $66.0 million of additional project costs. The Company reached a commercial agreement with its customer totaling $33.0 million, partially offsetting the charge, which mitigates weather risk and late delivery penalties. As a result, the Company intends to maintain continuous operations through the monsoon season to install production-critical aspects of the project in 2013. The first of the four installation campaigns was completed in October and project completion is expected in the first half of 2014.
In the Atlantic segment, a loss project at the Company’s Morgan City yard performed ahead of prior quarter estimates and is expected to be completed in the fourth quarter. A fabrication project in Mexico experienced estimated cost increases related to scope growth and schedule extensions during the quarter, resulting in a project loss of $9.0 million.
The third quarter results include approximately $4.0 million of restructuring costs, for a cumulative total of $19.5 million. The Company expects to incur the majority of the remaining $35.5 to $45.5 million in planned restructuring and management charges in the next two quarters.
Contract Backlog Summary
At September 30, 2013, the Company’s backlog was approximately $4.6 billion, compared to $5.1 billion at June 30, 2013. Of the September 30, 2013 backlog, approximately $564.6 million was derived from four projects that are currently in a loss position. In addition, the backlog includes approximately $151.3 million for one project under deferred profit recognition.
At the end of the third quarter, the Company had $9.0 billion in bids outstanding and is targeting approximately $8.9 billion in projects that the Company expects to bid within the next five quarters.
Balance Sheet Summary
As of September 30, 2013, McDermott reported total assets of approximately $3.2 billion. Included in this amount was $318.1 million of cash and cash equivalents, restricted cash and investments. Net working capital, calculated as current assets less current liabilities, was $226.6 million. In addition, total equity was $1.7 billion, or approximately 55% of total assets, with total debt of $94.1 million.
McDermott has scheduled a conference call and webcast related to its third quarter 2013 results on Tuesday, November 5, 2013, at 9:00 a.m. U.S. Central Standard Time. Interested parties may listen over the Internet and download supplemental slides through a link posted in the Investor Relations section of the Company’s website. The replay will also be available on the Company’s website following the end of the live call.
Press Release, November 05, 2013