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Earnings Analysis: 
McDermott International Second Quarter Earnings Call
Author: 123jump.com Staff
123jump.com
Last Update: 9:08 AM EDT August 13 2007


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The engineering and construction company reported a 35% jump in revenues to $1.42 billion following strong performance from the Offshore Oil and Gas Construction and Power Generation segments. Despite strong credit ratings, the firm eliminated all debt leading to a healthy cash position, which will be used to pursue organic growth through acquisitions.

 
Bruce W. Wilkinson: About $115 million has been targeted to fund pension plans. We expect to expend about $116 million CapEx primarily in J. Ray, $263 at Secunda, $75 million Marine Mechanical. We haven''t ruled out stock buybacks, but there''s been no formal activity by the board to authorize it at this time, because we still believe that we have a lot of growth and there''s reason to continue to make some of these acquisitions that facilitate our main businesses beyond the present footprint.

Brad Handler (Wachovia Capital Markets): In discussing the long-term agreement, there was talk about building a yard in Saudi. Is that still part of the mix in some way?

Bruce W. Wilkinson: Yes and as originally conceived it involved a long-term agreement that contemplated both out-of-kingdom services and in-kingdom services i.e. investing in building or setting up a fabrication yard to do offshore work. Saudi Aramco decided to split it and we won the out-of-kingdom part and there will be another award that will go to the in-kingdom part.

Brent Thielman (DA Davidson): On the J. Ray side, in the first quarter, you had $40 million in closeouts, change orders and settlements, and $20 million in Q2. Is there any guidance, or should we assume the same, in the second half of the year out of that business?

Michael S. Taff: We can not put a definitive number on that. With J. Ray''s backlog now over $4.5 billion, you''ll continue to see on a quarterly basis contract closeouts and change orders, and if are effective, recouping some of the contingencies.

Brent Thielman: Do you have any update on the time line of the UK opportunities?

Bruce W. Wilkinson: Not beyond the prepared comments. On AWE, my understanding is they''re trying to get that done before year end, and Sellafield is the first half of 2008, but both are substantial.
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