Exhibit 99.1
McDermott Reports First Quarter 2005
Results; Net Income of $22.4 Million, $0.32 Per Diluted Share,
Includes B&W Settlement Revaluation Income of $0.6 Million after Tax
NEW ORLEANS--(BUSINESS WIRE)--May 9, 2005--McDermott
International, Inc. (NYSE:MDR) ("McDermott" or the "Company") today
reported net income of $22.4 million, or $0.32 per diluted share, for
the 2005 first quarter, compared to a net loss of $10.9 million, or
$0.17 per diluted share, for the corresponding period in 2004.
Weighted average common shares outstanding on a fully diluted basis
were approximately 70.8 million and 65.3 million for March 31, 2005
and March 31, 2004, respectively.
Revenues in the first quarter of 2005 were $439.1 million,
compared to $499.3 million in the corresponding period in 2004.
Operating income was $40.7 million in the 2005 first quarter, compared
to an operating loss of $2.1 million in the 2004 first quarter.
Included in the first quarter 2005 operating income was approximately
$2.5 million of corporate qualified pension expense, compared to $15.3
million in the first quarter 2004. The year-over-year reduction in
corporate qualified pension expense reflects the previously announced
spin-off of The Babcock & Wilcox Company's ("B&W") pension plan and
related expense which was completed on January 31, 2005. In addition,
beginning January 1, 2005, McDermott now allocates to its Government
Operations segment the related pension expense of that segment.
"The Company has started the year off right by delivering strong
first quarter results," said Bruce W. Wilkinson, Chairman of the Board
and Chief Executive Officer of McDermott. "McDermott has now produced
net income for four consecutive quarters and, as a result of this
performance, our liquidity continued to strengthen. Both of our
consolidated operating segments continued to deliver solid results in
the quarter, but as McDermott, and particularly J. Ray, continues to
deliver finished projects to our customers, it is becoming more
essential that we obtain new awards to replace the recently completed
work. I am optimistic that as the year progresses, we will start to
see J. Ray's backlog build again."
RESULTS OF OPERATIONS
2005 First Quarter Compared to 2004 First Quarter
Marine Construction Services Segment ("J. Ray")
Revenues in the Marine Construction Services segment were $286.6
million in the 2005 first quarter, compared to $365.8 million a year
ago. The year-over-year reduction in revenues resulted primarily from
the 2004 completion of several large EPIC projects and decreased
fabrication activity on projects in Louisiana, partially offset by a
field development project in Australia and a number of marine
installation projects in the Middle East and Asia Pacific regions.
Segment income for the 2005 first quarter was $29.1 million,
compared to a segment loss of $3.6 million in the 2004 first quarter.
Major items contributing operating income to the 2005 first quarter
were change orders, contract close-outs and settlements on projects in
the Caspian, Asia Pacific and Middle East regions, increased
international marine operations, increased activity in our Mexican
ship repair facility and gains on sales of assets.
At March 31, 2005, J. Ray's backlog was $1.1 billion, compared to
backlog of $1.25 billion and $1.3 billion at December 31, 2004 and
March 31, 2004, respectively.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment increased $19.1
million, to $152.6 million in the 2005 first quarter, compared to
$133.5 million a year ago. The increase was primarily due to higher
volumes in the manufacture of nuclear components for certain U.S.
government programs, and increased revenues from commercial nuclear
environmental services and other commercial work, including increased
uranium downblending.
Segment income increased $4.3 million, to $24.0 million, compared
to the 2004 first quarter, primarily due to higher volume and margins
from the manufacture of nuclear components for certain U.S. government
programs, timing on the recognition of equity in income from investees
and increased commercial activity. These improvements were partially
offset by the previously announced corporate allocation of $5.3
million related to qualified pension expense, which in prior years
resided in the corporate segment.
At March 31, 2005, BWXT's backlog was $1.7 billion, essentially
equivalent to the backlog at both December 31, 2004 and March 31,
2004.
Corporate
Unallocated corporate expenses were $12.6 million in the 2005
first quarter, a decrease of $5.7 million compared to the 2004 first
quarter. The decrease was primarily due to a reduction in qualified
corporate pension expense during the first quarter of 2005, partially
offset by increased expenses associated with McDermott's captive
insurance program.
Other Income and Expense
The Company's other expense for the first quarter of 2005 was $3.5
million, compared to other expense of $3.9 million in the first
quarter of 2004, which included net interest expense of $6.8 million
and $7.5 million in the respective quarters.
During the 2005 first quarter, revaluation of certain components
of the estimated settlement cost related to the B&W Chapter 11
proceedings generated a reduction in the estimated cost of the
settlement to $139.3 million, resulting in the recognition of other
pretax income of $0.5 million ($0.6 million after tax). The decrease
in the first quarter 2005 estimated settlement cost is due primarily
to a reduction in the fair market value of the promissory notes to be
issued as a result of increased prevailing interest rates, partially
offset by an increase in the closing price of McDermott's common stock
from $18.36 per share at December 31, 2004 to $18.93 per share at
March 31, 2005. In the first quarter of 2004, the revaluation of the
estimated B&W settlement cost resulted in the recognition of other
pretax income of $2.4 million ($2.7 million after tax). As discussed
in the Company's annual report on Form 10-K for the year ended
December 31, 2004, the Company is required to revalue certain
components of the estimated settlement cost quarterly and at the time
the securities are issued, assuming the settlement is finalized.
THE BABCOCK & WILCOX COMPANY
The Company wrote off its remaining investment in B&W of $224.7
million during the second quarter of 2002 and has not consolidated B&W
with McDermott's financial results since B&W's Chapter 11 bankruptcy
filing in February 2000. B&W's revenues were $344.7 million in the
first quarter of 2005, a decrease of $32.4 million compared to the
first quarter of 2004. B&W's net income for the 2005 first quarter was
$12.7 million, compared to $24.2 million in the corresponding period
in 2004.
LIQUIDITY
At March 31, 2005, McDermott's consolidated unrestricted cash
balance was $324 million, with J. Ray representing approximately $201
million of this total. In addition, McDermott's consolidated
restricted cash balance was $168 million at March 31, 2005, with J.
Ray representing $139 million of the consolidated amount. As of March
31, 2005, approximately $44 million of J. Ray's restricted cash was
available for use on capital expenditures, in accordance with the
indenture relating to J. Ray's senior secured notes issued in December
2003.
OTHER INFORMATION
About the Company
McDermott International, Inc. is a leading worldwide energy
services company. The Company's subsidiaries provide engineering,
fabrication, installation, procurement, research, manufacturing,
environmental systems, project management and facility management
services to a variety of customers in the energy and power industries,
including the U.S. Department of Energy.
In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, McDermott cautions that
statements in this press release, which are forward-looking and
provide other than historical information, involve risks and
uncertainties that may impact the Company's actual results of
operations. These forward-looking statements include statements
relating to the proposed settlement of the B&W Chapter 11 proceedings,
the Company's ability to continue delivering finished projects and
optimism regarding the building of J. Ray's backlog. Although we
believe that the expectations reflected in those forward-looking
statements are reasonable, we can give no assurance that those
expectations will prove to have been correct. Those statements are
made by using various underlying assumptions and are subject to
numerous uncertainties and risks, including, but not limited to, risks
that the B&W Chapter 11 settlement may not be finalized on the terms
we have described, negative developments in the industries in which
McDermott operates, credit risks and J. Ray's ability to procure
favorable contracts. If one or more of these risks materialize, or if
underlying assumptions prove incorrect, actual results may vary
materially from those expected. For a more complete discussion of
these and other risk factors, please see McDermott's annual report for
the year ended December 31, 2004 and its 2005 quarterly reports filed
with the Securities and Exchange Commission.
Conference Call to Discuss 2005 First Quarter Earnings Release
Date: Tuesday, May 10, 2005, at 10:00 a.m. EST (9:00 a.m. CST)
Live Webcast: Investor Relations section of website at
www.mcdermott.com
Replay: Available for two weeks in the investor relations section
of www.mcdermott.com
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended
March 31,
2005 2004
---- ----
(Unaudited)
(In thousands,
except per share amounts)
Revenues $439,115 $499,334
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Costs and Expenses:
Cost of operations 363,032 465,568
Selling, general and administrative
expenses 45,278 43,592
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408,310 509,160
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Equity in Income of Investees 9,871 7,743
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Operating Income (Loss) 40,676 (2,083)
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Other Income (Expense):
Interest income 2,914 948
Interest expense (9,696) (8,471)
Reduction in estimated cost of The
Babcock & Wilcox Company bankruptcy
settlement 468 2,411
Other-net 2,770 1,203
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Total Other Income (Expense) (3,544) (3,909)
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Income (Loss) before Provision for
Income Taxes 37,132 (5,992)
Provision for Income Taxes 14,696 4,875
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Net Income (Loss) $22,436 $(10,867)
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Earnings (Loss) per Common Share:
Basic $0.34 $(0.17)
Diluted $0.32 $(0.17)
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Weighted Average Shares
Basic 66,774,239 65,272,103
Diluted 70,814,225 65,272,103
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McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended
March 31,
2005 2004
---- ----
(Unaudited; in thousands)
REVENUES
Marine Construction Services $286,603 $365,808
Government Operations 152,593 133,529
Adjustments and Eliminations (81) (3)
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TOTAL $439,115 $499,334
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SEGMENT INCOME (LOSS)
Marine Construction Services $29,081 $(3,601)
Government Operations 24,041 19,709
Power Generation Systems 123 111
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53,245 16,219
Corporate (12,569) (18,302)
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TOTAL $40,676 $(2,083)
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EQUITY IN INCOME FROM INVESTEES (1)
Marine Construction Services $(94) $1,163
Government Operations 9,623 6,247
Power Generation Systems 342 333
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TOTAL $9,871 $7,743
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DEPRECIATION & AMORTIZATION (1)
Marine Construction Services $6,715 $5,210
Government Operations 3,148 3,091
Corporate 656 625
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TOTAL $10,519 $8,926
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CAPITAL EXPENDITURES
Marine Construction Services $12,330 $1,749
Government Operations 5,353 1,906
Power Generation Systems - -
Corporate 21 -
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TOTAL $17,704 $3,655
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BACKLOG
Marine Construction Services $1,112,316 $1,266,637
Government Operations 1,745,182 1,713,984
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TOTAL $2,857,498 $2,980,621
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(1) Included in Segment Operating Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2005 2004
---- ----
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $324,329 $259,319
Restricted cash and cash equivalents 59,815 111,455
Accounts receivable - trade, net 224,146 226,731
Accounts receivable from The Babcock &
Wilcox Company 10,395 6,121
Accounts and notes receivable -
unconsolidated affiliates 37,939 29,330
Accounts receivable - other 40,740 71,522
Contracts in progress 81,822 72,355
Deferred income taxes 10,480 9,813
Other current assets 19,582 13,277
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Total Current Assets 809,248 799,923
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Restricted Cash and Cash Equivalents 108,498 66,498
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Property, Plant and Equipment 1,098,080 1,087,314
Less accumulated depreciation 786,425 780,225
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Net Property, Plant and Equipment 311,655 307,089
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Investments 44,614 41,884
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Goodwill 12,926 12,926
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Other Assets 162,903 158,612
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TOTAL $1,449,844 $1,386,932
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LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
2005 2004
---- ----
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current maturities
of long-term debt $14,250 $12,009
Accounts payable 129,256 114,235
Accounts payable to The Babcock &
Wilcox Company 59,747 55,180
Accrued employee benefits 52,877 79,362
Accrued liabilities - other 156,622 163,649
Accrued contract cost 78,347 81,591
Advance billings on contracts 267,256 217,053
U.S. and foreign income taxes payable 17,157 18,612
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Total Current Liabilities 775,512 741,691
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Long-Term Debt 261,315 268,011
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Accumulated Postretirement Benefit
Obligation 26,440 26,315
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Self-Insurance 64,582 61,715
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Pension Liability 215,921 328,852
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Accrued Cost of The Babcock & Wilcox
Company Bankruptcy Settlement 111,635 112,103
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Deferred Liability Associated with Babcock
& Wilcox Company Pension Plan Spin-Off 117,079 -
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Other Liabilities 109,411 109,688
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Commitments and Contingencies.
Stockholders' Deficit:
Common stock, par value $1.00 per
share, authorized 150,000,000 shares;
issued 70,287,108 at March 31, 2005
and 69,560,726 at December 31, 2004 70,287 69,561
Capital in excess of par value 1,129,147 1,122,055
Accumulated deficit (1,038,472) (1,060,908)
Treasury stock at cost, 2,320,170
shares at March 31, 2005 and
2,341,902 at December 31, 2004 (64,025) (64,625)
Accumulated other comprehensive loss (328,988) (327,526)
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Total Stockholders' Deficit (232,051) (261,443)
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TOTAL $1,449,844 $1,386,932
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
2005 2004
---- ----
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $22,436 $(10,867)
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Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 10,519 8,926
Income or loss of investees, less
dividends (4,612) (3,873)
Gain on asset disposals and
impairments - net (2,296) (641)
Provision for (benefit from) deferred
taxes 257 (1,205)
Reduction in estimated cost of The
Babcock & Wilcox Company bankruptcy
settlement (468) (2,411)
Other 3,367 (198)
Changes in assets and liabilities,
net of effects of acquisitions
and divestitures:
Accounts receivable 18,029 (1,887)
Net contracts in progress and
advance billings 40,719 (35,903)
Accounts payable 19,590 34,712
Accrued and other current
liabilities (9,689) (28,998)
Accrued employee benefits (26,478) (13,501)
Pension liability 4,148 12,931
Other - net (3,435) 5,508
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 72,087 (37,407)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 9,640 19,016
Purchases of property, plant and
equipment (17,704) (3,655)
Purchases of available-for-sale
securities (69,960) (14,966)
Sales of available-for-sale securities - 3,730
Maturities of available-for-sale
securities 62,797 11,315
Proceeds from asset disposals 6,106 1,923
Other - (1)
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (9,121) 17,362
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt (1,500) -
Decrease in short-term borrowing - (22,600)
Issuance of common stock 1,935 200
Debt issuance costs 926 -
Other 727 (534)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,088 (22,934)
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EFFECTS OF EXCHANGE RATE CHANGES ON CASH (44) 10
- ----------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 65,010 (42,969)
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CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 259,319 174,790
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CASH AND CASH EQUIVALENTS AT END OF
PERIOD $324,329 $131,821
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $2,991 $1,969
Income taxes - net $17,959 $12,851
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CONTACT: McDermott International, Inc.
Jay Roueche, 281-870-5462
jroueche@mcdermott.com