Exhibit 99.1
McDermott Reports Fourth Quarter 2005
Results; Net Income of $36.1 Million, $0.48 Per Diluted Share;
Represents the Last Quarter without Babcock & Wilcox Consolidated in
Financial Results
HOUSTON--(BUSINESS WIRE)--March 1, 2006--McDermott International,
Inc. (NYSE:MDR) ("McDermott" or the "Company") today reported net
income of $36.1 million, or $0.48 per diluted share, for the 2005
fourth quarter, compared to reported net income of $42.5 million, or
$0.61 per diluted share, for the corresponding period in 2004. Both
periods exclude the results of operations of The Babcock & Wilcox
Company ("B&W"), which was deconsolidated from McDermott's reported
results from February 2000 through February 2006. Weighted average
common shares outstanding on a fully diluted basis were approximately
74.9 million and 69.6 million for the quarters ended December 31, 2005
and December 31, 2004, respectively.
McDermott's revenues in the fourth quarter of 2005 were $398.6
million, compared to $473.7 million in the corresponding period in
2004, reflecting decreases at both consolidated segments. Operating
income was $55.5 million in the 2005 fourth quarter, compared to the
2004 fourth quarter operating income of $72.5 million, which included
a net benefit of $54.7 million of specially identified items in last
year's quarter.
With the announcement of B&W's revised Chapter 11 settlement,
which is now effective, McDermott suspended recording the quarterly
non cash adjustment associated with B&W's previously negotiated
settlement in the third quarter of 2005. In the fourth quarter of
2004, McDermott recorded an after-tax revaluation expense of $9.5
million associated with this adjustment.
"The fourth quarter culminated a very successful 2005 for our
Company," said Bruce W. Wilkinson, Chairman of the Board and Chief
Executive Officer of McDermott. "McDermott reported full-year
consolidated earnings per share of $2.72, increased backlog at all of
our major subsidiaries and resolved B&W's Chapter 11 reorganization.
Beginning in March, McDermott's financial statements will once again
include B&W's results in our Power Generation Systems segment, and
will reflect our strong position in the coal, nuclear and oil & gas
markets."
For the full year 2005, McDermott generated revenues of $1.86
billion and produced operating income of $225 million, compared to
$1.92 billion and $145.9 million, respectively, for the full year
2004. Net income for the full year 2005 was $198.0 million, or $2.72
per diluted share, which included a $50.4 million tax valuation
allowance benefit. For the full year 2004, McDermott's net income was
$61.6 million, or $0.90 per diluted share.
RESULTS OF OPERATIONS
2005 Fourth Quarter Compared to 2004 Fourth Quarter
Marine Construction Services Segment ("J. Ray")
Revenues in the Marine Construction Services segment were $253.0
million in the 2005 fourth quarter, compared to $317.2 million for the
same period a year ago. The year-over-year decrease in revenues
resulted primarily from lower fabrication activity in the Gulf of
Mexico, Middle East and Caspian regions, as well as lower marine
activity in the Gulf of Mexico, partially offset by increased revenues
from international marine projects.
Segment income for the 2005 fourth quarter was $36.3 million,
compared to $36.7 million in the 2004 fourth quarter. Major items
contributing to operating income in the 2005 fourth quarter were
international marine projects, as well as Middle East and Caspian
fabrication projects and associated change orders. Operating income in
the 2004 fourth quarter included a net benefit of $23.8 million, in
the aggregate, from favorable contract cost adjustments on certain
loss projects, gains on asset sales and other items.
At December 31, 2005, J. Ray's backlog was $1.8 billion, compared
to backlog of $1.2 billion and $1.7 billion at December 31, 2004 and
September 30, 2005, respectively.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $145.6 million
in the 2005 fourth quarter, compared to $156.5 million for the same
period a year ago. The decrease was primarily due to lower volumes in
the manufacture of nuclear components for certain U.S. Government
programs partially offset by increased revenues from engineering
services for U.S. Department of Energy sites, as well as increased
uranium downblending activity.
Segment income for the 2005 fourth quarter was $26.3 million,
compared to $29.5 million in the 2004 fourth quarter. The decrease was
primarily due to the corporate allocation to BWXT of $2.9 million
related to qualified pension expense in the fourth quarter of 2005,
which in 2004 and prior periods was recorded in the corporate segment.
At December 31, 2005, BWXT's backlog was $1.8 billion, compared to
backlog of $1.7 billion and $1.5 billion at December 31, 2004 and
September 30, 2005, respectively.
Corporate
Unallocated corporate expenses were $11.9 million in the 2005
fourth quarter, compared to corporate income in the 2004 fourth
quarter of $6.2 million, which included a $27.7 million gain on a U.K.
pension plan which more than offset other corporate expenses in last
year's fourth quarter. Corporate qualified pension expense in the
fourth quarter of 2005 improved by approximately $16.0 million
compared to the fourth quarter of 2004, as a result of the previously
announced spin-off of B&W's pension plan and the allocation to
McDermott's Government Operations segment of the applicable pension
expense related to that segment.
Other Income and Expense
The Company's other expense, net, for the fourth quarter of 2005
was $1.4 million, compared to $19.7 million in the fourth quarter of
2004. The expense reduction was primarily due to an $11.3 million
improvement in net interest income/expense.
In addition, as mentioned above, during the 2005 third quarter,
McDermott suspended the revaluation of certain components related to
the previously negotiated settlement of the B&W Chapter 11
proceedings. The recently completed settlement will be recorded in
McDermott's financial statements during the first quarter of 2006. See
McDermott's Form 10-K for the year ended December 31, 2005 for
additional information regarding the accounting for the completed B&W
settlement.
THE BABCOCK & WILCOX COMPANY
The Babcock & Wilcox Company is a leading provider of technology,
service, parts and equipment for the worldwide power generation
industry. With a business history exceeding 138 years, B&W's power
systems and equipment are found at over 800 utilities spanning over 90
countries.
On February 22, 2006, B&W effected its plan of reorganization and
has now emerged from its asbestos-related Chapter 11 proceedings,
which were initiated in February 2000. Beginning in March 2006, B&W's
financial results will once again be consolidated with McDermott's
reported financial statements, representing the vast majority of
operations in the Company's Power Generation Systems segment.
Although deconsolidated from McDermott's financial results, during
the fourth quarter of 2005, B&W's revenues were $422.2 million, an
increase of $66.7 million compared to the fourth quarter of 2004. In
the 2005 fourth quarter, B&W recorded in its financial statements
Chapter 11 restructuring charges of $7.3 million and legal settlement
expenses of $7.5 million. In addition, B&W recorded domestic pension
expense of $16.8 million during the fourth quarter of 2005. In prior
years B&W's domestic pension expense was recorded in McDermott's
corporate segment. Approximately $8.0 million of B&W's fourth quarter
2005 pension expense related to an actuarial adjustment. As a result
of these expenses, B&W's operating loss for the fourth quarter of
2005, prepared in accordance with generally accepted accounting
principles, was $7.8 million. In the fourth quarter of 2004, B&W's
revenue was $355.5 million and operating income was $28.4 million,
which included no domestic pension expense.
At December 31, 2005, B&W's backlog was $2.1 billion, compared to
backlog of $1.5 billion and $1.6 billion at December 31, 2004 and
September 30, 2005, respectively.
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 our position in coal, nuclear and oil & gas markets, and
statements about backlog, to the extent backlog may be viewed as an
indicator of future revenues. 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 there are adverse
changes in the industries in which we operate. 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 on Form 10-K for the year ended December 31,
2005 filed with the Securities and Exchange Commission.
Conference Call to Discuss 2005 Fourth Quarter Earnings Release
Date: Thursday, March 2, 2006, at 9:15 a.m. EST (8:15 a.m. CST)
Live Webcast: Investor Relations section of Web site 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
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
----------- ----------- ----------- -----------
(Unaudited)
(In thousands, except per share amounts)
Revenues $398,566 $473,681 $1,856,311 $1,923,019
- ---------------------------------------------------------------------
Costs and Expenses:
Cost of operations 292,459 396,840 1,457,371 1,673,922
Gain on settlements
and curtailments
of pension plans (1,390) (32,309) (1,390) (32,309)
Gains on asset
disposals and
impairments - net (53) (13,366) (6,554) (32,163)
Selling, general
and administrative
expenses 66,388 61,532 222,426 203,262
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357,404 412,697 1,671,853 1,812,712
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Equity in Income from
Investees 14,301 11,564 40,523 35,617
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Operating Income 55,463 72,548 224,981 145,924
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Other Income
(Expense):
Interest income 7,258 2,232 21,068 5,574
Interest expense (4,036) (10,291) (31,820) (36,066)
Estimated loss on
The Babcock &
Wilcox Company
bankruptcy
settlement - (8,931) (5,887) (11,187)
Other-net (4,603) (2,677) (956) (1,779)
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(1,381) (19,667) (17,595) (43,458)
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Income from
Continuing
Operations before
Provision for
Income Taxes 54,082 52,881 207,386 102,466
Provision for Income
Taxes 17,960 10,415 9,409 40,827
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Net Income $36,122 $42,466 $197,977 $61,639
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Income per Common
Share:
Basic:
Net Income $0.51 $0.64 $2.90 $0.94
Diluted:
Net Income $0.48 $0.61 $2.72 $0.90
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Weighted Average
Shares
Basic 70,483,418 66,102,386 68,379,222 65,688,361
Diluted 74,862,292 69,583,607 72,779,176 68,268,131
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McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
----------- ----------- ----------- -----------
(Unaudited)
(In thousands)
REVENUES
Marine Construction
Services $253,011 $317,177 $1,255,441 $1,367,923
Government
Operations 145,556 156,488 601,042 555,093
Power Generation
Systems - - - -
Adjustments and
Eliminations (1) 16 (172) 3
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TOTAL $398,566 $473,681 $1,856,311 $1,923,019
- ---------------------------------------------------------------------
SEGMENT INCOME
Marine Construction
Services $36,265 $36,712 $159,994 $83,841
Government
Operations 26,335 29,509 99,371 109,849
Power Generation
Systems 4,789 80 5,556 1,891
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67,389 66,301 264,921 195,581
Unallocated
Corporate (11,926) 6,247 (39,940) (49,657)
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OPERATING INCOME $55,463 $72,548 $224,981 $145,924
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EQUITY IN INCOME
(LOSS) FROM
INVESTEES (1)
Marine Construction
Services $614 $(90) $2,818 $1,886
Government
Operations 8,674 11,352 31,258 32,564
Power Generation
Systems 5,013 302 6,447 1,167
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TOTAL $14,301 $11,564 $40,523 $35,617
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DEPRECIATION &
AMORTIZATION (1)
Marine Construction
Services $8,418 $6,936 $28,727 $24,036
Government
Operations 4,328 3,445 13,696 12,567
Power Generation
Systems - - - -
Corporate 403 891 1,843 3,690
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TOTAL $13,149 $11,272 $44,266 $40,293
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CAPITAL EXPENDITURES
Marine Construction
Services $19,526 $4,900 $40,486 $12,645
Government
Operations 14,837 12,661 26,892 22,211
Power Generation
Systems - - - -
Corporate 62 505 217 788
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TOTAL $34,425 $18,066 $67,595 $35,644
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BACKLOG
Marine Construction
Services $1,781,917 $1,252,055 $1,781,917 $1,252,055
Government
Operations 1,772,258 1,700,243 1,772,258 1,700,243
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TOTAL $3,554,175 $2,952,298 $3,554,175 $2,952,298
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(1) Included in Segment Income above
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
2005 2004
-------- --------
(In thousands)
Current Assets:
Cash and cash equivalents $19,452 $259,319
Restricted cash and cash equivalents 152,086 111,455
Investments 384,209 -
Accounts receivable - trade, net 232,366 226,731
Accounts receivable from The Babcock &
Wilcox Company 3,778 6,121
Accounts and notes receivable -
unconsolidated affiliates 52,867 29,330
Accounts receivable - other 33,424 71,522
Contracts in progress 73,799 72,355
Deferred income taxes 32,131 9,813
Other current assets 8,987 13,277
- ----------------------------------------------------------------------
Total Current Assets 993,099 799,923
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Restricted Cash and Cash Equivalents 2,886 66,498
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Property, Plant and Equipment 1,127,614 1,087,314
Less accumulated depreciation 800,405 780,225
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Net Property, Plant and Equipment 327,209 307,089
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Total Investments 116,304 41,884
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Goodwill 12,926 12,926
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Deferred Income Taxes 93,880 31,844
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Other Assets 121,982 126,768
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TOTAL $1,668,286 $1,386,932
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31,
2005 2004
-------- --------
(In thousands)
Current Liabilities:
Notes payable and current maturities of
long-term debt $4,250 $12,009
Accounts payable 111,304 114,235
Accounts payable to The Babcock & Wilcox
Company 11,429 55,180
Accrued employee benefits 81,262 79,362
Accrued liabilities - other 134,334 163,649
Accrued contract cost 56,596 81,591
Advance billings on contracts 314,599 217,053
U.S. and foreign income taxes payable 49,519 18,612
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Total Current Liabilities 763,293 741,691
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Long-Term Debt 207,861 268,011
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Accumulated Postretirement Benefit
Obligation 25,519 26,315
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Self-Insurance 60,989 61,715
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Pension Liability 311,319 328,852
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Accrued Cost of The Babcock & Wilcox
Company Bankruptcy Settlement 117,990 112,103
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Deferred Babcock & Wilcox Company Pension
Plan Spin-Off 150,136 -
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Other Liabilities 114,477 109,688
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Commitments and Contingencies
Stockholders' Deficit:
Common stock, par value $1.00 per share,
authorized 150,000,000 shares; issued
73,857,922 and 69,560,726 shares at
December 31, 2005 and 2004,
respectively 73,858 69,561
Capital in excess of par value 1,183,123 1,122,055
Accumulated deficit (862,931) (1,060,908)
Treasury stock at cost, 2,055,096 and
2,341,902 shares at December 31, 2005
and 2004, respectively (56,496) (64,625)
Accumulated other comprehensive loss (420,852) (327,526)
- ----------------------------------------------------------------------
Total Stockholders' Deficit (83,298) (261,443)
- ----------------------------------------------------------------------
TOTAL $1,668,286 $1,386,932
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2005 2004
-------- --------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $197,977 $61,639
Depreciation and amortization 44,266 40,293
(Income) or loss of investees, less
dividends (4,714) 7,138
Gain on asset disposals and impairments -
net (6,554) (32,163)
Benefit from deferred taxes (47,557) (24,406)
Estimated loss on The Babcock & Wilcox
bankruptcy settlement 5,887 11,187
Cumulative effect of accounting change - -
Other 13,435 11,495
Changes in assets and liabilities, net
of effects from acquisitions and
divestitures:
Accounts receivable 2,568 (88,470)
Accounts payable (46,664) (19,400)
Net contracts in progress and
advance billings 96,010 38,185
Income taxes (14,570) 35,729
Accrued liabilities (52,935) 17,343
Pension liability 45,649 17,460
Other, net 22,338 (10,724)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 255,136 65,306
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 22,981 2,527
Purchases of property, plant and equipment (67,595) (35,644)
Purchases of available-for-sale securities (11,487,782) (139,219)
Maturities of available-for-sale securities 10,987,746 134,628
Sales of available-for-sale securities 42,766 6,069
Proceeds from asset disposals 17,223 89,184
Other (6,095) (1)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (490,756) 57,544
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt (66,984) -
Payment of debt issuance costs (949) (3,768)
Increase (decrease) in short-term borrowing - (36,750)
Issuance of common stock 60,951 2,800
Other 2,779 (629)
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NET CASH USED IN FINANCING ACTIVITIES (4,203) (38,347)
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EFFECTS OF EXCHANGE RATE CHANGES ON CASH (44) 26
- ----------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (239,867) 84,529
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 259,319 174,790
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $19,452 $259,319
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $37,720 $36,317
Income taxes (net of refunds) $44,961 $70,699
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THE BABCOCK & WILCOX COMPANY
(DECONSOLIDATED, UNAUDITED SUMMARY OF FINANCIAL DATA)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
(In thousands, except per share amounts)
Revenues $422,169 $355,479 $1,508,964 $1,368,918
- ----------------------------------------------------------------------
Operating Income (Loss) $(7,757) $28,426 $(415,472) $116,774
- ----------------------------------------------------------------------
Income (Loss) before
Income Taxes $(5,763) $18,563 $(412,144) $100,956
- ----------------------------------------------------------------------
Net Income (Loss) $(9,910) $18,336 $(262,771) $99,117
- ----------------------------------------------------------------------
Capital Expenditures $6,424 $8,154 $26,330 $18,560
- ----------------------------------------------------------------------
Depreciation &
Amortization (1) $4,464 $6,519 $17,822 $19,838
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Items Included in B&W
Operating Income (1)
Adjustment to
asbestos liability $- $3,994 $477,399 $3,635
Restructuring charges 7,301 1,147 13,390 7,688
Legal Settlements 7,500 (10,000) 7,500 (10,000)
Pension expense from
B&W-Sponsored Plan 16,765 - 34,964 -
- ----------------------------------------------------------------------
Total $31,566 $(4,859) $533,253 $1,323
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(1) Included in Operating Income (Loss) above.
Backlog $2,057,134 $1,489,629
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CONTACT: McDermott International, Inc.
Jay Roueche, 281-870-5462
jroueche@mcdermott.com