Exhibit 99.1
McDermott Reports First Quarter 2006
Results; Net Income of $54.1 Million, $0.72 Per Diluted Share
HOUSTON--(BUSINESS WIRE)--May 3, 2006--
Announces 3 for 2 Stock Split of Common Shares
McDermott International, Inc. (NYSE:MDR) ("McDermott" or the
"Company") today reported net income of $54.1 million, or $0.72 per
diluted share, for the 2006 first quarter, compared to net income of
$22.4 million, or $0.32 per diluted share, for the corresponding
period in 2005. The 2006 first quarter includes approximately one
month of The Babcock & Wilcox Company's ("B&W") financial results as
well as the reconsolidation of B&W into McDermott's balance sheet.
From February 2000 through February 22, 2006, the results of B&W were
deconsolidated from the Company's reported results. Weighted average
common shares outstanding on a fully diluted basis were approximately
75.3 million and 70.8 million for the quarters ended March 31, 2006
and March 31, 2005, respectively.
McDermott's revenues in the first quarter of 2006 were $644.9
million, compared to $436.0 million in the corresponding period in
2005, primarily reflecting the addition of B&W's revenues for the
month of March 2006. Operating income was $66.5 million in the 2006
first quarter, compared to the 2005 first quarter operating income of
$39.6 million.
"The first quarter has the Company off to a good start in 2006,"
said Bruce W. Wilkinson, Chairman of the Board and Chief Executive
Officer of McDermott. "The power generation systems segment reflects
an exceptional month from B&W, while marine construction services
produced a solid quarter considering it included a $16 million
non-cash impairment as part of its results."
At March 31, 2006, McDermott's consolidated backlog was $5.9
billion, compared to $2.8 billion and $3.6 billion, at March 31, 2005
and December 31, 2005, respectively.
Earlier today, the Company's Board of Directors declared a
three-for-two split of McDermott's common stock. The stock split will
be applicable to shareholders of record at the close of business on
May 17, 2006 and will be effected in the form of a stock dividend to
be issued on May 31, 2006. Any fractional shares as a result of the
split will be paid in cash based upon the closing price of McDermott's
stock price on the record date.
RESULTS OF OPERATIONS
2006 First Quarter Compared to 2005 First Quarter
Marine Construction Services Segment ("J. Ray")
Revenues in the Marine Construction Services segment were $295.4
million in the 2006 first quarter, compared to $283.4 million for the
same period a year ago. The year-over-year increase in revenues
resulted primarily from increased project activity in the Middle East,
Caspian and Asia Pacific regions, partially offset by declines in the
Americas and worldwide marine.
Segment income for the 2006 first quarter was $21.0 million,
compared to $28.0 million in the 2005 first quarter. Major items
contributing to operating income in the 2006 first quarter were
projects in the Middle East, Asia Pacific and Caspian regions. Also
during the first quarter 2006, J. Ray recorded a non-cash impairment
of $16.4 million for currency translation losses associated with the
planned termination of its Mexican joint venture.
At March 31, 2006, J. Ray's backlog was $2.4 billion, compared to
backlog of $1.1 billion and $1.8 billion at March 31, 2005 and
December 31, 2005, respectively.
Power Generation Systems Segment ("B&W")
Revenues in the Power Generation Systems segment for the first
quarter 2006 were $189.0 million, representing B&W's revenues
beginning February 22, 2006. Throughout 2005, B&W was deconsolidated
from McDermott's reported financial results due to its
asbestos-related reorganization and therefore the Power Generation
Systems segment did not report any revenues.
Segment income for the 2006 first quarter was $27.6 million,
compared to $0.1 million in the 2005 first quarter. The increase in
segment income was due to consolidating B&W for approximately one
month in the first quarter 2006.
At March 31, 2006, B&W's backlog was $1.9 billion and was not
consolidated during 2005.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $161.0 million
in the 2006 first quarter, compared to $152.6 million for the same
period a year ago. The increase was primarily due to higher volumes in
the manufacture of nuclear components for certain U.S. Government
programs and uranium recovery operations, as well as increased
revenues from engineering services for U.S. Department of Energy
sites.
Segment income for the 2006 first quarter was $26.4 million,
compared to $24.0 million in the 2005 first quarter. The increase was
primarily due to higher volumes and margins in the manufacture of
nuclear components and uranium recovery operations, and higher margins
on commercial work for the research test reactor area which were
partially offset by a decline in equity in income from investees.
At March 31, 2006, BWXT's backlog was $1.6 billion, compared to
backlog of $1.7 billion and $1.8 billion at March 31, 2005 and
December 31, 2005, respectively.
Corporate
Unallocated corporate expenses were $8.4 million in the 2006 first
quarter, compared to $12.6 million in the 2005 first quarter.
Other Income and Expense
The Company's other income, net, for the first quarter of 2006 was
$8.9 million, compared to other expense, net, of $3.6 million in the
first quarter of 2005. The expense reduction was primarily due to
increased interest income and an adjustment to interest resulting from
a settlement with U.S. and Canadian tax authorities.
OTHER INFORMATION
About the Company
McDermott International, Inc. is a leading worldwide energy
services company. The Company's subsidiaries provide engineering,
construction, 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 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 and
quarterly filings with the Securities and Exchange Commission,
including its report on Form 10-K for the year ended December 31,
2005.
Conference Call to Discuss 2006 First Quarter Earnings Release
- --------------------------------------------------------------
Date: Thursday, May 4, 2006, at 10:00 a.m. EST
(9:00 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
March 31,
2006 2005
---------- ----------
(Unaudited)
(In thousands, except
per share amounts)
Revenues $644,907 $435,959
- ----------------------------------------------------------------------
Costs and Expenses:
Cost of operations 502,926 361,424
(Gain) Loss on asset disposals and impairments
- net 16,006 (2,296)
Selling, general and administrative expenses 66,994 47,089
- ----------------------------------------------------------------------
585,926 406,217
- ----------------------------------------------------------------------
Equity in Income of Investees 7,547 9,871
- ----------------------------------------------------------------------
Operating Income 66,528 39,613
- ----------------------------------------------------------------------
Other Income (Expense):
Interest income 7,535 2,909
Interest expense (10,303) (9,696)
IRS interest expense adjustment 13,210 -
Other income (expense)-net (1,561) 3,226
- ----------------------------------------------------------------------
8,881 (3,561)
- ----------------------------------------------------------------------
Income from Continuing Operations
before Provision for Income Taxes 75,409 36,052
Provision for Income Taxes 20,394 14,486
- ----------------------------------------------------------------------
Income from Continuing Operations 55,015 21,566
Income (Loss) from Discontinued Operations (892) 870
- ----------------------------------------------------------------------
Net Income $54,123 $22,436
- ----------------------------------------------------------------------
Earnings (Loss) per Common Share:
Basic:
Income from Continuing Operations $0.77 $0.33
Income (Loss) from Discontinued Operations $(0.01) $0.01
Net Income $0.76 $0.34
Diluted:
Income from Continuing Operations $0.73 $0.31
Income (Loss) from Discontinued Operations $(0.01) $0.01
Net Income $0.72 $0.32
- ----------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended
March 31,
2006 2005
------------ ------------
(Unaudited; In thousands)
REVENUES
Marine Construction Services $295,439 $283,447
Government Operations 160,999 152,593
Power Generation Systems 189,023 -
Adjustments and Eliminations (554) (81)
- ----------------------------------------------------------------------
TOTAL $644,907 $435,959
- ----------------------------------------------------------------------
SEGMENT INCOME (LOSS)
Marine Construction Services 20,983 28,018
Government Operations 26,365 24,041
Power Generation Systems 27,552 123
- ----------------------------------------------------------------------
74,900 52,182
Corporate (8,372) (12,569)
- ----------------------------------------------------------------------
TOTAL $66,528 $39,613
- ----------------------------------------------------------------------
EQUITY IN INCOME FROM INVESTEES(1)
Marine Construction Services $(666) $(94)
Government Operations 6,453 9,623
Power Generation Systems 1,760 342
- ----------------------------------------------------------------------
TOTAL $7,547 $9,871
- ----------------------------------------------------------------------
DEPRECIATION & AMORTIZATION(1)
Marine Construction Services $6,392 $6,715
Government Operations 3,233 3,148
Power Generation Systems 1,679 -
Corporate 390 656
- ----------------------------------------------------------------------
TOTAL $11,694 $10,519
- ----------------------------------------------------------------------
CAPITAL EXPENDITURES
Marine Construction Services $20,659 $12,330
Government Operations 4,130 5,353
Power Generation Systems 1,855 -
Corporate 2,393 21
- ----------------------------------------------------------------------
TOTAL $29,037 $17,704
- ----------------------------------------------------------------------
BACKLOG
Marine Construction Services $2,383,833 $1,112,316
Government Operations 1,640,793 1,745,182
Power Generation Systems 1,909,592 -
- ----------------------------------------------------------------------
TOTAL $5,934,218 $2,857,498
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(1) Included in Segment Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2006 2005
------------ ------------
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $232,431 $19,263
Restricted cash and cash equivalents 141,300 152,086
Investments 455,222 384,202
Accounts receivable - trade, net 466,733 232,236
Accounts receivable from The Babcock &
Wilcox Company - 3,778
Accounts and notes receivable -
unconsolidated affiliates 47,279 52,867
Accounts and notes receivable - other 48,091 32,982
Contracts in progress 191,203 73,732
Inventories 65,365 319
Deferred income taxes 76,295 32,131
Assets held for sale 11,201 10,886
Other current assets 29,098 8,147
- ----------------------------------------------------------------------
Total Current Assets 1,764,218 1,002,629
- ----------------------------------------------------------------------
Restricted Cash and Cash Equivalents - 2,886
- ----------------------------------------------------------------------
Property, Plant and Equipment 1,426,267 1,097,427
Less accumulated depreciation 981,357 779,694
- ----------------------------------------------------------------------
Net Property, Plant and Equipment 444,910 317,733
- ----------------------------------------------------------------------
Investments 126,919 116,304
- ----------------------------------------------------------------------
Goodwill 88,236 12,926
- ----------------------------------------------------------------------
Deferred Income Taxes 462,962 93,880
- ----------------------------------------------------------------------
Other Assets 273,215 121,928
- ----------------------------------------------------------------------
TOTAL $3,160,460 $1,668,286
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, December 31,
2006 2005
------------ ------------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current maturities of
long-term debt $12,007 $4,250
Accounts payable 280,698 110,970
Accounts payable to The Babcock & Wilcox
Company - 11,429
Accrued employee benefits 112,663 81,196
Accrued liabilities - other 225,764 132,932
Accrued contract cost 68,093 56,566
Advance billings on contracts 753,807 314,467
Liabilities held for sale 8,385 7,182
U.S. and foreign income taxes payable 25,764 49,696
- ----------------------------------------------------------------------
Total Current Liabilities 1,487,181 768,688
- ----------------------------------------------------------------------
Long-Term Debt 210,285 207,861
- ----------------------------------------------------------------------
Accumulated Postretirement Benefit
Obligation 80,488 25,519
- ----------------------------------------------------------------------
Self-Insurance 81,145 60,989
- ----------------------------------------------------------------------
Pension Liability 512,630 311,319
- ----------------------------------------------------------------------
Accrued Cost of The Babcock & Wilcox Company
Bankruptcy Settlement 660,308 117,990
- ----------------------------------------------------------------------
Deferred Babcock & Wilcox Company Pension
Plan Spin-Off - 150,136
- ----------------------------------------------------------------------
Other Liabilities 78,215 109,082
- ----------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity (Deficit):
Common stock, par value $1.00 per share,
authorized 150,000,000 shares; issued
74,565,433 at March 31, 2006 and
73,857,922 at December 31, 2005 74,565 73,858
Capital in excess of par value 1,208,983 1,183,123
Accumulated deficit (801,783) (862,931)
Treasury stock at cost, 2,076,549 shares
at March 31, 2006 and 2,055,096 at
December 31, 2005 (59,958) (56,496)
Accumulated other comprehensive loss (371,599) (420,852)
- ----------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 50,208 (83,298)
- ----------------------------------------------------------------------
TOTAL $3,160,460 $1,668,286
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
2006 2005
---- ----
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $54,123 $22,436
- ----------------------------------------------------------------------
Depreciation and amortization 11,694 10,519
Income of investees, less dividends (1,399) (4,612)
(Gain) loss on asset disposals
and impairments - net 16,006 (2,296)
Provision for deferred taxes 70,022 257
Estimated loss on The Babcock & Wilcox
Company bankruptcy settlement - (468)
Excess tax benefits from stock options
exercised (4,918) -
Other 13,526 3,367
Changes in assets and liabilities, net
of effects of acquisitions and
divestitures:
Accounts receivable 141,523 18,029
Income taxes receivable (55,857) -
Net contracts in progress and
advance billings 7,005 40,719
Accounts payable (46,901) 19,590
Income taxes 6,463 (1,455)
Accrued and other current liabilities 1,012 (9,689)
Accrued employee benefits (25,264) (26,478)
Pension liability 6,787 4,148
Other, net (52,985) (1,980)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 140,837 72,087
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 13,672 9,640
Purchases of property, plant and equipment (29,037) (17,704)
Purchases of available-for-sale securities (5,131,607) (69,960)
Sales of available-for-sale securities 68,088 -
Maturities of available-for-sale securities 4,984,734 62,797
Proceeds from asset disposals 874 6,106
Cash acquired from the reconsolidation of The
Babcock & Wilcox Company 164,200 -
Other (1,732) -
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 69,192 (9,121)
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 592 -
Payment of long-term debt (4,323) (1,500)
Issuance of common stock 9,347 1,935
Payment of debt issuance costs (16) 926
Excess tax benefits from stock options
exercised 4,918 -
Other (7,519) 727
- ----------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,999 2,088
- ----------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 140 (44)
- ----------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 213,168 65,010
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 19,263 259,319
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $232,431 $324,329
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McDERMOTT INTERNATIONAL, INC.
SUPPLEMENTAL UNAUDITED PRO FORMA FINANCIAL INFORMATION
Presentation of combined results of operations ASSUMING
B&W had been reconsolidated with McDermott at the beginning of the
respective periods presented
Three Months Ended
March 31,
2006 2005
---- ----
(Unaudited)
(In thousands, except
per share amounts)
Revenues $903,174 $780,529
Operating Income $68,206 $62,761
Net Income $55,915 $35,156
Diluted Earnings Per Share $0.74 $0.50
CONTACT: McDermott International, Inc., Houston
Jay Roueche, 281-870-5462
jroueche@mcdermott.com