Exhibit 99.1
McDermott Reports Second Quarter 2006 Results;
Net Income of $45.4 Million, $0.40 Per Split-Adjusted Diluted Share;
Includes $49 Million After-Tax Expense Associated with Debt Retirement
HOUSTON--(BUSINESS WIRE)--Aug. 7, 2006--
Substantial Growth in Backlog / First Full Quarter with B&W
McDermott International, Inc. (NYSE:MDR) ("McDermott" or the
"Company") today reported net income of $45.4 million, or $0.40 per
diluted share, for the 2006 second quarter, compared to net income of
$80.9 million, or $0.75 per diluted share, for the corresponding
period in 2005. During the second quarter 2006, McDermott recorded a
one-time expense of approximately $49 million ($0.43 per share),
associated with the early retirement of debt, partially offset by
income from discontinued operations of $13.8 million ($0.12 per
share). In the second quarter of 2005, McDermott recorded a $50.4
million benefit ($0.47 per share) from an adjustment to the Company's
net deferred tax assets. Weighted average common shares outstanding on
a fully diluted basis were approximately 114.0 million and 108.2
million for the quarters ended June 30, 2006 and June 30, 2005,
respectively, with both periods adjusted for the 3-for-2 stock split
which was effected on May 31, 2006.
McDermott's revenues in the second quarter of 2006 were $1,048.9
million, compared to $509.7 million in the corresponding period in
2005. The increase in revenues is primarily attributable to the
reconsolidation of The Babcock & Wilcox Company's ("B&W") financial
results beginning in March 2006. Between February 2000 and February
2006, B&W was deconsolidated from McDermott's financial statements as
a result of B&W's asbestos-related reorganization which was completed
this year. Operating income was $111.1 million in the 2006 second
quarter, compared to the 2005 second quarter operating income of $54.1
million. The increase in operating income is primarily attributable to
improvement in the Offshore Oil & Gas Construction segment, as well as
the reconsolidation of B&W.
"During the first half of 2006, McDermott has been successful by
virtually any measure," said Bruce W. Wilkinson, Chairman of the Board
and Chief Executive Officer of McDermott. "Earnings have been strong,
backlog is at record levels, bids outstanding remain robust and our
cash flow has enabled the Company to retire substantially all of its
funded debt."
At June 30, 2006, McDermott's consolidated backlog was $7.8
billion, compared to $2.5 billion and $3.6 billion, at June 30, 2005
and December 31, 2005, respectively.
RESULTS OF OPERATIONS
2006 Second Quarter Compared to 2005 Second Quarter
Offshore Oil & Gas Construction Segment ("J. Ray")
Revenues in the Offshore Oil & Gas Construction segment were
$398.8 million in the 2006 second quarter, compared to $349.7 million
for the same period a year ago. The year-over-year increase in
revenues resulted primarily from increased activity in the Middle East
region and in worldwide marine projects.
Segment income for the 2006 second quarter was $63.9 million,
compared to $30.2 million in the 2005 second quarter. Major items
contributing to operating income in the 2006 second quarter were
projects in the Middle East and Caspian regions, as well as worldwide
marine activity. Also during the second quarter 2006, J. Ray's Dolphin
project, which previously was accounted for as a deferred profit
recognition contract, exceeded 70 percent complete and J. Ray
recognized approximately $21 million of gross profit which had been
deferred since contract inception through March 31, 2006.
At June 30, 2006, J. Ray's backlog was $3.2 billion, compared to
backlog of $0.9 billion and $1.8 billion at June 30, 2005 and December
31, 2005, respectively.
Power Generation Systems Segment ("B&W")
Revenues in the Power Generation Systems segment for the second
quarter 2006 were $488.7 million, primarily reflecting revenues from
B&W. During 2005, B&W was deconsolidated and therefore there were no
revenues reported for this segment during the second quarter of 2005.
Segment income for the 2006 second quarter was $25.2 million,
compared to $0.3 million in the 2005 second quarter. The increase in
segment income was due to the reconsolidation of B&W beginning in the
first quarter 2006.
At June 30, 2006, B&W's backlog was $3.1 billion and was not
consolidated during 2005.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $163.5 million
in the 2006 second quarter, compared to $159.9 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 from the transition activities at the Los Alamos National
Laboratory.
Segment income for the 2006 second quarter was $30.8 million,
compared to $29.7 million in the 2005 second quarter. The increase was
primarily due to an increase in the manufacture of fuel for research
test reactors and fuel development for commercial reactors.
At June 30, 2006, BWXT's backlog was $1.5 billion, compared to
backlog of $1.6 billion and $1.8 billion at June 30, 2005 and December
31, 2005, respectively.
Corporate
Unallocated corporate expenses were $8.8 million in the 2006
second quarter, compared to $6.1 million in the 2005 second quarter.
The increase was primarily related to higher stock based compensation
expenses resulting from the adoption of SFAS 123(R).
Other Income and Expense
The Company's other expense, net, for the second quarter of 2006
was $50.7 million, compared to $7.0 million in the second quarter of
2005. The expense increase was primarily due to the $49 million
expense associated with the early retirement of J. Ray's $200 million
11 percent senior secured notes, partially offset by an $8.8 million
improvement in net interest income/expense.
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 Second Quarter Earnings Release
Date: Monday, August 7, 2006, at 12:00 p.m. EST
(11:00 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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited)
(In thousands, except per share amounts)
Revenues $1,048,930 $509,650 $1,693,837 $945,609
- ----------------------------------------------------------------------
Costs and Expenses:
Cost of operations 844,373 412,837 1,347,299 774,261
(Gain) loss on asset
disposals and
impairments - net (1,085) (244) 14,921 (2,540)
Selling, general and
administrative
expenses 101,841 50,400 168,835 97,489
- ----------------------------------------------------------------------
945,129 462,993 1,531,055 869,210
- ----------------------------------------------------------------------
Equity in Income of
Investees 7,340 7,398 14,887 17,269
- ----------------------------------------------------------------------
Operating Income 111,141 54,055 177,669 93,668
- ----------------------------------------------------------------------
Other Income
(Expense):
Interest income 12,467 5,490 20,002 8,399
Interest expense (7,108) (8,923) (17,411) (18,619)
IRS interest expense
adjustment (2,620) - 10,590 -
Increase in
estimated cost of
the B&W
bankruptcy
settlement - (6,355) - (5,887)
Loss on early
retirement of debt (49,016) - (49,016) -
Other income
(expense) - net (4,438) 2,820 (5,999) 5,578
- ----------------------------------------------------------------------
(50,715) (6,968) (41,834) (10,529)
- ----------------------------------------------------------------------
Income from Continuing
Operations before
Provision for
(Benefit from) Income
Taxes 60,426 47,087 135,835 83,139
Provision for (Benefit
from) Income Taxes 28,768 (33,612) 49,162 (19,126)
- ----------------------------------------------------------------------
Income from Continuing
Operations 31,658 80,699 86,673 102,265
Income from
Discontinued
Operations 13,786 220 12,894 1,090
- ----------------------------------------------------------------------
Net Income 45,444 80,919 99,567 $103,355
- ----------------------------------------------------------------------
Earnings per Common
Share:
Basic:
Income from
Continuing
Operations $0.29 $0.80 $0.80 $1.02
Income from
Discontinued
Operations $0.13 $0.00 $0.12 $0.01
Net Income $0.42 $0.80 $0.92 $1.03
Diluted:
Income from
Continuing
Operations $0.28 $0.75 $0.77 $0.95
Income from
Discontinued
Operations $0.12 $0.00 $0.11 $0.01
Net Income $0.40 $0.75 $0.88 $0.96
- ----------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited; In thousands)
REVENUES
Offshore Oil and Gas
Construction $398,848 $349,742 $694,287 $633,189
Government
Operations 163,480 159,940 324,479 312,533
Power Generation
Systems 488,710 - 677,733 -
Adjustments and
Eliminations (2,108) (32) (2,662) (113)
- ----------------------------------------------------------------------
TOTAL $1,048,930 $509,650 $1,693,837 $945,609
- ----------------------------------------------------------------------
SEGMENT INCOME
Offshore Oil and Gas
Construction $63,928 $30,189 $84,911 $58,207
Government
Operations 30,760 29,736 57,125 53,777
Power Generation
Systems 25,233 262 52,785 385
- ----------------------------------------------------------------------
119,921 60,187 194,821 112,369
Corporate (8,780) (6,132) (17,152) (18,701)
- ----------------------------------------------------------------------
TOTAL $111,141 $54,055 $177,669 $93,668
- ----------------------------------------------------------------------
EQUITY IN INCOME
(LOSS) OF INVESTEES
(1)
Offshore Oil and Gas
Construction $(715) $(175) $(1,381) $(269)
Government
Operations 6,046 7,092 12,499 16,715
Power Generation
Systems 2,009 481 3,769 823
- ----------------------------------------------------------------------
TOTAL $7,340 $7,398 $14,887 $17,269
- ----------------------------------------------------------------------
DEPRECIATION &
AMORTIZATION (1)
Offshore Oil and Gas
Construction $5,895 $7,023 $12,287 $13,738
Government
Operations 3,379 3,107 6,612 6,255
Power Generation
Systems 4,859 - 6,538 -
Corporate 127 391 517 1,047
- ----------------------------------------------------------------------
TOTAL $14,260 $10,521 $25,954 $21,040
- ----------------------------------------------------------------------
CAPITAL EXPENDITURES
Offshore Oil and Gas
Construction $25,591 $2,274 $46,250 $14,604
Government
Operations 3,295 2,669 7,425 8,022
Power Generation
Systems 6,252 - 8,107 -
Corporate 211 135 2,604 156
- ----------------------------------------------------------------------
TOTAL $35,349 $5,078 $64,386 $22,782
- ----------------------------------------------------------------------
BACKLOG
Offshore Oil and Gas
Construction $3,231,059 $934,415 $3,231,059 $934,415
Government
Operations 1,524,306 1,613,593 1,524,306 1,613,593
Power Generation
Systems 3,056,313 - 3,056,313 -
- ----------------------------------------------------------------------
TOTAL $7,811,678 $2,548,008 $7,811,678 $2,548,008
- ----------------------------------------------------------------------
(1) Included in Segment Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2006 2005
------------ ------------
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $436,625 $19,263
Restricted cash and cash equivalents 84,991 152,086
Investments 238,270 384,202
Accounts receivable - trade, net 500,445 232,236
Accounts receivable from The Babcock &
Wilcox Company - 3,778
Accounts and notes receivable -
unconsolidated affiliates 36,306 52,867
Accounts receivable - other 55,975 32,982
Contracts in progress 180,325 73,732
Inventories 68,164 319
Deferred income taxes 78,055 32,131
Assets held for sale - 10,886
Other current assets 22,182 8,147
- ----------------------------------------------------------------------
Total Current Assets 1,701,338 1,002,629
- ----------------------------------------------------------------------
Restricted Cash and Cash Equivalents - 2,886
- ----------------------------------------------------------------------
Property, Plant and Equipment 1,465,796 1,097,427
Less accumulated depreciation 997,921 779,694
- ----------------------------------------------------------------------
Net Property, Plant and Equipment 467,875 317,733
- ----------------------------------------------------------------------
Investments 152,121 116,304
- ----------------------------------------------------------------------
Goodwill 88,791 12,926
- ----------------------------------------------------------------------
Deferred Income Taxes 440,805 93,880
- ----------------------------------------------------------------------
Other Assets 330,129 121,928
- ----------------------------------------------------------------------
TOTAL $3,181,059 $1,668,286
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
2006 2005
---- ----
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current maturities of
long-term debt $12,406 $4,250
Accounts payable 307,195 110,970
Accounts payable to The Babcock &
Wilcox Company - 11,429
Accrued employee benefits 113,563 81,196
Accrued liabilities - other 224,187 132,932
Accrued contract cost 73,144 56,566
Advance billings on contracts 852,415 314,467
Liabilities held for sale - 7,182
U.S. and foreign income taxes payable 54,737 49,696
- ----------------------------------------------------------------------
Total Current Liabilities 1,637,647 768,688
- ----------------------------------------------------------------------
Long-Term Debt 15,339 207,861
- ----------------------------------------------------------------------
Accumulated Postretirement Benefit
Obligation 80,554 25,519
- ----------------------------------------------------------------------
Self-Insurance 82,368 60,989
- ----------------------------------------------------------------------
Pension Liability 505,148 311,319
- ----------------------------------------------------------------------
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 74,735 109,082
- ----------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity (Deficit):
Common stock, par value $1.00 per
share, authorized 150,000,000 shares;
issued 112,926,450 at June 30, 2006
and 110,786,883 at December 31, 2005 112,926 110,787
Capital in excess of par value 1,190,557 1,146,194
Accumulated deficit (756,339) (862,931)
Treasury stock at cost, 3,056,301
shares at June 30, 2006 and 3,082,644
at December 31, 2005 (59,775) (56,496)
Accumulated other comprehensive loss (362,409) (420,852)
- ----------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 124,960 (83,298)
- ----------------------------------------------------------------------
TOTAL $3,181,059 $1,668,286
- ----------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2006 2005
---- ----
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $99,567 $103,355
- ----------------------------------------------------------------------
Depreciation and amortization 25,954 21,040
Income of investees, less dividends (3,149) (6,261)
(Gain) loss on asset disposals and
impairments - net 14,921 (2,540)
Gain on sale of business (13,786) -
Provision for (benefit from) deferred
taxes 90,678 (50,065)
Estimated loss on The Babcock & Wilcox
Company bankruptcy settlement - 5,887
Excess tax benefits from stock-based
compensation (13,163) -
Other 18,421 11,972
Changes in assets and liabilities, net of
effects of acquisitions and
divestitures:
Accounts receivable 114,023 1,878
Income taxes receivable (92,437) -
Net contracts in progress and advance
billings 114,723 42,822
Accounts payable (19,979) (33,919)
Income taxes 31,241 7,539
Accrued and other current liabilities (7,905) (6,787)
Accrued employee benefits (24,576) (16,852)
Other, net (3,274) (3,808)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 331,259 74,261
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 69,981 14,439
Purchases of property, plant and equipment (64,386) (22,782)
Purchases of available-for-sale securities (917,884) (194,307)
Sales of available-for-sale securities 172,521 2,450
Maturities of available-for-sale securities 859,706 131,545
Proceeds from asset disposals 21,549 8,690
Cash acquired from the reconsolidation of
The Babcock & Wilcox Company 164,200 -
Other (2,549) (4,657)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 303,138 (64,622)
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 592 -
Payment of long-term debt (236,941) (12,734)
Issuance of common stock 13,323 4,928
Payment of debt issuance costs (8,606) (940)
Excess tax benefits from stock options
exercised 13,163 -
Other (336) 1,210
- ----------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (218,805) (7,536)
- ----------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 1,770 (44)
NET INCREASE IN CASH AND CASH EQUIVALENTS 417,362 2,059
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 19,263 259,319
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $436,625 $261,378
- ----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $31,516 $9,394
Income taxes - net $21,811 $32,258
- ----------------------------------------------------------------------
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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
(Unaudited; In thousands, except per share amounts)
Revenues $1,048,930 $878,274 $1,952,104 $1,658,803
Operating Income $111,141 $64,835 $179,347 $127,596
Net Income $45,444 $87,239 $101,359 $122,395
Diluted Earnings Per
Share $0.40 $0.81 $0.89 $1.14
CONTACT: McDermott International, Inc., Houston
Investor Relations & Corporate Communications
Jay Roueche, 281-870-5462
jroueche@mcdermott.com
or
Robby Bellamy, 281-870-5165
rbellamy@mcdermott.com