Exhibit 99.1
McDermott Reports Third Quarter 2006 Results
Net Income of $101.7 million, $0.89 per fully diluted share
Bidding success in strong markets leads to record backlog of $8.6
billion
HOUSTON--(BUSINESS WIRE)--Nov. 2, 2006--McDermott International,
Inc. (NYSE:MDR) ("McDermott" or the "Company") today reported net
income of $101.7 million, or $0.89 per diluted share, for the 2006
third quarter, compared to net income of $58.5 million, or $0.53 per
diluted share, for the corresponding period in 2005. Weighted average
common shares outstanding on a fully diluted basis were approximately
114.2 million and 109.9 million for the quarters ended September 30,
2006 and September 30, 2005, respectively. For 2005, the Company's
common shares outstanding and earnings per share are adjusted to
reflect the 3-for-2 stock split effected in May 2006.
McDermott's revenues in the third quarter of 2006 were $1,118.3
million, compared to $498.2 million in the corresponding period in
2005. Operating income was $123.2 million in the 2006 third quarter,
compared to $74.2 million in the 2005 third quarter. The increase in
revenues and operating income 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. In addition, the Government Operations segment contributed
substantially to the increase in operating income, largely as a result
of the previously announced consolidation of its nuclear equipment and
nuclear products divisions.
"Whether it's coal-fired power, oil & gas infrastructure or
nuclear activities, the energy markets that McDermott serves continue
to be robust," said Bruce W. Wilkinson, Chairman of the Board and
Chief Executive Officer of McDermott. "Our focus on project execution
and financial discipline enabled the Company to convert strong
industry activity into solid quarterly results and record backlog."
At September 30, 2006, McDermott's consolidated backlog was $8.6
billion, compared to $3.2 billion and $3.6 billion, at September 30,
2005 and December 31, 2005, respectively, which did not include
backlog from B&W in the 2005 amounts.
RESULTS OF OPERATIONS
2006 Third Quarter Compared to 2005 Third Quarter
Offshore Oil & Gas Construction Segment ("J. Ray")
Revenues in the Offshore Oil & Gas Construction segment were
$440.2 million in the 2006 third quarter, compared to $355.3 million
for the same period a year ago. The year-over-year increase in
revenues resulted primarily from increased activity in worldwide
marine projects, the Middle East region and the Asia Pacific region.
Segment income for the 2006 third quarter was $57.3 million,
compared to $63.8 million in the 2005 third quarter. Major items
contributing to operating income in the 2006 third quarter were
projects in the Middle East, Asia Pacific and Caspian regions, as well
as in worldwide marine. In addition, the 2006 third quarter benefited
by approximately $13.1 million primarily related to project
close-outs, compared to approximately $36.4 million of benefit in the
2005 third quarter, primarily related to contract change orders and
close-outs of substantially completed projects.
At September 30, 2006, J. Ray's backlog was $4.0 billion, compared
to backlog of $1.7 billion and $1.8 billion at September 30, 2005 and
December 31, 2005, respectively.
Power Generation Systems Segment ("B&W")
Revenues in the Power Generation Systems segment for the third
quarter 2006 were $534.1 million. During 2005, B&W was deconsolidated
and therefore there were no revenues reported for this segment during
the third quarter of 2005.
Segment income for the 2006 third quarter was $37.0 million,
compared to $0.4 million in the 2005 third quarter. The increase in
segment income was due to the reconsolidation of B&W beginning in the
first quarter 2006.
At September 30, 2006, B&W's backlog was $3.2 billion and was not
consolidated during 2005.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $147.3 million
in the 2006 third quarter, compared to $143.0 million for the same
period a year ago. The increase was primarily due to higher volumes in
the manufacture of fuel for research test reactors, fuel development
for commercial reactors and the management and operating contract for
the Los Alamos National Laboratory which began June 2006.
Segment income for the 2006 third quarter was $34.6 million,
compared to $19.3 million in the 2005 third quarter. The increase was
primarily due to cost improvements in BWXT's manufacturing activities,
including the recognition of cost savings in the backlog associated
with the combination of two prior divisions into the Nuclear
Operations Division. In addition, segment income also improved with
the increases in commercial nuclear environmental services and the
management and operating contract at the Los Alamos National
Laboratory.
At September 30, 2006, BWXT's backlog was $1.4 billion, compared
to backlog of $1.5 billion and $1.8 billion at September 30, 2005 and
December 31, 2005, respectively.
Corporate
Unallocated corporate expenses were $5.8 million in the 2006 third
quarter, compared to $9.3 million in the 2005 third quarter. The
decrease was primarily related to lower departmental expenses and a
reduction in stock based compensation expenses compared to a year ago.
Other Income and Expense
The Company's other income for the third quarter of 2006 was $7.5
million, compared to other expense of $5.5 million in the third
quarter of 2005. The year-over-year variance is due to a $15.4 million
improvement in net interest income/expense resulting from the
retirement of substantially all of the Company's debt in June 2006,
increased cash balances and the resolution of an open tax matter which
increased interest income and reduced the provision for income taxes.
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 Third Quarter Earnings Release
Date: Friday, November 3, 2006, at 10:00 p.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 Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited)
(In thousands, except per share amounts)
Revenues $1,118,260 $498,237 $2,812,097 $1,443,846
- ----------------------------------------------------------------------
Costs and Expenses:
Cost of operations 901,293 379,922 2,248,592 1,154,183
(Gain) loss on asset
disposals and
impairments - net 28 (3,961) 14,949 (6,501)
Selling, general and
administrative
expenses 104,091 57,063 272,926 154,552
- ----------------------------------------------------------------------
1,005,412 433,024 2,536,467 1,302,234
- ----------------------------------------------------------------------
Equity in Income of
Investees 10,310 8,953 25,197 26,222
- ----------------------------------------------------------------------
Operating Income 123,158 74,166 300,827 167,834
- ----------------------------------------------------------------------
Other Income
(Expense):
Interest income 16,644 5,396 36,646 13,795
Interest expense (4,992) (9,165) (22,403) (27,784)
IRS interest expense
adjustment 421 - 11,011 -
Increase in estimated
cost of the B&W
bankruptcy
settlement - - - (5,887)
Loss on early
retirement of debt - - (49,016) -
Other income
(expense) - net (4,609) (1,704) (10,608) 3,874
- ----------------------------------------------------------------------
7,464 (5,473) (34,370) (16,002)
- ----------------------------------------------------------------------
Income from Continuing
Operations before
Provision for
(Benefit from) Income
Taxes 130,622 68,693 266,457 151,832
Provision for (Benefit
from) Income Taxes 28,897 9,955 78,059 (9,171)
- ----------------------------------------------------------------------
Income from Continuing
Operations 101,725 58,738 188,398 161,003
Income (Loss) from
Discontinued
Operations - (238) 12,894 852
- ----------------------------------------------------------------------
Net Income $101,725 $58,500 $201,292 $161,855
- ----------------------------------------------------------------------
Earnings per Common
Share:
Basic:
Income from
Continuing
Operations $0.93 $0.57 $1.74 $1.58
Income (Loss) from
Discontinued
Operations $0.00 $0.00 $0.12 $0.01
Net Income $0.93 $0.57 $1.86 $1.59
Diluted:
Income from
Continuing
Operations $0.89 $0.53 $1.66 $1.49
Income (Loss) from
Discontinued
Operations $0.00 $0.00 $0.11 $0.01
Net Income $0.89 $0.53 $1.77 $1.50
- ----------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited; In thousands)
REVENUES
Offshore Oil and Gas
Construction $440,164 $355,342 $1,134,451 $988,531
Government
Operations 147,337 142,953 471,816 455,486
Power Generation
Systems 534,074 - 1,211,807 -
Adjustments and
Eliminations (3,315) (58) (5,977) (171)
- ----------------------------------------------------------------------
TOTAL $1,118,260 $498,237 $2,812,097 $1,443,846
- ----------------------------------------------------------------------
SEGMENT INCOME (LOSS)
Offshore Oil and Gas
Construction $57,320 $63,838 $142,231 $122,045
Government
Operations 34,648 19,259 91,773 73,036
Power Generation
Systems 36,965 382 89,750 767
- ----------------------------------------------------------------------
128,933 83,479 323,754 195,848
Corporate (5,775) (9,313) (22,927) (28,014)
- ----------------------------------------------------------------------
TOTAL $123,158 $74,166 $300,827 $167,834
- ----------------------------------------------------------------------
EQUITY IN INCOME
(LOSS) OF INVESTEES
(1)
Offshore Oil and Gas
Construction $(677) $2,473 $(2,058) $2,204
Government
Operations 6,464 5,869 18,963 22,584
Power Generation
Systems 4,523 611 8,292 1,434
- ----------------------------------------------------------------------
TOTAL $10,310 $8,953 $25,197 $26,222
- ----------------------------------------------------------------------
DEPRECIATION &
AMORTIZATION (1)
Offshore Oil and Gas
Construction $7,511 $6,575 $19,798 $20,309
Government
Operations 3,481 3,111 10,093 9,368
Power Generation
Systems 4,908 - 11,446 -
Corporate 209 391 726 1,440
- ----------------------------------------------------------------------
TOTAL $16,109 $10,077 $42,063 $31,117
- ----------------------------------------------------------------------
CAPITAL EXPENDITURES
Offshore Oil and Gas
Construction $23,613 $6,110 $69,863 $20,960
Government
Operations 3,697 4,278 11,122 12,055
Power Generation
Systems 9,878 - 17,985 -
Corporate 173 - 2,777 155
- ----------------------------------------------------------------------
TOTAL $37,361 $10,388 $101,747 $33,170
- ----------------------------------------------------------------------
BACKLOG
Offshore Oil and Gas
Construction $4,014,670 $1,697,028 $4,014,670 $1,697,028
Government
Operations 1,376,701 1,497,649 1,376,701 1,497,649
Power Generation
Systems 3,202,147 - 3,202,147 -
- ----------------------------------------------------------------------
TOTAL $8,593,518 $3,194,677 $8,593,518 $3,194,677
- ----------------------------------------------------------------------
(1) Included in Segment Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2006 2005
------------- -------------
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $570,319 $19,263
Restricted cash and cash equivalents 84,004 152,086
Investments 316,749 384,202
Accounts receivable - trade, net 574,263 232,236
Accounts receivable from The Babcock &
Wilcox Company - 3,778
Accounts and notes receivable -
unconsolidated affiliates 30,316 52,867
Accounts receivable - other 57,246 32,982
Contracts in progress 253,102 73,732
Inventories 73,601 319
Deferred income taxes 76,306 32,131
Assets held for sale - 10,886
Other current assets 19,569 8,147
- ----------------------------------------------------------------------
Total Current Assets 2,055,475 1,002,629
- ----------------------------------------------------------------------
Restricted Cash and Cash Equivalents - 2,886
- ----------------------------------------------------------------------
Property, Plant and Equipment 1,492,773 1,097,427
Less accumulated depreciation 1,003,751 779,694
- ----------------------------------------------------------------------
Net Property, Plant and Equipment 489,022 317,733
- ----------------------------------------------------------------------
Investments 141,969 116,304
- ----------------------------------------------------------------------
Goodwill 88,801 12,926
- ----------------------------------------------------------------------
Deferred Income Taxes 269,067 93,880
- ----------------------------------------------------------------------
Other Assets 467,143 121,928
- ----------------------------------------------------------------------
TOTAL $3,511,477 $1,668,286
- ----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
2006 2005
------------- -------------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current maturities of
long-term debt $10,807 $4,250
Accounts payable 365,248 110,970
Accounts payable to The Babcock & Wilcox
Company - 11,429
Accrued employee benefits 136,405 81,196
Accrued liabilities - other 249,446 132,932
Accrued contract cost 86,044 56,566
Advance billings on contracts 989,774 314,467
Liabilities held for sale - 7,182
U.S. and foreign income taxes payable 34,118 49,696
- ----------------------------------------------------------------------
Total Current Liabilities 1,871,842 768,688
- ----------------------------------------------------------------------
Long-Term Debt 15,252 207,861
- ----------------------------------------------------------------------
Accumulated Postretirement Benefit
Obligation 81,422 25,519
- ----------------------------------------------------------------------
Self-Insurance 81,624 60,989
- ----------------------------------------------------------------------
Pension Liability 490,100 311,319
- ----------------------------------------------------------------------
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 68,288 109,082
- ----------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity (Deficit):
Common stock, par value $1.00 per share,
authorized 150,000,000 shares; issued
113,604,251 at September 30, 2006 and
110,786,883 at December 31, 2005 113,604 110,787
Capital in excess of par value 1,205,250 1,146,194
Accumulated deficit (654,614) (862,931)
Treasury stock at cost, 3,039,834 shares
at September 30, 2006 and 3,082,644 at
December 31, 2005 (60,704) (56,496)
Accumulated other comprehensive loss (360,895) (420,852)
- ----------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 242,641 (83,298)
- ----------------------------------------------------------------------
TOTAL $3,511,477 $1,668,286
- ----------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2006 2005
----------- -----------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $201,292 $161,855
- ----------------------------------------------------------------------
Depreciation and amortization 42,063 31,117
Income of investees, less dividends (9,329) (12,426)
(Gain) loss on asset disposals and
impairments - net 14,949 (6,501)
Gain on sale of business (13,786) -
Provision for (benefit from) deferred taxes 264,681 (49,825)
Estimated loss on The Babcock & Wilcox
Company bankruptcy settlement - 5,887
Excess tax benefits from stock-based
compensation (18,126) -
Other 20,625 6,844
Changes in assets and liabilities, net of
effects of acquisitions and divestitures:
Accounts receivable 44,853 (7,926)
Income taxes receivable (236,291) -
Net contracts in progress and advance
billings 179,440 67,025
Accounts payable 36,401 (18,283)
Income taxes 10,817 13,570
Accrued and other current liabilities 28,335 (18,081)
Pension liability (14,862) (3,291)
Other, net 8,603 10,156
- ----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 559,665 180,121
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 70,968 33,140
Purchases of property, plant and equipment (101,747) (33,170)
Purchases of available-for-sale securities (1,263,709) (314,114)
Sales of available-for-sale securities 195,306 2,450
Maturities of available-for-sale securities 1,113,086 209,966
Proceeds from asset disposals 21,516 15,363
Cash acquired from the reconsolidation of The
Babcock & Wilcox Company 164,200 -
Other (2,612) (4,435)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 197,008 (90,800)
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 592 -
Payment of long-term debt (237,066) (12,734)
Issuance of common stock 17,804 33,792
Payment of debt issuance costs (8,654) (949)
Excess tax benefits from stock-based
compensation 18,126 -
Other 1,624 5,382
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (207,574) 25,491
- ----------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 1,957 (44)
NET INCREASE IN CASH AND CASH EQUIVALENTS 551,056 114,768
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 19,263 259,319
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $570,319 $374,087
- ----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $33,212 $21,584
Income taxes - net $17,720 $37,501
- ----------------------------------------------------------------------
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 Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
------------ ----------- ------------ -------------
(Unaudited; In thousands, except per share amounts)
Revenues $1,118,260 $871,230 $3,070,364 $2,530,033
Operating Income $123,158 $(367,477) $302,505 $(239,881)
Net Income $101,725 $(213,401) $203,084 $(91,006)
Diluted Earnings
Per Share $0.89 $(1.94) $1.79 $(0.84)
CONTACT: McDermott International, Inc.
Investor Relations & Corporate Communications
Vice President
Jay Roueche, 281-870-5462
jroueche@mcdermott.com
or
Manager
Robby Bellamy, 281-870-5165
rbellamy@mcdermott.com