Exhibit 99.1
McDermott reports Second Quarter 2007 Results;
Net Income of $149.4 million, $1.31 per fully diluted share
Bookings exceed $2.3 billion during 2007 second quarter;
Backlog grows to $8.9 billion
Board of Directors declares 2-for-1 stock split
HOUSTON--(BUSINESS WIRE)--Aug. 7, 2007--McDermott International,
Inc. (NYSE:MDR) ("McDermott" or the "Company") today reported net
income of $149.4 million, or $1.31 per diluted share, for the 2007
second quarter, compared to net income of $47.0 million, or $0.41 per
diluted share, for the corresponding period in 2006. Weighted average
common shares outstanding on a fully diluted basis were approximately
114.0 million in the quarters ended June 30, 2007 and June 30, 2006.
McDermott's revenues in the second quarter of 2007 were $1,418.1
million, compared to $1,048.9 million in the corresponding period in
2006. The growth in Company revenues compared to a year ago was led by
the Offshore Oil & Gas Construction and Power Generation Systems
segments, increasing 45 percent and 37 percent, respectively.
Operating income was $181.8 million in the 2007 second quarter,
compared to $112.7 million in the 2006 second quarter. The improvement
in operating income is primarily attributable to a $50 million
increase in segment income in the Power Generation Systems segment. In
addition, the Company's Offshore Oil & Gas Construction increased
segment income by 39 percent, partially offset by higher unallocated
corporate expenses.
"At the mid-point of 2007, McDermott's financial performance is on
track to deliver another successful year for our shareholders," said
Bruce W. Wilkinson, Chairman of the Board and Chief Executive Officer
of McDermott. "We have generated strong results year-to-date from the
work we signed in the past. The Company's backlog has grown both
sequentially and compared to a year ago, which supports our continued
optimism for the markets we serve."
At June 30, 2007, McDermott's consolidated backlog was $8.9
billion, compared to $7.8 billion at June 30, 2006 and $7.6 billion at
December 31, 2006.
Earlier today, the Company's Board of Directors declared a
two-for-one split of McDermott's common stock. The stock split will be
applicable to shareholders of record at the close of business on
August 20, 2007 and will be effected in the form of a stock dividend
to be issued on September 10, 2007.
RESULTS OF OPERATIONS
2007 Second Quarter Compared to 2006 Second Quarter
Offshore Oil & Gas Construction Segment ("J. Ray")
Revenues in the Offshore Oil & Gas Construction segment were
$580.0 million in the 2007 second quarter, compared to $398.8 million
for the same period a year ago. The year-over-year increase in
revenues resulted primarily from increased activity in the Middle
East, Asia Pacific and Americas regions.
Segment income for the 2007 second quarter was $91.1 million,
compared to $65.5 million in the 2006 second quarter. Each major
region contributed to the improvement, led by the increased activities
in the Asia Pacific region. In addition, J. Ray experienced an
improvement of approximately $15 million compared to a year ago
related to project close-outs, change orders and settlements, which
are normal, ongoing components to J. Ray's business but which can vary
widely quarter-to-quarter. As disclosed a year ago, J. Ray's second
quarter 2006 segment income benefited by approximately $21 million
related to the accumulated profit recognized from the Dolphin project.
At June 30, 2007, J. Ray's backlog was $4.6 billion, compared to
backlog of $3.2 billion and $4.1 billion at June 30, 2006 and December
31, 2006, respectively.
On July 27, 2007, J. Ray completed its previously announced
acquisition of substantially all of the assets of Secunda
International, Ltd., including 14 multi-functional vessels as well as
its shore base operations for approximately $260 million.
Power Generation Systems Segment ("B&W")
Revenues in the Power Generation Systems segment for the second
quarter 2007 were $673.6 million, compared to $488.7 million reported
in the second quarter of 2006. The year-over-year increase resulted
from increased activity on boiler, scrubber and service projects
including approximately $150 million in revenue recognized from the
global settlement with TXU.
Segment income for the 2007 second quarter was $75.4 million,
compared to $25.2 million in the 2006 second quarter. The improvement
in segment income resulted from approximately $50 million in benefits
resulting from contract terminations and a variety of settlements. In
addition, during the second quarter of 2007, B&W had increased boiler,
scrubber and service activity compared to the same period a year ago.
At June 30, 2007, B&W's backlog was $2.8 billion compared to
backlog of $3.1 billion and $2.2 billion at June 30, 2006 and December
31, 2006, respectively. Backlog at June 30, 2006 included $1.1 billion
of TXU boiler/SCR projects which were removed from backlog by December
31, 2006. B&W has continued work on three TXU boiler and SCR contracts
which are not currently in backlog, but the respective amounts will be
rebooked should a new buyer or buyers contract for one or more of
these units.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $167.7 million
in the 2007 second quarter, compared to $163.5 million for the same
period a year ago. The increase was primarily the result of the
acquisition of Marine Mechanical Corporation which was completed in
April 2007.
Segment income for the 2007 second quarter was $29.7 million,
compared to $30.8 million in the 2006 second quarter. The decrease in
segment income was primarily related to a $1.1 million gain on an
asset sale which occurred in the 2006 second quarter.
At June 30, 2007, BWXT's backlog was $1.5 billion, compared to
backlog of $1.5 billion and $1.3 billion at June 30, 2006 and December
31, 2006, respectively.
Corporate
Unallocated corporate expenses were $14.3 million in the 2007
second quarter, compared to $8.8 million in the 2006 second quarter.
The increase was primarily related to higher stock based compensation
expenses due to McDermott's 70 percent stock price increase during the
second quarter, as well as other increased general corporate expenses.
Other Income and Expense
The Company's other income for the second quarter of 2007 was $9.5
million, compared to other expense of $50.7 million in the second
quarter of 2006. The year-over-year improvement is primarily due to a
$49 million loss on the early retirement of debt which occurred during
the second quarter of 2006 and a $5.1 million improvement in net
interest income/expense compared to the 2006 second quarter due to
improved cash and investment balances.
OTHER INFORMATION
About the Company
McDermott is an engineering and construction company, with
specialty manufacturing and service capabilities, focused on energy
infrastructure. McDermott's customers are predominantly utilities and
other power generators, major and national oil companies, and the
United States Government. With its global operations, McDermott
operates in over 20 countries with more than 20,000 employees.
Forward Looking Statements
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, our position to deliver a successful year and our continued
optimism for the markets we serve. 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, adverse changes in the markets
in which we operate, our inability to successfully execute on
contracts in backlog or that that awards and contracts in backlog may
not otherwise result in the expected revenues. 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, 2006.
Conference Call to Discuss 2007 Second Quarter Earnings Release
Date: Wednesday, August 8, 2007, at 9:00 a.m. ET (8:00 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,
2007 2006 2007 2006
----------- ----------- ----------- -----------
(Unaudited)
(In thousands, except per share amounts)
Revenues $1,418,146 $1,048,930 $2,781,576 $1,693,837
- ----------------------------------------------------------------------
Costs and Expenses:
Cost of operations 1,128,552 842,803 2,210,618 1,344,529
(Gains) losses on
asset disposals and
impairments - net (115) (1,085) (1,750) 14,921
Selling, general and
administrative
expenses 115,225 101,841 212,987 168,835
- ----------------------------------------------------------------------
1,243,662 943,559 2,421,855 1,528,285
- ----------------------------------------------------------------------
Equity in Income of
Investees 7,308 7,340 14,549 14,887
- ----------------------------------------------------------------------
Operating Income 181,792 112,711 374,270 180,439
- ----------------------------------------------------------------------
Other Income
(Expense):
Interest income 15,821 12,467 28,139 20,002
Interest expense (5,366) (7,108) (14,955) (17,411)
IRS interest expense
adjustment - (2,620) - 10,590
Loss on early
retirement of debt - (49,016) - (49,016)
Other expense - net (975) (4,438) (4,845) (5,999)
- ----------------------------------------------------------------------
9,480 (50,715) 8,339 (41,834)
- ----------------------------------------------------------------------
Income from Continuing
Operations before
Provision for Income
Taxes 191,272 61,996 382,609 138,605
Provision for Income
Taxes 41,898 28,768 75,174 49,162
- ----------------------------------------------------------------------
Income from Continuing
Operations 149,374 33,228 307,435 89,443
Income from
Discontinued
Operations - 13,786 - 12,894
- ----------------------------------------------------------------------
Net Income $ 149,374 $ 47,014 307,435 $ 102,337
======================================================================
Earnings per Common
Share:
Basic:
Income from
Continuing
Operations $ 1.34 $ 0.30 $ 2.77 $ 0.83
Income from
Discontinued
Operations $ 0.00 $ 0.13 $ 0.00 $ 0.12
Net Income $ 1.34 $ 0.43 $ 2.77 $ 0.95
Diluted:
Income from
Continuing
Operations $ 1.31 $ 0.29 $ 2.69 $ 0.79
Income from
Discontinued
Operations $ 0.00 $ 0.12 $ 0.00 $ 0.11
Net Income $ 1.31 $ 0.41 $ 2.69 $ 0.90
======================================================================
McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
----------- ----------- ----------- -----------
(Unaudited; In Thousands)
REVENUES
Offshore Oil and Gas
Construction $ 579,977 $ 398,848 $1,130,246 $ 694,287
Government
Operations 167,726 163,480 329,125 324,479
Power Generation
Systems 673,591 488,710 1,329,005 677,733
Adjustments and
Eliminations (3,148) (2,108) (6,800) (2,662)
- ----------------------------------------------------------------------
TOTAL $1,418,146 $1,048,930 $2,781,576 $1,693,837
- ----------------------------------------------------------------------
SEGMENT INCOME
Offshore Oil and Gas
Construction $ 91,056 $ 65,498 $ 212,259 $ 87,681
Government
Operations 29,673 30,760 64,428 57,125
Power Generation
Systems 75,364 25,233 118,828 52,785
- ----------------------------------------------------------------------
196,093 121,491 395,515 197,591
Corporate (14,301) (8,780) (21,245) (17,152)
- ----------------------------------------------------------------------
TOTAL $ 181,792 $ 112,711 $ 374,270 $ 180,439
- ----------------------------------------------------------------------
EQUITY IN INCOME
(LOSS) OF INVESTEES
(1)
Offshore Oil and Gas
Construction $ (1,043) $ (715) $ (1,856) $ (1,381)
Government
Operations 6,519 6,046 12,992 12,499
Power Generation
Systems 1,832 2,009 3,413 3,769
- ----------------------------------------------------------------------
TOTAL $ 7,308 $ 7,340 $ 14,549 $ 14,887
- ----------------------------------------------------------------------
DEPRECIATION &
AMORTIZATION (1)
Offshore Oil and Gas
Construction $ 7,755 $ 5,895 $ 15,059 $ 12,287
Government
Operations 4,674 3,379 8,374 6,612
Power Generation
Systems 5,280 4,859 10,493 6,538
Corporate 255 127 576 517
- ----------------------------------------------------------------------
TOTAL $ 17,964 $ 14,260 $ 34,502 $ 25,954
- ----------------------------------------------------------------------
CAPITAL EXPENDITURES
Offshore Oil and Gas
Construction $ 55,744 $ 25,591 $ 90,168 $ 46,250
Government
Operations 2,313 3,295 4,873 7,425
Power Generation
Systems 9,616 6,252 20,802 8,107
Corporate 145 211 176 2,604
- ----------------------------------------------------------------------
TOTAL $ 67,818 $ 35,349 $ 116,019 $ 64,386
- ----------------------------------------------------------------------
BACKLOG
Offshore Oil and Gas
Construction $4,611,449 $3,231,059 $4,611,449 $3,231,059
Government
Operations 1,491,523 1,524,306 1,491,523 1,524,306
Power Generation
Systems 2,780,337 3,056,313 2,780,337 3,056,313
- ----------------------------------------------------------------------
TOTAL $8,883,309 $7,811,678 $8,883,309 $7,811,678
- ----------------------------------------------------------------------
(1) Included in Segment Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2007 2006
------------ ------------
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $ 1,063,681 $ 600,843
Restricted cash and cash equivalents 86,832 106,674
Investments 148,500 172,171
Accounts receivable - trade, net 714,380 668,310
Accounts and notes receivable -
unconsolidated affiliates 29,731 29,825
Accounts receivable - other 59,267 48,041
Contracts in progress 246,958 230,146
Inventories 89,744 77,769
Deferred income taxes 168,441 180,234
Other current assets 42,313 39,461
- ----------------------------------------------------------------------
Total Current Assets 2,649,847 2,153,474
- ----------------------------------------------------------------------
Property, Plant and Equipment 1,653,831 1,525,187
Less accumulated depreciation 1,041,617 1,011,693
- ----------------------------------------------------------------------
Net Property, Plant and Equipment 612,214 513,494
- ----------------------------------------------------------------------
Investments 145,100 121,914
- ----------------------------------------------------------------------
Goodwill 127,298 89,226
- ----------------------------------------------------------------------
Deferred Income Taxes 213,923 260,341
- ----------------------------------------------------------------------
Long-Term Income Tax Receivable 33,828 299,786
- ----------------------------------------------------------------------
Other Assets 244,213 195,527
- ----------------------------------------------------------------------
TOTAL $ 4,026,423 $3,633,762
======================================================================
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2007 2006
------------ ------------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current maturities of
long-term debt $ 6,461 $ 257,492
Accounts payable 426,549 407,094
Accrued employee benefits 224,570 246,182
Accrued liabilities - other 289,563 264,839
Accrued contract cost 130,688 110,992
Advance billings on contracts 1,397,721 1,116,118
U.S. and foreign income taxes payable 44,315 58,557
- ----------------------------------------------------------------------
Total Current Liabilities 2,519,867 2,461,274
- ----------------------------------------------------------------------
Long-Term Debt 10,623 15,242
- ----------------------------------------------------------------------
Accumulated Postretirement Benefit Obligation 100,581 100,316
- ----------------------------------------------------------------------
Self-Insurance 84,077 84,704
- ----------------------------------------------------------------------
Pension Liability 339,505 372,504
- ----------------------------------------------------------------------
Other Liabilities 167,762 156,621
- ----------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $1.00 per share,
authorized 150,000,000 shares; issued
115,167,278 at June 30, 2007 and
113,897,309 at December 31, 2006 115,167 113,897
Capital in excess of par value 1,256,519 1,214,282
Accumulated deficit (163,416) (458,886)
Treasury stock at cost, 2,939,320 shares at
June 30, 2007 and 3,012,709 shares at
December 31, 2006 (64,000) (60,581)
Accumulated other comprehensive loss (340,262) (365,611)
- ----------------------------------------------------------------------
Total Stockholders' Equity 804,008 443,101
- ----------------------------------------------------------------------
TOTAL $4,026,423 $3,633,762
======================================================================
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2007 2006
------------ ------------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 307,435 $ 102,337
- ----------------------------------------------------------------------
Depreciation and amortization 34,502 25,954
Income of investees, less dividends (3,305) (3,149)
(Gains) losses on asset disposals and
impairments - net (1,750) 14,921
Gain on sale of business - (13,786)
Provision for deferred taxes 53,746 90,678
Excess tax benefits from FAS 123(R)
stock-based compensation (20,319) (13,163)
Other 11,261 18,421
Changes in assets and liabilities, net
of effects of acquisitions and
divestitures:
Accounts receivable (48,039) 114,023
Income tax receivable 270,368 (92,437)
Net contracts in progress and
advance billings on contracts 269,807 114,723
Accounts payable 18,945 (19,979)
Income taxes (23,120) 31,241
Accrued and other current
liabilities 37,592 (9,219)
Pension liability, accumulated
postretirement benefit obligation
and accrued employee benefits (45,167) (25,486)
Other, net (18,587) (3,820)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 843,369 331,259
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 19,842 69,981
Purchases of property, plant and
equipment (116,019) (64,386)
Acquisition of Marine Mechanical
Corporation, net of cash acquired (70,950) -
Purchases of available-for-sale
securities (1,737,053) (917,884)
Maturities of available-for-sale
securities 1,529,861 859,706
Sales of available-for-sale securities 212,743 172,521
Proceeds from asset disposals 2,531 21,549
Cash acquired from the reconsolidation
of The Babcock & Wilcox Company - 164,200
Other (954) (2,549)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (159,999) 303,138
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 592
Payment of long-term debt (255,501) (236,941)
Issuance of common stock 9,576 13,323
Payment of debt issuance costs - (8,606)
Excess tax benefits from FAS 123(R)
stock-based compensation 20,319 13,163
Other 4 (336)
- ----------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (225,602) (218,805)
- ----------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 5,070 1,770
NET INCREASE IN CASH AND CASH
EQUIVALENTS 462,838 417,362
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 600,843 19,263
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 1,063,681 $ 436,625
======================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 17,790 $ 31,516
Income taxes (net of refunds) $ (237,470) $ 21,811
======================================================================
CONTACT: McDermott Investor Relations & Corporate Communications
Jay Roueche, 281-870-5462
Vice President
jroueche@mcdermott.com
or
Robby Bellamy, 281-870-5165
Manager
rbellamy@mcdermott.com