Exhibit 99.1
McDermott Reports Third Quarter 2007
Results
Net Income of $140.4 million, $0.61 per fully diluted share
Continued project execution produces outstanding results,
Expecting 4th Quarter to complete strong 2007
HOUSTON--(BUSINESS WIRE)--Nov. 7, 2007--McDermott International,
Inc. (NYSE:MDR) ("McDermott" or the "Company") today reported net
income of $140.4 million, or $0.61 per diluted share, for the 2007
third quarter, compared to net income of $102.7 million, or $0.45 per
diluted share, for the corresponding period in 2006. Weighted average
common shares outstanding on a fully diluted basis were approximately
228.9 million and 228.3 million in the quarters ended September 30,
2007 and September 30, 2006, respectively. For 2006, the Company's
common shares outstanding and earnings per share are adjusted to
reflect the 2-for-1 stock split effected in September 2007.
McDermott's revenues in the third quarter of 2007 were $1,324.0
million, compared to $1,118.3 million in the corresponding period in
2006. The 18.4 percent growth in Company revenues, compared to a year
ago, was led by the Offshore Oil & Gas Construction segment which
increased $142 million, or 32.3 percent. The revenues in the Power
Generation Systems and Government Operations segments increased 6.2
percent and 20.3 percent, respectively.
Operating income was $155.2 million in the 2007 third quarter, a
25.0 percent improvement compared to $124.1 million in the 2006 third
quarter. The increase in operating income is attributable to continued
exceptional performance within the Offshore Oil & Gas Construction
segment combined with improved results from the Power Generation
Systems segment.
"Our employees' continued commitment to outstanding project
execution again produced superior results for our shareholders," said
Bruce W. Wilkinson, Chairman of the Board and Chief Executive Officer
of McDermott. "With the continued strength of McDermott's Offshore Oil
& Gas Construction business, we believe the 2007 fourth quarter will
complete a remarkably strong year at McDermott."
At September 30, 2007, McDermott's consolidated backlog was $9.3
billion, compared to $8.6 billion at September 30, 2006 and $8.9
billion at June 30, 2007.
RESULTS OF OPERATIONS
2007 Third Quarter Compared to 2006 Third Quarter
Offshore Oil & Gas Construction Segment
Revenues in the Offshore Oil & Gas Construction segment were
$582.2 million in the 2007 third quarter, compared to $440.2 million
for the same period a year ago. The year-over-year increase in
revenues resulted from a higher workload in the Middle East and
Americas regions, in addition to increased worldwide marine
activities.
Segment income for the 2007 third quarter was $88.1 million,
compared to $58.3 million in the 2006 third quarter. Major areas
contributing to third quarter 2007 segment income include activities
in the Middle East and Asia Pacific regions and projects within
worldwide marine operations, including related settlements, change
orders and contract close outs.
At September 30, 2007, segment backlog was $4.9 billion, compared
to backlog of $4.0 billion and $4.6 billion at September 30, 2006 and
June 30, 2007, respectively.
Power Generation Systems Segment
Revenues in the Power Generation Systems segment for the third
quarter 2007 were $567.2 million, compared to $534.1 million reported
in the third quarter of 2006. The year-over-year improvement resulted
from increased boiler activity and replacement part orders.
Segment income for the 2007 third quarter was $49.4 million,
compared to $37.0 million in the 2006 third quarter. Major areas
contributing to third quarter 2007 segment income include utility
steam system fabrication, industrial boiler, parts and service
activities, including related settlements, change orders and contract
close outs.
At September 30, 2007, segment backlog was $3.0 billion compared
to backlog of $3.2 billion and $2.8 billion at September 30, 2006 and
June 30, 2007, respectively.
Government Operations Segment
Revenues in the Government Operations segment were $177.2 million
in the 2007 third quarter, compared to $147.3 million for the same
period a year ago. The improvement was primarily due to higher volumes
in the manufacture of nuclear components for certain U.S. Government
programs, including revenues from the recent acquisition of Marine
Mechanical Corporation in April 2007.
Segment income for the 2007 third quarter was $25.2 million,
compared to $34.6 million in the 2006 third quarter. Major items
contributing to the third quarter 2007 segment income include the
manufacture of nuclear components for certain U.S. Government programs
and the management and operations of various U.S. Government sites. In
the third quarter of 2006, segment income benefited from the
recognition of cost savings in backlog associated with the combination
of two prior operating divisions into the Nuclear Operations Division.
At September 30, 2007, segment backlog was $1.4 billion, compared
to backlog of $1.4 billion and $1.5 billion at September 30, 2006 and
June 30, 2007, respectively.
Corporate
Unallocated corporate expenses were $7.6 million in the 2007 third
quarter, compared to $5.8 million in the 2006 third quarter. The
increase was primarily related to higher stock based compensation
expenses due to McDermott's 30.1 percent stock price increase during
the third quarter, as well as other increased general corporate
expenses.
Other Income and Expense
The Company's other income for the third quarter of 2007 was $13.6
million, compared to other income of $7.5 million in the third quarter
of 2006.
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 and our optimism for the continued strength of our Offshore
Oil & Gas Construction segment and completion of a strong 2007.
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
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 Third Quarter Earnings Release
Date: Thursday, November 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 Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
----------- ----------- ----------- -----------
(Unaudited)
(In thousands, except per share amounts)
Revenues $1,324,018 $1,118,260 $4,105,594 $2,812,097
- ----------------------------------------------------------------------
Costs and Expenses:
Cost of operations 1,067,437 900,351 3,278,055 2,244,880
(Gains) losses on
asset disposals and
impairments - net (630) 28 (2,380) 14,949
Selling, general and
administrative
expenses 114,538 104,091 327,525 272,926
- ----------------------------------------------------------------------
Total Costs and
Expenses 1,181,345 1,004,470 3,603,200 2,532,755
- ----------------------------------------------------------------------
Equity in Income of
Investees 12,477 10,310 27,026 25,197
- ----------------------------------------------------------------------
Operating Income 155,150 124,100 529,420 304,539
- ----------------------------------------------------------------------
Other Income (Expense):
Interest income 17,272 16,644 45,411 36,646
Interest expense (3,476) (4,992) (18,431) (22,403)
IRS interest expense
adjustment - 421 - 11,011
Loss on early
retirement of debt - - - (49,016)
Other expense - net (205) (4,609) (5,050) (10,608)
- ----------------------------------------------------------------------
Total Other Income
(Expense) 13,591 7,464 21,930 (34,370)
- ----------------------------------------------------------------------
Income from Continuing
Operations before
Provision for Income
Taxes 168,741 131,564 551,350 270,169
Provision for Income
Taxes 28,333 28,897 103,507 78,059
- ----------------------------------------------------------------------
Income from Continuing
Operations 140,408 102,667 447,843 192,110
Income from
Discontinued
Operations - - - 12,894
- ----------------------------------------------------------------------
Net Income $ 140,408 $ 102,667 $ 447,843 $ 205,004
======================================================================
Earnings per Common
Share:
Basic:
Income from
Continuing
Operations $ 0.63 $ 0.47 $ 2.01 $ 0.88
Income from
Discontinued
Operations $ 0.00 $ 0.00 $ 0.00 $ 0.06
Net Income $ 0.63 $ 0.47 $ 2.01 $ 0.94
Diluted:
Income from
Continuing
Operations $ 0.61 $ 0.45 $ 1.96 $ 0.84
Income from
Discontinued
Operations $ 0.00 $ 0.00 $ 0.00 $ 0.06
Net Income $ 0.61 $ 0.45 $ 1.96 $ 0.90
======================================================================
McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
----------- ----------- ----------- -----------
(Unaudited; In Thousands)
REVENUES
Offshore Oil and Gas
Construction $ 582,168 $ 440,164 $1,712,414 $1,134,451
Government Operations 177,215 147,337 506,340 471,816
Power Generation
Systems 567,173 534,074 1,896,178 1,211,807
Adjustments and
Eliminations (2,538) (3,315) (9,338) (5,977)
- ----------------------------------------------------------------------
TOTAL $1,324,018 $1,118,260 $4,105,594 $2,812,097
- ----------------------------------------------------------------------
SEGMENT INCOME
Offshore Oil and Gas
Construction $ 88,143 $ 58,262 $ 300,402 $ 145,943
Government Operations 25,207 34,648 89,635 91,773
Power Generation
Systems 49,376 36,965 168,204 89,750
- ----------------------------------------------------------------------
162,726 129,875 558,241 327,466
Corporate (7,576) (5,775) (28,821) (22,927)
- ----------------------------------------------------------------------
TOTAL $ 155,150 $ 124,100 $ 529,420 $ 304,539
- ----------------------------------------------------------------------
EQUITY IN INCOME (LOSS)
OF INVESTEES (1)
Offshore Oil and Gas
Construction $ (1,082) $ (677) $ (2,938) $ (2,058)
Government Operations 6,615 6,464 19,607 18,963
Power Generation
Systems 6,944 4,523 10,357 8,292
- ----------------------------------------------------------------------
TOTAL $ 12,477 $ 10,310 $ 27,026 $ 25,197
- ----------------------------------------------------------------------
DEPRECIATION &
AMORTIZATION (1)
Offshore Oil and Gas
Construction $ 21,997 $ 7,511 $ 37,056 $ 19,798
Government Operations 5,259 3,481 13,633 10,093
Power Generation
Systems 5,071 4,908 15,564 11,446
Corporate 279 209 855 726
- ----------------------------------------------------------------------
TOTAL $ 32,606 $ 16,109 $ 67,108 $ 42,063
- ----------------------------------------------------------------------
CAPITAL EXPENDITURES
Offshore Oil and Gas
Construction $ 46,761 $ 23,613 $ 136,929 $ 69,863
Government Operations 2,859 3,697 7,732 11,122
Power Generation
Systems 10,467 9,878 31,269 17,985
Corporate 5,697 173 5,873 2,777
- ----------------------------------------------------------------------
TOTAL $ 65,784 $ 37,361 $ 181,803 $ 101,747
- ----------------------------------------------------------------------
BACKLOG
Offshore Oil and Gas
Construction $4,905,011 $4,014,670 $4,905,011 $4,014,670
Government Operations 1,366,905 1,376,701 1,366,905 1,376,701
Power Generation
Systems 3,048,323 3,202,147 3,048,323 3,202,147
- ----------------------------------------------------------------------
TOTAL $9,320,239 $8,593,518 $9,320,239 $8,593,518
- ----------------------------------------------------------------------
(1) Included in Segment Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2007 2006
------------------- -------------------
(Unaudited)
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 735,599 $ 600,843
Restricted cash and cash
equivalents 98,295 106,674
Investments 248,089 172,171
Accounts receivable - trade,
net 761,341 668,310
Accounts and notes
receivable - unconsolidated
affiliates 33,227 29,825
Accounts receivable - other 95,769 48,041
Contracts in progress 217,641 230,146
Inventories 94,428 77,769
Deferred income taxes 120,575 180,234
Other current assets 87,100 39,461
- ---------------------------------------------------------------------
Total Current Assets 2,492,064 2,153,474
- ---------------------------------------------------------------------
Property, Plant and Equipment 1,966,456 1,525,187
Less accumulated
depreciation 1,071,111 1,011,693
- ---------------------------------------------------------------------
Net Property, Plant and
Equipment 895,345 513,494
- ---------------------------------------------------------------------
Investments 159,610 121,914
- ---------------------------------------------------------------------
Goodwill 149,229 89,226
- ---------------------------------------------------------------------
Deferred Income Taxes 226,497 260,341
- ---------------------------------------------------------------------
Long-Term Income Tax
Receivable 2,958 299,786
- ---------------------------------------------------------------------
Other Assets 269,081 195,527
- ---------------------------------------------------------------------
TOTAL $4,194,784 $3,633,762
=====================================================================
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2007 2006
-------------------- -------------------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current
maturities of long-term
debt $ 6,555 $ 257,492
Accounts payable 462,828 407,094
Accrued employee benefits 273,791 246,182
Accrued liabilities - other 220,241 185,762
Accrued contract cost 111,050 110,992
Advance billings on
contracts 1,392,893 1,116,118
Accrued warranty expense 102,041 79,077
Income taxes payable 42,332 58,557
- ----------------------------------------------------------------------
Total Current Liabilities 2,611,731 2,461,274
- ----------------------------------------------------------------------
Long-Term Debt 10,653 15,242
- ----------------------------------------------------------------------
Accumulated Postretirement
Benefit Obligation 99,630 100,316
- ----------------------------------------------------------------------
Self-Insurance 80,929 84,704
- ----------------------------------------------------------------------
Pension Liability 248,590 372,504
- ----------------------------------------------------------------------
Other Liabilities 155,700 156,621
- ----------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value
$1.00 per share, authorized
400,000,000 shares; issued
231,159,285 at September
30, 2007 and 227,794,618 at
December 31, 2006 231,159 227,795
Capital in excess of par
value 1,161,571 1,100,384
Accumulated deficit (23,008) (458,886)
Treasury stock at cost,
5,867,590 shares at
September 30, 2007 and
6,025,418 shares at
December 31, 2006 (63,962) (60,581)
Accumulated other
comprehensive loss (318,209) (365,611)
- ----------------------------------------------------------------------
Total Stockholders' Equity 987,551 443,101
- ----------------------------------------------------------------------
TOTAL $4,194,784 $3,633,762
======================================================================
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2007 2006
------------------- -------------------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 447,843 $ 205,004
- ----------------------------------------------------------------------
Depreciation and
amortization 67,108 42,063
Income of investees, less
dividends (10,196) (9,329)
(Gains) losses on asset
disposals and impairments -
net (2,380) 14,949
Gain on sale of business - (13,786)
Provision for deferred taxes 73,485 264,681
Excess tax benefits from FAS
123(R) stock-based
compensation (27,234) (18,126)
Other 27,916 20,625
Changes in assets and
liabilities, net of effects
of acquisitions and
divestitures:
Accounts receivable (129,353) 44,853
Income tax receivable 262,185 (236,291)
Net contracts in progress
and advance billings on
contracts 287,980 179,440
Accounts payable 46,522 36,401
Income taxes (22,514) 10,817
Accrued and other current
liabilities 47,003 17,888
Pension liability,
accumulated
postretirement benefit
obligation and accrued
employee benefits (78,728) (16,757)
Other, net (30,359) 17,233
- ----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 959,278 559,665
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Decrease in restricted cash
and cash equivalents 8,379 70,968
Purchases of property, plant
and equipment (181,803) (101,747)
Acquisition of businesses, net
of cash acquired (334,457) -
Net (increase) decrease in
available-for-sale securities (106,151) 44,683
Proceeds from asset disposals 4,582 21,516
Cash acquired from the
reconsolidation of The
Babcock & Wilcox Company - 164,200
Other (2,016) (2,612)
- ----------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (611,466) 197,008
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of long-term debt - 592
Payment of long-term debt (255,629) (237,066)
Issuance of common stock 12,683 17,804
Payment of debt issuance costs (3,468) (8,654)
Excess tax benefits from FAS
123(R) stock-based
compensation 27,234 18,126
Other 4 1,624
- ----------------------------------------------------------------------
NET CASH USED IN FINANCING
ACTIVITIES (219,176) (207,574)
- ----------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH 6,120 1,957
NET INCREASE IN CASH AND CASH
EQUIVALENTS 134,756 551,056
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 600,843 19,263
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 735,599 $ 570,319
======================================================================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for:
Interest (net of amount
capitalized) $ 23,896 $ 33,212
Income taxes (net of
refunds) $ (223,285) $ 17,720
======================================================================
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