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 EndedSeptember 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 September 30, Nine Months
Ended 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) 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 -0- *T 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
----------------------------------------------------------------------
*T -0- *T 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. *T -0- *T 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
----------------------------------------------------------------------
*T -0- *T 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
----------------------------------------------------------------------
*T -0- *T 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
----------------------------------------------------------------------
*T -0- *T 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) *T
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