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
EndedJune 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 �
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