-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MpO62ZgOW1Uao8oDCEAEAjCfcg6Z3aO+HUaBGGo6QKhaZS2vnttFmi2SEsBFU3NQ ypgDIKCC8a4S4x4U0XDU0w== 0001157523-03-004147.txt : 20030812 0001157523-03-004147.hdr.sgml : 20030812 20030812121523 ACCESSION NUMBER: 0001157523-03-004147 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030812 ITEM INFORMATION: FILED AS OF DATE: 20030812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCDERMOTT INTERNATIONAL INC CENTRAL INDEX KEY: 0000708819 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 720593134 STATE OF INCORPORATION: R1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08430 FILM NUMBER: 03836599 BUSINESS ADDRESS: STREET 1: 1450 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045875400 MAIL ADDRESS: STREET 1: 1450 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70161 8-K 1 a4453225.txt MCDERMOTT 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report: August 12, 2003 McDERMOTT INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) REPUBLIC OF PANAMA 1-8430 72-0593134 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission) (IRS Employer of incorporation) File No.) Identification No.) 1450 Poydras Street, New Orleans, Louisiana 70112-6050 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including Area Code: (504) 587-5400 -------------- Item 12. Results of Operations and Financial Condition On August 11, 2003, McDermott International, Inc. issued a press release announcing financial results for the second quarter of 2003. A copy of the press release is attached as Exhibit 99.1, and the information contained in Exhibit 99.1 is incorporated by reference. The information furnished pursuant to this Item 12, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. McDERMOTT INTERNATIONAL INC. By: /s/Thomas A. Henzler -------------------------------- Thomas A. Henzler Vice President and Corporate Controller August 12, 2003 EX-99 3 a4453225_ex99.txt MCDERMOTT EXHIBIT 99.1 Exhibit 99.1 McDermott Announces Second Quarter Net Loss of $59.9 Million, or $0.94 Loss per Diluted Share, Including B&W Revaluation Costs of $40 Million and Project Loss of $39.9 Million NEW ORLEANS--(BUSINESS WIRE)--Aug. 11, 2003--McDermott International Inc. (NYSE:MDR) ("McDermott" or the "Company") today announced a loss from continuing operations of $60.5 million, or $0.95 loss per diluted share, for the 2003 second quarter compared to a loss from continuing operations of $235.4 million, or $3.82 loss per diluted share, for the 2002 second quarter. Net loss for the 2003 second quarter of $59.9 million, or $0.94 loss per diluted share, included net income from discontinued operations of $0.7 million, or $0.01 per diluted share. Net loss for the 2002 second quarter of $234.2 million, or $3.80 loss per diluted share, included net income from discontinued operations of $1.2 million, or $0.02 per diluted share. Weighted average common shares outstanding were 64.0 million and 61.7 million at June 30, 2003 and June 30, 2002, respectively. Two significant items impacting the net loss for the 2003 quarter on an after-tax basis were as follows: -- $40.0 million loss for the revaluation of the estimated settlement costs related to the Chapter 11 proceedings involving The Babcock & Wilcox Company ("B&W") -- $39.9 million loss related to a marine construction project in Argentina Revenues increased 29% to $595.5 million in the 2003 second quarter compared to the 2002 second quarter. This increase is due primarily to the increased activity in the Marine Construction Services segment partially offset by the absence of revenues from the Power Generation Systems segment in the 2003 second quarter due to the sale of Babcock & Wilcox Volund ApS in 2002. Operating loss of $13.9 million for the 2003 second quarter included a $39.9 million loss related to a project in Argentina being performed by J. Ray McDermott ("J. Ray"), which comprises the Marine Construction Services segment, and an $18 million qualified pension plan expense in the Corporate segment. The 2002 second quarter operating loss of $237.3 million included a $224.7 million write-off of the investment in B&W in the Corporate segment and a $33.9 million loss from the EPIC Spar projects ("Spar projects") in the Marine Construction Services segment. "I am pleased with BWX Technologies Inc.'s ability to consistently deliver year-over-year improved operational performance and financial results in our Government Operations segment. Unfortunately, the Company's second quarter was adversely impacted by a weather-related event which caused a three-month delay in work on a project in Argentina. The project was awarded to J. Ray in the fall of 2001 prior to our announcement last year that we would no longer accept contracts that place a disproportionate amount of risk on the Company. We have reached an agreement in principle with the customer to minimize our future risk on this project. Absent losses from this project, J. Ray would have posted positive operating results for the quarter," said Bruce W. Wilkinson, chairman of the board and chief executive officer of McDermott. "J. Ray's new management team is in place and will continue to gain traction over the next several quarters. While I am confident in the team's ability to deliver improved operational performance going forward, there is still much to be done to stabilize J. Ray," continued Wilkinson. "Given the current situation at J. Ray and the uncertainty surrounding the passage of the pending asbestos legislation, which would have a significant impact on our Company, we are withdrawing the 2003 earnings guidance and feel that it is not prudent at this time to issue revised guidance for the remainder of 2003," said Wilkinson. RESULTS OF OPERATIONS 2003 Second Quarter Compared to 2002 Second Quarter Marine Construction Services Segment Revenues from the Marine Construction Services segment, which consists of J. Ray McDermott and its subsidiaries, increased 48% to $468.0 million in the 2003 second quarter. The revenue increase resulted from increased execution of fabrication and marine installation projects in all geographic areas in which J. Ray operates other than in the Gulf of Mexico, where activity declined slightly compared to the 2002 second quarter. The operating loss of $13.2 million for the 2003 second quarter resulted primarily from recording a $39.9 million loss provision for the project in Argentina. As previously reported, on June 11, 2003, due to a sudden change in weather, J. Ray experienced damage to some pipe-laying equipment and the Derrick Barge 60 ("DB60") while laying subsea pipe off the coast of southern Argentina. Work was suspended on the project to assess the remedial action required to complete the project and complete repairs to the DB60. J. Ray has very recently reached an agreement in principle, which is subject to ongoing negotiations, with the customer to minimize future risks associated with this project. Major projects contributing to 2003 second quarter operating income, excluding the $39.9 million loss provision discussed above, were the topsides fabrication and subsea pipeline installation projects in the Azerbaijani sector of the Caspian Sea, topsides fabrication work in the Morgan City fabrication facility and charter of a vessel into Mexico. Selling, general and administrative expenses were $3.4 million lower in the 2003 second quarter compared to the 2002 second quarter. The 2003 second quarter included no additional losses on the Spar projects, while the 2002 second quarter included losses of $33.9 million on the Spar projects. At June 30, 2003, J. Ray's backlog of $1.8 billion included $359 million related to contracts in loss positions. Of this amount $207 million related to uncompleted work on the Spar projects and $103 million related to the project in Argentina. Backlog was $2.0 billion and $2.1 billion at March 31, 2003 and at December 31, 2002, respectively. Government Operations Segment The Government Operations segment consists primarily of BWX Technologies Inc. Revenues in this segment decreased $3.6 million to $127.5 million in the 2003 second quarter primarily due to lower revenues in management and operations services partially offset by higher volumes from the manufacture of nuclear components for certain U.S. government programs. Effective January 1, 2003, BWXT became a teaming partner to complete the environmental restoration for a U.S. government site in Ohio, which it previously operated as a prime contractor. This resulted in the recording of revenues for the subcontract earned fees only rather than the full revenues from this contract. This caused a $20 million reduction in revenues for the 2003 second quarter compared to the 2002 second quarter. Operating income increased $5.7 million to $20.5 million in the 2003 second quarter, primarily due to the following: -- higher volumes from the manufacture of nuclear components for certain U.S. government programs -- favorable resolution of a contract dispute -- improved operating results from joint ventures in Idaho, Texas and Tennessee -- reduced spending on fuel cell research and development projects These increases were partially offset by lower volumes and margins from commercial work and other government manufacturing operations, and higher general and administrative expenses due to increased facility management oversight costs and higher variable stock-based compensation expense. At June 30, 2003, BWXT's backlog was $1.5 billion, compared to backlog of $1.6 billion and $1.7 billion at March 31, 2003 and December 31, 2002, respectively. Corporate Corporate expenses increased $18.0 million to $21.2 million in the 2003 second quarter compared to $3.3 million in the 2002 second quarter, primarily due to higher noncash qualified pension plan expense as a result of changes in the discount rate and plan asset performance. Additionally, the financial performance of the Company's captive insurance companies was less favorable during the 2003 second quarter than in the 2002 second quarter. Other Income and Expense Interest income decreased to $0.9 million in the 2003 second quarter compared to $1.8 million in the 2002 second quarter, primarily due to decreases in investments and prevailing interest rates. Interest expense increased $1.8 million to $4.2 million in the 2003 second quarter, primarily due to interest costs associated with the Company's credit facility, which was refinanced in February 2003. The Company reported other income of $0.7 million in the 2003 second quarter compared to other expense of $0.9 million in the 2002 second quarter due to income resulting from the curtailment of J. Ray's qualified pension plan and minority interest income associated with a J. Ray joint venture. Foreign currency transaction losses partially offset this income. During the 2003 second quarter, revaluation of certain components of the estimated settlement cost related to the Chapter 11 proceedings involving B&W resulted in an increase of the estimated liability to $126.4 million and recognition of other expense of $39.4 million ($40.0 million after tax). The consideration to be provided in the proposed settlement includes, among other things, McDermott common stock, a share price guaranty obligation and a promissory note. The increase is due primarily to an increase in the price of McDermott's common stock from $2.90 per share at March 31, 2003 to $6.33 per share at June 30, 2003. The Company is required to revalue certain components of the estimated settlement cost quarterly and at the time the securities are issued, assuming the settlement is finalized. Assuming issuance of the debt and equity securities, the Company will record such amounts as liabilities or stockholders' equity based on the nature of the individual securities. For the 2003 second quarter, income tax expense was impacted by the non-deductible portion of the expense associated with the revaluation of the estimated cost of settlement of the B&W Chapter 11 proceedings, an increase in the valuation allowance for the realization of deferred tax assets and the mix of income and losses from various tax jurisdictions in which the Company operates. DISCONTINUED OPERATIONS The Company is in final negotiations to sell Menck GmbH ("Menck"), a component of the Marine Construction Services segment, and expects to close the transaction by September 30, 2003. Accordingly, for the three and six months ended June 30, 2003 and June 30, 2002, the Company has reported the results of operations for Menck as discontinued operations. Hudson Products Corporation ("HPC") was sold in July 2002. Accordingly, for the three and six months ended June 30, 2002, the Company has reported the results of operations for HPC as discontinued operations. THE BABCOCK & WILCOX COMPANY The Company wrote off its investment in B&W of $224.7 million during the second quarter of 2002 and has not consolidated B&W with its financial results since the Chapter 11 bankruptcy filing on February 22, 2000. B&W's revenues decreased $52.8 million to $352.3 million in the 2003 second quarter compared to $405.1 million in the 2002 second quarter. Net loss for the 2003 second quarter of $51.7 million included a $70 million provision for an increase in B&W's estimated asbestos liability. Net income for the 2002 second quarter was $16.5 million. LIQUIDITY On a consolidated basis, the Company incurred negative cash flows for the first two quarters of 2003 and expects to incur negative cash flows during the remainder of 2003 and in the first half of 2004 primarily due to losses on the Spar projects and the Argentina project. Completion of the Spar projects and the Argentina project has and will continue to put a strain on J. Ray's liquidity. J. Ray intends to fund its negative cash flow through borrowings under the credit facility, intercompany loans from McDermott and sales of non-strategic assets including the sale of Menck and certain marine vessels. For the 2003 year, the Company anticipates negative operating cash flows before capital expenditures of between $100 million and $120 million. At August 8, 2003, the Company had liquidity of $146 million, which included unrestricted cash of $97 million and borrowing capacity of $49 million. The Company is in the process of refinancing BWXT on a stand-alone basis and has received a commitment letter from a commercial bank to underwrite a three-year $125 million revolving credit facility, which may be increased to $150 million. This commitment is subject to the successful refinancing of J. Ray on a stand-alone basis. The Company is in negotiations with a lender to provide financing to J. Ray and hopes to close both new facilities simultaneously. The Company's ability to obtain such a replacement facility for J. Ray will depend on numerous factors including J. Ray's operating performance and overall market conditions. If J. Ray experiences additional significant contract costs on its Spar projects, the Argentina project or any other project as a result of unforeseen events, it may be unable to fund all of its budgeted capital expenditures and meet all of its funding requirements for contractual commitments. If the Company is unable to obtain a new credit facility for J. Ray or is unable to replace or extend the existing credit facility, J. Ray's ability to pursue additional projects, which often require letters of credit, and its liquidity will be adversely impacted. These factors cause substantial doubt about J. Ray's ability to continue as a going concern. OTHER INFORMATION About the Company McDermott International Inc. is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, 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 International Inc. 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. The forward-looking statements in this press release include, among other things, statements about the Company's and J. Ray's liquidity and ability to obtain new credit facilities or extend the current facility, the estimated cash flows and timing to complete the Spar projects and the Argentina project, the estimated charges for the proposed settlement of the B&W Chapter 11 based on current negotiations, the probability of that proposed settlement, J. Ray's ability to continue as a going concern, J. Ray's management team's ability to deliver improved performance and the closing of the Menck transaction by September 30, 2003. 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. 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 risk factors, please see McDermott's annual report for the year ended December 31, 2002 and its 2003 quarterly reports filed with the Securities and Exchange Commission. Conference Call to Discuss 2003 Second Quarter Earning Release Date: Tuesday, August 12, 2003 at 10:00 a.m. EDT (9:00 a.m. CDT) Webcast: Investor Relations section of website at www.mcdermott.com Dial-in: (USA) (888) 396-2384 or (International) (617) 847-8711 Access code 61014564 Replay: August 12, 2003 beginning at 1:00 p.m. EDT (12:00 p.m. CDT) (USA) (888) 286-8010 or (International) (617) 801-6888 Access code 40389865 McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF LOSS Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Unaudited) (In thousands, except per share amounts) Revenues $595,475 $462,562 $1,108,212 $860,486 - ---------------------------------------------------------------------- Costs and Expenses: Cost of operations 578,578 439,421 1,044,085 804,531 Loss on write-off of investment in The Babcock & Wilcox Company - 224,664 - 224,664 Selling, general and administrative expenses 36,052 38,239 77,235 79,898 - ---------------------------------------------------------------------- 614,630 702,324 1,121,320 1,109,093 - ---------------------------------------------------------------------- Equity in Income of Investees 5,237 2,418 13,125 9,952 - ---------------------------------------------------------------------- Operating Income (Loss) (13,918) (237,344) 17 (238,655) - ---------------------------------------------------------------------- Other Income (Expense): Interest income 909 1,858 1,889 5,337 Interest expense (4,171) (2,368) (7,830) (9,533) Increase in estimated cost of The Babcock & Wilcox Company bankruptcy settlement (39,395) - (15,324) - Other-net 652 (878) 1,987 1,410 - ---------------------------------------------------------------------- (42,005) (1,388) (19,278) (2,786) - ---------------------------------------------------------------------- Loss from Continuing Operations before Provision for (Benefit from) Income Taxes and Cumulative Effect of Accounting Change (55,923) (238,732) (19,261) (241,441) Provision for (Benefit from) Income Taxes 4,624 (3,327) 11,661 (5,392) - ---------------------------------------------------------------------- Loss from Continuing Operations before Cumulative Effect of Accounting Change (60,547) (235,405) (30,922) (236,049) Income from Discontinued Operations 695 1,189 2,906 1,240 - ---------------------------------------------------------------------- Loss before Cumulative Effect of Accounting Change (59,852) (234,216) (28,016) (234,809) Cumulative Effect of Accounting Change - - 3,710 - - ---------------------------------------------------------------------- Net Loss $(59,852) $(234,216) $(24,306) $(234,809) - ---------------------------------------------------------------------- Earnings (Loss) per Common Share: Basic and Diluted Loss from Continuing Operations before Cumulative Effect of Accounting Change $(0.95) $(3.82) $(0.49) $(3.85) Income from Discontinued Operations $0.01 $0.02 $0.05 $0.02 Cumulative Effect of Accounting Change $- $- $0.06 $- Net Loss $(0.94) $(3.80) $(0.38) $(3.83) Weighted Average Common Shares 63,995 61,700 63,732 61,362 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. SELECTED SEGMENT INFORMATION Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Unaudited) (In thousands except Backlog) REVENUES Marine Construction Services $467,972 $315,691 $863,012 $578,594 Government Operations 127,523 131,115 245,231 252,906 Power Generation Systems - 15,793 - 29,035 Adjustments and Eliminations (20) (37) (31) (49) - ---------------------------------------------------------------------- TOTAL $595,475 $462,562 $1,108,212 $860,486 - ---------------------------------------------------------------------- OPERATING INCOME (LOSS) Marine Construction Services $(13,162) $(20,842) $3,478 $(28,671) Government Operations 20,486 14,802 44,111 32,560 Power Generation Systems (4) (3,384) 30 (3,922) - ---------------------------------------------------------------------- 7,320 (9,424) 47,619 (33) Write-off of investment in B&W - (224,664) - (224,664) Corporate (21,238) (3,256) (47,602) (13,958) - ---------------------------------------------------------------------- TOTAL $(13,918) $(237,344) $17 $(238,655) - ---------------------------------------------------------------------- EQUITY IN INCOME (LOSS) OF INVESTEES Marine Construction Services $(885) $182 $(577) $1,776 Government Operations 5,938 5,079 13,294 10,989 Power Generation Systems 184 (2,843) 408 (2,813) - ---------------------------------------------------------------------- TOTAL $5,237 $2,418 $13,125 $9,952 - ---------------------------------------------------------------------- DEPRECIATION & AMORTIZATION Marine Construction Services $7,757 $6,202 $13,181 $11,904 Government Operations 3,180 3,152 6,332 6,186 Power Generation Systems 4 183 7 356 Corporate 916 1,002 1,657 1,244 - ---------------------------------------------------------------------- TOTAL $11,857 $10,539 $21,177 $19,690 - ---------------------------------------------------------------------- CAPITAL EXPENDITURES Marine Construction Services $3,858 $10,354 $11,605 $16,694 Government Operations 5,318 5,106 7,460 9,391 Power Generation Systems - 51 - 171 Corporate 1,656 - 1,662 101 - ---------------------------------------------------------------------- TOTAL $10,832 $15,511 $20,727 $26,357 - ---------------------------------------------------------------------- BACKLOG (in millions) Marine Construction Services $1,838 $2,068 $1,838 $2,068 Government Operations 1,493 1,021 1,493 1,021 Power Generation Systems - 41 - 41 - ---------------------------------------------------------------------- TOTAL $3,331 $3,130 $3,331 $3,130 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. ITEMS INCLUDED IN LOSS FROM CONTINUING OPERATIONS Three Months Six Months Ended Ended June 30, June 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Unaudited) (In millions) ITEMS INCLUDED IN OPERATING INCOME (LOSS) BY SEGMENT Marine Construction Services Losses on Spar projects $- $(30.0) $- $(36.9) Losses on Argentina project (39.9) - (41.9) - Announced change orders on a project - - 11.0 - - ---------------------------------------------------------------------- TOTAL $(39.9) $(30.0) $(30.9) $(36.9) - ---------------------------------------------------------------------- Government Operations Favorable resolution of contract dispute $5.4 $- $8.7 $- - ---------------------------------------------------------------------- TOTAL $5.4 $- $8.7 $- - ---------------------------------------------------------------------- Corporate Write-off of investment in B&W $- $(224.7) $- $(224.7) Qualified pension plan expense (18.0) (2.1) (36.0) (4.1) - ---------------------------------------------------------------------- TOTAL $(18.0) $(226.8) $(36.0) $(228.8) - ---------------------------------------------------------------------- OTHER ITEMS Change in estimated cost of B&W bankruptcy settlement before tax $(39.4) $- $(15.3) $- Tax impact on B&W settlement (.6) - (1.1) - - ---------------------------------------------------------------------- Change in estimated cost of B&W bankruptcy settlement after tax $(40.0) $- $(16.4) $- - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS June 30, December 31, 2003 2002 ---- ---- (Unaudited) (In thousands) Current Assets: Cash and cash equivalents $ 181,465 $ 174,341 Investments -- 108,269 Accounts receivable -- trade, net 243,066 191,672 Accounts receivable from The Babcock & Wilcox Company 5,798 12,273 Accounts receivable -- unconsolidated affiliates 12,321 17,695 Accounts receivable -- other 30,429 63,270 Contracts in progress 94,051 147,336 Deferred income taxes 2,241 3,350 Other current assets 56,933 45,403 - ---------------------------------------------------------------------- Total Current Assets 626,304 763,609 - ---------------------------------------------------------------------- Property, Plant and Equipment 1,259,446 1,238,447 Less accumulated depreciation 903,410 885,051 - ---------------------------------------------------------------------- Net Property, Plant and Equipment 356,036 353,396 - ---------------------------------------------------------------------- Investments in Debt Securities 47,089 64,958 - ---------------------------------------------------------------------- Goodwill 12,926 12,926 - ---------------------------------------------------------------------- Prepaid Pension Costs 19,083 19,311 - ---------------------------------------------------------------------- Other Assets 78,172 63,971 - ---------------------------------------------------------------------- TOTAL $ 1,139,610 $1,278,171 - ---------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' DEFICIT June 30, December 31, 2003 2002 ---- ---- (Unaudited) (In thousands) Current Liabilities: Notes payable and current maturities of long-term debt $ 6,221 $ 55,577 Accounts payable 171,036 163,811 Accounts payable to The Babcock & Wilcox Company 32,792 32,379 Accrued employee benefits 55,985 60,896 Accrued liabilities -- other 155,690 190,844 Accrued contract costs 37,713 53,335 Advance billings on contracts 243,805 329,031 U.S. and foreign income taxes payable 22,967 31,176 - ---------------------------------------------------------------------- Total Current Liabilities 726,209 917,049 - ---------------------------------------------------------------------- Long-Term Debt 85,857 86,104 - ---------------------------------------------------------------------- Accumulated Postretirement Benefit Obligation 26,374 26,898 - ---------------------------------------------------------------------- Self-Insurance 82,978 71,918 - ---------------------------------------------------------------------- Pension Liability 429,012 392,072 - ---------------------------------------------------------------------- Accrued Cost of The Babcock & Wilcox Company Bankruptcy Settlement 101,701 86,377 - ---------------------------------------------------------------------- Other Liabilities 120,489 114,510 - ---------------------------------------------------------------------- Commitments and Contingencies Stockholders' Deficit: Common stock, par value $1.00 per share, authorized 150,000,000 shares; issued 67,684,756 at June 30, 2003, and 66,351,478 at December 31, 2002 67,685 66,351 Capital in excess of par value 1,099,303 1,093,428 Accumulated deficit (1,051,624) (1,027,318) Treasury stock at cost, 2,061,407 shares at June 30, 2003, and at December 31, 2002 (62,792) (62,792) Accumulated other comprehensive loss (485,582) (486,426) - ---------------------------------------------------------------------- Total Stockholders' Deficit (433,010) (416,757) - ---------------------------------------------------------------------- TOTAL $ 1,139,610 $ 1,278,171 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2003 2002 ---- ---- (Unaudited) (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (24,306) $(234,809) - ---------------------------------------------------------------------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 21,177 19,690 Income or loss of investees, less dividends (310) (4,988) Loss (gain) on asset disposals and impairments -- net (2,089) 139 Provision for (benefit from) deferred taxes (2,233) 5,996 Increase in estimated cost of The Babcock & Wilcox Company bankruptcy settlement 15,324 -- Loss on write-off of investment in The Babcock & Wilcox Company -- 224,664 Cumulative effect of accounting change (3,710) -- Other 3,293 8,428 Changes in assets and liabilities, net of effects of acquisitions and divestitures: Accounts receivable (8,049) (60,821) Net contracts in progress and advance billings (31,781) 60,844 Accounts payable 7,401 41,179 Accrued and other current liabilities (49,576) 112 Income taxes (11,840) (82,445) Other, net 33,172 1,164 - ---------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (53,527) (20,847) - ---------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (20,727) (26,357) Purchases of available-for-sale securities (232,364) (841,448) Sales of available-for-sale securities 131,241 737,869 Maturities of available-for-sale securities 227,493 259,814 Proceeds from asset disposals 2,377 269 Other (399) -- - ---------------------------------------------------------------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 107,621 130,147 - ---------------------------------------------------------------------- Six Months Ended June 30, 2003 2002 ---- ---- (Unaudited) (In thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt $ (9,500) $(208,387) Increase (decrease) in short-term borrowing (39,875) 22 Issuance of common stock 271 1,119 Other 2,140 (171) - ---------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (46,964) (207,417) - ---------------------------------------------------------------------- EFFECTS OF EXCHANGE RATE CHANGES ON CASH (6) 52 - ---------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,124 (98,065) - ---------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 174,341 196,912 - ---------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $181,465 $ 98,847 - ---------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 7,725 $ 15,156 Income taxes -- net $ 3,124 $ 64,068 - ---------------------------------------------------------------------- CONTACT: McDermott International, Houston Gay Stanley Mayeux, 281-870-5011 gmayeux@mcdermott.com -----END PRIVACY-ENHANCED MESSAGE-----