-----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, IKgpPp38fsfGjq+MiCfdZKGkoVyzu0X+D0A5lQRr3TKmxQ02Qmzc2QCdMQs4BgCt tVeVo8nIJRkGByPvJv+1VA== 0001157523-04-007554.txt : 20040810 0001157523-04-007554.hdr.sgml : 20040810 20040809185244 ACCESSION NUMBER: 0001157523-04-007554 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040809 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20040810 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: 04962689 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 a4698466.txt MCDERMOTT INTERNATIONAL 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 9, 2004 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 9, 2004 McDermott International, Inc. issued a press release announcing financial results for the second quarter of 2004. 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/ Keith G. Robinson ------------------------------- Keith G. Robinson Corporate Controller August 9, 2004 EX-99.1 2 a4698466ex991.txt PRESS RELEASE EXHIBIT 99.1 McDermott Reports Second Quarter 2004 Results; Net Income of $11.8 million, $0.17 per diluted share, includes B&W settlement revaluation expense of $4.0 million after tax NEW ORLEANS--(BUSINESS WIRE)--Aug. 9, 2004--McDermott International Inc. (NYSE:MDR) ("McDermott" or the "Company") today reported net income of $11.8 million, or $0.17 per diluted share, for the second quarter of 2004, compared to a loss from continuing operations of $60.5 million, or $0.95 per diluted share, for the corresponding period in 2003. Net loss for the second quarter of 2003 was $59.9 million, or $0.94 per diluted share, which included income from discontinued operations of $0.7 million. Included in the 2004 second quarter financial results was an after-tax expense in the quarterly adjustment related to the estimated costs of The Babcock & Wilcox Company ("B&W") Chapter 11 settlement of $4.0 million compared to a $40.0 million after tax expense in the second quarter of 2003. Weighted average common shares outstanding on a fully diluted basis were approximately 67.5 million and 64.0 million for June 30, 2004 and June 30, 2003, respectively. Revenues in the second quarter of 2004 were $499.8 million, compared to $595.5 million in the corresponding period in 2003. The change in revenues is due to reduced activity at J. Ray McDermott, S.A. and its subsidiaries ("J. Ray"), partially offset by increased revenues at BWX Technologies Inc. ("BWXT"). The second quarter 2004 operating income was $35.7 million, which included $15.8 million of corporate qualified pension expense, compared to the second quarter 2003 operating loss and corporate qualified pension expense of $13.9 million and $18.0 million, respectively. "Each of McDermott's segments reported significantly better operating results compared to last year's second quarter," said Bruce W. Wilkinson, chairman of the board and chief executive officer of McDermott. "BWXT produced record operating income and J. Ray returned to profitability. Additionally, unallocated corporate expense also improved in the quarter compared to a year ago. I am particularly pleased with J. Ray's positive cash flow performance during the 2004 second quarter, which was a substantial improvement compared to the prior four quarters and was well above our expectations." The Company's other expense for the second quarter of 2004 was $10.8 million, compared to $42.0 million in the second quarter of 2003. The year-over-year improvement is due to a $35.0 million reduction, pretax, in the quarterly adjustment related to the estimated costs of the B&W Chapter 11 settlement. This revaluation will continue to fluctuate on a quarterly basis and is largely dependent on the quarter end price of McDermott's stock. RESULTS OF OPERATIONS 2004 Second Quarter Compared to 2003 Second Quarter Marine Construction Services Segment ("J. Ray") Revenues in the Marine Construction Services segment were $359.3 million in the 2004 second quarter, a decrease of $108.6 million from a year ago. The year-over-year reduction resulted from decreased activity on fabrication and marine installation projects in the Middle East, southern Argentina and Asia Pacific regions, partially offset by increased activity in Azerbaijan and Morgan City, La. Segment income for the 2004 second quarter was $22.1 million compared to a segment loss in the second quarter 2003 of $13.2 million. Major projects contributing operating income to the 2004 second quarter were the projects in Azerbaijan for AIOC, a pipelay project for Shell in the Gulf of Mexico, and the fabrication projects for BP in Morgan City, La. In addition, J. Ray recognized approximately $23.4 million of operating income in the second quarter 2004 from favorable contract cost adjustments relating to operating improvements and recoveries on projects which had incurred losses in previous quarters, partially offset by an aggregate of $10.7 million in charges related to severance costs, drydock costs, legal settlements and other items. J. Ray's second quarter 2003 operating results included a $39.9 million loss related to a marine construction project in southern Argentina. Selling, general and administrative expenses were $24.4 million in the 2004 second quarter, compared to $15.3 million in the 2003 second quarter. This increase was due to higher marketing, compliance, insurance and information systems expenses. At June 30, 2004, J. Ray's backlog was $1.1 billion, which included an aggregate of $28.4 million related to uncompleted work on the Front Runner spar, the Belanak project and the Carina Aries project. J. Ray's backlog was $1.4 billion and $1.8 billion at Dec. 31, 2003 and June 30, 2003, respectively. Government Operations Segment ("BWXT") Revenues in the Government Operations segment increased $13.0 million to $140.5 million in the 2004 second quarter, primarily due to higher volumes from the manufacture of nuclear components for certain U.S. government programs, and increased volumes from commercial nuclear environmental services. Segment income increased $11.4 million to $31.9 million in the 2004 second quarter, primarily due to increased volume and margins from the manufacture of nuclear components, increased equity income from investees and approximately $4.4 million of aggregate benefit from various sales of assets, settlements and other items. At June 30, 2004, BWXT's backlog was $1.6 billion, compared to backlog of $1.8 billion and $1.5 billion at Dec. 31, 2003 and June 30, 2003, respectively. Corporate Unallocated corporate expenses were $20.0 million in the 2004 second quarter, a decrease of $1.2 million compared to the 2003 second quarter. Unallocated corporate expense in the second quarter of 2004 and 2003 included $15.8 million and $18.0 million, respectively, of qualified corporate pension expense. Other Income and Expense Net interest expense was $7.3 million in the 2004 second quarter compared to $3.3 million in the 2003 second quarter, due to the issuance of J. Ray's 11 percent senior secured notes in December 2003. During the 2004 second quarter, revaluation of certain components of the estimated settlement cost related to the Chapter 11 proceedings involving B&W resulted in an increase in the estimated cost of the settlement to $129.3 million, resulting in the recognition of other pretax expense of $4.4 million ($4.0 million after tax). The increase in the second quarter 2004 estimated settlement cost is due primarily to an increase in the closing price of McDermott's common stock from $8.39 per share at March 31, 2004 to $10.16 per share at June 30, 2004. As discussed in the Company's annual report on Form 10-K for the year ended Dec. 31, 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. Provision for income taxes during the second quarter of 2004 was $13.1 million, compared to $4.6 million during the second quarter of 2003. The Company's consolidated net provision for income taxes reflects the tax obligations in many of the jurisdictions in which it operates. DISCONTINUED OPERATIONS In August 2003, the Company completed the sale of Menck GmbH ("Menck"), formerly a component of the Marine Construction Services segment. Accordingly, the Company has reported the results of operations for Menck as discontinued operations. In the second quarter of 2003, the Company recorded income of $0.7 million, after tax, associated with the operations of Menck. THE BABCOCK & WILCOX COMPANY The Company wrote off its remaining investment in B&W of $224.7 million during the second quarter of 2002 and has not consolidated B&W with McDermott's financial results since B&W's Chapter 11 bankruptcy filing in February 2000. B&W's revenues were $357.3 million in the second quarter of 2004, an increase of $5.0 million compared to the second quarter of 2003. B&W's net income for the 2004 second quarter was $45.2 million, an increase of $97.0 million versus the corresponding period in 2003. The 2003 second quarter included a $70 million pretax charge for an increase in B&W's asbestos liability. LIQUIDITY The Company, on a consolidated basis, and J. Ray, on a stand-alone basis, both produced positive cash flow in the second quarter of 2004. As of June 30, 2004, J. Ray's unrestricted cash balance was $93.3 million, a significant improvement compared to the previous expectations of management for the second quarter 2004. During the 2004 second quarter, J. Ray and McDermott entered into a $25 million accounts receivable sales/purchase facility, which could provide J. Ray additional liquidity, if needed. There have not been any drawings to date under this facility. In addition, since June 30, 2004, J. Ray has taken several steps which it believes will further enhance its liquidity, including: -- Completing the sale of the DB60 in July, for cash proceeds of approximately $44 million, which it currently intends to use to fund J. Ray's capital expenditure program for the coming 12 months, -- Selling the Oceanic 93 for cash proceeds of approximately $18.7 million, which J. Ray currently intends to use to either retire a portion of J. Ray's 11 percent senior secured notes, purchase another vessel or fund capital expenditures on existing collateralized vessels, and -- Obtaining the completion certificate from the customer on the Front Runner Spar, which enabled the previously restricted $22 million in cash held in a temporary interest reserve account to become unrestricted cash. On Aug. 4, 2004, J. Ray's available unrestricted cash had improved $21 million since the end of the 2004 second quarter, to approximately $114 million. As a result of its improved liquidity position and current cash flow forecast, J. Ray has ceased negotiations on the new letter of credit facility it was pursuing. J. Ray believes that a $75-$100 million facility is not necessary to its near term liquidity. J. Ray will continue to cash collateralize letters of credit and will evaluate pursuing additional credit facilities, as the opportunity or need arises. As of June 30, 2004, J. Ray's restricted cash balance was $134 million, which primarily consisted of approximately $77 million of cash collateral for letters of credit and foreign exchange, $19 million in escrow relating to the sale of the Oceanic 93, $16 million for captive insurance programs and $22 million of temporary interest reserve. As previously disclosed, there continues to be substantial doubt about J. Ray's ability to continue as a going concern. As discussed in this section, however, J. Ray's outlook regarding its liquidity position has significantly improved since Dec. 31, 2003. In the remaining two quarters of 2004, excluding changes in letters of credit and further asset sales, J. Ray currently expects to incur a cash outflow of approximately $15 million, primarily due to the completion of the spar projects, the Carina Aries project and the Belanak project, for which substantial income statement expenses have already been recorded. The spar projects are now physically complete, and both the Carina Aries and Belanak projects are more than 97 percent complete, and J. Ray believes the risk of further costs overruns impacting its liquidity is significantly reduced. Completion of these projects has and may continue to put a strain on J. Ray's liquidity. J. Ray intends to fund its negative cash flow anticipated for the remainder of 2004 with its unrestricted cash on hand, and if needed, utilization of the $25 million intercompany accounts receivable sales facility with McDermott. While J. Ray's cash flow was positive in the second quarter, further declines in backlog could have a negative impact on cash flows beyond 2004. 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 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 our expectations regarding completion of the remaining contracts in loss positions, statements relating to the proposed settlement of the B&W Chapter 11 proceedings, and statements relating to our liquidity and J. Ray's liquidity. 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 Dec. 31, 2003 and its 2004 quarterly reports filed with the Securities and Exchange Commission. Conference Call to Discuss 2004 Second Quarter Earnings Release - --------------------------------------------------------------- Date: Tuesday, August 10, 2004, at 10:00 a.m. EDT (9:00 a.m. CDT) 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 LOSS Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 ------ ------ ------ ------ (Unaudited) (In thousands, except per share amounts) Revenues $499,817 $595,475 $999,151 $1,108,212 - ---------------------------------------------------------------------- Costs and Expenses: Cost of operations 426,804 578,578 892,372 1,044,085 Selling, general and administrative expenses 45,526 36,052 89,118 77,235 - ---------------------------------------------------------------------- 472,330 614,630 981,490 1,121,320 - ---------------------------------------------------------------------- Equity in Income of Investees 8,197 5,237 15,940 13,125 - ---------------------------------------------------------------------- Operating Income (Loss) 35,684 (13,918) 33,601 17 - ---------------------------------------------------------------------- Other Income (Expense): Interest income 872 909 1,820 1,889 Interest expense (8,213) (4,171) (16,684) (7,830) Increase in estimated cost of The Babcock & Wilcox Company bankruptcy settlement (4,383) (39,395) (1,972) (15,324) Other-net 912 652 2,115 1,987 - ---------------------------------------------------------------------- (10,812) (42,005) (14,721) (19,278) - ---------------------------------------------------------------------- Income (Loss) from Continuing Operations before Provision for Income Taxes and Cumulative Effect of Accounting Change 24,872 (55,923) 18,880 (19,261) Provision for Income Taxes 13,087 4,624 17,962 11,661 - ---------------------------------------------------------------------- Income (Loss) from Continuing Operations before Cumulative Effect of Accounting Change 11,785 (60,547) 918 (30,922) Income from Discontinued Operations - 695 - 2,906 - ---------------------------------------------------------------------- Income (Loss) before Cumulative Effect of Accounting Change 11,785 (59,852) 918 (28,016) Cumulative Effect of Accounting Change - - - 3,710 - ---------------------------------------------------------------------- Net Income (Loss) $11,785 $(59,852) $918 $(24,306) - ---------------------------------------------------------------------- Earnings (Loss) per Common Share: Basic Income (Loss) from Continuing Operations before Cumulative Effect of Accounting Change $0.18 $(0.95) $0.01 $(0.49) Income from Discontinued Operations $- $0.01 $- $0.05 Cumulative Effect of Accounting Change $- $- $- $0.06 Net Income (Loss) $0.18 $(0.94) $0.01 $(0.38) Diluted Income (Loss) from Continuing Operations before Cumulative Effect of Accounting Change $0.17 $(0.95) $0.01 $(0.49) Income from Discontinued Operations $- $0.01 $- $0.05 Cumulative Effect of Accounting Change $- $- $- $0.06 Net Income (Loss) $0.17 $(0.94) $0.01 $(0.38) - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF LOSS Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 ------ ------ ------ ------ (Unaudited) Weighted Average Common Shares Basic 65,524,948 63,995,146 65,398,526 63,732,409 Diluted 67,480,107 63,995,146 67,525,697 63,732,409 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. SELECTED SEGMENT INFORMATION Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 --------- --------- ---------- ---------- (Unaudited) (In thousands except Backlog) REVENUES Marine Construction Services $359,334 $467,972 $725,142 $863,012 Government Operations 140,490 127,523 274,019 245,231 Power Generation Systems - - - - Adjustments and Eliminations (7) (20) (10) (31) -------------------------------------------------------------------- TOTAL $499,817 $595,475 $999,151 $1,108,212 -------------------------------------------------------------------- SEGMENT INCOME (LOSS) Marine Construction Services $22,112 $(13,162) $18,511 $3,478 Government Operations 31,908 20,486 51,617 44,111 Power Generation Systems 1,660 (4) 1,771 30 -------------------------------------------------------------------- 55,680 7,320 71,899 47,619 Corporate (19,996) (21,238) (38,298) (47,602) -------------------------------------------------------------------- TOTAL $35,684 $(13,918) $33,601 $17 -------------------------------------------------------------------- EQUITY IN INCOME FROM INVESTEES Marine Construction Services $746 $(885) $1,909 $(577) Government Operations 7,180 5,938 13,427 13,294 Power Generation Systems 271 184 604 408 -------------------------------------------------------------------- TOTAL $8,197 $5,237 $15,940 $13,125 -------------------------------------------------------------------- DEPRECIATION & AMORTIZATION Marine Construction Services $6,537 $7,757 $11,747 $13,181 Government Operations 2,945 3,180 6,036 6,332 Power Generation Systems - 4 - 7 Corporate 1,018 916 1,643 1,657 -------------------------------------------------------------------- TOTAL $10,500 $11,857 $19,426 $21,177 -------------------------------------------------------------------- CAPITAL EXPENDITURES Marine Construction Services $2,121 $3,858 $3,870 $11,605 Government Operations 2,333 5,318 4,239 7,460 Power Generation Systems - - - - Corporate 2 1,656 2 1,662 -------------------------------------------------------------------- TOTAL $4,456 $10,832 $8,111 $20,727 -------------------------------------------------------------------- BACKLOG (in millions) Marine Construction Services $1,082,386 $1,837,606 $1,082,386 $1,837,606 Government Operations 1,592,926 1,493,313 1,592,926 1,493,313 -------------------------------------------------------------------- TOTAL $2,675,312 $3,330,919 $2,675,312 $3,330,919 -------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. ITEMS INCLUDED IN CONTINUING OPERATIONS Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 ------ ------ ------ ------ (Unaudited) (In millions) ITEMS INCLUDED IN OPERATING INCOME (LOSS): Marine Construction Services Contract cost adjustments on loss projects $23.4 $- $28.4 $- Miscellaneous one-time items, net (10.7) - (10.7) - Announced project change order - - - 11.0 Carina Aries Weather Related - (39.9) - (41.9) ----------------------------------------------------------------- TOTAL $12.7 $(39.9) $17.7 $(30.9) ------------------------------------------------------------------- Government Operations Miscellaneous favorable one- time benefits 4.4 5.4 4.4 8.7 ----------------------------------------------------------------- TOTAL $4.4 $5.4 $4.4 $8.7 ------------------------------------------------------------------- Corporate Qualified Pension Plan Expense $(15.8) $(18.0) $(31.6) $(36.0) ----------------------------------------------------------------- TOTAL $(15.8) $(18.0) $(31.6) $(36.0) - ---------------------------------------------------------------------- OTHER ITEMS: Estimated Change in B&W bankruptcy settlement $(4.4) $(39.4) $(2.0) $(15.3) Tax impact on B&W settlement 0.4 (0.6) 0.7 (1.1) ------------------------------------------------------------------- Net After Tax Effect $(4.0) $(40.0) $(1.3) $(16.4) ------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS June 30, Dec. 31, 2004 2003 --------- --------- (Unaudited) (In thousands) Current Assets: Cash and cash equivalents $134,694 $174,790 Restricted cash and cash equivalents 168,308 180,480 Accounts receivable - trade, net 214,234 195,073 Accounts receivable from The Babcock & Wilcox Company 5,017 6,192 Accounts and notes receivable - unconsolidated affiliates 10,292 14,024 Accounts receivable - other 28,613 38,296 Contracts in progress 78,480 69,485 Deferred income taxes 3,440 4,168 Other current assets 20,506 16,019 - ---------------------------------------------------------------------- Total Current Assets 663,584 698,527 - ---------------------------------------------------------------------- Property, Plant and Equipment 1,202,712 1,244,222 Less accumulated depreciation 854,535 880,460 - ---------------------------------------------------------------------- Net Property, Plant and Equipment 348,177 363,762 - ---------------------------------------------------------------------- Investments 42,820 42,800 - ---------------------------------------------------------------------- Goodwill 12,926 12,926 - ---------------------------------------------------------------------- Prepaid Pension Costs 18,573 18,722 - ---------------------------------------------------------------------- Other Assets 160,156 112,137 - ---------------------------------------------------------------------- TOTAL $1,246,236 $1,248,874 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' DEFICIT June 30, Dec. 31, 2004 2003 -------------- --------------- (Unaudited) (In thousands) Current Liabilities: Notes payable and current maturities of long-term debt $11,988 $37,217 Accounts payable 164,430 146,665 Accounts payable to The Babcock & Wilcox Company 36,507 42,137 Accrued employee benefits 66,812 69,923 Accrued liabilities - other 178,607 166,129 Accrued contract costs 49,418 69,928 Advance billings on contracts 160,966 176,105 U.S. and foreign income taxes payable 28,474 14,727 - ---------------------------------------------------------------------- Total Current Liabilities 697,202 722,831 - ---------------------------------------------------------------------- Long-Term Debt 268,096 279,682 - ---------------------------------------------------------------------- Accumulated Postretirement Benefit Obligation 26,388 26,861 - ---------------------------------------------------------------------- Self-Insurance 74,197 60,737 - ---------------------------------------------------------------------- Pension Liability 334,938 311,393 - ---------------------------------------------------------------------- Accrued Cost of The Babcock & Wilcox Company Bankruptcy Settlement 102,888 100,916 - ---------------------------------------------------------------------- Other Liabilities 103,711 109,631 - ---------------------------------------------------------------------- Commitments and Contingencies. Stockholders' Deficit: Common stock, par value $1.00 per share, authorized 150,000,000 shares; issued 68,993,119 at June 30, 2004 and 68,129,390 at Dec. 31, 2003 68,993 68,129 Capital in excess of par value 1,110,464 1,105,828 Accumulated deficit (1,121,629) (1,122,547) Treasury stock at cost, 2,354,069 shares at June 30, 2004 and 2,061,407 at Dec. 31, 2003 (65,332) (62,792) Accumulated other comprehensive loss (353,680) (351,795) - ---------------------------------------------------------------------- Total Stockholders' Deficit (361,184) (363,177) - ---------------------------------------------------------------------- TOTAL $1,246,236 $1,248,874 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2004 2003 --------------- -------------- (Unaudited; In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $918 $(24,306) - ---------------------------------------------------------------------- Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 19,426 21,177 Income or loss of investees, less dividends (6,689) (310) Gain on asset disposals and impairments - net (2,953) (2,089) Benefit from deferred taxes (7,996) (2,233) Increase in estimated cost of The Babcock & Wilcox Company bankruptcy settlement 1,972 15,324 Cumulative effect of accounting change - (3,710) Other 1,200 3,293 Changes in assets and liabilities, net of effects of acquisitions and divestitures: Accounts receivable (4,633) (8,049) Net contracts in progress and advance billings (24,102) (31,781) Accounts payable 12,130 7,401 Accrued and other current liabilities (7,332) (49,576) Income taxes 13,748 (11,840) Other, net (9,326) 33,172 - ---------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (13,637) (53,527) - ---------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in restricted cash and cash equivalents 12,172 (12,312) Purchases of property, plant and equipment (8,111) (20,727) Purchases of available-for-sale securities (34,965) (232,364) Sales of available-for-sale securities 5,140 131,241 Maturities of available-for-sale securities 30,025 227,493 Proceeds from asset disposals 6,601 2,377 Other (1) (399) - ---------------------------------------------------------------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 10,861 95,309 - ---------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt - (9,500) Decrease in short-term borrowing (36,750) (39,875) Issuance of common stock 281 271 Other (857) 2,140 - ---------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (37,326) (46,964) - ---------------------------------------------------------------------- EFFECTS OF EXCHANGE RATE CHANGES ON CASH 6 (6) - ---------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (40,096) (5,188) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 174,790 129,517 - ---------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $134,694 $124,329 - ---------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $16,939 $7,725 Income taxes - net $24,428 $3,124 - ---------------------------------------------------------------------- CONTACT: McDermott International Inc., Houston Jay Roueche, 281-870-5462 jroueche@mcdermott.com -----END PRIVACY-ENHANCED MESSAGE-----