-----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, GdDA9Ma7DK6ubsnQ5JpNSNuf7c3eoppnYHzqD1cwEGVR42HimPdiA1D3+e+Vw61m oKVh0heTft/5Z4n5G0PavA== 0001157523-06-010779.txt : 20061102 0001157523-06-010779.hdr.sgml : 20061102 20061102161814 ACCESSION NUMBER: 0001157523-06-010779 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061102 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061102 DATE AS OF CHANGE: 20061102 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: 061182959 BUSINESS ADDRESS: STREET 1: 777 N. ELDRIDGE PARKWAY CITY: HOUSTON STATE: TX ZIP: 77079 BUSINESS PHONE: 281-870-5000 MAIL ADDRESS: STREET 1: 777 N. ELDRIDGE PARKWAY CITY: HOUSTON STATE: TX ZIP: 77079 8-K 1 a5265335.txt MCDERMOTT INTERNATIONAL, INC. 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 (Date of earliest event reported): November 2, 2006 McDERMOTT INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) REPUBLIC OF PANAMA 001-08430 72-0593134 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 777 N. Eldridge Parkway, Houston, Texas 77079 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including Area Code: (281) 870-5901 -------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ----------------------------------------- Item 2.02 Results of Operations and Financial Condition. On November 2, 2006, we issued a press release announcing our financial results for the third quarter ended September 30, 2006. 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 2.02, 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, (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01 Financial Statements and Exhibits. (d) Exhibits 99.1 Press Release dated November 2, 2006. 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/ Michael S. Taff ------------------------------------------- Michael S. Taff Vice President and Chief Accounting Officer November 2, 2006 2 EX-99.1 2 a5265335ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 McDermott Reports Third Quarter 2006 Results Net Income of $101.7 million, $0.89 per fully diluted share Bidding success in strong markets leads to record backlog of $8.6 billion HOUSTON--(BUSINESS WIRE)--Nov. 2, 2006--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 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 - ---------------------------------------------------------------------- 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) CONTACT: McDermott International, Inc. Investor Relations & Corporate Communications Vice President Jay Roueche, 281-870-5462 jroueche@mcdermott.com or Manager Robby Bellamy, 281-870-5165 rbellamy@mcdermott.com -----END PRIVACY-ENHANCED MESSAGE-----