EX-99.1 2 dex991.htm UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unaudited Pro Forma Condensed Consolidated Financial Statements

Exhibit 99.1

McDermott International, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Statements

The following unaudited pro forma condensed consolidated statements of income for the three and six months ended June 30, 2010 and June 30, 2009 have been derived from the historical financial statements of McDermott International, Inc. (“we”, “us”, or “our”) as if the disposal of our Power Generation Systems and Government Operations segments via the spin-off of The Babcock & Wilcox Company (“B&W”) occurred as of the beginning of the periods presented. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 has been prepared as if the spin-off occurred as of June 30, 2010.

Due to the spin-off of B&W, when we issue financial statements for the period ending September 30, 2010 and for the year ending December 31, 2010, the historical results of B&W will be reclassified as discontinued operations in accordance with Financial Accounting Standards Board Codification Topic 205-20, Presentation of Financial Statements – Discontinued Operations.

The pro forma adjustments include assumptions that management believes are reasonable. The pro forma adjustments may differ from the adjustments that will be calculated to report the B&W business as discontinued operations in our future filings.

These unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the spin-off of B&W been completed as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma condensed consolidated financial statements and the accompanying unaudited notes should be read together with our annual report on Form 10-K for the year ended December 31, 2009 and our quarterly report on Form 10-Q for the quarter ended June 30, 2010.

 

1

McDERMOTT INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of June 30, 2010

 

     As Reported    Pro Forma
Adjustments		     Pro Forma
     (In thousands)

ASSETS

        

Current Assets:

        

Cash and cash equivalents

    $ 777,554    $  240,347   (a)    $ 537,207

Restricted cash and cash equivalents

      150,708      19,196   (a)      131,512

Accounts receivable – trade, net

      568,515      323,697   (a)      244,818

Accounts and notes receivable – unconsolidated affiliates

      13,657      7,941   (a)      5,716

Accounts receivable – other

      64,829      42,317   (a)      22,512

Contracts in progress

      351,923      288,154   (a)      63,769

Inventories

      100,636      97,863   (a)      2,773

Deferred income taxes

      90,702      84,343   (a)      6,359

Other current assets

      99,890      48,345   (a)      51,545
                     

Total Current Assets

      2,218,414      1,152,203        1,066,211
                     

Property, Plant and Equipment

      2,691,060      948,915   (a)      1,742,145

Less accumulated depreciation

      1,312,985      524,839   (a)      788,146
                     

Net Property, Plant and Equipment

      1,378,075      424,076   (a)      953,999
                     

Investments

      168,195      72,600   (a)      95,595
                     

Goodwill

      334,649      279,904   (a)      54,745
                     

Deferred Income Taxes

      242,826      242,826   (a)      —  
                     

Investments in Unconsolidated Affiliates

      101,228      86,770   (a)      14,458
                     

Other Assets

      271,262      147,443   (a)      123,819
                     

TOTAL

    $ 4,714,649    $ 2,405,822      $ 2,308,827
                     

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

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McDERMOTT INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of June 30, 2010

 

     As Reported     Pro Forma
Adjustments		     Pro Forma  
     (In thousands)  

LIABILITIES AND EQUITY

       

Current Liabilities:

       

Notes payable and current maturities of long-term debt

    $ 15,067      $  7,525    (a)    $ 7,542   

Accounts payable

      425,170        187,407    (a)      237,763   

Accrued contract costs

      86,599        445    (a)      86,154   

Accrued employee benefits

      146,147        95,109    (a)      51,038   

Accrued pension liability – current portion

      130,914        123,770    (a)      7,144   

Accrued liabilities – other

      162,052        73,111    (a)      88,941   

Advance billings on contracts

      595,410        439,312    (a)      156,098   

Accrued warranty expense

      117,213        114,780     (a)      2,433   

Income taxes payable

      59,617        2,074    (a)      57,543   
                        

Total Current Liabilities

      1,738,189        1,043,533       694,656   
                        

Long-Term Debt

      49,218        953    (a)      48,265   
                        

Accumulated Postretirement Benefit Obligation

      105,270        105,136     (a)      134   
                        

Self-Insurance

      91,247        55,487     (a)      35,760   
                        

Pension Liability

      547,031        525,392     (a)      21,639   
                        

Other Liabilities

      152,413        90,216     (a)      62,197   
                        

Commitments and Contingencies

       

Equity

       

Common stock par value

      239,264        —          239,264   

Capital in excess of par value

      1,343,787        —          1,343,787   

Retained earnings

      1,087,622        1,017,058    (a)      70,564   

Treasury stock

      (83,284 )      —          (83,284 ) 

Accumulated other comprehensive loss

      (598,441 )      (432,454 )  (a)      (165,987 ) 
                        

Stockholders’ Equity – McDermott International, Inc.

      1,988,948        584,604       1,404,344   
                        

Noncontrolling interest

      42,333        501    (a)      41,832   
                        

Total Equity

      2,031,281        585,105        1,446,176   
                        

TOTAL

    $ 4,714,649      $ 2,405,822      $ 2,308,827   
                        

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

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McDERMOTT INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Three Months Ended June 30, 2010

 

     As Reported     Pro Forma
Adjustments		     Pro Forma  
     (In thousands)  

Revenues

    $ 1,333,562      $ (688,496 ) (b)    $ 645,066   
                        

Costs and Expenses:

       

Cost of operations

      1,006,733        (518,369 ) (b)      488,364   

Gains on asset disposals and impairments – net

      (165 )      (61 ) (b)      (226 ) 

Costs to spin-off B&W

      66,218        (66,218 ) (d)      —     

Selling, general and administrative expenses

      154,203        (100,664 ) (b)      53,539   
                        

Total Costs and Expenses

      1,226,989        (685,312 )      541,677   
                        

Equity in Income (Loss) of Investees

      16,719        (17,435 ) (b)      (716 ) 
                        

Operating Income

      123,292        (20,619 )      102,673   
                        

Other Income (Expense):

       

Interest income (expense) – net

      (3,333 )      1,553   (b)      (1,780 ) 

Other expense – net

      (4,494 )      3,945   (b)      (549 ) 
                        

Total Other Income (Expense)

      (7,827 )      5,498        (2,329 ) 
                        

Income before Provision for Income Taxes

      115,465        (15,121 )      100,344   

Provision for Income Taxes

      33,872        (20,341 ) (b) (c)      13,531   
                        

Net Income

      81,593        5,220        86,813   
                        

Less: Net Income Attributable to Noncontrolling Interest

      (5,559 )      72  (b)      (5,487 ) 
                        

Net Income Attributable to McDermott International, Inc.

    $ 76,034      $ 5,292      $ 81,326   
                        

Pro Forma Earnings per Share:

       

Basic

    $ 0.33        $ 0.35   

Diluted

    $ 0.32        $ 0.35   

Shares used in Calculating Pro Forma Earnings per Share:

       

Basic

      231,847,145          231,847,145   

Diluted

      234,423,546          234,423,546   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

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McDERMOTT INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Three Months Ended June 30, 2009

 

     As Reported     Pro Forma
Adjustments		     Pro Forma  
     (In thousands)  

Revenues

    $ 1,564,999      $ (732,069 ) (b)    $ 832,930   
                        

Costs and Expenses:

       

Cost of operations

      1,275,058        (553,489 ) (b)      721,569   

Gains on asset disposals and impairments – net

      (1,897 )      30   (b)      (1,867 ) 

Selling, general and administrative expenses

      153,195        (96,745 ) (b)      56,450   
                        

Total Costs and Expenses

      1,426,356        (650,204 )      776,152   
                        

Equity in Income (Loss) of Investees

      9,097        (10,153 ) (b)      (1,056 ) 
                        

Operating Income

      147,740        (92,018 )      55,722   
                        

Other Income (Expense):

       

Interest income (expense) – net

      4,987        (112 ) (b)      4,875   

Other expense – net

      (10,201 )      7,50   (b)      (2,698 ) 
                        

Total Other Income (Expense)

      (5,214 )      7,391        2,177   
                        

Income before Provision for Income Taxes

      142,526        (84,627 )      57,899   

Provision for Income Taxes

      44,645        (26,408 ) (b)(c)      18,237   
                        

Net Income

      97,881        (58,219 )      39,662   
                        

Less: Net Income Attributable to Noncontrolling Interest

      (5,326 )      43   (b)      (5,283 ) 
                        

Net Income Attributable to McDermott International, Inc.

    $ 92,555      $ (58,176 )    $ 34,379   
                        

Pro Forma Earnings per Share:

       

Basic

    $ 0.40        $ 0.15   

Diluted

    $ 0.40        $ 0.15   

Shares used in Calculating Pro Forma Earnings per Share:

       

Basic

      229,273,441          229,273,441   

Diluted

      233,105,949          233,105,949   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

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McDERMOTT INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Six Months Ended June 30, 2010

 

     As Reported     Pro Forma
Adjustments		     Pro Forma  
     (In thousands)  

Revenues

    $ 2,515,492      $ (1,350,884 ) (b)    $ 1,164,608   
                        

Costs and Expenses:

       

Cost of operations

      1,941,584        (1,063,320 ) (b)      878,264   

Gains on asset disposals and impairments – net

      (2,258 )      (48 ) (b)      (2,306 ) 

Costs to spin-off B&W

      90,420        (90,420 ) (d)      —     

Selling, general and administrative expenses

      297,953        (192,129 ) (b)      105,824   
                        

Total Costs and Expenses

      2,327,699        (1,345,917 )      981,782   
                        

Equity in Income (Loss) of Investees

      27,307        (31,454 ) (b)      (4,147 ) 
                        

Operating Income

      215,100        (36,421 )      178,679   
                        

Other Income (Expense):

       

Interest income (expense) – net

      (3,034 )      1,582   (b)      (1,452 ) 

Other expense – net

      (8,711 )      7,035   (b)      (1,676 ) 
                        

Total Other Income (Expense)

      (11,745 )      8,617        (3,128 ) 
                        

Income before Provision for Income Taxes

      203,355        (27,804 )      175,551   

Provision for Income Taxes

      53,544        (26,662 ) (b)(c)      26,882   
                        

Net Income

      149,811        (1,142 )      148,669   
                        

Less: Net Income Attributable to Noncontrolling Interest

      (13,836 )      85   (b)      (13,751 ) 
                        

Net Income Attributable to McDermott International, Inc.

    $ 135,975      $ (1,057 )    $ 134,918   
                        

Pro Forma Earnings per Share:

       

Basic

    $ 0.59        $ 0.58   

Diluted

    $ 0.58        $ 0.58   

Shares used in Calculating Pro Forma Earnings per Share:

       

Basic

      231,335,723          231,335,723   

Diluted

      234,588,291          234,588,291   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

6

McDERMOTT INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the Six Months Ended June 30, 2009

 

     As Reported     Pro Forma
Adjustments		     Pro Forma  
     (In thousands)  

Revenues

    $ 3,058,262      $ (1,517,122 ) (b)    $ 1,541,140   
                        

Costs and Expenses:

       

Cost of operations

      2,503,680        (1,164,403 ) (b)      1,339,277   

Gains on asset disposals and impairments – net

      (656 )      (177 ) (b)      (833 ) 

Selling, general and administrative expenses

      294,589        (184,412 ) (b)      110,177   
                        

Total Costs and Expenses

      2,797,613        (1,348,992 )      1,448,621   
                        

Equity in Income (Loss) of Investees

      18,297        (20,498 ) (b)      (2,201 ) 
                        

Operating Income

      278,946        (188,628 )      90,318   
                        

Other Income (Expense):

       

Interest income (expense) – net

      6,844        (789 ) (b)      6,055   

Other expense – net

      (20,971 )      9,543   (b)      (11,428 ) 
                        

Total Other Income (Expense)

      (14,127 )      8,754        (5,373 ) 
                        

Income before Provision for Income Taxes

      264,819        (179,874 )      84,945   

Provision for Income Taxes

      88,523        (61,618 ) (b)(c)      26,905   
                        

Net Income

      176,296        (118,256 )      58,040   
                        

Less: Net Income attributable to Noncontrolling Interest

      (6,049 )      95   (b)      (5,954 ) 
                        

Net Income Attributable to McDermott International, Inc.

    $ 170,247      $ (118,161 )    $ 52,086   
                        

Pro Forma Earnings per Share:

       

Basic

    $ 0.74        $ 0.23   

Diluted

    $ 0.73        $ 0.22   

Shares used in Calculating Pro Forma Earnings per Share:

       

Basic

      228,794,113          228,794,113   

Diluted

      232,846,098          232,846,098   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

7

McDermott International, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

(a) Reflects the pro forma elimination of the assets, liabilities and equity associated with The Babcock & Wilcox Operations of McDermott International, Inc., which are included in our historical condensed consolidated balance sheet.

 

(b) Reflects the pro forma elimination of the operating results of The Babcock & Wilcox Operations of McDermott International, Inc.

 

(c) Reflects the pro forma elimination of certain income tax benefits that are not expected to be realized in future periods, as a result of the spin-off of The Babcock & Wilcox Operations.

 

(d) Reflects the pro forma elimination, from continuing operations, of costs consisting primarily of severance and professional services directly attributable to the spin-off.

 

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