McDermott Reports Fourth Quarter and Full-Year 2004 Unaudited Results; Fourth Quarter Net Income of $0.61 Per Diluted Share; McDermott Extends Filing of Form 10-K.NEW ORLEANS New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded -- McDermott McDermott is a surname, and may refer to:
See: New York Stock Exchange : MDR MDR, n See multidrug resistance. MDR, n the abbreviation for minimum daily requirement, specifically the Minimum Daily Requirements for Specific Nutrients compiled by the United States Food and Drug Administration. ) ("McDermott" or the "Company") announced today its unaudited results for the fourth quarter and full year 2004. In addition, McDermott disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). that it has filed a 12b-25 extension for the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. report to be filed with the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities and Exchange Commission (the "SEC"). FORM 10-K EXTENSION On December December: see month. 29, 2004, McDermott received an initial comment letter from the staff of the Division of Corporate Finance of the SEC containing questions and comments regarding the Company's 2003 annual report on Form 10-K. The Company actively responded to the SEC staff's questions, and believes it satisfactorily answered the items contained in the initial correspondence and a January January: see month. 26, 2005 follow-up letter follow-up letter n → carta recordatoria . However, on March 11, 2005, McDermott received a second follow-up letter from the SEC seeking additional information regarding the Company's accounting for certain loss-generating EPIC projects (the three Spars, Belanak and Carina Carina (kərē`nə) [Lat.,=the keel], southern constellation, representing the keel of the ancient constellation Argo Navis, or Ship of the Argonauts. Carina contains Canopus, the second brightest star in the sky. Aries projects) in the Marine Construction Services segment. Each of these projects was complete at December 31, 2004 and has been delivered to its respective customer. The SEC staff has questioned whether McDermott's accounting for these projects using the percentage-of-completion method percentage-of-completion method A method of recognizing revenues and costs from a long-term project in relation to the percentage completed during the course of the project. was appropriate, or if the completed-contract method completed-contract method A method of recognizing revenues and costs from a long-term project in which profit is recorded only when the project has been completed. of accounting should have been used. Under completed-contract accounting, revenues and profit are not recognized on a project until completion; however, under both methods, project losses are recorded in periods when the losses become evident. McDermott will continue working with the SEC staff to resolve the remaining open items. The Company is utilizing a 15-day filing extension for its December 31, 2004 annual report on Form 10-K in an effort to ensure McDermott's Form 10-K filing reflects the appropriate accounting. McDermott's management believes that under either accounting approach, the Company's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , net income, cash flow, liquidity and balance sheet will be unaffected as of the period ended December 31, 2004. Accordingly, McDermott is announcing its unaudited financial results for the fourth quarter and full-year 2004 below. If McDermott had accounted for its financial results for these projects using the completed-contract accounting method, reported revenues and costs would have changed materially during the affected years of 2001 through 2004. McDermott has included Exhibit A as part of this release showing management's assessment of the difference in revenues and pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. for the affected years, between accounting for the loss-generating EPIC projects utilizing the reported percentage-of-completion accounting method and accounting for these projects under the completed-contract method. 2004 UNAUDITED FINANCIAL RESULTS For the quarter ended December 31, 2004, McDermott recorded net income of $42.5 million, or 61 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. For the full year 2004, the Company's net income was $61.6 million, or 90 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . Weighted average common shares outstanding on a fully diluted basis were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 69.6 million and 68.3 million for the end of the fourth quarter and full year 2004, respectively. Revenues in the quarter and year ended December 31, 2004 were $473.7 million and $1.9 billion, respectively, as accounted for under the percentage-of-completion accounting method. Operating income was $72.5 million and $145.9 million during these respective periods. During the fourth quarter and full year, operating income included approximately $15.2 million and $60.8 million, respectively, of corporate qualified pension expense. "The fourth quarter represented a solid culmination to our 2004 year," said Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. W. Wilkinson Noun 1. Wilkinson - English chemist honored for his research on pollutants in car exhausts (born in 1921) Sir Geoffrey Wilkinson , Chairman of the Board and Chief Executive Officer of McDermott. "McDermott has now realized net income for three consecutive quarters, while at the same time our liquidity has strengthened, so I am encouraged by our progress. We look forward to resolving the remaining open issues with the SEC staff in the near term, and filing our 2004 Form 10-K as soon as practicable practicable adj. when something can be done or performed. . McDermott had a successful 2004, and while there's still much left to accomplish, we are better positioned for the future as a result." UNAUDITED RESULTS OF OPERATIONS Fourth Quarter and Full Year 2004 Results Marine Construction Services Segment ("J. Ray") Revenues in the Marine Construction Services segment were $317.2 million and $1.37 billion in the fourth quarter and full-year 2004, respectively, as accounted for under the percentage-of-completion accounting method. Segment income was $36.7 million and $83.8 million for the fourth quarter and full-year 2004, respectively. Major projects contributing operating income during these periods were the fabrication fabrication (fab´rikā´sh  n),n the construction or making of a restoration. projects for BP in Morgan City, Louisiana Morgan City (previously known as Brashear) is a city in St. Mary Parish, Louisiana, United States. [1] [2] The population was 12,703 at the 2000 census. Morgan City is home to the Louisiana Shrimp and Petroleum Festival. , the projects in Azerbaijan Azerbaijan, country, Asia Azerbaijan (ä'zərbījän`, ă'zər–), Azeri Azərbaycan, officially Republic of Azerbaijan, republic (2005 est. pop. 7,912,000), 33,428 sq mi (86,579 sq km), in Transcaucasia. for AIOC AIOC Azerbaijan International Operating Company AIOC Anglo-Iranian Oil Company AIOC Acceptable Initial Operating Capability , and certain marine projects. In addition, J. Ray recognized approximately $16.7 million during the fourth quarter and $46.6 million during the full year, in aggregate operating income from net improvements including income from change orders, insurance claims and productivity improvements in the recently completed EPIC projects which incurred substantial losses in prior years. Gains on asset sales provided an additional $13.7 million and $30.3 million of operating income during the fourth quarter and full-year 2004, respectively. These improvements were partially offset by an aggregate expense of $6.6 million and $14.5 million for the fourth quarter and full-year 2004, respectively, related to various items, including severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , Sarbanes-Oxley compliance expenses, additional vessel VESSEL, mar. law. A ship, brig, sloop or other craft used in navigation. 1 Boul. Paty, tit. 1, p. 100. See sup. 2. By an act of congress, approved July 29, 1850, it is provided that any person, not being an owner, who shall on the high seas, willfully, with. drydock expenses and compensation accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . At December 31, 2004, J. Ray's backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. was $1.25 billion. Government Operations This article aims to describe the financial expenditure associated with the operations and processes of world governments of all levels. Size of economic footprint
Revenues in the Government Operations segment were $156.5 million and $555.1 million in the fourth quarter and full-year 2004, respectively, as accounted for under the percentage-of-completion accounting method. Segment income was $29.5 million and $109.8 million for the fourth quarter and full-year 2004, respectively. During the fourth quarter and full-year 2004, BWXT continued to have strong margins in the manufacture of nuclear components and in uranium uranium (y  rā`nēəm), radioactive metallic chemical element; symbol U; at. no. 92; at. wt. 238.0289; m.p. 1,132°C;; b.p. 3,818°C;; sp. gr. 19. recovery, and has benefited from
cost reduction activities. In addition, BWXT also received pension
funding reimbursement ReimbursementPayment made to someone for out-of-pocket expenses has incurred. during the fourth quarter and full year 2004 of $3.2 million and $11.8 million, respectively; however the associated pension expense was reflected in the corporate segment. As previously announced, beginning with the 2005 fiscal year McDermott will allocate To reserve a resource such as memory or disk. See memory allocation. the applicable pension expense to BWXT. BWXT's segment income includes $11.4 million and $32.6 million of equity income of investees for the quarter and year ended December 31, 2004, respectively. At December 31, 2004, BWXT's backlog was $1.7 billion. Corporate The corporate segment produced unallocated income of $6.2 million in the 2004 fourth quarter, reflecting a $27.7 million gain associated with the previously announced wind-up wind-up or wind·up n. 1. a. The act of bringing something to an end. b. A concluding part; a conclusion. 2. of a U.K. pension plan. For the year ended December 31, 2004, corporate had an unallocated expense of $49.7 million. Other Income and Expense The Company's other expense for the fourth quarter and full-year 2004 was $19.7 million and $43.5 million, respectively, which included net interest expense of $8.1 million during the fourth quarter and $30.5 million for the full year 2004. During the 2004 fourth quarter, revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of certain components of the estimated settlement cost related to The Babcock Babcock is a surname that can refer to: People
See Wilcox (surname) Other
Provisions of the Bankruptcy Reform Act under which the debtor firm is reorganized by a court because the estimated value of the reorganized firm exceeds the expected proceeds from its liquidation. generated an increase in the estimated cost of the settlement to $139.9 million, resulting in the recognition of other pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern expense of $8.9 million ($9.5 million after tax). This estimated settlement cost increase was due primarily to an increase in the closing price of McDermott's common stock from $11.80 per share at September September: see month. 30, 2004 to $18.36 per share at December 31, 2004. For the year ended December 31, 2004, the estimated settlement cost increased $11.2 million, pretax ($11.9 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ). As discussed in the Company's annual report on Form 10-K for the year ended December 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 See finalization. . 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 con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: B&W with McDermott's financial results since B&W's Chapter 11 bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most filing in February February: see month. 2000. B&W's revenues were $355.5 million and $1.37 billion in the fourth quarter and full-year 2004, respectively. B&W's net income for the 2004 fourth quarter was $18.3 million, increasing full-year 2004 net income to $99.1 million. As of December 31, 2004, B&W had cash and cash equivalents of $351.5 million. At December 31, 2004, B&W's backlog was $1.5 billion. LIQUIDITY At December 31, 2004, McDermott's consolidated unrestricted cash was $259 million, with J. Ray's unrestricted cash balance representing approximately $156 million of this total. In addition, McDermott's consolidated restricted cash balance was $178 million at December 31, 2004, with J. Ray representing $149 million of the consolidated amount. As of December 31, 2004, approximately $51 million of J. Ray's restricted cash was available for use on capital expenditures, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc J. Ray's senior secured notes issued in December 2003. As of March 11, 2005, McDermott's consolidated unrestricted cash balance was approximately $338 million, with J. Ray accounting for approximately $208 million of the total. INTERNAL CONTROLS McDermott's management has determined that as of December 31, 2004, J. Ray has remediated the previously disclosed material weakness regarding J. Ray's ability to forecast accurately total costs to complete fixed-price contracts, primarily first-of-a-kind projects, which were disclosed in McDermott's annual report on Form 10-K for the year ended December 31, 2003 and in its 2004 Form 10-Q Form 10-Q See 10-Q. filings. The remediation of this weakness as of December 31, 2004 was the result of improved controls throughout the bidding, contracting and project management process and implementation of new reporting procedures, improved information systems designs and enhanced communication processes throughout the J. Ray organization. During March 2005, McDermott's management completed its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2004 as required by Section 404 of the Sarbanes-Oxley Act See SOX. of 2002, and determined the Company did not maintain effective controls over certain account reconciliations and access to application programs and data, which deficiencies management has determined represent material weaknesses. Specifically, account reconciliations in the Marine Construction Services segment in the Eastern Hemisphere Eastern Hemisphere Part of the Earth east of the Atlantic Ocean. It includes Europe, Asia, Australia, and Africa. Longitudes 20° W and 160° E are often considered its boundaries. were not being properly completed. Further, as of December 31, 2004, the Company identified control deficiencies at its business units with respect to access to financial application programs and data. As a result of these material weaknesses, the Company's independent registered public accounting firm is expected to issue an adverse report related to the effectiveness of the Company's internal control over financial reporting (which is different from the independent auditor's report Auditor's Report Recorded in the annual report, the auditor's report tests to see that a corporation's financial statements comply with GAAP. This is sometimes referred to as the clean opinion. Notes: Most auditor's reports consist of three paragraphs. on the Company's financial statements). Additionally, if as a result of the ongoing discussions with the SEC staff, the Company determines to change its accounting for the loss-generating EPIC projects mentioned above to the completed-contract accounting methodology, management will evaluate the impact that such a change may have on its report of the effectiveness of the Company's internal control over financial reporting. Neither the account reconciliation nor the access control deficiency A shortage or insufficiency. The amount by which federal Income Tax due exceeds the amount reported by the taxpayer on his or her return; also, the amount owed by a taxpayer who has not filed a return. referred to above resulted in a material adjustment to the 2004 interim or annual consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . McDermott is actively addressing these issues and will notify investors of material progress made in resolving these material weaknesses in future regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. filings with the SEC. While the Company's internal control over financial reporting was not effective as of December 31, 2004, as a result of the material weaknesses noted above, McDermott's management believes that McDermott's financial statements present fairly in all material respects, the financial position and the results of operations of the Company. OTHER INFORMATION About the Company McDermott International, Inc. is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, installation, procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. , 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, McDermott cautions that statements in this press release, which are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and provide other than historical information, involve risks and uncertainties that may impact the Company's actual results of operations. These forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. include statements relating to the proposed settlement of the B&W Chapter 11 proceedings, resolution of the SEC staff's comments, the impact on McDermott's financial statements and results of operations for the fourth quarter and fiscal year 2004 if the completed contract accounting method were utilized, and the Company's position for the future. 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 the SEC staff may not conclude its review process prior to the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of the 15 day extension, the B&W Chapter 11 settlement may not be finalized on the terms we have described and changes to McDermott's liquidity requirements. Additionally, all statements made regarding fourth quarter and fiscal year 2004 results (and prior period's results if we had applied the completed contract accounting method for the loss-generating EPIC projects) are unaudited and are subject to audit and other adjustments. If one or more of these risks materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or if underlying assumptions prove incorrect Incorrect means to not be correct and may also refer to:
Conference Call to Discuss 2004 Fourth Quarter Earnings Release Date: Wednesday Wednesday: see week. , March 16, 2005, at 10:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy (9:00 a.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. ) Live Webcast: Investor Relations Investor relations The process by which the corporation communicates with its investors. section of website at www.mcdermott.com Replay: Available for two weeks in the investor relations section of www.mcdermott.com
EXHIBIT A
---------
McDERMOTT INTERNATIONAL, INC.
COMPARISON OF MCDERMOTT'S PERCENTAGE-OF-COMPLETION RESULTS AS
REPORTED TO COMPLETED CONTRACT METHOD OF ACCOUNTING ON
FIVE LOSS GENERATING EPIC PROJECTS (1)
(UNAUDITED, $ MILLIONS)
McDermott Expected Annual difference to
Results if reported results if
McDermott Reported Completed Contract Completed Contract
Results (2) Accounting Accounting Used
-------------------------- ------------------- --------------------
Pre-tax Pre-tax Pre-tax
Full Income/ Income/ Income/
Year Revenue (Loss) Revenue (Loss) Revenue (Loss)
-------- --------- ------- --------- --------- --------- ----------
2001 $1,888.1 85.4 $1,779.1 82.3 $(109.0) (3.1)
2002 1,733.8 (773.6) 1,408.5 (778.5) (325.3) (4.9)
2003 2,335.4 (80.9) 2,061.5 (72.9) (273.9) 8.0
2004 1,923.0 102.5 2,631.2 102.5 708.2 -
(1) Medusa, Devils Tower, Front Runner, Carina Aries, and Belanak
projects
(2) Computed using percentage-of-completion accounting
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME (1)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2004
------------------ -------------------
(Unaudited)
(In thousands, except per share amounts)
Revenues $473,681 $1,923,019
----------------------------------------------------------------------
Costs and Expenses:
Cost of operations 396,840 1,673,922
Gain on settlements and
curtailments of pension
plans (32,309) (32,309)
Losses (gains) on asset
disposals and
impairments-net (13,366) (32,163)
Selling, general and
administrative expenses 61,532 203,262
----------------------------------------------------------------------
412,697 1,812,712
----------------------------------------------------------------------
Equity in Income of Investees 11,564 35,617
----------------------------------------------------------------------
Operating Income 72,548 145,924
----------------------------------------------------------------------
Other Income (Expense):
Interest income 2,232 5,574
Interest expense (10,291) (36,066)
Estimated loss on The Babcock
& Wilcox Company bankruptcy
settlement (8,931) (11,187)
Other-net (2,677) (1,779)
----------------------------------------------------------------------
(19,667) (43,458)
----------------------------------------------------------------------
Income from Continuing
Operations before Provision for
Income Taxes and Cumulative
Effect of Accounting Change 52,881 102,466
Provision for Income Taxes 10,415 40,827
----------------------------------------------------------------------
Income from Continuing Operations
before Cumulative Effect of
Accounting Change 42,466 61,639
Income from Discontinued
Operations - -
----------------------------------------------------------------------
Income before Cumulative
Effect of Accounting Change 42,466 61,639
Cumulative Effect of
Accounting Change - -
----------------------------------------------------------------------
Net Income $42,466 $61,639
----------------------------------------------------------------------
Income per Common Share:
Basic:
Income from Continuing
Operations before Cumulative
Effect of Accounting Change $0.64 $0.94
Income from Discontinued
Operations $- $-
Cumulative Effect of
Accounting Change $- $-
Net Income $0.64 $0.94
Diluted:
Income from Continuing Operations
before Cumulative Effect of
Accounting Change $0.61 $0.90
Income from Discontinued
Operations $- $-
Cumulative Effect of
Accounting Change $- $-
Net Income $0.61 $0.90
----------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2004
------------------ -------------------
(Unaudited)
Weighted Average Common Shares
Basic 66,102,386 65,688,361
Diluted 69,583,607 68,268,131
----------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION (1)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2004 2004
---------------- --------------
(Unaudited, In thousands)
REVENUES
Marine Construction Services $317,177 $1,367,923
Government Operations 156,488 555,093
Power Generation Systems - -
Adjustments and Eliminations 16 3
----------------------------------------------------------------------
TOTAL $473,681 $1,923,019
----------------------------------------------------------------------
SEGMENT OPERATING INCOME (LOSS)
Marine Construction Services $36,712 $83,841
Government Operations 29,509 109,849
Power Generation Systems 80 1,891
----------------------------------------------------------------------
66,301 195,581
Corporate 6,247 (49,657)
----------------------------------------------------------------------
TOTAL $72,548 $145,924
----------------------------------------------------------------------
EQUITY IN INCOME (LOSS) OF INVESTEES (2)
Marine Construction Services $(90) $1,886
Government Operations 11,352 32,564
Power Generation Systems 302 1,167
----------------------------------------------------------------------
TOTAL $11,564 $35,617
----------------------------------------------------------------------
DEPRECIATION & AMORTIZATION EXPENSE (2)
Marine Construction Services $6,936 $24,036
Government Operations 3,445 12,567
Power Generation Systems - -
Corporate 891 3,690
----------------------------------------------------------------------
TOTAL $11,272 $40,293
----------------------------------------------------------------------
CAPITAL EXPENDITURES
Marine Construction Services $4,900 $12,645
Government Operations 12,661 22,211
Power Generation Systems - -
Corporate 716 999
----------------------------------------------------------------------
TOTAL $18,277 $35,855
----------------------------------------------------------------------
BACKLOG
Marine Construction Services $1,252,055 $1,252,055
Government Operations 1,700,243 1,700,243
----------------------------------------------------------------------
TOTAL $2,952,298 $2,952,298
----------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
(2) Included in Segment Operating Income (Loss) above.
McDERMOTT INTERNATIONAL, INC.
ITEMS INCLUDED IN CONTINUING OPERATIONS (1)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2004
------------------ -------------------
(Unaudited, In Millions)
ITEMS INCLUDED IN OPERATING
INCOME (LOSS):
Marine Construction Services
Contract cost adjustments on
loss projects $16.7 $46.6
Gain on sale of assets 13.7 30.3
Miscellaneous items, net (6.6) (14.5)
------------------------------------------------------------------
TOTAL $23.8 $62.4
--------------------------------------------------------------------
Government Operations
Pension funding reimbursement $3.2 $11.8
Miscellaneous items - 3.2
------------------------------------------------------------------
TOTAL $3.2 $15.0
--------------------------------------------------------------------
Corporate
Qualified pension plan expense $(15.2) $(60.8)
Gain on U.K. pension plans 27.7 27.7
------------------------------------------------------------------
TOTAL $12.5 $(33.1)
--------------------------------------------------------------------
OTHER ITEMS:
Estimated change in B&W
bankruptcy settlement $(8.9) $(11.2)
Tax impact on B&W settlement 0.6 0.7
--------------------------------------------------------------------
Net After Tax Effect $(9.5) $(11.9)
--------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (1)
ASSETS
December 31,
2004
--------------------------
(Unaudited, In thousands)
Current Assets:
Cash and cash equivalents $259,319
Restricted cash and cash equivalents 111,455
Accounts receivable - trade, net 226,731
Accounts receivable from The Babcock &
Wilcox Company 6,121
Accounts and notes receivable -
unconsolidated affiliates 29,330
Accounts receivable - other 71,522
Contracts in progress 72,355
Deferred income taxes 9,813
Other current assets 13,277
----------------------------------------------------------------------
Total Current Assets 799,923
----------------------------------------------------------------------
Restricted cash and cash equivalents 66,498
----------------------------------------------------------------------
Property, Plant and Equipment:
Land 11,717
Buildings 114,318
Machinery and equipment 925,236
Property under construction 36,043
----------------------------------------------------------------------
1,087,314
Less accumulated depreciation 780,225
----------------------------------------------------------------------
Net Property, Plant and Equipment 307,089
----------------------------------------------------------------------
Restricted Investments:
Government obligations 13,257
Other investments 28,627
----------------------------------------------------------------------
Total Investments 41,884
----------------------------------------------------------------------
Goodwill 12,926
----------------------------------------------------------------------
Prepaid Pension Costs -
----------------------------------------------------------------------
Other Assets 158,612
----------------------------------------------------------------------
TOTAL $1,386,932
----------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (1)
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31,
2004
-------------------------
(Unaudited, In thousands)
Current Liabilities:
Notes payable and current maturities of
long-term debt $12,009
Accounts payable 114,235
Accounts payable to The Babcock & Wilcox
Company 55,180
Accrued employee benefits 79,362
Accrued liabilities - other 163,649
Accrued contract costs 81,591
Advance billings on contracts 217,053
U.S. and foreign income taxes payable 18,612
----------------------------------------------------------------------
Total Current Liabilities 741,691
----------------------------------------------------------------------
Long-Term Debt 268,011
----------------------------------------------------------------------
Accumulated Postretirement Benefit
Obligation 26,315
----------------------------------------------------------------------
Self-Insurance 61,715
----------------------------------------------------------------------
Pension Liability 328,852
----------------------------------------------------------------------
Accrued Cost of The Babcock & Wilcox Company
Bankruptcy Settlement 112,103
----------------------------------------------------------------------
Other Liabilities 109,688
----------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Deficit:
Common stock, par value $1.00 per share,
authorized 150,000,000 shares; issued
69,560,726 shares at December 31, 2004 69,561
Capital in excess of par value 1,122,055
Accumulated deficit (1,060,908)
Treasury stock at cost, 2,341,902 shares
at December 31, 2004 (64,625)
Accumulated other comprehensive loss (327,526)
----------------------------------------------------------------------
Total Stockholders' Deficit (261,433)
----------------------------------------------------------------------
TOTAL $1,386,932
----------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
Year Ended December 31
2004
------------------------
(Unaudited, In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $61,639
Depreciation and amortization 40,293
Income or loss of investees, less
dividends 7,138
Loss (gain) on asset disposals and
impairments - net (32,163)
Provision for (benefit from) deferred
taxes (24,406)
Gain on sale of businesses -
Impairment of J. Ray McDermott, S.A.
goodwill -
Loss on write-off of investment in The
Babcock & Wilcox Company -
Estimated loss on The Babcock & Wilcox
bankruptcy settlement 11,187
Cumulative effect of accounting change -
Other 11,495
Changes in assets and liabilities, net
of effects from acquisitions and
divestitures:
Accounts receivable (88,470)
Accounts payable (19,400)
Net contracts in progress and advance
billings 38,185
Income taxes 35,729
Accrued liabilities 17,343
Pension liability 17,460
Other, net (10,724)
----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 65,306
----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash
equivalents 2,527
Purchases of property, plant and equipment (35,644)
Purchases of available-for-sale securities (139,219)
Maturities of available-for-sale securities 134,628
Sales of available-for-sale securities 6,069
Proceeds from asset disposals 89,184
Other (1)
----------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 57,544
----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt -
Payment of long-term debt -
Payment of debt issuance costs (3,768)
Increase (decrease) in short-term borrowing (36,750)
Issuance of common stock 2,800
Other (629)
----------------------------------------------------------------------
NET CASH (USED IN) FINANCING ACTIVITIES (38,347)
----------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 26
----------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
2004
------------------------
(Unaudited, In thousands)
NET INCREASE IN CASH AND CASH EQUIVALENTS 84,529
----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 174,790
----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $259,319
----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $36,317
Income taxes (net of refunds) $70,699
----------------------------------------------------------------------
(1) Accounted for under the percentage-of-completion accounting
method.
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