McDermott Reports First Quarter 2006 Results
McDermott International, Inc. (NYSE: MDR) reported net income of $54.1 million, or $0.72 per diluted share, for the 2006 first quarter, compared to net income of $22.4 million, or $0.32 per diluted share, for the corresponding period in 2005. The 2006 first quarter includes approximately one month of The Babcock & Wilcox Company's ("B&W") financial results as well as the reconsolidation of B&W into McDermott's balance sheet. From February 2000 through February 22, 2006, the results of B&W were deconsolidated from the Company's reported results. Weighted average common shares outstanding on a fully diluted basis were approximately 75.3 million and 70.8 million for the quarters ended March 31, 2006 and March 31, 2005, respectively.
McDermott's revenues in the first quarter of 2006 were $644.9 million, compared to $436.0 million in the corresponding period in 2005, primarily reflecting the addition of B&W's revenues for the month of March 2006. Operating income was $66.5 million in the 2006 first quarter, compared to the 2005 first quarter operating income of $39.6 million.
"The first quarter has the Company off to a good start in 2006," said Bruce W. Wilkinson, Chairman of the Board and Chief Executive Officer of McDermott. "The power generation systems segment reflects an exceptional month from B&W, while marine construction services produced a solid quarter considering it included a $16 million non-cash impairment as part of its results."
At March 31, 2006, McDermott's consolidated backlog was $5.9 billion, compared to $2.8 billion and $3.6 billion, at March 31, 2005 and December 31, 2005, respectively.
Earlier today, the Company's Board of Directors declared a three-for-two split of McDermott's common stock. The stock split will be applicable to shareholders of record at the close of business on May 17, 2006 and will be effected in the form of a stock dividend to be issued on May 31, 2006. Any fractional shares as a result of the split will be paid in cash based upon the closing price of McDermott's stock price on the record date.
RESULTS OF OPERATIONS
2006 First Quarter Compared to 2005 First Quarter
Marine Construction Services Segment ("J. Ray")
Revenues in the Marine Construction Services segment were $295.4 million in the 2006 first quarter, compared to $283.4 million for the same period a year ago. The year-over-year increase in revenues resulted primarily from increased project activity in the Middle East, Caspian and Asia Pacific regions, partially offset by declines in the Americas and worldwide marine.
Segment income for the 2006 first quarter was $21.0 million, compared to $28.0 million in the 2005 first quarter. Major items contributing to operating income in the 2006 first quarter were projects in the Middle East, Asia Pacific and Caspian regions. Also during the first quarter 2006, J. Ray recorded a non-cash impairment of $16.4 million for currency translation losses associated with the planned termination of its Mexican joint venture.
At March 31, 2006, J. Ray's backlog was $2.4 billion, compared to backlog of $1.1 billion and $1.8 billion at March 31, 2005 and December 31, 2005, respectively.
Power Generation Systems Segment ("B&W")
Revenues in the Power Generation Systems segment for the first quarter 2006 were $189.0 million, representing B&W's revenues beginning February 22, 2006. Throughout 2005, B&W was deconsolidated from McDermott's reported financial results due to its asbestos-related reorganization and therefore the Power Generation Systems segment did not report any revenues.
Segment income for the 2006 first quarter was $27.6 million, compared to $0.1 million in the 2005 first quarter. The increase in segment income was due to consolidating B&W for approximately one month in the first quarter 2006.
At March 31, 2006, B&W's backlog was $1.9 billion and was not consolidated during 2005.
Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $161.0 million in the 2006 first quarter, compared to $152.6 million for the same period a year ago. The increase was primarily due to higher volumes in the manufacture of nuclear components for certain U.S. Government programs and uranium recovery operations, as well as increased revenues from engineering services for U.S. Department of Energy sites.
Segment income for the 2006 first quarter was $26.4 million, compared to $24.0 million in the 2005 first quarter. The increase was primarily due to higher volumes and margins in the manufacture of nuclear components and uranium recovery operations, and higher margins on commercial work for the research test reactor area which were partially offset by a decline in equity in income from investees.
At March 31, 2006, BWXT's backlog was $1.6 billion, compared to backlog of $1.7 billion and $1.8 billion at March 31, 2005 and December 31, 2005, respectively.
Unallocated corporate expenses were $8.4 million in the 2006 first quarter, compared to $12.6 million in the 2005 first quarter.
Other Income and Expense
The Company's other income, net, for the first quarter of 2006 was
$8.9 million, compared to other expense, net, of $3.6 million in the
first quarter of 2005. The expense reduction was primarily due to
increased interest income and an adjustment to interest resulting from
a settlement with U.S. and Canadian tax authorities.
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