McDermott International, Inc. (NYSE:MDR) (�McDermott� or the
�Company�) today reported net income of $123.2 million, or $0.54
per diluted share, for the 2008 first quarter, compared to net
income of $158.1 million, or $0.69 per diluted share, for the
corresponding period in 2007. Weighted average common shares
outstanding on a fully diluted basis were approximately 230.1
million and 228.4 million in the quarters ended March 31, 2008 and
March 31, 2007, respectively. For 2007, the Company�s common shares
outstanding and earnings per share are adjusted to reflect the
2-for-1 stock split effected in September 2007. McDermott�s
revenues in the first quarter of 2008 were $1,450.4 million, an
increase of 6.4 percent compared to $1,363.4 million in the
corresponding period in 2007. The consolidated improvement in
Company revenues, compared to a year ago, was a result of increases
in the Offshore Oil & Gas Construction and Government
Operations segments, partially offset by a decline in the Power
Generation Systems segment. Operating income was $157.1 million in
the 2008 first quarter compared to $192.5 million in the 2007 first
quarter. Year-over-year increases in the Power Generation Systems
and Government Operations segments, totaling a combined $36
million, were more than offset by a $68.3 million decline segment
income from the Offshore Oil & Gas Construction segment,
primarily due to weather-related downtime in the 2008 first quarter
and a lower amount of project close-outs, change orders and
settlements compared to the first quarter of 2007. �Despite a
disruptive first quarter for Offshore Oil & Gas Construction,
the outlook for all of our business segments remains strong for
2008 as we execute our record backlog and continue robust bidding
activity,� said Bruce W. Wilkinson, Chairman of the Board and Chief
Executive Officer of McDermott. �Each of the energy markets we
serve has significant needs, and with our record of safe and timely
execution, McDermott is well-positioned in the marketplace.� At
March 31, 2008, McDermott�s consolidated backlog was $10.2 billion,
compared to $7.9 billion and $9.8 billion at March 31, 2007 and
December 31, 2007, respectively. RESULTS OF OPERATIONS 2008 First
Quarter Compared to 2007 First Quarter Offshore Oil & Gas
Construction Segment Revenues in the Offshore Oil & Gas
Construction segment were $645.9 million in the 2008 first quarter,
compared to $550.3 million for the same period a year ago. The
year-over-year increase in revenues resulted from increased
fabrication activities in the Middle East and Asia Pacific regions,
partially offset by reduced activities in the Caspian region.
Segment income for the 2008 first quarter was $52.9 million,
compared to $121.2 million in the 2007 first quarter. The decrease
in segment income was primarily attributable to a high-level of
unproductive offshore working days for major construction vessels
during the 2008 first quarter, due to poor weather conditions in
major areas of operation, and reduced activities in the Caspian
region. In addition, the 2007 first quarter benefited from a
significant amount of project close-outs, change orders and
settlements, totaling approximately $40 million, compared to
approximately $11 million in the first quarter of 2008. At March
31, 2008, segment backlog was $5.3 billion, compared to backlog of
$4.2 billion and $4.8 billion at March 31, 2007 and December 31,
2007, respectively. Power Generation Systems Segment Revenues in
the Power Generation Systems segment for the first quarter of 2008
were $616.3 million, compared to $655.4 million in the first
quarter of 2007. The reduction in revenues resulted primarily from
lower activities on new fossil utility steam systems and retrofits
of existing facilities compared to a year ago, partially offset by
increased levels of replacement parts and activities on replacement
nuclear steam generators. Segment income for the 2008 first quarter
was $76.3 million, compared to $43.5 million in the 2007 first
quarter. The increase in segment income resulted primarily from
improved profitability on utility steam systems, higher volumes of
replacement parts and increased activities on replacement nuclear
steam generator. At March 31, 2008, segment backlog was $3.2
billion, compared to backlog of $2.3 billion and $3.3 billion at
March 31, 2007 and December 31, 2007, respectively. Government
Operations Segment Revenues in the Government Operations segment
were $190.6 million in the 2008 first quarter, compared to $161.4
million for the same period a year ago. The improvement was
primarily due to the manufacture of nuclear components for a
commercial uranium enrichment project which was awarded in June
2007, and higher volumes in the manufacture of nuclear components
for certain U.S. Government programs, including revenues from
Marine Mechanical Corporation which was acquired in May 2007.
Segment income for the 2008 first quarter was $38.0 million, the
highest level of quarterly segment income since inception, compared
to $34.8 million in the 2007 first quarter. The increase in segment
income resulted primarily from an increase in site management
income, and increased activity in the manufacture of nuclear
components for the new commercial uranium enrichment project and
for certain U.S. Government programs. At March 31, 2008, segment
backlog was $1.7 billion, compared to backlog of $1.5 billion and
$1.8 billion at March 31, 2007 and December 31, 2007, respectively.
Corporate Unallocated corporate expenses were $10.0 million in the
2008 first quarter, compared to $6.9 million in the 2007 first
quarter. The year-over-year increase was primarily related to
increased general corporate expenses, including higher stock-based
compensation expenses. Other Income and Expense The Company�s other
income for the first quarter of 2008 was $6.5 million, compared to
other expense of $1.1 million in the first quarter of 2007. The
year-over-year improvement was primarily related to lower interest
expense following the retirement of the $250 million term loan in
April 2007. OTHER INFORMATION About the Company McDermott is an
engineering and construction company, with specialty manufacturing
and service capabilities, focused on energy infrastructure.
McDermott�s customers are predominantly utilities and other power
generators, major and national oil companies, and the United States
Government. With its global operations, McDermott operates in over
20 countries with more than 20,000 employees. Forward-Looking
Statements 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, our belief that
McDermott is well positioned in the marketplace and that our
outlook for 2008 is strong. 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 adverse changes in the markets
in which we operate, our inability to successfully execute on
contracts in backlog or that awards and contracts in backlog may
not otherwise result in the expected revenues. 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, 2007. Conference Call to
Discuss 2008 First Quarter Earnings Release Date: Tuesday, May 13,
2008, 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 INCOME � Three Months Ended March 31,
2008 � 2007 (Unaudited) (In thousands, except shares and per share
amounts) � Revenues � $ 1,450,426 � � $ 1,363,430 � Costs and
Expenses: Cost of operations 1,188,696 1,082,066 Gains on asset
disposals and impairments � net (11,443 ) (1,635 ) Selling, general
and administrative expenses � � 126,731 � � � 97,762 � Total Costs
and Expenses � � 1,303,984 � � � 1,178,193 � � Equity in Income of
Investees � � 10,670 � � � 7,241 � � Operating Income � � 157,112 �
� � 192,478 � � Other Income (Expense): Interest income 13,395
12,318 Interest expense (2,940 ) (9,589 ) Other expense � net � �
(3,997 ) � � (3,870 ) Total Other Income (Expense) � � 6,458 � � �
(1,141 ) � Income before Provision for Income Taxes 163,570 191,337
� Provision for Income Taxes � � 40,380 � � � 33,276 � � Net Income
� $ 123,190 � � $ 158,061 � � Earnings per Share: Basic $ 0.55 $
0.71 Diluted � $ 0.54 � � $ 0.69 � � Shares used in the computation
of earnings per share: Basic 225,632,169 221,589,626 Diluted � �
230,112,858 � � � 228,438,412 � McDERMOTT INTERNATIONAL, INC.
SELECTED SEGMENT INFORMATION � Three Months Ended March 31, 2008 �
2007 (Unaudited) REVENUES Offshore Oil and Gas Construction $
645,949 $ 550,269 Government Operations 190,594 161,399 Power
Generation Systems 616,298 655,414 Adjustments and Eliminations � �
(2,415 ) � � (3,652 ) TOTAL � $ 1,450,426 � � $ 1,363,430 � �
SEGMENT INCOME Offshore Oil and Gas Construction $ 52,925 $ 121,203
Government Operations 37,950 34,755 Power Generation Systems � �
76,258 � � � 43,464 � 167,133 199,422 Corporate � � (10,021 ) � �
(6,944 ) TOTAL � $ 157,112 � � $ 192,478 � � EQUITY IN INCOME
(LOSS) OF INVESTEES (1) Offshore Oil and Gas Construction $ (754 )
$ (813 ) Government Operations 8,749 6,473 Power Generation Systems
� � 2,675 � � � 1,581 � TOTAL � $ 10,670 � � $ 7,241 � �
DEPRECIATION & AMORTIZATION (1) Offshore Oil and Gas
Construction $ 19,963 $ 7,304 Government Operations 5,566 3,700
Power Generation Systems 5,497 5,213 Corporate � � 285 � � � 321 �
TOTAL � $ 31,311 � � $ 16,538 � � CAPITAL EXPENDITURES Offshore Oil
and Gas Construction $ 47,237 $ 34,424 Government Operations 1,511
2,560 Power Generation Systems 7,204 11,186 Corporate � � 3,334 � �
� 31 � TOTAL � $ 59,286 � � $ 48,201 � � BACKLOG Offshore Oil and
Gas Construction $ 5,320,839 $ 4,208,217 Government Operations
1,676,766 1,456,593 Power Generation Systems � � 3,179,244 � � �
2,260,520 � TOTAL � $ 10,176,849 � � $ 7,925,330 � � (1) Included
in Segment Income Above McDERMOTT INTERNATIONAL, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS � ASSETS � � March 31, December 31,
2008 2007 (Unaudited) (In thousands) � ASSETS Current Assets: Cash
and cash equivalents $ 800,600 $ 1,001,394 Restricted cash and cash
equivalents 79,347 64,786 Investments 348,186 300,092 Accounts
receivable � trade, net 817,577 770,024 Accounts and notes
receivable � unconsolidated affiliates 3,328 2,303 Accounts
receivable � other 100,078 71,162 Contracts in progress 212,917
194,292 Inventories 108,098 95,208 Deferred income taxes 143,123
160,783 Other current assets � � 109,079 � � 97,456 � Total Current
Assets � � 2,722,333 � � 2,757,500 � Property, Plant and Equipment
2,031,973 2,004,138 Less accumulated depreciation � � 1,101,097 � �
1,090,400 � Net Property, Plant and Equipment � � 930,876 � �
913,738 � Investments � � 200,807 � � 162,069 � Goodwill � �
165,212 � � 158,533 � Deferred Income Taxes � � 132,014 � � 134,292
� Investments in Unconsolidated Affiliates � � 69,238 � � 62,241 �
Other Assets � � 231,585 � � 223,113 � TOTAL � $ 4,452,065 � $
4,411,486 McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS � LIABILITIES AND STOCKHOLDERS' EQUITY � � March 31,
� December 31, 2008 2007 (Unaudited) (In thousands) � LIABILITIES
AND STOCKHOLDERS� EQUITY Current Liabilities: Notes payable and
current maturities of long-term debt $ 6,771 $ 6,599 Accounts
payable 453,757 455,659 Accrued employee benefits 264,503 343,812
Accrued liabilities � other 223,375 175,557 Accrued contract cost
117,534 93,281 Advance billings on contracts 1,379,739 1,463,223
Accrued warranty expense 105,726 101,330 Income taxes payable � �
53,267 � � � 57,071 � � Total Current Liabilities � � 2,604,672 � �
� 2,696,532 � � Long-Term Debt � � 6,368 � � � 10,609 � �
Accumulated Postretirement Benefit Obligation � � 93,791 � � �
96,253 � � Self-Insurance � � 86,083 � � � 82,525 � � Pension
Liability � � 166,503 � � � 188,748 � � Other Liabilities � �
171,672 � � � 169,814 � � Commitments and Contingencies �
Stockholders� Equity: Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued 232,566,598 and 231,722,659
at March 31, 2008 and December 31, 2007, respectively 232,567
231,723 Capital in excess of par value 1,167,370 1,145,829 Retained
earnings 258,479 135,289 Treasury stock at cost, 5,823,698 and
5,852,248 at March 31, 2008 and December 31, 2007, respectively
(63,806 ) (63,903 ) Accumulated other comprehensive loss � �
(271,634 ) � � (281,933 ) � Total Stockholders� Equity � �
1,322,976 � � � 1,167,005 � � TOTAL � $ 4,452,065 � � $ 4,411,486 �
McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS � Three Months Ended March 31, 2008 � 2007 (Unaudited)
(In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income � $
123,190 � � $ 158,061 � Non-cash items included in net income:
Depreciation and amortization 31,311 16,538 Income of investees,
less dividends (3,057 ) (319 ) Gains on asset disposals and
impairments � net (11,443 ) (1,635 ) Provision for deferred taxes
16,063 28,880 Amortization of pension and postretirement costs
10,137 11,863 Excess tax benefits from FAS 123(R) stock-based
compensation (5,346 ) (6,784 ) Other, net 10,727 6,164 Changes in
assets and liabilities, net of effects of acquisitions and
divestitures: Accounts receivable (75,109 ) (139,263 ) Net
contracts in progress and advance billings on contracts (103,241 )
125,833 Accounts payable 7,754 (15,937 ) Income taxes 2,150 (26,807
) Accrued and other current liabilities 77,316 10,376 Pension
liability, accumulated postretirement benefit obligation and
accrued employee benefits (104,121 ) (70,346 ) Other, net � �
(29,258 ) � � (22,040 ) NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES � � (52,927 ) � � 74,584 � CASH FLOWS FROM INVESTING
ACTIVITIES: Increase in restricted cash and cash equivalents
(14,561 ) (7,886 ) Purchases of property, plant and equipment
(59,286 ) (45,504 ) Net (increase) decrease in available-for-sale
securities (88,633 ) 55,864 Proceeds from asset disposals 11,921
2,203 Other, net � � (820 ) � � 167 � NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES � � (151,379 ) � � 4,844 � CASH FLOWS FROM
FINANCING ACTIVITIES: Payment of long-term debt (4,385 ) (5,375 )
Issuance of common stock 2,845 2,471 Payment of debt issuance costs
(164 ) - Excess tax benefits from FAS 123(R) stock-based
compensation � � 5,346 � � � 6,784 � NET CASH PROVIDED BY FINANCING
ACTIVITIES � � 3,642 � � � 3,880 � EFFECTS OF EXCHANGE RATE CHANGES
ON CASH � � (130 ) � � 903 � NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (200,794 ) 84,211 CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD � � 1,001,394 � � � 600,843 � CASH AND CASH
EQUIVALENTS AT END OF PERIOD � $ 800,600 � � $ 685,054 �
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during
the period for: Interest (net of amount capitalized) $ 3,139 $
11,594 Income taxes (net of refunds) � $ 30,058 � � $ 21,487 �
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