-----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, ROfhgW0Ra3vJk0V+niDsdhz/xbP5wIlKK9BMTdqefxblIaK9AghX9wvfDVGSpiol mDe+2Oy1EDSJB7wRz7cAZw== 0001157523-03-006270.txt : 20031105 0001157523-03-006270.hdr.sgml : 20031105 20031104213216 ACCESSION NUMBER: 0001157523-03-006270 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031104 ITEM INFORMATION: FILED AS OF DATE: 20031105 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: 03977766 BUSINESS ADDRESS: STREET 1: 1450 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045875400 MAIL ADDRESS: STREET 1: 1450 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70161 8-K 1 a4509608.txt MCDERMOTT INTL 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: November 4, 2003 McDERMOTT INTERNATIONAL, INC. -------------------------------------------------- (Exact name of registrant as specified in its charter) REPUBLIC OF PANAMA 1-8430 72-0593134 (State or other jurisdiction (Commission) (IRS Employer of incorporation) File No.) Identification No.) 1450 Poydras Street, New Orleans, Louisiana 70112-6050 - --------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including Area Code: (504) 587-5400 -------------- Item 12. Results of Operations and Financial Condition On November 4, 2003, McDermott International, Inc. issued a press release announcing financial results for the third quarter of 2003. 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 12, 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, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. 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/Thomas A. Henzler ------------------------- Thomas A. Henzler Vice President and Corporate Controller November 4, 2003 2 EX-99 3 a4509608ex991.txt EXHIBIT 99.1 PRESS RELEASE EXHIBIT 99.1 McDermott Reports Third Quarter 2003 Income from Continuing Operations of $10.1 Million, $0.15 Per Diluted Share NEW ORLEANS--(BUSINESS WIRE)--Nov. 4, 2003-- Includes after-tax B&W settlement revaluation benefit of $8.2 million McDermott International, Inc. (NYSE: MDR) ("McDermott" or the "Company") today reported income from continuing operations of $10.1 million, or 15 cents per diluted share, for the third quarter of 2003 compared to a loss from continuing operations of $366.3 million, or $5.91 per diluted share, for the same period in 2002. Including $1.7 million of income from discontinued operations, net income for the 2003 third quarter was $11.8 million, or 18 cents per diluted share. Net loss for the third quarter of 2002 was $357.1 million, or $5.76 per diluted share, which included income from discontinued operations of $9.3 million. Weighted average common shares outstanding on a fully diluted basis were 66.7 million and 62.0 million for September 30, 2003 and September 30, 2002, respectively. Revenues in the third quarter of 2003 increased 49.8 percent, to $645.3 million, compared to the corresponding period in 2002. The growth in revenues is due to increased activity in the Marine Construction Services ("J. Ray") segment, partially offset by the loss of revenues from the Power Generation Systems segment due to the sale of Babcock & Wilcox Volund ApS in October 2002. Third quarter 2003 operating income was $8.4 million, which included a $19.9 million increase in the Company's estimate of the costs necessary to complete the EPIC Spar projects by J. Ray, primarily the Front Runner spar, and a $20.7 million non-cash qualified pension plan expense in the Corporate segment. The 2002 third quarter operating loss of $367.2 million included a $313.0 million impairment of goodwill, a $3.9 million impairment of an international joint venture and a $65.2 million loss from the EPIC Spar projects, all at J. Ray and a $4.2 million non-cash qualified pension plan expense in the Corporate segment. "We demonstrated solid progress during the quarter," said Bruce W. Wilkinson, chairman of the board and chief executive officer of McDermott. "Our operating businesses, J. Ray and BWXT, showed marked improvement versus a year ago, with both groups contributing to our earnings this quarter. J. Ray's increased activity during this strong third quarter contributed to its operating income and although our expected costs to complete the spars increased, primarily on Front Runner, I am encouraged by the solid earnings power that J. Ray demonstrated absent these increased costs. I believe J. Ray's improved focus on financial discipline will produce results over the long-term. I am particularly pleased with the consistent, year-over-year improvements at our BWXT operations. Its improving performance is commendable." The Company's other income for the third quarter of 2003 was $6.9 million, compared to other expense of $3.4 million in the third quarter of 2002. The year-over-year improvement is primarily due to a $9.7 million pretax ($8.2 million after-tax) reduction in the estimated costs related to The Babcock & Wilcox Company ("B&W") Chapter 11 settlement. RESULTS OF OPERATIONS 2003 Third Quarter Compared to 2002 Third Quarter Marine Construction Services Segment Revenues from the Marine Construction Services segment, which consists of J. Ray McDermott and its subsidiaries, increased 85 percent to $512.3 million in the 2003 third quarter. The revenue growth resulted from increased activity on fabrication and marine installation projects in all geographic areas where J. Ray operates, other than the Gulf of Mexico. The operating income for the 2003 third quarter was $11.9 million. Major projects contributing to 2003 third quarter operating income were the fabrication of topsides and marine installation of topsides and pipelines for projects in the Azerbaijani sector of the Caspian Sea, topsides fabrication work in the Morgan City fabrication facility, and deck fabrication and installation projects for an offshore operator in Vietnam. Selling, general and administrative expenses were $1.8 million lower in the 2003 third quarter compared to the 2002 third quarter. The 2003 third quarter included $19.9 million of increased costs associated with the Spar projects, primarily the Front Runner spar, while the 2002 third quarter included $65.2 million of Spar-related losses and $313 million of goodwill impairment. At September 30, 2003, J. Ray's backlog of $1.5 billion included $213 million related to contracts in loss positions. Of this amount, $137 million related to uncompleted work on the Spar projects and $71 million related to the Carina Aries project in Argentina. J. Ray's backlog was $1.8 billion and $2.1 billion at June 30, 2003 and at December 31, 2002, respectively. Government Operations Segment The Government Operations segment consists primarily of BWX Technologies, Inc. ("BWXT"). Revenues in this segment decreased $3.2 million to $133.0 million in the 2003 third quarter primarily due to lower revenues from a management and operations contract in Ohio, partially offset by higher volumes from the manufacture of nuclear components for certain U.S. government programs. Operating income increased 75 percent to $21.4 million in the 2003 third quarter, primarily due to the following: -- higher volumes from the manufacture of nuclear components for certain U.S. government programs -- improved operating results from joint ventures in Idaho, Louisiana, and Tennessee -- better margins from the commercial nuclear environmental services -- reduced spending on fuel cell research and development projects These items were partially offset by lower volumes at other government manufacturing operations, and higher general and administrative expenses due to increased facility management oversight costs. At September 30, 2003, BWXT's backlog was $1.4 billion, compared to backlog of $1.5 billion and $1.7 billion at June 30, 2003 and December 31, 2002, respectively. Corporate Corporate expenses were $25.0 million in the 2003 third quarter, an increase of $18.7 million, primarily due to higher noncash qualified pension plan expense as a result of year-end 2002 changes in the discount rate and plan asset performance. Additionally, the financial performance of the Company's captive insurance companies was less favorable during the 2003 third quarter compared to the same period in 2002. Other Income and Expense Net interest expense was $3.1 million in the 2003 third quarter compared to $1.4 million in the 2002 third quarter, due to higher interest rates associated with the Company's credit facility, and lower interest income due to a decrease in the amount of investments held combined with lower average interest rates earned on the investments. During the 2003 third quarter, revaluation of certain components of the estimated settlement cost related to the Chapter 11 proceedings involving B&W resulted in a decrease in the estimated cost of the settlement to $92.0 million resulting in the recognition of other income of $9.7 million ($8.2 million after tax). The consideration to be provided in the proposed settlement includes, among other things, McDermott common stock, a share price guaranty obligation and a promissory note. The decrease in the estimated settlement cost is due primarily to a decline in the price of McDermott's common stock from $6.33 per share at June 30, 2003 to $5.71 per share at September 30, 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. Assuming issuance of the debt and equity securities, the Company will record such amounts as either liabilities or stockholders' equity based on the nature of the individual securities. Thereafter, only the 3-year share price guaranty will be required to be revalued on an ongoing quarterly basis. The Company reported other income of $0.3 million in the 2003 third quarter compared to other expense of $1.9 million in the 2002 third quarter due to minority interest income associated with a J. Ray joint venture and an increase in foreign currency transaction gains. Provision for income taxes during the third quarter of 2003 was $5.1 million, compared to a benefit from income taxes of $4.3 million during the same period of 2002. The $9.4 million variance was due to the increase in pretax income combined with the changing mix of income earned in various tax jurisdictions. DISCONTINUED OPERATIONS In August 2003, the Company completed the sale of Menck GmbH ("Menck"), formerly a component of the Marine Construction Services segment. Accordingly, for the three and nine months ended September 30, 2003 and September 30, 2002, the Company has reported the results of operations for Menck as discontinued operations. Hudson Products Corporation ("HPC") was sold in July 2002. Accordingly, for the three and nine months ended September 30, 2002, the Company has reported the results of operations for HPC as discontinued operations. THE BABCOCK & WILCOX COMPANY The Company wrote off its investment in B&W of $224.7 million during the second quarter of 2002 and has not consolidated B&W with McDermott's financial results since B&W's Chapter 11 bankruptcy filing on February 22, 2000. B&W's revenues increased $1.6 million to $318.5 million in the third quarter of 2003. Net income for the 2003 third quarter was $15.4 million, an increase of $5.4 million versus the corresponding period in 2002. LIQUIDITY On a consolidated basis, the Company incurred negative cash flows for the first three quarters of 2003 and expects to incur negative cash flows from operations during the remainder of 2003 and in the first three quarters of 2004, primarily due to losses on the Spar projects and the Argentina project at J. Ray. Completion of the Spar projects and the Carina Aries project in Argentina has and will continue to put a strain on J. Ray's liquidity. J. Ray intends to fund its negative cash flow through new financing arrangements and sales of non-strategic assets. For the 2003 year, the Company anticipates negative operating cash flows before capital expenditures of between $100 million to $120 million. At October 28, 2003, the Company had liquidity of $199 million, which included unrestricted cash of $139 million and borrowing capacity under its existing credit facilities of $60 million. The Company is in the process of refinancing BWXT on a stand-alone basis and has received a commitment letter from a commercial bank to underwrite a three-year $125 million revolving credit facility, which may be increased to $150 million. This commitment is subject to the successful refinancing of J. Ray on a stand-alone basis. The Company is developing new financing arrangements for J. Ray and expects to close the BWXT and J. Ray financings simultaneously during the fourth quarter of 2003. The Company's ability to obtain new financing for J. Ray will depend on numerous factors, including J. Ray's operating performance and overall market conditions. If the Company is unable to obtain new financing arrangements, J. Ray's ability to pursue additional projects, which often require letters of credit, and its liquidity will be adversely impacted. These factors continue to cause substantial doubt about J. Ray's ability to continue as a going concern. OTHER INFORMATION About the Company McDermott International, Inc. is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, 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 International, Inc. 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. The forward-looking statements in this press release include, among other things, statements about the Company's and J. Ray's liquidity and ability to obtain new financing arrangements, the estimated cash flows and timing to complete the Spar projects and the Carina Aries project and the estimated charges for the proposed settlement of the B&W Chapter 11 proceedings based on current negotiations. 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. 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 risk factors, please see McDermott's annual report for the year ended December 31, 2002 and its 2003 quarterly reports filed with the Securities and Exchange Commission. Conference Call to Discuss 2003 Third Quarter Earnings Release Date: Wednesday, November 5, 2003 at 10:00 a.m. EDT (9:00 a.m. CDT) Webcast: Investor Relations section of website at www.mcdermott.com Replay: November 5, 2003 beginning at 1:00 p.m. EDT (12:00 p.m. CDT) (USA) (888)-286-8010 or (International) (617) 801-6888 Access code 31426403 McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Unaudited; in thousands, except per share amounts) Revenues $645,334 $ 430,937 $1,753,546 $1,291,423 - ---------------------------------------------------------------------- Costs and Expenses: Cost of operations 600,353 452,546 1,644,438 1,257,077 Impairment of JRM goodwill - 313,008 - 313,008 Loss on write-off of investment in The Babcock & Wilcox Company - - - 224,664 Selling, general and administrative expenses 43,052 37,091 120,287 116,989 - ---------------------------------------------------------------------- 643,405 802,645 1,764,725 1,911,738 - ---------------------------------------------------------------------- Equity in Income of Investees 6,457 4,469 19,582 14,421 - ---------------------------------------------------------------------- Operating Income (Loss) 8,386 (367,239) 8,403 (605,894) - ---------------------------------------------------------------------- Other Income (Expense): Interest income 709 1,540 2,598 6,877 Interest expense (3,801) (2,983) (11,631) (12,516) (Increase) decrease in estimated cost of The Babcock & Wilcox Company bankruptcy settlement 9,682 - (5,642) - Other-net 299 (1,916) 2,286 (506) - ---------------------------------------------------------------------- 6,889 (3,359) (12,389) (6,145) Income (Loss) from Continuing Operations before Provision for (Benefit from) Income Taxes and Cumulative Effect of Accounting Change 15,275 (370,598) (3,986) (612,039) Provision for (Benefit from) Income Taxes 5,140 (4,284) 16,801 (9,676) - ---------------------------------------------------------------------- Income (Loss) from Continuing Operations before Cumulative Effect of Accounting Change 10,135 (366,314) (20,787) (602,363) Income from Discontinued Operations 1,649 9,258 4,555 10,498 - ---------------------------------------------------------------------- Income (Loss) before Cumulative Effect of Accounting Change 11,784 (357,056) (16,232) (591,865) Cumulative Effect of Accounting Change - - 3,710 - - ---------------------------------------------------------------------- Net Income (Loss) $ 11,784 $(357,056) $ (12,522) $ (591,865) - ---------------------------------------------------------------------- Earnings (Loss) per Common Share: Basic: Income (Loss) from Continuing Operations before Cumulative Effect of Accounting Change $ 0.16 $ (5.91) $ (0.33) $ (9.78) Income from Discontinued Operations $ 0.03 $ 0.15 $ 0.07 $ 0.17 Cumulative Effect of Accounting Change $ - $ - $ 0.06 $ - Net Income (Loss) $ 0.18 $ (5.76) $ (0.20) $ (9.61) Diluted: Income (Loss) from Continuing Operations before Cumulative Effect of Accounting Change $ 0.15 $ (5.91) $ (0.33) $ (9.78) Income from Discontinued Operations $ 0.02 $ 0.15 $ 0.07 $ 0.17 Cumulative Effect of Accounting Change $ - $ - $ 0.06 $ - Net Income (Loss) $ 0.18 $ (5.76) $ (0.20) $ (9.61) - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL, INC. SELECTED SEGMENT INFORMATION Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 (Unaudited) (In thousands) REVENUES: Marine Construction Services $512,347 $ 276,843 $1,375,359 $ 855,437 Government Operations 133,031 136,255 378,262 389,161 Power Generation Systems - 17,846 - 46,881 Adjustments and Eliminations (44) (7) (75) (56) - ---------------------------------------------------------------------- $645,334 $ 430,937 $1,753,546 $1,291,423 - ---------------------------------------------------------------------- OPERATING INCOME (LOSS): Marine Construction Services $ 11,926 $(370,342) $ 15,404 $ (399,013) Government Operations 21,398 12,226 65,509 44,786 Power Generation Systems 87 (1,326) 117 (5,248) - ---------------------------------------------------------------------- 33,411 (359,442) 81,030 (359,475) Write-off of investment in B&W - - - (224,664) Other unallocated - (1,452) - (1,452) Corporate (25,025) (6,345) (72,627) (20,303) - ---------------------------------------------------------------------- TOTAL $ 8,386 $(367,239) $ 8,403 $ (605,894) - ---------------------------------------------------------------------- EQUITY IN INCOME (LOSS) OF INVESTEES: Marine Construction Services $ 144 $ (530) $ (433) $ 1,246 Government Operations 6,038 4,837 19,332 15,826 Power Generation Systems 275 162 683 (2,651) - ---------------------------------------------------------------------- TOTAL $ 6,457 $ 4,469 $ 19,582 $ 14,421 - ---------------------------------------------------------------------- DEPRECIATION & AMORTIZATION: Marine Construction Services $ 7,648 $ 7,018 $ 20,830 $ 18,842 Government Operations 3,120 1,953 9,452 8,139 Power Generation Systems 3 187 10 543 Corporate 632 1,466 2,289 2,710 - ---------------------------------------------------------------------- TOTAL $ 11,403 $ 10,624 $ 32,581 $ 30,234 - ---------------------------------------------------------------------- CAPITAL EXPENDITURES: Marine Construction Services $ 2,461 $ 10,040 $ 13,796 $ 26,463 Government Operations 3,828 5,760 11,288 15,449 Power Generation Systems - 185 - 246 Corporate 1,051 - 2,447 - - ---------------------------------------------------------------------- TOTAL $ 7,340 $ 15,985 $ 27,531 $ 42,158 - ---------------------------------------------------------------------- BACKLOG (in millions): Marine Construction Services $ 1,483 $ 1,957 $ 1,483 $ 1,957 Government Operations 1,380 949 1,380 949 Power Generation Systems - - - - - ---------------------------------------------------------------------- TOTAL $ 2,863 $ 2,906 $ 2,863 $ 2,906 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL, INC. ITEMS INCLUDED IN LOSS FROM CONTINUING OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Unaudited) (In millions) ITEMS INCLUDED IN OPERATING INCOME (LOSS) BY SEGMENT: Marine Construction Services Losses on Spar projects $(19.9) $ (65.2) $(19.9) $(102.1) Impairment of JRM goodwill - (313.0) - (313.0) Losses on Argentina project - (0.8) (41.9) (0.3) Announced change orders on a project - - 11.0 - - ---------------------------------------------------------------------- TOTAL $(19.9) $(379.0) $(50.8) $(415.4) - ---------------------------------------------------------------------- Government Operations Favorable resolution of contract dispute $ - $ - $ 8.7 $ - - ---------------------------------------------------------------------- TOTAL $ - $ - $ 8.7 $ - - ---------------------------------------------------------------------- Corporate Write-off of investment in B&W $ - $ - $ - $(224.7) Qualified pension plan expense (20.7) (4.2) (56.8) (8.3) - ---------------------------------------------------------------------- TOTAL $(20.7) $ (4.2) $(56.8) $(233.0) - ---------------------------------------------------------------------- OTHER ITEMS: Change in estimated cost of B&W bankruptcy settlement before tax $ 9.7 $ - $ (5.6) $ - Tax impact on B&W settlement 1.5 - 2.6 - - ---------------------------------------------------------------------- Change in estimated cost of B&W bankruptcy settlement after tax $ 8.2 $ - $ (8.2) $ - - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS Sept. 30, Dec. 31, 2003 2002 ---- ---- (Unaudited) (In thousands) Current Assets: Cash and cash equivalents $ 163,525 $ 174,341 Restricted cash 7,899 - Investments - 108,269 Accounts receivable - trade, net 252,796 191,672 Accounts receivable from The Babcock & Wilcox Company 7,864 12,273 Accounts receivable - unconsolidated affiliates 14,140 17,695 Accounts receivable - other 28,978 63,270 Contracts in progress 102,083 147,336 Deferred income taxes 2,123 3,350 Other current assets 33,712 45,403 - ---------------------------------------------------------------------- Total Current Assets 613,120 763,609 - ---------------------------------------------------------------------- Property, Plant and Equipment 1,262,316 1,238,447 Less accumulated depreciation 910,014 885,051 - ---------------------------------------------------------------------- Net Property, Plant and Equipment 352,302 353,396 - ---------------------------------------------------------------------- Investments in Debt Securities 44,591 64,958 - ---------------------------------------------------------------------- Goodwill 12,926 12,926 - ---------------------------------------------------------------------- Prepaid Pension Costs 18,974 19,311 - ---------------------------------------------------------------------- Other Assets 82,210 63,971 - ---------------------------------------------------------------------- TOTAL $1,124,123 $1,278,171 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' DEFICIT September 30, December 31, 2003 2002 ---- ---- (Unaudited) (In thousands) Current Liabilities: Notes payable and current maturities of long-term debt $ 505 $ 55,577 Accounts payable 179,564 163,811 Accounts payable to The Babcock & Wilcox Company 45,751 32,379 Accrued employee benefits 62,421 60,896 Accrued liabilities - other 156,357 190,844 Accrued contract costs 50,414 53,335 Advance billings on contracts 208,810 329,031 U.S. and foreign income taxes payable 9,875 31,176 - ---------------------------------------------------------------------- Total Current Liabilities 713,697 917,049 - ---------------------------------------------------------------------- Long-Term Debt 85,729 86,104 - ---------------------------------------------------------------------- Accumulated Postretirement Benefit Obligation 26,512 26,898 - ---------------------------------------------------------------------- Self-Insurance 70,186 71,918 - ---------------------------------------------------------------------- Pension Liability 441,369 392,072 - ---------------------------------------------------------------------- Accrued Cost of The Babcock & Wilcox Company Bankruptcy Settlement 92,019 86,377 - ---------------------------------------------------------------------- Other Liabilities 114,663 114,510 - ---------------------------------------------------------------------- Commitments and Contingencies Stockholders' Deficit: Common stock, par value $1.00 per share, authorized 150,000,000 shares; issued 67,983,694 at September 30, 2003 and 66,351,478 at December 31, 2002 67,984 66,351 Capital in excess of par value 1,101,432 1,093,428 Accumulated deficit (1,039,840) (1,027,318) Treasury stock at cost, 2,061,407 shares at September 30, 2003 and at December 31, 2002 (62,792) (62,792) Accumulated other comprehensive loss (486,836) (486,426) - ---------------------------------------------------------------------- Total Stockholders' Deficit (420,052) (416,757) - ---------------------------------------------------------------------- TOTAL $ 1,124,123 $ 1,278,171 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2003 2002 ---- ---- (Unaudited) (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (12,522) $ (591,865) - ---------------------------------------------------------------------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 32,581 30,234 Income or loss of investees, less dividends (2,547) (1,503) Gain on asset disposals and impairments - net (3,406) (207) Provision for (benefit from) deferred taxes (4,518) 18,908 Increase in estimated cost of The Babcock & Wilcox Company bankruptcy settlement 5,642 - Loss on write-off of investment in The Babcock & Wilcox Company - 224,664 Impairment of JRM goodwill 313,008 Cumulative effect of accounting change (3,710) - Gain on sale of Hudson Products Corporation - (15,044) Gain on sale of Menck GmbH (2,365) - Other 3,773 9,520 Changes in assets and liabilities, net of effects of acquisitions and divestitures: Accounts receivable (17,148) (40,485) Net contracts in progress and advance billings (74,928) 62,971 Accounts payable 24,180 25,328 Accrued and other current liabilities (29,490) 31,252 Income taxes (25,435) (94,834) Other, net 37,114 (230) - ---------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (72,779) (28,283) - ---------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (27,531) (42,158) Purchases of available-for-sale securities (260,886) (1,087,131) Sales of available-for-sale securities 133,679 784,494 Maturities of available-for-sale securities 256,600 458,301 Proceeds from asset disposals 20,946 38,621 Other (403) - - ---------------------------------------------------------------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 122,405 152,127 - ---------------------------------------------------------------------- McDERMOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2003 2002 ---- ---- (Unaudited) (In thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt $ (9,500) $(208,416) Decrease in short-term borrowing (45,600) (26) Issuance of common stock 256 1,342 Other 2,317 (400) - ---------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (52,527) (207,500) - ---------------------------------------------------------------------- EFFECTS OF EXCHANGE RATE CHANGES ON CASH (16) 49 - ---------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2,917) (83,607) - ---------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 174,341 196,809 - ---------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $171,424 $ 113,202 - ---------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 10,501 $ 16,816 Income taxes - net $ 17,744 $ 90,337 - ---------------------------------------------------------------------- CONTACT: McDermott International, Inc., Houston Jay Roueche, 281-870-5462 jroueche@mcdermott.com -----END PRIVACY-ENHANCED MESSAGE-----