EX-99.1 2 a4844110ex991.txt PRESS RELEASE Exhibit 99.1 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--(BUSINESS WIRE)--March 15, 2005--McDermott International, Inc. (NYSE:MDR) ("McDermott" or the "Company") announced today its unaudited results for the fourth quarter and full year 2004. In addition, McDermott disclosed that it has filed a 12b-25 extension for the Company's Form 10-K report to be filed with the United States Securities and Exchange Commission (the "SEC"). FORM 10-K EXTENSION On December 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 26, 2005 follow-up letter. 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 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 was appropriate, or if the completed-contract method 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, 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 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 share. For the full year 2004, the Company's net income was $61.6 million, or 90 cents per share. Weighted average common shares outstanding on a fully diluted basis were approximately 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 W. 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. 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 projects for BP in Morgan City, Louisiana, the projects in Azerbaijan for AIOC, 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, Sarbanes-Oxley compliance expenses, additional vessel drydock expenses and compensation accruals. At December 31, 2004, J. Ray's backlog was $1.25 billion. Government Operations Segment ("BWXT") 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 recovery, and has benefited from cost reduction activities. In addition, BWXT also received pension funding reimbursement 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 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 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 of certain components of the estimated settlement cost related to The Babcock & Wilcox Company (""B&W") Chapter 11 proceedings generated an increase in the estimated cost of the settlement to $139.9 million, resulting in the recognition of other pretax 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 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). 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. 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 B&W with McDermott's financial results since B&W's Chapter 11 bankruptcy filing in February 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 with the indenture relating to 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 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 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 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 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 referred to above resulted in a material adjustment to the 2004 interim or annual consolidated financial statements. McDermott is actively addressing these issues and will notify investors of material progress made in resolving these material weaknesses in future regulatory 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, 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 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 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 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, 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 report for the year ended December 31, 2003 and McDermott's 2004 quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Conference Call to Discuss 2004 Fourth Quarter Earnings Release Date: Wednesday, March 16, 2005, at 10:00 a.m. EST (9:00 a.m. CST) 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 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. CONTACT: McDermott International, Inc. Jay Roueche, 281-870-5462 jroueche@mcdermott.com