PENSION PLANS

9 Months Ended

Sep. 30, 2012

PENSION PLANS

NOTE 3 – PENSION PLANS

Although we currently provide retirement benefits for most of our U.S. employees through sponsorship of the McDermott Thrift Plan, some of our longer-term U.S. employees and former employees are entitled to retirement benefits under the McDermott (U.S.) Retirement Plan, a non-contributory qualified defined benefit pension plan (the “McDermott Plan”), and several non-qualified supplemental defined benefit pension plans. The McDermott Plan and the non-qualified supplemental defined benefit pension plans are collectively referred to herein as the “Domestic Plans.” The McDermott Plan has been closed to new participants since 2006, and benefit accruals under the McDermott Plan were frozen completely in 2010.

We also sponsor a defined benefit pension plan established under the laws of the Commonwealth of the Bahamas, the J. Ray McDermott, S.A. Third Country National Employees Pension Plan (the “TCN Plan”) which provides retirement benefits for certain of our current and former foreign employees. Effective August 1, 2011, new entry into the TCN Plan was closed, and effective December 31, 2011, benefit accruals under the TCN Plan were frozen. Effective January 1, 2012, we established a new global defined contribution plan to provide retirement benefits to employees who may have otherwise obtained benefits under the TCN Plan.

Net periodic benefit cost for the Domestic Plans and the TCN Plan includes the following components:

	Domestic Plans
	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Unaudited) (In thousands)
Interest cost	$	6,631		$	7,129		$	19,893		$	21,359
Expected return on plan assets		(8,952	)		(8,069	)		(26,857	)		(22,144	)
Recognized net actuarial loss and other		2,409			3,365			7,227			12,087
Net periodic benefit cost	$	88		$	2,425		$	263		$	11,302
	TCN Plan
	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Unaudited) (In thousands)
Service cost	$	—		$	684		$	—		$	2,055
Interest cost		460			594			1,382			1,784
Expected return on plan assets		(610	)		(612	)		(1,832	)		(1,838	)
Recognized net actuarial loss and other		446			688			1,339			2,064
Net periodic benefit cost	$	296		$	1,354		$	889		$	4,065