McDermott Reports Second Quarter 2014 Financial Results

  McDermott Reports Second Quarter 2014 Financial Results

                             Turnaround on track

      Company to Host Conference Call and Webcast Today at 4:00 p.m. CT

Business Wire

HOUSTON -- August 4, 2014

McDermott International, Inc. (NYSE: MDR) (“McDermott” or the “Company”) today
announced financial results for the quarter ended June 30, 2014. The Company
reported a second quarter 2014 net loss of $11 million or $0.05 per fully
diluted share, compared to a net loss of $149 million or $0.63 per diluted
share in the prior-year quarter. Weighted average common shares outstanding on
a fully diluted basis were approximately 237 million and 236 million in the
quarters ended June 30, 2014 and June 30, 2013, respectively.

The Company reported second quarter revenues of $476 million, a decrease of
26% compared to revenues of $647 million in the corresponding period of 2013
due to lower marine contribution. Operating income was $28 million in the
second quarter 2014 and included $46 million of gains on asset sales and $1
million of restructuring expenses. These results compare to the prior-year
operating loss of $150 million, which included $15 million of restructuring
expenses.

“The results reflect our efforts to improve execution, and we are pleased to
return three legacy projects to profitability and to complete two others,”
said David Dickson, President and Chief Executive Officer of McDermott.
Dickson added, “I am encouraged by the steps our reorganized management team
is taking to promote cultural change as we focus on improving our
competitiveness and building quality backlog.”

The Company’s other expense for the second quarter 2014 was $32 million
compared to other income of $9 million in the year-ago quarter due to
increased interest expense. The second quarter 2014 interest expense included
$28 million of expenses related to prior financing arrangements.

Contract Backlog Summary

As of June 30, 2014, the Company’s backlog was $4.1 billion, compared to $4.4
billion at March 31, 2014. Of the June 30, 2014 backlog, approximately 39%
related to offshore operations and approximately 61% related to subsea
operations. Order intake in the second quarter 2014 totaled $176 million.

At the end of the second quarter, the Company had $8.4 billion in bids and
change orders outstanding. The Company is targeting to bid approximately $9.8
billion in projects that are expected to be awarded in the next five quarters.
In total, the Company’s revenue pipeline was $22 billion as of June 30, 2014.

Balance Sheet Summary

As of June 30, 2014, McDermott reported total assets of $3.7 billion. Included
in this amount is $958 million in cash and cash equivalents, restricted cash
and investments. At quarter-end the Company had $904 million in debt
outstanding and total equity of $1.6 billion, or 45% of total assets.

Conference Call

McDermott has scheduled a conference call and webcast related to its second
quarter 2014 results today at 4:00 p.m. U.S. Central Daylight Time. Interested
parties may listen over the Internet through a link posted in the Investor
Relations section of the Company’s Web site. The replay will also be available
on the Company’s Web site following the end of the call. In addition, a
presentation will be available on the Investor Relations section of the
Company’s Web site that contains supplemental information on our operations
and our business outlook.

About the Company

McDermott is a leading provider of integrated engineering, procurement,
construction and installation (EPCI) services for upstream field developments
worldwide. The Company delivers fixed and floating production facilities,
pipelines and subsea systems from concept to commissioning for complex
Offshore and Subsea oil and gas projects to help oil companies safely produce
and transport hydrocarbons. Our clients include national and major energy
companies. Operating in more than 20 countries across the world, our locally
focused and globally integrated resources include approximately 14,000
employees, a diversified fleet of specialty marine construction vessels,
fabrication facilities and engineering offices. We are renowned for our
extensive knowledge and experience, technological advancements, performance
records, superior safety and commitment to deliver. McDermott has served the
energy industry since 1923 and is listed on the New York Stock Exchange.

To learn more, please visit our website at www.mcdermott.com

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, contingencies and uncertainties that may impact
McDermott's actual results of operations. These forward-looking statements
include, but are not limited to, statements about the profitability of legacy
projects, backlog, bids and change orders outstanding, projects McDermott
expects to bid and the timing of award of such, and revenue pipeline, to the
extent these may be viewed as indicators of future revenues or profitability,
optimism about steps being taken to promote cultural change and the Company’s
focus on improving competitiveness to build quality backlog. 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 risks, contingencies and
uncertainties, including, among others: adverse changes in the markets in
which we operate or credit markets, our inability to successfully execute on
contracts in backlog, changes in project design or schedules, the availability
of qualified personnel, changes in the scope or timing of contracts, and
contract cancellations, change orders and other modifications. If one or more
of these risks materialize, or if underlying assumptions prove incorrect,
actual results may vary materially from those expected. You should not place
undue reliance on forward-looking statements. 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 annual
report on Form 10-K for the year ended December 31, 2013 and subsequent
quarterly reports on Form 10-Q. This news release reflects management's views
as of the date hereof. Except to the extent required by applicable law,
McDermott undertakes no obligation to update or revise any forward-looking
statement.

                                                             
McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                      
                   Three Months Ended               Six Months Ended
                   June 30,                         June 30,
                   2014            2013             2014              2013
                   (Unaudited)

                   (In thousands, except share and per share amounts)
Revenues           $ 476,083      $ 647,250       $ 1,079,894      $ 1,454,738 
                                                                      
Costs and
Expenses:
Cost of              432,298         723,259          1,023,791         1,436,073
operations
Selling,
general and          56,877          52,617           112,274           104,843
administrative
expenses
Gain on asset        (45,769 )       (13      )       (52,208   )       (14,729   )
disposals
Restructuring       1,263         15,462         7,388           15,462    
expenses
                                                                      
Total costs         444,669       791,325        1,091,245       1,541,649 
and expenses
                                                                      
Equity in Loss
of                  (3,322  )      (5,461   )      (2,199    )      (9,592    )
Unconsolidated
Affiliates
                                                                      
Operating           28,092        (149,536 )      (13,550   )      (96,503   )
Income (Loss)
                                                                      
Other Income
(Expense):
Interest
income               (38,745 )       428              (38,684   )       770
(expense)--net
Gain on
foreign              6,622           8,904            2,540             6,378
currency--net
Other income        (312    )      (31      )      (577      )      751       
(expense)--net
                                                                      
Total other
income              (32,435 )      9,301          (36,721   )      7,899     
(expense)
                                                                      
Loss before
provision for
income taxes        (4,343  )      (140,235 )      (50,271   )      (88,604   )
and
noncontrolling
interests
                                                                      
Provision for       4,788         5,902          8,277           33,215    
Income Taxes
                                                                      
Net Loss            (9,131  )      (146,137 )      (58,548   )      (121,819  )
                                                                      
Less: Net
Income
Attributable        1,699         3,286          2,235           7,051     
to
Noncontrolling
Interests
                                                                      
Net Loss
Attributable
to McDermott       $ (10,830 )     $ (149,423 )     $ (60,783   )     $ (128,870  )
International,
Inc.

                                                                     
McDERMOTT INTERNATIONAL, INC.

EARNINGS PER SHARE COMPUTATION
                                                                               
                   Three Months Ended                      Six Months Ended
                   June 30,                                June 30,
                   2014                2013                2014                2013
                   (In thousands, except share and per share amounts)
Net loss
attributable
to McDermott       $ (10,830     )     $ (149,423    )     $ (60,783     )     $ (128,870    )
International,
Inc.
                                                                               
                                                                               
Weighted
average common       237,395,580         236,199,438         237,178,369         236,070,311
shares (basic)
Effect of
dilutive
securities:
Stock options,
restricted
stock and           -                 -                 -                 -           
restricted
stock units
                                                                               
Adjusted
weighted
average common
shares and
assumed             237,395,580       236,199,438       237,178,369       236,070,311 
exercises of
stock options
and vesting of
stock awards
(diluted)
                                                                               
                                                                               
Basic earnings
per share:
Net loss
attributable
to McDermott         (0.05       )       (0.63       )       (0.26       )       (0.55       )
International,
Inc.
                                                                               
Diluted
earnings per
share:
Net loss
attributable
to McDermott         (0.05       )       (0.63       )       (0.26       )       (0.55       )
International,
Inc.

                                                          
SUPPLEMENTARY DATA
                                                                   
                   Three Months Ended              Six Months Ended
                   June 30,                        June 30,
                   2014            2013            2014            2013
                   (In thousands)
Depreciation &
amortization       $ 21,645        $ 19,096        $ 46,247        $ 39,318
expense
Drydock            $ 3,020         $ 4,381         $ 9,966         $ 9,931
amortization
Capital            $ 117,064       $ 106,826       $ 154,957       $ 144,475
expenditures
Backlog            $ 4,063,900     $ 5,090,868     $ 4,063,900     $ 5,090,868

                                                            
McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                 
                                               June 30,          December 31,
                                               2014              2013
                                               (Unaudited)

                                               (In thousands, except share
                                               and per share amounts)
Assets
Current Assets:
Cash and cash equivalents                      $ 764,034         $ 118,702
Restricted cash and cash equivalents             189,871           23,652
Accounts receivable--trade, net                  225,459           381,858
Accounts receivable--other                       72,347            89,273
Contracts in progress                            440,345           425,986
Deferred income taxes                            9,092             7,091
Assets held for sale                             1,396             1,396
Other current assets                            43,339          32,242    
                                                                 
Total Current Assets                            1,745,883       1,080,200 
                                                                 
Property, Plant and Equipment                    2,343,876         2,367,686
Less accumulated depreciation                   (790,871  )      (889,009  )
                                                                 
Net Property, Plant and Equipment                1,553,005         1,478,677
Accounts receivable-- long-term retainages       145,883           65,365
Investments in Unconsolidated Affiliates         46,111            50,536
Deferred income taxes                            18,220            16,766
Assets held for sale                             10,121            12,243
Investments                                      4,219             13,511
Other Assets                                    119,757         90,073    
                                                                 
Total Assets                                   $ 3,643,199      $ 2,807,371 
                                                                 
Liabilities and Equity
Current Liabilities:
Notes payable and current maturities of        $ 26,285          $ 39,543
long-term debt
Accounts payable                                 347,910           398,739
Accrued liabilities                              326,573           365,224
Advance billings on contracts                    204,536           278,929
Deferred income taxes                            19,564            17,892
Income taxes payable                            15,660          20,657    
                                                                 
Total Current Liabilities                       940,528         1,120,984 
                                                                 
Long-Term Debt                                   878,090           49,019
Self-Insurance                                   22,625            20,531
Pension Liability                                15,320            15,681
Non-current Income Taxes                         57,084            56,042
Other Liabilities                                82,009            104,770
Commitments and Contingencies
Stockholders’ Equity:
Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued
244,950,464 and 244,271,365 shares at June       244,950           244,271
30, 2014 and December 31, 2013,
respectively
Capital in excess of par value (including        1,661,543         1,414,457
prepaid common stock purchase contracts)
Retained earnings                                (131,940  )       (71,157   )
Treasury stock, at cost, 7,316,539 and
7,130,294 shares at June 30, 2014 and            (97,069   )       (97,926   )
December 31, 2013, respectively
Accumulated other comprehensive loss            (119,221  )      (140,131  )
                                                                 
Stockholders’ Equity--McDermott                  1,558,263         1,349,514
International, Inc.
Noncontrolling Interests                        89,280          90,830    
                                                                 
Total Equity                                    1,647,543       1,440,344 
                                                                 
Total Liabilities and Equity                   $ 3,643,199      $ 2,807,371 

                                                                             
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                            
                                                Six Months Ended
                                                June 30,
                                                2014              2013
                                                (Unaudited)
                                                (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                        $ (58,548   )     $ (121,819 )
Non-cash items included in net loss:
Depreciation and amortization                     46,247            39,318
Drydock amortization                              9,966             9,931
Stock-based compensation charges                  10,352            10,110
Net periodic pension benefit cost                 6,164             (641     )
Equity in loss of unconsolidated                  2,199             9,592
affiliates
Restructuring activity                            (982      )       12,104
Gain on asset disposals                           (52,208   )       (14,729  )
Benefit for deferred taxes                        (4,375    )       (4,314   )
Gain on foreign currency                          (2,540    )       (6,378   )
Other non-cash items                              374               321
Changes in assets and liabilities, net of
effects from acquisitions and
dispositions:
Accounts receivable                               86,305            54,106
Net contracts in progress and advance             (88,771   )       (4,051   )
billings on contracts
Accounts payable                                  (31,756   )       24,413
Accrued and other current liabilities             (9,706    )       (23,299  )
Pension liability and accrued                     9,563             (25,973  )
postretirement and employee benefits
Derivative instruments and hedging                (26,153   )       (71,013  )
activities
Other assets and liabilities                     10,958          15,840   
TOTAL CASH USED IN OPERATING ACTIVITIES          (92,911   )      (96,482  )
                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and                  (154,957  )       (144,475 )
equipment
Increase in restricted cash and cash              (166,219  )       (6,370   )
equivalents
Purchases of available-for-sale                   (1,997    )       (8,637   )
securities
Sales and maturities of                           11,303            34,031
available-for-sale securities
Proceeds from the sale and disposal of            53,704            35,672
assets
Other investing activities                       (5,076    )      (6,939   )
TOTAL CASH USED IN INVESTING ACTIVITIES          (263,242  )      (96,718  )
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from 8% senior Notes                     500,000           -
Proceeds from term Loan                           300,000           -
Proceeds from prepaid common stock                240,044           -
purchase contracts issuance
Proceeds from amortizing notes issuance           47,456          -
Issuance of common stock                          169               45
Payments - long term debt                         (35,705   )       (7,073   )
Borrowings - short term debt                      250,000           -
Payments - short term debt                        (250,000  )       -
Debt issuance costs                               (45,521   )       -
Distributions to noncontrolling interests         (3,754    )       (11,243  )
Other financing activities                       (1,413    )      (1,083   )
TOTAL CASH PROVIDED BY (USED IN)                 1,001,276       (19,354  )
FINANCING ACTIVITIES
EFFECTS OF EXCHANGE RATE CHANGES ON CASH         209             118      
NET INCREASE (DECREASE) IN CASH AND CASH         645,332         (212,436 )
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF        118,702         640,147  
PERIOD
CASH AND CASH EQUIVALENTS AT END OF             $ 764,034        $ 427,711  
PERIOD
                                                                             
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes (net of refunds)                   $ 17,162          $ 72,363
Interest expense (net of amount                 $ 10,884            -
capitalized)
                                                                             

Contact:

McDermott International, Inc.
Investors & Financial Media
Steve Oldham, 281.870.5147
soldham@mcdermott.com
or
Trade, General & Local Media
Louise Denly, 281.870.5025
ldenly@mcdermott.com
 
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