NEW ORLEANS--(BUSINESS WIRE)--May 21, 1999-- -- Excluding non-recurring charges, FY99 net EPS of $2.60, diluted, vs. $1.54, diluted, a year ago. -- Excluding non-recurring charges, net fourth quarter EPS of $0.56, diluted, vs. $0.30, diluted, a year ago. -- Non-recurring after-tax charges in FY99 were $4.0 million; non-recurring after-tax charges in the fourth quarter were $95.1 million. -- Operating income improved, year-over-year, at all business units. -- Backlog declines as marine construction market slows; power generation and government markets remain stable. McDermott International, Inc. (NYSE:MDR) today reported revenues of $3.15 billion and a net income of $153.4 million, or $2.60 a share, basic and $2.53 a share, diluted, for the fiscal year ended March 31, 1999. These results compare to revenues of $3.67 billion and net income of $215.7 million, or $3.74 a share, basic, and $3.48 a share, diluted, for the fiscal year ended March 31, 1998. Excluding non-recurring after-tax charges of $4.0 million, net income for fiscal 1999 was $157.4 million, or $2.67 a share, basic, and $2.60 a share, diluted. Excluding non-recurring, after-tax gains of $120.0 million, net income applicable to common stock for fiscal 1998 was $87.4 million, or $1.58 a share, basic, and $1.54 a share, diluted. For the quarter ended March 31, 1999, McDermott reported revenues of $749.4 million and a net loss of $62.1 million, or $1.06 a share, basic and diluted. Results for the recent quarter compared with revenues of $924.8 million and net income of $16.7 million or $0.26 a share, basic, and $0.25 a share, diluted, for the quarter ended March 31, 1998. Excluding non-recurring, after-tax charges of $95.1 million, net income for the 1999 quarter was $33.0 million, or $0.56 a share, basic and diluted. NON-RECURRING ITEMS The pre-tax non-recurring charges for the year totaled $77.5 million. They included a provision for asbestos claims of $85.2 million and an extraordinary charge of $38.7 million for the retirement of J. Ray McDermott 9 3/8% Senior Subordinated Notes, as well as charges for settlements of various claims and litigation. These items were somewhat offset by net gains on asset disposals and impairments of $18.0 million, interest on a tax refund and adjustments to employee benefit plans. Non-recurring items for the fiscal year also included a tax benefit of $62.0 million, including reversal of tax provisions on the settlement of issues in two foreign tax jurisdictions, reductions in the valuation allowance on deferred tax assets and a tax refund. For the quarter, pre-tax non-recurring charges totaled $160.7 million. They included a net loss on asset disposals and impairments of $19.0 million, the provision for asbestos claims and the extraordinary charge for the retirement of J. Ray McDermott's debt. Other non-recurring charges included settlements and provisions for various claims and litigation. Non-recurring items for the quarter also included a tax benefit of $12.1 million for reductions in the valuation allowance on deferred tax assets. CHAIRMAN'S COMMENTS "Based on the declining marine construction backlog of recent quarters, we expected the decline in our consolidated revenues" said Roger E. Tetrault, chairman of the board and chief executive officer. "However, the improvement in segment operating income at all business units indicates the effectiveness of our cost reduction programs and the ability of our Marine Construction Services business unit to remain profitable in a weak market." Tetrault noted that the boards of directors of McDermott International and J. Ray McDermott, S.A. (NYSE:JRM), McDermott's majority-owned subsidiary, have reached a definitive merger agreement that would recombine the two companies following a tender offer for the shares of J. Ray McDermott not already owned by McDermott International. If a majority of the publicly held shares of J. Ray McDermott are tendered by June 10, a second-step merger of the companies would follow. "Recombining the companies will continue our simplification of McDermott International and support our ability to focus on growth as we go forward," Tetrault said. "We are exploring a number of initiatives, both internal and external, that will help us continue the development of McDermott International into a stronger and more valuable company." Tetrault said the business outlook for fiscal 2000 is unchanged. However, he said the amortization of goodwill from the merger and the expectation of lower earnings at J. Ray McDermott will have a dilutive effect on the earnings of McDermott International in the next fiscal year. The company continues to expect revenues from its Marine Construction Services business unit to be 35% to 40% below fiscal 1999, while the revenues from the remainder of the company are expected to be about the same as in fiscal 1999. "If our expectations hold, we will see some strengthening toward the end of the fiscal year, which should provide the basis for a level of activity in fiscal 2001 equal to or better than in fiscal 1999," Tetrault said. MARINE CONSTRUCTION SERVICES Revenues from Marine Construction Services were $1.28 billion for the year ended March 31, 1999, compared with $1.86 billion a year ago. Segment operating income was $126.5 million for the year, compared with $107.1 million a year ago. For the fourth quarter of fiscal 1999, revenues were $246.6 million, compared with $413.1 million a year ago, while segment operating income for the quarter was $12.3 million, compared with $9.7 million a year ago. The business unit reported income from investees of $10.7 million for the year, compared with $70.2 million a year ago. The year ago results included a $61.6 million distribution of earnings associated with the termination of the HeereMac joint venture. For the fourth quarter of fiscal 1999, income from investees was $3.3 million, compared with income of $8.9 million a year ago. The decline in the quarter is principally the result of a weaker performance by European, North American and Mexican joint ventures, somewhat offset by improvements from a Far East joint venture. The unit saw declines in revenues from all geographic areas, except the Far East, from fiscal 1998 to fiscal 1999. However, segment operating income improved year over year in Middle East operations and in Far East operations, where there was a loss the year before. Segment operating income declined in North America, and both Europe and West Africa operations and engineering operations reported segment operating losses, compared with income a year ago. The Marine Construction Services business unit's backlog declined to $407.2 million at the end of fiscal 1999, compared with $1.27 billion at the end of fiscal 1998. POWER GENERATION SYSTEMS Revenues from Power Generation Systems were $1.07 billion for fiscal 1999, compared with $1.14 billion in fiscal 1998. Segment operating income from Power Generation Systems was $90.3 million for fiscal 1999, compared with $82.5 million a year ago. For the recent quarter, revenues were $290.7 million, compared with $315.3 million a year ago, with segment operating income of $33.3 million compared with $23.1 million a year ago. The business unit's services markets continued to be strong in the fourth quarter, contributing to the improvements in revenues and operating income for both the quarter and the year. However, weaknesses in the unit's international markets for power generation equipment are reflected in the results from the unit's original equipment operations. At Diamond Power, both revenues and income improved for the fiscal year, but were lower for the quarter compared with a year ago. The business unit reported a loss from investees of $4.7 million for fiscal 1999 and $11.0 million for the fourth quarter of fiscal 1999, compared with income from investees of $7.5 million for fiscal 1998 and $0.9 million for the quarter a year ago. The loss for the recent fiscal year and quarter are the result of the write-off of a receivable from a foreign joint venture. Backlog in the Power Generation business unit was $905.0 million at the end of the fiscal year, compared with $1.07 billion a year earlier. GOVERNMENT OPERATIONS Revenues from the Government Operations business unit were $382.7 million for fiscal 1999, compared with $370.5 million a year earlier. Segment operating income for the year was $39.4 million compared with $35.8 million the year before. For the fourth quarter of fiscal 1999, the business unit had revenues of $92.2 million, compared with $111.1 million a year earlier. Segment operating income for the quarter improved to $20.5 million from $8.3 million the year before. The current quarter includes a benefit from a settlement relating to environmental remediation costs. Revenues for the fiscal year and the fourth quarter from the business unit's Naval Nuclear Fuel and Nuclear Equipment divisions were lower than a year ago. Revenues from other areas were higher for the entire fiscal year, but for the fourth quarter were lower than they were a year ago. Segment operating income from the Naval Nuclear Fuel and Nuclear Equipment divisions was slightly higher than a year ago, both for the fourth quarter and the full fiscal year. Segment operating income from other areas was higher in the fourth quarter than a year ago. However, for the fiscal year, these other areas reported a slightly smaller loss. Backlog increased in substantially all the unit's operations, resulting in improved backlog for the business unit of $861.0 million at the end of fiscal 1999, compared with $810.7 million the year before. INDUSTRIAL OPERATIONS Revenues from the Industrial Operations business unit were $427.5 million in fiscal 1999, compared with $337.8 million in fiscal 1998. Segment operating income improved to $16.9 million from $4.7 million a year earlier. For the quarter, revenues were $121.9 million compared with $89.6 million the year before, and segment operating income improved to $2.7 million from $1.4 million the year before. The improvements in the Industrial Operations business unit's revenues for the year and the quarter were the result of a significant increase from its Engineering and Construction operations. This increase was somewhat offset by a decline in revenues at Hudson Products. Engineering and Construction operations reported segment operating income for both fiscal 1999 and fiscal 1998. For the fourth quarter of fiscal 1999, these operations reported segment operating income as opposed to a loss in the same period a year ago. Hudson Products' segment operating income for the fiscal year was slightly higher than in fiscal 1998, but was slightly lower for the quarter as compared with a year ago. Increases in engineering and construction backlog were responsible for an increase in Industrial Operations backlog, which stood at $401.4 million at the end of the fiscal year, compared with $262.5 million the year before. Backlog at Hudson Products declined. Statements in this release which express a belief, expectation or intention, as well as those which are not historical fact, are forward looking. They involve a number of risks and uncertainties which may cause actual results to differ materially from such forward looking statements. These risks and uncertainties include: decisions about offshore developments to be made by oil and gas companies; the deregulation of the U.S. energy market; governmental regulation and the continued funding of company contracts with U.S. governmental agencies; estimates for pending and future non-employee asbestos claims; the highly competitive nature of the company's businesses; operating risks associated with the marine construction services business; the results of the ongoing investigation by the company and the U.S. Department of Justice into possible anti-competitive practices by the company and its majority-owned subsidiary, J. Ray McDermott, S.A. and the pending civil anti-trust litigation relating to this issue; the results of an ongoing investigation by the Securities and Exchange Commission into anti-competitive practices, as well as other matters; and other factors detailed from time to time in the company's filings with the Securities and Exchange Commission. McDermott International, Inc. is a leading worldwide energy services company. The company and its subsidiaries manufacture steam-generating equipment, environmental equipment, and products for the U.S. government. They also provide engineering and construction services for industrial, utility, and hydrocarbon processing facilities, and to the offshore oil and natural gas industry. A COMPARATIVE SUMMARY OF McDERMOTT INTERNATIONAL, INC. OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (In thousands, except for shares and per share amounts) THREE MONTHS ENDED March 31, March 31, 1999 1998 ------------ ------------ Earnings (Loss) Per Common Share Basic $ (1.06) $ 0.26 Diluted (1.06) 0.25 ------------ ------------ Revenues $ 749,368 $ 924,762 Costs and Expenses: Cost of operations 650,626 800,744 Depreciation and amortization 28,468 31,201 Selling, general and administrative expenses 58,278 63,891 ------------ ------------ Losses on Asset Disposals and Impairments - Net (19,057) (6,319) ------------ ------------ Operating Income (Loss) before Income (Loss) from Investees (7,061) 22,607 Income (Loss) from Investees (5,898) 9,913 ------------ ------------ Operating Income (Loss) (12,959) 32,520 Other Expense - net (31,751) (8,925) ------------ ------------ Income (Loss) before Provision for (Benefit from) Income Taxes (44,710) 23,595 Provision for (Benefit from) Income Taxes (21,326) 6,918 ------------ ------------ Income (Loss) before Extraordinary Item (23,384) 16,677 Extraordinary Item (38,719) -- ------------ ------------ Net Income (Loss) $ (62,103) $ 16,677 ------------ ------------ Dividend Requirements of Preferred Stock, Series C -- 2,067 ------------ ------------ Net Income (Loss) Applicable to Common Stock $ (62,103) $ 14,610 ============ ============ Weighted Average Number of Common Shares: Basic 58,773,052 56,045,777 Diluted 58,773,052 57,774,419 A COMPARATIVE SUMMARY OF McDERMOTT INTERNATIONAL, INC. OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1999 AND 1998 (In thousands, except for shares and per share amounts) FISCAL YEAR ENDED March 31, March 31, 1999 1998 ------------ ------------ Earnings Per Common Share Basic $ 2.60 $ 3.74 Diluted 2.53 3.48 ------------ ------------ Revenues $ 3,149,985 $ 3,674,635 Costs and Expenses: Cost of operations 2,635,229 3,117,279 Depreciation and amortization 101,390 142,301 Selling, general and administrative expenses 222,239 224,045 ------------ ------------ Gains on Asset Disposals and Impairments - Net 17,910 79,065 ------------ ------------ Operating Income before Income from Investees 209,037 270,075 Income from Investees 8,379 85,382 ------------ ------------ Operating Income 217,416 355,457 Other Expense - net (30,138) (63,650) ------------ ------------ Income before Provision for (Benefit From) Income Taxes 187,278 291,807 Provision for (Benefit From) Income Taxes (4,803) 76,117 ------------ ------------ Income before Extraordinary Item 192,081 215,690 Extraordinary Item (38,719) -- ------------ ------------ Net Income $ 153,362 $ 215,690 ------------ ------------ Dividend Requirements of Preferred Stock, Series C -- (8,266) ------------ ------------ Net Income Applicable to Common Stock $ 153,362 $ 207,424 ============ ============ Weighted Average Number of Common Shares: Basic 59,015,091 55,432,949 Diluted 61,634,195 63,776,227 McDERMOTT INTERNATIONAL, INC. SUMMARY OF OPERATIONS (In thousands) THREE MONTHS ENDED March 31, March 31, 1999 1998 --------- --------- REVENUES: Marine Construction Services $ 246,571 $ 413,123 Power Generation Systems 290,658 315,325 Government Operations 92,217 111,092 Industrial Operations 121,922 89,585 Adjustments and Eliminations (2,000) (4,363) --------- --------- Total Revenues $ 749,368 $ 924,762 ========= ========= OPERATING INCOME: Segment Operating Income: Marine Construction Services $ 12,283 $ 9,651 Power Generation Systems 33,309 23,051 Government Operations 20,482 8,290 Industrial Operations 2,733 1,381 --------- --------- Total Segment Operating Income 68,807 42,373 --------- --------- Gain (Loss) on Asset Disposals and Impairments - Net: Marine Construction Services (20,229) 187 Power Generation Systems 3,527 (6,181) Government Operations 45 527 Industrial Operations (50) 3,089 --------- --------- Total Loss on Asset Disposals and Impairments - Net (16,707) (2,378) --------- --------- Income (Loss) from Investees: Marine Construction Services 3,335 8,925 Power Generation Systems (10,988) 854 Government Operations 2,264 459 Industrial Operations (509) (325) --------- --------- Total Income (Loss) from Investees (5,898) 9,913 --------- --------- Other Unallocated Items (49,776) (5,689) General Corporate Expenses - Net (9,385) (11,699) --------- --------- Total Operating Income (Loss) $ (12,959) $ 32,520 ========= ========= McDERMOTT INTERNATIONAL, INC. SUMMARY OF OPERATIONS (In thousands) FISCAL YEAR ENDED March 31, March 31, 1999 1998 ----------- ----------- REVENUES: Marine Construction Services $ 1,279,570 $ 1,855,486 Power Generation Systems 1,066,217 1,142,721 Government Operations 382,706 370,519 Industrial Operations 427,520 337,787 Adjustments and Eliminations (6,028) (31,878) ----------- ----------- Total Revenues $ 3,149,985 $ 3,674,635 =========== =========== OPERATING INCOME: Segment Operating Income: Marine Construction Services $ 126,482 $ 107,122 Power Generation Systems 90,318 82,431 Government Operations 39,353 35,816 Industrial Operations 16,906 4,679 ----------- ----------- Total Segment Operating Income 273,059 230,048 ----------- ----------- Gain (Loss) on Asset Disposals and Impairments - Net: Marine Construction Services 18,620 (40,119) Power Generation Systems 4,465 (6,086) Government Operations 183 523 Industrial Operations (234) 128,239 ----------- ----------- Total Gain on Asset Disposals and Impairments - Net 23,034 82,557 ----------- ----------- Income (Loss) from Investees: Marine Construction Services 10,670 70,236 Power Generation Systems (4,733) 7,541 Government Operations 4,088 4,236 Industrial Operations (1,646) 3,376 ----------- ----------- Total Income from Investees 8,379 85,389 ----------- ----------- Other Unallocated Items (51,005) (5,286) General Corporate Expenses - Net (36,051) (37,251) ----------- ----------- Total Operating Income $ 217,416 $ 355,457 =========== =========== McDERMOTT INTERNATIONAL, INC. KEY BALANCE SHEET STATISTICS 3/31/99 3/31/98 ------- ------- (In thousands) Cash and Cash Equivalents $ 181,503 $ 277,876 Investments 906,899 1,073,491 ---------- ---------- Total Cash and Investments 1,088,402 1,351,367 ---------- ---------- Short-term Debt 0 87,883 Notes Payable and Current Maturities of Long-term Debt 31,126 68,417 Long-Term Debt 323,774 598,182 ---------- ---------- Total Debt 354,900 754,482 ---------- ---------- Net Cash and Investments $ 733,502 $ 596,885 ========== ========== BACKLOG 3/31/99 3/31/98 ------- ------- (In thousands) Marine Construction Services $ 407,223 $ 1,267,148 Power Generation Systems 905,042 1,071,121 Government Operations 860,981 810,749 Industrial Operations 401,437 262,455 Eliminations (1,587) (2,243) ----------- ----------- Total Backlog $ 2,573,096 $ 3,409,230 =========== ===========  