NEW ORLEANS--(BUSINESS WIRE)--May 21, 1999-- -- Excluding non-recurring gain, FY99 net EPS of $2.64, diluted, vs. $1.51, diluted, a year ago. -- Excluding non-recurring charges, net fourth quarter EPS of $0.47, diluted, vs. $0.17 a year ago. -- Non-recurring after-tax gain in FY99 was $3.8 million; non-recurring after-tax charges in the fourth quarter were $59.4 million. -- Middle East, Far East operations contribute to higher operating income. -- Backlog declines, but outlook is for increasing activity by fiscal year end. J. Ray McDermott, S.A. (NYSE: JRM) today reported revenues of $1.28 billion and net income applicable to common stock of $117.0 million, or $2.95 a share, basic, and $2.72 a share, diluted, for the fiscal year ended March 31, 1999. These results compare to revenues of $1.86 billion and net income applicable to common stock of $81.8 million or $2.00 a share, basic, and $1.89 a share, diluted, for the fiscal year ended March 31, 1998. Excluding non-recurring after-tax gains of $3.8 million, net income applicable to common stock for fiscal 1999 was $113.2 million, or $2.86 a share, basic, and $2.64 a share, diluted. Excluding non-recurring after-tax gains of $17.9 million, net income applicable to common stock for fiscal 1998 was $63.9 million, or $1.56 a share, basic, and $1.51 a share, diluted. For the quarter ended March 31, 1999, J. Ray McDermott reported revenues of $246.6 million and a net loss applicable to common stock of $41.0 million, or $1.05 a share, basic and diluted. Results for the recent quarter compare with revenues of $413.1 million and net income applicable to common stock of $9.0 million or $0.22 a share, basic and diluted, for the quarter ended March 31, 1998. Excluding non-recurring, after-tax charges of $59.4 million, net income applicable to common stock for the 1999 quarter was $18.4 million, or $0.47 a share, basic and diluted. The company 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 weaker performance by European, North American and Mexican joint ventures, somewhat offset by improvements from a Far East joint venture. NON-RECURRING ITEMS Pre-tax non-recurring losses for the year totaled $7.6 million. They included an extraordinary charge of $38.7 million for the retirement of J. Ray McDermott 9 3/8% Senior Subordinated Notes. Other non-recurring charges included settlements and provisions for various claims and litigation. There was a net gain on asset disposals and impairments of $18.7 million, as well as a gain on the sale of assets in a joint venture. Non-recurring items for the fiscal year also included a tax benefit from the reversal of tax provisions on the settlement of issues in two foreign tax jurisdictions. For the quarter, pre-tax non-recurring charges totaled $62.7 million. They included a net loss on asset disposals and impairments of $20.2 million and the extraordinary charge for the retirement of J. Ray McDermott's debt. Other non-recurring charges included provisions for settlements of various claims and litigation. CHAIRMAN'S COMMENTS "Based on the declining backlog of recent quarters, we expected the decline in our revenues," said Roger E. Tetrault, chairman of the board and chief executive officer. "However, the improvement in segment operating income indicates the effectiveness of our cost reduction programs and the ability of J. Ray McDermott to remain profitable in a weak market." Tetrault noted that the boards of directors of J. Ray McDermott and McDermott International (NYSE: MDR) have reached a definitive merger agreement that would recombine the two companies following a tender offer by McDermott International for the shares of J. Ray McDermott it does not already own. 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 not change our strategy to explore opportunities for growth at J. Ray McDermott," Tetrault said. "If the merger is completed, J. Ray will continue to do business under its own name as a wholly-owned subsidiary of McDermott International, and we will continue to focus on expanding J. Ray's presence in the oil service industry." Tetrault said J. Ray McDermott's business outlook for fiscal 2000 is unchanged. J. Ray McDermott continues to expect revenues to be 35% to 40% below fiscal 1999 as a result of declining capital spending by customers. "If our expectations hold, we will see some strengthening toward the end of the fiscal year, which should provide the basis for a higher level of activity in fiscal 2001," Tetrault said. REVIEW OF REGIONAL OPERATIONS Lower commodity prices and reduced capital spending by customers led to lower revenues for fiscal 1999 in all regions, except the Far East where they were higher. Segment operating income, however, improved in the Middle East. In the Far East, the company's operations reported segment operating income for fiscal 1999, after reporting a loss in fiscal 1998. Far East operations turned in the strongest regional performance in fiscal 1999, with an increase in revenues to $372.7 million from $336.7 million in fiscal 1998, and segment operating income of $67.1 million compared with a segment operating loss of $11.3 million the year before. Revenues in the region decreased to $72.4 million in the fourth quarter from $98.3 million. Segment operating income increased to $16.1 million in the fourth quarter from $2.4 million in the same period a year ago. In the Middle East, the company's operations reported revenues of $235.1 million compared with $345.1 million the year before. Segment operating income also increased, with $40.5 million reported in fiscal 1999 compared with $34.3 million in fiscal 1998. Revenues in the region declined in the fourth quarter to $47.7 million from $78.2 million a year earlier. Segment operating income in the fourth quarter was $13.0 million compared with $4.2 million in the fourth quarter of fiscal 1998. North American operations reported fiscal 1999 revenues of $556.5 million compared with $708.0 million in fiscal 1998. Segment operating income also declined in these operations, which reported $51.1 million in segment operating income in the recent year, compared with $75.6 a year earlier. North American operations reported $89.4 million in revenues for the fourth quarter compared with $149.5 the year before. The region reported a segment operating loss of $1.4 million for the three months compared with segment operating income of $9.3 million a year earlier. Europe and West Africa operations reported revenues of $100.3 million in fiscal 1999, compared with $378.0 million the year before. These operations reported a segment operating loss of $3.4 million, compared with segment operating income of $15.1 million the year before. For the fourth quarter, these operations had revenues of $30.4 million compared with $67.0 million a year ago. They reported a segment operating loss of $2.4 million in the fourth quarter compared with segment operating income of $5.3 million the year before. The decline in Europe and West Africa operations reflects the company's decision to withdraw from traditional European engineering markets. Revenues from engineering operations declined to $60.1 million from $131.0 million a year ago. These operations reported a segment operating loss of $4.2 million, compared with segment operating income of $3.8 million the year before. For the fourth quarter, revenues from engineering were $11.9 million compared with $28.2 million a year ago. These operations had a segment operating loss of $4.5 million in the quarter compared with a loss of $6.0 million the year before. Backlog declined in all geographic regions and in engineering. Total backlog for the company was $407.2 million at the end of fiscal 1999, compared with $1.27 billion at the same time a year ago. ---------- 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 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 the pending civil anti-trust litigation relating to this issue; the results of an ongoing investigation by the Securities and Exchange Commission into these possible 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. J. Ray McDermott is a leading worldwide marine construction company. Its services include design, fabrication, transportation, and installation of new and refurbished offshore platforms, installation of offshore pipelines, and design and installation of subsea production facilities for the offshore oil and gas industry. McDermott International, Inc. (NYSE:MDR) holds a majority interest in J. Ray McDermott. A COMPARATIVE SUMMARY OF J. RAY McDERMOTT, S.A. 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 $ (1.05) $ 0.22 Diluted (1.05) 0.22 ----------- ----------- Revenues $ 246,571 $ 413,123 Costs and Expenses: Cost of operations 196,571 358,595 Depreciation and amortization 16,451 16,097 Selling, general and administrative expenses 25,112 32,740 ----------- ----------- Gain (Loss) on Asset Disposals and Impairments-Net (20,229) 187 ----------- ----------- Operating Income (Loss) before Income from Investees (11,792) 5,878 Income from Investees 3,335 8,925 ----------- ----------- Operating Income (Loss) (8,457) 14,803 Other Income (Expense) - net 5,655 (489) ----------- ----------- Income (Loss) before Provision for (Benefit from) Income Taxes and Extraordinary Item (2,802) 14,314 Provision for (Benefit from) Income Taxes (2,357) 3,472 ----------- ----------- Income (Loss) before Extraordinary Item (445) 10,842 Extraordinary Item (38,719) - ----------- ----------- Net Income (Loss) $ (39,164) $ 10,842 =========== =========== Dividend Requirements of Preferred Stock 1,800 1,800 ----------- ----------- Net Income (Loss) Applicable to Common Stock $ (40,964) $ 9,042 =========== =========== Weighted Average Number of Common Shares: Basic 38,996,155 40,976,928 Diluted 38,996,155 41,280,861 A COMPARATIVE SUMMARY OF J. RAY McDERMOTT, S.A. OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1999 AND 1998 (In thousands, except for shares and per share amounts) FISAL YEAR ENDED --------------------------- March 31, March 31, 1999 1998 ----------- ----------- Earnings Per Common Share Basic $ 2.95 $ 2.00 Diluted 2.72 1.89 ----------- ----------- Revenues $ 1,279,570 $ 1,855,486 Costs and Expenses: Cost of operations 1,006,092 1,555,272 Depreciation and amortization 56,761 93,843 Selling, general and administrative expenses 103,656 112,313 ----------- ----------- Gain (Loss) on Asset Disposals and Impairments-Net 18,620 (40,119) ----------- ----------- Operating Income before Income from Investees 131,681 53,939 Income from Investees 10,670 70,236 ----------- ----------- Operating Income 142,351 124,175 Other Income (Expense) - net 30,535 (364) ----------- ----------- Income before Provision for Income Taxes and Extraordinary Item 172,886 123,811 Provision for Income Taxes 10,008 34,851 ----------- ----------- Income before Extraordinary Item 162,878 88,960 Extraordinary Item (38,719) - ----------- ----------- Net Income $ 124,159 $ 88,960 =========== =========== Dividend Requirements of Preferred Stock 7,200 7,200 ----------- ----------- Net Income Applicable to Common Stock $ 116,959 $ 81,760 =========== =========== Weighted Average Number of Common Shares: Basic 39,585,255 40,926,294 Diluted 45,589,653 46,956,755 J. RAY McDERMOTT, S.A. SUMMARY OF OPERATIONS (In thousands) THREE MONTHS ENDED --------------------------- March 31, March 31, 1999 1998 ----------- ----------- REVENUES: North American Operations $ 89,447 $ 149,466 Middle East Operations 47,727 78,182 Far East Operations 72,350 98,336 Europe and West Africa Operations 30,410 67,047 Engineering Operations 11,944 28,242 Other 3,646 12,072 Eliminations (8,953) (20,222) ----------- ----------- Total Revenues $ 246,571 $ 413,123 =========== =========== OPERATING INCOME: ---------------- Segment Operating Income (Loss): North American Operations $ (1,421) $ 9,253 Middle East Operations 13,036 4,191 Far East Operations 16,053 2,430 Europe and West Africa Operations (2,427) 5,283 Engineering Operations (4,488) (5,960) Other (8,470) (5,546) ----------- ----------- Total Segment Operating Income 12,283 9,651 ----------- ----------- Gain (Loss) on Asset Disposals and Impairments - Net: North American Operations (5,641) 278 Middle East Operations (53) (175) Far East Operations (4,303) 3 Europe and West Africa Operations (702) 4,066 Engineering Operations (5,636) 0 Other (3,894) (3,985) ----------- ----------- Total Gain (Loss) on Asset Disposals and Impairments - Net (20,229) 187 ----------- ----------- Income (Loss) from Investees: North American Operations 3,119 5,042 Far East Operations 2,382 1,292 Europe and West Africa Operations (1,605) 1,082 Other (561) 1,509 ----------- ----------- Total Income from Investees 3,335 8,925 ----------- ----------- General Corporate Expenses (3,846) (3,960) ----------- ----------- Total Operating Income (Loss) $ (8,457) $ 14,803 =========== =========== J. RAY McDERMOTT, S.A. SUMMARY OF OPERATIONS (In thousands) FISCAL YEAR ENDED --------------------------- March 31, March 31, 1999 1998 ----------- ----------- REVENUES: North American Operations $ 556,522 $ 707,985 Middle East Operations 235,094 345,146 Far East Operations 372,676 336,692 Europe and West Africa Operations 100,293 378,037 Engineering Operations 60,110 131,046 Other 9,478 34,000 Eliminations (54,603) (77,420) ----------- ----------- Total Revenues $ 1,279,570 $ 1,855,486 =========== =========== OPERATING INCOME: ---------------- Segment Operating Income (Loss): North American Operations $ 51,115 $ 75,588 Middle East Operations 40,502 34,292 Far East Operations 67,108 (11,306) Europe and West Africa Operations (3,350) 15,093 Engineering Operations (4,235) 3,775 Other (24,658) (10,320) ----------- ----------- Total Segment Operating Income 126,482 107,122 ----------- ----------- Gain (Loss) on Asset Disposals and Impairments - Net: North American Operations (10,233) (6,532) Middle East Operations (47) (34) Far East Operations (4,311) 817 Europe and West Africa Operations 34,890 224,552 Engineering Operations (5,635) (25) Other 3,956 (258,897) ----------- ----------- Total Gain (Loss) on Asset Disposals and Impairments - Net 18,620 (40,119) ----------- ----------- Income (Loss) from Investees: North American Operations (1,239) 4,539 Far East Operations 13,350 4,253 Europe and West Africa Operations 127 59,748 Other (1,568) 1,696 ----------- ----------- Total Income from Investees 10,670 70,236 ----------- ----------- General Corporate Expenses (13,421) (13,064) ----------- ----------- Total Operating Income $ 142,351 $ 124,175 =========== =========== J. RAY McDERMOTT, S.A. KEY BALANCE SHEET STATISTICS 3/31/99 3/31/98 ----------- ----------- (In thousands) Cash and Cash Equivalents $ 65,996 $ 152,011 Investments 502,934 543,658 ----------- ----------- Total Cash and Investments 568,930 695,669 ----------- ----------- Notes Payable and Current Maturities of Long-term Debt 306 31,272 Long-Term Debt 1,782 245,822 ----------- ----------- Total Debt 2,088 277,094 ----------- ----------- Net Cash and Investments $ 566,842 $ 418,575 =========== =========== BACKLOG 3/31/99 3/31/98 ----------- ----------- (In thousands) North American Operations $ 253,524 $ 629,374 Middle East Operations 91,641 181,127 Far East Operations 35,040 367,454 Europe and West Africa Operations 22,439 86,611 Engineering Operations 10,047 10,657 Other (5,468) (8,075) ----------- ----------- Total Backlog $ 407,223 $ 1,267,148 =========== ===========  