McDermott reports First Quarter 2009 Results; Net Income of $77.7 million, $0.33 per fully diluted share

Sequential Income Improvement in Each Segment; Near-Record Consolidated Backlog
of $10 Billion
HOUSTON--(Business Wire)--
McDermott International, Inc. (NYSE: MDR) ("McDermott" or the "Company") today
reported net income of $77.7 million, or $0.33 per diluted share, for the 2009
first quarter, compared to net income of $123.2 million, or $0.54 per diluted
share, for the corresponding period in 2008. Weighted average common shares
outstanding on a fully diluted basis were approximately 232.6 million and 230.1
million in the quarters ended March 31, 2009 and March 31, 2008, respectively.

McDermott`s revenues in the first quarter of 2009 were $1,493.3 million, an
increase of 3.0 percent compared to $1,450.4 million in the corresponding period
in 2008. The increase in consolidated revenues was due to a higher level of
activity in the Offshore Oil & Gas Construction and Government Operations
segments, partially offset by lower revenues in the Power Generation Systems
segment.

The Company`s operating income in the 2009 first quarter was $131.2 million,
compared to $157.1 million in the 2008 first quarter. A year-over-year increase
of $21.8 million in consolidated pension plan expense, which was predominantly a
non-cash expense, combined with a $12.7 million reduction in gains on asset
sales, were the primary factors in the variance between the two periods.

"Considering the ongoing state of uncertainty in the global economy and that we
continue to work through the Middle East pipeline projects in the Offshore Oil &
Gas Construction segment, I am quite pleased with the results McDermott produced
in the quarter," said John A. Fees, Chief Executive Officer of McDermott. "The
Company`s backlog is near record levels at $10 billion; we see the end to the
problematic pipeline projects later this year, and our financial position
remains solid. Clearly, the Company has work to do, and near-term challenges
still exist, but I am confident McDermott is well-positioned and progressing in
this environment."

At March 31, 2009, McDermott`s consolidated backlog was $10.0 billion, compared
to $10.2 billion and $9.8 billion at March 31, 2008 and December 31, 2008,
respectively.

RESULTS OF OPERATIONS

2009 First Quarter Compared to 2008 First Quarter

Offshore Oil & Gas Construction Segment

Revenues in the Offshore Oil & Gas Construction segment were $708.5 million in
the 2009 first quarter, compared to $645.9 million for the same period a year
ago. The year-over-year improvement in revenues resulted from increased
activities in the Middle East and Americas regions, partially offset by a
decline in the Caspian region.

Segment income for the 2009 first quarter was $45.0 million, compared to $52.9
million in the 2008 first quarter. Major areas contributing to first quarter
2009 segment income include the Middle East, Asia Pacific, Caspian and Americas
regions. During the first quarter of 2009, the Company substantially completed
the marine pipeline installation portion on one of its three Qatar projects. The
remaining two Qatar projects recently commenced pipeline installation activities
during the second quarter of 2009.

At March 31, 2009, segment backlog was $5.0 billion, compared to backlog of $5.3
billion and $4.5 billion at March 31, 2008 and December 31, 2008, respectively.

Power Generation Systems Segment

Revenues in the Power Generation Systems segment for the first quarter of 2009
were $528.6 million, compared to $616.3 million in the first quarter of 2008.

Segment income for the 2009 first quarter was $58.2 million, compared to $76.3
million in the 2008 first quarter. Major activities contributing to first
quarter 2009 segment income include the supply and construction of new boilers
and environmental equipment, retrofit projects of existing facilities, and
related parts and services.

At March 31, 2009, segment backlog was $2.2 billion, compared to backlog of $3.2
billion and $2.5 billion at March 31, 2008 and December 31, 2008, respectively.

Government Operations Segment

Revenues in the Government Operations segment were $257.1 million in the 2009
first quarter, compared to $190.6 million for the same period a year ago. The
improvement was primarily due to activities in the manufacture of nuclear
components and nuclear fuels for certain U.S. Government programs, including
revenues from Nuclear Fuel Services which was acquired in December 2008, and in
the manufacture of nuclear components for a commercial uranium enrichment
project.

Segment income for the 2009 first quarter was $45.8 million, compared to $38.0
million in the 2008 first quarter. Major items contributing to first quarter
2009 segment income include the manufacture of nuclear components and nuclear
fuels for certain U.S. Government programs, the manufacture of nuclear
components for a commercial uranium enrichment project, and the management and
operations of various U.S. Government sites.

At March 31, 2009, segment backlog was $2.7 billion, compared to backlog of $1.7
billion and $2.9 billion at March 31, 2008 and December 31, 2008, respectively.

Corporate & Other Income and Expense

Unallocated corporate expenses were $17.7 million in the 2009 first quarter,
compared to $10.0 million in the 2008 first quarter.

The Company`s other expense-net for the first quarter of 2009 was $9.6 million,
compared to other income-net of $6.5 million in the first quarter of 2008. The
$16.1 million decline was predominantly due to a year-over-year decline in
interest income and approximately $9.4 million of non-cash charges related to
foreign currency hedging activity, compared to $2.4 million in the corresponding
period a year ago.

OTHER INFORMATION

About the Company

McDermott is an engineering and construction company, with specialty
manufacturing and service capabilities, focused on energy infrastructure.
McDermott`s customers are predominantly utilities and other power generators,
major and national oil companies, and the United States Government. With its
global operations, McDermott operates in over 20 countries with more than 25,000
employees.

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 and uncertainties that may impact the Company`s
actual results of operations. These forward-looking statements include
statements about backlog, to the extent backlog may be viewed as an indicator of
future revenues, the expected timing of the completion of the problematic
pipeline projects and our belief that we are well-positioned and progressing in
the current environment. 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 adverse changes in the markets in which we operate or
credit markets, our inability to successfully execute on contracts in backlog
and changes in the scope or timing of contracts in backlog. 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 and quarterly
filings with the Securities and Exchange Commission, including its annual report
on Form 10-K.

Conference Call to Discuss First Quarter 2009 Earnings Release

Date: Tuesday, May 12, 2009, at 10:00 a.m. EDT (9:00 a.m. CDT)
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

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended
March 31,
2009 2008
(Unaudited)
(In thousands, except shares and per
share amounts)

Revenues $ 1,493,263 $ 1,450,426
Costs and Expenses:
Cost of operations 1,228,622 1,188,696
(Gains) losses on asset disposals and impairments - net 1,241 (11,443 )
Selling, general and administrative expenses 141,394 126,731
Total Costs and Expenses 1,371,257 1,303,984

Equity in Income of Investees 9,200 10,670

Operating Income 131,206 157,112

Other Income (Expense):
Interest income 2,813 13,395
Interest expense (956 ) (2,940 )
Other expense - net (11,493 ) (3,997 )
Total Other Income (Expense) (9,636 ) 6,458

Income before Provision for Income Taxes 121,570 163,570

Provision for Income Taxes 43,878 40,380

Net Income $ 77,692 $ 123,190

Earnings per Share:
Basic $ 0.34 $ 0.55
Diluted $ 0.33 $ 0.54

Shares used in the computation of earnings per share:
Basic 228,314,785 225,632,169
Diluted 232,586,245 230,112,858

McDERMOTT INTERNATIONAL, INC.

SELECTED SEGMENT INFORMATION

Three Months Ended
March 31,
2009 2008
REVENUES (Unaudited)
Offshore Oil and Gas Construction $ 708,524 $ 645,949
Government Operations 257,105 190,594
Power Generation Systems 528,573 616,298
Adjustments and Eliminations (939 ) (2,415 )
TOTAL $ 1,493,263 $ 1,450,426

SEGMENT INCOME
Offshore Oil and Gas Construction $ 45,038 $ 52,925
Government Operations 45,752 37,950
Power Generation Systems 58,159 76,258
148,949 167,133
Corporate (17,743 ) (10,021 )
TOTAL $ 131,206 $ 157,112

EQUITY IN INCOME (LOSS) OF INVESTEES (1)
Offshore Oil and Gas Construction $ (1,145 ) $ (754 )
Government Operations 8,702 8,749
Power Generation Systems 1,643 2,675
TOTAL $ 9,200 $ 10,670
PENSION EXPENSE (1)
Offshore Oil and Gas Construction $ 2,177 $ 1,665
Government Operations 12,158 4,061
Power Generation Systems 15,315 6,026
Corporate 4,598 733
TOTAL $ 34,248 $ 12,485

DEPRECIATION & AMORTIZATION (1)
Offshore Oil and Gas Construction $ 19,760 $ 19,963
Government Operations 11,243 5,566
Power Generation Systems 4,335 5,497
Corporate 684 285
TOTAL $ 36,022 $ 31,311

RESEARCH & DEVELOPMENT, NET (1) $ 10,240 $ 9,008

CAPITAL EXPENDITURES
Offshore Oil and Gas Construction $ 41,359 $ 47,237
Government Operations 5,246 1,511
Power Generation Systems 12,333 7,204
Corporate 2,450 3,334
TOTAL $ 61,388 $ 59,286

BACKLOG
Offshore Oil and Gas Construction $ 5,043,788 $ 5,320,839
Government Operations 2,698,580 1,676,766
Power Generation Systems 2,220,517 3,179,244
TOTAL $ 9,962,885 $ 10,176,849

(1) Included in Segment Income Above

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

March 31, December 31,
2009 2008
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $ 528,624 $ 586,649
Restricted cash and cash equivalents 59,026 50,536
Investments 81,912 131,515
Accounts receivable - trade, net 613,537 712,055
Accounts and notes receivable - unconsolidated 4,569 1,504
affiliates
Accounts receivable - other 141,021 139,062
Contracts in progress 400,305 311,713
Inventories 113,273 128,383
Deferred income taxes 100,364 97,069
Other current assets 63,670 58,499

Total Current Assets 2,106,301 2,216,985

Property, Plant and Equipment 2,276,138 2,234,050
Less accumulated depreciation 1,172,208 1,155,191

Net Property, Plant and Equipment 1,103,930 1,078,859

Investments 317,292 319,170

Goodwill 297,525 298,265

Deferred Income Taxes 288,804 335,877

Investments in Unconsolidated Affiliates 73,001 70,304

Other Assets 274,416 282,233

TOTAL $ 4,461,269 $ 4,601,693

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

March 31, December 31,
2009 2008
(Unaudited)
(In thousands)

Current Liabilities:
Notes payable and current maturities of long-term debt $ 4,161 $ 9,021
Accounts payable 464,875 551,435
Accrued employee benefits 181,264 205,521
Accrued contract cost 92,896 97,041
Advance billings on contracts 828,610 951,895
Accrued warranty expense 119,708 120,237
Income taxes payable 40,603 55,709
Accrued liabilities - other 249,883 217,486

Total Current Liabilities 1,982,000 2,208,345

Long-Term Debt 5,915 6,109

Accumulated Postretirement Benefit Obligation 106,431 107,567

Self-Insurance 91,637 88,312

Pension Liability 665,518 682,624

Other Liabilities 197,028 192,564

Contingencies and Commitments

Stockholders` Equity:
Common stock, par value $1.00 per share 234,544 234,174
Capital in excess of par value 1,264,556 1,252,848
Retained earnings 642,283 564,591
Treasury stock at cost, 5,854,959 and 5,840,314 shares at March 31,
2009 and December 31, 2008, respectively (63,166 ) (63,026 )
Accumulated other comprehensive loss (665,477 ) (672,415 )

Total Stockholders` Equity 1,412,740 1,316,172

TOTAL $ 4,461,269 $ 4,601,693

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended
March 31,
2009 2008
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 77,692 $ 123,190
Non-cash items included in net income:
Depreciation and amortization 36,022 31,311
Income of investees, less dividends (1,142 ) (3,057 )
(Gains) losses on asset disposals and impairments - net 1,241 (11,443 )
Provision for deferred taxes 38,407 16,063
Amortization of pension and postretirement costs 21,970 10,137
Excess tax benefits from FAS 123(R) stock-based compensation (134 ) (5,346 )
Other, net 13,159 10,727
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable 90,367 (75,109 )
Net contracts in progress and advance billings on contracts (208,063 ) (103,241 )
Accounts payable (85,830 ) 7,754
Income taxes (16,717 ) 2,150
Accrued and other current liabilities 29,767 77,316
Pension liability, accumulated postretirement benefit obligation and accrued
employee benefits (43,281 ) (107,488 )
Other, net 19,629 (25,891 )
NET CASH USED IN OPERATING ACTIVITIES (26,913 ) (52,927 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents (8,490 ) (14,561 )
Purchases of property, plant and equipment (61,388 ) (59,286 )
Net (increase) decrease in available-for-sale securities 49,007 (88,633 )
Proceeds from asset disposals 279 11,921
Other, net (1,055 ) (820 )
NET CASH USED IN INVESTING ACTIVITIES (21,647 ) (151,379 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt (4,825 ) (4,385 )
Issuance of common stock 160 2,845
Payment of debt issuance costs (19 ) (164 )
Excess tax benefits from FAS 123(R) stock-based compensation 134 5,346
Other 943 -
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,607 ) 3,642
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (5,858 ) (130 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (58,025 ) (200,794 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 586,649 1,001,394
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 528,624 $ 800,600
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 1,124 $ 3,139
Income taxes (net of refunds) $ 19,786 $ 30,058

McDermott Investor Relations & Corporate Communications
Jay Roueche, 281-870-5462
Vice President
jroueche@mcdermott.com
or
Robby Bellamy, 281-870-5165
Director
rbellamy@mcdermott.com

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