EXHIBIT 99.1
Mc DERMOTT INTERNATIONAL, INC.
Fourth Quarter 2003 Supplemental Presentation
March 19, 2004
Cautionary Statements/Explanation of Non–GAAP Measurements
Statements in this presentation 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 factors detailed in McDermott International’s filings with the Securities Exchange Commission, including its Form 10-K for the year ended December 31, 2003 and its Form 10-Q’s which are filed quarterly.
McDermott management believes that certain non-GAAP measurements used in this presentation provide the investor with useful information to evaluate the financial results of the Company’s ongoing operations and allows for easier comparison to historical basis. The term non-GAAP is used in this presentation to distinguish certain measurements from those prepared on a generally accepted accounting principle basis (“GAAP”).
Reconciliations of non-GAAP measurements are included as part of the presentation. The presentation can be found for a period of time on Company’s website at www.mcdermott.com in the investor relations section.
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McDermott Operating Companies
Consolidated Operating Subsidiaries
Marine Construction
J. Ray McDermott (J. Ray)
Providing solutions for offshore field development to the worldwide oil and gas industry
Government Operations
BWX Technologies (BWXT)
Lifecycle management of special nuclear materials, facilities & technologies primarily for the U.S. government
Not Consolidated Chapter 11
Power Generation
Babcock & Wilcox (B&W)
Power generation equipment design, supply and construction and after market services
[1] Major subsidiaries only
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Financial Results
Fourth Quarter and Full Year 2003
4th Quarter Income from Cont. Ops
(in millions, except per share) 4Q03 4Q02 % Change
Revenues 581.8 442.4 31.5
Operating Inc./(Loss) (61.1) (70.5) 13.4
Operating Margin -10.5% -15.9% 34.1
Net. Interest Expense (6.7) (0.9) 616
B&W Settlement Cost (8.9) (86.4) 89.7
Other Items, net (0.2) (3.7) 95.6
Income Taxes (4.5) (24.1) 81.4
Income/(loss) from (81.4) (185.6) 56.2
cont. operations
Income/(loss) from ($1.26) ($2.96) 57.4
cont. ops/share
Depreciation & Amort. 11.9 10.4 14.4
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4th Quarter Segment Highlights
(in millions) 4Q03 4Q02 % Change
Revenues by Segment
J. Ray McDermott 428.5 277.7 54.3
BWXT 153.3 164.7 (6.9)
Total Revenues 581.8 442.4 31.5
Segment Income/(loss)
J. Ray McDermott (61.3) (81.9) 25.2
BWXT 21.2 14.5 45.4
Other 0.0 0.2 N/M
Segment Income/(loss) (40.1) (67.2) 40.3
Unallocated Corp. Exp. (21.0) (3.3) 531.0
Operating Income/(Loss) (61.1) (70.5) 13.4
Depreciation & Amort.
J. Ray McDermott 7.4 6.0 24.6
BWXT 3.7 3.3 14.6
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Major Items in 4th Quarter Net Loss
(in millions) 4Q03 4Q02
Belanak project (29.2)
Spar projects (8.1) (47.2)
Carina Aries project (24.6) (9.6)
J. Ray insurance exp. (5.4)
BWXT reimbursement 4.5
B&W Settlement Expense (8.9) (86.4)
– pretax
B&W Settlement Expense (0.9) (23.6)
– taxes
MI pension expense* (18.9) (1.6)
Total (91.5) (168.4)
* Recorded in corporate ( ) = expenses
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Full Year 2003 Income from Cont. Ops
(in millions, except per share) FY03 FY02 % Change
Revenues 2,335.4 1,733.8 34.7
Operating Inc./( loss) (52.7) (676.4) 92.2
Operating Margin -2.3% -38.1% 94.1
Net. Interest Expense (15.8) (6.6) 140.0
B&W Settlement Exp. (14.5) (86.4) 83.2
Other Items, net 2.1 (4.2) N/M
Income Taxes (21.3) (14.4) 47.8
Inc./(loss) from cont. (102.2) (788.0) 87.0
operations
Inc./(loss) from cont. ($1.59) ($12.74) 87.5
operations/share
Depreciation & Amort. 44.5 40.6 9.6
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Full Year 2003 Segment Highlights
(in millions) FY03 FY02 % Change
Revenues by Segment
J. Ray McDermott 1,803.9 1,133.2 59.2
BWXT 531.5 553.8 (4.0)
Power (0.0) 46.8 N/M
Total Revenues 2,335.4 1,733.8 34.7
Segment Income/(loss)
J. Ray McDermott (45.9) (480.9) 90.5
BWXT 86.7 59.3 46.2
Other 0.1 (5.1) N/M
Segment Income/(loss) 40.9 (426.7) N/M
B&W write-off/other 0.0 (226.1) N/M
Unallocated Corp. Exp. (93.6) (23.6) 297
Operating Income/(Loss) (52.7) (676.4) 92.2
Depreciation & Amort.
J. Ray McDermott 28.3 24.8 14.0
BWXT 13.2 11.4 15.8
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Major Items in 2003 Net Loss
(in millions) FY03 FY02
Belanak project (25.3) 8.0
Spar projects (27.9) (149.2)
Carina Aries project (66.5) (9.3)
J. Ray insurance (5.4)
J. Ray goodwill impairment (313.0)
BWXT reimbursement 4.5
BWXT contract resolution 8.7
B&W Settlement Expense - (14.6) (86.4)
pretax
B&W Settlement Expense – (3.4) (23.6)
taxes
B&W investment write-off (224.7)
Pension expense (75.7) (11.1)
Total (205.6) (809.3)
( ) = expenses
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Summary Balance Sheet at 12/31/03
(in millions) 12/31/03 12/31/02
Assets
Cash & equivalents, unrestricted 174.8 129.5
Cash & equivalents, restricted 180.5 44.8
Investments 0.0 108.3
Other current assets 343.2 466.7
Total Current Assets 698.5 749.3
Property, Plant & Eq. 363.8 353.4
LT Investments 42.8 65.0
All Other Assets 143.8 110.5
Total Assets $ 1,248.9 $ 1,278.2
Liabilities & equity
Current liabilities 722.8 917.0
Long-term debt 279.7 86.1
Pension liability 311.4 392.1
B&W Settlement 100.9 86.4
Self Insurance 60.7 71.9
All other liabilities 136.6 141.5
Shareholder’s equity (363.2) (416.8)
Total Liabilities &SE $ 1,248.9 $ 1,278.2
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Corporate Structure Affects Liquidity
MII (Panama)
MIICO (Panama)
J. Ray S.A. (Panama)
Captive Insurers (Honore, Creole, Brick)
McDermott Inc.
(U.S.)
J. Ray Holdings (U.S.)
Foreign Chain
The B&W Co.
BWXT
Can only
Downstream Cash
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Liquidity at 3/9/04
($ in millions) J. Ray MI MII Total
Cash, equivalents & $ 188 $ 1 $ 116 $ 305
investments
Less restricted amounts:
Letter of credit collateral (84) 0 (4) (88)
Captive insurer (16) 0 (33) (49)
Pledged securities 0 0 (41) (41)
Temporary interest reserve (22) 0 0 (22)
Foreign accounts (3) 0 (1) (4)
FX trading (5) 0 0 (5)
Total free cash available 58 1 37 96
BWXT credit capacity 0 74 0 74
Total available liquidity $58 $ 75 $37 $ 170
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Finance Activities
• In December 2003, finance activities included:
– Issuance of J. Ray’s $200 million note offering
– Signing BWXT’s $135 million credit facility
• Cancelled prior omnibus credit facility
• Negotiating letter-of-credit facility for J. Ray
– Expected to be securitized by accounts receivable
– Borrowing base expected to be about $75 million
• J. Ray reviewing sales of non-strategic assets
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Pension
• Underfunded status at 12/03 was $409.7 mm ($462 mm at 12/02)
– Actual plan assets returned $270 million (vs. $115 mm expected)
– Change in assumptions increased obligation by $107 million
• Balance sheet reflects long-term pension liability of $311 million; prepaid pension costs of $18.7 million
• Improvement in other comprehensive income was $134.5 million due to gain in pension plan assets
• Qualified pension expense for 2004 is expected to be $63 million
• No required cash contribution expected for MI plan in 2004; BWXT may fund and will include cost in its rates; J. Ray expected to contribute about $5.0 million to its pension
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J. Ray Operational Information
Fourth Quarter and Full Year 2003
J. Ray 2003 Overview
• Substantially completed 2 troubled spars projects
– Medusa (3/03) & Devil’s Tower (1/04)
• Incurred $120mm additional charges on contracts in loss position
• Problem contracts have common traits
– First-of-a-kind; fixed price & EPIC
• End is in sight; contracts in loss position expected to be completed in 2004
• Improving people, processes and procedures
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J. Ray 2003 Revenues—$1.8 bln
Revenue by Product/Service Line[1]
Procurement 42%
Offshore Operations 29%
Engineering 14%
Fabrication 15%
[1] Percentages do not reflect $200 million of intercompany eliminations
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Belanak Project
PROJECT OVERVIEW
• Floating Production Storage Offloading Project
• Client: KBR
• Awarded in 3Q01
• First of a kind, fixed cost, EPIC
• JRM facility: Batam Island
4Q2003 UPDATE
• Increased cost related to overruns of material and subcontractor cost estimates and increased labor costs
• Loss of $29.2 mm in 4Q03
– Offset $11.9 mm in previously recorded income ($3.9 in 2003)
– Increased est. manhours to complete
– Increased contingency
• Expected completion in fall ‘04
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Front Runner Spar Project
PROJECT OVERVIEW
• Spar engineering, procurement, construction, and installation
• Client: Murphy Oil
• Awarded in 1Q02
• First of a kind, fixed cost, EPIC
• Spar hull constructed at JRM Jebel Ali facility; subcontracted topsides
4Q2003 UPDATE
• Hull complete and moored in Gulf of Mexico; subcontractor completing topsides; marine installation during June
• Loss of $39.7 mm in 2003
–$ 10.7 mm in 4Q03
– Increased reimbursable expenses at subcontractor
– Improvements on other spar projects was $12 mm
• Expected completion in summer 2004
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Carina Aries Project—Argentina
PROJECT OVERVIEW
• Jacket/topsides fabrication, pipelay and installation
• Client: TotalFinaElf
• Awarded in 3Q01
• First of a kind, fixed cost, EPIC
• Field located in S. Argentina
• JRM Vessel: DB60
4Q2003 UPDATE
• Experienced difficulties in pipelay portion of project, productivity and mechanical issues
• Loss of $66.5 mm in 2003
–$ 24.6 mm in 4Q03 related to fabrication overruns ($6mm) and pipelay difficulties ($18mm)
–$ 40 mm in 2Q03 related to force majeure and related damage
• Pending insurance claim related to 2Q03 event not reflected in loss
• Expect completion in 2Q04
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Year End J. Ray Backlog—$1.4 bln
2003 Year-End Backlog by Type of Contract
Unit Rate 1%
Combination 32%
Loss Position 12%
Fixed Price 40%
Cost Plus 15%
2003 Year-End Backlog by Geographic Region
Asia Pacific 4%
Contracts in loss position 12%
Middle East 28%
Caspian 36%
Americas 20%
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J. Ray Backlog—$1.4 bln
Backlog by Estimated Revenue Year
Beyond 2006 <1%
2005 28%
2006 8%
2004 64%
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J. Ray 2004 Major Backlog Review
Program 2004 Rev.
of Work Contract Work Expected Contribution
Location (# of projects in Backlog) Types Began Completion Range
Azerbaijan Fabrication and Mixed 4Q2001 4Q2006 >$200mm
Pipelines (3)
Argentina Carina Aries* (1) Mixed 3Q2001 2Q2004 $50-100mm
Morgan City LA BP Deepwater (4) Cost+ 1Q2001 2Q2005 $ 100-200mm
Harbor Island TX Vacant — — — —
evaluating Lease/Disposition
Vera Cruz MX Ship Repair — — — —
Jebel Ali UAE Fabrication and Fixed 2Q2001 3Q2005 >$200mm
Marine (8)
Batam Island ID Fabrication (2) Fixed 3Q2001 3Q2004 $50-100mm
incl. Belanak FPSO*
Houston TX Legacy spars* (2) Fixed 1Q2001 2Q2004 $50-100mm
and FEED (1)
GOM US/MX Marine Install (8) Rates/ 4Q2002 2Q2004 $50-100mm
Fixed
* Indicates contracts in loss position
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JRM Fabrication Facility/Marine Overview
2003 Actual Percent 2004 Backlog and Prospective Work as a
of Standards Percent of Standards
Fabrication Q403 FY03 Booked Prospective Forecast
Facility / Backlog Work 2004 Under/(over)
Marine Utilization
Jebel Ali 30.5% 145% 82.3% 17.8% (0.1%)
Batam 171.6% 214.3% 49.4% 35.2% 15.4%
TNG 70.4% 109.3% 0.0% 75.0% 25.0%
Morgan City 109.1% 107.5% 74.9% 7.2% 17.9%
Harbor Is.
Total 104.5% 156.5% 60.0% 27.5% 12.5%
Fabrication
Marine 117% 118.7% 45.7% 35.2% 19.1%
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J. Ray Bid Outstanding—$1.9 bln
Bids Outstanding by Estimated Starting Year [1]
2006 3%
2005 26%
2004 71%
[1] Estimated starting year does not indicate all or a majority of those revenues would be recognized in that year.
A substantial amount of starting year revenues may fall in the following years.
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J. Ray Bid Outstanding—$1.9 bln
Bids Outstanding by Type of Contract
Fixed Price 77%
Cost Plus 7%
Combination 12%
Unit Rate 4%
Bids Outstanding by Geographic Region
Americas 23%
Asia Pacific 33%
Middle East 44%
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BWXT Operational Information
Fourth Quarter and Full Year 2003
BWXT 2003 Overview
• Record segment income of $86.7 million
• Year end backlog of $1.8 billion is all time high
• Substantial M&O contract bids on the horizon
• Continue to be a leader in the defense industry
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BWXT 2003 Revenues—$531 million
Revenue by Product/Service Line
4% Other
3% Environmental
5% Commercial
2% M&O contracts
86% Nuclear components
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BWXT Backlog—$1.8 billion
Backlog by Estimated Revenue Year
Beyond 2006 25%
2004 28%
2005 28%
2006 19%
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For additional information, please contact: Jay Roueche Director of Investor Relations 281-870-5462