Mcdermott International (MDRIQ) 10-Q 10 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	MDR
Entity Registrant Name	MCDERMOTT INTERNATIONAL INC
Entity Central Index Key	0000708819
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		231,122,597

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current Assets:
Cash and cash equivalents	$775,980	$899,270
Restricted cash and cash equivalents (Note 1)	96,040	69,920
Investments	12	12
Accounts receivable - trade, net	550,275	642,995
Accounts and notes receivable - unconsolidated affiliates	9,614	5,806
Accounts receivable - other	66,211	68,035
Contracts in progress	408,479	400,831
Inventories (Note 1)	97,874	101,494
Deferred income taxes	107,236	100,828
Other current assets	72,132	68,730
Total Current Assets	2,183,853	2,357,921
Property, Plant and Equipment	2,655,474	2,608,740
Less accumulated depreciation	1,295,906	1,271,135
Net Property, Plant and Equipment	1,359,568	1,337,605
Investments	178,566	228,706
Goodwill	325,760	306,497
Deferred Income Taxes	265,971	275,567
Investments in Unconsolidated Affiliates	93,139	86,932
Other Assets	268,103	255,882
TOTAL	4,674,960	4,849,110
Current Liabilities:
Notes payable and current maturities of long-term debt	13,558	16,270
Accounts payable	366,355	471,858
Accrued employee benefits	126,101	217,178
Accrued pension liability - current portion	213,188	173,271
Accrued contract cost	96,858	103,041
Advance billings on contracts	578,538	689,334
Accrued warranty expense	122,164	118,278
Income taxes payable	71,128	64,029
Accrued liabilities - other	176,882	155,773
Total Current Liabilities	1,764,772	2,009,032
Long-Term Debt	55,092	56,714
Accumulated Postretirement Benefit Obligation	106,461	105,605
Self-Insurance	89,044	87,222
Pension Liability	573,311	610,166
Other Liabilities	148,091	147,271
Contingencies and Commitments (Note 3)
Stockholders' Equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 237,800,603 and 236,919,404 shares at March 31, 2010 and December 31, 2009, respectively	237,801	236,919
Capital in excess of par value	1,323,712	1,300,998
Retained earnings	1,011,588	951,647
Treasury stock at cost, 6,435,903 and 6,168,705 shares at March 31, 2010 and December 31, 2009, respectively	(73,725)	(69,370)
Accumulated other comprehensive loss (Note 1)	(596,845)	(612,997)
Stockholders' Equity - McDermott International, Inc.	1,902,531	1,807,197
Noncontrolling interest	35,658	25,903
Total Stockholders' Equity	1,938,189	1,833,100
TOTAL	$4,674,960	$4,849,110

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
	Mar. 31, 2010	Dec. 31, 2009
Common stock, par value	$1	$1
Common stock, authorized	400,000,000	400,000,000
Common stock, issued	237,800,603	236,919,404
Treasury stock, shares	6,435,903	6,168,705

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues	$1,181,930	$1,493,263
Costs and Expenses:
Cost of operations	934,851	1,228,622
(Gains) losses on asset disposals and impairments - net	(2,093)	1,241
Selling, general and administrative expenses	167,952	141,394
Total Costs and Expenses	1,100,710	1,371,257
Equity in Income of Investees	10,588	9,200
Operating Income	91,808	131,206
Other Income (Expense):
Interest income	680	2,813
Interest expense	(381)	(956)
Other expense - net	(4,217)	(10,770)
Total Other Expense	(3,918)	(8,913)
Income before Provision for Income Taxes	87,890	122,293
Provision for Income Taxes	19,672	43,878
Net Income	68,218	78,415
Less: Net Income attributable to Noncontrolling Interest	(8,277)	(723)
Net Income Attributable to McDermott International, Inc.	$59,941	$77,692
Basic:
Net Income Attributable to McDermott International, Inc.	0.26	0.34
Diluted:
Net Income Attributable to McDermott International, Inc.	0.26	0.33
Shares used in the computation of earnings per share (Note 8):
Basic	230,824,301	228,314,785
Diluted	234,753,035	232,586,245

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net Income	$68,218	$78,415
Currency translation adjustments:
Foreign currency translation adjustments	3,499	(5,372)
Unrealized (losses) gains on derivative financial instruments:
Unrealized losses on derivative financial instruments	(4,006)	(1,854)
Realized gains on derivative financial instruments	871	1,922
Amortization of benefit plan costs	14,738	14,155
Unrealized gains (losses) on investments:
Unrealized gains (losses) arising during the period	915	(1,872)
Realized gains (losses) recognized during the period	138	(50)
Other Comprehensive Income	16,155	6,929
Total Comprehensive Income	84,373	85,344
Comprehensive Income Attributable to Noncontrolling Interest	(8,280)	(714)
Comprehensive Income Attributable to McDermott International, Inc.	$76,093	$84,630

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data	Common Stock	Capital In Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Stockholders' Equity MII	Non- Controlling Interest	Total
Beginning Balance at Dec. 31, 2008	$234,174	$1,252,848	$564,591	($672,415)	($63,026)	$1,316,172	$341	$1,316,513
Beginning Balance (in shares) at Dec. 31, 2008	234,174,088
Net Income			77,692			77,692	723	78,415
Amortization of benefit plan costs				14,155		14,155		14,155
Unrealized gain (loss) on investments				(1,922)		(1,922)		(1,922)
Translation adjustments				(5,363)		(5,363)	(9)	(5,372)
Unrealized (loss) gain on derivatives				68		68		68
Exercise of stock options (in shares)	43,110
Exercise of stock options	43	70				113		113
Excess tax benefits on stock options		134				134		134
Contributions to thrift plan (in shares)	326,997
Contributions to thrift plan	327	3,113				3,440		3,440
Purchase of treasury shares					(140)	(140)		(140)
Stock-based compensation charges		8,391				8,391		8,391
Ending Balance (in shares) at Mar. 31, 2009	234,544,195
Ending Balance at Mar. 31, 2009	234,544	1,264,556	642,283	(665,477)	(63,166)	1,412,740	1,055	1,413,795
Beginning Balance at Dec. 31, 2009	236,919	1,300,998	951,647	(612,997)	(69,370)	1,807,197	25,903	1,833,100
Beginning Balance (in shares) at Dec. 31, 2009	236,919,404
Net Income			59,941			59,941	8,277	68,218
Amortization of benefit plan costs				14,738		14,738		14,738
Unrealized gain (loss) on investments				1,053		1,053		1,053
Translation adjustments				3,496		3,496	3	3,499
Unrealized (loss) gain on derivatives				(3,135)		(3,135)		(3,135)
Exercise of stock options (in shares)	242,081
Exercise of stock options	242	(426)				(184)		(184)
Excess tax benefits on stock options		2,556				2,556		2,556
Contributions to thrift plan (in shares)	150,912
Contributions to thrift plan	151	3,505				3,656		3,656
Purchase of treasury shares					(4,355)	(4,355)		(4,355)
Accelerated vesting, net of forfeitures (in shares)	488,206
Accelerated vesting, net of forfeitures	489	(489)
Stock-based compensation charges		17,568				17,568		17,568
Acquisition of noncontrolling interest							1,475	1,475
Ending Balance (in shares) at Mar. 31, 2010	237,800,603
Ending Balance at Mar. 31, 2010	$237,801	$1,323,712	$1,011,588	($596,845)	($73,725)	$1,902,531	$35,658	$1,938,189

4_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$68,218	$78,415
Non-cash items included in net income:
Depreciation and amortization	36,862	36,022
Income of investees, less dividends	(5,327)	(1,142)
(Gains) losses on asset disposals and impairments - net	(2,093)	1,241
Provision for deferred taxes	4,903	38,407
Amortization of pension and postretirement costs	22,859	21,970
Excess tax benefits from FAS 123(R) stock-based compensation	(2,556)	(134)
Other, net	14,236	13,159
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable	79,095	90,367
Net contracts in progress and advance billings on contracts	(122,333)	(208,063)
Accounts payable	(98,651)	(85,830)
Income taxes	8,591	(16,717)
Accrued and other current liabilities	11,486	29,767
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits	(89,091)	(43,281)
Other, net	(4,794)	18,906
NET CASH USED IN OPERATING ACTIVITIES	(78,595)	(26,913)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents	(26,120)	(8,490)
Purchases of property, plant and equipment	(66,526)	(61,388)
Net decrease in available-for-sale securities	51,147	49,007
Acquisition of businesses, net of cash acquired	(9,612)
Proceeds from asset disposals	3,985	279
Other, net		(1,055)
NET CASH USED IN INVESTING ACTIVITIES	(47,126)	(21,647)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt	(2,325)	(4,825)
Issuance of common stock	620	160
Payment of debt issuance costs	(683)	(19)
Excess tax benefits from FAS 123(R) stock-based compensation	2,556	134
Other		943
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	168	(3,607)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH	2,263	(5,858)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(123,290)	(58,025)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	899,270	586,649
CASH AND CASH EQUIVALENTS AT END OF PERIOD	775,980	528,624
Cash paid during the period for:
Interest (net of amount capitalized)	398	1,124
Income taxes (net of refunds)	$15,099	$19,786

BASIS OF PRESENTATION AND SIGNI

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
	3 Months Ended Mar. 31, 2010
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES	NOTE 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES We have presented our condensed consolidated financial statements in U.S. Dollars in accordance with the interim reporting requirements of Form 10-Q and Rule10-01 of RegulationS-X. Financial information and disclosures normally included in our financial statements prepared annually in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and the notes in our annual report on Form 10-K for the year ended December31, 2009. We have included all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. These condensed consolidated financial statements include the accounts of McDermott International, Inc. and its subsidiaries and controlled entities consistent with Financial Accounting Standards Board (FASB) Topic Consolidation. We use the equity method to account for investments in entities that we do not control, but over which we have significant influence. We generally refer to these entities as joint ventures. We have eliminated all significant intercompany transactions and accounts. We have reclassified certain amounts previously reported to conform to the presentation at March31, 2010 and for the three months ended March31, 2010. We have evaluated subsequent events through the date of issuance of this report. We present the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated. McDermott International, Inc. (MII), incorporated under the laws of the Republic of Panama in 1959, is an engineering and construction company with specialty manufacturing and service capabilities and is the parent company of the McDermott group of companies, including J. Ray McDermott, S.A. (JRMSA) and Babcock Wilcox Investment Company (BWICO). In this quarterly report on Form 10-Q, unless the context otherwise indicates, we, us and our mean MII and its consolidated subsidiaries. On December7, 2009, we announced plans to separate our Government Operations segment and our Power Generation Systems segment into an independent publicly traded company to be named The Babcock Wilcox Company. We plan to effect the separation through a spin-off transaction that is intended to be tax free to our shareholders. In the three months ended March31, 2010, we incurred approximately $24.0 million of costs directly related to the spin-off, consisting of severance and costs for professional services. We operate in three business segments: Offshore Oil and Gas Construction, Government Operations and Power Generation Systems, further described as follows: Our Offshore Oil and Gas Construction segment includes the business and operations of JRMSA, J. Ray McDermott Holdings, LLC and their respective subsidiaries. This segment supplies services primarily to offshore oil and gas field developments worldwide, including the front-end design and detailed engineering, fabrication and installation of offshore drilling and production facil

PENSION PLANS AND POSTRETIREMEN

PENSION PLANS AND POSTRETIREMENT BENEFITS
	3 Months Ended Mar. 31, 2010
PENSION PLANS AND POSTRETIREMENT BENEFITS	NOTE 2 PENSION PLANS AND POSTRETIREMENT BENEFITS Components of net periodic benefit cost included in net income are as follows: Pension Benefits Other Benefits Three Months Ended March31, ThreeMonths Ended March31, 2010 2009 2010 2009 (Unaudited) (In thousands) Service cost $ 10,203 $ 9,565 $ 267 $ 231 Interest cost 40,937 40,101 1,964 2,170 Expected return on plan assets (39,224 ) (36,909 ) (411 ) (377 ) Amortization of prior service cost 898 690 18 15 Amortization of transition obligation 70 59 Recognized net actuarial loss 21,533 20,801 340 405 Net periodic benefit cost $ 34,347 $ 34,248 $ 2,248 $ 2,503

CONTINGENCIES AND COMMITMENTS

CONTINGENCIES AND COMMITMENTS
	3 Months Ended Mar. 31, 2010
CONTINGENCIES AND COMMITMENTS	NOTE 3 CONTINGENCIES AND COMMITMENTS Other than as noted below, there have been no material changes during the period covered by this Form 10-Q in the status of the legal proceedings disclosed in Note 10 to the consolidated financial statements in Part II of our annual report on Form 10-K for the year ended December31, 2009 (our 2009 10-K). Investigations and Litigation On March19, 2010, Jessi Ann Casella, William E. Uhing and Kenneth B. Cyphert filed suit against BW PGG, Babcock Wilcox Technical Services Group, Inc., formerly known as BW Nuclear Environmental Services, Inc. and Atlantic Richfield Company in the United States District Court for the Western District of Pennsylvania (the Casella Litigation). The plaintiffs in the Casella Litigation allege, among other things, that they suffered personal injuries and property damage as a result of alleged radioactive and non-radioactive releases relating to the operation, remediation and/or decommissioning of the same two former nuclear fuel processing facilities located in Apollo and Parks Township, Pennsylvania involved in the McMunn Litigation described in our 2009 10-K. On November17, 2008,December5, 2008 and January20, 2009, three separate alleged purchasers of our common stock during the period from February27, 2008 through November5, 2008 filed purported class action complaints against MII, Bruce Wilkinson (MIIs former Chief Executive Officer and Chairman of the Board), and Michael S. Taff (the Chief Financial Officer of MII) in the United States District Court for the Southern District of New York. Each of the complaints alleges that the defendants violated federal securities laws by disseminating materially false and misleading information and/or concealing material adverse information relating to the operational and financial status of three ongoing construction contracts in our Offshore Oil and Gas Construction segment for the installation of pipelines off the coast of Qatar. Each complaint seeks relief, including unspecified compensatory damages and an award for costs and expenses. The three cases were consolidated and transferred to the United States District Court for the Southern District of Texas. In May 2009, the plaintiffs filed an amended consolidated complaint, which, among other things, added Robert A. Deason (JRMSAs former President and Chief Executive Officer) as a defendant in the proceedings. In July 2009, MII and the other defendants filed a motion to dismiss the complaint, which was referred to a Magistrate Judge. On February23, 2010, the Magistrate Judge entered a Memorandum and Recommendation on the motion, finding that the plaintiffs had failed to state a claim for relief under the securities laws and therefore recommended to the District Court that motion to dismiss be granted. On March26, 2010, the Court issued an order adopting the Magistrate Judges recommendations in full and dismissing the case. However, the order granted the plaintiffs leave to request to amend their complaint and, on April30, 2010, the plaintiffs filed a motion with the District Court for leave to amend the complaint. The defendants have until May21 to file their opposition to

DERIVATIVE FINANCIAL INSTRUMENT

DERIVATIVE FINANCIAL INSTRUMENTS
	3 Months Ended Mar. 31, 2010
DERIVATIVE FINANCIAL INSTRUMENTS	NOTE 4 DERIVATIVE FINANCIAL INSTRUMENTS Our worldwide operations give rise to exposure to market risks from changes in foreign exchange rates. We use derivative financial instruments (primarily foreign currency forward-exchange contracts) to reduce the impact of changes in foreign exchange rates on our operating results. We use these instruments primarily to hedge our exposure associated with revenues or costs on our long-term contracts and other cash flow exposures that are denominated in currencies other than our operating entities functional currencies. We do not hold or issue financial instruments for trading or other speculative purposes. We enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either deferred in stockholders equity (deficit) as a component of accumulated other comprehensive loss, until the hedged item is recognized in earnings, or offset against the change in fair value of the hedged firm commitment through earnings. The ineffective portion of a derivatives change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. The gain or loss on a derivative instrument not designated as a hedging instrument is also immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of other income (expense) net in our consolidated statements of income. We have designated all of our forward contracts as cash flow hedging instruments. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in spot exchange rates of forecasted transactions related to long-term contracts and certain capital expenditures. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. At March31, 2010, we had deferred approximately $6.8 million of net losses on these derivative financial instruments in accumulated other comprehensive loss. We expect to recognize all of this amount in the next 12 months. At March31, 2010, all of our derivative financial instruments consisted of foreign currency forward-exchange contracts and foreign currency options. The notional value of our forward contracts totaled $297.9 million at March31, 2010, with maturities extending to June 2013. These instruments consist primarily of contracts to purchase or sell Euros or Canadian Dollars. The fair value of these contracts was in a net liability position totaling $4.0 million at March31, 2010 and all of the contracts were Level 2 in nature. The fair value of our foreign currency options totaled $4.8 million at March31, 2010, all of which were Level 2 in nature, and are included in other current assets on our condensed consolidated balance sheets. We are expo

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS
	3 Months Ended Mar. 31, 2010
FAIR VALUE MEASUREMENTS	NOTE 5 FAIR VALUE MEASUREMENTS The following is a summary of our available-for-sale securities measured at fair value at March31, 2010 (in thousands): 3/31/10 Level 1 Level 2 Level 3 Mutual funds $ 5,053 $ $ 5,053 $ Certificates of deposit 2,516 2,516 U.S. Government and agency securities 141,112 137,100 4,012 Asset-backed securities and collateralized mortgage obligations 10,792 3,069 7,723 Corporate notes and bonds 19,105 19,105 Total $ 178,578 $ 137,100 $ 33,755 $ 7,723 The following is a summary of our available-for-sale securities measured at fair value at December31, 2009 (in thousands): 12/31/09 Level 1 Level 2 Level 3 Mutual funds $ 4,944 $ $ 4,944 $ Certificates of deposit 2,522 2,522 U.S. Government and agency securities 163,466 148,683 14,783 Asset-backed securities and collateralized mortgage obligations 10,555 3,061 7,494 Corporate notes and bonds 47,231 47,231 Total $ 228,718 $ 148,683 $ 72,541 $ 7,494 Changes in Level 3 Instrument The following is a summary of the changes in our Level 3 instrument measured on a recurring basis for the period ended March31, 2010 (in thousands): Balance, beginning of the year $ 7,494 Total realized and unrealized gains (losses): 880 Included in other income (expense) Included in other comprehensive income 880 Purchases, issuances and settlements (111 ) Principal repayments (540 ) Balance, end of period $ 7,723 Other Financial Instruments We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments, as follows: Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying consolidated balance sheets for cash and cash equivalents approximate their fair values. Long-term and short-term debt. We base the fair values of debt instruments on quoted market prices. Where quoted prices are not available, we base the fair values on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. The estimated fair values of our financial instruments are as follows: March31, 2010 December31, 2009 Carrying Amount Fair Value Carrying Amount Fair Value (In thousands) Balance Sheet Instruments Cash and cash equivalents $ 775,980 $ 775,980 $ 899,270 $ 899,270 Restricted cash and cash equivalents $ 96,040 $ 96,040 $ 69,920 $ 69,920 Investments $ 178,578 $ 178,578 $ 228,718 $ 228,718 Debt

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION
	3 Months Ended Mar. 31, 2010
STOCK-BASED COMPENSATION	NOTE 6 STOCK-BASED COMPENSATION Total stock-based compensation expense recognized for the three months ended March31, 2010 and 2009 was as follows: Compensation Tax Net Expense Benefit Impact (Unaudited) (In thousands) Three Months Ended March31, 2010 Stock Options $ 3,740 $ (263 ) $ 3,477 Restricted Stock 1,309 (284 ) 1,025 Performance Shares 7,774 (1,181 ) 6,593 Performance and Deferred Stock Units 5,634 (862 ) 4,772 Total $ 18,457 $ (2,590 ) $ 15,867 ThreeMonthsEndedMarch31,2009 Stock Options $ 228 $ (76 ) $ 152 Restricted Stock 1,162 (362 ) 800 Performance Shares 6,525 (2,182 ) 4,343 Performance and Deferred Stock Units 1,109 (365 ) 744 Total $ 9,024 $ (2,985 ) $ 6,039

SEGMENT REPORTING

SEGMENT REPORTING
	3 Months Ended Mar. 31, 2010
SEGMENT REPORTING	NOTE 7 SEGMENT REPORTING An analysis of our operations by segment is as follows: Three Months Ended March31, 2010 2009 (Unaudited) (In thousands) REVENUES: Offshore Oil and Gas Construction $ 519,545 $ 708,524 Government Operations 253,251 257,105 Power Generation Systems 409,731 528,573 Adjustments and Eliminations(1) (597 ) (939 ) $ 1,181,930 $ 1,493,263 (1) Segment revenues are net of the following intersegment transfers and other adjustments: Offshore Oil and Gas Construction Transfers $ 3 $ 315 Government Operations Transfers 590 624 Power Generation Systems Transfers 4 $ 597 $ 939 OPERATING INCOME: Segment Operating Income: Offshore Oil and Gas Construction $ 84,136 $ 47,217 Government Operations 26,450 37,050 Power Generation Systems 4,771 56,504 $ 115,357 $ 140,771 Gains (Losses) on Asset Disposals and Impairments Net: Offshore Oil and Gas Construction $ 2,079 $ (1,034 ) Government Operations 25 Power Generation Systems (11 ) 12 $ 2,093 $ (1,022 ) Equity in Income (Loss) of Investees: Offshore Oil and Gas Construction $ (3,431 ) $ (1,145 ) Government Operations 9,478 8,702 Power Generation Systems 4,541 1,643 $ 10,588 $ 9,200 Segment Income: Offshore Oil and Gas Construction $ 82,784 $ 45,038 Government Operations 35,953 45,752 Power Generation Systems 9,301 58,159 128,038 148,949 Corporate (36,230 ) (17,743 ) Total Operating Income $ 91,808 $ 131,206

EARNINGS PER SHARE

EARNINGS PER SHARE
	3 Months Ended Mar. 31, 2010
EARNINGS PER SHARE	NOTE 8 EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March31, 2010 2009 (Unaudited) (In thousands, except per share amounts) Basic: Net income attributable to McDermott International, Inc. $ 59,941 $ 77,692 Weighted average common shares 230,824 228,315 Basic earnings per common share $ 0.26 $ 0.34 Diluted: Net income attributable to McDermott International, Inc. $ 59,941 $ 77,692 Weighted average common shares (basic) 230,824 228,315 Effect of dilutive securities: Stock options, restricted stock and performance shares 3,929 4,271 Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards 234,753 232,586 Diluted earnings per common share $ 0.26 $ 0.33

SUBSEQUENT EVENT

SUBSEQUENT EVENT
	3 Months Ended Mar. 31, 2010
SUBSEQUENT EVENT	NOTE 9 SUBSEQUENT EVENT On April2, 2010, a subsidiary of BWICO acquired the electrostatic precipitator aftermarket and emissions monitoring business units of GE Energy, a division of General Electric Company, for approximately $22.0 million. This acquisition includes GE Energys electrostatic precipitator replacement parts and mechanical components product lines, performance-enhancing hardware, controls and software, remote diagnostics equipment and emissions monitoring products and services. These products and services are used by a wide variety of power generation and industrial customers to monitor and control particulates and other emissions from power plants, factories and other facilities. These business units maintain offices in the United States in Kansas City, Missouri, Folkston, Georgia, Newport News, Virginia and Hatfield, Pennsylvania, as well as locations in Germany, India, Russia and China. On May 3, 2010 we, together with JRMSA, entered into a credit agreement with a syndicate of lenders and credit issuers. This facility provides for revolving credit borrowings and issuances of letters of credit, in the aggregate, of up to $900 million outstanding and expires on May 3, 2014. Also on May 3, 2010, BWICO entered into a similar credit agreement with a syndicate of lenders and credit issuers, this facility providing an aggregate outstanding amount of up to $700 million for revolving credit borrowings and issuances of letters of credit. This facility also expires on May 3, 2014. These facilities replace the existing facilities of JRMSA and BWICO respectively.