This summary is based on the first quarter fiscal 2007 earnings call conducted by McDermott International, Inc. (MDR: chart) on May 08, 2007.

Vice President, Investor Relations and Corporate Communications: Jay Roueche
Senior Vice President and Chief Financial Officer: Michael S. Taff
Chairman and Chief Executive Officer: Bruce W. Wilkinson

Key Investors Issues

- EPS were $1.38 per share compared to 49 cents per share a year ago.
- Net income was $158.1 million compared to $55.3 million last year.
- Revenues were $1,363.4 million compared to $644.9 million last year.

First Quarter Highlights

Revenues were just under $1.4 billion, more than double the consolidated top line in the 2006 quarter.

The increase was primarily attributable to the three months of B&W’s revenues in the 2007 quarter compared to only one month in 2006 first quarter. B&W was reconsolidated in March of last year and contributing to the sizeable increase in revenues was an 86% improvement in the top line of offshore construction business.

Operating income was approximately $192.5 million, up $125 million from a year ago.

The catalyst for this substantial improvement was offshore oil and gas construction. Other segments power generation and government operations contributed solid increases as well and unallocated corporate expenses were down, all in all an ideal combination. With a reported tax rate of approximately 17%, the vast majority of operating income dropped to the bottom line with McDermott reporting net income of a $158 million or a $1.38 per share compared to $55 million or 49 cents per share in last year’s quarter.

Revenues in the Offshore Oil & Gas Construction segment were $550.3 million compared to $295.4 million for the same period a year ago.

The year-over-year increase in revenues resulted primarily from increased activity in the Middle East, Asia Pacific and Caspian regions.

- Segment income was $121.2 million, compared to $22.2 million in the 2006 first quarter. Each major region contributed to the improvement, led by the increased activities in the Middle East. In addition, project close-outs, change orders and settlements were particularly strong, with J. Ray realizing approximately $40 million in segment income from these items. In the 2006 first quarter, J. Ray''s segment income was reduced by non-cash impairment of $16.4 million related to accumulated currency translation losses.

In Government Operations Segment, BWXT generated segment income of about $34.8 million or about $8.4 million better than a year ago and approximately $14.9 million better than the fourth quarter of 2006.

That was largely provided by increased activity and higher margins in manufacture of nuclear components enhance by cost savings, including those associated with the $1.7 billion multi-award agreement which announced in March which provided a 30% boost.

- As part of the multi-award, BWXT’s backlog increased to $1.5 billion and the company expects the next award under this agreement to be booked in December of this year.
- BWXT’s revenues were essentially flat at $161 million, compared to the prior year. BWXT also received about 25% of its income from cost reductions included those associated with the multi-award agreement announced in the first quarter of 2007.
- Lowering customers cost is what BWXT has incentivised to do.

The unallocated corporate expenses were $6.9 million, about $1.4 million below last year.

The decrease was due to lower stock-based compensation expense.

- The other expense line item was $1.1 million compared to other income of $8.9 million a year ago.
- A year ago, the company had a $13.2 million benefit from a tax related interest adjustment which the company did not enjoy this year. The loss of this onetime income more than offset this year’s improvement in interest income and reduced interest expense compared to year ago.
- Consolidated tax rate of 17% appears lower than normal, but is a result of the exceptional income generated by J. Ray’s international operations and the various taxing jurisdictions in which the company operates.

In April, the company announced that McDermott received a refund of $272 million from IRS.

This refund related to carrying back to prior tax years the 2006 losses created from payments to the B&W asbestos trust. While the company was pleased that the money came in about six to ten months earlier than expected and the company used this inflow to pay off the debt incurred making the final asbestos payment.