-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FhB5AijJec4NbyM6M2r8PFl4WeWIMBmOt8D8Q05KJSDWYMKrFRvYzN46V+Qf2pF4 RfOaH8jdNMF8DUZjobWikw== 0000899243-97-001382.txt : 19970730 0000899243-97-001382.hdr.sgml : 19970730 ACCESSION NUMBER: 0000899243-97-001382 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970729 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCDERMOTT INTERNATIONAL INC CENTRAL INDEX KEY: 0000708819 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES [3510] IRS NUMBER: 720593134 STATE OF INCORPORATION: R1 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08430 FILM NUMBER: 97646566 BUSINESS ADDRESS: STREET 1: 1450 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045875400 MAIL ADDRESS: STREET 1: 1450 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70161 10-K/A 1 FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F O R M 1 0 - K/A-1 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the transition period from _____________________ to ____________________ Commission File Number 1-8430 McDERMOTT INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) REPUBLIC OF PANAMA 72-0593134 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1450 POYDRAS STREET NEW ORLEANS, LOUISIANA 70112-6050 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including area code (504) 587-5400 -------------- Securities Registered Pursuant to Section 12(b) of the Act: Name of each Exchange Title of each class on which registered - ------------------- --------------------- Common Stock, $1.00 par value New York Stock Exchange Rights to Purchase Common Stock New York Stock Exchange (Currently Traded with Common Stock) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by non-affiliates of the registrant was $1,154,884,075 as of May 12, 1997. The number of shares outstanding of the Company's Common Stock at May 12, 1997 was 55,064,216. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the Company's 1997 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. McDERMOTT INTERNATIONAL, INC. INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS Page ---- Report of Independent Auditors 2 Financial Statement Schedule Covered by Report of Independent Auditors: I Condensed Financial Information of Registrant 3 Signature of Registrant 9 Exhibit Index - ------------- 3.2 McDermott International, Inc.'s amended and restated By-Laws. 23 Consent of Independent Auditors 99 (1) McDermott-ETPM West, Inc. Combined Financial Statements for the Years Ended March 31, 1997, 1996 and 1995 (2) Supplementary Financial Information on Panamanian Securities Regulations All schedules other than the above have been omitted because they are not required or the information is included in the Consolidated Financial Statements, or Notes thereto. 1 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders McDermott International, Inc. We have audited the consolidated financial statements of McDermott International, Inc. as of March 31, 1997 and 1996, and for each of the three years in the period ended March 31, 1997, and have issued our report thereon dated July 10, 1997. Our audits also included the financial statement schedule listed in the Index to Financial Statement Schedules and Exhibits in this Form 10-K/A-1. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New Orleans, Louisiana July 10, 1997 2 Schedule I McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) BALANCE SHEET MARCH 31, 1997 AND 1996
ASSETS 1997 1996 - ------- -------- -------- (In thousands) Current Assets: Cash and cash equivalents $ 43 $ 115 Accounts receivable - trade 337 1,339 Accounts receivable - other 1,164 875 Accounts receivable from subsidiaries 179,399 322,375 Other current assets 3,228 56 ---------- ---------- Total Current Assets 184,171 324,760 ---------- ---------- Investments in Subsidiaries and Other Investees, at Equity 1,102,496 1,244,868 ---------- ---------- Property, Plant and Equipment, at Cost: Buildings 3,328 3,420 Machinery and equipment 6,834 10,241 Property under construction - 4 ---------- ---------- 10,162 13,665 Less accumulated depreciation 10,116 13,288 ---------- ---------- Net Property, Plant and Equipment 46 377 ---------- ---------- Notes Receivable from Subsidiaries and Other Investees - 231,000 ---------- ---------- Other Assets 39,634 30,766 ---------- ---------- TOTAL $1,326,347 $1,831,771 ========== ==========
See accompanying notes to condensed financial information. 3 Schedule I
LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------- 1997 1996 -------- ---------- (In thousands) Current Liabilities: Current maturities of long-term debt $ 22,600 $ 20,500 Accounts payable 1,500 1,305 Accounts payable to subsidiaries 813,804 1,010,558 Accrued liabilities - other 24,486 22,849 Income taxes 2,362 18 ---------- ---------- Total Current Liabilities 864,752 1,055,230 ---------- ---------- Long-Term Debt 12,200 34,800 ---------- ---------- Notes Payable to Subsidiaries - 45,455 ---------- ---------- Other Liabilities 12,394 11,766 ---------- ---------- Contingencies Stockholders' Equity: Preferred stock 2,875 2,875 Common stock 54,937 54,436 Capital in excess of par value 962,445 949,022 Deficit (538,163) (290,968) Minimum pension liability (2,148) (1,428) Net unrealized loss on investments (4,132) (1,875) Currency translation adjustments (38,813) (27,542) ---------- ---------- Total Stockholders' Equity 437,001 684,520 ---------- ---------- TOTAL $1,326,347 $1,831,771 ========== ==========
4 Schedule I McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) STATEMENT OF INCOME (LOSS) FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997
1997 1996 1995 ------- ------ ------- (In thousands) Revenues $ - $ 840 $41,855 Costs and Expenses: Cost of operations (excluding depreciation and amortization) 16,072 2 34,135 Depreciation and amortization 761 3,067 4,698 Selling, general and administrative expenses 3,284 2,949 8,623 --------- -------- --------- 20,117 6,018 47,456 --------- -------- --------- Gain (Loss) on Asset Disposals-net (24) - 8,332 --------- -------- --------- Operating Income (Loss) before Equity in Income (Loss) of Investees (20,141) (5,178) 2,731 Equity in Income (Loss) of Subsidiaries and Other Investees (190,569) 16,314 877 --------- -------- --------- Operating Income (Loss) (210,710) 11,136 3,608 --------- -------- --------- Other Income (Expense): Interest income 6,729 21,913 25,047 Interest expense (5,225) (12,801) (13,916) Other - net 1,871 377 706 --------- -------- --------- 3,375 9,489 11,837 --------- -------- --------- Income (Loss) before Provision for (Benefit from) Income Taxes and Cumulative Effect of Accounting Change (207,335) 20,625 15,445 Provision for (Benefit from) Income Taxes (1,230) - 4,569 --------- -------- --------- Income (Loss) before Cumulative Effect of Accounting Change (206,105) 20,625 10,876 Cumulative Effect of Accounting Change - - (1,765) --------- -------- --------- Net Income (Loss) $(206,105) $20,625 $9,111 ========= ======== =========
See accompanying notes to condensed financial information. 5 McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) STATEMENT OF CASH FLOWS FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1997 1996 1995 ---- ---- ---- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (206,105) $20,625 $9,111 ---------- ------- ------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 761 3,067 4,698 Equity in income or loss of subsidiaries and other investees, less dividends 207,769 4,936 10,922 (Gain) loss on asset disposals-net 24 - (8,332) Benefit from deferred taxes (1,230) - (627) Cumulative effect of accounting changes - - 1,765 Other 7,385 8,349 5,284 Changes in assets and liabilities: Accounts and notes receivable 153,023 300,318 96,338 Accounts payable (196,099) (249,706) 67,603 Income taxes (4,212) (195) (28,992) Other, net (6,897) (5,953) (41,253) ---------- ------- ------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (45,581) 81,441 116,517 ---------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from asset disposals 6 - 8,334 Purchases of property, plant and equipment 2 - (562) Investments in subsidiaries (68,162) (100) (200) (Increase) decrease in loans to subsidiaries 231,000 - (16,600) ---------- ------- ------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 162,846 (100) (9,028) ---------- ------- ------- 6 CONTINUED INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1997 1996 1995 --------- -------------- --------- (In thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt $(20,500) $(18,500) $(16,600) Decrease in short-term borrowing - - (19,370) Issuance of common stock 565 1,802 3,194 Decrease in loans from subsidiaries (45,455) (2,329) (14,928) Dividends paid (51,947) (62,411) (61,827) Other - - (159) --------- -------- --------- NET CASH USED IN FINANCING ACTIVITIES (117,337) (81,438) (109,690) --------- -------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (72) (97) (2,201) --------- -------- --------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 115 212 2,413 --------- -------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 43 $115 $212 ========= ======== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, including intercompany interest (net of amount capitalized) $ 5,778 $13,267 $14,186 Income taxes, net of refunds $ - $ 199 $ 252 ========= ======= ======== See accompanying notes to condensed financial information. 7 McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL INFORMATION FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997 NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements have been prepared to present the unconsolidated financial position, results of operations and cash flows of McDermott International, Inc. (Parent Company Only). Investments in subsidiaries and other investees are stated at cost plus equity in undistributed earnings from date of acquisition. These Parent Company Only financial statements should be read in conjunction with McDermott International, Inc.'s consolidated financial statements. NOTE 2 - LONG-TERM DEBT Long-term debt consists of: 1997 1996 ------- ------- (In thousands) 10.375% Note payable due 1998 (Secured) $34,800 $55,300 Less: Amounts due within one year 22,600 20,500 ------- ------- $12,200 $34,800 ======= ======= Maturities of long-term debt subsequent to March 31, 1997 are as follows: 1998 - - $22,600,000; 1999 - $12,200,000. NOTE 3 - CONTINGENCIES McDermott International, Inc. is contingently liable under standby letters of credit totaling $154,187,000 at March 31, 1997 issued in the normal course of business. McDermott International, Inc. has guaranteed the indebtedness of certain of its subsidiaries and other investees. At March 31, 1997, these guarantees included $17,501,000 of loans to and $725,000 of standby letters of credit issued by certain subsidiaries and other investees. NOTE 4 - DIVIDENDS RECEIVED McDermott International, Inc. received dividends from its consolidated subsidiaries of $17,200,000, $21,250,000, and $11,799,000 for the years ended March 31, 1997, March 31, 1996 and March 31, 1995, respectively. 8 SIGNATURE OF THE REGISTRANT Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. McDERMOTT INTERNATONAL, INC. ---------------------------- (REGISTRANT) By: /s/Daniel R. Gaubert -------------------- Daniel R. Gaubert Senior Vice President and Chief Financial Officer (Principal Financial Officer) July 24, 1997 9 EXHIBIT INDEX Exhibit Number ------- 23 Consent of Independent Auditors 99 (1) McDermott-ETPM West, Inc. Combined Financial Statements for the Years Ended March 31, 1997, 1996 and 1995 (2) Supplementary Financial Information on Panamanian Securities Regulations 10 EX-23 2 CONSENT EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent th the incorporation by reference in the Registration Statements (Forms S-8 No. 2-83692, No. 33-16680, No. 33-51892, No. 33-51894, No. 33-63832, No. 33-55341, No. 33-60499 and No. 333-12531) of McDermott International, Inc. and the Registration Statement (Form S-3 No. 33-54940) of McDermott Incorporated and in the related Prospectuses of our report dated April 25, 1997 with respect to the combined financial statements of McDermott-ETPM West, Inc. included in this Annual Report (Form 10-K/A-1) for the year ended March 31, 1997. ERNST & YOUNG LLP New Orleans, Louisiana July 24, 1997 11 EX-99.1 3 FINANCIAL STATEMENTS EXHIBIT 99 (1) McDERMOTT-ETPM WEST, INC. COMBINED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 1997, 1996 AND 1995 McDERMOTT-ETPM WEST, INC. INDEX PAGE ---- REPORT OF INDEPENDENT AUDITORS 3 COMBINED BALANCE SHEET - MARCH 31, 1997 AND 1996 4 COMBINED STATEMENT OF INCOME (LOSS) FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997 5 COMBINED STATEMENT OF CASH FLOWS FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997 6 COMBINED STATEMENT OF COMMON STOCK AND OTHER EQUITY - FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997 7 NOTES TO COMBINED FINANCIAL STATEMENTS 8 2 REPORT OF INDEPENDENT AUDITORS ------------------------------ The Board of Directors J. Ray McDermott, S.A. We have audited the accompanying combined balance sheet of McDermott - ETPM West, Inc. as of March 31, 1997 and 1996, and the related combined statements of income (loss), common stock and other equity, and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of McDermott - ETPM West, Inc. at March 31, 1997 and 1996, and the combined results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP New Orleans, Louisiana April 25, 1997 3 McDERMOTT-ETPM WEST INC. COMBINED BALANCE SHEET MARCH 31, 1997 and 1996
1997 1996 ------- ------- (In thousands) ASSETS Current Assets: Cash and cash equivalents $28,517 $76,720 Accounts receivable - trade 62,083 40,083 Accounts receivable - affiliates 3,323 5,658 Accounts receivable - other 1,661 2,295 Contracts in progress 20,151 2,777 Other current assets 5,359 5,720 -------- -------- Total Current Assets 121,094 133,253 -------- -------- Machinery and Equipment, at Cost: 48,178 27,230 Less accumulated depreciation 12,477 9,451 -------- -------- Net Machinery and Equipment 35,701 17,779 -------- -------- Other Assets 104 111 -------- -------- TOTAL $156,899 $151,143 ======== ======== LIABILITIES AND EQUITY (DEFICIT) Current Liabilities: Accounts payable $ 94,396 $ 48,354 Accounts payable - affiliates 40,405 27,941 Advance billings on contracts 355 4,799 Estimated loss on uncompleted contract 12,847 24,133 Accrued liabilities - other 6,592 15,595 Income taxes payable 6,437 3,506 -------- -------- Total Current Liabilities 161,032 124,328 -------- -------- Other Liabilities 4,705 4,451 -------- -------- Common Stock and Other Equity (Deficit): Common stock (par value $1.00 per share, authorized 1,000,000 shares; outstanding 10,000 shares) 10 10 Retained earnings and other venture capital (deficit) (4,736) 24,303 Currency translation adjustments (4,112) (1,949) -------- ------- Total Common Stock and Other Equity (Deficit) (8,838) 22,364 -------- -------- TOTAL $156,899 $151,143 ======== ========
See accompanying notes to combined financial statements. 4 McDERMOTT-ETPM WEST, INC. COMBINED STATEMENT OF INCOME (LOSS) FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1997
1997 1996 1995 ---- ---- ---- (In thousands) Revenues $347,849 $250,642 $342,247 Costs and Expenses: Cost of operations (excluding depreciation) 347,358 225,369 267,637 Depreciation 3,026 1,423 6,064 Selling, general and administrative expenses 19,032 19,696 28,509 -------- -------- -------- 369,416 246,488 302,210 -------- -------- -------- Operating Income (Loss) (21,567) 4,154 40,037 -------- -------- -------- Other Income (Expense): Interest income 1,973 5,593 6,729 Foreign currency transactions losses - net (2,179) (1,946) (3,853) -------- -------- -------- (206) 3,647 2,876 -------- -------- -------- Income (Loss) before Provision for Income Taxes (21,773) 7,801 42,913 Provision for Income Taxes 7,266 625 5,807 -------- -------- -------- Net Income (Loss) $(29,039) $ 7,176 $ 37,106 ======== ======== ========
See accompanying notes to combined financial statements. 5 McDERMOTT-ETPM WEST, INC. COMBINED STATEMENT OF CASH FLOWS FOR THE THREE FISCAL YEARS ENDED MARCH 31,1997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1997 1996 1995 ---- ---- ---- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $(29,039) $7,176 $ 37,106 -------- -------- -------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 3,026 1,423 6,064 Changes in assets and liabilities: Net contracts in progress, advance billings and estimated loss on uncompleted contracts (33,104) (11,669) 18,121 Accounts receivable (19,031) 6,272 (19,864) Accounts payable 58,506 23,564 (7,020) Other, net (4,574) (17,811) (9,986) -------- -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (24,216) 8,955 24,421 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (20,948) (15,299) (6,190) -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (20,948) (15,299) (6,190) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid - (3,618) (82,002) -------- -------- -------- NET CASH USED IN FINANCING ACTIVITIES - (3,618) (82,002) -------- -------- -------- EFFECTS OF EXCHANGE RATE CHANGES ON CASH (3,039) (2,091) 15,659 -------- -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (48,203) (12,053) (48,112) -------- -------- -------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 76,720 88,773 136,885 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,517 $ 76,720 $ 88,773 ======== ======== ========
See accompanying notes to combined financial statements. 6 McDERMOTT-ETPM WEST, INC. COMBINED STATEMENT OF COMMON STOCK AND OTHER EQUITY MARCH 31, 1997 (In thousands)
Retained Earnings Currency Common and Other Translation Stock Venture Capital (Deficit) Adjustments Total ------ -------------------------- ------------ --------- Balance April 1, 1994 $10 $ 65,641 $(17,929) $ 47,722 --- -------- -------- -------- Net income - 37,106 - 37,106 Dividends paid - (82,002) - (82,002) Currency translation adjustments - - 14,288 14,288 --- -------- -------- -------- Balance March 31, 1995 10 20,745 (3,641) 17,114 --- -------- -------- -------- Net income - 7,176 - 7,176 Dividends paid - (3,618) - (3,618) Currency translation adjustments - - 1,692 1,692 --- -------- -------- -------- Balance March 31, 1996 10 24,303 (1,949) 22,364 --- -------- -------- -------- Net income (Loss) - (29,039) - (29,039) Currency translation adjustments - - (2,163) (2,163) --- -------- -------- -------- Balance March 31, 1997 $10 $ (4,736) $ (4,112) $ (8,838) === ======== ======== ========
See accompanying notes to combined financial statements. 7 McDERMOTT-ETPM WEST, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 1997, 1996 AND 1995 NOTE 1 - GENERAL McDermott-ETPM West, Inc. a Panamanian corporation, is a joint venture between J. Ray McDermott S.A. ("JRM") and ETPM S.A. ("ETPM") which provides general marine construction services to the petroleum industry in the North Sea and West Africa. Its principal activity is installation of marine pipelines. McDermott- ETPM West, Inc. charters one semi-submersible lay barge from JRM and two combination derrick-pipelaying barges from ETPM. JRM and ETPM also provide fabrication facilities located in Warri, Nigeria and Tchenque, Gabon, respectively. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - --------------------- The combined financial statements are presented in U.S. dollars in accordance with accounting principles generally accepted in the United States. The combined financial statements combine financial information of McDermott-ETPM West, Inc. and its subsidiaries, and other entities of both JRM and ETPM, which perform contracts on behalf of McDermott-ETPM West, Inc. All significant intercompany transactions and accounts have been eliminated. Unless the context otherwise requires, hereinafter the "Joint Venture" will be used to mean the combined enterprise. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents - ------------------------- Cash equivalents are highly liquid investments, with maturities of three months or less when purchased. The carrying amounts reported in the balance sheet for cash and cash equivalents approximate their fair value. Contracts and Revenue Recognition - --------------------------------- Contract revenues on long-term contracts are recognized on a percentage of completion method. Under this method revenues and costs are recognized based on the percentage that costs to date bear to total estimated costs. Revenues that exceed amounts invoiced to customers under the terms of the contracts are included in Contracts in Progress. Billings that exceed revenues recognized are included in Advance Billings on Contracts. Most long-term contracts have provisions for progress payments. There are no unbilled revenues which will not be billed. Contract price and cost estimates are reviewed periodically as the work progresses and adjustments proportionate to the percentage of completion are reflected in income in the period when such estimates are revised. Provisions are made currently for all known or anticipated losses. Variations from estimated contract performance could result in a material adjustment to operating results for any fiscal quarter or year. Claims for extra work or changes in scope of work 8 are included in contract revenues when collection is probable. Included in Contracts in Progress are approximately $15,464,000 relating to commercial contract claims whose final settlement is subject to future determination through negotiation or other procedures which had not been completed at March 31, 1997. Depreciation, Maintenance and Repairs and Drydocking Expenses - ------------------------------------------------------------- Machinery and equipment is depreciated on the straight-line method, using estimated useful lives of four to seven years. Maintenance, repairs and renewals which do not materially prolong the useful life of an asset are expensed as incurred except for drydocking costs for the marine fleet. Drydocking costs are estimated and accrued over the period of time between drydockings, and are charged to operations currently. Included in Accrued liabilities-other are accruals for drydocking of $3,447,000 and $9,342,000 at March 31, 1997 and 1996, respectively. Foreign Currency Translation - ---------------------------- Assets and liabilities are translated into U.S. Dollars at current exchange rates and income statement items are translated at average exchange rates for the year. Adjustments resulting from the translation of foreign currency financial statements are recorded in a separate component of equity. Derivative Financial Instruments - -------------------------------- The Joint Venture operates internationally giving rise to exposure to market risks from changes in foreign exchange rates. Derivative financial instruments, primarily forward exchange contracts, are utilized to reduce those risks. The Joint Venture does not hold or issue financial instruments for trading purposes. Forward exchange contracts are entered into primarily as hedges of certain firm purchase and sale commitments denominated in foreign currencies. At March 31, 1997 and 1996, the Joint Venture had forward exchange contracts to purchase $35,924,000 and $14,913,000, respectively, in foreign currencies (primarily Dutch Guilders, Norwegian Kroner, British Pounds, German Marks and Spanish Pesetas) with French Francs, and to sell $86,200,000 and $9,681,000, respectively, in foreign currencies (primarily U.S. Dollars) for French Francs. The 1997 forward exchange contracts have varying maturities, all of which occur during fiscal year 1998. Deferred realized and unrealized gains and losses from hedging firm purchase and sale commitments are included on a net basis in the balance sheet as a component of either other current assets or accrued liabilities. They are recognized as part of the purchase or sale transaction when it is recognized, or as other gains or losses when a hedged transaction is no longer expected to occur. At March 31, 1997 the Joint Venture had no deferred gains or losses ($210,000 deferred gains at March 31, 1996). The fair values of foreign currency forward exchange contracts are estimated by obtaining quotes from brokers. At March 31, 1997 and 1996, notional amounts approximate the fair values. 9 NOTE 3 - INCOME TAXES All income has been earned outside of Panama and McDermott-ETPM West, Inc. along with the other entities included in the Joint Venture are not subject to income tax in Panama on income earned outside of Panama. Substantially all income taxes provided are based on the deemed profits of contracts performed in various taxing jurisdictions or the profits of contracts performed by McDermott-ETPM U. K. Ltd, a subsidiary of McDermott-ETPM West, Inc. In the countries in which Joint Venture operations are conducted through an ad hoc joint venture between JRM and ETPM or through a registered partnership between a McDermott and ETPM entity, the respective McDermott and ETPM entities are responsible for taxes based on their proportionate share of contract revenues and costs; therefore, no taxes are reflected in these statements. Therefore, there is no expected relationship between the provision for income taxes and income before provision for income taxes. NOTE 4 - CONTINGENCIES AND COMMITMENTS The Joint Venture is a defendant in numerous legal proceedings. Management believes that the outcome of these proceedings will not have a material adverse effect on the combined financial position of the Joint Venture. The stockholders of the Joint Venture are contingently liable under standby letters of credit totalling approximately $53,706,000 at March 31, 1997, issued in the normal course of business. NOTE 5 - FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK The Joint Venture's customers are primarily in the petroleum industry in the North Sea and West Africa. Sales to major customers that exceeded 10% of revenues were: 1997 - Customer A -$101,000,000 (29%), Customer B - $72,000,000 (21%), Customer C - $50,000,000 (14%), Customer D - $44,000,000 (13%), Customer E - $40,000,000 (11%); 1996 - Customer E -$108,000,000 (43%), Customer C - $54,000,000 (22%), Customer A - $43,000,000 (17%); 1995 - Customer E - $212,000,000 (62%), Customer F $92,000,000 (27%). Management is cognizant of its concentration of customers, but feels that the risk associated with this is minimal as all of its customers are well known and established participants in the petroleum industry. Receivables are generally not collateralized. NOTE 6 - RELATED PARTY TRANSACTIONS The Joint Venture has material transactions with JRM and ETPM occurring in the normal course of operations. Under the joint venture agreement, marine equipment and fabrication facilities are chartered into the Joint Venture by JRM and ETPM. Charter expense for fiscal years 1997, 1996 and 1995 was $21,175,000, $21,175,000 and $23,061,000, respectively. In addition, an ETPM subsidiary provides general and administrative services to the Joint Venture. In fiscal years 1997, 1996 and 1995, the amounts of these services were approximately $19,032,000, $19,696,000 and $28,509,000, respectively. 10 EX-99.2 4 SUPPLEMENTAL FINANCIAL INFO. EXHIBIT 99 (2) McDERMOTT INTERNATIONAL, INC. ADDITIONAL EXHIBITS SUPPLEMENTARY FINANCIAL INFORMATION PREPARED IN ACCORDANCE WITH AND SOLELY FOR THE PURPOSE OF COMPLYING WITH CERTAIN PANAMANIAN SECURITIES REGULATIONS
F.Y.E. 3/31/97 -------------- (Unaudited) (In thousands) ARTICLE 29 RULE #9 - INVESTMENTS IN SUBSIDIARIES AND OTHER INVESTEES AT EQUITY Head Office (Parent Company) $ 1,102,496 Subsidiaries and Affiliates - Eliminations/Other (1,041,479) ----------- McDERMOTT INTERNATIONAL, INC. $ 61,017 =========== RULE #25C - PARENT COMPANY ACCOUNTS AND NOTES PAYABLE TO SUBSIDIARIES Head Office (Parent Company) $ 813,804 Eliminations/Other (813,804) ----------- McDERMOTT INTERNATIONAL, INC. $ - =========== ARTICLE 30 ---------- (c)-OPERATING EXPENSES BY SEGMENT Power Generation Systems and Equipment $ 1,595,462 Marine Construction Services 1,668,384 Eliminations (17,305) ----------- McDERMOTT INTERNATIONAL, INC. $ 3,246,541 =========== RULE #40 - OPERATING REVENUES Head Office (Parent Company) $ - Subsidiaries and Affiliates 3,146,559 Eliminations/Other 4,291 ----------- McDERMOTT INTERNATIONAL, INC. $ 3,150,850 =========== RULE #41 - OPERATING EXPENSES Head Office (Parent Company) $ 20,117 Subsidiaries and Affiliates 3,269,565 Eliminations/Other 4,315 ----------- McDERMOTT INTERNATIONAL, INC. $ 3,293,997 ===========
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F.Y.E. 3/31/97 -------------- (Unaudited) (In thousands) ARTICLE 30 - Continued RULE #43 - DIVIDENDS RECEIVED Head Office (Parent Company) from Subsidiaries and Affiliates $ 17,200 Subsidiaries and Affiliates from Other Corporations 13,324 Eliminations/Other (17,200) -------- McDERMOTT INTERNATIONAL, INC. $ 13,324 ======== RULE #44 - INTEREST INCOME Head Office (Parent Company): from Subsidiaries and Affiliates $ 6,657 from Other Corporations 72 Subsidiaries and Affiliates from Other Corporations 46,670 Eliminations (6,657) -------- McDERMOTT INTERNATIONAL, INC. $ 46,742 ======== RULE #46 - OTHER MISCELLANEOUS REVENUES Foreign Currency Transaction Gains - Net 3,628 Bank Fees and Discounts on Sale of Receivables (4,737) Other Items - Net (18,423) -------- McDERMOTT INTERNATIONAL, INC. $(19,532) ======== RULE #51 - INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY (Unaudited) (In thousands) Balance at 3/31/96 $129,658 Additional Investments 13,030 Equity Income (4,098) Transfer of investment to cost method (46,694) Dividends Received (13,324) Other Changes (17,555) -------- Balance at 3/31/97 $ 61,017 ========
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