8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  April 25, 2017

McDermott International, Inc.

(Exact name of registrant as specified in its charter)

REPUBLIC OF PANAMA	001-08430	72-0593134
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

757 N. Eldridge Parkway Houston, Texas	77079
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, including Area Code:  (281) 870-5000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the

Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Item 8.01 Other Events

McDermott International, Inc. (“MDR”) is filing this Current Report on Form 8-K to provide a recast of the presentation of the historical financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) filed with the Securities and Exchange Commission (the "SEC"), to reflect changes to our reportable segments which took effect in the first quarter of 2017. In this Form 8-K, unless the context otherwise indicates, “we,” “us” and “our” mean MDR and its consolidated subsidiaries, and references to any of the Notes to the accompanying Consolidated Financial Statements refer to the Notes to the Consolidated Financial Statements included in Item 8 of Exhibit 99.1 to this report.

We report financial results under three reportable segments consisting of (1) the Americas, Europe and Africa (“AEA”), (2) the Middle East (“MEA”) and (3) Asia (“ASA”). We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure, as follows:

• Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market pension actuarial gains and losses, costs not attributable to a particular reportable segment, and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other”.

• Research and development (“R&D”) expenses are separately presented in our Consolidated Statements of Operations. Previously R&D expenses were included in Cost of Operations.

• Gain (loss) on foreign currency, net is included in Other non-operating income (expense), net in our Consolidated Statements of Operations.  Previously, Gain (loss) on foreign currency, net was separately presented.

• Our Note 19, Segment Reporting, to the accompanying Consolidated Financial Statements, includes, under caption “Information about Operations”, a reconciliation of segment operating income (loss) before income taxes to Income (loss) before income taxes in our Consolidated Statements of Operations.

We are filing this Current Report on Form 8-K to recast our Consolidated Financial Statements as of December 31, 2016 and 2015 and for each of the years ended December 31, 2016, 2015 and 2014, to reflect the changes described above.  The recast Consolidated Financial Statements and revised notes to the Consolidated Financial Statements are included in Exhibit 99.1 to this report, which is incorporated by reference into this Item 8.01.  Also included in Exhibit 99.1 is the report of our independent registered public accounting firm on the Consolidated Financial Statements, which is unchanged from the report included in the 2016 Form 10-K, other than the dual date to reflect the recast and reissuance. Except for minor, nonsubstantive revisions, only the following notes have been revised from their previous presentation:

• Note 1, Basis of Reporting and Significant Accounting Policies, only under the caption “Business Segments” and “Classification”;

• Note 3, Use of Estimates;

• Note 4, Restructuring;

• Note 8, Property, Plant and Equipment;

• Note 13, Fair Value Measurements; and

• Note 19, Segment Reporting.

Similarly, the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) from the 2016 Form 10-K has been recast to reflect the changes referred to above.  The revised MD&A presentation is also included in Exhibit 99.1 to this report.

The changes referred to above had no impact on our historical consolidated financial position, results of operations or cash flows, as reflected in the recast Consolidated Financial Statements contained in Exhibit 99.1 to this report.  The recast Consolidated Financial Statements do not represent a restatement of previously issued consolidated financial statements.

This report, including Exhibit 99.1, does not reflect events occurring after the filing of the 2016 Form 10-K and does not modify or update the disclosures in the 2016 Form 10-K, other than as required to reflect the changes described above. Without limitation of the foregoing, this report does not purport to update the MD&A contained in the 2016 Form 10-K for any forward-looking statements. More current information is contained in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 and our Current Reports on Form 8-K filed with the SEC with respect to events occurring after December 31, 2016. This report should be read in conjunction with the 2016 Form 10-K, our Form 10-Q for the quarterly period ended March 31, 2017 and our Current Reports on Form 8-K filed subsequent to the 2016 Form 10-K. The Exhibits provided with this Form 8-K shall be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, as amended.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

23	Consent of Deloitte & Touche LLP
99.1	Revised Part II—Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8. "Financial Statements and Supplementary Data" of McDermott International, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, each as revised solely to reflect the changes to our financial reporting structure.
101	The following revised materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2016, formatted in Extensible Business Reporting Language (XBRL), each as revised solely to reflect the changes to our financial reporting structure: (a) Consolidated Statements of Operations; (b) Consolidated Statements of Comprehensive Income (Loss); (c) Consolidated Balance Sheets; (d) Consolidated Statements of Cash Flows; (e) Consolidated Statements of Equity;  and (f) Notes to the Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

April 25, 2017

McDERMOTT INTERNATIONAL, INC.
By:	/s/ Stuart Spence
	Stuart Spence Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
23	Consent of Deloitte & Touche LLP
99.1	Revised Part II—Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8. "Financial Statements and Supplementary Data" of McDermott International, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, each as revised solely to reflect the changes to our financial reporting structure.
101	The following revised materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2016, formatted in Extensible Business Reporting Language (XBRL) , each as revised solely to reflect the changes to our financial reporting structure: (a) Consolidated Statements of Operations; (b) Consolidated Statements of Comprehensive Income (Loss); (b) Consolidated Balance Sheets; (d) Consolidated Statements of Equity; (e) Consolidated Statements of Cash Flows; and (f) Notes to the Consolidated Financial Statements.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-159129, No. 333-192029, No. 333-195772 and No. 333-211028 each on Form S-8 of our report dated February 21, 2017 (April 25, 2017 as to the effect of the changes in presentation described in Notes 1, 3, 4, 8, 13 and 19 to the consolidated financial statements), relating to the consolidated financial statements and financial statement schedule of McDermott International, Inc. and subsidiaries (the “Company”) appearing in McDermott International, Inc.’s Current Report on Form 8-K dated April 25, 2017.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

April 25, 2017

EX-99

Exhibit 99.1

McDERMOTT INTERNATIONAL, INC.

INDEX—FORM 8-K

		PAGE
	PART II
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 8.	Financial Statements and Supplementary Data	20
	Report of Independent Registered Public Accounting Firm	20
	Consolidated Statements of Operations	21
	Consolidated Statements of Comprehensive Income (Loss)	22
	Consolidated Balance Sheets	23
	Consolidated Statements of Cash Flows	24
	Consolidated Statements of Equity	25
	Notes to Consolidated Financial Statements	26

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements we make in the following discussion which express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including the risks and uncertainties we have referred to under the headings “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in Items 1 and 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”).

General

McDermott International, Inc. (“MDR”, “we” or “us”) is a leading provider of integrated engineering, procurement, construction and installation (“EPCI”), front-end engineering and design (“FEED”), and module fabrication services for upstream field developments worldwide.  We deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for complex offshore and subsea oil and gas projects. Operating in approximately 20 countries across the Americas, Europe, Africa, the Middle East, Asia and Australia, our integrated resources include a diversified fleet of marine vessels, fabrication facilities and engineering offices. We support our activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction.

We report financial results under three reportable segments consisting of (1) the Americas, Europe and Africa (“AEA”), (2) the Middle East (“MEA”) and (3) Asia (“ASA”). We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure, as follows:

• Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market (“MTM”) pension actuarial gains and losses, costs not attributable to a particular reportable segment, and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other”. Our segment financial information is discussed in Note 19, Segment Reporting, to the accompanying Consolidated Financial Statements.

• Research and development (“R&D”) expenses are separately presented in our Consolidated Statements of Operations. Previously R&D expenses were included in Cost of operations.

• Gain (loss) on foreign currency, net is included in Other non-operating income (expense), net in our Consolidated Statements of Operations.  Previously, Gain (loss) on foreign currency, net was separately presented.

• Note 19, Segment Reporting, to the accompanying Consolidated Financial Statements, includes, under caption “Information about Operations,” a reconciliation of segment operating income (loss) before income taxes to Income (loss) before income taxes in our Consolidated Statements of Operations.

Previously reported financial statements have been adjusted to reflect the above changes.

Our business activity depends mainly on capital expenditures for offshore construction services of major integrated oil and gas companies and national oil companies for the construction of development projects in the regions in which we operate. Our operations are generally capital intensive and rely on large contracts, which can account for a substantial amount of our revenues.

Overview

Our performance is significantly impacted by spending on upstream exploration, development and production programs by our customers. Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices, global oil supply, the world economy, the availability of credit, government regulation and global stability. Under the current macro commodity environment, we have seen continued pressure from customer capital expenditure spending delays, stronger competitive pricing pressure given contraction in certain markets, and lower utilization of our assets. However, we believe our long-term industry position remains favorable, and we will continue to maintain our focus on opportunities, customer alignment, efficient execution of our backlog, efficient asset utilization, and costs control and liquidity management. We will also continue positioning ourselves for growth when the global oil and gas industry rebounds and the producers increase their capital spending.

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Operating Results

2016―We have a strong foundation for 2017. Our backlog at December 31, 2016 was $4.3 billion. Approximately $3 billion of this backlog is expected to roll-off in 2017. Significant new awards under the second Saudi Aramco Long Term Agreement (“LTA II”), two other significant awards, with one in our AEA segment and one in our ASA segment, and a number of change orders contributed to our backlog increase.

Revenues decreased by $434 million in 2016 compared to 2015, primarily due to lower activity on our Ichthys project and completion of the Brunei Shell pipeline replacement project in our ASA segment. That decrease was partially offset by increased activities on several of our MEA segment projects.

Operating income increased by $29 million from $113 million in 2015 to $142 million in 2016 despite the challenging environment of low crude oil and natural gas prices. We believe our performance indicates our capability to deliver strong results under a wide range of operating environments due to strong project execution and cost management driven by the “One McDermott Way” Initiative.

The 2016 period operating income was positively impacted by:

• successful completion of the 12 jacket Saudi Aramco project and a large Middle East pipeline-related project;

• progress on a lump sum EPCI project under the LTA II, and efficient execution and related cost saving on the Marjan power systems replacement project, both Saudi Aramco projects; and

• close-out improvements, favorable changes in estimates and recognition of approved change orders on active and closed projects.

The 2016 period operating income was negatively impacted by $31 million resulting from a failure identified in certain supplier provided subsea-pipe connector components previously installed on the Ichthys project in Australia, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements.

A total of $55 million of non-cash impairment charges related to our Agile vessel and certain other marine assets impacted our 2016 operating income, as discussed in Note 13, Fair Value Measurement, to the accompanying Consolidated Financial Statements.

In 2016 we realized approximately $150 million and $46 million of cash savings, before restructuring charges, from our McDermott Profitability Initiative (“MPI”) and Additional Overhead Reduction program (“AOR”), respectively. MPI was completed during the third quarter of 2016 and AOR was completed during the fourth quarter of 2016. See Note 4, Restructuring, to the accompanying Consolidated Financial Statements for further discussion.

2015―Our backlog as of December 31, 2015 was $4.2 billion. A significant award under the LTA II, two key awards in Qatar and a number of change orders contributed to $3.7 billion of backlog increase, partially offset by $3 billion of revenue roll-off during 2015, resulting in a net increase of approximately $631 million over our backlog as of December 31, 2014.  

Revenues for 2015 were approximately $3 billion, an increase of $769 million, or 33%, over 2014.  This increase was primarily attributable to:

• progress, driven by marine activities, on the Ichthys project;  

• completion of the Brunei Shell pipeline replacement project;

• a significant increase in activities associated with several of our Middle East projects; and

• increased fabrication and marine activities on the PB Litoral project.

Operating income was $113 million in 2015, an increase of $96 million compared to 2014.  Operating income was positively impacted by:

• strong project execution, including on the Ichthys project, where the activities remained on schedule;

• successful completion of the Manifa, Abu Ali and Karan 45 projects, all with Saudi Aramco; and

• completion of fabrication, installation and hook up of the PB Litoral facilities.  

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Significant items we recognized as charges in our operating income included:

• $41 million for the restructuring actions discussed in Note 4, Restructuring, to the accompanying Consolidated Financial Statements;

• a $26 million non-cash MTM actuarial loss on our pension benefit plans, discussed in Note 11, Pension and Postretirement Benefits, to the accompanying Consolidated Financial Statements; and

• a $17 million charge associated with a legal settlement in the third quarter of 2015.

During 2015, from our MPI program, we realized approximately $115 million of cash savings, before restructuring charges. In addition, we continued our efforts to improve our cost structure and commenced AOR during the fourth quarter of 2015.  

2014―Operating income of $16 million included favorable changes in estimates of $111 million due to:

• project closeout benefits and reimbursement for weather downtime and vessel standby time, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements;

• a gain of $46 million associated with the sale of non-core assets; and

• an improvement of $11 million related to a change in estimate of vessel-impairment charges recognized in 2013 for the CSV 108 pipelay system, as discussed in Note 13, Fair Value Measurements, to the accompanying Consolidated Financial Statements.

Those increases were partially offset by $110 million of increased costs to complete certain projects, primarily due to marine equipment downtime driven by adverse weather conditions, mechanical issues and standby delays and accrual for liquidated damages, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements.  Additionally, we incurred a charge in the amount of $18 million associated with our ongoing restructuring programs, as discussed in Note 4, Restructuring, to the accompanying Consolidated Financial Statements.

Business Outlook

The demand for our services is affected by the capital expenditure decisions of oil and gas producers. Material declines in oil and natural gas prices have affected, and will likely continue to affect, the demand for and pricing of our EPCI services. Many of our customers make their capital expenditure decisions based on their long-term view of oil and gas prices and the economics of specific projects. We operate in most major oil and gas producing regions of the world, work on both new and existing field developments and provide services that require a varying amount of technical complexity. As a result, the economics of specific projects that we provide services for varies considerably.

The sustained relatively lower-oil-price environment since 2014 and the slowdown of growth in certain developing countries has raised uncertainty around the economics of certain potential projects that have not yet been approved or awarded by our customers. We do not currently have any reason to expect cancellation of existing projects in our backlog.Nonetheless, the continued relatively depressed price of oil has adversely affected demand for our services and could, over a sustained period of time, materially adversely affect our financial condition, results of operations and cash flows.

Since the start of the most recent substantial decline in the price of oil, many oil and gas companies made significant reductions in their capital expenditure budgets for 2015 and 2016. Though some of our customers have reduced their current levels of spending on exploration, development and production programs, including by deferring or delaying certain capital projects, we expect other capital projects to continue, as they are economic or strategically necessary in a variety of oil and gas price environments. We also expect that project deferrals and delays, combined with the natural decline rates of existing production and the resetting of the industry cost base, will ultimately contribute to further investment by oil and gas producers in the long-term.

In the current environment, we will continue to maintain our focus on opportunities, customer alignment, efficient execution of our backlog, efficient asset utilization and cost and liquidity management.  We will also continue positioning ourselves for growth when the global oil and gas industry rebounds and the producers increase their capital spending.

Segment Operations

We use Operating income (loss) as our measure of profitability for segment reporting purposes. For additional financial information related to our reporting segments, as well as a reconciliation of segment operating income to income before provision for income

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taxes, as defined by generally accepted accounting principles (“GAAP”), see Note 19, Segment Reporting, to the accompanying Consolidated Financial Statements.

2016 Versus 2015

Revenues

	2016		2015		Change
	(In thousands)							Percentage
Revenues:
AEA	$	285,988	$	478,800	$	(192,812	)		(40	)	%
MEA		1,241,591		1,134,555		107,036			9
ASA		1,108,404		1,456,920		(348,516	)		(24	)
Total revenues	$	2,635,983	$	3,070,275	$	(434,292	)		(14	)	%

Revenues decreased by 14%, or $434 million, in 2016 compared to 2015, primarily due to decreases in our AEA and ASA segments, partially offset by an increase in our MEA segment.

AEA—Revenues decreased by 40%, or $193 million, due to a reduction in active projects in 2016 compared to 2015.

In 2016, a variety of projects and activities contributed to revenues, as follows:

• completion of jacket fabrication activity at our Altamira facility in Mexico and its installation campaign undertaken by the DB 50 vessel on the Ayatsil-C jacket replacement project;

• transportation, installation and marine campaigns executed by the DB 50 and NO105 vessels on the EOG Sercan project in Trinidad;

• hookup and commissioning activities associated with the PB Litoral project in Mexico, which was completed in the first half of 2016;

• fabrication, spooling and installation of jumpers and control umbilicals on the Jack St. Malo project in the Gulf of Mexico, which was completed in the third quarter of 2016;

• commencement of engineering work on the Abkatun-A2 platform project, a turnkey EPCI contract in the Gulf of Mexico awarded in 2016;

• umbilical and flowline installation marine campaigns by the North Ocean 102 (“NO 102”) and NO 105 vessels for the Caesar Tonga field development project in the Gulf of Mexico;

• completion of the LLOG Otis subsea tieback project in the Gulf of Mexico;

• marine campaigns executed by the DB 50 vessel on the Exxon Julia subsea tieback project in the Gulf of Mexico, which was completed in the first quarter of 2016; and

• multiple front-end engineering and design projects.

In 2015, the following projects, which were complete or substantially complete in 2015, contributed to revenue:

• NO 102, NO 105 and Agile vessel charter campaigns in Brazil;

• completion of fabrication and installation activity on the PB Litoral project, as well as the reversal of a $12 million provision for liquidated damages due to an agreed extension of the PB Litoral project completion date;

• marine campaigns executed by the DB 50 vessel, primarily on the Exxon Julia subsea tieback project, the Ayatsil-A project, a transportation and installation (“T&I”) project, and a mobile drilling structure installation project; and

• close-out improvements on our Papa Terra project.

The start-up of fabrication work on the Ayatsil-C jacket replacement project at our Altamira facility, awarded in 2015, also contributed to 2015 revenue.

MEA—Revenues increased by 9%, or $107 million, in 2016 compared to 2015.

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In 2016, a variety of projects and activities contributed to revenues, as follows:

• engineering, fabrication and marine activities on a lump-sum EPCI project under the LTA II entered into with Saudi Aramco;

• continued fabrication and marine installation progress on the 12 jacket Saudi Aramco project, which was completed in 2016;

• fabrication and marine cablelay activities on the Marjan Saudi Aramco power system replacement project;

• commencement and substantial completion of a large pipeline-related project in the Middle East;

• the marine campaign for installation of a pipeline, spool and risers on a flow assurance project in Qatar, awarded in the fourth quarter of 2015;

• engineering, fabrication and marine activity on our KJO Hout project in the Neutral Zone;

• commencement and substantial completion of offshore marine hookup campaign progress on a wellhead jacket and umbilical project in Qatar; and

• the Qatar Petroleum EPCI project, which was completed in 2016.

Close out improvements on the Safaniya phase 2 and ADMA 4 GI projects also contributed to 2016 revenue.

In 2015, activities on the following projects, which either were complete or were substantially complete in 2015, contributed to revenues:

• the Safaniya phase 2, Manifa facilities, Karan 45 and Abu Ali Cables projects, each with Saudi Aramco; and

• the ADMA 4 GI project in the U.A.E.

Commencement in 2015 of a lump-sum EPCI project under the LTA II, the Marjan power system replacement project and the KJO Hout project also contributed to 2015 revenue.

ASA—Revenues decreased 24%, or $349 million, in 2016 compared to 2015, primarily due to reduced activity in 2016 on our Ichthys EPCI project in Australia, as the project progressed through to the marine transportation and installation phase.

Those decreases were partially offset by the following projects:

• higher fabrication activity in 2016 on the Yamal project awarded in the third quarter of 2015;

• commencement in 2016 of the Vashishta subsea field infrastructure development work, an EPCI project in India; and

• the Bergading offshore installation project in Malaysia, which was completed in the second quarter of 2016.

In 2015 the following projects, which were either complete or were substantially complete in 2015, contributed to revenue:

• the Brunei Shell pipeline replacement project;

• the Gorgon MRU project; and

• the Bukit-Tua platform/subsea spools installation project.

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Segment Operating Income

Segment operating income is frequently influenced by the resolution of change orders, project close-outs and settlements, which generally can cause operating margins to improve during the period in which these items are approved or finalized. While we expect change orders, close-outs and settlements to continue as part of our normal business activities, the period in which they are recognized is largely driven by the finalization of agreements with customers and suppliers and, as a result, is difficult to predict. Additionally, the future margin increases or decreases associated with these items are difficult to predict, due to, among other items, the difficulty of predicting the timing of recognition of change orders, close-outs and settlements and the timing of new project awards.

	2016		2015		Change
	(In thousands)							Percentage
Segment operating income:
AEA	$	51,129	$	52,918	$	(1,789	)		(3	)	%
MEA		209,401		146,866		62,535			43
ASA		97,963		123,718		(25,755	)		(21	)
Total	$	358,493	$	323,502	$	34,991			11		%

Segment operating income improved by $35 million in 2016 compared to 2015, primarily due to improvements in our MEA segment.

AEA—Segment operating income was $51 million and $53 million in 2016 and 2015, respectively.

In 2016, a variety of projects and activities contributed to the segment operating income, as follows:

• net favorable changes in estimates in 2016 as compared to 2015 of approximately an additional $28 million, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements;

• successful execution and close-out improvements on the PB Litoral, Jack St. Malo II and Exxon Julia subsea tieback projects;

• productivity improvement and associated cost savings related to our DB 50 and NO 102 vessels’ marine campaigns undertaken in the Gulf of Mexico; and

• the reversal of a $7 million provision for liquidated damages due to an agreed extension of the PB Litoral project completion date.

The 2015 segment operating results were impacted by:

• marine charter activities undertaken by the NO 102, NO 105 and Agile vessels on various projects in Brazil;

• the DB 50’s marine campaigns on various projects in the Gulf of Mexico;

• benefits as a result of a favorable outcome in our discussions with the customer on compensation for weather-related delays on the Papa Terra project; and

• increased fabrication and marine activities on the PB Litoral project, as well as the reversal of a $12 million provision for liquidated damages due to an agreed extension of the PB Litoral project completion date.

MEA—Segment operating income in 2016 and 2015 was $209 million and $147 million, respectively, an increase of $62 million year-on-year.  

In 2016, a variety of projects and activities contributed to segment operating income, as follows:

• the completion in 2016 of jacket fabrication and marine installation activity coupled with close-out improvements on the 12 jacket Saudi Aramco project;

• progress driven by higher engineering, fabrication and marine pipelay activity, as well as improved productivity and associated cost savings, on a lump sum EPCI project under the Saudi Aramco LTA II agreement;

• increased engineering, marine cable lay activities, and award of a jacket change order, together with efficient execution and related cost saving on the Marjan power systems replacement, a Saudi Aramco project;  

• start and substantial completion of a large pipeline-related project in the Middle East;  

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• marine installation activities undertaken by the DB 32 and Emerald Sea vessels for a pipeline, spool and risers flow assurance project in Qatar; and

• successful execution and close-out improvements on the Safaniya Phase 2, Abu Ali Cables and Manifa facility projects, all with Saudi Aramco, and the offshore marine hookup campaign on a wellhead jacket and umbilical project in Qatar.

Those benefits were partially offset by an $8 million operating loss for KJO Hout, an EPCI project in the Neutral Zone, because of changes to our execution plan and increased costs associated with the DB 27 vessel and subcontractor standby time due primarily to work permit delays. This project is in a loss position and is expected to be complete in the second quarter of 2017.

In 2015, a variety of projects and activities contributed to segment operating income as follows:

• increased marine and hookup activities, improved marine vessel productivity and reimbursement for mobilization costs on the Karan 45, a Saudi Aramco project;

• improved productivity and lower demobilization costs on the Abu Ali Cables, a Saudi Aramco project;

• increased jacket and deck installation activity on the Manifa, a Saudi Aramco project;

• reimbursement for vessel downtime/standby time on various Saudi Aramco projects; and

• KJO Ratawi project close-out improvements.

Those benefits were partially offset by a $20 million segment operating income deterioration on our ADMA 4 GI project in the U.A.E. because of changes in our execution plan, increased costs associated with the DB 32 vessel demobilization and productivity related cost increases during hookup and pre-commissioning work.  See Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements for further information on this change.

ASA—Segment operating income in 2016 and 2015 was $98 million and $124 million, respectively, primarily due to reduced activity in 2016 on our Ichthys EPCI project, as the project progressed through to the marine transportation and installation phase.

In 2016, a variety of projects and activities contributed to the segment operating income, as follows:

• improved productivity and project execution cost savings and recognition of approved change orders on active projects; and

• close-out improvements on our completed projects.

The 2016 period segment operating income was negatively impacted by $31 million resulting from a failure identified in certain supplier provided subsea-pipe connector components previously installed on the Ichthys project in Australia, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements.

Other Items in Operating Income

Corporate and Other

	2016			2015			Change
	(In thousands)									Percentage
Corporate and Other	$	(216,240	)	$	(210,820	)	$	(5,420	)		(3	)	%

Corporate and Other expenseswere $216 million and $211 million in 2016 and 2015, respectively. The $5 million year-over-year increase in Corporate and Other expenses was primarily due to:

• lower cost recovery associated with our fabrication facility at Altamira and certain vessels in 2016, as compared to 2015, due to a reduction in active projects; and

• $48 million higher non-cash impairment charge related to our marine assets in 2016, as compared to 2015, as discussed in Note 13, Fair Value Measurement, to the accompanying Consolidated Financial Statements.

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Those increases were partially offset by:

• a $5 million year-end, non-cash actuarial pension MTM gain in 2016, as compared to a $26 million year-end, actuarial pension MTM charge in 2015, as discussed in Note 11, Pension and Postretirement Benefits, to the accompanying Consolidated Financial Statements; and

• $30 million of lower restructuring expense in 2016, as compared to 2015, as discussed in Note 4, Restructuring, to the accompanying Consolidated Financial Statements.

The 2015 operating results also included a $17 million legal settlement charge, which was not repeated in 2016.

Selling, general and administrative expenses (“SG&A”)—SG&A was $179 million and $217 million in 2016 and 2015, respectively. We continue our efforts to improve our cost structure, and the implementation of both our MPI and AOR programs contributed to lower SG&A expense in 2016 compared to 2015. As of December 31, 2016, both the MPI and AOR programs are complete.

Other Non-operating Items

Interest expense, net—Interest expense, net was $59 million and $50 million in 2016 and 2015, respectively.  Increase in interest expense was primarily due to lower interest capitalization in 2016 compared to 2015. The DLV 2000 vessel, which was under construction in 2015, was deployed to our fleet in the second quarter of 2016.  Interest expense for both periods is associated with our long-term debt obligations discussed in Note 10, Debt, to the accompanying Consolidated Financial Statements.

Provision for Income Taxes—For the year ended December 31, 2016, we recognized income before provision for income taxes of $82 million, compared to income before provision for income taxes of $65 million for the year ended December 31, 2015.  In the aggregate, the provision for income taxes was $42 million and $52 million for the years ended December 31, 2016 and 2015, respectively.  The decrease in the provision for income taxes was primarily driven by increased mix of income in favorable tax jurisdictions, which was partially offset by losses in certain jurisdictions where we did not recognize a tax benefit. In addition, due to our improving operations, we were able to release the remaining $9 million valuation allowance recorded against our deferred tax asset related to the Saudi Arabia net operating loss, as well as partially release a $4 million valuation allowance recorded against our deferred tax asset related to the Mexico net operating loss as a result of current contracts in our backlog.  Our effective tax rate decreased from 80% in 2015 to 51% in 2016.

Losses from investments in unconsolidated affiliates—The loss from investments in our unconsolidated affiliates was $4 million and $21 million in 2016 and 2015, respectively.  The decrease in losses from investments in unconsolidated affiliates was primarily attributable to improved operating results of our China joint venture.

Net Income Attributable to Non-controlling Interest—Net income attributable to noncontrolling interests was $2 million and $9 million in 2016 and 2015, respectively.  The $7 million decrease in net income attributable to noncontrolling interests in 2016 compared to 2015 was primarily due to a loss incurred by Berlian McDermott Sdn. Bhd (“BMD”), our former Malaysian joint venture and lower profitability in our Indonesian joint venture during 2016.  In the third quarter of 2016, we acquired the BMD noncontrolling interest, as discussed in Note 17, Stockholders’ Equity, to the accompanying Consolidated Financial Statements.  

2015 Versus 2014

Revenues

	2015		2014		Change
	(In thousands)							Percentage
Revenues:
AEA	$	478,800	$	567,608	$	(88,808	)		(16	)	%
MEA		1,134,555		795,666		338,889			43
ASA		1,456,920		937,615		519,305			55
Total revenues	$	3,070,275	$	2,300,889	$	769,386			33		%

Revenues were $3,070 million and $2,301 million in 2015 and 2014, respectively, an increase of approximately 33%, or $769 million, primarily due to increased activity in our ASA and MEA segments, partially offset by decreased activity in our AEA segment.

AEA—Revenues decreased by 16%, or $89 million, in 2015 compared to 2014.  This decrease was primarily due to a reduction in active projects in 2015 compared to 2014.

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In 2015, a variety of projects and activities contributed to revenue, as follows:

• completion of fabrication and installation activity on the PB Litoral project and a $12 million reversal of a liquidated damage reserve related to the extension to the contract completion date associated with the PB Litoral project;

• completion of engineering work and near completion of marine activities associated with the Exxon Julia subsea tieback project;

• completion of various marine installation campaign projects executed by the DB 50 in the Gulf of Mexico awarded in 2014 and 2015;

• higher NO 102 vessel charter activities in Brazil; and

• the start-up of fabrication for a jacket replacement and deck installation on Ayatsil-C, an EPCI project awarded in 2015.

Significant projects contributing to the 2014 revenues that were either complete or substantially complete in 2014 were Papa Terra, Jack St. Malo, Gulfstar, Mafumeria Sul, Ayatsil-B, and Megalodon Platform Installation.

MEA—Revenues increased by 43%, or $339 million, in 2015 compared to 2014.

In 2015, a variety of projects and activities contributed to revenue, as follows:

• significant increases in fabrication, marine pipelay, marine cable laying and hookup activities on the Karan 45 and Abu Ali Cables, both  Saudi Aramco projects;

• the installation of jackets and an observation platform on the Saudi Aramco Manifa project;

• the commencement of engineering and fabrication activities for the replacement of power systems on the Marjan project;

• the start of two new Saudi Aramco projects: (1) a lump-sum EPCI project under the LTA II and (2) a project to supply 12 jackets;

• multiple change order awards on existing and new projects with Saudi Aramco;

• increased fabrication and marine activities on the ADMA 4 GI project in the U.A.E.; and

• increased marine and commissioning activity on the KJO Ratawi project in the Neutral Zone.

In 2014, a variety of projects and activities contributed to revenue, as follows:

• marine and fabrication activities on the Saudi Aramco Safaniya Phase-2 project;

• completion of a pipelay project in the Caspian; and

• substantial completion of a Saudi Aramco five jackets project.

ASA—Revenues increased by 55%, or $519 million, in 2015 compared to 2014.  

In 2015, a variety of projects and activities contributed to revenue, as follows:

• a significant increase in marine activity on the Ichthys project; and

• the start of two new projects in 2015: (1) the Brunei Shell Petroleum (“BSP”) pipeline replacement project, which was completed in 2015; and (2) the Jangkrik subsea isolation valve and manifolds fabrication project in Indonesia.

In 2014, a variety of projects and activities, all of which were either complete or substantially complete in 2014, contributed to revenue as follows:

• Siakap subsea development project in Malaysia;

• Kepodang gas development project in Indonesia;

• Champion Waterflood project in Brunei;

• Banyu Urip project in Indonesia; and

• DB 101 marine campaign projects.

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Segment Operating Income

	2015		2014			Change
	(In thousands)							Percentage
Segment operating income (loss):
AEA	$	52,918	$	(65,565	)	$	118,483		181	%
MEA		146,866		47,863			99,003		207
ASA		123,718		90,838			32,880		36
Total	$	323,502	$	73,136		$	250,366		342	%

Segment operating income improved by $250 million in 2015 compared to 2014.

AEA—Segment operating results improved by $118 million in 2015 compared to 2014.  

In 2015, a variety of projects and activities contributed to the segment operating results, as follows:

• net favorable changes in estimates in 2015 of $27 million, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements;

• increased fabrication and marine activitieson the PB Litoral project;

• Agile, NO 105, and NO 102 marine charter activities in Brazil, on various projects;

• the DB 50 vessel working on various projects in the Gulf of Mexico; and

• a $14 million benefit resulting from additional close-out improvements and compensation for weather-related delays on the Papa Terra project.

The 2014 results were negatively impacted by a $69 million increase in estimated costs at completion on the PB Litoral project, primarily due to increased costs arising from project delays, increases in projected fabrication, procurement and marine installation costs, reduced productivity and recognition of liquidated damages.

Those negative factors in 2014 were partially offset by:

• approximately $40 million of segment operating income related to the Papa Terra project in Brazil in 2014, mainly due to project close-out improvements, savings on marine costs and increased recoveries from additional weather-related compensation; and

• $24 million of segment operating income in 2014 contributed by the successful completion of the Jack & St Malo and Gulfstar projects.

The 2014 segment operating results also included $37 million of net unfavorable changes in estimates, as discussed in Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements.

MEA— Segment operating income improved by $99 million in 2015 compared to 2014.  

In 2015, a variety of projects and activities contributed to segment operating results, as follows:

• increased marine and hookup activities, improved marine vessel productivity and reimbursement for mobilization costs on the Karan 45, a Saudi Aramco project;

• improved productivity and lower demobilization costs on the Abu Ali Cables, Saudi Aramco project;

• increased jacket and deck installation activity on the Manifa, a Saudi Aramco project; and

• reimbursement for vessel downtime/standby time on various projects with Saudi Aramco.

Close-out improvements on the KJO Ratawi project also contributed $16 million of benefit to the segment operating income.

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Those increases were partially offset by a $20 million segment operating income deterioration on our ADMA 4 GI project in the U.A.E. because of changes in our execution plan, increased costs associated with theDB 32 vessel demobilization and productivity related cost increases during hookup and pre-commissioning work.  See Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements for further information on this change.

The 2014 segment operating income included a $66 million benefit from a pipelay project in the Caspian, which had minimal activity in 2015.  In addition, 2014 included deteriorations, not repeated in 2015, of approximately:

• $15 million primarily due to a revision in the execution plan as a result of delayed access to the KJO Ratawi project in the Neutral Zone; and

• $13 million related to vessel downtime due to weather and standby delays on the Saudi Aramco Safaniya Phase-1 project.

ASA—Segment operating income increased by $33 million in 2015 compared to 2014. 

In 2015, a variety of projects and activities contributed to the segment operating results, as follows:

• higher marine activities and change in scope in 2015 on our Ichthys project with no comparable benefits in 2014; and

• completion of the Brunei Shell pipeline replacement project, which started in 2015.

In addition, in 2014, we recognized favorable change in estimates mainly related to two EPCI projects, both completed in 2014: the Siakap subsea development project in Malaysia and the Champion Waterflood project in Brunei.

Other Items in Operating Income

Corporate and Other

	2015			2014			Change
	(In thousands)									Percentage
Corporate and Other	$	(210,820	)	$	(56,734	)	$	(154,086	)		(272	)	%

Corporate and Other expenses increased to $211 million in 2015 compared to $57 million in 2014. The $154 million year-over-year increase in Corporate and Other expenses were primarily due to:

• lower cost recovery associated with our fabrication facilities at Altamira and Batam and certain vessels in 2015, as compared to 2014, due to a reduction in active projects;

• a $26 million year-end, non-cash actuarial pension MTM charge in 2015 compared to a $3 million year-end, actuarial pension MTM gain in 2014, as discussed in Note 11, Pension and Postretirement Benefits, to the accompanying Consolidated Financial Statements;

• $23 million of higher restructuring expense in 2015, as compared to 2014, as discussed in Note 4, Restructuring, to the accompanying Consolidated Financial Statements;

• a $17 million legal settlement charge in 2015; and

• a $7 million non-cash impairment charge related to our marine assets in 2015. The 2014 results included an $11 million improvement to the cancellation cost estimate included in a $38 million vessel impairment charge recognized in 2013. See Note 13, Fair Value Measurement, to the accompanying Consolidated Financial Statements for further discussion.

The 2014 operating results included $46 million in gains from asset sales, discussed in Note 8, Property, Plant and Equipment, to the accompanying Consolidated Financial Statements, compared to $1 million of loss from sale of miscellaneous assets in 2015.

Selling, general and administrative expenses increased by $9 million in 2015 as compared to 2014, primarily due to a fourth quarter non-cash MTM pension charge of $26 million, partially offset by cost savings realized by MPI.

Gain (loss) on disposal of asset for 2014 primarily related to the following sales and disposals: (1) sale of the DB 16 and the KP1, resulting in a $11 million gain; (2) a gain from the sale of our Harbor Island facility near Corpus Christi, Texas of approximately $25 million; and (3) an aggregate gain of approximately $10 million from the disposal of various assets from our Morgan City facility.

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Other Non-operating Items

Interest expense, net was $50 million in 2015 and $61 million in 2014.  The 2015 interest expense was lower compared to 2014 primarily due to a one-time $28 million interest charge for unamortized issuance fees in the second quarter of 2014 related to the termination of bridge financing arrangements with an affiliate of Goldman Sachs. Interest expense for 2015 includes full-year interest on all of our long-term debt obligations issued in April 2014.

Provision for Income Taxes—For the year ended December 31, 2015, we recognized income before provision for income taxes of $65 million, compared to a loss before provision for income taxes of $37 million for the year ended December 31, 2014.  The provision for income taxes was $52 million and $20 million for the years ended December 31, 2015 and 2014, respectively.  The increase in the provision for income taxes was primarily driven by increased profits in certain jurisdictions in which we operate (primarily Saudi Arabia and Australia).  In addition, we were able to utilize past losses in certain jurisdictions which were previously un-benefited to offset our improving income (primarily Saudi Arabia and Singapore).  

Our effective tax rate for 2015 and 2014 was 80% and (54)%, respectively. The rate increase was primarily driven by increased profits in certain jurisdictions in which we operate (mainly Saudi Arabia and Australia), a valuation allowance against losses in tax jurisdictions where we do not expect to receive a tax benefit, and taxes on unremitted earnings in jurisdictions where we do not have plans to indefinitely reinvest such earnings. This resulted in an increase in our overall effective tax rate. See Note 15, Income Taxes, to the accompanying Consolidated Financial Statementsfor the rate reconciliation table.

Losses from investments in unconsolidated affiliatesincreased by $14 million from an $8 million loss in 2014 to a $22 million loss in 2015, primarily due to increased operating losses on the joint ventures Qingdao McDermott Wuchuan Offshore, io Oil & Gas and THHE Fabricators Sdn. Bhd.

Net Income Attributable to Non-controlling Interest—Net income attributable to noncontrolling interests was $9 million and $11 million for 2015 and 2014, respectively.  The decrease was primarily due to our acquisition of our partner’s interest in our North Ocean joint venture related to the NO 102, partially offset by increased income from two of our consolidated affiliates.

Inflation and Changing Prices

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), generally using historical U.S. dollar accounting (“historical cost”). Statements based on historical cost, however, do not adequately reflect the cumulative effect of increasing costs and changes in the purchasing power of the dollar, especially during times of significant and continued inflation.

In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost of anticipated changes in labor, material and service costs either through an estimate of those changes, which we reflect in the original price, or through price escalation clauses in our contracts.

Liquidity and Capital Resources

General

Our primary ongoing sources of liquidity are cash flows generated from operations and cash and cash equivalents on hand. We regularly review our sources and uses of funds and may access capital markets to increase our liquidity position or to refinance our existing debt. We plan to fund our ongoing working capital, capital expenditures, debt service and other funding requirements with cash on hand, cash from operating activities, proceeds from the issuance of debt, or a combination thereof.

Management believes, based on our current financial condition and existing and expected backlog, that our cash flows from operations and the sources of liquidity and capital resources described below will be sufficient to fund our liquidity requirements for at least the next twelve months.

Cash, Cash Equivalents and Restricted Cash

As of December 31, 2016, we had $612 million of cash and cash equivalents and restricted cash compared to $782 million as of December 31, 2015. At December 31, 2016, we had $75 million of cash in jurisdictions outside the U.S., principally in Indonesia, Malaysia, Mauritius, the United Arab Emirates, Mexico and Qatar. Approximately 4% of our outstanding cash balance is held in countries that have established government imposed currency restrictions that could impede the ability of our subsidiary to transfer funds to us.  

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As of December 31, 2016, we had restricted cash and cash equivalents totaling $16 million, compared to $117 million as of December 31, 2015. The amounts as of December 31, 2016 and 2015 include $16 million and $102 million, respectively, of cash collateral for letters of credit that generally may be replaced with letters of credit under the LC Facility.

Cash Flow Activities

Operating activities―Net cash provided by operating activities in 2016, 2015 and 2014 was $178 million, $55 million and $7 million, respectively.

The cash provided by operating activities primarily reflected our net income (loss), adjusted for non-cash items and changes in components of our working capital—accounts receivable, contracts in progress net of advance billings on contracts, and accounts payable. Fluctuations in working capital are normal in our business. Working capital is impacted by the size of our projects and the achievement of billing milestones on backlog as we complete certain phases of the project.

We believe our anticipated future operating cash flow, capacity under our credit facilities and uncommitted bilateral lines of credit, along with access to surety bonds, will be sufficient to finance our capital expenditures, settle our commitments and contingencies and address our working capital needs for the foreseeable future.

In the first half of  2015, we reached agreements with a representative we previously utilized in our Middle East operations and certain of its affiliates and associates regarding:  (1) the value and timing of payment of ongoing future amounts that were to be paid under a representation agreement that we elected to allow to expire, with respect to: (a) commissions on customer contracts that we had entered into prior to such expiration; and (b) future commissions payable on customer contracts we expected to enter into during a specified post-expiration period under the representation agreement (pursuant to provisions that provided for commissions to be payable on customer contracts entered into during such post-expiration period); and (2) our repurchase of shares of capital stock in one of our subsidiaries previously held by them.  Under these agreements, we agreed to make a series of payments in respect of the commissions that were expected to become due and payable under the prior arrangement.  We paid approximately $21 million in March 2015, $26 million in April 2015 and $4 million in the second half of 2015 in connection with these agreements.

Investing activities―Our net cash used in investing activities was $231 million, $96 million and $245 million in 2016, 2015 and 2014, respectively.

Cash used in 2016 primarily related to the construction of the Deepwater Lay Vessel 2000 (“DLV 2000”),and was incurred as a result of the construction work reaching established milestones, including completion in the second quarter of 2016.

The change in cash used in investing activities in 2015 compared to 2014 was primarily due to lower capital expenditures. A lower level of capital spending in 2015 compared to 2014 was primarily due to the delay in completion of our DLV 2000, resulting from deferrals of milestone payments, and lower payments in 2015 for our CSV 108 vessel, which was completed and put in service in the first quarter of 2015.

Proceeds from disposition of assets provided cash of $2 million, $11 million and $72 million in 2016, 2015 and 2014, respectively.

Financing activities―Our net cash used in financing activities was $116 million and $28 million in 2016 and 2015, respectively, and net cash provided by financing activities in 2014 was $951 million.

Net cash used in 2016 was primarily attributable to the prepayment of $75 million under the Term Loan discussed in Note 10, Debt, to the accompanying Consolidated Financial Statements, and $16 million and $8 million of repayments related to the Amortizing Notes comprising part of TEUs described below under “Credit Agreement and Debt” and NO 105 construction financing, respectively.

Net cash used in 2015 was primarily attributable to $15 million and $8 million of repayments related to the Amortizing Notes and NO 105 construction financing, respectively.

Net cash provided by financing activities in 2014 was primarily attributable to the financing transactions completed in April 2014, as discussed in Note 10, Debt, to the accompanying Consolidated Financial Statements. Cash provided was partially offset by:

• our exercise, in October 2014, of our option to purchase the interest of our joint venture partner, Oceanteam Shipping ASA, in the NO 102 vessel-owning entities, at a net cost of approximately $33 million. We completed the acquisition of the additional interest in December 2014; and

• a $6 million distribution to noncontrolling interests.

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Credit Agreement and Debt

In April 2014 we entered into a credit agreement (the “Credit Agreement”), which initially provided for a $400 million first-lien, first-out three-year letter of credit facility (the “LC Facility”), scheduled to mature in 2017, and a $300 million first-lien, second-out five-year term loan (the “Term Loan”), scheduled to mature in 2019. We also completed the issuance of (a) $500 million of second-lien, seven-year, senior secured notes; and (b) $288 million of tangible equity units (“TEUs”) composed of (1) three-year amortizing, senior unsecured notes, in an aggregate principal amount of $48 million, and (2) prepaid common stock purchase contracts.

In October 2015, we entered into an amendment which amended the Credit Agreement primarily to increase the existing LC Facility from $400 million to $520 million.

In February 2016, we entered into a second amendment to the Credit Agreement to permit us to add to Covenant EBITDA certain cash restructuring expenses related to the conclusion of MPI or implementation of AOR for the quarters ending on or after March 31, 2016 but before April 16, 2017, in an aggregate amount not to exceed $25 million (as of any date of determination).

On April 18, 2016, we entered into another amendment to the Credit Agreement, which, among other things:

• replaced the existing EBITDA covenant with new ratios as follows:

• a minimum fixed charge coverage ratio (as defined in the amendment) of 1.15x for the fiscal quarter ended March 31, 2016 and each fiscal quarter thereafter;

• a maximum total leverage ratio (as defined in the amendment) of 4.5x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through June 30, 2017, 4.0x for the fiscal quarters ending September 30, 2017 and December 31, 2017, and 3.5x for each fiscal quarter thereafter; and

• a maximum secured leverage ratio (as defined in the amendment) of 2.0x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through December 31, 2017, and 1.5x for each fiscal quarter thereafter;

• amended the maximum capital expenditure covenant to limit capital expenditures in 2016 and thereafterto $250 million each fiscal year, with any prior fiscal year unused capital expenditures up to $125 million able to be carried forward and added to the next year’s capital expenditure capacity, for a total of $375 million;

• extended the maturity date of the LC Facility commitments;

• changed the existing letter of credit capacity to $450 million;

• extended the deadline for mortgaging the DLV 2000 to one year after taking delivery thereof, and gave McDermott the option to consider potential financing options for the DLV 2000 during that period;

• increased the basket for purchase money indebtedness to $150 million;

• modified the covenant limiting acquisitions to permit up to $150 million of acquisitions; and

• modified the covenant limiting the prepayment or purchase of junior priority debt to permit up to $100 million of such prepayments or purchases.

On May 12, 2016, we entered into a further amendment to the Credit Agreement which, among other things, increased the applicable margin payable on the Term Loan by 3.0% per annum and requires that the net cash proceeds of any sale (including a sale and leaseback) of the DLV 2000 be applied as a mandatory prepayment of the Term Loan.

On May 13, 2016, we prepaid $75 million of the Term Loan and satisfied the other conditions to the “effective date” set forth in the last amendment.

As of December 31, 2016, we were in compliance with our financial covenants, as shown below:

Ratios	Requirement	Actual
Minimum fixed charge coverage ratio	1.15x	2.36x
Maximum total leverage ratio	4.5x	2.36x
Maximum secured leverage ratio	2x	0.73x

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Calculation of ratios under the Credit Agreement, as amended, requires us to compute consolidated earnings before interest, taxes, depreciation and amortization, as adjusted (“Covenant EBITDA”). Covenant EBITDA is not a substitute for or superior to, operating income, net income, operating cash flow and other measures of financial performance prepared in accordance with U.S GAAP.  Covenant EBITDA has a specific definition per the Credit Agreement and will differ in the method of calculation from similarly titled measures used by other companies. The following reconciliation shows the calculation of Covenant EBITDA based on net income (loss) for each of the periods presented:

	Quarter ended			Quarter ended			Quarter ended			Quarter ended
	December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
	(In millions)
Net Income (loss) attributable to McDermott International, Inc.	$	(0.5	)	$	16.1		$	20.7		$	(2.2	)
Adjustments:
Interest Expense (including interest capitalized)		18.3			18.0			13.2			11.6
Tax expense		(13.2	)		16.0			19.8			19.3
Depreciation, drydock and amortization (excluding attributable to Nonguarantors)		24.8			26.7			23.4			23.4
Other items:
Equity (income) loss		1.2			(1.5	)		(0.1	)		4.5
(Gain) loss on assets disposal		0.1			(0.6	)		(0.4	)		-
Impairment loss		10.9			11.8			-			32.3
Restructuring - other expense		0.6			1.8			2.5			6.4
Pension (benefit) expense		(5.1	)		0.2			0.3			0.3
Others		12.2			8.3			10.0			5.2
Total adjustments	$	49.8		$	80.7		$	68.7		$	103.0
Calculated Covenant EBITDA attributable to McDermott International, Inc.	$	49.3		$	96.8		$	89.4		$	100.8
Calculated Covenant EBITDA attributable to McDermott International, Inc. - Cumulative/TTM	$	336.3

As of December 31, 2016 we had $442 million of outstanding letters of credit issued under the LC Facility and $753 million of total debt, including current maturities, net of debt issuance costs of $14 million. In addition, as of December 31, 2016 we had $359 million of outstanding bank guarantees issued under uncommitted lines of credit and $79 million of surety bonds issued under general agreements of indemnity.

See Note 10, Debt, to the accompanying Consolidated Financial Statements for additional information related to our credit facilities and other indebtness.

Capital Expenditures

As part of our strategic growth program, our management regularly evaluates our marine vessel fleet and our fabrication yard construction capacity to ensure our fleet and construction capabilities are adequately aligned with our overall growth strategy. These assessments may result in capital expenditures to construct, upgrade, acquire or operate vessels or acquire or upgrade fabrication yards that would enhance or grow our technical capabilities, or may involve engaging in discussions to dispose of certain marine vessels or fabrication yards.

Capital expenditures for 2016, 2015 and 2014 were $228 million, $103 million and $321 million, respectively, discussed below:

• 2016 capital expenditures were primarily attributable to the construction of the DLV 2000,and were incurred as a result of the construction work reaching established milestones, including completion in the second quarter of 2016.

• 2015 capital expenditures were primarily attributable to the construction of the DLV 2000, as well as costs associated with upgrading the capabilities of other marine vessels.

• 2014 capital expenditures were primarily attributable to construction of the CSV 108, development of our Altamira, Mexico fabrication yard, and certain upgrades and equipment expenditures associated with other vessels in our marine fleet.  The CSV 108 was substantially complete at December 31, 2014, and the vessel was put into service in February 2015.

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Contractual Obligations

In the table below, we set forth our contractual and other obligations as of December 31, 2016. Certain amounts included in this table are based on some estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and other factors. The contractual and other obligations we will actually pay in future periods may vary from those reflected in the table because some estimates and assumptions are subjective.

	Total		Less than         1 Year		1-3 Years		3-5 Years		More than 5 Years
	(In thousands)
Debt and capital lease obligations1	$	766,093	$	49,820	$	216,273	$	500,000	$	-
Estimated interest payments2		225,891		59,908		145,983		20,000		-
Operating leases3		226,680		27,864		61,469		14,425		122,922
Purchase obligations		31,522		23,849		7,673		-		-

⁽¹⁾ Amounts represent the expected cash payments for the principal amounts related to our debt, including capital lease obligations. Amounts do not include any deferred issuance costs and interest.

⁽²⁾ Amounts represent the expected cash payments for interest on our long-term debt and capital lease obligations.

⁽³⁾ Amounts represent future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more.

We have recorded a $61 million liability as of December 31, 2016 for unrecognized tax positions and the payment of related interest and penalties. Due to the uncertainties related to these tax matters, we are unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority will occur.

Our contingent commitments under letters of credit, bank guarantees and surety bonds currently outstanding expire as follows:

(In thousands)	Total		Less than 1 Year		1-3 Years		3-5 Years			More than 5 Years
Contingent commitments	$	895,286	$	455,228	$	314,475		$	-		$	125,583

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements and accompanying notes are presented in U.S. Dollars and prepared in accordance with GAAP. We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  We believe the following are our most critical accounting policies applied in the preparation of our Consolidated Financial Statements. These policies require our most difficult, subjective and complex judgments, often as a result of the need to make estimates of matters that are inherently uncertain.  This discussion should be read in conjunction with our Consolidated Financial Statements and related notes included in this Annual Report.

Use of Estimates―We use estimates and assumptions to prepare our financial statements in conformity with GAAP. These estimates and assumptions affect the amounts we report in our financial statements and accompanying notes. Our actual results could differ from these estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, unexpected changes in weather conditions, productivity, unanticipated vessel repair requirements, customer, subcontractor and supplier delays and other costs. We generally expect to experience a variety of unanticipated events, and some of these events can result in significant cost increases above cost amounts we previously estimated. As of December 31, 2016, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results. See Note 3, Use of Estimates, to the accompanying Consolidated Financial Statements.

Revenue Recognition—We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved.

17

At the outset of each project, we prepare a detailed analysis of our estimated cost to complete the project.  Total estimated project costs, and resulting contract income, are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. In order to record revenue and profits on these projects, we multiply the total estimated profit over the life of the project by the current percentage towards completion based on the appropriate units noted above. Estimated losses on a project are recorded in full in the period the loss becomes known.

Estimated profit over the life of a project includes consideration of contract price, change orders, claims, costs incurred and estimated costs to complete.  Change orders, which are a normal and recurring part of our business, can increase (sometimes substantially) the future scope and cost of a job. Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts we expect to recover or costs incurred. To the extent claims included in backlog are not resolved in our favor, there could be reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings, which could be material.

We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit, proportionate to the job percentage of completion in the period, when those estimates are revised. External factors such as weather, customer requirements, timely availability of materials, productivity, and other factors outside of our control may affect the progress and estimated cost of a project’s completion which could materially impact the timing and amount of our revenue and income recognition. See Note 1, Basis of Presentation and Significant Accounting Policies, and Note 2, Revenue Recognition, to the accompanying Consolidated Financial Statements for further information.

Loss Contingencies― We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We have accrued our estimates of the probable losses associated with these matters and associated legal costs are generally recognized in selling, general and administrative expenses as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Pension and Postretirement Benefit Plans—We estimate income or expense related to our pension and postretirement benefit plans based on actuarial assumptions, including assumptions regarding discount rates and expected returns on plan assets adjusted for the current period actuarial gains and losses. We determine our discount rate based on a review of published financial data and discussions with our actuary regarding rates of return on high-quality, fixed-income investments currently available and expected to be available during the period to maturity of our pension obligations. Based on historical data and discussions with our investment consultant, we determine our expected return on plan assets based on the expected long-term rate of return on our plan assets and the market value of our plan assets. The expected long-term rate of return is based on the expected return of the various asset classes held in the plan, weighted by the target allocation of the plan’s assets. Changes in these assumptions can result in significant changes in our estimated pension income or expense and our consolidated financial condition. We revise our assumptions annually based upon changes in current interest rates, return on plan assets and the underlying demographics of our workforce. These assumptions are reasonably likely to change in future periods and may have a material impact on future earnings.

The following table illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for our pension plan. 

	Effect on
	Pretax Pension Expense in 2016		Pension Benefit Obligation at December 31, 2016
	(In Millions)
25-basis-point change in discount rate	$	13	$	13
25-basis-point change in expected long-term rate of return	1			-

See Note 11, Pension and Postretirement Benefits, to the accompanying Consolidated Financial Statements included in this Annual Report for information on our pension plans.

18

Impairment—We review our tangible long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Deferred Taxes—We believe that our deferred tax assets recorded as of December 31, 2016 are realizable through carrybacks, future reversals of existing taxable temporary differences and future taxable income. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. If we subsequently determine that we will be able to realize deferred tax assets in the future in excess of our net recorded amount, the resulting adjustment would increase earnings for the period in which such determination was made. We will continue to assess the adequacy of the valuation allowance on a quarterly basis. Any changes to our estimated valuation allowance could be material to our consolidated financial condition and results of operations. See Note 15, Income Taxes, to the accompanying Consolidated Financial Statements for information on our deferred taxes.

Accounting and Reporting Changes

For a discussion of the potential impact of new accounting pronouncements on our Consolidated Financial Statements, see Note 1, Basis of Presentation and Significant Accounting Policies, to the accompanying Consolidated Financial Statements.

19

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of McDermott International, Inc.

Houston, Texas

We have audited the accompanying consolidated balance sheets of McDermott International, Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, such consolidated financial statements present fairly, in all material respects, the financial position of McDermott International, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 21, 2017

(April 25, 2017 as to the effect of the changes in presentation described in notes 1, 3, 4, 8, 13 and 19 to the Consolidated Financial Statements)

20

 McDermott

McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
	Year Ended December 31,
	2016			2015			2014
	(In thousands, except share and per share amounts)
Revenues	$	2,635,983		$	3,070,275		$	2,300,889
Costs and Expenses:
Cost of operations		2,249,270			2,690,560			2,111,958
Research and development expense		346			724			1,055
Selling, general and administrative expenses		178,752			217,239			208,564
Impairment loss (recovery)		54,958			6,808			(9,002	)
Loss (gain) on asset disposals		(859	)		1,443			(46,201	)
Restructuring expenses		11,263			40,819			18,113
Total costs and expenses		2,493,730			2,957,593			2,284,487
Operating income		142,253			112,682			16,402
Other income (expense):
Interest expense, net		(58,871	)		(50,058	)		(60,877	)
Other non-operating income (expense), net		(1,067	)		1,986			7,002
Total other expense, net		(59,938	)		(48,072	)		(53,875	)
Income (loss) before provision for income taxes		82,315			64,610			(37,473	)
Provision for income taxes		41,926			51,963			20,073
Income (loss) before loss from Investments in Unconsolidated Affiliates		40,389			12,647			(57,546	)
Loss from Investments in Unconsolidated Affiliates		(4,090	)		(21,486	)		(7,848	)
Net income (loss)		36,299			(8,839	)		(65,394	)
Less: Net income attributable to noncontrolling interest		2,182			9,144			10,600
Net income (loss) attributable to McDermott International, Inc.	$	34,117		$	(17,983	)	$	(75,994	)
Net income (loss) per share
Net income (loss) attributable to McDermott International, Inc.:
Basic	$	0.14		$	(0.08	)	$	(0.32	)
Diluted	$	0.12		$	(0.08	)	$	(0.32	)
Shares used in the computation of net income (loss) per share:
Basic		240,359,363			238,240,763			237,229,086
Diluted		284,184,239			238,240,763			237,229,086

See accompanying Notes to the Consolidated Financial Statements.

21

McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Net income (loss)	$	36,299		$	(8,839	)	$	(65,394	)
Other comprehensive income (loss), net of tax:
Unrealized gain on investments		22			6			3
Gain (loss) on derivatives		39,148			18,480			(37,537	)
Foreign currency translation		(12,157	)		(14,713	)		(12,653	)
Other comprehensive income (loss), net of tax		27,013			3,773			(50,187	)
Total comprehensive income (loss)		63,312			(5,066	)		(115,581	)
Less: Comprehensive income attributable to non-controlling interests		2,135			9,064			10,511
Comprehensive income (loss) attributable to McDermott International, Inc.	$	61,177		$	(14,130	)	$	(126,092	)

See accompanying Notes to the Consolidated Financial Statements.

22

McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
	December 31, 2016			December 31, 2015
	(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	595,921		$	664,844
Restricted cash and cash equivalents		16,412			116,801
Accounts receivable—trade, net		334,384			208,474
Accounts receivable—other		36,929			66,689
Contracts in progress		319,138			435,829
Other current assets		29,599			34,641
Total current assets		1,332,383			1,527,278
Property, plant and equipment		2,586,179			2,467,352
Less accumulated depreciation		(898,878	)		(856,493	)
Property, plant and equipment, net		1,687,301			1,610,859
Accounts receivable—long-term retainages		127,193			155,061
Investments in Unconsolidated Affiliates		17,023			26,551
Deferred income taxes		21,116			18,822
Other assets		37,214			48,505
Total assets	$	3,222,230		$	3,387,076
Liabilities and Equity
Current liabilities:
Notes payable and current maturities of long-term debt	$	48,125		$	24,882
Accounts payable		173,203			279,821
Accrued liabilities		277,584			330,943
Advance billings on contracts		192,486			164,773
Income taxes payable		17,945			23,787
Total current liabilities		709,343			824,206
Long-term debt		704,395			819,001
Self-insurance		16,980			18,653
Pension liabilities		19,471			24,066
Non-current income taxes		60,870			52,559
Other liabilities		115,703			101,870
Commitments and contingencies
Stockholders' equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares;
issued 249,690,281 and 246,841,128 shares, respectively		249,690			246,841
Capital in excess of par value (including prepaid common stock purchase contracts)		1,695,119			1,687,059
Accumulated deficit		(226,767	)		(260,884	)
Accumulated other comprehensive loss		(66,895	)		(93,955	)
Treasury stock, at cost: 8,302,004 and 7,824,204 shares, respectively		(94,957	)		(92,262	)
Stockholders' Equity—McDermott International, Inc.		1,556,190			1,486,799
Noncontrolling interest		39,278			59,922
Total equity		1,595,468			1,546,721
Total liabilities and equity	$	3,222,230		$	3,387,076

See accompanying Notes to the Consolidated Financial Statements.

23

McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	36,299		$	(8,839	)	$	(65,394	)
Non-cash items included in net income (loss):
Depreciation and amortization		89,882			100,334			93,185
Drydock amortization		12,795			17,947			19,719
Impairment loss (recovery)		54,958			6,808			(9,002	)
Stock-based compensation charges		22,680			16,593			18,565
Loss from investments in Unconsolidated Affiliates		4,090			21,486			7,848
(Gain) loss on foreign currency, net		(5,984	)		6,238			(10,310	)
Restructuring expense (gain)		(1,350	)		7,473			(2,310	)
Loss (gain) on asset disposals		(859	)		1,443			(46,201	)
Deferred income taxes		(2,695	)		3,525			891
Pension (gain) expense		(3,228	)		19,821			(4,291	)
Debt issuance cost amortization		13,141			12,767			22,915
Other non-cash items		(5,392	)		1,269			686
Changes in operating assets and liabilities that provided (used) cash:
Accounts receivable		(89,776	)		(82,697	)		166,385
Contracts in progress, net of Advance billings on contracts		144,412			(113,338	)		(10,695	)
Accounts payable		(101,845	)		78,646			(154,439	)
Accrued and other current liabilities		(37,064	)		(33,969	)		(2,801	)
Pension liability		(1,684	)		(1,506	)		(1,861	)
Income taxes		2,469			1,778			(4,668	)
Other assets and liabilities, net		47,330			(507	)		(11,262	)
Total cash provided by operating activities		178,179			55,272			6,960
Cash flows from investing activities:
Purchases of property, plant and equipment		(228,079	)		(102,851	)		(321,187	)
Investments in unconsolidated affiliates		(5,093	)		(7,038	)		(2,420	)
Proceeds from asset dispositions		2,366			10,724			71,961
Sales and maturities of available-for-sale securities		-			3,176			12,978
Purchases of available-for-sale securities		-			-			(3,695	)
Other investing activities		-			417			(2,706	)
Total cash used in investing activities		(230,806	)		(95,572	)		(245,069	)
Cash flows from financing activities:
Repayment of debt		(103,020	)		(26,938	)		(298,534	)
Proceeds from debt		-			-			1,328,875
Repurchase of common stock		(4,022	)		(1,720	)		(1,707	)
Payment of debt issuance costs		(8,730	)		(170	)		(39,112	)
Distributions to noncontrolling interests		-			-			(6,352	)
Issuance of common stock		-			682			327
Acquisition of noncontrolling interest		-			(24	)		(32,943	)
Total cash provided by (used in) financing activities		(115,772	)		(28,170	)		950,554
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(913	)		(2,779	)		(1,905	)
Net increase (decrease) in cash, cash equivalents and restricted cash		(169,312	)		(71,249	)		710,540
Cash, cash equivalents and restricted cash at beginning of year		781,645			852,894			142,354
Cash, cash equivalents and restricted cash at end of year	$	612,333		$	781,645		$	852,894
Supplemental Cash Flow Information:
Cash paid during the period for:
Income taxes, net of refunds	$	37,710		$	40,560		$	26,661
Cash paid for interest, net of amounts capitalized		46,693			40,690			28,390
Supplemental Disclosure of Noncash Investing Activities:
Non-cash purchase (sale) of investments in unconsolidated affiliates		(12,377	)		2,396			-
Capital lease		-			-			3,407
Supplemental Disclosure of Noncash Financing Activities:
Note payable in connection with noncontrolling interest distribution		5,000			-			-
Non-cash acquisition of noncontrolling interest		17,779			-			11,136

See accompanying Notes to the Consolidated Financial Statements.

24

McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF EQUITY
		Common			Capital in Excess						Accumulated Other									Noncontrolling
		Stock Par Value			of Par Value			Accumulated Deficit			Comprehensive Loss ("AOCI")			Treasury Stock			Stockholders' Equity			Interest ("NCI")			Total Equity
	(in thousands)
Balance at January 1, 2014		$	244,271		$	1,414,457		$	(163,578	)	$	(47,710	)	$	(97,926	)	$	1,349,514		$	90,830		$	1,440,344
Net income (loss)			-			-			(75,994	)		-			-			(75,994	)		10,600			(65,394	)
Other comprehensive loss, net of tax			-			-			-			(50,098	)		-			(50,098	)		(89	)		(50,187	)
Common stock issued			939			(612	)		-			-			-			327			-			327
Issuance of tangible equity units			-			240,044			-			-			-			240,044			-			240,044
Stock-based compensation charges			-			13,324			-			-			3,192			16,516			-			16,516
Purchase of shares from NCI			-			11,136			-			-			-			11,136			(44,079	)		(32,943	)
Purchase of treasury shares			-			-			-			-			(1,707	)		(1,707	)		-			(1,707	)
Sales of subsidiary shares to NCI			-			(1,534	)		-			-			-			(1,534	)		-			(1,534	)
Distributions to NCI			-			-			-			-			-			-			(6,352	)		(6,352	)
Balance at December 31, 2014			245,210			1,676,815			(239,572	)		(97,808	)		(96,441	)		1,488,204			50,910			1,539,114
Net income (loss)			-			-			(17,983	)		-			-			(17,983	)		9,144			(8,839	)
Other comprehensive income (loss), net of tax			-			-			-			3,853			-			3,853			(80	)		3,773
Common stock issued			1,673			(8,750	)		(3,329	)		-			11,085			679			-			679
Stock-based compensation charges			-			20,753			-			-			(5,359	)		15,394			-			15,394
Purchase of treasury shares			-			-			-			-			(1,720	)		(1,720	)		-			(1,720	)
Retirement of common stock			(42	)		(131	)		-			-			173			-			-			-
Other			-			(1,628	)		-			-			-			(1,628	)		(52	)		(1,680	)
Balance at December 31, 2015			246,841			1,687,059			(260,884	)		(93,955	)		(92,262	)		1,486,799			59,922			1,546,721
Net income			-			-			34,117			-			-			34,117			2,182			36,299
Other comprehensive income (loss), net of tax			-			-			-			27,060			-			27,060			(47	)		27,013
Common stock issued			3,305			(3,305	)		-			-			-			-			-			-
Stock-based compensation charges			-			11,639			-			-			-			11,639			-			11,639
Purchase of treasury shares			-			-			-			-			(4,022	)		(4,022	)		-			(4,022	)
Retirement of common stock			(456	)		(871	)		-			-			1,327			-			-			-
Distributions to NCI			-			-			-			-			-			-			(5,000	)		(5,000	)
Purchase of shares from NCI			-			597			-			-			-			597			(17,779	)		(17,182	)
Balance at December 31, 2016		$	249,690		$	1,695,119		$	(226,767	)	$	(66,895	)	$	(94,957	)	$	1,556,190		$	39,278		$	1,595,468

See accompanying Notes to the Consolidated Financial Statements.

25

McDERMOTT INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

	PAGE
Note 1—Basis of Presentation and Significant Accounting Policies	27
Note 2—Revenue Recognition	35
Note 3—Use of Estimates	36
Note 4—Restructuring	39
Note 5— Cash, Cash Equivalents and Restricted Cash	40
Note 6—Accounts Receivable	40
Note 7—Contracts in Progress and Advance Billings on Contracts	41
Note 8—Property, Plant and Equipment	41
Note 9—Equity method investments	42
Note 10—Debt	43
Note 11—Pension and Postretirement Benefits	46
Note 12—Derivative Financial Instruments	50
Note 13—Fair Value Measurements	51
Note 14—Stock-based Compensation	53
Note 15—Income Taxes	55
Note 16—Earnings per Share	57
Note 17—Stockholders’ Equity	58
Note 18—Commitments and Contingencies	59
Note 19—Segment Reporting	61
Note 20—Quarterly Financial Data (unaudited)	65
Note 21—Subsequent Events	66

26

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016

NOTE 1—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

McDermott International, Inc. (“MDR”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a leading provider of integrated engineering, procurement, construction and installation (“EPCI”), front-end engineering and design (“FEED”), and module fabrication services for upstream field developments worldwide.  We deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for complex offshore and subsea oil and gas projects. Operating in approximately 20 countries across Americas, Europe, Africa, the Middle East, Asia and Australia, our integrated resources include a diversified fleet of marine vessels, fabrication facilities and engineering offices. We support our activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction. Our customers include national, major integrated and other oil and gas companies, and we operate in most major offshore oil and gas producing regions throughout the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods. In these Notes to our Consolidated Financial Statements, unless the context otherwise indicates, “we,” “us” and “our” mean MDR and its consolidated subsidiaries.

Basis of Presentation

We have presented our Consolidated Financial Statements in U.S. Dollars in accordance with accounting principles generally accepted in the United States (“GAAP”). These Consolidated Financial Statements include the accounts of McDermott International, Inc., its consolidated subsidiaries and controlled entities.  Subsidiaries are defined as being those companies over which we, either directly or indirectly, have control through a majority of the voting rights or the right to exercise control or to obtain the majority of the benefits and be exposed to the majority of the risks. Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases. All intercompany transactions and balances have been eliminated in consolidation.

Business Segments

We report financial results under three reportable segments consisting of (1) Americas, Europe, and Africa (“AEA”), (2) the Middle East (“MEA”) and (3) Asia (“ASA”).  We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.  For financial information about our segments, see Note 19, Segment Reporting.

Revenue Recognition

Contracts―We determine the appropriate accounting treatment for each of our contracts with customers before work on the project begins. We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved. We include the amount of accumulated contract costs and estimated earnings that exceed billings to customers in Contracts in Progress. We include billings to customers that exceed accumulated contract costs and estimated earnings in Advance Billings on Contracts. Most long-term contracts contain provisions for progress payments. We expect to invoice customers for all unbilled revenues. Certain costs are generally excluded from the cost-to-cost method of measuring progress, such as significant costs for materials and third-party subcontractors. On certain projects, we may purchase a significant portion of the materials or incur third-party subcontractor costs, recognized as project costs, either upfront or during other phases of contract execution. Therefore, we believe exclusion of the costs for such materials and subcontractors provides a better measure of actual progress toward completion, particularly in the early stages of contracts, as inclusion of these costs could overstate the progress of projects. We believe that our approach more closely aligns with the actual, physical progress of our contracts. 

27

Costs incurred prior to a project award are generally expensed during the period in which they are incurred. Total estimated project costs and resulting contract income are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. Additionally, external factors such as weather, customer requirements and other factors outside of our control may affect the progress and estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income recognition. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit proportionate to the job percentage of completion during the period in which those estimates are revised.

Unapproved Change Orders―Change orders, which are a normal and recurring part of our business, can increase, sometimes substantially, the future scope and cost of a job. Therefore, change order awards, although frequently beneficial in the long term, can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date.

Revenues and gross profit on contracts can be significantly affected by change orders that may not be approved by the customer until the later stages of a contract or subsequent to the date a project is completed. If it is not probable the costs will be recovered through a change in contract price, the costs attributable to change orders are treated as contract costs without incremental revenue. For certain contracts where it is probable the costs will be recovered through a change order, total estimated contract revenue is increased by the lesser of the amounts management expects to recover and the costs expected to be incurred.

Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts we expect to recover or costs incurred. To the extent claims included in backlog are not resolved in our favor, there could be reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings, which could be material.

Claims Revenue—Claims revenue may relate to various factors, including the procurement of materials, equipment performance failures, change order disputes or schedule disruptions and other delays, including those associated with weather and sea conditions. Claims revenue, when recorded, is only recorded to the extent of the lesser of the amounts management expects to recover and the associated costs incurred. We include certain unapproved claims in the applicable contract values when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Amounts attributable to unapproved change orders are not included in claims. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Claims are generally negotiated over the course of the respective projects, many of which are long-term in nature.

Deferred Profit Recognition―For contracts as to which we are unable to estimate the final profitability due to their uncommon nature, including first-of-a-kind projects, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these contracts, we only recognize gross margin when reliably estimable and the level of uncertainty has been significantly reduced, which we generally determine to be when the contract is at least 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical as deferred profit recognition contracts. If, while being accounted for under our deferred profit recognition policy, a current estimate of total contract costs indicates a loss, the projected loss is recognized in full and the project is accounted for under our normal revenue recognition guidelines.  Currently, we are not accounting for any projects under our deferred profit recognition policy.

Completed Contract Method―Under the completed contract method, revenue and gross profit is recognized only when a contract is complete or substantially complete. We generally do not enter into fixed-price contracts without an estimate of cost to complete that we believe to be accurate. However, it is possible that in the time between contract award and the commencement of work on a project we could lose the ability to forecast costs to complete adequately based on intervening events, including, but not limited to, experience on similar projects, civil unrest, strikes and volatility in our expected costs. In such a situation, we would use the completed contract method of accounting for that project. In last three years, we did not enter into any contracts that we accounted for under the completed contract method.

Loss Recognition―A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, subcontractor or supplier performance, pipeline lay rates or steel and other raw material prices. Increases in costs associated with our fixed-price contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows.

See Note 2, Revenue Recognition, for discussion on Revenue.

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Use of Estimates

We use estimates and assumptions to prepare our financial statements in conformity with GAAP. Those estimates and assumptions affect the amounts we report in our Consolidated Financial Statements and accompanying Notes. Our actual results could differ from those estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, changes in cost recovery estimates, unexpected changes in weather conditions, changes in productivity, unidentified required vessel repairs, customer and vendor delays and other costs. We generally expect to experience a reasonable amount of unanticipated events, and some of those events can result in significant cost increases above cost amounts we previously estimated. As of December 31, 2016, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full when determined.

Loss Contingencies

We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We are currently involved in litigation and other proceedings, as discussed in Note 18, Commitments and Contingencies. We have accrued our estimates of the probable losses associated with these matters and associated legal costs are generally recognized as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Stock-Based Compensation

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. We use a Black-Scholes model to determine the fair value of certain share-based awards, such as stock options. Additionally, we use a Monte Carlo model to determine the fair value of certain share-based awards that contain market and performance-based conditions. The use of these models requires highly subjective assumptions, such as assumptions about the expected life of the award, vesting probability, expected dividend yield and the volatility of our stock price. See Note 14, Stock-Based Compensation, for additional information.

Cash, Cash Equivalents and Restricted Cash

Our cash and cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. A majority of our restricted cash and cash equivalents serves as collateral for outstanding letters of credit, as further discussed in Note 10, Debt.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount based on contracted prices. Amounts collected on accounts receivable are included in total cash provided by operating activities in the Consolidated Statements of Cash Flows.

We establish allowances for doubtful accounts based on our assessments of our customers’ willingness and abilities to pay. In addition to such allowances, there are often items in dispute or being negotiated that may require us to make an estimate as to the ultimate outcome. Past due receivable balances are written off when our internal collection efforts have been unsuccessful in collecting the amounts due.

Retainage, included in accounts receivable, represents amounts withheld from billings by our clients pursuant to provisions in the applicable contracts and may not be paid to us until the completion of specific tasks or the completion of the project and, in some instances, for even longer periods. Retainage may also be subject to restrictive conditions, such as performance guarantees.

Property, Plant and Equipment

We carry our property, plant and equipment at depreciated cost. Except for major marine vessels, we depreciate our property, plant and equipment using the straight-line method, over the estimated economic useful lives of eight to 33 years for buildings and three to 28 years for machinery and equipment. We do not depreciate property, plant and equipment classified as held for sale.

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We depreciate major marine vessels using the units-of-production method based on the utilization of each vessel. Our units-of-production method of depreciation involves the calculation of depreciation expense on each vessel based on the product of actual utilization for the vessel for the period and the applicable daily depreciation value (which is based on vessel book value, standard utilization and vessel life) for the vessel. Our actual utilization is determined based on the actual days that the vessel was working or otherwise actively engaged (other than in transit between regions) under a contract, as determined by daily vessel operating reports prepared by the crew of the vessel. Our standard utilization is determined by vessel at least annually based on recent actual utilization combined with an expectation of future utilization, both of which allow for idle time. We ensure that a minimum amount of accumulated depreciation of at least 50% of equivalent life-to-date straight-line depreciation is recorded. Additionally, in periods of very low utilization, a minimum amount of depreciation expense of at least 25% of an equivalent straight-line depreciation expense (which is based on an initial 25-year life) is recorded.

We capitalize drydocking costs in other current assets and other assets when incurred and amortize the costs over the period of time between two drydock periods, which is generally five years.  We expense the costs of other maintenance, repairs and renewals, which do not materially prolong useful life of an asset, as we incur them.

Investments in Unconsolidated Affiliates

We account for equity investments using the equity method of accounting if we have the ability to exercise significant influence over, but not control of, an investee.  Significant influence generally exists if we have an ownership interest representing between 20% and 50% voting rights.  Under the equity method of accounting, investments are stated initially at cost and are adjusted for subsequent additional investments and our proportionate share of profit or losses and distributions.

We record our share of the profit or losses of the equity method investments, net of income taxes, in the Consolidated Statements of Operations.  When our share of losses in an equity investment equals or exceeds our interest in the equity investment, including any other unsecured receivables, we do not recognize further losses, unless we have incurred obligations or made payments on behalf of the equity investment.

We evaluate our equity method investments for impairment when events or changes in circumstances indicate, in our management’s judgment, that the carrying value of such investments may have experienced other-than-temporary decline in value.  When evidence of loss in value has occurred, we compare the estimated fair value of investment to the carrying value of investment to determine whether an impairment has occurred.  If the estimated fair value is less than the carrying value and our management considers the decline in value to be other-than-temporary, the excess of the carrying value over the estimated fair value is recognized in the Consolidated Financial Statements as an impairment.

Derivative Financial Instruments

Our worldwide operations give rise to exposure to changes in certain market conditions, which may adversely impact our financial performance. When we deem it appropriate, we use derivatives as a risk management tool to mitigate the potential impacts of certain market risks. The primary market risk we manage through the use of derivative instruments is movement in foreign currency exchange rates. We use foreign currency derivative contracts to reduce the impact of changes in foreign currency exchange rates on our operating results. We use these instruments to hedge our exposure associated with revenues, costs (or both) 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.

In certain cases, contracts with our customers contain provisions under which some payments from our customers are denominated in U.S. Dollars and other payments are denominated in a foreign currency. In general, the payments denominated in a foreign currency are designed to compensate us for costs that we expect to incur in such foreign currency. In these cases, we may use derivative instruments to reduce the risks associated with foreign currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. We recognize all derivatives at fair value on the balance sheet. Derivatives that are not accounted for as hedges under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, are adjusted to fair value, and such changes are reflected through our results of operations. If a derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings, or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. See Note 12, Derivative Financial Instruments for additional information.

The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings generally are included as a component of gain (loss) on foreign currency—net in our Consolidated Statements of Operations.

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Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An established hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1—inputs are based on quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based on quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques.

The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivables and accounts payable approximate their fair values due to the short maturity of those instruments. See Note 13, Fair Value Measurements, for additional information.

Insurance and Self-Insurance

Our wholly owned “captive” insurance subsidiary provides coverage for our retentions under employer’s liability, general and products liability, automobile liability and workers’ compensation insurance and, from time to time, builder’s risk and marine hull insurance within certain limits. We may also have business reasons in the future to arrange for our insurance subsidiary to insure other risks which we cannot or do not wish to transfer to outside insurance companies. Premiums charged and reserves related to these insurance programs are based on the facts and circumstances specific to the insurance claims, our past experience with similar claims, loss factors and the performance of the outside insurance market for the type of risk at issue. The actual outcome of insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for the coverages discussed above. These accruals are based on various assumptions developed utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted as required based upon reported claims, actual claim payments and settlements and claim reserves. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable. Claims as a result of our operations, if greater in frequency or severity than actuarially predicted, could adversely impact the ability of our captive insurance subsidiary to respond to all claims presented.  

Concentration of Credit Risk

Our principal customers are businesses in the offshore oil and gas industry. This concentration of customers may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic or other conditions. In addition, we and many of our customers operate worldwide and are therefore exposed to risks associated with the economic and political forces of various countries and geographic areas. We generally do not obtain any collateral for our receivables. See Note 19, Segment Reporting, for additional information about our operations in different geographic areas.

Pension and Postretirement Benefit Plans

We have both defined benefit (funded and unfunded) and defined contribution plans. For the defined benefit plans, a projected benefit obligation is calculated annually by independent actuaries using the unit credit method.

We recognize actuarial gains and losses on pension and postretirement benefit plans immediately in our operating results. These gains and losses are generally measured annually as of December 31 and accordingly will normally be recorded during the fourth quarter, unless an earlier remeasurement is required. Should actual experience differ from actuarial assumptions, the projected pension benefit obligation and net pension cost and accumulated postretirement benefit obligation and postretirement benefit cost would be affected in future years.

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Pension costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, offset by expected return on plan assets.

For defined contribution plans, we pay contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The contributions are recognized as employee benefit expense when due.

Foreign Currency Translation

We translate assets and liabilities of our foreign operations, other than operations in highly inflationary economies, into U.S. Dollars at year-end exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of other comprehensive income (loss), net of tax.

Impairment Review

We review our tangible long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Income Taxes

We provide for income taxes based on the tax laws and rates in the countries in which we conduct our operations. MDR is a Panamanian corporation that earns all of its income outside of Panama. As a result, we are not subject to income tax in Panama. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variations, along with changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

We believe that our deferred tax assets recorded as of December 31, 2016 are realizable through carrybacks, future reversals of existing taxable temporary differences and future taxable income.  Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the net tax effects of net operating loss carryforwards.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. If we subsequently determine that we will be able to realize deferred tax assets in the future in excess of our net recorded amount, the resulting adjustment would increase earnings for the period in which such determination was made. We will continue to assess the adequacy of the valuation allowance on a quarterly basis. Any changes to our estimated valuation allowance could be material to our consolidated financial condition and results of operations. See Note 15, Income Taxes, for additional disclosures.

Classification

Certain prior year amounts have been reclassified for consistency with the current year presentation. Our Consolidated Financial Statements previously reported income and loss from investment in unconsolidated affiliates as components of operating income. In the first quarter of 2016, we concluded that classification of loss from investments in unconsolidated affiliates after provision for income tax better reflected how the operations of our unconsolidated affiliates relate to our business as a whole.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure resulting in:

• Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market (“MTM”) pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other.”

• Research and development (“R&D”) expenses are separately presented in our Consolidated Statements of Operations. Previously R&D expenses were included in Cost of operations.

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• Gain (loss) on foreign currency, net is included in Other non-operating income (expense), net in our Consolidated Statements of Operations.  Previously, Gain (loss) on foreign currency, net was separately presented.

• Note 19 includes, under caption “Information about Operations”, a reconciliation of segment operating income (loss) before income taxes to Income (loss) before income taxes in our Consolidated Statements of Operations.

Previously reported financial statements have been adjusted to reflect the above changes.

Recently Issued and Adopted Accounting Guidance

Statement of Cash Flows—In November 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash.  This ASU clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We adopted this ASU in the fourth quarter of 2016. As a result, our Consolidated Statement of Cash Flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents.  All comparative periods presented have been revised to reflect this change. See Note 5, Cash, Cash Equivalents and Restricted Cash for a reconciliation of the totals in Consolidated Statements of Cash Flows and in the Consolidated Balance Sheets.

In August 2016,the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU clarifies how entities should classify certain cash receipts and cash payments in their statements of cash flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We adopted this ASU in the third quarter of 2016. Our retrospective adoption did not have a material impact on the presentation of our Consolidated Financial Statements.

Consolidation—In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That are under Common Control.  This ASU amends the primary beneficiary assessment under ASC 810, requiring that a single decision maker consider indirect interests held by related parties under common control on a proportionate basis.  This ASU is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We adopted this ASU in the fourth quarter of 2016. Our adoption did not have a material impact on the accompanying Consolidated Financial Statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This ASU eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment.

In February 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis, which amends and changes the consolidation analysis previously required under U.S. GAAP. This ASU modifies the process used to evaluate whether limited partnerships and similar entities are variable interest entities or voting interest entities; affects the analysis performed by reporting entities regarding variable interest entities, particularly those with fee arrangements and related party relationships; and provides a scope exception for certain investment funds.

The amendments in ASUs 2015-16 and 2015-02 became effective for annual and interim periods beginning after December 15, 2015. Early adoption was permitted. We adopted these ASUs in the first quarter of 2016. Our adoption of these ASUs did not have a material impact on the accompanying Consolidated Financial Statements.

Stock Compensation—In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, earnings per share and classification in the statement of cash flows. We adopted this ASU in the second quarter of 2016. Our adoption did not have a material impact on the presentation of our Consolidated Financial Statements.

Derivatives—In March 2016, the FASB issued ASU 2016-06,Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This ASU clarifies that a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency.

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In March 2016, the FASB issued ASU 2016-05,Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under Topic 815 does not require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met.

The amendments in ASU 2016-06 and 2016-05 are effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. We adopted these ASUs in the fourth quarter of 2016. Our adoption of those ASUs did not have a material impact on the accompanying Consolidated Financial Statements.

Income Tax—In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Under this ASU an entity shall classify deferred tax assets and liabilities as noncurrent. We adopted ASU 2015-17 in the first quarter of 2016. Our adoption of that ASU did not have a material impact on the presentation of our Consolidated Financial Statements. All comparable periods presented have been revised to reflect this change.

Going Concern—In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under this ASU, we are required to assess our ability to continue as a going concern each interim and annual reporting period and provide certain disclosures if there is substantial doubt about our ability to continue as a going concern, including our management’s plan to alleviate any such substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter with early adoption permitted. We adopted this ASU in the third quarter of 2016. Our adoption of the ASU did not impact the presentation of our Consolidated Financial Statements or the disclosures in the Consolidated Financial Statements.

Accounting Guidance Issued But Not Adopted as of December 31, 2016

Income Taxes—In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.  This ASU requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  The ASU is effective for interim and annual periods beginning after December 15, 2017.  Early adoption is permitted.  The application of this amendment is not expected to have a material impact on our future Consolidated Financial Statements and related disclosures.

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. A valuation account, allowance for credit losses, will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This ASU is effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact of this guidance on our future Consolidated Financial Statements and related disclosures.

Leases—In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The ASU will require entities that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. This ASU is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this ASU on our future Consolidated Financial Statements and related disclosures.

Financial Assets and Liabilities—In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  Under this new guidance, entities will be required to measure all investments in equity securities that are not subject to equity method or consolidation accounting at fair value, with changes recognized in net income.  Fair value changes related to instrument-specific credit risk in financial liabilities accounted for under the fair value option in Accounting Standards Codification 825 must be recorded in other comprehensive income instead of earnings.  ASU 2016-01 also changes presentation and disclosure requirements for financial assets and liabilities.  ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption not permitted except related to changes in fair value for financial liabilities. We are currently assessing the impact of these amendments on our future Consolidated Financial Statements and related disclosures.

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Revenue from Contracts with Customers (Topic 606)—In May 2014, the FASB issued a new standard related to revenue recognition which supersedes most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. It also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The FASB has issued several amendments to the standard, including clarification on accounting for licenses of intellectual property, identifying performance obligations, reporting gross versus net revenue and narrow-scope improvements and practical expedients.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (“full retrospective method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (“modified retrospective application”).

We are currently assessing the impact of this ASU and the amendments on our future Consolidated Financial Statements and related disclosures. Adoption may affect the manner in which the company determines the unit of account for its projects and estimates revenue associated with unapproved change orders and claims. We intend to adopt the new standard on January 1, 2018 (the “initial application” date):

• using the modified retrospective application, with no restatement of the comparative periods presented and a cumulative effect adjustment as of the date of adoption;

• applying the new standard only to those contracts that are in process at the date of initial application; and

• disclosing the impact of the new standard on our 2018 Consolidated Financial Statements.

This standard could have a significant impact on our Consolidated Financial Statements and related disclosures.

NOTE 2—REVENUE RECOGNITION

Contract Types

We execute our contracts using a variety of pricing methods, including fixed-price, unit-basis, cost-plus, or some combination of those methods, with fixed-price being the most prevalent.  The percentage of our revenues by contract type for each of the years ended December 31 was as follows:

	2016			2015			2014
Fixed-price		92	%		93	%		87	%
Unit-basis and other		8			7			13
		100	%		100	%		100	%

Unapproved Change Orders

As of December 31, 2016, total unapproved change orders included in our estimates at completion aggregated approximately $119 million, of which approximately $15 million was included in backlog. As of December 31, 2015, total unapproved change orders included in our estimates at completion aggregated approximately $122 million, of which approximately $21 million was included in backlog.

Claims Revenue

The amount of revenues included in our estimates at completion (i.e., contract values) associated with such claims was $10 million as of December 31, 2016 and 2015, all in our Middle East segment. These amounts are determined based on various factors, including our analysis of the underlying contractual language and our experience in making and resolving claims. Our unconsolidated joint ventures did not include any material claims revenue in their 2016, 2015 and 2014 financial results.

None of the claims included in our estimates at completion at December 31, 2016 were the subject of any litigation proceedings. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses.

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Loss Recognition

As of December 31, 2016, we have provided for our estimated costs to complete for all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full immediately and reflected in cost of operations in the Consolidated Statements of Operations.

For loss projects, it is possible that our estimates of gross profit could increase or decrease based on changes in productivity, actual downtime and the resolution of change orders and claims with the customers. The provision for estimated losses on all active uncompleted projects is a component of "Advance billings on contracts" in our Consolidated Balance Sheets.

As of December 31, 2016, KJO Hout, an active EPCI project in our MEA segment, was in an $8 million loss position and is expected to be complete in the second quarter of 2017.

As of December 31, 2015, two significant active projects in our AEA segment were in loss positions. PB Litoral, an EPCI project, in Mexico, which was completed in the first quarter of 2016, and the five-year Agile vessel charter project in Brazil which was terminated in the second quarter of 2016.

The provision for estimated losses on all active uncompleted projects in our Consolidated Balance Sheets as of December 31, 2016 was not material and was $22 million as of December 31, 2015.

NOTE 3—USE OF ESTIMATES

The following is a discussion of our most significant changes in estimates, which impacted 2016, 2015 and 2014 segment operating income.

Year ended December 31, 2016

Segment operating income for 2016 was impacted by net favorable changes in cost estimates totaling approximately $91 million.

AEA—The segment was positively impacted by net favorable changes in estimates aggregating approximately $38 million, primarily due to:

• successful execution and close-out improvements on the PB Litoral, Chevron Jack St Malo, EOG Sercan and Exxon Julia Subsea Tieback projects; and

• productivity improvements and associated cost savings related to the DB 50 and the NO 102 marine campaigns undertaken in the Gulf of Mexico.

Included in the change was a reversal of a $7 million provision for liquidated damages, due to an agreed additional extension of the PB Litoral project completion date.

Those changes were partially offset by net unfavorable changes on multiple projects, none of which were individually material.

MEA—The segment was positively impacted by net favorable changes in estimates aggregating approximately $38 million, primarily due to productivity improvements and associated cost savings related to the DB 27 and the Intermac 406, both associated with Saudi Aramco projects, due to effective execution.

Those favorable changes in estimates were partially offset by:

• marine equipment downtime due to unfavorable weather conditions on a project in Qatar; and

• a change in estimate at completion on the KJO Hout project, in the Neutral Zone, due to changes to our execution plan and increased costs associated with DB 27 vessel and subcontractor standby time, primarily due to work permit delays. This project is in an $8 million loss position and is expected to be complete in the second quarter of 2017.

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ASA―The segment was positively impacted by net favorable changes in estimates aggregating approximately $15 million, primarily driven by:

• efficient project execution including productivity improvements on our marine vessels and associated cost savings, and improved fabrication facility utilization;

• favorable settlements with our vendors and sub-contractors; and

• favorable agreements on outstanding change orders on active and completed projects.

Those net favorable changes were partially offset by a $31 million increase in our estimated costs at completion, as of December 31, 2016, on our Ichthys project in Australia. During January 2017, we identified a failure in supplier-provided subsea-pipe connector components previously installed on this project. As a result, we have determined our estimated costs at completion for the project, as a whole, will increase by $34 million, primarily due to: (1) offshore costs attributable to replacement of those failed components; (2) changes to our execution plan; and (3) incremental mobilization costs and costs attributable to inefficiencies of executing work out-of-sequence as a result of the revised execution plan. Due to uncertainties in the estimation process, we believe it is reasonably possible the completion costs could be further revised in the near term by an additional $10 million. Although this project could recognize these additional costs in 2017, we expect the project to remain in an overall profitable position.

Year ended December 31, 2015

Segment operating income for 2015 was impacted by net favorable changes in cost estimates totaling approximately $70 million.

AEA―The segment had net favorable changes in estimates aggregating approximately $27 million, primarily due to:

• the extension of the PB Litoral project completion date, which resulted in a $12 million reversal of liquidated damages;

• the Agile charter project, which provided $11 million of favorable changes due to (1) productivity improvements and (2) our cost reduction initiatives; and

• other projects experienced net favorable changes in estimate of $4 million, which individually were not material.  

MEA―The segment had net favorable changes in estimates aggregating approximately $20 million primarily due to: 

• two Saudi Aramco projects were positively impacted by an aggregate $24 million related to: (1) productivity improvements and associated cost savings on the Intermac 406 vessel, which was working on the Abu Ali cable-lay project; and (2) offshore installation-related cost savings as well as reimbursement for standby cost incurred on the Manifa project; and

• the KJO Hout project in the Neutral Zone was positively impacted by $9 million due to a favorable discussion with the customer on reimbursement for vessel downtime and cost savings resulting from customer-approved design optimization;

Those net favorable changes were partly offset by a $20 million change in estimate to complete on the ADMA 4 GI project in the U.A.E. because of changes in our execution plan, increased costs associated with the DB 32 vessel demobilization and productivity related cost increases during hookup and pre-commissioning work. Other projects experienced net positive changes in estimate of $7 million, which individually were not material.

ASA―The segment had net favorable changes in estimates aggregating approximately $23 million primarily due to:

• positive impact of $5 million benefit on the Ichthys project, due to project execution cost savings;

• net positive changes in estimates of $4 million on the Gorgon MRU project due to close out improvements; and

• net positive changes in estimate of $14 million on other multiple projects, which individually were not material.

Year ended December 31, 2014

Segment operating income for 2014 was impacted by changes in estimates relating to projects in each of our segments.

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AEA―The segment was negatively impacted by net unfavorable changes in estimates aggregating $37 million associated with the following:

• on the PB Litoral project, an EPCI project in Mexico, we increased our estimated cost to complete by approximately $69 million, due to liquidated damages and extended project management costs arising from unexpected project delays and projected fabrication cost increases reflecting reduced productivity, and execution plan changes to mitigate further project delays, as well as procurement and marine installation cost increases;

• on the Jack St. Malo subsea project in the Gulf of Mexico, we increased our estimated cost to complete by approximately $6 million, primarily due to equipment downtime issues on the NO 102, our primary vessel working on the project, partially offset by project close-out savings on marine spread costs and increased cost recovery estimates based on positive developments from the ongoing negotiations with the customer. This project, which was in a loss position, was completed in 2014; and

• on a fabrication project in Morgan City, the BG Comp Module, completed during 2013, we reduced our cost recovery estimates by approximately $8 million, mainly based on an agreement in principle with the customer in 2014, which resulted in lower-than-anticipated recoveries.

Those negative impacts were partially offset by $40 million of project close-out improvements on the Papa Terra EPCI project in Brazil, which resulted from marine cost reductions upon completion of activities and increased recoveries due to successful developments from the ongoing approval process for additional weather-related compensation.

We also recognized $5 million of cost reductions on the Gulfstar marine installation project in the Gulf of Mexico, primarily due to project close-out improvements.

MEA―The segment was negatively impacted by net unfavorable changes aggregating about $4 million, primarily attributable to changes on the following:

• Safaniya Phase-2, a Saudi Aramco EPCI project, we increased our estimated cost at completion by approximately $23 million, net.  Increases of $43 million were primarily a result of vessel downtime due to weather and standby delays, and were partially offset by increased cost recovery estimates of approximately $20 million based on positive discussions with the customer during the fourth quarter of 2014;

• Safaniya Phase-1, another Saudi Aramco project, we increased our estimated cost to complete by $19 million, primarily as a result of increased cost estimates to complete the onshore scope. Although the project recognized a loss in 2013, it remains in an overall profitable position and is substantially complete; and

• the KJO Ratawi project, we increased our estimated costs to complete by approximately $12 million, to reflect cost overruns related to (1) the onshore work, which was substantially completed in July 2014, and (2) delays in completing the offshore work, due to delayed access to the project site, resulting in a revised execution plan. The revised execution plan included the costs of an incremental mobilization and reflected inefficiencies of executing out-of-sequence work. This project was completed in the third quarter of 2015.

These negative changes were partially offset by approximately $54 million due to increased cost recovery estimates on a completed pipelay project in the Caspian based on positive negotiations with the customer in 2014, in connection with the ongoing project close-out process.

ASA―The segment experienced net favorable changes aggregating approximately $52 million, primarily attributable to changes in estimates on following:

• changes in estimates on the Siakap subsea development project in Malaysia resulted in an improvement of approximately $34 million in 2014, primarily related to productivity improvements on our marine vessels and offshore support activities, as well as the favorable resolution of cost contingencies relating to offshore performance risks;

• the BSP Champion marine installation project in Brunei, a reduction in estimated cost to complete due to productivity improvements on marine vessels and offshore support activities resulted in project savings of approximately $12 million;

• the Dai Hung SURF and Macedon projects, insurance claim collection and final project close-out adjustments resulted in an additional recovery of approximately $10 million in 2014; and

• completion of Sepat FEED and Esso KTT projects resulted in project close-out savings of approximately $6 million.

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These positive changes were partially offset by a negative change in estimate of $11 million on the Ichthys project in Australia, primarily due to lower than expected fabrication productivity, increase in procurement costs as well as an increase in marine costs primarily due to changes in marine asset utilization.

NOTE 4—RESTRUCTURING

In 2014 we completed a major review of our cost structure, and subsequently implemented a plan, which we referred to as the McDermott Profitability Initiative (the “MPI”), to increase our profitability and flexibility through reduced fixed and variable costs. The plan included personnel reductions, centralization of operational activities, other cost reduction initiatives and certain asset impairments. As part of MPI, the previously announced move of our ASA regional headquarters from Singapore to Kuala Lumpur, along with additional sourcing initiatives, is substantially complete.We completed the MPI restructuring during third quarter of 2016.

We continued our efforts to improve our cost structure by initiating the Additional Overhead Reduction program (“AOR”) during the fourth quarter of 2015. AOR actions, which have included personnel reductions affecting direct operating and selling, general and administrative expenses, were complete as of December 31, 2016.

During 2013 and 2014, we implemented a restructuring of our Americas operations, which involved our Morgan City, Louisiana, Houston, Texas, New Orleans, Louisiana and some Brazil locations. The restructuring involved, among other things, reductions of management, administrative, fabrication and engineering personnel, and the discontinued utilization of the Morgan City facility.

We completed a Corporate restructuring during 2014. Costs associated with our Corporate restructuring activities primarily included severance, relocation and other personnel-related costs and costs for advisors, as well as costs for certain executive management changes that became effective during the fourth quarter of 2013.

The above restructuring initiatives are driven and managed by Corporate. Those costs are not allocated to our reportable segments.

The following table presents restructuring costs incurred in 2016, 2015, 2014 and from inception, by major cost type.

	Year ended December 31,									Incurred from  inception to
	2016					2015		2014		December 31, 2016
	(In thousands)
Americas Restructuring	$	(1,350	)	(1	)	$	2,308	$	9,170	$	44,194
Corporate Restructuring		-					-		4,940		6,601
MPI
Severance and other personnel-related costs		2,590					15,217		-		17,807
Asset impairment and disposal		-					7,471		-		7,471
Legal and other advisor fees		222					7,414		4,003		11,639
Other		2,436					7,609		-		10,045
Total MPI		5,248					37,711		4,003		46,962
AOR
Severance and other personnel-related costs		5,012					-		-		5,012
Legal and other advisor fees		1,968					800		-		2,768
Other		385					-		-		385
Total AOR		7,365					800		-		8,165
Total	$	11,263				$	40,819	$	18,113	$	105,922

⁽¹⁾ This amount includes reversal of environmental liability established in connection with discontinued utilization of our Morgan City fabrication facility. For further discussion see, Note 18, Commitments and Contingencies.

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NOTE 5—CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the totals of such amounts shown in the Consolidated Statements of Cash Flows.  

	December 31, 2016		December 31, 2015
	(in thousands)
Cash and cash equivalents	$	595,921	$	664,844
Restricted cash and cash equivalents		16,412		116,801
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	612,333	$	781,645

A majority of our restricted cash balances as of December 31, 2016 and 2015 serves as collateral for letters of credit, as further discussed in Note 10, Debt. 

NOTE 6—ACCOUNTS RECEIVABLE

Accounts Receivable—Trade, Net

A summary of contract receivables is as follows:

	December 31, 2016			December 31, 2015
	(in thousands)
Contract receivables:
Contracts in progress	$	245,604			164,898
Completed contracts		40,345			35,702
Retainages		58,431			17,896
Unbilled (1)		4,303			4,303
Less allowances		(14,299	)		(14,325	)
Accounts receivable—trade, net	$	334,384		$	208,474

⁽¹⁾ This amount relates to a project milestone billing for which we are awaiting the customer’s final acceptance certificate. We expect to receive the final acceptance certificate during 2017.

We expect to invoice our unbilled receivables once certain milestones or other metrics are reached, and we expect to collect all unbilled amounts. We believe that our provision for losses on uncollectible accounts receivable is adequate for our credit loss exposure.

The following amounts represent retainages on contracts:

	December 31, 2016		December 31, 2015
	(in thousands)
Retainages expected to be collected within one year	$	58,431	$	17,896
Retainages expected to be collected after one year		127,193		155,061
Total retainages	$	185,624	$	172,957

We have included in Accounts receivable—trade, net, retainages expected to be collected in 2017. Of the long-term retainages at December 31, 2016, we expect to collect $121 million in 2018 and $6 million in 2019.

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Accounts Receivable—Other

A summary of accounts receivable—other is as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Receivables from unconsolidated affiliates	$	13,292	$	12,816
Accrued unbilled other		12,075		14,021
Employee receivables		4,730		4,376
Other taxes receivable		2,483		28,743
Other		4,349		6,733
Accounts receivable—other	$	36,929	$	66,689

Employee receivables are expected to be collected within 12 months, and any allowance for doubtful accounts on our Accounts receivable—other is based on our estimate of the amount of probable losses due to the inability to collect these amounts (based on historical collection experience and other available information). As of December 31, 2016 and 2015, no such allowance for doubtful accounts was recorded.

NOTE 7—CONTRACTS IN PROGRESS AND ADVANCE BILLINGS ON CONTRACTS

Components of contracts in progress and advance billings on contracts is as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Costs incurred less costs of revenue recognized	$	119,688	$	112,819
Revenues recognized less billings to customers		199,450		323,010
Contracts in Progress	$	319,138	$	435,829
Billings to customers less revenue recognized		42,637		265,618
Costs incurred less costs of revenue recognized		149,849		(100,845	)
Advance Billings on Contracts	$	192,486	$	164,773

NOTE 8—PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment by asset category is as follows:

	December 31, 2016			December 31, 2015
	(In thousands)
Marine Vessels	$	1,789,942		$	1,391,556
Construction Equipment		474,128			478,175
Buildings		152,584			155,292
All other		148,805			143,580
Construction in Progress		20,720			298,749
Total Cost	$	2,586,179		$	2,467,352
Accumulated Depreciation		(898,878	)		(856,493	)
Net Book Value	$	1,687,301		$	1,610,859

Interest capitalization―We incurred interest of $75 million, $74 million and $85 million and capitalized $14 million, $23 million and $24 million of interest in 2016, 2015 and 2014, respectively.  The capitalized interest primarily related to vessels under construction in the respective periods – the DLV 2000 and CSV 108.

Depreciation―Our depreciation expense was approximately $90 million, $100 million and $93 million in 2016, 2015 and 2014, respectively.

Asset Sales—During 2014, we completed the sale of the DB16 and the DLB KP1 for aggregate cash proceeds of approximately $25 million, and realized approximately $11 million of associated gains.

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In April 2014, we completed the sale of our Harbor Island facility near Corpus Christi, Texas for proceeds of approximately $32 million, and realized an approximate $25 million gain.

In June 2014, as part of our plan to discontinue utilization of our Morgan City facility, we disposed of several assets, including various items of equipment, for aggregate cash proceeds of approximately $14 million, resulting in an aggregate gain of approximately $11 million, of which approximately $1 million was recorded in connection with our Americas restructuring, discussed in Note 4, Restructuring. This portion of the gain pertained to an impairment charge previously recorded in 2013 in connection with the Americas restructuring.

Loss (gain) on asset disposals is generally reflected in Corporate and Other.

NOTE 9—EQUITY METHOD INVESTMENTS

Our consolidated net income includes our proportionate share of the net income or loss of our equity method investees.  We do not have any investments accounted for under the equity method that are considered individually material. None of the equity method investees are listed on a stock exchange.

Summarized 100 percent balance sheet information for investments in equity method investees, combined, are set forth below:

	December 31, 2016		December 31, 2015
	(In thousands)
Current Assets	$	74,430	$	133,171
Noncurrent Assets		124,862		189,536
Total Assets	$	199,292	$	322,707
Current Liabilities	$	91,268	$	176,165
Noncurrent Liabilities		86,963		112,162
Total Liabilities	$	178,231	$	288,327

Summarized 100 percent income statement information for investments in equity method investees, combined, are set forth below:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Revenues	$	111,847		$	107,795		$	294,408
Cost of operations		87,335			105,465			275,015
Gross Profit		24,512			2,330			19,393
Net Income (loss)	$	(8,609	)	$	(38,245	)	$	(28,773	)

Our share of income taxes incurred directly by an equity company is reported in equity in earnings of equity method investee, and as such is not included in income taxes in our Consolidated Financial Statements.

During the third quarter of 2016, we exited our investment in THHE Fabricators Sdn. Bhd. and recorded a $12 million decrease in Investments in unconsolidated affiliates and a $5 million gain in Other non-operating income (expense), net in our ASA segment. For further discussion see Note 17, Stockholders’ Equity.

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NOTE 10—DEBT

As of December 31, 2016 and 2015 the carrying values of our long-term debt obligations, net of unamortized debt issuance costs of $14 million and $20 million, respectively, are as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Senior Notes	$	493,461	$	491,890
Term Loan		212,070		289,979
North Ocean 105 construction financing		31,877		38,263
Amortizing Notes		7,932		21,205
Other, including capital lease obligation		7,180		2,546
		752,520		843,883
Less: Amounts due within one year		48,125		24,882
Total long-term debt	$	704,395	$	819,001

Maturities of long-term debt during the five years subsequent to December 31, 2016 are as follows:

	(in thousands)
2017	$	49,820
2018		3,427
2019		212,846
2020		-
2021		500,000
Total Debt	$	766,093
Debt Issuance Costs		(13,573	)
Total Debt - Net of Issuance Costs	$	752,520

In April 2014, we entered into a credit agreement (the “Credit Agreement”), which initially provided for a $400 million first-lien, first-out three-year letter of credit facility (the “LC Facility”), scheduled to mature in 2017, and a $300 million first-lien, second-out five-year term loan (the “Term Loan”), scheduled to mature in 2019. The indebtedness and other obligations under the Credit Agreement are unconditionally guaranteed on a senior secured basis by substantially all of our wholly owned subsidiaries, other than our captive insurance subsidiary (collectively, the “Guarantors”). We also completed the issuance of (a) $500 million of second-lien, seven-year, senior secured notes; and (b) $288 million of tangible equity units (“TEUs”) composed of (1) three-year amortizing, senior unsecured notes, in an aggregate principal amount of $48 million, and (2) prepaid common stock purchase contracts.

In October 2015, we entered into Amendment No. 1 to the Credit Agreement, which amended the Credit Agreement primarily to increase the existing LC Facility from $400 million to $520 million.

In February 2016, we entered into Amendment No. 2 to the Credit Agreement, which amended the Credit Agreement to permit us to add to Covenant EBITDA certain cash restructuring expenses related to the conclusion of MPI or implementation of AOR for the quarters ending on or after March 31, 2016 but before April 16, 2017, in an aggregate amount not to exceed $25 million (as of any date of determination).      

On April 18, 2016, we entered into Amendment No. 3 to the Credit Agreement, which, among other things:

• replaced the existing EBITDA covenant with new ratios (as defined in Amendment No. 3) as follows:

• a minimum fixed charge coverage ratio of 1.15x for the fiscal quarter ended March 31, 2016 and each fiscal quarter thereafter;

• a maximum total leverage ratio of 4.5x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through June 30, 2017, 4.0x for the fiscal quarters ending September 30, 2017 and December 31, 2017, and 3.5x for each fiscal quarter thereafter; and

• a maximum secured leverage ratio of 2.0x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through December 31, 2017, and 1.5x for each fiscal quarter thereafter; and

• amended the maximum capital expenditure covenant to limit capital expenditures in 2016 and thereafter to $250 million each fiscal year, with any prior fiscal year unused capital expenditures up to $125 million able to be carried forward and added to the next year’s capital expenditure capacity, for a total of $375 million.

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In addition, upon the May 13, 2016 satisfaction of certain conditions set forth in Amendment 3, including the receipt of requisite consents from term lenders under the Credit Agreement, Amendment 3 also amended the Credit Agreement to, among other things:

• extend the maturity date of the LC Facility commitments to April 22, 2019, unless the Term Loan has not been repaid or refinanced by January 15, 2019, in which case the LC Facility commitments will expire on January 15, 2019;

• change the existing letter of credit capacity of $520 million to $450 million;

• extend the deadline for mortgaging the DLV 2000 to one year after taking delivery thereof, and give McDermott the option to consider potential financing options for the DLV 2000 during that period;

• increase the basket for purchase money indebtedness from $20 million to $150 million;

• modify the covenant limiting acquisitions to permit up to $150 million of acquisitions; and

• modify the covenant limiting the prepayment or purchase of junior priority debt to permit up to $100 million of such prepayments or purchases.

On May 12, 2016, we entered into Amendment No. 4 to the Credit Agreement which, among other things:

• increased the applicable margin payable on the Term Loan by 3.0% per annum; and

• required that the net cash proceeds of any sale (including a sale and leaseback) of the DLV 2000 be applied as a mandatory prepayment of the Term Loan.

On May 13, 2016, McDermott prepaid $75 million of the Term Loan and satisfied the other conditions to the “effective date” set forth in Amendment No. 4.

As of December 31, 2016 we were in compliance with the financial covenants set forth in the Credit Agreement.

LC Facility

As ofDecember 31, 2016 and 2015, the capacity under our LC Facility was $450 million and $520 million, respectively. The aggregate face amount of letters of credit issued under the LC Facility, as of December 31, 2016 and 2015, was $442 million and $384 million, respectively.

The LC Facility permits us to deposit up to $300 million with letter of credit issuers to cash collateralize letters of credit issued on a bilateral basis outside the credit facility. As of December 31, 2016, we had bilateral arrangements to issue cash collateralized letters of credit of $175 million. As of December 31, 2016 and 2015, we had an aggregate face amount of approximately $16 million and $102 million of such letters of credit outstanding supported by cash collateral. We have included the supporting cash collateral in restricted cash and cash equivalents in the accompanying Consolidated Balance Sheets.

The LC Facility is secured on a first-lien, first-out basis (with relative priority over the Term Loan) by pledges of the capital stock of all the Guarantors and mortgages on, or other security interests in, substantially all the tangible and intangible assets of our company and the Guarantors, subject to specific exceptions.

The LC Facility contains various customary affirmative covenants, as well as specific affirmative covenants, including specific reporting requirements and a requirement for ongoing periodic financial reviews by a financial advisor. The LC Facility also requires compliance with various negative covenants, including limitations with respect to the incurrence of other indebtedness and liens, restrictions on acquisitions, capital expenditures and other investments, restrictions on sale leaseback transactions and restrictions on prepayments of other indebtedness.

The LC Facility provides for a commitment fee of 0.50% per year on the unused portion of the LC Facility and letter of credit fees at an annual rate of 2.25% for performance letters of credit and 4.50% for financial letters of credit, as well as customary issuance fees and other fees and expenses.

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Term Loan

The Term Loan bears interest at a floating rate, which can be, at our option, either: (1) a LIBOR rate for a specified interest period (subject to a LIBOR “floor” of 1.00%) plus an applicable margin of 7.25%; or (2) an alternate base rate (subject to a base rate “floor” of 2.00%) plus an applicable margin of 6.25%. The Term Loan was incurred with 25 basis points of original issue discount.

The Term Loan is secured on a first-lien, second-out basis (with the LC Facility having relative priority over the Term Loan) by pledges of the capital stock of all the Guarantors and mortgages on, or other security interests in, substantially all tangible and intangible assets of our company and the Guarantors, subject to specific exceptions.

The Term Loan requires mandatory prepayments from: (1) the proceeds from the sale of assets, as well as insurance proceeds, in each case subject to certain exceptions, to the extent such proceeds are not reinvested in our business within 365 days of receipt; (2) net cash proceeds from the incurrence of indebtedness not otherwise permitted under the Credit Agreement; and (3) 50% of amounts deemed to be “excess cash flow,” subject to specified adjustments. The Term Loan requires $750,000 quarterly payments of principal.

The Term Loan requires compliance with various customary affirmative and negative covenants. We are required to maintain a ratio of “ownership adjusted fair market value” of marine vessels to the sum of (1) the outstanding principal amount of the Term Loan and (2) the aggregate principal amount of unreimbursed drawings and advances under the LC Facility of at least 1.75:1.00. As of December 31, 2016, the actual ratio was 6.4 to 1.0.  As of December 31, 2016, we were in compliance with all of the covenants under the Term Loan.

Under the terms of the Credit Agreement we are restricted in our ability to pay junior priority indebtness, which would include dividends to MDR stockholders, to $50 million prior to April 16, 2017 and $150 million after April 16, 2017.

Senior Notes

In April 2014 we issued $500 million in aggregate principal amount of 8.00% senior secured notes due 2021 (the “Notes”) in a private placement in accordance with Rule 144A and Regulation S under the Securities Act of 1933, as amended. Interest on the Notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2014. The Notes are scheduled to mature on May 1, 2021.

The Notes are unconditionally guaranteed on a senior secured basis by the Guarantors, and the Notes are secured on a second-lien basis by pledges of capital stock of certain of our subsidiaries and mortgages and other security interests covering (1) specified marine vessels owned by certain of the Guarantors and (2) substantially all the other tangible and intangible assets of our company and the Guarantors, subject to exceptions for certain assets.

At any time, or from time to time, on or after May 1, 2017, at our option, we may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed)set forth below, together with accrued and unpaid interest to the redemption date, if redeemed during the 12-month period beginning May 1 of the years indicated:  

Year	Percentage
2017		104	%
2018		102
2019 and thereafter		100

The indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: (1) incur or guarantee additional indebtedness or issue preferred stock; (2) make investments or certain other restricted payments; (3) pay dividends or distributions on capital stock or purchase or redeem subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; (6) create certain liens; (7) sell all or substantially all of our assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create unrestricted subsidiaries. Many of those covenants would become suspended if the Notes were to attain an investment grade rating from both Moody’s Investors Service, Inc. and Standard and Poor’s Ratings Services and no default has occurred.

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Tangible Equity Units (“TEUs”)

In April 2014, we issued 11,500,000 6.25% TEUs, each with a stated amount of $25. Each TEU consists of (1) a prepaid common stock purchase contract and (2) a senior amortizing note due April 1, 2017 (each an “Amortizing Note”) that has an initial principal amount of $4.1266 per Amortizing Note and bears interest at a rate of 7.75% per annum and has a final scheduled installment payment date of April 1, 2017.

The prepaid common stock purchase contracts were accounted for as additional paid-in capital totaling $240 million.  As of December 31, 2016, the outstanding principal balance of the Amortizing Notes was $9 million, all of which was classified as current notes payable.

Each prepaid common stock purchase contract will automatically settle on April 1, 2017, unless settled earlier: (1) at the holder’s option, upon which we will deliver shares of our common stock, based on the applicable settlement rate and applicable market value of our stock as determined under the purchase contract; or (2) at our option, upon which we will deliver shares of our common stock, based upon the stated maximum settlement rate of 3.5562 shares per Unit, subject to adjustment. Potential dilutive common shares that may be issued for the settlement of the common stock purchase contracts, based on the maximum number of shares issuable per Unit is 40.9 million (i.e., conversion at $7.03 per share). The potential minimum number of shares issuable is 33.4 million (i.e., conversion at $8.61 per share), which represents 2.9030 per Unit. The maximum and minimum settlement rates for the Units are subject to adjustment for certain dilutive events.

North Ocean Financing

NO 105―On September 30, 2010, MDR, as guarantor, and North Ocean 105 AS, in which we have a 75% ownership interest, as borrower, entered into a financing agreement to finance a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of North Ocean 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of North Ocean 105 AS. MDR unconditionally guaranteed all amounts to be borrowed under the agreement. Under the Credit Agreement, we are required to exercise our option under the North Ocean 105 AS joint venture agreement to purchase Oceanteam ASA’s 25% ownership interest in the vessel-owning company and repay the outstanding NO 105 debt by April 2017.

During 2016, North Ocean 105 AS converted the $5 million dividend declared for the year ended December 31, 2015 in favor of Oceanteam ASA into a $5 million note payable.  The note, which is expected to mature in June 2017, bears interest at 4% per annum.

Bank Guarantees and Bilateral Letter of Credit

MDR has uncommitted lines of credit in place with Middle Eastern banks in support of our contracting activities in the Middle East. Bank guarantees issued under these agreements totaled $359 million and $118 million, as of December 31, 2016 and 2015, respectively. Overall capacity under these arrangements totaled $375 million and $200 million as of December 31, 2016 and 2015, respectively.  

During January 2017, we received an increase of $150 million in capacity under our agreements and now have an overall capacity of $525 million.

Surety Bonds

As of December 31, 2016 and 2015, surety bonds issued under general agreements of indemnity in favor of surety underwriters in support of contracting activities of our subsidiaries J. Ray McDermott de México, S.A. de C.V. and McDermott, Inc. totaled $79 million and $54 million, respectively.

NOTE 11—PENSION AND POSTRETIREMENT BENEFITS

Although we currently provide retirement benefits for most of our U.S. employees through sponsorship of the McDermott Thrift Plan (see “Defined Contribution Plans” below), some of our longer-term U.S. employees and former employees are entitled to retirement benefits under the McDermott (U.S.) Retirement Plan, a non-contributory qualified defined benefit pension plan (the “McDermott Plan”), and several non-qualified supplemental defined benefit pension plans. The McDermott Plan and the non-qualified supplemental defined benefit pension plans are collectively referred to herein as the “Domestic Plans.” The McDermott Plan has been closed to new participants since 2006, and benefit accruals under the McDermott Plan were frozen completely in 2010.

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We also sponsor a defined benefit pension plan established under the laws of the Commonwealth of the Bahamas, the J. Ray McDermott, S.A. Third Country National Employees Pension Plan (the “TCN Plan”) which provides retirement benefits for certain of our current and former foreign employees. Effective August 1, 2011, new entry into the TCN Plan was closed, and effective December 31, 2011, benefit accruals under the TCN Plan were frozen. Effective January 1, 2012, we established a new global defined contribution plan to provide retirement benefits to non-U.S. expatriate employees who may have otherwise obtained benefits under the TCN Plan.

Retirement benefits under the McDermott Plan and the TCN Plan are generally based on final average compensation and years of service, subject to the applicable freeze in benefit accruals under the plans. Our funding policy is to fund the plans as recommended by the respective plan actuaries and in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or other applicable law. The Pension Protection Act of 2006 (“PPA”) amended ERISA and modified the funding requirements for certain defined benefit pension plans including the McDermott Plan. We are in compliance with provisions under the PPA accelerated funding requirements.

	Domestic Plans						TCN Plan
	Year Ended December 31,						Year Ended December 31,
	2016			2015			2016			2015
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	519,199		$	556,632		$	38,265		$	43,985
Interest cost		21,102			21,613			1,351			1,626
Actuarial loss (gain)		2,641			(21,754	)		(3,172	)		(4,095	)
Benefits paid		(37,586	)		(37,292	)		(5,227	)		(3,251	)
Benefit obligation at end of year		505,356			519,199			31,217			38,265
Change in plan assets:
Fair value of plan assets at beginning of year		494,146			551,821			38,257			42,106
Actual return on plan assets		26,891			(21,889	)		(778	)		(598	)
Company contributions		1,510			1,506			-			-
Benefits paid		(37,586	)		(37,292	)		(5,227	)		(3,251	)
Fair value of plan assets at end of year		484,961			494,146			32,252			38,257
Funded status	$	(20,395	)	$	(25,053	)	$	1,035		$	(8	)
Amounts recognized in balance sheet consist of:
Other Assets	$	-		$	-		$	1,035		$	-
Accrued pension liability—current		(1,382	)		(1,409	)		-			-
Pension liability		(19,013	)		(23,644	)		-			(8	)
Accrued benefit liability		(20,395	)		(25,053	)		-			(8	)
Net (Liability) Asset	$	(20,395	)	$	(25,053	)	$	1,035		$	(8	)

	Domestic Plans				TCN Plan
	Year Ended December 31,				Year Ended December 31,
	2016		2015		2016		2015
	(In thousands)
Supplemental information:
Plans with accumulated benefit obligation in excess          of plan assets
Projected benefit obligation	$	505,356	$	519,199	$	31,217	$	38,265
Accumulated benefit obligation		505,356		519,199		31,217		38,265
Fair value of plan assets		484,961		494,146		32,252		38,257

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Assumptions

	Domestic Plans						TCN Plan
	2016			2015			2016			2015
Weighted average assumptions used to determine net periodic benefit obligations at December 31:
Discount rate		4.1	%		4.2	%		4.1	%		4.0	%
Rate of compensation increase	N/A			N/A			N/A			N/A

	Domestic Plans									TCN Plan
	Year Ended December 31,									Year Ended December 31,
	2016			2015			2014			2016			2015			2014
	(In thousands)
Supplemental information:
Components of periodic benefit cost:
Interest cost	$	21,102		$	21,613		$	26,972		$	1,351		$	1,626		$	1,900
Expected return on plan assets		(20,006	)		(26,707	)		(27,501	)		(1,587	)		(2,840	)		(2,961	)
Actuarial loss (gain)		(4,244	)		26,842			(8,728	)		(807	)		(657	)		6,027
Net periodic benefit cost (gain)	$	(3,148	)	$	21,748		$	(9,257	)	$	(1,043	)	$	(1,871	)	$	4,966
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate		4.2	%		4.0	%		4.8	%		4.0	%		4.0	%		4.8	%
Expected return on plan assets		4.2	%		5.0	%		5.0	%		4.7	%		6.9	%		6.9	%
Rate of compensation increase	N/A			N/A			N/A			N/A			N/A			N/A

Expected Long-Term Rate of Return—Our long-term rates of return reflect the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In setting the long-term assumed rate of return, we consider capital markets future expectations and the asset mix of the plans’ investments. Actual long-term return can, in relatively stable markets, also serve as a factor in determining future expectations. We consider many factors that include, but are not limited to, historical returns on plan assets, current market information on long-term returns (e.g., long-term bond rates) and current and target asset allocations between asset categories. The target asset allocation is determined based on consultations with external investment advisers. However, any differences in the rate and actual returns will be included with the actuarial gain or loss recorded in the fourth quarter when our plans are remeasured.

Investment Goals

General

The investment goals of the McDermott Trust and the trust underlying the TCN Plan (“TCN Trust”) are generally to provide for the solvency of the respective plans and fulfillment of pension obligations over time, and to maximize long-term investment return consistent with a reasonable level of risk. Asset allocations within the McDermott Trust and TCN Trust are reviewed periodically and rebalanced, if appropriate, to ensure the continued conformance to the investment goals, objectives and strategies. Both the McDermott Trust and the TCN Trust employ a professional investment advisor and a number of professional investment managers whose individual benchmarks are, in the aggregate, consistent with the applicable trust’s overall investment objectives.

The specific goals of each investment manager are set out in the investment policy adopted by the investment committee for the respective trust, but, in general, the goals are (1) to perform in line with (in the case of passive accounts) or outperform (for actively managed accounts) the benchmark selected and agreed upon by the manager and the trust, and (2) to display an overall level of risk in its portfolio that is consistent with the risk associated with the agreed upon benchmark. The estimated allocations discussed below are periodically reviewed to assess the appropriateness of the particular funds in which they are invested, and these estimated allocations are subject to change.

The performance of each investment manager’s portfolio is periodically measured against commonly accepted benchmarks, including the individual investment manager’s benchmarks. In evaluating investment manager performance, consideration is also given to personnel, strategy, research capabilities, organizational and business matters, adherence to discipline and other qualitative factors that may impact the ability to achieve desired investment results.

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The following is a summary of the asset allocations at December 31, 2016 and 2015 by asset category.

	Domestic Plans						TCN Plan
	2016			2015			2016			2015
Asset Category:
Fixed Income		85	%		85	%		67	%		49	%
Equity Securities		15			15			33			51
Total		100	%		100	%		100	%		100	%

As of December 31, 2015, $14 million of TCN plan assets were held in cash and cash equivalents.

Fair Value

The following is a summary of total investments for our plans, measured at fair value at:

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Pension Benefits:	(In thousands)
Fixed Income	$	167,271	$	247,882	$	5,087	$	420,240
Equities		82,442		-		-		82,442
Cash and Accrued Items		14,531		-		-		14,531
Total Investments	$	264,244	$	247,882	$	5,087	$	517,213
	December 31, 2015
	Level 1		Level 2		Level 3		Total
Pension Benefits:	(In thousands)
Fixed Income	$	60,128	$	356,107	$	5,752	$	421,987
Equities		85,065		12		-		85,077
Cash and Accrued Items		25,335		4		-		25,339
Total Investments	$	170,528	$	356,123	$	5,752	$	532,403

Changes in Level 3 Instrument

The following is a summary of the changes in our Level 3 fixed income instruments measured on a recurring basis:

	December 31,
	2016			2015
	(In thousands)
Balance at beginning of period	$	5,752		$	5,013
Purchases, net		107			1,269
Total unrealized loss		(772	)		(530	)
Balance at end of period	$	5,087		$	5,752

Cash Flows

	Domestic Plans		TCN Plan
	(In thousands)
Expected employer contributions to trusts of defined benefit plans:
2017	$	-	$	-
Expected benefit payments:
2017	$	37,148	$	5,803
2018		36,929		1,304
2019		36,620		1,571
2020		36,228		1,799
2021		35,876		1,483
2022-2026		169,531		9,309

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Defined Contribution Plans

Most of our employees in the U.S., through the McDermott Thrift Plan (the “Thrift Plan”), and certain non-U.S. employees, through the McDermott Global Defined Contribution Plan (the “Global Thrift Plan”), are eligible to participate in qualified defined contribution plans by contributing portions of their compensation.

For the Thrift Plan, we make employer matching contributions of 50% of participants’ contributions up to 6% of compensation and unmatched employer cash contributions equal to 3% of participants’ base pay, plus overtime pay, expatriate pay and commissions.

For the Global Thrift Plan, we make employer matching contributions of 50% of participants’ contributions up to 6% of base salary and unmatched employer cash contributions equal to 3% of participants’ base salary.

The following table summarizes our contributions under the plans:

		Thrift Plan						Global Thrift Plan
		Year Ended December 31,						Year Ended December 31,
		2016	2015		2014			2016	2015		2014
		(In thousands)
Contributions	$	4,176	$	3,840	$	3,879	$	998	$	1,095	$	1,236

We also provide benefits under the McDermott International, Inc. Director and Executive Deferred Compensation Plan (“Deferred Compensation Plan”), which is a non-qualified defined contribution plan. Expense associated with the Deferred Compensation Plan was not material to our Consolidated Financial Statements.

NOTE 12—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into derivative financial instruments primarily to hedge certain firm purchase or sale commitments and forecasted transactions 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: (1) deferred as a component of AOCI until the hedged item is recognized in earnings; (2) offset against the change in fair value of the hedged firm commitment through earnings; or (3) recognized immediately in earnings. At inception and on an ongoing basis, we assess the hedging relationship to determine its effectiveness in offsetting changes in cash flows or fair value attributable to the hedged risk. 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. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings are included as a component of gain (loss) on foreign currency—net in our Consolidated Statements of Operations. As of December 31, 2016, we designated the majority of our foreign currency forward contracts as cash flow hedging instruments.

As of December 31, 2016, we deferred approximately $25 million of net losses on these derivative financial instruments in AOCI, and we expect to reclassify approximately $11 million of the net deferred losses out of AOCI by December 31, 2017.

As of December 31, 2016, the majority of our derivative financial instruments consisted of foreign currency forward contracts. The notional value of our outstanding derivative contracts totaled $332 million at December 31, 2016, with maturities extending through May 2018. Of this amount, approximately $158 million is associated with various foreign currency expenditures we expect to incur on one of our EPCI projects in the ASA segment. These instruments consist of contracts to purchase or sell foreign-denominated currencies. As of December 31, 2016, the fair value of these contracts was in a net liability position totaling approximately $7 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

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The following table summarizes our asset and liability derivative financial instruments:

	December 31,
	2016		2015
	(In thousands)
Derivatives Designated as Hedges:
Location:
Accounts receivable-other	$	2,631	$	1,668
Other assets		-		215
Total derivatives asset	$	2,631	$	1,883
Accrued liabilities	$	9,361	$	26,649
Other liabilities		4		4,018
Total derivatives liability	$	9,365	$	30,667

The following table summarizes the effects of derivative instruments on our Consolidated Financial Statements:

	December 31,
	2016			2015			2014
	(in thousands)
Derivatives Designated as Hedges:
Amount of gain (loss) recognized in other comprehensive income (loss)	$	4,004		$	(57,459	)	$	(65,503	)
Reclassified from AOCI to Cost of operations		34,556			76,034			26,418
Ineffective portion and amount excluded from effectiveness testing gain (loss) recognized in Gain (loss) on foreign currency, net		(1,461	)		6,238			6,910

Credit Risk

In the event of nonperformance by counterparties to our derivative financial instruments, we may be exposed to credit-related losses. However, when possible, we enter into International Swaps and Derivative Association agreements with our derivative counterparties to mitigate this risk. We also attempt to mitigate this risk by using highly-rated major financial institutions as counterparties. Our derivative counterparties have the benefit of the same collateral arrangements and covenants as described under our Credit Agreement.

NOTE 13—FAIR VALUE MEASUREMENTS

The following table presents the financial instruments outstanding as of December 31, 2016 and 2015 that are measured at fair value on recurring basis and financial instruments that are not measured at fair value on a recurring basis.

	December 31, 2016
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(6,734	)		(6,734	)	$	-	$	(6,734	)	$	-
Non-recurring
Debt		(752,520	)		(777,072	)		-		(728,072	)		(49,000	)
	December 31, 2015
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(28,784	)	$	(28,784	)	$	-	$	(28,784	)	$	-
Non-recurring
Debt		(843,883	)		(777,634	)		-		(707,492	)		(70,142	)

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The carrying value of all non-derivative financial instruments included in current assets (including cash, cash equivalents and restricted cash, accounts receivable) and current liabilities, including accounts payable but excluding short-term debt approximates the applicable fair value due to the short maturity of those instruments.

See Note 1, Basis of Presentation and Significant Accounting Policies—Impairment Review, for a description of significant Level 3 inputs used in development of fair value of nonfinancial assets.

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Short-term and long-term debt. The fair value of debt instruments valued using a market approach based on quoted prices for similar instruments traded in active markets is classified as Level 2 within the fair value hierarchy.

Quoted prices are not available for Amortizing Notes and NO 105 debt. The income approach was used to value these instruments based 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. These instruments are classified as Level 3 within the fair value hierarchy.

Forward contracts. The fair value of forward contracts is classified as Level 2 within the fair value hierarchy and is valued using observable market parameters for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value forward contracts, which discounts future cash flows based on current market expectations and credit risk.

Fair Value Disclosure of Non-financial Instruments

During the fourth quarter of 2016, we impaired the Intermac 600, a launch cargo barge, given the lack of opportunities for that vessel. In connection with that decision, we wrote off the deferred drydock costs associated with the vessel and recognized a non-cash impairment charge of $11 million.

During the third quarter of 2016, our management reevaluated our operational plans for certain underutilized marine assets. As a result of that exercise, we identified certain marine assets that would not be used in a manner consistent with management’s original intent. Based on this determination, we tested the carrying value of those assets for recoverability by comparing the undiscounted future cash flows to the assets’ respective carrying values. As the carrying value of those assets exceeded the undiscounted future cash flows, an impairment was recorded.  The impairment was calculated as the difference between the $22 million carrying value of the assets and the $10 million estimated fair value of the assets, resulting in a $12 million non-cash impairment charge.  We utilized both a market approach and income approach to estimate the fair value of the assets.  Inputs included market sales data for comparable assets, forecasted cash flows and discount rates believed to be consistent with those used by principal market participants.  The fair value measurement is based on inputs that are not observable in the market and thus represent level 3 inputs.

During the first quarter of 2016, we impaired our Agile vessel upon termination of its then current charter in May 2016, given the lack of opportunities for that vessel. In connection with that decision, we recognized a non-cash impairment charge of $32 million during the first quarter of 2016, which equaled the vessel’s carrying value, in accordance with ASC 360-10, Property, Plant and Equipment.

In accordance with ASC 360-10, Property, Plant and Equipment, one of our vessels, the DB101, was written down to a fair value of $14 million, resulting in a non-cash impairment charge of $4 million in the first quarter of 2015, which related to our plan to decommission this vessel in the second quarter of 2015. In the second quarter of 2015, we disposed of the vessel and recognized an additional loss of $3 million. Impairment loss on this asset has been included in restructuring expenses.

In the second quarter of 2015, we abandoned a marine pipelay welding system project and recognized a $7 million non-cash impairment charge, which equaled the carrying value of that asset.

In June 2014, we cancelled a pipelay system originally intended for the CSV 108, which resulted in approximately $11 million improvement to the cancellation cost estimate included in $38 million of vessel-impairment charges recognized in 2013.

During 2014, we determined that certain of our intangible assets were fully impaired and, in 2014, we recorded an associated impairment charge of approximately $2 million.

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NOTE 14—STOCK-BASED COMPENSATION

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. Compensation expense is based on awards we expect to ultimately vest. Therefore, we have reduced compensation expense for estimated forfeitures based on our historical forfeiture rates. Our estimate of forfeitures is determined at the grant date and is revised if our actual forfeiture rate is materially different from our estimate.

Total compensation expense recognized is as follows:

	2016		2015		2014
	(In thousands)
Restricted stock awards (“RSAs”) and restricted stock units (“RSUs”)	$	15,746	$	14,395	$	14,417
Performance shares and performance units		6,888		1,428		352
Stock options		46		770		1,747
Total	$	22,680	$	16,593	$	16,516

The components of the total gross unrecognized estimated compensation expense for equity awards and their expected remaining weighted-average periods for expense recognition are as follows:

	Amount (In thousands)		Weighted-Average Period (years)
RSUs and RSAs	$	17,603		1.8
Performance shares and performance units(1)		258		0.3
	$	17,861

⁽¹⁾ Excludes performance shares and performance units accounted for as liability awards.

Stock Plans

2016 McDermott International, Inc. Long-Term Incentive Plan

In April 2016, our stockholders approved the 2016 McDermott International, Inc. Long-Term Incentive Plan (the “2016 LTIP”). Members of the Board of Directors, officers, employees and consultants are eligible to participate in the 2016 LTIP. The Compensation Committee of our Board of Directors selects the participants for the 2016 LTIP. The 2016 LTIP provides for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units and performance shares and performance share units, subject to satisfaction of specific performance goals. As part of the approval of the 2016 LTIP, 12 million shares were approved for issuance in connection with awards made under the plan.  In addition, shares of our common stock approved for issuance pursuant to the prior long-term incentive plans described below, and which had not been made subject to awards as of the April 29, 2016 effective date of the 2016 LTIP, are available for awards under the 2016 LTIP.  As provided in the 2016 LTIP, following the April 29, 2016 approval of the 2016 LTIP by our stockholders, no additional grants may be made pursuant to those prior long-term incentive plans.  Also, if an award under the 2016 LTIP or either of the prior plans expires or is terminated, cancelled or forfeited, the shares of our common stock associated with the expired, terminated, cancelled or forfeited award will again be available for awards under the 2016 LTIP.  Further, the 2016 LTIP contains a provision that MDR common stock tendered by a participant or withheld as full or partial payment of withholding taxes related to the vesting or settlement of awards (other than options)  shall become available again for issuance.

2014 McDermott International, Inc. Long-Term Incentive Plan

In May 2014, our stockholders approved the 2014 McDermott International, Inc. Long-Term Incentive Plan (the “2014 LTIP”). Members of the Board of Directors, officers, employees and consultants were eligible to participate in the 2014 LTIP. The Compensation Committee of our Board of Directors selected the participants for the 2014 LTIP. The 2014 LTIP provided for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units and performance shares and performance share units, subject to satisfaction of specific performance goals. Shares approved under the 2009 McDermott International, Inc. Long-Term Incentive Plan (the “2009 LTIP”) that were not awarded as of the date of approval of the 2014 LTIP, or shares that were subject to awards that were cancelled, terminated, forfeited, expired or settled in cash in lieu of shares, were available for issuance under the 2014 LTIP. As part of the approval of the 2014 LTIP, 6.6 million additional shares were approved for issuance. We no longer issue awards under the 2014 LTIP.

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2009 McDermott International, Inc. Long-Term Incentive Plan

We no longer issue awards under the 2009 LTIP. Members of the Board of Directors, executive officers and key employees were eligible to participate in the 2009 LTIP. The Compensation Committee of our Board of Directors selected the participants for the 2009 LTIP. The 2009 LTIP provided for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units and performance shares and performance units, subject to satisfaction of specific performance goals. Shares approved under the 2001 Directors and Officers Long-Term Incentive Plan (the “2001 LTIP”) that were not awarded as of the date of approval of the 2009 LTIP, or shares that were subject to awards that were cancelled, terminated, forfeited, expired or settled in cash in lieu of shares, were available for issuance under the 2009 LTIP. As part of the approval of the 2009 LTIP, 9 million shares were authorized for issuance. Options to purchase shares were granted at the fair market value (closing trading price) on the date of grant, became exercisable at such time or times as determined when granted and expired not more than seven years after the date of grant.

MDR’s equity award agreements under the 2016, 2014 and 2009 LTIPs provide that amounts that the Company is required to withhold on behalf of participants for federal or state income taxes upon the vesting of restricted stock units, performance shares or performance units will be satisfied by withholding shares of MDR common stock having an aggregate fair market value equal to but not exceeding the amount of such required tax withholding.  Such transactions under the 2016, 2014 and 2009 LTIP are accounted for as purchases of the shares by the Company, and are included in the ordinary shares roll-forward in Note 17, Stockholders’ Equity.  

Stock Options

There were no stock options granted in 2016, 2015 or 2014.

The following table summarizes stock options activity during 2016 (share data in thousands):

	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term
Outstanding at beginning of period		2,896		$	12.76
Cancelled/expired/forfeited		(721	)		8.65
Outstanding at end of period(1)		2,175		$	14.13		1.94 years

⁽¹⁾ All remaining outstanding options were vested prior to December 31, 2016.

There were no stock options exercised during 2016. The total intrinsic value of stock options exercised during 2015 and 2014 was $0.3 million and $0.9 million, respectively. The intrinsic value is calculated as the total number of option shares multiplied by the excess of the closing price of our common stock on the last trading day over the exercise price of the options. This amount changes based on the fair market value of our common stock. Had all option holders exercised their options on December 31, 2016, the aggregate intrinsic value of the options would have been negative, as their exercise price is higher than closing price of our common stock on December 31, 2016. The total estimated fair value of shares vested during 2016, 2015 and 2014 was $1 million, $3 million and $4 million, respectively.

RSUs and RSAs

RSUs and RSAs and changes during 2016 were as follows (share data in thousands):

	Number of Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		6,689		$	5.15
Granted		3,876			3.28
Vested		(3,524	)		5.78
Cancelled/forfeited		(868	)		3.86
Nonvested at end of period		6,173		$	3.80

There were no tax benefits realized related to RSUs and RSAs that lapsed or vested during 2016, 2015 and 2014.

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Performance Shares

Nonvested performance share awards and changes during 2016 were as follows (share data in thousands):

	Number of Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		2,590		$	6.71
Granted		1,582			3.22
Cancelled/forfeited		(711	)		10.22
Nonvested at end of period		3,461		$	4.39

In February 2016 and March 2015, we issued performance unit awards totaling 1,553,134 and 1,774,770 shares, respectively, which were classified as liability awards. Compensation cost for liability awards is re-measured at each reporting period and is recognized as expense over the applicable service period. The remaining weighted-average vesting period for these performance units is 1.8 years.

NOTE 15—INCOME TAXES

The provision for income taxes consisted of:

	Year Ended December 31,
	2016			2015		2014
	(In thousands)
Other than U.S.:
Current	$	43,944		$	45,752	$	21,619
Deferred		(2,018	)		6,211		(1,546	)
Total provision for income taxes	$	41,926		$	51,963	$	20,073

The geographic sources of income before income taxes are as follows:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
U.S.		(124,154	)		(99,738	)		(35,782	)
Other than U.S.		206,469			164,348			(1,691	)
Income before provision for income taxes	$	82,315		$	64,610		$	(37,473	)

The following is a reconciliation of the Panama statutory federal tax rate to the consolidated effective tax rate:

	Year Ended December 31,
	2016			2015			2014
Panama federal statutory rate		25	%		25	%		25	%
Non-Panama operations		(14	)		29			9
Valuation allowance for deferred tax assets		24			10			(105	)
Audit settlements and reserves		14			9			17
Other (primarily tax on unremitted earnings)		2			7			-
Effective tax rate attributable to continuing operations		51	%		80	%		(54	)%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes, as well as operating loss and tax credit carryforwards.

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Significant components of deferred tax assets and liabilities were as follows:

	December 31,
	2016			2015
	(In thousands)
Deferred tax assets:
Pension liability	$	9,732		$	12,033
Accrued liabilities for incentive compensation		22,208			21,640
Net operating loss carryforward		349,916			325,636
State net operating loss carryforward		18,308			24,367
Long-term contracts		-			4,312
Other		1,861			2,060
Total deferred tax assets		402,025			390,048
Valuation allowance for deferred tax assets		(334,991	)		(336,146	)
Deferred tax assets	$	67,034		$	53,902
Deferred tax liabilities:
Property, plant and equipment		37,883			34,419
Prepaid drydock		1,367			7,639
Long-term contracts		10,989			-
Investments in joint ventures and affiliated companies		17,044			14,960
Unrealized exchange gains and other		3,335			3,163
Total deferred tax liabilities	$	70,618		$	60,181
Net deferred tax liability	$	(3,584	)	$	(6,279	)
	December 31,
	2016			2015
	(In thousands)
Deferred tax assets and liabilities in the accompanying
Consolidated Balance Sheets include:
Deferred tax assets	$	21,116		$	18,822
Deferred tax liabilities		24,700			25,101
Net deferred tax liability	$	(3,584	)	$	(6,279	)

At December 31, 2016, we had a valuation allowance of $335 million for deferred tax assets that we expect cannot be realized through carrybacks, future reversals of existing taxable temporary differences or based on our estimate of future taxable income. We believe that our remaining deferred tax assets will more likely than not be realized through carrybacks, future reversals of existing taxable temporary differences and future taxable income. Any changes to our estimated valuation allowance could be material to our Consolidated Financial Statements.  

We have foreign net operating loss carryforwards of $373 million available to offset future taxable income in foreign jurisdictions. Of the foreign net operating loss carryforwards, $22 million is scheduled to expire in years 2017 to 2019. The foreign net operating losses have a valuation allowance of $76 million against the related deferred taxes. We have U.S. federal net operating loss carryforwards of approximately $745 million, which includes $17 million for which the benefit will be recorded in APIC when realized, and carry a $261 million valuation allowance against the related deferred taxes. The U.S. federal net operating loss carryforwards are scheduled to expire in years 2030 to 2036. We have state net operating losses of $355 million available to offset future taxable income in states where we operate. The state net operating loss carryforwards are scheduled to expire in years 2017 to 2030. We are carrying a valuation allowance of $18 million against the deferred tax asset related to the state loss carryforwards.

We have provided $21 million of taxes on earnings we intend to remit. All other earnings are considered permanently reinvested. We would be subject to withholding taxes if we were to distribute these permanently reinvested earnings from our U.S. subsidiaries and certain foreign subsidiaries. At December 31, 2016, the undistributed earnings of these subsidiaries were $236 million. Unrecognized deferred income tax liabilities, including withholding taxes, of approximately $0.2 million would be payable upon distribution of these earnings.

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We operate under a tax holiday in Malaysia, our new Asia Pacific headquarters. This tax holiday is effective through December 31, 2020, and may be extended for an additional five years if we satisfy certain requirements. The Malaysian tax holiday reduced our 2016 foreign income tax expense by $0.2 million.

We conduct business globally and, as a result, we or one or more of our subsidiaries file income tax returns in a number of jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Malaysia, Australia, Indonesia, Singapore, Saudi Arabia, Kuwait, India, and the United States. With few exceptions, we are no longer subject to tax examinations for years prior to 2010.

A reconciliation of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance at beginning of period	$	36,353		$	34,106		$	40,613
Increases based on tax positions taken in the current year		2,328			4,720			3,479
Increases based on tax positions taken in prior years		7,741			4,710			3,195
Decreases based on tax positions taken in prior years		(5,090	)		(2,836	)		(863	)
Decreases due to lapse of applicable statute of limitation		(310	)		(4,347	)		(12,318	)
Balance at end of period	$	41,022		$	36,353		$	34,106

The entire balance of unrecognized tax benefits at December 31, 2016 would reduce our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2016, 2015 and 2014, we had recorded liabilities of approximately $20 million, $16 million and $15 million, respectively, for the payment of tax-related interest and penalties.

NOTE 16—EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to McDermott International, Inc. by the weighted average number of common shares outstanding during the period. Diluted earnings per share equals net income attributable to McDermott International, Inc. divided by the weighted average common shares outstanding adjusted for the dilutive effect of our stock–based awards and common stock purchase contracts.

The following table sets forth the computation of basic and diluted earnings per share:

	Year Ended December 31,
	2016		2015			2014
	(In thousands, except share and per share amounts)
Net income (loss) attributable to McDermott International, Inc.	$	34,117	$	(17,983	)	$	(75,994	)
Weighted average common stock (basic)		240,359,363		238,240,763			237,229,086
Effect of dilutive securities:
Tangible equity units		40,824,938		-			-
Stock options, restricted stock and restricted stock units		2,999,938		-			-
Potential dilutive common stock		284,184,239		238,240,763			237,229,086
Net income (loss) per share
Net income (loss) attributable to McDermott International, Inc.
Basic:	$	0.14	$	(0.08	)	$	(0.32	)
Diluted:	$	0.12	$	(0.08	)	$	(0.32	)

Approximately 2.2 million, 2.9 million and 3.1 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share in 2016, 2015 and 2014, respectively, because inclusion of such shares would have been antidilutive in each of those years.  

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Potential dilutive common shares for the settlement of our common stock purchase contracts, a component of our TEUs, of 40.9 million and 30.7 million shares were considered in the calculation of diluted weighted-average shares in 2015 and 2014, respectively. Restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) totaling 2.4 million were also considered in the calculation of diluted weighted average shares for 2015. However, due to our net loss position in 2015 and 2014, shares underlying TEUs, RSUs, and RSAs have not been reflected in the diluted earnings per share, because inclusion of those shares would have been antidilutive.

NOTE 17— STOCKHOLDERS’ EQUITY

The changes in the number of ordinary shares outstanding and treasury shares held by the Company are as follows:

	Year Ended December 31,
	2016			2015
Shares outstanding
Beginning balance		239,016,924			237,809,823
Common stock issued		3,304,808			1,672,923
Purchase of common stock		(933,455	)		(465,822	)
Ending balance		241,388,277			239,016,924
Shares held as Treasury shares
Beginning balance		7,824,204			7,400,027
Purchase of common stock		933,455			465,822
Retirement of common stock		(455,655	)		(41,645	)
Ending balance		8,302,004			7,824,204
Ordinary shares issued at the end of the period		249,690,281			246,841,128

Accumulated Other Comprehensive Income (Loss)

The components of AOCI included in stockholders’ equity are as follows:

	December 31, 2016			December 31, 2015
	(In thousands)
Foreign currency translation adjustments ("FCTA")	$	(42,082	)	$	(29,925	)
Net unrealized gain on investments		269			247
Net loss on derivative financial instruments		(25,082	)		(64,277	)
Accumulated other comprehensive loss	$	(66,895	)	$	(93,955	)

During the first quarter of 2016, we recorded a $7 million adjustment decreasing FCTA, with an offsetting reduction of Loss on foreign currency, net, to correct amounts accounted for inappropriately in a previous period.

In the second quarter of 2016, foreign currency instruments associated with construction of our DLV 2000 vessel were settled upon the final payment to the shipyard. These instruments were designated as cash flow hedges and, as such, $20 million of cumulative loss was recorded in AOCI and will be amortized consistent with the depreciation of the vessel.

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The following table presents the components of AOCI and the amounts that were reclassified during 2016, 2015 and 2014:

	Foreign currency translation adjustments			Unrealized holding gain (loss) on investments		Gain (loss) on derivative (1)				TOTAL
	(In thousands)
Balance, January 1, 2014	$	(2,562	)	$	238	$	(45,386	)		$	(47,710	)
Other comprehensive income (loss) before reclassification		(9,250	)		3		(65,503	)			(74,750	)
Amounts reclassified from AOCI		(3,400	)		-		28,052		(2)		24,652
Net current period other comprehensive income (loss)		(12,650	)		3		(37,451	)			(50,098	)
Balance, December 31, 2014		(15,212	)		241		(82,837	)			(97,808	)
Other comprehensive income (loss) before reclassification		(12,470	)		6		(57,459	)			(69,923	)
Amounts reclassified from AOCI		(2,243	)		-		76,019		(2)		73,776
Net current period other comprehensive income (loss)		(14,713	)		6		18,560				3,853
Balance, December 31, 2015		(29,925	)		247		(64,277	)			(93,955	)
Other comprehensive income (loss) before reclassification		(12,157	)		22		4,004				(8,131	)
Amounts reclassified from AOCI		-			-		35,191		(2)		35,191
Net current period other comprehensive income (loss)		(12,157	)		22		39,195				27,060
Balance, December 31, 2016	$	(42,082	)	$	269	$	(25,082	)		$	(66,895	)

⁽¹⁾ Refer to Note 12, Derivative Financial Instruments, for additional details

⁽²⁾ Reclassified to cost of operations and gain (loss) on foreign currency, net

Noncontrolling Interest

In 2013, we entered into certain joint ventures with TH Heavy Engineering Berhad (“THHE”), whereby we acquired a 30% interest in THHE Fabricators Sdn. Bhd. (“THF”), a subsidiary of THHE, and THHE acquired a 30% interest in our Malaysian subsidiary, Berlian McDermott Sdn. Bhd (“BMD”). In the third quarter of 2016, we reacquired the 30% of noncontrolling interest in BMD from THHE in exchange for our 30% equity interest in THF. We determined the fair value of the asset surrendered to be $17 million. In connection with the acquisition of the BMD noncontrolling interest, we recorded an $18 million decrease in noncontrolling interest, and, in connection with the sale of our investment in THF, we recorded a $12 million decrease in investments in unconsolidated affiliates and a $5 million gain in Other non-operating income (expense), net in our Consolidated Financial Statements.

NOTE 18—COMMITMENTS AND CONTINGENCIES

Investigations and Litigation

We co-own interests in several entities (collectively “FloaTEC”) with Keppel Corporation (including its subsidiaries, “Keppel”).  We have conducted an internal investigation in connection with allegations by a former Petrobras employee that Keppel’s agent made improper payments to secure project awards from Petrobras on a number of Keppel affiliated projects in Brazil, including a FloaTEC project on which we were also a subcontractor.  Keppel’s agent subsequently entered into a plea arrangement with the Brazilian authorities and admitted to having made improper payments on behalf of Keppel to former Petrobras employees on projects unrelated to FloaTEC.  We voluntarily contacted the U.S. Department of Justice (“DOJ”) to advise it of the preliminary results of our internal investigation, which identified no evidence to indicate any improper payments were made by us or FloaTEC or that any of our or FloaTEC’s employees authorized, had knowledge of, or direction or control over, any such payments.  We have responded to the DOJ’s requests for additional information.   If in the future, the DOJ determines that violations of applicable law have occurred involving us, we could be subject to civil or criminal sanctions, including monetary penalties, which could be material.   However, based on the preliminary results of our investigation, we do not expect this matter to have a material adverse effect on us or our operations. 

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Additionally, due to the nature of our business, we and our affiliates are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including, among other things:

• performance or warranty-related matters under our customer and supplier contracts and other business arrangements; and

• workers’ compensation claims, Jones Act claims, occupational hazard claims, including asbestos-exposure claims, premises liability claims and other claims.

Based upon our prior experience, we do not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows; however, because of the inherent uncertainty of litigation and other dispute resolution proceedings and, in some cases, the availability and amount of potentially applicable insurance, we can provide no assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material effect on our consolidated financial condition, results of operations or cash flows for the fiscal period in which that resolution occurs.

Environmental Matters

We have been identified as a potentially responsible party at various cleanup sites under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”). CERCLA and other environmental laws can impose liability for the entire cost of cleanup on any of the potentially responsible parties, regardless of fault or the lawfulness of the original conduct. Generally, however, where there are multiple responsible parties, a final allocation of costs is made based on the amount and type of wastes disposed of by each party and the number of financially viable parties, although this may not be the case with respect to any particular site. We have not been determined to be a major contributor of wastes to any of these sites. On the basis of our relative contribution of waste to each site, we expect our share of the ultimate liability for the various sites will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows in any given year.

In 2013, we established a $6 million environmental reserve in connection with our plan to discontinue the utilization of our Morgan City fabrication facility.  For this site, up to June 30, 2016, we incurred approximately $4 million. During the second quarter of 2016 we received a notice from the State of Louisiana stating that our environmental remediation obligations related to the closure of our Morgan City fabrication facility had been fulfilled.  Pursuant to the notice received from the State of Louisiana, as well as our internal assessment, we believe no environmental remediation liability exists with respect to the Morgan City site.  As a result, during 2016, we reversed $1 million of environmental remediation obligation accrual.

Contracts Containing Liquidated Damages Provisions

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under those provisions. Those contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have historically had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of December 31, 2016, we had approximately $16 million of potential liquidated damages exposure, however the amount of liability recorded in our Consolidated Financial Statements is under $1 million. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for unaccrued liquidated damages. Accordingly, we believe that no amounts for these potential liquidated damages are probable of being paid by us. However, we may not achieve relief on some or all of the issues involved and, as a result, could be subject to higher damage amounts.  

Operating Leases

Future minimum payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year at December 31, 2016 are as follows (in thousands):

Fiscal Year Ending December 31,	Amount
2017	$	27,864
2018		23,185
2019		19,076
2020		19,208
2021		14,425
Thereafter		122,922

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Total rental expense in 2016, 2015 and 2014 was $36 million, $40 million and $107 million, respectively. These expense amounts include contingent rentals and are net of sublease income, neither of which is material.

NOTE 19—SEGMENT REPORTING

We disclose the results of each of our reportable segments in accordance with ASC 280, Segment Reporting. Each of the reportable segments is separately managed by a senior executive who is a member of our Executive Committee (“EXCOM”).  EXCOM is led by our Chief Executive Officer, who is the chief operating decision maker. Discrete financial information is available for each of the segments, and the EXCOM uses the operating results of each of the reportable segments for performance evaluation and resource allocation.

We manage reportable segments along geographic lines consisting of (1) AEA, (2) MEA and (3) ASA. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure. Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end MTM pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other.”

We account for intersegment sales at prices that we generally establish by reference to similar transactions with unaffiliated customers. Reportable segments are measured based on operating income, which is defined as revenues reduced by total costs and expenses and equity in loss of unconsolidated affiliates.

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1.Information about Operations:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Revenues (1):
AEA	$	285,988		$	478,800		$	567,608
MEA		1,241,591			1,134,555			795,666
ASA		1,108,404			1,456,920			937,615
Total revenues:	$	2,635,983		$	3,070,275		$	2,300,889
Income (loss) before provision for income taxes:
Operating income (loss) (2)
AEA	$	51,129		$	52,918		$	(65,565	)
MEA		209,401			146,866			47,863
ASA		97,963			123,718			90,838
Segment operating income		358,493			323,502			73,136
Corporate and Other		(216,240	)		(210,820	)		(56,734	)
Total operating income	$	142,253		$	112,682		$	16,402
Interest expense, net		(58,871	)		(50,058	)		(60,877	)
Other non-operating income (expense), net		(1,067	)		1,986			7,002
Income (loss) before provision for income taxes	$	82,315		$	64,610		$	(37,473	)
Capital expenditures (3):
AEA	$	16,667		$	13,715		$	53,431
MEA		18,564			28,328			99,974
ASA		190,260			60,220			154,735
Corporate and Other		2,588			588			13,047
Total capital expenditures:	$	228,079		$	102,851		$	321,187
Depreciation and amortization:
AEA	$	26,924		$	43,006		$	34,494
MEA		24,268			30,567			31,876
ASA		30,314			16,880			19,020
Corporate and Other		8,376			9,881			7,795
Total depreciation and amortization:	$	89,882		$	100,334		$	93,185
Drydock amortization
AEA	$	9,905		$	12,554		$	11,453
MEA		1,975			2,089			2,011
ASA		915			3,304			6,255
Total drydock amortization	$	12,795		$	17,947		$	19,719

⁽¹⁾ Intercompany transactions were not significant during 2016, 2015 and 2014.

⁽²⁾ The 2016 and 2015 Corporate and Other operating results include $55 million and $7 million of impairment, respectively. The 2014 Corporate and Other operating results include $11 million of improvements to the cancellation cost estimate included in the $38 million vessel impairment charge recognized in 2013. See Note 13, Fair Value Measurements, for further discussion.

⁽³⁾ Total capital expenditures represent expenditures for which cash payments were made during the period. Capital expenditures for 2016, 2015 and 2014 include $4 million, $14 million and $27 million of cash payments for accrued capital expenditures outstanding as of December 31, 2015, 2014 and 2013, respectively.

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2. Information about our most significant Customers

Our significant customers by segments during 2016, 2015 and 2014, were as follows:

	% of
	Consolidated		Reportable
	Revenues		Segment
Year Ended December 31, 2016:
Inpex Operations Australia Pty Ltd		33%	ASA
Saudi Aramco		26%	MEA
RasGas Company Limited		12%	MEA
Year Ended December 31, 2015:
Inpex Operations Australia Pty Ltd		36%	ASA
Saudi Aramco		28%	MEA
Year Ended December 31, 2014:
Saudi Aramco		27%	MEA
Inpex Operations Australia Pty Ltd		25%	ASA

3. Information about our Service Lines and Operations in Different Geographic Areas:

	Year Ended December 31,
	2016		2015		2014
	(In thousands)
Service line revenues:
Installation Operations	$	1,074,069	$	1,256,412	$	1,041,525
Procurement Activities		879,222		1,123,329		677,734
Project Services and Engineering Operations		356,781		416,906		314,776
Fabrication Operations		325,911		273,628		266,854
	$	2,635,983	$	3,070,275	$	2,300,889
Geographic revenues:
Australia	$	881,812	$	1,157,723	$	614,164
Saudi Arabia		767,119		900,483		616,659
Qatar		419,963		46,873		-
Mexico		112,484		247,859		130,642
Russia		108,392		-		-
United States		95,996		32,858		148,606
Trinidad		67,757		-		-
India		56,027		-		-
United Arab Emirates		54,392		185,606		57,249
Malaysia		22,637		-		98,004
Indonesia		21,726		54,288		150,205
Brunei		-		237,337		-
Brazil		6,449		183,656		290,561
Azerbaijan		-		-		111,382
Other countries		21,229		23,592		83,417
	$	2,635,983	$	3,070,275	$	2,300,889

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4. Information about our Segment Assets and Property, Plant and Equipment by Country:

	Year Ended December 31,
	2016		2015
	(In thousands)
Segment assets:
AEA	$	727,328	$	896,822
MEA		907,936		971,170
ASA		976,470		774,365
Corporate and Other		610,496		744,719
Total assets	$	3,222,230	$	3,387,076
Property, plant and equipment, net(1):
Australia	$	626,605	$	-
Mexico		603,185		96,090
United Arab Emirates		318,822		341,502
United States		27,482		561,990
Saudi Arabia		22,608		4,522
Indonesia		73,213		521,922
India		10,666		307
Malaysia		2,457		49,609
Brazil		170		31,765
Other countries		2,093		3,152
Total property, plant and equipment, net	$	1,687,301	$	1,610,859

⁽¹⁾ Our marine vessels are included in the country in which they were located as of year-end.

5. Information about our Unconsolidated Affiliates:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Equity in loss of unconsolidated affiliates:
AEA	$	(5,082	)	$	(6,255	)	$	4,829
MEA		-			(94	)		(2,668	)
ASA		1,167			(15,137	)		(10,009	)
Corporate and Other		(175	)		-			-
Total equity in loss of unconsolidated affiliates:	$	(4,090	)	$	(21,486	)	$	(7,848	)
Investments in unconsolidated affiliates:
AEA	$	2,449		$	1,540
ASA		14,064			24,327
Corporate and Other		510			684
Total investments in unconsolidated affiliates	$	17,023		$	26,551

Our consolidated balance sheets include accounts receivable attributable to our unconsolidated affiliates of approximately $17 million and $13 million as of December 31, 2016 and 2015, respectively.

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NOTE 20—QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables set forth selected unaudited quarterly financial information for the quarterly periods in 2016 and 2015:

	For the Quarter Ended
	March 31(1)			June 30(2)		September 30(3)		December 31(4)
2016	(In thousands, except per share data amounts)
Revenues	$	729,032		$	706,627	$	558,543	$	641,781
Gross Profit		112,999			111,185		103,044		59,139
Net income (loss)		(2,444	)		21,805		16,392		546
Net income (loss) attributable to non-controlling interest		(272	)		1,148		284		1,022
Net income (loss) attributable to McDermott International, Inc.		(2,172	)		20,657		16,108		(476	)
Income (loss) per share(5)
Basic		(0.01	)		0.09		0.07		0.00
Diluted		(0.01	)		0.07		0.06		0.00

⁽¹⁾ Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment,  partially offset by impairment losses on the Agile vessel.

⁽²⁾ Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

⁽³⁾ Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

⁽⁴⁾ Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600.  Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

⁽⁵⁾ May not tie to the Consolidated Statements of Operations due to rounding.

	For the Quarter Ended
	March 31(1)			June 30(2)		September 30(3)		December 31(4)
2015	(In thousands, except per share data amounts)
Revenues	$	550,463		$	1,046,537	$	805,857	$	667,418
Gross Profit		75,004			121,015		84,896		98,076
Net income (loss)		(12,048	)		13,690		7,534		(18,015	)
Net income attributable to non-controlling interest		2,459			2,164		3,868		653
Net income (loss) attributable to McDermott International, Inc.		(14,507	)		11,526		3,666		(18,668	)
Income (loss) per share(5)
Basic		(0.06	)		0.05		0.02		(0.08	)
Diluted		(0.06	)		0.04		0.01		(0.08	)

⁽¹⁾ Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

⁽²⁾ Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

⁽³⁾ Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.  

⁽⁴⁾ Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

⁽⁵⁾ May not tie to the Consolidated Statements of Operations due to rounding.

65

NOTE 21—SUBSEQUENT EVENTS

In February 2017, J. Ray McDermott de Mexico, S.A. de C.V. (“JRM Mexico”), one of our indirectly 100% owned subsidiaries, entered into a 364 day, $50 million committed revolving receivables purchase agreement which provides for the sale, at a discount, of certain receivables to a designated purchaser. JRM Mexico’s obligations in connection with the receivables purchase agreement are guaranteed by McDermott International, Inc.  Additionally in February 2017, JRM Mexico entered into a 21-month loan agreement for equipment financing in the amount of $48 million. Borrowings under the loan agreement bear interest at a fixed rate of 5.75%. JRM Mexico’s obligations in connection with equipment financing are guaranteed by McDermott International Management, S. de RL, one of our indirectly 100% owned subsidiaries.

In January 2017, we purchased the pipelay and construction vessel, the Amazon, for a total cash consideration of approximately $52 million. Following the purchase, we sold the Amazon to an unrelated third party for total cash consideration of $52 million and simultaneously entered into an 11-year bareboat charter agreement with the purchaser.  The bareboat charter agreement provides us with options to purchase the Amazon, at a predetermined value periodically over the charter term. We accounted for the transaction as a sale leaseback and will record the bareboat charter agreement as an operating lease.

66

XML

Document and Entity Information - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	MCDERMOTT INTERNATIONAL INC
Entity Central Index Key	0000708819
Document Type	8-K
Current Fiscal Year End Date	Dec. 31, 2016
Entity Public Float		$ 1.2
Amendment Flag	false

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
Revenues	[1]	$ 2,635,983	$ 3,070,275	$ 2,300,889
Costs and Expenses:
Cost of operations		2,249,270	2,690,560	2,111,958
Research and development expense		346	724	1,055
Selling, general and administrative expenses		178,752	217,239	208,564
Impairment loss (recovery)		54,958	6,808	(9,002)
Loss (gain) on asset disposals		(859)	1,443	(46,201)
Restructuring expenses		11,263	40,819	18,113
Total costs and expenses		2,493,730	2,957,593	2,284,487
Operating income	[2]	142,253	112,682	16,402
Other income (expense):
Interest expense, net		(58,871)	(50,058)	(60,877)
Other non-operating income (expense), net		(1,067)	1,986	7,002
Total other expense, net		(59,938)	(48,072)	(53,875)
Income (loss) before provision for income taxes		82,315	64,610	(37,473)
Provision for income taxes		41,926	51,963	20,073
Income (loss) before loss from Investments in Unconsolidated Affiliates		40,389	12,647	(57,546)
Loss from Investments in Unconsolidated Affiliates		(4,090)	(21,486)	(7,848)
Net income (loss)		36,299	(8,839)	(65,394)
Less: Net income attributable to noncontrolling interest		2,182	9,144	10,600
Net income (loss) attributable to McDermott International, Inc.		$ 34,117	$ (17,983)	$ (75,994)
Net income (loss) attributable to McDermott International, Inc.:
Basic		$ 0.14	$ (0.08)	$ (0.32)
Diluted		$ 0.12	$ (0.08)	$ (0.32)
Shares used in the computation of net income (loss) per share:
Basic		240,359,363	238,240,763	237,229,086
Diluted		284,184,239	238,240,763	237,229,086

[1] Intercompany transactions were not significant during 2016, 2015 and 2014.

[2] The 2016 and 2015 Corporate and Other operating results include $55 million and $7 million of impairment, respectively. The 2014 Corporate and Other operating results include $11 million of improvements to the cancellation cost estimate included in the $38 million vessel impairment charge recognized in 2013. See Note 13, Fair Value Measurements, for further discussion.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ 36,299	$ (8,839)	$ (65,394)
Other comprehensive income (loss), net of tax:
Unrealized gain on investments	22	6	3
Gain (loss) on derivatives	39,148	18,480	(37,537)
Foreign currency translation	(12,157)	(14,713)	(12,653)
Other comprehensive income (loss), net of tax	27,013	3,773	(50,187)
Total comprehensive income (loss)	63,312	(5,066)	(115,581)
Less: Comprehensive income attributable to non-controlling interests	2,135	9,064	10,511
Comprehensive income (loss) attributable to McDermott International, Inc.	$ 61,177	$ (14,130)	$ (126,092)

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents		$ 595,921	$ 664,844
Restricted cash and cash equivalents		16,412	116,801
Accounts receivable—trade, net		334,384	208,474
Accounts receivable—other		36,929	66,689
Contracts in progress		319,138	435,829
Other current assets		29,599	34,641
Total current assets		1,332,383	1,527,278
Property, plant and equipment		2,586,179	2,467,352
Less accumulated depreciation		(898,878)	(856,493)
Property, plant and equipment, net	[1]	1,687,301	1,610,859
Accounts receivable—long-term retainages		127,193	155,061
Investments in Unconsolidated Affiliates		17,023	26,551
Deferred income taxes		21,116	18,822
Other assets		37,214	48,505
Total assets		3,222,230	3,387,076
Current liabilities:
Notes payable and current maturities of long-term debt		48,125	24,882
Accounts payable		173,203	279,821
Accrued liabilities		277,584	330,943
Advance billings on contracts		192,486	164,773
Income taxes payable		17,945	23,787
Total current liabilities		709,343	824,206
Long-term debt		704,395	819,001
Self-insurance		16,980	18,653
Pension liabilities		19,471	24,066
Non-current income taxes		60,870	52,559
Other liabilities		115,703	101,870
Commitments and contingencies
Stockholders' equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 249,690,281 and 246,841,128 shares, respectively		249,690	246,841
Capital in excess of par value (including prepaid common stock purchase contracts)		1,695,119	1,687,059
Accumulated deficit		(226,767)	(260,884)
Accumulated other comprehensive loss		(66,895)	(93,955)
Treasury stock, at cost: 8,302,004 and 7,824,204 shares, respectively		(94,957)	(92,262)
Stockholders' Equity—McDermott International, Inc.		1,556,190	1,486,799
Noncontrolling interest		39,278	59,922
Total equity		1,595,468	1,546,721
Total liabilities and equity		$ 3,222,230	$ 3,387,076

[1] Our marine vessels are included in the country in which they were located as of year-end.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	249,690,281	246,841,128
Treasury stock, shares	8,302,004	7,824,204

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CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)		Dec. 31, 2015 USD ($)		Dec. 31, 2014 USD ($)
Cash flows from operating activities:
Net income (loss)	$ 36,299		$ (8,839)		$ (65,394)
Non-cash items included in net income (loss):
Depreciation and amortization	89,882		100,334		93,185
Drydock amortization	12,795		17,947		19,719
Impairment loss (recovery)	54,958		6,808		(9,002)
Stock-based compensation charges	22,680		16,593		18,565
Loss from investments in Unconsolidated Affiliates	4,090		21,486		7,848
(Gain) loss on foreign currency, net	(5,984)		6,238		(10,310)
Restructuring expense (gain)	(1,350)		7,473		(2,310)
Loss (gain) on asset disposals	(859)		1,443		(46,201)
Deferred income taxes	(2,695)		3,525		891
Pension (gain) expense	(3,228)		19,821		(4,291)
Debt issuance cost amortization	13,141		12,767		22,915
Other non-cash items	(5,392)		1,269		686
Changes in operating assets and liabilities that provided (used) cash:
Accounts receivable	(89,776)		(82,697)		166,385
Contracts in progress, net of Advance billings on contracts	144,412		(113,338)		(10,695)
Accounts payable	(101,845)		78,646		(154,439)
Accrued and other current liabilities	(37,064)		(33,969)		(2,801)
Pension liability	(1,684)		(1,506)		(1,861)
Income taxes	2,469		1,778		(4,668)
Other assets and liabilities, net	47,330		(507)		(11,262)
Total cash provided by operating activities	178,179		55,272		6,960
Cash flows from investing activities:
Purchases of property, plant and equipment	(228,079)	[1]	(102,851)	[1]	(321,187)	[1]
Investments in unconsolidated affiliates	(5,093)		(7,038)		(2,420)
Proceeds from asset dispositions	2,366		10,724		71,961
Sales and maturities of available-for-sale securities			3,176		12,978
Purchases of available-for-sale securities					(3,695)
Other investing activities			417		(2,706)
Total cash used in investing activities	(230,806)		(95,572)		(245,069)
Cash flows from financing activities:
Repayment of debt	(103,020)		(26,938)		(298,534)
Proceeds from debt					1,328,875
Repurchase of common stock	(4,022)		(1,720)		(1,707)
Payment of debt issuance costs	(8,730)		(170)		(39,112)
Distributions to noncontrolling interests					(6,352)
Issuance of common stock			682		327
Acquisition of noncontrolling interest			(24)		(32,943)
Total cash provided by (used in) financing activities	(115,772)		(28,170)		950,554
Effects of exchange rate changes on cash, cash equivalents and restricted cash	(913)		(2,779)		(1,905)
Net increase (decrease) in cash, cash equivalents and restricted cash	(169,312)		(71,249)		710,540
Cash, cash equivalents and restricted cash at beginning of year	781,645		852,894		142,354
Cash, cash equivalents and restricted cash at end of year	612,333		781,645		852,894
Cash paid during the period for:
Income taxes, net of refunds	37,710		40,560		26,661
Cash paid for interest, net of amounts capitalized	46,693		40,690		28,390
Supplemental Disclosure of Noncash Investing Activities:
Non-cash purchase (sale) of investments in unconsolidated affiliates	(12,377)		$ 2,396
Capital lease					3,407
Supplemental Disclosure of Noncash Financing Activities:
Note payable in connection with noncontrolling interest distribution	5,000
Non-cash acquisition of noncontrolling interest	$ 17,779				$ 11,136

[1] Total capital expenditures represent expenditures for which cash payments were made during the period. Capital expenditures for 2016, 2015 and 2014 include $4 million, $14 million and $27 million of cash payments for accrued capital expenditures outstanding as of December 31, 2015, 2014 and 2013, respectively.

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	Common Stock Par Value [Member]	Capital in Excess of Par Value [Member]	Retained Earnings/(Accumulated Deficit) [Member]	Accumulated Other Comprehensive Income (Loss) ("AOCI") [Member]	Treasury Stock [Member]	Stockholder's Equity [Member]	Noncontrolling Interest ("NCI") [Member]
Beginning Balance at Dec. 31, 2013	$ 1,440,344	$ 244,271	$ 1,414,457	$ (163,578)	$ (47,710)	$ (97,926)	$ 1,349,514	$ 90,830
Net income (loss)	(65,394)			(75,994)			(75,994)	10,600
Other comprehensive income (loss), net of tax	(50,187)				(50,098)		(50,098)	(89)
Common stock issued	327	939	(612)				327
Issuance of tangible equity units	240,044		240,044				240,044
Stock-based compensation charges	16,516		13,324			3,192	16,516
Purchase of shares from NCI	(32,943)		11,136				11,136	(44,079)
Purchase of treasury shares	(1,707)					(1,707)	(1,707)
Sales of subsidiary shares to NCI	(1,534)		(1,534)				(1,534)
Distributions to NCI	(6,352)							(6,352)
Ending Balance at Dec. 31, 2014	1,539,114	245,210	1,676,815	(239,572)	(97,808)	(96,441)	1,488,204	50,910
Net income (loss)	(8,839)			(17,983)			(17,983)	9,144
Other comprehensive income (loss), net of tax	3,773				3,853		3,853	(80)
Common stock issued	679	1,673	(8,750)	(3,329)		11,085	679
Stock-based compensation charges	15,394		20,753			(5,359)	15,394
Purchase of treasury shares	(1,720)					(1,720)	(1,720)
Retirement of common stock		(42)	(131)			173
Other	(1,680)		(1,628)				(1,628)	(52)
Ending Balance at Dec. 31, 2015	1,546,721	246,841	1,687,059	(260,884)	(93,955)	(92,262)	1,486,799	59,922
Net income (loss)	36,299			34,117			34,117	2,182
Other comprehensive income (loss), net of tax	27,013				27,060		27,060	(47)
Common stock issued		3,305	(3,305)
Stock-based compensation charges	11,639		11,639				11,639
Purchase of shares from NCI	(17,182)		597				597	(17,779)
Purchase of treasury shares	(4,022)					(4,022)	(4,022)
Retirement of common stock		(456)	(871)			1,327
Distributions to NCI	(5,000)							(5,000)
Ending Balance at Dec. 31, 2016	$ 1,595,468	$ 249,690	$ 1,695,119	$ (226,767)	$ (66,895)	$ (94,957)	$ 1,556,190	$ 39,278

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

McDermott International, Inc. (“MDR”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a leading provider of integrated engineering, procurement, construction and installation (“EPCI”), front-end engineering and design (“FEED”), and module fabrication services for upstream field developments worldwide.  We deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for complex offshore and subsea oil and gas projects. Operating in approximately 20 countries across Americas, Europe, Africa, the Middle East, Asia and Australia, our integrated resources include a diversified fleet of marine vessels, fabrication facilities and engineering offices. We support our activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction. Our customers include national, major integrated and other oil and gas companies, and we operate in most major offshore oil and gas producing regions throughout the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods. In these Notes to our Consolidated Financial Statements, unless the context otherwise indicates, “we,” “us” and “our” mean MDR and its consolidated subsidiaries.

Basis of Presentation

We have presented our Consolidated Financial Statements in U.S. Dollars in accordance with accounting principles generally accepted in the United States (“GAAP”). These Consolidated Financial Statements include the accounts of McDermott International, Inc., its consolidated subsidiaries and controlled entities.  Subsidiaries are defined as being those companies over which we, either directly or indirectly, have control through a majority of the voting rights or the right to exercise control or to obtain the majority of the benefits and be exposed to the majority of the risks. Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases. All intercompany transactions and balances have been eliminated in consolidation.

Business Segments

We report financial results under three reportable segments consisting of (1) Americas, Europe, and Africa (“AEA”), (2) the Middle East (“MEA”) and (3) Asia (“ASA”).  We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.  For financial information about our segments, see Note 19, Segment Reporting.

Revenue Recognition

Contracts―We determine the appropriate accounting treatment for each of our contracts with customers before work on the project begins. We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved. We include the amount of accumulated contract costs and estimated earnings that exceed billings to customers in Contracts in Progress. We include billings to customers that exceed accumulated contract costs and estimated earnings in Advance Billings on Contracts. Most long-term contracts contain provisions for progress payments. We expect to invoice customers for all unbilled revenues. Certain costs are generally excluded from the cost-to-cost method of measuring progress, such as significant costs for materials and third-party subcontractors. On certain projects, we may purchase a significant portion of the materials or incur third-party subcontractor costs, recognized as project costs, either upfront or during other phases of contract execution. Therefore, we believe exclusion of the costs for such materials and subcontractors provides a better measure of actual progress toward completion, particularly in the early stages of contracts, as inclusion of these costs could overstate the progress of projects. We believe that our approach more closely aligns with the actual, physical progress of our contracts. 

Costs incurred prior to a project award are generally expensed during the period in which they are incurred. Total estimated project costs and resulting contract income are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. Additionally, external factors such as weather, customer requirements and other factors outside of our control may affect the progress and estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income recognition. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit proportionate to the job percentage of completion during the period in which those estimates are revised.

Unapproved Change Orders―Change orders, which are a normal and recurring part of our business, can increase, sometimes substantially, the future scope and cost of a job. Therefore, change order awards, although frequently beneficial in the long term, can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date.

Revenues and gross profit on contracts can be significantly affected by change orders that may not be approved by the customer until the later stages of a contract or subsequent to the date a project is completed. If it is not probable the costs will be recovered through a change in contract price, the costs attributable to change orders are treated as contract costs without incremental revenue. For certain contracts where it is probable the costs will be recovered through a change order, total estimated contract revenue is increased by the lesser of the amounts management expects to recover and the costs expected to be incurred.

Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts we expect to recover or costs incurred. To the extent claims included in backlog are not resolved in our favor, there could be reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings, which could be material.

Claims Revenue—Claims revenue may relate to various factors, including the procurement of materials, equipment performance failures, change order disputes or schedule disruptions and other delays, including those associated with weather and sea conditions. Claims revenue, when recorded, is only recorded to the extent of the lesser of the amounts management expects to recover and the associated costs incurred. We include certain unapproved claims in the applicable contract values when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Amounts attributable to unapproved change orders are not included in claims. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Claims are generally negotiated over the course of the respective projects, many of which are long-term in nature.

Deferred Profit Recognition―For contracts as to which we are unable to estimate the final profitability due to their uncommon nature, including first-of-a-kind projects, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these contracts, we only recognize gross margin when reliably estimable and the level of uncertainty has been significantly reduced, which we generally determine to be when the contract is at least 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical as deferred profit recognition contracts. If, while being accounted for under our deferred profit recognition policy, a current estimate of total contract costs indicates a loss, the projected loss is recognized in full and the project is accounted for under our normal revenue recognition guidelines.  Currently, we are not accounting for any projects under our deferred profit recognition policy.

Completed Contract Method―Under the completed contract method, revenue and gross profit is recognized only when a contract is complete or substantially complete. We generally do not enter into fixed-price contracts without an estimate of cost to complete that we believe to be accurate. However, it is possible that in the time between contract award and the commencement of work on a project we could lose the ability to forecast costs to complete adequately based on intervening events, including, but not limited to, experience on similar projects, civil unrest, strikes and volatility in our expected costs. In such a situation, we would use the completed contract method of accounting for that project. In last three years, we did not enter into any contracts that we accounted for under the completed contract method.

Loss Recognition―A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, subcontractor or supplier performance, pipeline lay rates or steel and other raw material prices. Increases in costs associated with our fixed-price contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows.

See Note 2, Revenue Recognition, for discussion on Revenue.

Use of Estimates

We use estimates and assumptions to prepare our financial statements in conformity with GAAP. Those estimates and assumptions affect the amounts we report in our Consolidated Financial Statements and accompanying Notes. Our actual results could differ from those estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, changes in cost recovery estimates, unexpected changes in weather conditions, changes in productivity, unidentified required vessel repairs, customer and vendor delays and other costs. We generally expect to experience a reasonable amount of unanticipated events, and some of those events can result in significant cost increases above cost amounts we previously estimated. As of December 31, 2016, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full when determined.

Loss Contingencies

We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We are currently involved in litigation and other proceedings, as discussed in Note 18, Commitments and Contingencies. We have accrued our estimates of the probable losses associated with these matters and associated legal costs are generally recognized as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Stock-Based Compensation

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. We use a Black-Scholes model to determine the fair value of certain share-based awards, such as stock options. Additionally, we use a Monte Carlo model to determine the fair value of certain share-based awards that contain market and performance-based conditions. The use of these models requires highly subjective assumptions, such as assumptions about the expected life of the award, vesting probability, expected dividend yield and the volatility of our stock price. See Note 14, Stock-Based Compensation, for additional information.

Cash, Cash Equivalents and Restricted Cash

Our cash and cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. A majority of our restricted cash and cash equivalents serves as collateral for outstanding letters of credit, as further discussed in Note 10, Debt.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount based on contracted prices. Amounts collected on accounts receivable are included in total cash provided by operating activities in the Consolidated Statements of Cash Flows.

We establish allowances for doubtful accounts based on our assessments of our customers’ willingness and abilities to pay. In addition to such allowances, there are often items in dispute or being negotiated that may require us to make an estimate as to the ultimate outcome. Past due receivable balances are written off when our internal collection efforts have been unsuccessful in collecting the amounts due.

Retainage, included in accounts receivable, represents amounts withheld from billings by our clients pursuant to provisions in the applicable contracts and may not be paid to us until the completion of specific tasks or the completion of the project and, in some instances, for even longer periods. Retainage may also be subject to restrictive conditions, such as performance guarantees.

Property, Plant and Equipment

We carry our property, plant and equipment at depreciated cost. Except for major marine vessels, we depreciate our property, plant and equipment using the straight-line method, over the estimated economic useful lives of eight to 33 years for buildings and three to 28 years for machinery and equipment. We do not depreciate property, plant and equipment classified as held for sale.

We depreciate major marine vessels using the units-of-production method based on the utilization of each vessel. Our units-of-production method of depreciation involves the calculation of depreciation expense on each vessel based on the product of actual utilization for the vessel for the period and the applicable daily depreciation value (which is based on vessel book value, standard utilization and vessel life) for the vessel. Our actual utilization is determined based on the actual days that the vessel was working or otherwise actively engaged (other than in transit between regions) under a contract, as determined by daily vessel operating reports prepared by the crew of the vessel. Our standard utilization is determined by vessel at least annually based on recent actual utilization combined with an expectation of future utilization, both of which allow for idle time. We ensure that a minimum amount of accumulated depreciation of at least 50% of equivalent life-to-date straight-line depreciation is recorded. Additionally, in periods of very low utilization, a minimum amount of depreciation expense of at least 25% of an equivalent straight-line depreciation expense (which is based on an initial 25-year life) is recorded.

We capitalize drydocking costs in other current assets and other assets when incurred and amortize the costs over the period of time between two drydock periods, which is generally five years.  We expense the costs of other maintenance, repairs and renewals, which do not materially prolong useful life of an asset, as we incur them.

Investments in Unconsolidated Affiliates

We account for equity investments using the equity method of accounting if we have the ability to exercise significant influence over, but not control of, an investee.  Significant influence generally exists if we have an ownership interest representing between 20% and 50% voting rights.  Under the equity method of accounting, investments are stated initially at cost and are adjusted for subsequent additional investments and our proportionate share of profit or losses and distributions.

We record our share of the profit or losses of the equity method investments, net of income taxes, in the Consolidated Statements of Operations.  When our share of losses in an equity investment equals or exceeds our interest in the equity investment, including any other unsecured receivables, we do not recognize further losses, unless we have incurred obligations or made payments on behalf of the equity investment.

We evaluate our equity method investments for impairment when events or changes in circumstances indicate, in our management’s judgment, that the carrying value of such investments may have experienced other-than-temporary decline in value.  When evidence of loss in value has occurred, we compare the estimated fair value of investment to the carrying value of investment to determine whether an impairment has occurred.  If the estimated fair value is less than the carrying value and our management considers the decline in value to be other-than-temporary, the excess of the carrying value over the estimated fair value is recognized in the Consolidated Financial Statements as an impairment.

Derivative Financial Instruments

Our worldwide operations give rise to exposure to changes in certain market conditions, which may adversely impact our financial performance. When we deem it appropriate, we use derivatives as a risk management tool to mitigate the potential impacts of certain market risks. The primary market risk we manage through the use of derivative instruments is movement in foreign currency exchange rates. We use foreign currency derivative contracts to reduce the impact of changes in foreign currency exchange rates on our operating results. We use these instruments to hedge our exposure associated with revenues, costs (or both) 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.

In certain cases, contracts with our customers contain provisions under which some payments from our customers are denominated in U.S. Dollars and other payments are denominated in a foreign currency. In general, the payments denominated in a foreign currency are designed to compensate us for costs that we expect to incur in such foreign currency. In these cases, we may use derivative instruments to reduce the risks associated with foreign currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. We recognize all derivatives at fair value on the balance sheet. Derivatives that are not accounted for as hedges under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, are adjusted to fair value, and such changes are reflected through our results of operations. If a derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings, or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. See Note 12, Derivative Financial Instruments for additional information.

The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings generally are included as a component of gain (loss) on foreign currency—net in our Consolidated Statements of Operations.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An established hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1—inputs are based on quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based on quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques.

The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivables and accounts payable approximate their fair values due to the short maturity of those instruments. See Note 13, Fair Value Measurements, for additional information.

Insurance and Self-Insurance

Our wholly owned “captive” insurance subsidiary provides coverage for our retentions under employer’s liability, general and products liability, automobile liability and workers’ compensation insurance and, from time to time, builder’s risk and marine hull insurance within certain limits. We may also have business reasons in the future to arrange for our insurance subsidiary to insure other risks which we cannot or do not wish to transfer to outside insurance companies. Premiums charged and reserves related to these insurance programs are based on the facts and circumstances specific to the insurance claims, our past experience with similar claims, loss factors and the performance of the outside insurance market for the type of risk at issue. The actual outcome of insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for the coverages discussed above. These accruals are based on various assumptions developed utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted as required based upon reported claims, actual claim payments and settlements and claim reserves. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable. Claims as a result of our operations, if greater in frequency or severity than actuarially predicted, could adversely impact the ability of our captive insurance subsidiary to respond to all claims presented.  

Concentration of Credit Risk

Our principal customers are businesses in the offshore oil and gas industry. This concentration of customers may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic or other conditions. In addition, we and many of our customers operate worldwide and are therefore exposed to risks associated with the economic and political forces of various countries and geographic areas. We generally do not obtain any collateral for our receivables. See Note 19, Segment Reporting, for additional information about our operations in different geographic areas.

Pension and Postretirement Benefit Plans

We have both defined benefit (funded and unfunded) and defined contribution plans. For the defined benefit plans, a projected benefit obligation is calculated annually by independent actuaries using the unit credit method.

We recognize actuarial gains and losses on pension and postretirement benefit plans immediately in our operating results. These gains and losses are generally measured annually as of December 31 and accordingly will normally be recorded during the fourth quarter, unless an earlier remeasurement is required. Should actual experience differ from actuarial assumptions, the projected pension benefit obligation and net pension cost and accumulated postretirement benefit obligation and postretirement benefit cost would be affected in future years.

Pension costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, offset by expected return on plan assets.

For defined contribution plans, we pay contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The contributions are recognized as employee benefit expense when due.

Foreign Currency Translation

We translate assets and liabilities of our foreign operations, other than operations in highly inflationary economies, into U.S. Dollars at year-end exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of other comprehensive income (loss), net of tax.

Impairment Review

We review our tangible long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Income Taxes

We provide for income taxes based on the tax laws and rates in the countries in which we conduct our operations. MDR is a Panamanian corporation that earns all of its income outside of Panama. As a result, we are not subject to income tax in Panama. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variations, along with changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

We believe that our deferred tax assets recorded as of December 31, 2016 are realizable through carrybacks, future reversals of existing taxable temporary differences and future taxable income.  Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the net tax effects of net operating loss carryforwards.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. If we subsequently determine that we will be able to realize deferred tax assets in the future in excess of our net recorded amount, the resulting adjustment would increase earnings for the period in which such determination was made. We will continue to assess the adequacy of the valuation allowance on a quarterly basis. Any changes to our estimated valuation allowance could be material to our consolidated financial condition and results of operations. See Note 15, Income Taxes, for additional disclosures.

Classification

Certain prior year amounts have been reclassified for consistency with the current year presentation. Our Consolidated Financial Statements previously reported income and loss from investment in unconsolidated affiliates as components of operating income. In the first quarter of 2016, we concluded that classification of loss from investments in unconsolidated affiliates after provision for income tax better reflected how the operations of our unconsolidated affiliates relate to our business as a whole.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure resulting in:

• Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market (“MTM”) pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other.”

• Research and development (“R&D”) expenses are separately presented in our Consolidated Statements of Operations. Previously R&D expenses were included in Cost of operations.

• Gain (loss) on foreign currency, net is included in Other non-operating income (expense), net in our Consolidated Statements of Operations.  Previously, Gain (loss) on foreign currency, net was separately presented.

• Note 19 includes, under caption “Information about Operations”, a reconciliation of segment operating income (loss) before income taxes to Income (loss) before income taxes in our Consolidated Statements of Operations.

Previously reported financial statements have been adjusted to reflect the above changes.

Recently Issued and Adopted Accounting Guidance

Statement of Cash Flows—In November 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash.  This ASU clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We adopted this ASU in the fourth quarter of 2016. As a result, our Consolidated Statement of Cash Flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents.  All comparative periods presented have been revised to reflect this change. See Note 5, Cash, Cash Equivalents and Restricted Cash for a reconciliation of the totals in Consolidated Statements of Cash Flows and in the Consolidated Balance Sheets.

In August 2016,the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU clarifies how entities should classify certain cash receipts and cash payments in their statements of cash flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We adopted this ASU in the third quarter of 2016. Our retrospective adoption did not have a material impact on the presentation of our Consolidated Financial Statements.

Consolidation—In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That are under Common Control.  This ASU amends the primary beneficiary assessment under ASC 810, requiring that a single decision maker consider indirect interests held by related parties under common control on a proportionate basis.  This ASU is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We adopted this ASU in the fourth quarter of 2016. Our adoption did not have a material impact on the accompanying Consolidated Financial Statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This ASU eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment.

In February 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis, which amends and changes the consolidation analysis previously required under U.S. GAAP. This ASU modifies the process used to evaluate whether limited partnerships and similar entities are variable interest entities or voting interest entities; affects the analysis performed by reporting entities regarding variable interest entities, particularly those with fee arrangements and related party relationships; and provides a scope exception for certain investment funds.

The amendments in ASUs 2015-16 and 2015-02 became effective for annual and interim periods beginning after December 15, 2015. Early adoption was permitted. We adopted these ASUs in the first quarter of 2016. Our adoption of these ASUs did not have a material impact on the accompanying Consolidated Financial Statements.

Stock Compensation—In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, earnings per share and classification in the statement of cash flows. We adopted this ASU in the second quarter of 2016. Our adoption did not have a material impact on the presentation of our Consolidated Financial Statements.

Derivatives—In March 2016, the FASB issued ASU 2016-06,Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This ASU clarifies that a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under Topic 815 does not require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met.

The amendments in ASU 2016-06 and 2016-05 are effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. We adopted these ASUs in the fourth quarter of 2016. Our adoption of those ASUs did not have a material impact on the accompanying Consolidated Financial Statements.

Income Tax—In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Under this ASU an entity shall classify deferred tax assets and liabilities as noncurrent. We adopted ASU 2015-17 in the first quarter of 2016. Our adoption of that ASU did not have a material impact on the presentation of our Consolidated Financial Statements. All comparable periods presented have been revised to reflect this change.

Going Concern—In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under this ASU, we are required to assess our ability to continue as a going concern each interim and annual reporting period and provide certain disclosures if there is substantial doubt about our ability to continue as a going concern, including our management’s plan to alleviate any such substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter with early adoption permitted. We adopted this ASU in the third quarter of 2016. Our adoption of the ASU did not impact the presentation of our Consolidated Financial Statements or the disclosures in the Consolidated Financial Statements.

Accounting Guidance Issued But Not Adopted as of December 31, 2016

Income Taxes—In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.  This ASU requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  The ASU is effective for interim and annual periods beginning after December 15, 2017.  Early adoption is permitted.  The application of this amendment is not expected to have a material impact on our future Consolidated Financial Statements and related disclosures.

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. A valuation account, allowance for credit losses, will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This ASU is effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact of this guidance on our future Consolidated Financial Statements and related disclosures.

Leases—In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The ASU will require entities that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. This ASU is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this ASU on our future Consolidated Financial Statements and related disclosures.

Financial Assets and Liabilities—In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  Under this new guidance, entities will be required to measure all investments in equity securities that are not subject to equity method or consolidation accounting at fair value, with changes recognized in net income.  Fair value changes related to instrument-specific credit risk in financial liabilities accounted for under the fair value option in Accounting Standards Codification 825 must be recorded in other comprehensive income instead of earnings.  ASU 2016-01 also changes presentation and disclosure requirements for financial assets and liabilities.  ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption not permitted except related to changes in fair value for financial liabilities. We are currently assessing the impact of these amendments on our future Consolidated Financial Statements and related disclosures.

Revenue from Contracts with Customers (Topic 606)—In May 2014, the FASB issued a new standard related to revenue recognition which supersedes most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. It also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The FASB has issued several amendments to the standard, including clarification on accounting for licenses of intellectual property, identifying performance obligations, reporting gross versus net revenue and narrow-scope improvements and practical expedients.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (“full retrospective method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (“modified retrospective application”).

We are currently assessing the impact of this ASU and the amendments on our future Consolidated Financial Statements and related disclosures. Adoption may affect the manner in which the company determines the unit of account for its projects and estimates revenue associated with unapproved change orders and claims. We intend to adopt the new standard on January 1, 2018 (the “initial application” date):

• using the modified retrospective application, with no restatement of the comparative periods presented and a cumulative effect adjustment as of the date of adoption;

• applying the new standard only to those contracts that are in process at the date of initial application; and

• disclosing the impact of the new standard on our 2018 Consolidated Financial Statements.

This standard could have a significant impact on our Consolidated Financial Statements and related disclosures.

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REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2016

Revenue Recognition [Abstract]

REVENUE RECOGNITION

NOTE 2—REVENUE RECOGNITION

Contract Types

We execute our contracts using a variety of pricing methods, including fixed-price, unit-basis, cost-plus, or some combination of those methods, with fixed-price being the most prevalent.  The percentage of our revenues by contract type for each of the years ended December 31 was as follows:

	2016			2015			2014
Fixed-price		92	%		93	%		87	%
Unit-basis and other		8			7			13
		100	%		100	%		100	%

Unapproved Change Orders

As of December 31, 2016, total unapproved change orders included in our estimates at completion aggregated approximately $119 million, of which approximately $15 million was included in backlog. As of December 31, 2015, total unapproved change orders included in our estimates at completion aggregated approximately $122 million, of which approximately $21 million was included in backlog.

Claims Revenue

The amount of revenues included in our estimates at completion (i.e., contract values) associated with such claims was $10 million as of December 31, 2016 and 2015, all in our Middle East segment. These amounts are determined based on various factors, including our analysis of the underlying contractual language and our experience in making and resolving claims. Our unconsolidated joint ventures did not include any material claims revenue in their 2016, 2015 and 2014 financial results.

None of the claims included in our estimates at completion at December 31, 2016 were the subject of any litigation proceedings. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses.

Loss Recognition

As of December 31, 2016, we have provided for our estimated costs to complete for all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full immediately and reflected in cost of operations in the Consolidated Statements of Operations.

For loss projects, it is possible that our estimates of gross profit could increase or decrease based on changes in productivity, actual downtime and the resolution of change orders and claims with the customers. The provision for estimated losses on all active uncompleted projects is a component of "Advance billings on contracts" in our Consolidated Balance Sheets.

As of December 31, 2016, KJO Hout, an active EPCI project in our MEA segment, was in an $8 million loss position and is expected to be complete in the second quarter of 2017.

As of December 31, 2015, two significant active projects in our AEA segment were in loss positions. PB Litoral, an EPCI project, in Mexico, which was completed in the first quarter of 2016, and the five-year Agile vessel charter project in Brazil which was terminated in the second quarter of 2016.

The provision for estimated losses on all active uncompleted projects in our Consolidated Balance Sheets as of December 31, 2016 was not material and was $22 million as of December 31, 2015.

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USE OF ESTIMATES

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

USE OF ESTIMATES

NOTE 3—USE OF ESTIMATES

The following is a discussion of our most significant changes in estimates, which impacted 2016, 2015 and 2014 segment operating income.

Year ended December 31, 2016

Segment operating income for 2016 was impacted by net favorable changes in cost estimates totaling approximately $91 million.

AEA—The segment was positively impacted by net favorable changes in estimates aggregating approximately $38 million, primarily due to:

• successful execution and close-out improvements on the PB Litoral, Chevron Jack St Malo, EOG Sercan and Exxon Julia Subsea Tieback projects; and

• productivity improvements and associated cost savings related to the DB 50 and the NO 102 marine campaigns undertaken in the Gulf of Mexico.

Included in the change was a reversal of a $7 million provision for liquidated damages, due to an agreed additional extension of the PB Litoral project completion date.

Those changes were partially offset by net unfavorable changes on multiple projects, none of which were individually material.

MEA—The segment was positively impacted by net favorable changes in estimates aggregating approximately $38 million, primarily due to productivity improvements and associated cost savings related to the DB 27 and the Intermac 406, both associated with Saudi Aramco projects, due to effective execution.

Those favorable changes in estimates were partially offset by:

• marine equipment downtime due to unfavorable weather conditions on a project in Qatar; and

• a change in estimate at completion on the KJO Hout project, in the Neutral Zone, due to changes to our execution plan and increased costs associated with DB 27 vessel and subcontractor standby time, primarily due to work permit delays. This project is in an $8 million loss position and is expected to be complete in the second quarter of 2017.

ASA―The segment was positively impacted by net favorable changes in estimates aggregating approximately $15 million, primarily driven by:

• efficient project execution including productivity improvements on our marine vessels and associated cost savings, and improved fabrication facility utilization;

• favorable settlements with our vendors and sub-contractors; and

• favorable agreements on outstanding change orders on active and completed projects.

Those net favorable changes were partially offset by a $31 million increase in our estimated costs at completion, as of December 31, 2016, on our Ichthys project in Australia. During January 2017, we identified a failure in supplier-provided subsea-pipe connector components previously installed on this project. As a result, we have determined our estimated costs at completion for the project, as a whole, will increase by $34 million, primarily due to: (1) offshore costs attributable to replacement of those failed components; (2) changes to our execution plan; and (3) incremental mobilization costs and costs attributable to inefficiencies of executing work out-of-sequence as a result of the revised execution plan. Due to uncertainties in the estimation process, we believe it is reasonably possible the completion costs could be further revised in the near term by an additional $10 million. Although this project could recognize these additional costs in 2017, we expect the project to remain in an overall profitable position.

Year ended December 31, 2015

Segment operating income for 2015 was impacted by net favorable changes in cost estimates totaling approximately $70 million.

AEA―The segment had net favorable changes in estimates aggregating approximately $27 million, primarily due to:

• the extension of the PB Litoral project completion date, which resulted in a $12 million reversal of liquidated damages;

• the Agile charter project, which provided $11 million of favorable changes due to (1) productivity improvements and (2) our cost reduction initiatives; and

• other projects experienced net favorable changes in estimate of $4 million, which individually were not material.  

MEA―The segment had net favorable changes in estimates aggregating approximately $20 million primarily due to: 

• two Saudi Aramco projects were positively impacted by an aggregate $24 million related to: (1) productivity improvements and associated cost savings on the Intermac 406 vessel, which was working on the Abu Ali cable-lay project; and (2) offshore installation-related cost savings as well as reimbursement for standby cost incurred on the Manifa project; and

• the KJO Hout project in the Neutral Zone was positively impacted by $9 million due to a favorable discussion with the customer on reimbursement for vessel downtime and cost savings resulting from customer-approved design optimization;

Those net favorable changes were partly offset by a $20 million change in estimate to complete on the ADMA 4 GI project in the U.A.E. because of changes in our execution plan, increased costs associated with the DB 32 vessel demobilization and productivity related cost increases during hookup and pre-commissioning work. Other projects experienced net positive changes in estimate of $7 million, which individually were not material.

ASA―The segment had net favorable changes in estimates aggregating approximately $23 million primarily due to:

• positive impact of $5 million benefit on the Ichthys project, due to project execution cost savings;

• net positive changes in estimates of $4 million on the Gorgon MRU project due to close out improvements; and

• net positive changes in estimate of $14 million on other multiple projects, which individually were not material.

Year ended December 31, 2014

Segment operating income for 2014 was impacted by changes in estimates relating to projects in each of our segments.

AEA―The segment was negatively impacted by net unfavorable changes in estimates aggregating $37 million associated with the following:

• on the PB Litoral project, an EPCI project in Mexico, we increased our estimated cost to complete by approximately $69 million, due to liquidated damages and extended project management costs arising from unexpected project delays and projected fabrication cost increases reflecting reduced productivity, and execution plan changes to mitigate further project delays, as well as procurement and marine installation cost increases;

• on the Jack St. Malo subsea project in the Gulf of Mexico, we increased our estimated cost to complete by approximately $6 million, primarily due to equipment downtime issues on the NO 102, our primary vessel working on the project, partially offset by project close-out savings on marine spread costs and increased cost recovery estimates based on positive developments from the ongoing negotiations with the customer. This project, which was in a loss position, was completed in 2014; and

• on a fabrication project in Morgan City, the BG Comp Module, completed during 2013, we reduced our cost recovery estimates by approximately $8 million, mainly based on an agreement in principle with the customer in 2014, which resulted in lower-than-anticipated recoveries.

Those negative impacts were partially offset by $40 million of project close-out improvements on the Papa Terra EPCI project in Brazil, which resulted from marine cost reductions upon completion of activities and increased recoveries due to successful developments from the ongoing approval process for additional weather-related compensation.

We also recognized $5 million of cost reductions on the Gulfstar marine installation project in the Gulf of Mexico, primarily due to project close-out improvements.

MEA―The segment was negatively impacted by net unfavorable changes aggregating about $4 million, primarily attributable to changes on the following:

• Safaniya Phase-2, a Saudi Aramco EPCI project, we increased our estimated cost at completion by approximately $23 million, net.  Increases of $43 million were primarily a result of vessel downtime due to weather and standby delays, and were partially offset by increased cost recovery estimates of approximately $20 million based on positive discussions with the customer during the fourth quarter of 2014;

• Safaniya Phase-1, another Saudi Aramco project, we increased our estimated cost to complete by $19 million, primarily as a result of increased cost estimates to complete the onshore scope. Although the project recognized a loss in 2013, it remains in an overall profitable position and is substantially complete; and

• the KJO Ratawi project, we increased our estimated costs to complete by approximately $12 million, to reflect cost overruns related to (1) the onshore work, which was substantially completed in July 2014, and (2) delays in completing the offshore work, due to delayed access to the project site, resulting in a revised execution plan. The revised execution plan included the costs of an incremental mobilization and reflected inefficiencies of executing out-of-sequence work. This project was completed in the third quarter of 2015.

These negative changes were partially offset by approximately $54 million due to increased cost recovery estimates on a completed pipelay project in the Caspian based on positive negotiations with the customer in 2014, in connection with the ongoing project close-out process.

ASA―The segment experienced net favorable changes aggregating approximately $52 million, primarily attributable to changes in estimates on following:

• changes in estimates on the Siakap subsea development project in Malaysia resulted in an improvement of approximately $34 million in 2014, primarily related to productivity improvements on our marine vessels and offshore support activities, as well as the favorable resolution of cost contingencies relating to offshore performance risks;

• the BSP Champion marine installation project in Brunei, a reduction in estimated cost to complete due to productivity improvements on marine vessels and offshore support activities resulted in project savings of approximately $12 million;

• the Dai Hung SURF and Macedon projects, insurance claim collection and final project close-out adjustments resulted in an additional recovery of approximately $10 million in 2014; and

• completion of Sepat FEED and Esso KTT projects resulted in project close-out savings of approximately $6 million.

These positive changes were partially offset by a negative change in estimate of $11 million on the Ichthys project in Australia, primarily due to lower than expected fabrication productivity, increase in procurement costs as well as an increase in marine costs primarily due to changes in marine asset utilization.

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RESTRUCTURING

12 Months Ended

Dec. 31, 2016

Restructuring And Related Activities [Abstract]

RESTRUCTURING

NOTE 4—RESTRUCTURING

In 2014 we completed a major review of our cost structure, and subsequently implemented a plan, which we referred to as the McDermott Profitability Initiative (the “MPI”), to increase our profitability and flexibility through reduced fixed and variable costs. The plan included personnel reductions, centralization of operational activities, other cost reduction initiatives and certain asset impairments. As part of MPI, the previously announced move of our ASA regional headquarters from Singapore to Kuala Lumpur, along with additional sourcing initiatives, is substantially complete.We completed the MPI restructuring during third quarter of 2016.

We continued our efforts to improve our cost structure by initiating the Additional Overhead Reduction program (“AOR”) during the fourth quarter of 2015. AOR actions, which have included personnel reductions affecting direct operating and selling, general and administrative expenses, were complete as of December 31, 2016.

During 2013 and 2014, we implemented a restructuring of our Americas operations, which involved our Morgan City, Louisiana, Houston, Texas, New Orleans, Louisiana and some Brazil locations. The restructuring involved, among other things, reductions of management, administrative, fabrication and engineering personnel, and the discontinued utilization of the Morgan City facility.

We completed a Corporate restructuring during 2014. Costs associated with our Corporate restructuring activities primarily included severance, relocation and other personnel-related costs and costs for advisors, as well as costs for certain executive management changes that became effective during the fourth quarter of 2013.

The above restructuring initiatives are driven and managed by Corporate. Those costs are not allocated to our reportable segments.

The following table presents restructuring costs incurred in 2016, 2015, 2014 and from inception, by major cost type.

	Year ended December 31,									Incurred from  inception to
	2016					2015		2014		December 31, 2016
	(In thousands)
Americas Restructuring	$	(1,350	)	(1	)	$	2,308	$	9,170	$	44,194
Corporate Restructuring		-					-		4,940		6,601
MPI
Severance and other personnel-related costs		2,590					15,217		-		17,807
Asset impairment and disposal		-					7,471		-		7,471
Legal and other advisor fees		222					7,414		4,003		11,639
Other		2,436					7,609		-		10,045
Total MPI		5,248					37,711		4,003		46,962
AOR
Severance and other personnel-related costs		5,012					-		-		5,012
Legal and other advisor fees		1,968					800		-		2,768
Other		385					-		-		385
Total AOR		7,365					800		-		8,165
Total	$	11,263				$	40,819	$	18,113	$	105,922

(1) This amount includes reversal of environmental liability established in connection with discontinued utilization of our Morgan City fabrication facility. For further discussion see, Note 18, Commitments and Contingencies.

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH

12 Months Ended

Dec. 31, 2016

Cash And Cash Equivalents [Abstract]

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

NOTE 5—CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the totals of such amounts shown in the Consolidated Statements of Cash Flows.  

	December 31, 2016		December 31, 2015
	(in thousands)
Cash and cash equivalents	$	595,921	$	664,844
Restricted cash and cash equivalents		16,412		116,801
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	612,333	$	781,645

A majority of our restricted cash balances as of December 31, 2016 and 2015 serves as collateral for letters of credit, as further discussed in Note 10, Debt. 

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ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

ACCOUNTS RECEIVABLE

NOTE 6—ACCOUNTS RECEIVABLE

Accounts Receivable—Trade, Net

A summary of contract receivables is as follows:

	December 31, 2016			December 31, 2015
	(in thousands)
Contract receivables:
Contracts in progress	$	245,604			164,898
Completed contracts		40,345			35,702
Retainages		58,431			17,896
Unbilled (1)		4,303			4,303
Less allowances		(14,299	)		(14,325	)
Accounts receivable—trade, net	$	334,384		$	208,474

⁽¹⁾ This amount relates to a project milestone billing for which we are awaiting the customer’s final acceptance certificate. We expect to receive the final acceptance certificate during 2017.

We expect to invoice our unbilled receivables once certain milestones or other metrics are reached, and we expect to collect all unbilled amounts. We believe that our provision for losses on uncollectible accounts receivable is adequate for our credit loss exposure.

The following amounts represent retainages on contracts:

	December 31, 2016		December 31, 2015
	(in thousands)
Retainages expected to be collected within one year	$	58,431	$	17,896
Retainages expected to be collected after one year		127,193		155,061
Total retainages	$	185,624	$	172,957

We have included in Accounts receivable—trade, net, retainages expected to be collected in 2017. Of the long-term retainages at December 31, 2016, we expect to collect $121 million in 2018 and $6 million in 2019.

Accounts Receivable—Other

A summary of accounts receivable—other is as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Receivables from unconsolidated affiliates	$	13,292	$	12,816
Accrued unbilled other		12,075		14,021
Employee receivables		4,730		4,376
Other taxes receivable		2,483		28,743
Other		4,349		6,733
Accounts receivable—other	$	36,929	$	66,689

Employee receivables are expected to be collected within 12 months, and any allowance for doubtful accounts on our Accounts receivable—other is based on our estimate of the amount of probable losses due to the inability to collect these amounts (based on historical collection experience and other available information). As of December 31, 2016 and 2015, no such allowance for doubtful accounts was recorded.

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CONTRACTS IN PROGRESS AND ADVANCE BILLINGS ON CONTRACTS

12 Months Ended

Dec. 31, 2016

Contractors [Abstract]

CONTRACTS IN PROGRESS AND ADVANCE BILLINGS ON CONTRACTS

NOTE 7—CONTRACTS IN PROGRESS AND ADVANCE BILLINGS ON CONTRACTS

Components of contracts in progress and advance billings on contracts is as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Costs incurred less costs of revenue recognized	$	119,688	$	112,819
Revenues recognized less billings to customers		199,450		323,010
Contracts in Progress	$	319,138	$	435,829
Billings to customers less revenue recognized		42,637		265,618
Costs incurred less costs of revenue recognized		149,849		(100,845	)
Advance Billings on Contracts	$	192,486	$	164,773

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PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2016

Property Plant And Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

NOTE 8—PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment by asset category is as follows:

	December 31, 2016			December 31, 2015
	(In thousands)
Marine Vessels	$	1,789,942		$	1,391,556
Construction Equipment		474,128			478,175
Buildings		152,584			155,292
All other		148,805			143,580
Construction in Progress		20,720			298,749
Total Cost	$	2,586,179		$	2,467,352
Accumulated Depreciation		(898,878	)		(856,493	)
Net Book Value	$	1,687,301		$	1,610,859

Interest capitalization―We incurred interest of $75 million, $74 million and $85 million and capitalized $14 million, $23 million and $24 million of interest in 2016, 2015 and 2014, respectively.  The capitalized interest primarily related to vessels under construction in the respective periods – the DLV 2000 and CSV 108.

Depreciation―Our depreciation expense was approximately $90 million, $100 million and $93 million in 2016, 2015 and 2014, respectively.

Asset Sales—During 2014, we completed the sale of the DB16 and the DLB KP1 for aggregate cash proceeds of approximately $25 million, and realized approximately $11 million of associated gains.

In April 2014, we completed the sale of our Harbor Island facility near Corpus Christi, Texas for proceeds of approximately $32 million, and realized an approximate $25 million gain.

In June 2014, as part of our plan to discontinue utilization of our Morgan City facility, we disposed of several assets, including various items of equipment, for aggregate cash proceeds of approximately $14 million, resulting in an aggregate gain of approximately $11 million, of which approximately $1 million was recorded in connection with our Americas restructuring, discussed in Note 4, Restructuring. This portion of the gain pertained to an impairment charge previously recorded in 2013 in connection with the Americas restructuring.

Loss (gain) on asset disposals is generally reflected in Corporate and Other.

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EQUITY METHOD INVESTMENTS

12 Months Ended

Dec. 31, 2016

Equity Method Investment Summarized Financial Information Equity [Abstract]

EQUITY METHOD INVESTMENTS

NOTE 9—EQUITY METHOD INVESTMENTS

Our consolidated net income includes our proportionate share of the net income or loss of our equity method investees.  We do not have any investments accounted for under the equity method that are considered individually material. None of the equity method investees are listed on a stock exchange.

Summarized 100 percent balance sheet information for investments in equity method investees, combined, are set forth below:

	December 31, 2016		December 31, 2015
	(In thousands)
Current Assets	$	74,430	$	133,171
Noncurrent Assets		124,862		189,536
Total Assets	$	199,292	$	322,707
Current Liabilities	$	91,268	$	176,165
Noncurrent Liabilities		86,963		112,162
Total Liabilities	$	178,231	$	288,327

Summarized 100 percent income statement information for investments in equity method investees, combined, are set forth below:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Revenues	$	111,847		$	107,795		$	294,408
Cost of operations		87,335			105,465			275,015
Gross Profit		24,512			2,330			19,393
Net Income (loss)	$	(8,609	)	$	(38,245	)	$	(28,773	)

Our share of income taxes incurred directly by an equity company is reported in equity in earnings of equity method investee, and as such is not included in income taxes in our Consolidated Financial Statements.

During the third quarter of 2016, we exited our investment in THHE Fabricators Sdn. Bhd. and recorded a $12 million decrease in Investments in unconsolidated affiliates and a $5 million gain in Other non-operating income (expense), net in our ASA segment. For further discussion see Note 17, Stockholders’ Equity.

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DEBT

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

DEBT

NOTE 10—DEBT

As of December 31, 2016 and 2015 the carrying values of our long-term debt obligations, net of unamortized debt issuance costs of $14 million and $20 million, respectively, are as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Senior Notes	$	493,461	$	491,890
Term Loan		212,070		289,979
North Ocean 105 construction financing		31,877		38,263
Amortizing Notes		7,932		21,205
Other, including capital lease obligation		7,180		2,546
		752,520		843,883
Less: Amounts due within one year		48,125		24,882
Total long-term debt	$	704,395	$	819,001

Maturities of long-term debt during the five years subsequent to December 31, 2016 are as follows:

	(in thousands)
2017	$	49,820
2018		3,427
2019		212,846
2020		-
2021		500,000
Total Debt	$	766,093
Debt Issuance Costs		(13,573	)
Total Debt - Net of Issuance Costs	$	752,520

In April 2014, we entered into a credit agreement (the “Credit Agreement”), which initially provided for a $400 million first-lien, first-out three-year letter of credit facility (the “LC Facility”), scheduled to mature in 2017, and a $300 million first-lien, second-out five-year term loan (the “Term Loan”), scheduled to mature in 2019. The indebtedness and other obligations under the Credit Agreement are unconditionally guaranteed on a senior secured basis by substantially all of our wholly owned subsidiaries, other than our captive insurance subsidiary (collectively, the “Guarantors”). We also completed the issuance of (a) $500 million of second-lien, seven-year, senior secured notes; and (b) $288 million of tangible equity units (“TEUs”) composed of (1) three-year amortizing, senior unsecured notes, in an aggregate principal amount of $48 million, and (2) prepaid common stock purchase contracts.

In October 2015, we entered into Amendment No. 1 to the Credit Agreement, which amended the Credit Agreement primarily to increase the existing LC Facility from $400 million to $520 million.

In February 2016, we entered into Amendment No. 2 to the Credit Agreement, which amended the Credit Agreement to permit us to add to Covenant EBITDA certain cash restructuring expenses related to the conclusion of MPI or implementation of AOR for the quarters ending on or after March 31, 2016 but before April 16, 2017, in an aggregate amount not to exceed $25 million (as of any date of determination).      

On April 18, 2016, we entered into Amendment No. 3 to the Credit Agreement, which, among other things:

• replaced the existing EBITDA covenant with new ratios (as defined in Amendment No. 3) as follows:

• a minimum fixed charge coverage ratio of 1.15x for the fiscal quarter ended March 31, 2016 and each fiscal quarter thereafter;

• a maximum total leverage ratio of 4.5x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through June 30, 2017, 4.0x for the fiscal quarters ending September 30, 2017 and December 31, 2017, and 3.5x for each fiscal quarter thereafter; and

• a maximum secured leverage ratio of 2.0x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through December 31, 2017, and 1.5x for each fiscal quarter thereafter; and

• amended the maximum capital expenditure covenant to limit capital expenditures in 2016 and thereafter to $250 million each fiscal year, with any prior fiscal year unused capital expenditures up to $125 million able to be carried forward and added to the next year’s capital expenditure capacity, for a total of $375 million.

In addition, upon the May 13, 2016 satisfaction of certain conditions set forth in Amendment 3, including the receipt of requisite consents from term lenders under the Credit Agreement, Amendment 3 also amended the Credit Agreement to, among other things:

• extend the maturity date of the LC Facility commitments to April 22, 2019, unless the Term Loan has not been repaid or refinanced by January 15, 2019, in which case the LC Facility commitments will expire on January 15, 2019;

• change the existing letter of credit capacity of $520 million to $450 million;

• extend the deadline for mortgaging the DLV 2000 to one year after taking delivery thereof, and give McDermott the option to consider potential financing options for the DLV 2000 during that period;

• increase the basket for purchase money indebtedness from $20 million to $150 million;

• modify the covenant limiting acquisitions to permit up to $150 million of acquisitions; and

• modify the covenant limiting the prepayment or purchase of junior priority debt to permit up to $100 million of such prepayments or purchases.

On May 12, 2016, we entered into Amendment No. 4 to the Credit Agreement which, among other things:

• increased the applicable margin payable on the Term Loan by 3.0% per annum; and

• required that the net cash proceeds of any sale (including a sale and leaseback) of the DLV 2000 be applied as a mandatory prepayment of the Term Loan.

On May 13, 2016, McDermott prepaid $75 million of the Term Loan and satisfied the other conditions to the “effective date” set forth in Amendment No. 4.

As of December 31, 2016 we were in compliance with the financial covenants set forth in the Credit Agreement.

LC Facility

As ofDecember 31, 2016 and 2015, the capacity under our LC Facility was $450 million and $520 million, respectively. The aggregate face amount of letters of credit issued under the LC Facility, as of December 31, 2016 and 2015, was $442 million and $384 million, respectively.

The LC Facility permits us to deposit up to $300 million with letter of credit issuers to cash collateralize letters of credit issued on a bilateral basis outside the credit facility. As of December 31, 2016, we had bilateral arrangements to issue cash collateralized letters of credit of $175 million. As of December 31, 2016 and 2015, we had an aggregate face amount of approximately $16 million and $102 million of such letters of credit outstanding supported by cash collateral. We have included the supporting cash collateral in restricted cash and cash equivalents in the accompanying Consolidated Balance Sheets.

The LC Facility is secured on a first-lien, first-out basis (with relative priority over the Term Loan) by pledges of the capital stock of all the Guarantors and mortgages on, or other security interests in, substantially all the tangible and intangible assets of our company and the Guarantors, subject to specific exceptions.

The LC Facility contains various customary affirmative covenants, as well as specific affirmative covenants, including specific reporting requirements and a requirement for ongoing periodic financial reviews by a financial advisor. The LC Facility also requires compliance with various negative covenants, including limitations with respect to the incurrence of other indebtedness and liens, restrictions on acquisitions, capital expenditures and other investments, restrictions on sale leaseback transactions and restrictions on prepayments of other indebtedness.

The LC Facility provides for a commitment fee of 0.50% per year on the unused portion of the LC Facility and letter of credit fees at an annual rate of 2.25% for performance letters of credit and 4.50% for financial letters of credit, as well as customary issuance fees and other fees and expenses.

Term Loan

The Term Loan bears interest at a floating rate, which can be, at our option, either: (1) a LIBOR rate for a specified interest period (subject to a LIBOR “floor” of 1.00%) plus an applicable margin of 7.25%; or (2) an alternate base rate (subject to a base rate “floor” of 2.00%) plus an applicable margin of 6.25%. The Term Loan was incurred with 25 basis points of original issue discount.

The Term Loan is secured on a first-lien, second-out basis (with the LC Facility having relative priority over the Term Loan) by pledges of the capital stock of all the Guarantors and mortgages on, or other security interests in, substantially all tangible and intangible assets of our company and the Guarantors, subject to specific exceptions.

The Term Loan requires mandatory prepayments from: (1) the proceeds from the sale of assets, as well as insurance proceeds, in each case subject to certain exceptions, to the extent such proceeds are not reinvested in our business within 365 days of receipt; (2) net cash proceeds from the incurrence of indebtedness not otherwise permitted under the Credit Agreement; and (3) 50% of amounts deemed to be “excess cash flow,” subject to specified adjustments. The Term Loan requires $750,000 quarterly payments of principal.

The Term Loan requires compliance with various customary affirmative and negative covenants. We are required to maintain a ratio of “ownership adjusted fair market value” of marine vessels to the sum of (1) the outstanding principal amount of the Term Loan and (2) the aggregate principal amount of unreimbursed drawings and advances under the LC Facility of at least 1.75:1.00. As of December 31, 2016, the actual ratio was 6.4 to 1.0.  As of December 31, 2016, we were in compliance with all of the covenants under the Term Loan.

Under the terms of the Credit Agreement we are restricted in our ability to pay junior priority indebtness, which would include dividends to MDR stockholders, to $50 million prior to April 16, 2017 and $150 million after April 16, 2017.

Senior Notes

In April 2014 we issued $500 million in aggregate principal amount of 8.00% senior secured notes due 2021 (the “Notes”) in a private placement in accordance with Rule 144A and Regulation S under the Securities Act of 1933, as amended. Interest on the Notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2014. The Notes are scheduled to mature on May 1, 2021.

The Notes are unconditionally guaranteed on a senior secured basis by the Guarantors, and the Notes are secured on a second-lien basis by pledges of capital stock of certain of our subsidiaries and mortgages and other security interests covering (1) specified marine vessels owned by certain of the Guarantors and (2) substantially all the other tangible and intangible assets of our company and the Guarantors, subject to exceptions for certain assets.

At any time, or from time to time, on or after May 1, 2017, at our option, we may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed)set forth below, together with accrued and unpaid interest to the redemption date, if redeemed during the 12-month period beginning May 1 of the years indicated:

Year	Percentage
2017		104	%
2018		102
2019 and thereafter		100

The indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: (1) incur or guarantee additional indebtedness or issue preferred stock; (2) make investments or certain other restricted payments; (3) pay dividends or distributions on capital stock or purchase or redeem subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; (6) create certain liens; (7) sell all or substantially all of our assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create unrestricted subsidiaries. Many of those covenants would become suspended if the Notes were to attain an investment grade rating from both Moody’s Investors Service, Inc. and Standard and Poor’s Ratings Services and no default has occurred.

Tangible Equity Units (“TEUs”)

In April 2014, we issued 11,500,000 6.25% TEUs, each with a stated amount of $25. Each TEU consists of (1) a prepaid common stock purchase contract and (2) a senior amortizing note due April 1, 2017 (each an “Amortizing Note”) that has an initial principal amount of $4.1266 per Amortizing Note and bears interest at a rate of 7.75% per annum and has a final scheduled installment payment date of April 1, 2017.

The prepaid common stock purchase contracts were accounted for as additional paid-in capital totaling $240 million.  As of December 31, 2016, the outstanding principal balance of the Amortizing Notes was $9 million, all of which was classified as current notes payable.

Each prepaid common stock purchase contract will automatically settle on April 1, 2017, unless settled earlier: (1) at the holder’s option, upon which we will deliver shares of our common stock, based on the applicable settlement rate and applicable market value of our stock as determined under the purchase contract; or (2) at our option, upon which we will deliver shares of our common stock, based upon the stated maximum settlement rate of 3.5562 shares per Unit, subject to adjustment. Potential dilutive common shares that may be issued for the settlement of the common stock purchase contracts, based on the maximum number of shares issuable per Unit is 40.9 million (i.e., conversion at $7.03 per share). The potential minimum number of shares issuable is 33.4 million (i.e., conversion at $8.61 per share), which represents 2.9030 per Unit. The maximum and minimum settlement rates for the Units are subject to adjustment for certain dilutive events.

North Ocean Financing

NO 105―On September 30, 2010, MDR, as guarantor, and North Ocean 105 AS, in which we have a 75% ownership interest, as borrower, entered into a financing agreement to finance a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of North Ocean 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of North Ocean 105 AS. MDR unconditionally guaranteed all amounts to be borrowed under the agreement. Under the Credit Agreement, we are required to exercise our option under the North Ocean 105 AS joint venture agreement to purchase Oceanteam ASA’s 25% ownership interest in the vessel-owning company and repay the outstanding NO 105 debt by April 2017.

During 2016, North Ocean 105 AS converted the $5 million dividend declared for the year ended December 31, 2015 in favor of Oceanteam ASA into a $5 million note payable.  The note, which is expected to mature in June 2017, bears interest at 4% per annum.

Bank Guarantees and Bilateral Letter of Credit

MDR has uncommitted lines of credit in place with Middle Eastern banks in support of our contracting activities in the Middle East. Bank guarantees issued under these agreements totaled $359 million and $118 million, as of December 31, 2016 and 2015, respectively. Overall capacity under these arrangements totaled $375 million and $200 million as of December 31, 2016 and 2015, respectively.

During January 2017, we received an increase of $150 million in capacity under our agreements and now have an overall capacity of $525 million.

Surety Bonds

As of December 31, 2016 and 2015, surety bonds issued under general agreements of indemnity in favor of surety underwriters in support of contracting activities of our subsidiaries J. Ray McDermott de México, S.A. de C.V. and McDermott, Inc. totaled $79 million and $54 million, respectively.

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PENSION AND POSTRETIREMENT BENEFITS

12 Months Ended

Dec. 31, 2016

Compensation And Retirement Disclosure [Abstract]

PENSION AND POSTRETIREMENT BENEFITS

NOTE 11—PENSION AND POSTRETIREMENT BENEFITS

Although we currently provide retirement benefits for most of our U.S. employees through sponsorship of the McDermott Thrift Plan (see “Defined Contribution Plans” below), some of our longer-term U.S. employees and former employees are entitled to retirement benefits under the McDermott (U.S.) Retirement Plan, a non-contributory qualified defined benefit pension plan (the “McDermott Plan”), and several non-qualified supplemental defined benefit pension plans. The McDermott Plan and the non-qualified supplemental defined benefit pension plans are collectively referred to herein as the “Domestic Plans.” The McDermott Plan has been closed to new participants since 2006, and benefit accruals under the McDermott Plan were frozen completely in 2010.

We also sponsor a defined benefit pension plan established under the laws of the Commonwealth of the Bahamas, the J. Ray McDermott, S.A. Third Country National Employees Pension Plan (the “TCN Plan”) which provides retirement benefits for certain of our current and former foreign employees. Effective August 1, 2011, new entry into the TCN Plan was closed, and effective December 31, 2011, benefit accruals under the TCN Plan were frozen. Effective January 1, 2012, we established a new global defined contribution plan to provide retirement benefits to non-U.S. expatriate employees who may have otherwise obtained benefits under the TCN Plan.

Retirement benefits under the McDermott Plan and the TCN Plan are generally based on final average compensation and years of service, subject to the applicable freeze in benefit accruals under the plans. Our funding policy is to fund the plans as recommended by the respective plan actuaries and in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or other applicable law. The Pension Protection Act of 2006 (“PPA”) amended ERISA and modified the funding requirements for certain defined benefit pension plans including the McDermott Plan. We are in compliance with provisions under the PPA accelerated funding requirements.

	Domestic Plans						TCN Plan
	Year Ended December 31,						Year Ended December 31,
	2016			2015			2016			2015
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	519,199		$	556,632		$	38,265		$	43,985
Interest cost		21,102			21,613			1,351			1,626
Actuarial loss (gain)		2,641			(21,754	)		(3,172	)		(4,095	)
Benefits paid		(37,586	)		(37,292	)		(5,227	)		(3,251	)
Benefit obligation at end of year		505,356			519,199			31,217			38,265
Change in plan assets:
Fair value of plan assets at beginning of year		494,146			551,821			38,257			42,106
Actual return on plan assets		26,891			(21,889	)		(778	)		(598	)
Company contributions		1,510			1,506			-			-
Benefits paid		(37,586	)		(37,292	)		(5,227	)		(3,251	)
Fair value of plan assets at end of year		484,961			494,146			32,252			38,257
Funded status	$	(20,395	)	$	(25,053	)	$	1,035		$	(8	)
Amounts recognized in balance sheet consist of:
Other Assets	$	-		$	-		$	1,035		$	-
Accrued pension liability—current		(1,382	)		(1,409	)		-			-
Pension liability		(19,013	)		(23,644	)		-			(8	)
Accrued benefit liability		(20,395	)		(25,053	)		-			(8	)
Net (Liability) Asset	$	(20,395	)	$	(25,053	)	$	1,035		$	(8	)

	Domestic Plans				TCN Plan
	Year Ended December 31,				Year Ended December 31,
	2016		2015		2016		2015
	(In thousands)
Supplemental information:
Plans with accumulated benefit obligation in excess          of plan assets
Projected benefit obligation	$	505,356	$	519,199	$	31,217	$	38,265
Accumulated benefit obligation		505,356		519,199		31,217		38,265
Fair value of plan assets		484,961		494,146		32,252		38,257

Assumptions

	Domestic Plans						TCN Plan
	2016			2015			2016			2015
Weighted average assumptions used to determine net periodic benefit obligations at December 31:
Discount rate		4.1	%		4.2	%		4.1	%		4.0	%
Rate of compensation increase	N/A			N/A			N/A			N/A

	Domestic Plans									TCN Plan
	Year Ended December 31,									Year Ended December 31,
	2016			2015			2014			2016			2015			2014
	(In thousands)
Supplemental information:
Components of periodic benefit cost:
Interest cost	$	21,102		$	21,613		$	26,972		$	1,351		$	1,626		$	1,900
Expected return on plan assets		(20,006	)		(26,707	)		(27,501	)		(1,587	)		(2,840	)		(2,961	)
Actuarial loss (gain)		(4,244	)		26,842			(8,728	)		(807	)		(657	)		6,027
Net periodic benefit cost (gain)	$	(3,148	)	$	21,748		$	(9,257	)	$	(1,043	)	$	(1,871	)	$	4,966
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate		4.2	%		4.0	%		4.8	%		4.0	%		4.0	%		4.8	%
Expected return on plan assets		4.2	%		5.0	%		5.0	%		4.7	%		6.9	%		6.9	%
Rate of compensation increase	N/A			N/A			N/A			N/A			N/A			N/A

Expected Long-Term Rate of Return—Our long-term rates of return reflect the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In setting the long-term assumed rate of return, we consider capital markets future expectations and the asset mix of the plans’ investments. Actual long-term return can, in relatively stable markets, also serve as a factor in determining future expectations. We consider many factors that include, but are not limited to, historical returns on plan assets, current market information on long-term returns (e.g., long-term bond rates) and current and target asset allocations between asset categories. The target asset allocation is determined based on consultations with external investment advisers. However, any differences in the rate and actual returns will be included with the actuarial gain or loss recorded in the fourth quarter when our plans are remeasured.

Investment Goals

General

The investment goals of the McDermott Trust and the trust underlying the TCN Plan (“TCN Trust”) are generally to provide for the solvency of the respective plans and fulfillment of pension obligations over time, and to maximize long-term investment return consistent with a reasonable level of risk. Asset allocations within the McDermott Trust and TCN Trust are reviewed periodically and rebalanced, if appropriate, to ensure the continued conformance to the investment goals, objectives and strategies. Both the McDermott Trust and the TCN Trust employ a professional investment advisor and a number of professional investment managers whose individual benchmarks are, in the aggregate, consistent with the applicable trust’s overall investment objectives.

The specific goals of each investment manager are set out in the investment policy adopted by the investment committee for the respective trust, but, in general, the goals are (1) to perform in line with (in the case of passive accounts) or outperform (for actively managed accounts) the benchmark selected and agreed upon by the manager and the trust, and (2) to display an overall level of risk in its portfolio that is consistent with the risk associated with the agreed upon benchmark. The estimated allocations discussed below are periodically reviewed to assess the appropriateness of the particular funds in which they are invested, and these estimated allocations are subject to change.

The performance of each investment manager’s portfolio is periodically measured against commonly accepted benchmarks, including the individual investment manager’s benchmarks. In evaluating investment manager performance, consideration is also given to personnel, strategy, research capabilities, organizational and business matters, adherence to discipline and other qualitative factors that may impact the ability to achieve desired investment results.

The following is a summary of the asset allocations at December 31, 2016 and 2015 by asset category.

	Domestic Plans						TCN Plan
	2016			2015			2016			2015
Asset Category:
Fixed Income		85	%		85	%		67	%		49	%
Equity Securities		15			15			33			51
Total		100	%		100	%		100	%		100	%

As of December 31, 2015, $14 million of TCN plan assets were held in cash and cash equivalents.

Fair Value

The following is a summary of total investments for our plans, measured at fair value at:

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Pension Benefits:	(In thousands)
Fixed Income	$	167,271	$	247,882	$	5,087	$	420,240
Equities		82,442		-		-		82,442
Cash and Accrued Items		14,531		-		-		14,531
Total Investments	$	264,244	$	247,882	$	5,087	$	517,213
	December 31, 2015
	Level 1		Level 2		Level 3		Total
Pension Benefits:	(In thousands)
Fixed Income	$	60,128	$	356,107	$	5,752	$	421,987
Equities		85,065		12		-		85,077
Cash and Accrued Items		25,335		4		-		25,339
Total Investments	$	170,528	$	356,123	$	5,752	$	532,403

Changes in Level 3 Instrument

The following is a summary of the changes in our Level 3 fixed income instruments measured on a recurring basis:

	December 31,
	2016			2015
	(In thousands)
Balance at beginning of period	$	5,752		$	5,013
Purchases, net		107			1,269
Total unrealized loss		(772	)		(530	)
Balance at end of period	$	5,087		$	5,752

Cash Flows

	Domestic Plans		TCN Plan
	(In thousands)
Expected employer contributions to trusts of defined benefit plans:
2017	$	-	$	-
Expected benefit payments:
2017	$	37,148	$	5,803
2018		36,929		1,304
2019		36,620		1,571
2020		36,228		1,799
2021		35,876		1,483
2022-2026		169,531		9,309

Defined Contribution Plans

Most of our employees in the U.S., through the McDermott Thrift Plan (the “Thrift Plan”), and certain non-U.S. employees, through the McDermott Global Defined Contribution Plan (the “Global Thrift Plan”), are eligible to participate in qualified defined contribution plans by contributing portions of their compensation.

For the Thrift Plan, we make employer matching contributions of 50% of participants’ contributions up to 6% of compensation and unmatched employer cash contributions equal to 3% of participants’ base pay, plus overtime pay, expatriate pay and commissions.

For the Global Thrift Plan, we make employer matching contributions of 50% of participants’ contributions up to 6% of base salary and unmatched employer cash contributions equal to 3% of participants’ base salary.

The following table summarizes our contributions under the plans:

		Thrift Plan						Global Thrift Plan
		Year Ended December 31,						Year Ended December 31,
		2016	2015		2014			2016	2015		2014
		(In thousands)
Contributions	$	4,176	$	3,840	$	3,879	$	998	$	1,095	$	1,236

We also provide benefits under the McDermott International, Inc. Director and Executive Deferred Compensation Plan (“Deferred Compensation Plan”), which is a non-qualified defined contribution plan. Expense associated with the Deferred Compensation Plan was not material to our Consolidated Financial Statements.

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DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 12—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into derivative financial instruments primarily to hedge certain firm purchase or sale commitments and forecasted transactions 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: (1) deferred as a component of AOCI until the hedged item is recognized in earnings; (2) offset against the change in fair value of the hedged firm commitment through earnings; or (3) recognized immediately in earnings. At inception and on an ongoing basis, we assess the hedging relationship to determine its effectiveness in offsetting changes in cash flows or fair value attributable to the hedged risk. 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. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings are included as a component of gain (loss) on foreign currency—net in our Consolidated Statements of Operations. As of December 31, 2016, we designated the majority of our foreign currency forward contracts as cash flow hedging instruments.

As of December 31, 2016, we deferred approximately $25 million of net losses on these derivative financial instruments in AOCI, and we expect to reclassify approximately $11 million of the net deferred losses out of AOCI by December 31, 2017.

As of December 31, 2016, the majority of our derivative financial instruments consisted of foreign currency forward contracts. The notional value of our outstanding derivative contracts totaled $332 million at December 31, 2016, with maturities extending through May 2018. Of this amount, approximately $158 million is associated with various foreign currency expenditures we expect to incur on one of our EPCI projects in the ASA segment. These instruments consist of contracts to purchase or sell foreign-denominated currencies. As of December 31, 2016, the fair value of these contracts was in a net liability position totaling approximately $7 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

The following table summarizes our asset and liability derivative financial instruments:

	December 31,
	2016		2015
	(In thousands)
Derivatives Designated as Hedges:
Location:
Accounts receivable-other	$	2,631	$	1,668
Other assets		-		215
Total derivatives asset	$	2,631	$	1,883
Accrued liabilities	$	9,361	$	26,649
Other liabilities		4		4,018
Total derivatives liability	$	9,365	$	30,667

The following table summarizes the effects of derivative instruments on our Consolidated Financial Statements:

	December 31,
	2016			2015			2014
	(in thousands)
Derivatives Designated as Hedges:
Amount of gain (loss) recognized in other comprehensive income (loss)	$	4,004		$	(57,459	)	$	(65,503	)
Reclassified from AOCI to Cost of operations		34,556			76,034			26,418
Ineffective portion and amount excluded from effectiveness testing gain (loss) recognized in Gain (loss) on foreign currency, net		(1,461	)		6,238			6,910

Credit Risk

In the event of nonperformance by counterparties to our derivative financial instruments, we may be exposed to credit-related losses. However, when possible, we enter into International Swaps and Derivative Association agreements with our derivative counterparties to mitigate this risk. We also attempt to mitigate this risk by using highly-rated major financial institutions as counterparties. Our derivative counterparties have the benefit of the same collateral arrangements and covenants as described under our Credit Agreement.

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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 13—FAIR VALUE MEASUREMENTS

The following table presents the financial instruments outstanding as of December 31, 2016 and 2015 that are measured at fair value on recurring basis and financial instruments that are not measured at fair value on a recurring basis.

	December 31, 2016
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(6,734	)		(6,734	)	$	-	$	(6,734	)	$	-
Non-recurring
Debt		(752,520	)		(777,072	)		-		(728,072	)		(49,000	)
	December 31, 2015
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(28,784	)	$	(28,784	)	$	-	$	(28,784	)	$	-
Non-recurring
Debt		(843,883	)		(777,634	)		-		(707,492	)		(70,142	)

The carrying value of all non-derivative financial instruments included in current assets (including cash, cash equivalents and restricted cash, accounts receivable) and current liabilities, including accounts payable but excluding short-term debt approximates the applicable fair value due to the short maturity of those instruments.

See Note 1, Basis of Presentation and Significant Accounting Policies—Impairment Review, for a description of significant Level 3 inputs used in development of fair value of nonfinancial assets.

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Short-term and long-term debt. The fair value of debt instruments valued using a market approach based on quoted prices for similar instruments traded in active markets is classified as Level 2 within the fair value hierarchy.

Quoted prices are not available for Amortizing Notes and NO 105 debt. The income approach was used to value these instruments based 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. These instruments are classified as Level 3 within the fair value hierarchy.

Forward contracts. The fair value of forward contracts is classified as Level 2 within the fair value hierarchy and is valued using observable market parameters for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value forward contracts, which discounts future cash flows based on current market expectations and credit risk.

Fair Value Disclosure of Non-financial Instruments

During the fourth quarter of 2016, we impaired the Intermac 600, a launch cargo barge, given the lack of opportunities for that vessel. In connection with that decision, we wrote off the deferred drydock costs associated with the vessel and recognized a non-cash impairment charge of $11 million.

During the third quarter of 2016, our management reevaluated our operational plans for certain underutilized marine assets. As a result of that exercise, we identified certain marine assets that would not be used in a manner consistent with management’s original intent. Based on this determination, we tested the carrying value of those assets for recoverability by comparing the undiscounted future cash flows to the assets’ respective carrying values. As the carrying value of those assets exceeded the undiscounted future cash flows, an impairment was recorded.  The impairment was calculated as the difference between the $22 million carrying value of the assets and the $10 million estimated fair value of the assets, resulting in a $12 million non-cash impairment charge.  We utilized both a market approach and income approach to estimate the fair value of the assets.  Inputs included market sales data for comparable assets, forecasted cash flows and discount rates believed to be consistent with those used by principal market participants.  The fair value measurement is based on inputs that are not observable in the market and thus represent level 3 inputs.

During the first quarter of 2016, we impaired our Agile vessel upon termination of its then current charter in May 2016, given the lack of opportunities for that vessel. In connection with that decision, we recognized a non-cash impairment charge of $32 million during the first quarter of 2016, which equaled the vessel’s carrying value, in accordance with ASC 360-10, Property, Plant and Equipment.

In accordance with ASC 360-10, Property, Plant and Equipment, one of our vessels, the DB101, was written down to a fair value of $14 million, resulting in a non-cash impairment charge of $4 million in the first quarter of 2015, which related to our plan to decommission this vessel in the second quarter of 2015. In the second quarter of 2015, we disposed of the vessel and recognized an additional loss of $3 million. Impairment loss on this asset has been included in restructuring expenses.

In the second quarter of 2015, we abandoned a marine pipelay welding system project and recognized a $7 million non-cash impairment charge, which equaled the carrying value of that asset.

In June 2014, we cancelled a pipelay system originally intended for the CSV 108, which resulted in approximately $11 million improvement to the cancellation cost estimate included in $38 million of vessel-impairment charges recognized in 2013.

During 2014, we determined that certain of our intangible assets were fully impaired and, in 2014, we recorded an associated impairment charge of approximately $2 million.

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STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

STOCK-BASED COMPENSATION

NOTE 14—STOCK-BASED COMPENSATION

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. Compensation expense is based on awards we expect to ultimately vest. Therefore, we have reduced compensation expense for estimated forfeitures based on our historical forfeiture rates. Our estimate of forfeitures is determined at the grant date and is revised if our actual forfeiture rate is materially different from our estimate.

Total compensation expense recognized is as follows:

	2016		2015		2014
	(In thousands)
Restricted stock awards (“RSAs”) and restricted stock units (“RSUs”)	$	15,746	$	14,395	$	14,417
Performance shares and performance units		6,888		1,428		352
Stock options		46		770		1,747
Total	$	22,680	$	16,593	$	16,516

The components of the total gross unrecognized estimated compensation expense for equity awards and their expected remaining weighted-average periods for expense recognition are as follows:

	Amount (In thousands)		Weighted-Average Period (years)
RSUs and RSAs	$	17,603		1.8
Performance shares and performance units(1)		258		0.3
	$	17,861

⁽¹⁾ Excludes performance shares and performance units accounted for as liability awards.

Stock Plans

2016 McDermott International, Inc. Long-Term Incentive Plan

In April 2016, our stockholders approved the 2016 McDermott International, Inc. Long-Term Incentive Plan (the “2016 LTIP”). Members of the Board of Directors, officers, employees and consultants are eligible to participate in the 2016 LTIP. The Compensation Committee of our Board of Directors selects the participants for the 2016 LTIP. The 2016 LTIP provides for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units and performance shares and performance share units, subject to satisfaction of specific performance goals. As part of the approval of the 2016 LTIP, 12 million shares were approved for issuance in connection with awards made under the plan.  In addition, shares of our common stock approved for issuance pursuant to the prior long-term incentive plans described below, and which had not been made subject to awards as of the April 29, 2016 effective date of the 2016 LTIP, are available for awards under the 2016 LTIP.  As provided in the 2016 LTIP, following the April 29, 2016 approval of the 2016 LTIP by our stockholders, no additional grants may be made pursuant to those prior long-term incentive plans.  Also, if an award under the 2016 LTIP or either of the prior plans expires or is terminated, cancelled or forfeited, the shares of our common stock associated with the expired, terminated, cancelled or forfeited award will again be available for awards under the 2016 LTIP.  Further, the 2016 LTIP contains a provision that MDR common stock tendered by a participant or withheld as full or partial payment of withholding taxes related to the vesting or settlement of awards (other than options)  shall become available again for issuance.

2014 McDermott International, Inc. Long-Term Incentive Plan

In May 2014, our stockholders approved the 2014 McDermott International, Inc. Long-Term Incentive Plan (the “2014 LTIP”). Members of the Board of Directors, officers, employees and consultants were eligible to participate in the 2014 LTIP. The Compensation Committee of our Board of Directors selected the participants for the 2014 LTIP. The 2014 LTIP provided for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units and performance shares and performance share units, subject to satisfaction of specific performance goals. Shares approved under the 2009 McDermott International, Inc. Long-Term Incentive Plan (the “2009 LTIP”) that were not awarded as of the date of approval of the 2014 LTIP, or shares that were subject to awards that were cancelled, terminated, forfeited, expired or settled in cash in lieu of shares, were available for issuance under the 2014 LTIP. As part of the approval of the 2014 LTIP, 6.6 million additional shares were approved for issuance. We no longer issue awards under the 2014 LTIP.

2009 McDermott International, Inc. Long-Term Incentive Plan

We no longer issue awards under the 2009 LTIP. Members of the Board of Directors, executive officers and key employees were eligible to participate in the 2009 LTIP. The Compensation Committee of our Board of Directors selected the participants for the 2009 LTIP. The 2009 LTIP provided for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units and performance shares and performance units, subject to satisfaction of specific performance goals. Shares approved under the 2001 Directors and Officers Long-Term Incentive Plan (the “2001 LTIP”) that were not awarded as of the date of approval of the 2009 LTIP, or shares that were subject to awards that were cancelled, terminated, forfeited, expired or settled in cash in lieu of shares, were available for issuance under the 2009 LTIP. As part of the approval of the 2009 LTIP, 9 million shares were authorized for issuance. Options to purchase shares were granted at the fair market value (closing trading price) on the date of grant, became exercisable at such time or times as determined when granted and expired not more than seven years after the date of grant.

MDR’s equity award agreements under the 2016, 2014 and 2009 LTIPs provide that amounts that the Company is required to withhold on behalf of participants for federal or state income taxes upon the vesting of restricted stock units, performance shares or performance units will be satisfied by withholding shares of MDR common stock having an aggregate fair market value equal to but not exceeding the amount of such required tax withholding.  Such transactions under the 2016, 2014 and 2009 LTIP are accounted for as purchases of the shares by the Company, and are included in the ordinary shares roll-forward in Note 17, Stockholders’ Equity.  

Stock Options

There were no stock options granted in 2016, 2015 or 2014.

The following table summarizes stock options activity during 2016 (share data in thousands):

	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term
Outstanding at beginning of period		2,896		$	12.76
Cancelled/expired/forfeited		(721	)		8.65
Outstanding at end of period(1)		2,175		$	14.13		1.94 years

⁽¹⁾ All remaining outstanding options were vested prior to December 31, 2016.

There were no stock options exercised during 2016. The total intrinsic value of stock options exercised during 2015 and 2014 was $0.3 million and $0.9 million, respectively. The intrinsic value is calculated as the total number of option shares multiplied by the excess of the closing price of our common stock on the last trading day over the exercise price of the options. This amount changes based on the fair market value of our common stock. Had all option holders exercised their options on December 31, 2016, the aggregate intrinsic value of the options would have been negative, as their exercise price is higher than closing price of our common stock on December 31, 2016. The total estimated fair value of shares vested during 2016, 2015 and 2014 was $1 million, $3 million and $4 million, respectively.

RSUs and RSAs

RSUs and RSAs and changes during 2016 were as follows (share data in thousands):

	Number of Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		6,689		$	5.15
Granted		3,876			3.28
Vested		(3,524	)		5.78
Cancelled/forfeited		(868	)		3.86
Nonvested at end of period		6,173		$	3.80

There were no tax benefits realized related to RSUs and RSAs that lapsed or vested during 2016, 2015 and 2014.

Performance Shares

Nonvested performance share awards and changes during 2016 were as follows (share data in thousands):

	Number of Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		2,590		$	6.71
Granted		1,582			3.22
Cancelled/forfeited		(711	)		10.22
Nonvested at end of period		3,461		$	4.39

In February 2016 and March 2015, we issued performance unit awards totaling 1,553,134 and 1,774,770 shares, respectively, which were classified as liability awards. Compensation cost for liability awards is re-measured at each reporting period and is recognized as expense over the applicable service period. The remaining weighted-average vesting period for these performance units is 1.8 years.

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INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 15—INCOME TAXES

The provision for income taxes consisted of:

	Year Ended December 31,
	2016			2015		2014
	(In thousands)
Other than U.S.:
Current	$	43,944		$	45,752	$	21,619
Deferred		(2,018	)		6,211		(1,546	)
Total provision for income taxes	$	41,926		$	51,963	$	20,073

The geographic sources of income before income taxes are as follows:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
U.S.		(124,154	)		(99,738	)		(35,782	)
Other than U.S.		206,469			164,348			(1,691	)
Income before provision for income taxes	$	82,315		$	64,610		$	(37,473	)

The following is a reconciliation of the Panama statutory federal tax rate to the consolidated effective tax rate:

	Year Ended December 31,
	2016			2015			2014
Panama federal statutory rate		25	%		25	%		25	%
Non-Panama operations		(14	)		29			9
Valuation allowance for deferred tax assets		24			10			(105	)
Audit settlements and reserves		14			9			17
Other (primarily tax on unremitted earnings)		2			7			-
Effective tax rate attributable to continuing operations		51	%		80	%		(54	)%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes, as well as operating loss and tax credit carryforwards.

Significant components of deferred tax assets and liabilities were as follows:

	December 31,
	2016			2015
	(In thousands)
Deferred tax assets:
Pension liability	$	9,732		$	12,033
Accrued liabilities for incentive compensation		22,208			21,640
Net operating loss carryforward		349,916			325,636
State net operating loss carryforward		18,308			24,367
Long-term contracts		-			4,312
Other		1,861			2,060
Total deferred tax assets		402,025			390,048
Valuation allowance for deferred tax assets		(334,991	)		(336,146	)
Deferred tax assets	$	67,034		$	53,902
Deferred tax liabilities:
Property, plant and equipment		37,883			34,419
Prepaid drydock		1,367			7,639
Long-term contracts		10,989			-
Investments in joint ventures and affiliated companies		17,044			14,960
Unrealized exchange gains and other		3,335			3,163
Total deferred tax liabilities	$	70,618		$	60,181
Net deferred tax liability	$	(3,584	)	$	(6,279	)
	December 31,
	2016			2015
	(In thousands)
Deferred tax assets and liabilities in the accompanying
Consolidated Balance Sheets include:
Deferred tax assets	$	21,116		$	18,822
Deferred tax liabilities		24,700			25,101
Net deferred tax liability	$	(3,584	)	$	(6,279	)

At December 31, 2016, we had a valuation allowance of $335 million for deferred tax assets that we expect cannot be realized through carrybacks, future reversals of existing taxable temporary differences or based on our estimate of future taxable income. We believe that our remaining deferred tax assets will more likely than not be realized through carrybacks, future reversals of existing taxable temporary differences and future taxable income. Any changes to our estimated valuation allowance could be material to our Consolidated Financial Statements.  

We have foreign net operating loss carryforwards of $373 million available to offset future taxable income in foreign jurisdictions. Of the foreign net operating loss carryforwards, $22 million is scheduled to expire in years 2017 to 2019. The foreign net operating losses have a valuation allowance of $76 million against the related deferred taxes. We have U.S. federal net operating loss carryforwards of approximately $745 million, which includes $17 million for which the benefit will be recorded in APIC when realized, and carry a $261 million valuation allowance against the related deferred taxes. The U.S. federal net operating loss carryforwards are scheduled to expire in years 2030 to 2036. We have state net operating losses of $355 million available to offset future taxable income in states where we operate. The state net operating loss carryforwards are scheduled to expire in years 2017 to 2030. We are carrying a valuation allowance of $18 million against the deferred tax asset related to the state loss carryforwards.

We have provided $21 million of taxes on earnings we intend to remit. All other earnings are considered permanently reinvested. We would be subject to withholding taxes if we were to distribute these permanently reinvested earnings from our U.S. subsidiaries and certain foreign subsidiaries. At December 31, 2016, the undistributed earnings of these subsidiaries were $236 million. Unrecognized deferred income tax liabilities, including withholding taxes, of approximately $0.2 million would be payable upon distribution of these earnings.

We operate under a tax holiday in Malaysia, our new Asia Pacific headquarters. This tax holiday is effective through December 31, 2020, and may be extended for an additional five years if we satisfy certain requirements. The Malaysian tax holiday reduced our 2016 foreign income tax expense by $0.2 million.

We conduct business globally and, as a result, we or one or more of our subsidiaries file income tax returns in a number of jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Malaysia, Australia, Indonesia, Singapore, Saudi Arabia, Kuwait, India, and the United States. With few exceptions, we are no longer subject to tax examinations for years prior to 2010.

A reconciliation of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance at beginning of period	$	36,353		$	34,106		$	40,613
Increases based on tax positions taken in the current year		2,328			4,720			3,479
Increases based on tax positions taken in prior years		7,741			4,710			3,195
Decreases based on tax positions taken in prior years		(5,090	)		(2,836	)		(863	)
Decreases due to lapse of applicable statute of limitation		(310	)		(4,347	)		(12,318	)
Balance at end of period	$	41,022		$	36,353		$	34,106

The entire balance of unrecognized tax benefits at December 31, 2016 would reduce our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2016, 2015 and 2014, we had recorded liabilities of approximately $20 million, $16 million and $15 million, respectively, for the payment of tax-related interest and penalties.

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EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 16—EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to McDermott International, Inc. by the weighted average number of common shares outstanding during the period. Diluted earnings per share equals net income attributable to McDermott International, Inc. divided by the weighted average common shares outstanding adjusted for the dilutive effect of our stock–based awards and common stock purchase contracts.

The following table sets forth the computation of basic and diluted earnings per share:

	Year Ended December 31,
	2016		2015			2014
	(In thousands, except share and per share amounts)
Net income (loss) attributable to McDermott International, Inc.	$	34,117	$	(17,983	)	$	(75,994	)
Weighted average common stock (basic)		240,359,363		238,240,763			237,229,086
Effect of dilutive securities:
Tangible equity units		40,824,938		-			-
Stock options, restricted stock and restricted stock units		2,999,938		-			-
Potential dilutive common stock		284,184,239		238,240,763			237,229,086
Net income (loss) per share
Net income (loss) attributable to McDermott International, Inc.
Basic:	$	0.14	$	(0.08	)	$	(0.32	)
Diluted:	$	0.12	$	(0.08	)	$	(0.32	)

Approximately 2.2 million, 2.9 million and 3.1 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share in 2016, 2015 and 2014, respectively, because inclusion of such shares would have been antidilutive in each of those years.  

Potential dilutive common shares for the settlement of our common stock purchase contracts, a component of our TEUs, of 40.9 million and 30.7 million shares were considered in the calculation of diluted weighted-average shares in 2015 and 2014, respectively. Restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) totaling 2.4 million were also considered in the calculation of diluted weighted average shares for 2015. However, due to our net loss position in 2015 and 2014, shares underlying TEUs, RSUs, and RSAs have not been reflected in the diluted earnings per share, because inclusion of those shares would have been antidilutive.

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2016

Stockholders Equity Note [Abstract]

STOCKHOLDERS? EQUITY

NOTE 17— STOCKHOLDERS’ EQUITY

The changes in the number of ordinary shares outstanding and treasury shares held by the Company are as follows:

	Year Ended December 31,
	2016			2015
Shares outstanding
Beginning balance		239,016,924			237,809,823
Common stock issued		3,304,808			1,672,923
Purchase of common stock		(933,455	)		(465,822	)
Ending balance		241,388,277			239,016,924
Shares held as Treasury shares
Beginning balance		7,824,204			7,400,027
Purchase of common stock		933,455			465,822
Retirement of common stock		(455,655	)		(41,645	)
Ending balance		8,302,004			7,824,204
Ordinary shares issued at the end of the period		249,690,281			246,841,128

Accumulated Other Comprehensive Income (Loss)

The components of AOCI included in stockholders’ equity are as follows:

	December 31, 2016			December 31, 2015
	(In thousands)
Foreign currency translation adjustments ("FCTA")	$	(42,082	)	$	(29,925	)
Net unrealized gain on investments		269			247
Net loss on derivative financial instruments		(25,082	)		(64,277	)
Accumulated other comprehensive loss	$	(66,895	)	$	(93,955	)

During the first quarter of 2016, we recorded a $7 million adjustment decreasing FCTA, with an offsetting reduction of Loss on foreign currency, net, to correct amounts accounted for inappropriately in a previous period.

In the second quarter of 2016, foreign currency instruments associated with construction of our DLV 2000 vessel were settled upon the final payment to the shipyard. These instruments were designated as cash flow hedges and, as such, $20 million of cumulative loss was recorded in AOCI and will be amortized consistent with the depreciation of the vessel.

The following table presents the components of AOCI and the amounts that were reclassified during 2016, 2015 and 2014:

	Foreign currency translation adjustments			Unrealized holding gain (loss) on investments		Gain (loss) on derivative (1)				TOTAL
	(In thousands)
Balance, January 1, 2014	$	(2,562	)	$	238	$	(45,386	)		$	(47,710	)
Other comprehensive income (loss) before reclassification		(9,250	)		3		(65,503	)			(74,750	)
Amounts reclassified from AOCI		(3,400	)		-		28,052		(2)		24,652
Net current period other comprehensive income (loss)		(12,650	)		3		(37,451	)			(50,098	)
Balance, December 31, 2014		(15,212	)		241		(82,837	)			(97,808	)
Other comprehensive income (loss) before reclassification		(12,470	)		6		(57,459	)			(69,923	)
Amounts reclassified from AOCI		(2,243	)		-		76,019		(2)		73,776
Net current period other comprehensive income (loss)		(14,713	)		6		18,560				3,853
Balance, December 31, 2015		(29,925	)		247		(64,277	)			(93,955	)
Other comprehensive income (loss) before reclassification		(12,157	)		22		4,004				(8,131	)
Amounts reclassified from AOCI		-			-		35,191		(2)		35,191
Net current period other comprehensive income (loss)		(12,157	)		22		39,195				27,060
Balance, December 31, 2016	$	(42,082	)	$	269	$	(25,082	)		$	(66,895	)

⁽¹⁾ Refer to Note 12, Derivative Financial Instruments, for additional details

⁽²⁾ Reclassified to cost of operations and gain (loss) on foreign currency, net

Noncontrolling Interest

In 2013, we entered into certain joint ventures with TH Heavy Engineering Berhad (“THHE”), whereby we acquired a 30% interest in THHE Fabricators Sdn. Bhd. (“THF”), a subsidiary of THHE, and THHE acquired a 30% interest in our Malaysian subsidiary, Berlian McDermott Sdn. Bhd (“BMD”). In the third quarter of 2016, we reacquired the 30% of noncontrolling interest in BMD from THHE in exchange for our 30% equity interest in THF. We determined the fair value of the asset surrendered to be $17 million. In connection with the acquisition of the BMD noncontrolling interest, we recorded an $18 million decrease in noncontrolling interest, and, in connection with the sale of our investment in THF, we recorded a $12 million decrease in investments in unconsolidated affiliates and a $5 million gain in Other non-operating income (expense), net in our Consolidated Financial Statements.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 18—COMMITMENTS AND CONTINGENCIES

Investigations and Litigation

We co-own interests in several entities (collectively “FloaTEC”) with Keppel Corporation (including its subsidiaries, “Keppel”).  We have conducted an internal investigation in connection with allegations by a former Petrobras employee that Keppel’s agent made improper payments to secure project awards from Petrobras on a number of Keppel affiliated projects in Brazil, including a FloaTEC project on which we were also a subcontractor.  Keppel’s agent subsequently entered into a plea arrangement with the Brazilian authorities and admitted to having made improper payments on behalf of Keppel to former Petrobras employees on projects unrelated to FloaTEC.  We voluntarily contacted the U.S. Department of Justice (“DOJ”) to advise it of the preliminary results of our internal investigation, which identified no evidence to indicate any improper payments were made by us or FloaTEC or that any of our or FloaTEC’s employees authorized, had knowledge of, or direction or control over, any such payments.  We have responded to the DOJ’s requests for additional information.   If in the future, the DOJ determines that violations of applicable law have occurred involving us, we could be subject to civil or criminal sanctions, including monetary penalties, which could be material.   However, based on the preliminary results of our investigation, we do not expect this matter to have a material adverse effect on us or our operations. 

Additionally, due to the nature of our business, we and our affiliates are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including, among other things:

• performance or warranty-related matters under our customer and supplier contracts and other business arrangements; and

• workers’ compensation claims, Jones Act claims, occupational hazard claims, including asbestos-exposure claims, premises liability claims and other claims.

Based upon our prior experience, we do not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows; however, because of the inherent uncertainty of litigation and other dispute resolution proceedings and, in some cases, the availability and amount of potentially applicable insurance, we can provide no assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material effect on our consolidated financial condition, results of operations or cash flows for the fiscal period in which that resolution occurs.

Environmental Matters

We have been identified as a potentially responsible party at various cleanup sites under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”). CERCLA and other environmental laws can impose liability for the entire cost of cleanup on any of the potentially responsible parties, regardless of fault or the lawfulness of the original conduct. Generally, however, where there are multiple responsible parties, a final allocation of costs is made based on the amount and type of wastes disposed of by each party and the number of financially viable parties, although this may not be the case with respect to any particular site. We have not been determined to be a major contributor of wastes to any of these sites. On the basis of our relative contribution of waste to each site, we expect our share of the ultimate liability for the various sites will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows in any given year.

In 2013, we established a $6 million environmental reserve in connection with our plan to discontinue the utilization of our Morgan City fabrication facility.  For this site, up to June 30, 2016, we incurred approximately $4 million. During the second quarter of 2016 we received a notice from the State of Louisiana stating that our environmental remediation obligations related to the closure of our Morgan City fabrication facility had been fulfilled.  Pursuant to the notice received from the State of Louisiana, as well as our internal assessment, we believe no environmental remediation liability exists with respect to the Morgan City site.  As a result, during 2016, we reversed $1 million of environmental remediation obligation accrual.

Contracts Containing Liquidated Damages Provisions

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under those provisions. Those contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have historically had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of December 31, 2016, we had approximately $16 million of potential liquidated damages exposure, however the amount of liability recorded in our Consolidated Financial Statements is under $1 million. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for unaccrued liquidated damages. Accordingly, we believe that no amounts for these potential liquidated damages are probable of being paid by us. However, we may not achieve relief on some or all of the issues involved and, as a result, could be subject to higher damage amounts.  

Operating Leases

Future minimum payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year at December 31, 2016 are as follows (in thousands):

Fiscal Year Ending December 31,	Amount
2017	$	27,864
2018		23,185
2019		19,076
2020		19,208
2021		14,425
Thereafter		122,922

Total rental expense in 2016, 2015 and 2014 was $36 million, $40 million and $107 million, respectively. These expense amounts include contingent rentals and are net of sublease income, neither of which is material.

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SEGMENT REPORTING

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 19—SEGMENT REPORTING

We disclose the results of each of our reportable segments in accordance with ASC 280, Segment Reporting. Each of the reportable segments is separately managed by a senior executive who is a member of our Executive Committee (“EXCOM”).  EXCOM is led by our Chief Executive Officer, who is the chief operating decision maker. Discrete financial information is available for each of the segments, and the EXCOM uses the operating results of each of the reportable segments for performance evaluation and resource allocation.

We manage reportable segments along geographic lines consisting of (1) AEA, (2) MEA and (3) ASA. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure. Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end MTM pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other.”

We account for intersegment sales at prices that we generally establish by reference to similar transactions with unaffiliated customers. Reportable segments are measured based on operating income, which is defined as revenues reduced by total costs and expenses and equity in loss of unconsolidated affiliates.

1.Information about Operations:  

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Revenues (1):
AEA	$	285,988		$	478,800		$	567,608
MEA		1,241,591			1,134,555			795,666
ASA		1,108,404			1,456,920			937,615
Total revenues:	$	2,635,983		$	3,070,275		$	2,300,889
Income (loss) before provision for income taxes:
Operating income (loss) (2)
AEA	$	51,129		$	52,918		$	(65,565	)
MEA		209,401			146,866			47,863
ASA		97,963			123,718			90,838
Segment operating income		358,493			323,502			73,136
Corporate and Other		(216,240	)		(210,820	)		(56,734	)
Total operating income	$	142,253		$	112,682		$	16,402
Interest expense, net		(58,871	)		(50,058	)		(60,877	)
Other non-operating income (expense), net		(1,067	)		1,986			7,002
Income (loss) before provision for income taxes	$	82,315		$	64,610		$	(37,473	)
Capital expenditures (3):
AEA	$	16,667		$	13,715		$	53,431
MEA		18,564			28,328			99,974
ASA		190,260			60,220			154,735
Corporate and Other		2,588			588			13,047
Total capital expenditures:	$	228,079		$	102,851		$	321,187
Depreciation and amortization:
AEA	$	26,924		$	43,006		$	34,494
MEA		24,268			30,567			31,876
ASA		30,314			16,880			19,020
Corporate and Other		8,376			9,881			7,795
Total depreciation and amortization:	$	89,882		$	100,334		$	93,185
Drydock amortization
AEA	$	9,905		$	12,554		$	11,453
MEA		1,975			2,089			2,011
ASA		915			3,304			6,255
Total drydock amortization	$	12,795		$	17,947		$	19,719

⁽¹⁾ Intercompany transactions were not significant during 2016, 2015 and 2014.

⁽²⁾ The 2016 and 2015 Corporate and Other operating results include $55 million and $7 million of impairment, respectively. The 2014 Corporate and Other operating results include $11 million of improvements to the cancellation cost estimate included in the $38 million vessel impairment charge recognized in 2013. See Note 13, Fair Value Measurements, for further discussion.

⁽³⁾ Total capital expenditures represent expenditures for which cash payments were made during the period. Capital expenditures for 2016, 2015 and 2014 include $4 million, $14 million and $27 million of cash payments for accrued capital expenditures outstanding as of December 31, 2015, 2014 and 2013, respectively.

2. Information about our most significant Customers

Our significant customers by segments during 2016, 2015 and 2014, were as follows:

	% of
	Consolidated		Reportable
	Revenues		Segment
Year Ended December 31, 2016:
Inpex Operations Australia Pty Ltd		33%	ASA
Saudi Aramco		26%	MEA
RasGas Company Limited		12%	MEA
Year Ended December 31, 2015:
Inpex Operations Australia Pty Ltd		36%	ASA
Saudi Aramco		28%	MEA
Year Ended December 31, 2014:
Saudi Aramco		27%	MEA
Inpex Operations Australia Pty Ltd		25%	ASA

3. Information about our Service Lines and Operations in Different Geographic Areas:

	Year Ended December 31,
	2016		2015		2014
	(In thousands)
Service line revenues:
Installation Operations	$	1,074,069	$	1,256,412	$	1,041,525
Procurement Activities		879,222		1,123,329		677,734
Project Services and Engineering Operations		356,781		416,906		314,776
Fabrication Operations		325,911		273,628		266,854
	$	2,635,983	$	3,070,275	$	2,300,889
Geographic revenues:
Australia	$	881,812	$	1,157,723	$	614,164
Saudi Arabia		767,119		900,483		616,659
Qatar		419,963		46,873		-
Mexico		112,484		247,859		130,642
Russia		108,392		-		-
United States		95,996		32,858		148,606
Trinidad		67,757		-		-
India		56,027		-		-
United Arab Emirates		54,392		185,606		57,249
Malaysia		22,637		-		98,004
Indonesia		21,726		54,288		150,205
Brunei		-		237,337		-
Brazil		6,449		183,656		290,561
Azerbaijan		-		-		111,382
Other countries		21,229		23,592		83,417
	$	2,635,983	$	3,070,275	$	2,300,889

4. Information about our Segment Assets and Property, Plant and Equipment by Country:

	Year Ended December 31,
	2016		2015
	(In thousands)
Segment assets:
AEA	$	727,328	$	896,822
MEA		907,936		971,170
ASA		976,470		774,365
Corporate and Other		610,496		744,719
Total assets	$	3,222,230	$	3,387,076
Property, plant and equipment, net(1):
Australia	$	626,605	$	-
Mexico		603,185		96,090
United Arab Emirates		318,822		341,502
United States		27,482		561,990
Saudi Arabia		22,608		4,522
Indonesia		73,213		521,922
India		10,666		307
Malaysia		2,457		49,609
Brazil		170		31,765
Other countries		2,093		3,152
Total property, plant and equipment, net	$	1,687,301	$	1,610,859

⁽¹⁾ Our marine vessels are included in the country in which they were located as of year-end.

5. Information about our Unconsolidated Affiliates:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Equity in loss of unconsolidated affiliates:
AEA	$	(5,082	)	$	(6,255	)	$	4,829
MEA		-			(94	)		(2,668	)
ASA		1,167			(15,137	)		(10,009	)
Corporate and Other		(175	)		-			-
Total equity in loss of unconsolidated affiliates:	$	(4,090	)	$	(21,486	)	$	(7,848	)
Investments in unconsolidated affiliates:
AEA	$	2,449		$	1,540
ASA		14,064			24,327
Corporate and Other		510			684
Total investments in unconsolidated affiliates	$	17,023		$	26,551

Our consolidated balance sheets include accounts receivable attributable to our unconsolidated affiliates of approximately $17 million and $13 million as of December 31, 2016 and 2015, respectively.

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QUARTERLY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL DATA (UNAUDITED)

NOTE 20—QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables set forth selected unaudited quarterly financial information for the quarterly periods in 2016 and 2015:

	For the Quarter Ended
	March 31(1)			June 30(2)		September 30(3)		December 31(4)
2016	(In thousands, except per share data amounts)
Revenues	$	729,032		$	706,627	$	558,543	$	641,781
Gross Profit		112,999			111,185		103,044		59,139
Net income (loss)		(2,444	)		21,805		16,392		546
Net income (loss) attributable to non-controlling interest		(272	)		1,148		284		1,022
Net income (loss) attributable to McDermott International, Inc.		(2,172	)		20,657		16,108		(476	)
Income (loss) per share(5)
Basic		(0.01	)		0.09		0.07		0.00
Diluted		(0.01	)		0.07		0.06		0.00

⁽¹⁾ Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment,  partially offset by impairment losses on the Agile vessel.

⁽²⁾ Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

⁽³⁾ Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

⁽⁴⁾ Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600.  Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

⁽⁵⁾ May not tie to the Consolidated Statements of Operations due to rounding.

	For the Quarter Ended
	March 31(1)			June 30(2)		September 30(3)		December 31(4)
2015	(In thousands, except per share data amounts)
Revenues	$	550,463		$	1,046,537	$	805,857	$	667,418
Gross Profit		75,004			121,015		84,896		98,076
Net income (loss)		(12,048	)		13,690		7,534		(18,015	)
Net income attributable to non-controlling interest		2,459			2,164		3,868		653
Net income (loss) attributable to McDermott International, Inc.		(14,507	)		11,526		3,666		(18,668	)
Income (loss) per share(5)
Basic		(0.06	)		0.05		0.02		(0.08	)
Diluted		(0.06	)		0.04		0.01		(0.08	)

⁽¹⁾ Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

⁽²⁾ Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

⁽³⁾ Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.  

⁽⁴⁾ Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

⁽⁵⁾ May not tie to the Consolidated Statements of Operations due to rounding.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 21—SUBSEQUENT EVENTS

In February 2017, J. Ray McDermott de Mexico, S.A. de C.V. (“JRM Mexico”), one of our indirectly 100% owned subsidiaries, entered into a 364 day, $50 million committed revolving receivables purchase agreement which provides for the sale, at a discount, of certain receivables to a designated purchaser. JRM Mexico’s obligations in connection with the receivables purchase agreement are guaranteed by McDermott International, Inc.  Additionally in February 2017, JRM Mexico entered into a 21-month loan agreement for equipment financing in the amount of $48 million. Borrowings under the loan agreement bear interest at a fixed rate of 5.75%. JRM Mexico’s obligations in connection with equipment financing are guaranteed by McDermott International Management, S. de RL, one of our indirectly 100% owned subsidiaries.

In January 2017, we purchased the pipelay and construction vessel, the Amazon, for a total cash consideration of approximately $52 million. Following the purchase, we sold the Amazon to an unrelated third party for total cash consideration of $52 million and simultaneously entered into an 11-year bareboat charter agreement with the purchaser.  The bareboat charter agreement provides us with options to purchase the Amazon, at a predetermined value periodically over the charter term. We accounted for the transaction as a sale leaseback and will record the bareboat charter agreement as an operating lease.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

McDermott International, Inc. (“MDR”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a leading provider of integrated engineering, procurement, construction and installation (“EPCI”), front-end engineering and design (“FEED”), and module fabrication services for upstream field developments worldwide.  We deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for complex offshore and subsea oil and gas projects. Operating in approximately 20 countries across Americas, Europe, Africa, the Middle East, Asia and Australia, our integrated resources include a diversified fleet of marine vessels, fabrication facilities and engineering offices. We support our activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction. Our customers include national, major integrated and other oil and gas companies, and we operate in most major offshore oil and gas producing regions throughout the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods. In these Notes to our Consolidated Financial Statements, unless the context otherwise indicates, “we,” “us” and “our” mean MDR and its consolidated subsidiaries.

Basis of Presentation

Basis of Presentation

We have presented our Consolidated Financial Statements in U.S. Dollars in accordance with accounting principles generally accepted in the United States (“GAAP”). These Consolidated Financial Statements include the accounts of McDermott International, Inc., its consolidated subsidiaries and controlled entities.  Subsidiaries are defined as being those companies over which we, either directly or indirectly, have control through a majority of the voting rights or the right to exercise control or to obtain the majority of the benefits and be exposed to the majority of the risks. Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases. All intercompany transactions and balances have been eliminated in consolidation.

Business Segments

Business Segments

We report financial results under three reportable segments consisting of (1) Americas, Europe, and Africa (“AEA”), (2) the Middle East (“MEA”) and (3) Asia (“ASA”).  We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our reportable segments.  For financial information about our segments, see Note 19, Segment Reporting.

Revenue Recognition

Revenue Recognition

Contracts―We determine the appropriate accounting treatment for each of our contracts with customers before work on the project begins. We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved. We include the amount of accumulated contract costs and estimated earnings that exceed billings to customers in Contracts in Progress. We include billings to customers that exceed accumulated contract costs and estimated earnings in Advance Billings on Contracts. Most long-term contracts contain provisions for progress payments. We expect to invoice customers for all unbilled revenues. Certain costs are generally excluded from the cost-to-cost method of measuring progress, such as significant costs for materials and third-party subcontractors. On certain projects, we may purchase a significant portion of the materials or incur third-party subcontractor costs, recognized as project costs, either upfront or during other phases of contract execution. Therefore, we believe exclusion of the costs for such materials and subcontractors provides a better measure of actual progress toward completion, particularly in the early stages of contracts, as inclusion of these costs could overstate the progress of projects. We believe that our approach more closely aligns with the actual, physical progress of our contracts. 

Costs incurred prior to a project award are generally expensed during the period in which they are incurred. Total estimated project costs and resulting contract income are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. Additionally, external factors such as weather, customer requirements and other factors outside of our control may affect the progress and estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income recognition. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit proportionate to the job percentage of completion during the period in which those estimates are revised.

Unapproved Change Orders―Change orders, which are a normal and recurring part of our business, can increase, sometimes substantially, the future scope and cost of a job. Therefore, change order awards, although frequently beneficial in the long term, can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date.

Revenues and gross profit on contracts can be significantly affected by change orders that may not be approved by the customer until the later stages of a contract or subsequent to the date a project is completed. If it is not probable the costs will be recovered through a change in contract price, the costs attributable to change orders are treated as contract costs without incremental revenue. For certain contracts where it is probable the costs will be recovered through a change order, total estimated contract revenue is increased by the lesser of the amounts management expects to recover and the costs expected to be incurred.

Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts we expect to recover or costs incurred. To the extent claims included in backlog are not resolved in our favor, there could be reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings, which could be material.

Claims Revenue—Claims revenue may relate to various factors, including the procurement of materials, equipment performance failures, change order disputes or schedule disruptions and other delays, including those associated with weather and sea conditions. Claims revenue, when recorded, is only recorded to the extent of the lesser of the amounts management expects to recover and the associated costs incurred. We include certain unapproved claims in the applicable contract values when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Amounts attributable to unapproved change orders are not included in claims. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Claims are generally negotiated over the course of the respective projects, many of which are long-term in nature.

Deferred Profit Recognition―For contracts as to which we are unable to estimate the final profitability due to their uncommon nature, including first-of-a-kind projects, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these contracts, we only recognize gross margin when reliably estimable and the level of uncertainty has been significantly reduced, which we generally determine to be when the contract is at least 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical as deferred profit recognition contracts. If, while being accounted for under our deferred profit recognition policy, a current estimate of total contract costs indicates a loss, the projected loss is recognized in full and the project is accounted for under our normal revenue recognition guidelines.  Currently, we are not accounting for any projects under our deferred profit recognition policy.

Completed Contract Method―Under the completed contract method, revenue and gross profit is recognized only when a contract is complete or substantially complete. We generally do not enter into fixed-price contracts without an estimate of cost to complete that we believe to be accurate. However, it is possible that in the time between contract award and the commencement of work on a project we could lose the ability to forecast costs to complete adequately based on intervening events, including, but not limited to, experience on similar projects, civil unrest, strikes and volatility in our expected costs. In such a situation, we would use the completed contract method of accounting for that project. In last three years, we did not enter into any contracts that we accounted for under the completed contract method.

Loss Recognition―A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, subcontractor or supplier performance, pipeline lay rates or steel and other raw material prices. Increases in costs associated with our fixed-price contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows.

See Note 2, Revenue Recognition, for discussion on Revenue.

Use of Estimates

Use of Estimates

We use estimates and assumptions to prepare our financial statements in conformity with GAAP. Those estimates and assumptions affect the amounts we report in our Consolidated Financial Statements and accompanying Notes. Our actual results could differ from those estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, changes in cost recovery estimates, unexpected changes in weather conditions, changes in productivity, unidentified required vessel repairs, customer and vendor delays and other costs. We generally expect to experience a reasonable amount of unanticipated events, and some of those events can result in significant cost increases above cost amounts we previously estimated. As of December 31, 2016, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full when determined.

Loss Contingencies

Loss Contingencies

We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We are currently involved in litigation and other proceedings, as discussed in Note 18, Commitments and Contingencies. We have accrued our estimates of the probable losses associated with these matters and associated legal costs are generally recognized as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Stock-Based Compensation

Stock-Based Compensation

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. We use a Black-Scholes model to determine the fair value of certain share-based awards, such as stock options. Additionally, we use a Monte Carlo model to determine the fair value of certain share-based awards that contain market and performance-based conditions. The use of these models requires highly subjective assumptions, such as assumptions about the expected life of the award, vesting probability, expected dividend yield and the volatility of our stock price. See Note 14, Stock-Based Compensation, for additional information.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

Our cash and cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. A majority of our restricted cash and cash equivalents serves as collateral for outstanding letters of credit, as further discussed in Note 10, Debt.

Accounts Receivable

Accounts Receivable

Accounts receivable are recorded at the invoiced amount based on contracted prices. Amounts collected on accounts receivable are included in total cash provided by operating activities in the Consolidated Statements of Cash Flows.

We establish allowances for doubtful accounts based on our assessments of our customers’ willingness and abilities to pay. In addition to such allowances, there are often items in dispute or being negotiated that may require us to make an estimate as to the ultimate outcome. Past due receivable balances are written off when our internal collection efforts have been unsuccessful in collecting the amounts due.

Retainage, included in accounts receivable, represents amounts withheld from billings by our clients pursuant to provisions in the applicable contracts and may not be paid to us until the completion of specific tasks or the completion of the project and, in some instances, for even longer periods. Retainage may also be subject to restrictive conditions, such as performance guarantees.

Property, Plant and Equipment

Property, Plant and Equipment

We carry our property, plant and equipment at depreciated cost. Except for major marine vessels, we depreciate our property, plant and equipment using the straight-line method, over the estimated economic useful lives of eight to 33 years for buildings and three to 28 years for machinery and equipment. We do not depreciate property, plant and equipment classified as held for sale.

We depreciate major marine vessels using the units-of-production method based on the utilization of each vessel. Our units-of-production method of depreciation involves the calculation of depreciation expense on each vessel based on the product of actual utilization for the vessel for the period and the applicable daily depreciation value (which is based on vessel book value, standard utilization and vessel life) for the vessel. Our actual utilization is determined based on the actual days that the vessel was working or otherwise actively engaged (other than in transit between regions) under a contract, as determined by daily vessel operating reports prepared by the crew of the vessel. Our standard utilization is determined by vessel at least annually based on recent actual utilization combined with an expectation of future utilization, both of which allow for idle time. We ensure that a minimum amount of accumulated depreciation of at least 50% of equivalent life-to-date straight-line depreciation is recorded. Additionally, in periods of very low utilization, a minimum amount of depreciation expense of at least 25% of an equivalent straight-line depreciation expense (which is based on an initial 25-year life) is recorded.

We capitalize drydocking costs in other current assets and other assets when incurred and amortize the costs over the period of time between two drydock periods, which is generally five years.  We expense the costs of other maintenance, repairs and renewals, which do not materially prolong useful life of an asset, as we incur them.

Investments in Unconsolidated Affiliates

Investments in Unconsolidated Affiliates

We account for equity investments using the equity method of accounting if we have the ability to exercise significant influence over, but not control of, an investee.  Significant influence generally exists if we have an ownership interest representing between 20% and 50% voting rights.  Under the equity method of accounting, investments are stated initially at cost and are adjusted for subsequent additional investments and our proportionate share of profit or losses and distributions.

We record our share of the profit or losses of the equity method investments, net of income taxes, in the Consolidated Statements of Operations.  When our share of losses in an equity investment equals or exceeds our interest in the equity investment, including any other unsecured receivables, we do not recognize further losses, unless we have incurred obligations or made payments on behalf of the equity investment.

We evaluate our equity method investments for impairment when events or changes in circumstances indicate, in our management’s judgment, that the carrying value of such investments may have experienced other-than-temporary decline in value.  When evidence of loss in value has occurred, we compare the estimated fair value of investment to the carrying value of investment to determine whether an impairment has occurred.  If the estimated fair value is less than the carrying value and our management considers the decline in value to be other-than-temporary, the excess of the carrying value over the estimated fair value is recognized in the Consolidated Financial Statements as an impairment.

Derivative Financial Instruments

Derivative Financial Instruments

Our worldwide operations give rise to exposure to changes in certain market conditions, which may adversely impact our financial performance. When we deem it appropriate, we use derivatives as a risk management tool to mitigate the potential impacts of certain market risks. The primary market risk we manage through the use of derivative instruments is movement in foreign currency exchange rates. We use foreign currency derivative contracts to reduce the impact of changes in foreign currency exchange rates on our operating results. We use these instruments to hedge our exposure associated with revenues, costs (or both) 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.

In certain cases, contracts with our customers contain provisions under which some payments from our customers are denominated in U.S. Dollars and other payments are denominated in a foreign currency. In general, the payments denominated in a foreign currency are designed to compensate us for costs that we expect to incur in such foreign currency. In these cases, we may use derivative instruments to reduce the risks associated with foreign currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. We recognize all derivatives at fair value on the balance sheet. Derivatives that are not accounted for as hedges under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, are adjusted to fair value, and such changes are reflected through our results of operations. If a derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings, or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. See Note 12, Derivative Financial Instruments for additional information.

The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings generally are included as a component of gain (loss) on foreign currency—net in our Consolidated Statements of Operations.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An established hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1—inputs are based on quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based on quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques.

The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivables and accounts payable approximate their fair values due to the short maturity of those instruments. See Note 13, Fair Value Measurements, for additional information.

Insurance and Self-Insurance

Insurance and Self-Insurance

Our wholly owned “captive” insurance subsidiary provides coverage for our retentions under employer’s liability, general and products liability, automobile liability and workers’ compensation insurance and, from time to time, builder’s risk and marine hull insurance within certain limits. We may also have business reasons in the future to arrange for our insurance subsidiary to insure other risks which we cannot or do not wish to transfer to outside insurance companies. Premiums charged and reserves related to these insurance programs are based on the facts and circumstances specific to the insurance claims, our past experience with similar claims, loss factors and the performance of the outside insurance market for the type of risk at issue. The actual outcome of insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for the coverages discussed above. These accruals are based on various assumptions developed utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted as required based upon reported claims, actual claim payments and settlements and claim reserves. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable. Claims as a result of our operations, if greater in frequency or severity than actuarially predicted, could adversely impact the ability of our captive insurance subsidiary to respond to all claims presented.  

Concentration of Credit Risk

Concentration of Credit Risk

Our principal customers are businesses in the offshore oil and gas industry. This concentration of customers may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic or other conditions. In addition, we and many of our customers operate worldwide and are therefore exposed to risks associated with the economic and political forces of various countries and geographic areas. We generally do not obtain any collateral for our receivables. See Note 19, Segment Reporting, for additional information about our operations in different geographic areas.

Pension and Postretirement Benefit Plans

Pension and Postretirement Benefit Plans

We have both defined benefit (funded and unfunded) and defined contribution plans. For the defined benefit plans, a projected benefit obligation is calculated annually by independent actuaries using the unit credit method.

We recognize actuarial gains and losses on pension and postretirement benefit plans immediately in our operating results. These gains and losses are generally measured annually as of December 31 and accordingly will normally be recorded during the fourth quarter, unless an earlier remeasurement is required. Should actual experience differ from actuarial assumptions, the projected pension benefit obligation and net pension cost and accumulated postretirement benefit obligation and postretirement benefit cost would be affected in future years.

Pension costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, offset by expected return on plan assets.

For defined contribution plans, we pay contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The contributions are recognized as employee benefit expense when due.

Foreign Currency Translation

Foreign Currency Translation

We translate assets and liabilities of our foreign operations, other than operations in highly inflationary economies, into U.S. Dollars at year-end exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of other comprehensive income (loss), net of tax.

Impairment Review

Impairment Review

We review our tangible long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Income Taxes

Income Taxes

We provide for income taxes based on the tax laws and rates in the countries in which we conduct our operations. MDR is a Panamanian corporation that earns all of its income outside of Panama. As a result, we are not subject to income tax in Panama. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variations, along with changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

We believe that our deferred tax assets recorded as of December 31, 2016 are realizable through carrybacks, future reversals of existing taxable temporary differences and future taxable income.  Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the net tax effects of net operating loss carryforwards.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. If we subsequently determine that we will be able to realize deferred tax assets in the future in excess of our net recorded amount, the resulting adjustment would increase earnings for the period in which such determination was made. We will continue to assess the adequacy of the valuation allowance on a quarterly basis. Any changes to our estimated valuation allowance could be material to our consolidated financial condition and results of operations. See Note 15, Income Taxes, for additional disclosures.

Classification

Classification

Certain prior year amounts have been reclassified for consistency with the current year presentation. Our Consolidated Financial Statements previously reported income and loss from investment in unconsolidated affiliates as components of operating income. In the first quarter of 2016, we concluded that classification of loss from investments in unconsolidated affiliates after provision for income tax better reflected how the operations of our unconsolidated affiliates relate to our business as a whole.

In the first quarter of 2017, we implemented certain changes to our financial reporting structure resulting in:

• Corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market (“MTM”) pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources, are no longer apportioned to our reportable segments. Those expenses are reported under “Corporate and Other.”

• Research and development (“R&D”) expenses are separately presented in our Consolidated Statements of Operations. Previously R&D expenses were included in Cost of operations.

• Gain (loss) on foreign currency, net is included in Other non-operating income (expense), net in our Consolidated Statements of Operations.  Previously, Gain (loss) on foreign currency, net was separately presented.

• Note 19 includes, under caption “Information about Operations”, a reconciliation of segment operating income (loss) before income taxes to Income (loss) before income taxes in our Consolidated Statements of Operations.

Previously reported financial statements have been adjusted to reflect the above changes.

Recently Issued and Adopted Accounting Guidance

Recently Issued and Adopted Accounting Guidance

Statement of Cash Flows—In November 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash.  This ASU clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We adopted this ASU in the fourth quarter of 2016. As a result, our Consolidated Statement of Cash Flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents.  All comparative periods presented have been revised to reflect this change. See Note 5, Cash, Cash Equivalents and Restricted Cash for a reconciliation of the totals in Consolidated Statements of Cash Flows and in the Consolidated Balance Sheets.

In August 2016,the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU clarifies how entities should classify certain cash receipts and cash payments in their statements of cash flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We adopted this ASU in the third quarter of 2016. Our retrospective adoption did not have a material impact on the presentation of our Consolidated Financial Statements.

Consolidation—In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That are under Common Control.  This ASU amends the primary beneficiary assessment under ASC 810, requiring that a single decision maker consider indirect interests held by related parties under common control on a proportionate basis.  This ASU is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We adopted this ASU in the fourth quarter of 2016. Our adoption did not have a material impact on the accompanying Consolidated Financial Statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This ASU eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment.

In February 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis, which amends and changes the consolidation analysis previously required under U.S. GAAP. This ASU modifies the process used to evaluate whether limited partnerships and similar entities are variable interest entities or voting interest entities; affects the analysis performed by reporting entities regarding variable interest entities, particularly those with fee arrangements and related party relationships; and provides a scope exception for certain investment funds.

The amendments in ASUs 2015-16 and 2015-02 became effective for annual and interim periods beginning after December 15, 2015. Early adoption was permitted. We adopted these ASUs in the first quarter of 2016. Our adoption of these ASUs did not have a material impact on the accompanying Consolidated Financial Statements.

Stock Compensation—In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, earnings per share and classification in the statement of cash flows. We adopted this ASU in the second quarter of 2016. Our adoption did not have a material impact on the presentation of our Consolidated Financial Statements.

Derivatives—In March 2016, the FASB issued ASU 2016-06,Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This ASU clarifies that a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under Topic 815 does not require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met.

The amendments in ASU 2016-06 and 2016-05 are effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. We adopted these ASUs in the fourth quarter of 2016. Our adoption of those ASUs did not have a material impact on the accompanying Consolidated Financial Statements.

Income Tax—In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Under this ASU an entity shall classify deferred tax assets and liabilities as noncurrent. We adopted ASU 2015-17 in the first quarter of 2016. Our adoption of that ASU did not have a material impact on the presentation of our Consolidated Financial Statements. All comparable periods presented have been revised to reflect this change.

Going Concern—In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under this ASU, we are required to assess our ability to continue as a going concern each interim and annual reporting period and provide certain disclosures if there is substantial doubt about our ability to continue as a going concern, including our management’s plan to alleviate any such substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter with early adoption permitted. We adopted this ASU in the third quarter of 2016. Our adoption of the ASU did not impact the presentation of our Consolidated Financial Statements or the disclosures in the Consolidated Financial Statements.

Accounting Guidance Issued But Not Adopted

Accounting Guidance Issued But Not Adopted as of December 31, 2016

Income Taxes—In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.  This ASU requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  The ASU is effective for interim and annual periods beginning after December 15, 2017.  Early adoption is permitted.  The application of this amendment is not expected to have a material impact on our future Consolidated Financial Statements and related disclosures.

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. A valuation account, allowance for credit losses, will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This ASU is effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact of this guidance on our future Consolidated Financial Statements and related disclosures.

Leases—In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The ASU will require entities that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. This ASU is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this ASU on our future Consolidated Financial Statements and related disclosures.

Financial Assets and Liabilities—In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  Under this new guidance, entities will be required to measure all investments in equity securities that are not subject to equity method or consolidation accounting at fair value, with changes recognized in net income.  Fair value changes related to instrument-specific credit risk in financial liabilities accounted for under the fair value option in Accounting Standards Codification 825 must be recorded in other comprehensive income instead of earnings.  ASU 2016-01 also changes presentation and disclosure requirements for financial assets and liabilities.  ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption not permitted except related to changes in fair value for financial liabilities. We are currently assessing the impact of these amendments on our future Consolidated Financial Statements and related disclosures.

Revenue from Contracts with Customers (Topic 606)—In May 2014, the FASB issued a new standard related to revenue recognition which supersedes most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. It also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The FASB has issued several amendments to the standard, including clarification on accounting for licenses of intellectual property, identifying performance obligations, reporting gross versus net revenue and narrow-scope improvements and practical expedients.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (“full retrospective method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (“modified retrospective application”).

We are currently assessing the impact of this ASU and the amendments on our future Consolidated Financial Statements and related disclosures. Adoption may affect the manner in which the company determines the unit of account for its projects and estimates revenue associated with unapproved change orders and claims. We intend to adopt the new standard on January 1, 2018 (the “initial application” date):

• using the modified retrospective application, with no restatement of the comparative periods presented and a cumulative effect adjustment as of the date of adoption;

• applying the new standard only to those contracts that are in process at the date of initial application; and

• disclosing the impact of the new standard on our 2018 Consolidated Financial Statements.

This standard could have a significant impact on our Consolidated Financial Statements and related disclosures.

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REVENUE RECOGNITION (Tables)

12 Months Ended

Dec. 31, 2016

Revenue Recognition [Abstract]

Percentage of Revenues by Contract Type

The percentage of our revenues by contract type for each of the years ended December 31 was as follows:

	2016			2015			2014
Fixed-price		92	%		93	%		87	%
Unit-basis and other		8			7			13
		100	%		100	%		100	%

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RESTRUCTURING (Tables)

12 Months Ended

Dec. 31, 2016

Restructuring And Related Activities [Abstract]

Restructuring Costs Incurred and Future Cost Expected to be Incurred

	Year ended December 31,									Incurred from  inception to
	2016					2015		2014		December 31, 2016
	(In thousands)
Americas Restructuring	$	(1,350	)	(1	)	$	2,308	$	9,170	$	44,194
Corporate Restructuring		-					-		4,940		6,601
MPI
Severance and other personnel-related costs		2,590					15,217		-		17,807
Asset impairment and disposal		-					7,471		-		7,471
Legal and other advisor fees		222					7,414		4,003		11,639
Other		2,436					7,609		-		10,045
Total MPI		5,248					37,711		4,003		46,962
AOR
Severance and other personnel-related costs		5,012					-		-		5,012
Legal and other advisor fees		1,968					800		-		2,768
Other		385					-		-		385
Total AOR		7,365					800		-		8,165
Total	$	11,263				$	40,819	$	18,113	$	105,922

(1) This amount includes reversal of environmental liability established in connection with discontinued utilization of our Morgan City fabrication facility. For further discussion see, Note 18, Commitments and Contingencies.

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH (Tables)

12 Months Ended

Dec. 31, 2016

Cash And Cash Equivalents [Abstract]

Reconciliation of Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the totals of such amounts shown in the Consolidated Statements of Cash Flows.  

	December 31, 2016		December 31, 2015
	(in thousands)
Cash and cash equivalents	$	595,921	$	664,844
Restricted cash and cash equivalents		16,412		116,801
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	612,333	$	781,645

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ACCOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Contract Receivables

A summary of contract receivables is as follows:

	December 31, 2016			December 31, 2015
	(in thousands)
Contract receivables:
Contracts in progress	$	245,604			164,898
Completed contracts		40,345			35,702
Retainages		58,431			17,896
Unbilled (1)		4,303			4,303
Less allowances		(14,299	)		(14,325	)
Accounts receivable—trade, net	$	334,384		$	208,474

⁽¹⁾ This amount relates to a project milestone billing for which we are awaiting the customer’s final acceptance certificate. We expect to receive the final acceptance certificate during 2017.

Retainages on Contracts

The following amounts represent retainages on contracts:

	December 31, 2016		December 31, 2015
	(in thousands)
Retainages expected to be collected within one year	$	58,431	$	17,896
Retainages expected to be collected after one year		127,193		155,061
Total retainages	$	185,624	$	172,957

Summary of Accounts Receivable Other

A summary of accounts receivable—other is as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Receivables from unconsolidated affiliates	$	13,292	$	12,816
Accrued unbilled other		12,075		14,021
Employee receivables		4,730		4,376
Other taxes receivable		2,483		28,743
Other		4,349		6,733
Accounts receivable—other	$	36,929	$	66,689

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CONTRACTS IN PROGRESS AND ADVANCE BILLINGS ON CONTRACTS (Tables)

12 Months Ended

Dec. 31, 2016

Contractors [Abstract]

Components of Contracts in Progress and Advance Billings on Contracts

Components of contracts in progress and advance billings on contracts is as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Costs incurred less costs of revenue recognized	$	119,688	$	112,819
Revenues recognized less billings to customers		199,450		323,010
Contracts in Progress	$	319,138	$	435,829
Billings to customers less revenue recognized		42,637		265,618
Costs incurred less costs of revenue recognized		149,849		(100,845	)
Advance Billings on Contracts	$	192,486	$	164,773

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PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2016

Property Plant And Equipment [Abstract]

Summary of Property Plant Equipment by Asset Category

A summary of property, plant and equipment by asset category is as follows:

	December 31, 2016			December 31, 2015
	(In thousands)
Marine Vessels	$	1,789,942		$	1,391,556
Construction Equipment		474,128			478,175
Buildings		152,584			155,292
All other		148,805			143,580
Construction in Progress		20,720			298,749
Total Cost	$	2,586,179		$	2,467,352
Accumulated Depreciation		(898,878	)		(856,493	)
Net Book Value	$	1,687,301		$	1,610,859

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EQUITY METHOD INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2016

Equity Method Investment Summarized Financial Information Equity [Abstract]

Summary of Financial Statement Information Under The Equity Method Investment

Summarized 100 percent balance sheet information for investments in equity method investees, combined, are set forth below:

	December 31, 2016		December 31, 2015
	(In thousands)
Current Assets	$	74,430	$	133,171
Noncurrent Assets		124,862		189,536
Total Assets	$	199,292	$	322,707
Current Liabilities	$	91,268	$	176,165
Noncurrent Liabilities		86,963		112,162
Total Liabilities	$	178,231	$	288,327

Summarized 100 percent income statement information for investments in equity method investees, combined, are set forth below:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Revenues	$	111,847		$	107,795		$	294,408
Cost of operations		87,335			105,465			275,015
Gross Profit		24,512			2,330			19,393
Net Income (loss)	$	(8,609	)	$	(38,245	)	$	(28,773	)

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DEBT (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Summary of Long-Term Debt Obligations

As of December 31, 2016 and 2015 the carrying values of our long-term debt obligations, net of unamortized debt issuance costs of $14 million and $20 million, respectively, are as follows:

	December 31, 2016		December 31, 2015
	(In thousands)
Senior Notes	$	493,461	$	491,890
Term Loan		212,070		289,979
North Ocean 105 construction financing		31,877		38,263
Amortizing Notes		7,932		21,205
Other, including capital lease obligation		7,180		2,546
		752,520		843,883
Less: Amounts due within one year		48,125		24,882
Total long-term debt	$	704,395	$	819,001

Maturities of Long-Term Debt During Five Years

Maturities of long-term debt during the five years subsequent to December 31, 2016 are as follows:

	(in thousands)
2017	$	49,820
2018		3,427
2019		212,846
2020		-
2021		500,000
Total Debt	$	766,093
Debt Issuance Costs		(13,573	)
Total Debt - Net of Issuance Costs	$	752,520

Summary of Redemption Prices Expressed as Percentage

At any time, or from time to time, on or after May 1, 2017, at our option, we may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed)set forth below, together with accrued and unpaid interest to the redemption date, if redeemed during the 12-month period beginning May 1 of the years indicated:

Year	Percentage
2017		104	%
2018		102
2019 and thereafter		100

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PENSION AND POSTRETIREMENT BENEFITS (Tables)

12 Months Ended

Dec. 31, 2016

Compensation And Retirement Disclosure [Abstract]

Obligations and Funded Status

	Domestic Plans						TCN Plan
	Year Ended December 31,						Year Ended December 31,
	2016			2015			2016			2015
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	519,199		$	556,632		$	38,265		$	43,985
Interest cost		21,102			21,613			1,351			1,626
Actuarial loss (gain)		2,641			(21,754	)		(3,172	)		(4,095	)
Benefits paid		(37,586	)		(37,292	)		(5,227	)		(3,251	)
Benefit obligation at end of year		505,356			519,199			31,217			38,265
Change in plan assets:
Fair value of plan assets at beginning of year		494,146			551,821			38,257			42,106
Actual return on plan assets		26,891			(21,889	)		(778	)		(598	)
Company contributions		1,510			1,506			-			-
Benefits paid		(37,586	)		(37,292	)		(5,227	)		(3,251	)
Fair value of plan assets at end of year		484,961			494,146			32,252			38,257
Funded status	$	(20,395	)	$	(25,053	)	$	1,035		$	(8	)
Amounts recognized in balance sheet consist of:
Other Assets	$	-		$	-		$	1,035		$	-
Accrued pension liability—current		(1,382	)		(1,409	)		-			-
Pension liability		(19,013	)		(23,644	)		-			(8	)
Accrued benefit liability		(20,395	)		(25,053	)		-			(8	)
Net (Liability) Asset	$	(20,395	)	$	(25,053	)	$	1,035		$	(8	)

	Domestic Plans				TCN Plan
	Year Ended December 31,				Year Ended December 31,
	2016		2015		2016		2015
	(In thousands)
Supplemental information:
Plans with accumulated benefit obligation in excess          of plan assets
Projected benefit obligation	$	505,356	$	519,199	$	31,217	$	38,265
Accumulated benefit obligation		505,356		519,199		31,217		38,265
Fair value of plan assets		484,961		494,146		32,252		38,257

Weighted Average Assumptions used Determine Net Periodic Benefit Obligations

Assumptions

	Domestic Plans						TCN Plan
	2016			2015			2016			2015
Weighted average assumptions used to determine net periodic benefit obligations at December 31:
Discount rate		4.1	%		4.2	%		4.1	%		4.0	%
Rate of compensation increase	N/A			N/A			N/A			N/A

Net Periodic Benefit Cost

	Domestic Plans									TCN Plan
	Year Ended December 31,									Year Ended December 31,
	2016			2015			2014			2016			2015			2014
	(In thousands)
Supplemental information:
Components of periodic benefit cost:
Interest cost	$	21,102		$	21,613		$	26,972		$	1,351		$	1,626		$	1,900
Expected return on plan assets		(20,006	)		(26,707	)		(27,501	)		(1,587	)		(2,840	)		(2,961	)
Actuarial loss (gain)		(4,244	)		26,842			(8,728	)		(807	)		(657	)		6,027
Net periodic benefit cost (gain)	$	(3,148	)	$	21,748		$	(9,257	)	$	(1,043	)	$	(1,871	)	$	4,966
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate		4.2	%		4.0	%		4.8	%		4.0	%		4.0	%		4.8	%
Expected return on plan assets		4.2	%		5.0	%		5.0	%		4.7	%		6.9	%		6.9	%
Rate of compensation increase	N/A			N/A			N/A			N/A			N/A			N/A

Asset Allocations, by Asset Class

The following is a summary of the asset allocations at December 31, 2016 and 2015 by asset category.

	Domestic Plans						TCN Plan
	2016			2015			2016			2015
Asset Category:
Fixed Income		85	%		85	%		67	%		49	%
Equity Securities		15			15			33			51
Total		100	%		100	%		100	%		100	%

Total Investments Plans Measured at Fair Value

The following is a summary of total investments for our plans, measured at fair value at:

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Pension Benefits:	(In thousands)
Fixed Income	$	167,271	$	247,882	$	5,087	$	420,240
Equities		82,442		-		-		82,442
Cash and Accrued Items		14,531		-		-		14,531
Total Investments	$	264,244	$	247,882	$	5,087	$	517,213
	December 31, 2015
	Level 1		Level 2		Level 3		Total
Pension Benefits:	(In thousands)
Fixed Income	$	60,128	$	356,107	$	5,752	$	421,987
Equities		85,065		12		-		85,077
Cash and Accrued Items		25,335		4		-		25,339
Total Investments	$	170,528	$	356,123	$	5,752	$	532,403

Changes in Level 3 Fixed Income Instrument Measured on Recurring Basis

The following is a summary of the changes in our Level 3 fixed income instruments measured on a recurring basis:

	December 31,
	2016			2015
	(In thousands)
Balance at beginning of period	$	5,752		$	5,013
Purchases, net		107			1,269
Total unrealized loss		(772	)		(530	)
Balance at end of period	$	5,087		$	5,752

Expected Employer Contributions and Expected Benefit Payments

	Domestic Plans		TCN Plan
	(In thousands)
Expected employer contributions to trusts of defined benefit plans:
2017	$	-	$	-
Expected benefit payments:
2017	$	37,148	$	5,803
2018		36,929		1,304
2019		36,620		1,571
2020		36,228		1,799
2021		35,876		1,483
2022-2026		169,531		9,309

Summary of Contributions Under Defined Contribution Plans

The following table summarizes our contributions under the plans:

		Thrift Plan						Global Thrift Plan
		Year Ended December 31,						Year Ended December 31,
		2016	2015		2014			2016	2015		2014
		(In thousands)
Contributions	$	4,176	$	3,840	$	3,879	$	998	$	1,095	$	1,236

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

The following table summarizes our asset and liability derivative financial instruments:

	December 31,
	2016		2015
	(In thousands)
Derivatives Designated as Hedges:
Location:
Accounts receivable-other	$	2,631	$	1,668
Other assets		-		215
Total derivatives asset	$	2,631	$	1,883
Accrued liabilities	$	9,361	$	26,649
Other liabilities		4		4,018
Total derivatives liability	$	9,365	$	30,667

Effects of Derivative Instruments on Consolidated Financial Statements

The following table summarizes the effects of derivative instruments on our Consolidated Financial Statements:

	December 31,
	2016			2015			2014
	(in thousands)
Derivatives Designated as Hedges:
Amount of gain (loss) recognized in other comprehensive income (loss)	$	4,004		$	(57,459	)	$	(65,503	)
Reclassified from AOCI to Cost of operations		34,556			76,034			26,418
Ineffective portion and amount excluded from effectiveness testing gain (loss) recognized in Gain (loss) on foreign currency, net		(1,461	)		6,238			6,910

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FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Outstanding Measured at Fair Value on Recurring and Nonrecurring Basis

The following table presents the financial instruments outstanding as of December 31, 2016 and 2015 that are measured at fair value on recurring basis and financial instruments that are not measured at fair value on a recurring basis.

	December 31, 2016
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(6,734	)		(6,734	)	$	-	$	(6,734	)	$	-
Non-recurring
Debt		(752,520	)		(777,072	)		-		(728,072	)		(49,000	)
	December 31, 2015
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(28,784	)	$	(28,784	)	$	-	$	(28,784	)	$	-
Non-recurring
Debt		(843,883	)		(777,634	)		-		(707,492	)		(70,142	)

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STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Total Stock-Based Compensation Expense Recognized

Total compensation expense recognized is as follows:

	2016		2015		2014
	(In thousands)
Restricted stock awards (“RSAs”) and restricted stock units (“RSUs”)	$	15,746	$	14,395	$	14,417
Performance shares and performance units		6,888		1,428		352
Stock options		46		770		1,747
Total	$	22,680	$	16,593	$	16,516

Total Gross Unrecognized Estimated Compensation Expense and Expected Weighted-Average Periods

The components of the total gross unrecognized estimated compensation expense for equity awards and their expected remaining weighted-average periods for expense recognition are as follows:

	Amount (In thousands)		Weighted-Average Period (years)
RSUs and RSAs	$	17,603		1.8
Performance shares and performance units(1)		258		0.3
	$	17,861

⁽¹⁾ Excludes performance shares and performance units accounted for as liability awards.

Activity for Stock Option

The following table summarizes stock options activity during 2016 (share data in thousands):

	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term
Outstanding at beginning of period		2,896		$	12.76
Cancelled/expired/forfeited		(721	)		8.65
Outstanding at end of period(1)		2,175		$	14.13		1.94 years

⁽¹⁾ All remaining outstanding options were vested prior to December 31, 2016.

Nonvested RSUs and RSAs and Changes

RSUs and RSAs and changes during 2016 were as follows (share data in thousands):

	Number of Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		6,689		$	5.15
Granted		3,876			3.28
Vested		(3,524	)		5.78
Cancelled/forfeited		(868	)		3.86
Nonvested at end of period		6,173		$	3.80

Nonvested Performance Shares and Performance Unit Awards and Changes

Nonvested performance share awards and changes during 2016 were as follows (share data in thousands):

	Number of Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		2,590		$	6.71
Granted		1,582			3.22
Cancelled/forfeited		(711	)		10.22
Nonvested at end of period		3,461		$	4.39

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Provision for income taxes

The provision for income taxes consisted of:

	Year Ended December 31,
	2016			2015		2014
	(In thousands)
Other than U.S.:
Current	$	43,944		$	45,752	$	21,619
Deferred		(2,018	)		6,211		(1,546	)
Total provision for income taxes	$	41,926		$	51,963	$	20,073

Geographic Source of Income Before Provision for Income Taxes

The geographic sources of income before income taxes are as follows:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
U.S.		(124,154	)		(99,738	)		(35,782	)
Other than U.S.		206,469			164,348			(1,691	)
Income before provision for income taxes	$	82,315		$	64,610		$	(37,473	)

Reconciliation of Panama Statutory Federal Tax Rate to Consolidated Effective Tax Rate

The following is a reconciliation of the Panama statutory federal tax rate to the consolidated effective tax rate:

	Year Ended December 31,
	2016			2015			2014
Panama federal statutory rate		25	%		25	%		25	%
Non-Panama operations		(14	)		29			9
Valuation allowance for deferred tax assets		24			10			(105	)
Audit settlements and reserves		14			9			17
Other (primarily tax on unremitted earnings)		2			7			-
Effective tax rate attributable to continuing operations		51	%		80	%		(54	)%

Significant Components of Deferred Tax Assets and Liabilities

Significant components of deferred tax assets and liabilities were as follows:

	December 31,
	2016			2015
	(In thousands)
Deferred tax assets:
Pension liability	$	9,732		$	12,033
Accrued liabilities for incentive compensation		22,208			21,640
Net operating loss carryforward		349,916			325,636
State net operating loss carryforward		18,308			24,367
Long-term contracts		-			4,312
Other		1,861			2,060
Total deferred tax assets		402,025			390,048
Valuation allowance for deferred tax assets		(334,991	)		(336,146	)
Deferred tax assets	$	67,034		$	53,902
Deferred tax liabilities:
Property, plant and equipment		37,883			34,419
Prepaid drydock		1,367			7,639
Long-term contracts		10,989			-
Investments in joint ventures and affiliated companies		17,044			14,960
Unrealized exchange gains and other		3,335			3,163
Total deferred tax liabilities	$	70,618		$	60,181
Net deferred tax liability	$	(3,584	)	$	(6,279	)
	December 31,
	2016			2015
	(In thousands)
Deferred tax assets and liabilities in the accompanying
Consolidated Balance Sheets include:
Deferred tax assets	$	21,116		$	18,822
Deferred tax liabilities		24,700			25,101
Net deferred tax liability	$	(3,584	)	$	(6,279	)

Reconciliation of Unrecognized Tax Benefits

A reconciliation of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Balance at beginning of period	$	36,353		$	34,106		$	40,613
Increases based on tax positions taken in the current year		2,328			4,720			3,479
Increases based on tax positions taken in prior years		7,741			4,710			3,195
Decreases based on tax positions taken in prior years		(5,090	)		(2,836	)		(863	)
Decreases due to lapse of applicable statute of limitation		(310	)		(4,347	)		(12,318	)
Balance at end of period	$	41,022		$	36,353		$	34,106

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EARNINGS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Year Ended December 31,
	2016		2015			2014
	(In thousands, except share and per share amounts)
Net income (loss) attributable to McDermott International, Inc.	$	34,117	$	(17,983	)	$	(75,994	)
Weighted average common stock (basic)		240,359,363		238,240,763			237,229,086
Effect of dilutive securities:
Tangible equity units		40,824,938		-			-
Stock options, restricted stock and restricted stock units		2,999,938		-			-
Potential dilutive common stock		284,184,239		238,240,763			237,229,086
Net income (loss) per share
Net income (loss) attributable to McDermott International, Inc.
Basic:	$	0.14	$	(0.08	)	$	(0.32	)
Diluted:	$	0.12	$	(0.08	)	$	(0.32	)

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2016

Accumulated Other Comprehensive Income Loss [Line Items]

Changes in the Number of Ordinary Shares Outstanding and Treasury Shares Held by the Company

The changes in the number of ordinary shares outstanding and treasury shares held by the Company are as follows:

	Year Ended December 31,
	2016			2015
Shares outstanding
Beginning balance		239,016,924			237,809,823
Common stock issued		3,304,808			1,672,923
Purchase of common stock		(933,455	)		(465,822	)
Ending balance		241,388,277			239,016,924
Shares held as Treasury shares
Beginning balance		7,824,204			7,400,027
Purchase of common stock		933,455			465,822
Retirement of common stock		(455,655	)		(41,645	)
Ending balance		8,302,004			7,824,204
Ordinary shares issued at the end of the period		249,690,281			246,841,128

Reclassifications [Member]

Accumulated Other Comprehensive Income Loss [Line Items]

Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholders' Equity

The components of AOCI included in stockholders’ equity are as follows:

	December 31, 2016			December 31, 2015
	(In thousands)
Foreign currency translation adjustments ("FCTA")	$	(42,082	)	$	(29,925	)
Net unrealized gain on investments		269			247
Net loss on derivative financial instruments		(25,082	)		(64,277	)
Accumulated other comprehensive loss	$	(66,895	)	$	(93,955	)

The following table presents the components of AOCI and the amounts that were reclassified during 2016, 2015 and 2014:

	Foreign currency translation adjustments			Unrealized holding gain (loss) on investments		Gain (loss) on derivative (1)				TOTAL
	(In thousands)
Balance, January 1, 2014	$	(2,562	)	$	238	$	(45,386	)		$	(47,710	)
Other comprehensive income (loss) before reclassification		(9,250	)		3		(65,503	)			(74,750	)
Amounts reclassified from AOCI		(3,400	)		-		28,052		(2)		24,652
Net current period other comprehensive income (loss)		(12,650	)		3		(37,451	)			(50,098	)
Balance, December 31, 2014		(15,212	)		241		(82,837	)			(97,808	)
Other comprehensive income (loss) before reclassification		(12,470	)		6		(57,459	)			(69,923	)
Amounts reclassified from AOCI		(2,243	)		-		76,019		(2)		73,776
Net current period other comprehensive income (loss)		(14,713	)		6		18,560				3,853
Balance, December 31, 2015		(29,925	)		247		(64,277	)			(93,955	)
Other comprehensive income (loss) before reclassification		(12,157	)		22		4,004				(8,131	)
Amounts reclassified from AOCI		-			-		35,191		(2)		35,191
Net current period other comprehensive income (loss)		(12,157	)		22		39,195				27,060
Balance, December 31, 2016	$	(42,082	)	$	269	$	(25,082	)		$	(66,895	)

⁽¹⁾ Refer to Note 12, Derivative Financial Instruments, for additional details

⁽²⁾ Reclassified to cost of operations and gain (loss) on foreign currency, net

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Payments Required under Operating Leases that have Initial or Remaining Non-cancellable Lease Terms in Excess of One Year

Future minimum payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year at December 31, 2016 are as follows (in thousands):

Fiscal Year Ending December 31,	Amount
2017	$	27,864
2018		23,185
2019		19,076
2020		19,208
2021		14,425
Thereafter		122,922

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SEGMENT REPORTING (Tables)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Information about Operations in Different Segments

1.Information about Operations:  

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Revenues (1):
AEA	$	285,988		$	478,800		$	567,608
MEA		1,241,591			1,134,555			795,666
ASA		1,108,404			1,456,920			937,615
Total revenues:	$	2,635,983		$	3,070,275		$	2,300,889
Income (loss) before provision for income taxes:
Operating income (loss) (2)
AEA	$	51,129		$	52,918		$	(65,565	)
MEA		209,401			146,866			47,863
ASA		97,963			123,718			90,838
Segment operating income		358,493			323,502			73,136
Corporate and Other		(216,240	)		(210,820	)		(56,734	)
Total operating income	$	142,253		$	112,682		$	16,402
Interest expense, net		(58,871	)		(50,058	)		(60,877	)
Other non-operating income (expense), net		(1,067	)		1,986			7,002
Income (loss) before provision for income taxes	$	82,315		$	64,610		$	(37,473	)
Capital expenditures (3):
AEA	$	16,667		$	13,715		$	53,431
MEA		18,564			28,328			99,974
ASA		190,260			60,220			154,735
Corporate and Other		2,588			588			13,047
Total capital expenditures:	$	228,079		$	102,851		$	321,187
Depreciation and amortization:
AEA	$	26,924		$	43,006		$	34,494
MEA		24,268			30,567			31,876
ASA		30,314			16,880			19,020
Corporate and Other		8,376			9,881			7,795
Total depreciation and amortization:	$	89,882		$	100,334		$	93,185
Drydock amortization
AEA	$	9,905		$	12,554		$	11,453
MEA		1,975			2,089			2,011
ASA		915			3,304			6,255
Total drydock amortization	$	12,795		$	17,947		$	19,719

⁽¹⁾ Intercompany transactions were not significant during 2016, 2015 and 2014.

⁽²⁾ The 2016 and 2015 Corporate and Other operating results include $55 million and $7 million of impairment, respectively. The 2014 Corporate and Other operating results include $11 million of improvements to the cancellation cost estimate included in the $38 million vessel impairment charge recognized in 2013. See Note 13, Fair Value Measurements, for further discussion.

⁽³⁾ Total capital expenditures represent expenditures for which cash payments were made during the period. Capital expenditures for 2016, 2015 and 2014 include $4 million, $14 million and $27 million of cash payments for accrued capital expenditures outstanding as of December 31, 2015, 2014 and 2013, respectively.

Significant Impact of Customers on Company Segments

2. Information about our most significant Customers

Our significant customers by segments during 2016, 2015 and 2014, were as follows:

	% of
	Consolidated		Reportable
	Revenues		Segment
Year Ended December 31, 2016:
Inpex Operations Australia Pty Ltd		33%	ASA
Saudi Aramco		26%	MEA
RasGas Company Limited		12%	MEA
Year Ended December 31, 2015:
Inpex Operations Australia Pty Ltd		36%	ASA
Saudi Aramco		28%	MEA
Year Ended December 31, 2014:
Saudi Aramco		27%	MEA
Inpex Operations Australia Pty Ltd		25%	ASA

Information about Service Lines and Operations in Different Geographic Areas

3. Information about our Service Lines and Operations in Different Geographic Areas:

	Year Ended December 31,
	2016		2015		2014
	(In thousands)
Service line revenues:
Installation Operations	$	1,074,069	$	1,256,412	$	1,041,525
Procurement Activities		879,222		1,123,329		677,734
Project Services and Engineering Operations		356,781		416,906		314,776
Fabrication Operations		325,911		273,628		266,854
	$	2,635,983	$	3,070,275	$	2,300,889
Geographic revenues:
Australia	$	881,812	$	1,157,723	$	614,164
Saudi Arabia		767,119		900,483		616,659
Qatar		419,963		46,873		-
Mexico		112,484		247,859		130,642
Russia		108,392		-		-
United States		95,996		32,858		148,606
Trinidad		67,757		-		-
India		56,027		-		-
United Arab Emirates		54,392		185,606		57,249
Malaysia		22,637		-		98,004
Indonesia		21,726		54,288		150,205
Brunei		-		237,337		-
Brazil		6,449		183,656		290,561
Azerbaijan		-		-		111,382
Other countries		21,229		23,592		83,417
	$	2,635,983	$	3,070,275	$	2,300,889

Information about Segment Assets and Property, Plant and Equipment by Country

4. Information about our Segment Assets and Property, Plant and Equipment by Country:

	Year Ended December 31,
	2016		2015
	(In thousands)
Segment assets:
AEA	$	727,328	$	896,822
MEA		907,936		971,170
ASA		976,470		774,365
Corporate and Other		610,496		744,719
Total assets	$	3,222,230	$	3,387,076
Property, plant and equipment, net(1):
Australia	$	626,605	$	-
Mexico		603,185		96,090
United Arab Emirates		318,822		341,502
United States		27,482		561,990
Saudi Arabia		22,608		4,522
Indonesia		73,213		521,922
India		10,666		307
Malaysia		2,457		49,609
Brazil		170		31,765
Other countries		2,093		3,152
Total property, plant and equipment, net	$	1,687,301	$	1,610,859

⁽¹⁾ Our marine vessels are included in the country in which they were located as of year-end.

Other Information about Segment

5. Information about our Unconsolidated Affiliates:

	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Equity in loss of unconsolidated affiliates:
AEA	$	(5,082	)	$	(6,255	)	$	4,829
MEA		-			(94	)		(2,668	)
ASA		1,167			(15,137	)		(10,009	)
Corporate and Other		(175	)		-			-
Total equity in loss of unconsolidated affiliates:	$	(4,090	)	$	(21,486	)	$	(7,848	)
Investments in unconsolidated affiliates:
AEA	$	2,449		$	1,540
ASA		14,064			24,327
Corporate and Other		510			684
Total investments in unconsolidated affiliates	$	17,023		$	26,551

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QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Selected Unaudited Quarterly Financial Information

The following tables set forth selected unaudited quarterly financial information for the quarterly periods in 2016 and 2015:

	For the Quarter Ended
	March 31(1)			June 30(2)		September 30(3)		December 31(4)
2016	(In thousands, except per share data amounts)
Revenues	$	729,032		$	706,627	$	558,543	$	641,781
Gross Profit		112,999			111,185		103,044		59,139
Net income (loss)		(2,444	)		21,805		16,392		546
Net income (loss) attributable to non-controlling interest		(272	)		1,148		284		1,022
Net income (loss) attributable to McDermott International, Inc.		(2,172	)		20,657		16,108		(476	)
Income (loss) per share(5)
Basic		(0.01	)		0.09		0.07		0.00
Diluted		(0.01	)		0.07		0.06		0.00

⁽¹⁾ Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment,  partially offset by impairment losses on the Agile vessel.

⁽²⁾ Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

⁽³⁾ Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

⁽⁴⁾ Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600.  Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

⁽⁵⁾ May not tie to the Consolidated Statements of Operations due to rounding.

	For the Quarter Ended
	March 31(1)			June 30(2)		September 30(3)		December 31(4)
2015	(In thousands, except per share data amounts)
Revenues	$	550,463		$	1,046,537	$	805,857	$	667,418
Gross Profit		75,004			121,015		84,896		98,076
Net income (loss)		(12,048	)		13,690		7,534		(18,015	)
Net income attributable to non-controlling interest		2,459			2,164		3,868		653
Net income (loss) attributable to McDermott International, Inc.		(14,507	)		11,526		3,666		(18,668	)
Income (loss) per share(5)
Basic		(0.06	)		0.05		0.02		(0.08	)
Diluted		(0.06	)		0.04		0.01		(0.08	)

⁽¹⁾ Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

⁽²⁾ Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

⁽³⁾ Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.  

⁽⁴⁾ Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

⁽⁵⁾ May not tie to the Consolidated Statements of Operations due to rounding.

XML

Basis of Presentation and Significant Accounting Policies - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 Country Segment
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Number of countries | Country	20
Number of reportable segments | Segment	3
Percentage of completion to recognize expected profit	70.00%
Building [Member] | Minimum [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Property, plant and equipment economic useful lives	8 years
Building [Member] | Maximum [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Property, plant and equipment economic useful lives	33 years
Machinery and Equipment [Member] | Minimum [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Property, plant and equipment economic useful lives	3 years
Machinery and Equipment [Member] | Maximum [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Property, plant and equipment economic useful lives	28 years
Other Capitalized Property Plant And Equipment
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Property, plant and equipment economic useful lives	5 years

XML

Revenue Recognition - Percentage of Revenues by Contract Type (Detail)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Percentage of revenue	100.00%	100.00%	100.00%
Fixed-Price [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Percentage of revenue	92.00%	93.00%	87.00%
Unit-Basis and Other [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Percentage of revenue	8.00%	7.00%	13.00%

XML

Revenue Recognition - Additional Information (Detail)	3 Months Ended																12 Months Ended
	Dec. 31, 2016 USD ($)		Sep. 30, 2016 USD ($)	[2]	Jun. 30, 2016 USD ($)	[3]	Mar. 31, 2016 USD ($)	[4]	Dec. 31, 2015 USD ($)		Sep. 30, 2015 USD ($)	[6]	Jun. 30, 2015 USD ($)	[7]	Mar. 31, 2015 USD ($)	[8]	Dec. 31, 2016 USD ($)		Dec. 31, 2015 USD ($) Project		Dec. 31, 2014 USD ($)
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Unapproved change orders	$ 119,000,000								$ 122,000,000								$ 119,000,000		$ 122,000,000
Revenues	641,781,000	[1]	$ 558,543,000		$ 706,627,000		$ 729,032,000		667,418,000	[5]	$ 805,857,000		$ 1,046,537,000		$ 550,463,000		2,635,983,000	[9]	3,070,275,000	[9]	$ 2,300,889,000	[9]
Loss on contracts																			22,000,000
Mexico [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues																	112,484,000		247,859,000		130,642,000
Brazil [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues																	6,449,000		$ 183,656,000		290,561,000
Charter contract term																			5 years
MEA [Member] | Unconsolidated joint ventures [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues																	0		$ 0		$ 0
MEA [Member] | Claims Revenue [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues																	10,000,000		10,000,000
Backlog [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Unapproved change orders	$ 15,000,000								$ 21,000,000								15,000,000		$ 21,000,000
Backlog [Member] | AEA [Member] | Mexico [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Project completion year																			2016
Active EPCI Project [Member] | MEA [Member] | KJO Hout Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Loss on contracts																	$ 8,000,000
Project completion year																	2017
Active Projects [Member] | AEA [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Number of projects accounted under deferred profit recognition policy | Project																			2
Backlog Associated with Charter of Agile [Member] | AEA [Member] | Brazil [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Project termination year																			2016

[1] Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600. Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

[2] Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

[3] Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

[4] Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment, partially offset by impairment losses on the Agile vessel.

[5] Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

[6] Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.

[7] Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

[8] Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

[9] Intercompany transactions were not significant during 2016, 2015 and 2014.

XML

Use of Estimates - Additional Information (Detail) $ in Millions	1 Months Ended	3 Months Ended	12 Months Ended
	Jan. 31, 2017 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($) Project	Dec. 31, 2014 USD ($)
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results			$ 91	$ 70
Effect of additional estimated project costs On Income			10
Subsequent Event [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	$ 34
AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results			38	27	$ 37
MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results			38	$ 20	4
Number of projects | Project				2
ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results			15	$ 23	10
PB Litoral project [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results			7	12
KJO Hout Project [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results				9
Loss position in estimated cost of project			8
Ichthys Project [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Partial offset on estimated costs on project			$ 31
Benefit from project execution cost saving				5
Agile Charter [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Favorable changes due to productivity improvements and cost reduction initiatives				11
Other Multiple Projects [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results				4
Other Multiple Projects [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results				7
Other Multiple Projects [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results				14
Abu Ali cable lay project | MEA [Member] | Project One [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results				24
ADMA Four GI Project [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Partial offset on estimated costs on project				20
Gorgon MRU Project [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results				$ 4
PB Litoral an EPCI Project [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					69
Jack & St. Malo [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					6
Morgan City Fabrication Project [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					(8)
Papa Terra Project [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					40
Marine Installation Project [Member] | AEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					(5)
Safaniya phase two Saudi Aramco EPCI project [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results		$ 20			23
Partial offset on estimated costs on project					43
Safaniya phase one Saudi Aramco project [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					19
KJO Ratawi project [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					12
Caspian Pipelay project [Member] | MEA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					54
Siakap [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					52
Siakap project [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					34
Brunei Project [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					12
Sepat FEED and Esso KIT Project [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					6
Ichthys Project in Australia [Member] | ASA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results					$ 11

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Restructuring - Restructuring Costs Incurred and Future Cost Expected to be Incurred (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	$ 11,263		$ 40,819	$ 18,113
Incurred from inception to December 31, 2016	105,922
Americas Restructuring [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	(1,350)	[1]	2,308	9,170
Incurred from inception to December 31, 2016	44,194
Corporate Restructuring [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period				4,940
Incurred from inception to December 31, 2016	6,601
MPI [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	5,248		37,711	4,003
Incurred from inception to December 31, 2016	46,962
MPI [Member] | Severance and other personnel-related costs [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	2,590		15,217
Incurred from inception to December 31, 2016	17,807
MPI [Member] | Asset impairment and disposal [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period			7,471
Incurred from inception to December 31, 2016	7,471
MPI [Member] | Legal and other advisor fees [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	222		7,414	$ 4,003
Incurred from inception to December 31, 2016	11,639
MPI [Member] | Other [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	2,436		7,609
Incurred from inception to December 31, 2016	10,045
AOR [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	7,365		800
Incurred from inception to December 31, 2016	8,165
AOR [Member] | Severance and other personnel-related costs [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	5,012
Incurred from inception to December 31, 2016	5,012
AOR [Member] | Legal and other advisor fees [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	1,968		$ 800
Incurred from inception to December 31, 2016	2,768
AOR [Member] | Other [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Incurred for the period	385
Incurred from inception to December 31, 2016	$ 385

[1] This amount includes reversal of environmental liability established in connection with discontinued utilization of our Morgan City fabrication facility. For further discussion see, Note 18, Commitments and Contingencies.

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Cash, Cash Equivalents and Restricted Cash - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash And Cash Equivalents [Abstract]
Cash and cash equivalents	$ 595,921	$ 664,844
Restricted cash and cash equivalents	16,412	116,801
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$ 612,333	$ 781,645	$ 852,894	$ 142,354

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Accounts Receivable - Contract Receivables (Detail) - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
Accounts Notes And Loans Receivable [Line Items]
Retainages		$ 58,431	$ 17,896
Accounts receivable—trade, net		334,384	208,474
Contract receivables [Member]
Accounts Notes And Loans Receivable [Line Items]
Contracts receivable		245,604	164,898
Unbilled	[1]	4,303	4,303
Less allowances		(14,299)	(14,325)
Accounts receivable—trade, net		334,384	208,474
Contract receivables [Member] | Completed contracts [Member]
Accounts Notes And Loans Receivable [Line Items]
Contracts receivable		$ 40,345	$ 35,702

[1] This amount relates to a project milestone billing for which we are awaiting the customer’s final acceptance certificate. We expect to receive the final acceptance certificate during 2017.

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Accounts Receivable - Retainages on Contracts (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Retainages expected to be collected within one year	$ 58,431	$ 17,896
Retainages expected to be collected after one year	127,193	155,061
Total retainages	$ 185,624	$ 172,957

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Accounts Receivable - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Accounts Notes And Loans Receivable [Line Items]
Retainages expected to be collected in 2018	$ 121,000,000
Retainages expected to be collected in 2019	6,000,000
Allowance for doubtful accounts	$ 0	$ 0
Maximum [Member]
Accounts Notes And Loans Receivable [Line Items]
Employee receivables expected collection months	12 months

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Accounts Receivable - Summary of Accounts Receivable Other (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Receivables from unconsolidated affiliates	$ 13,292	$ 12,816
Accrued unbilled other	12,075	14,021
Employee receivables	4,730	4,376
Other taxes receivable	2,483	28,743
Other	4,349	6,733
Accounts receivable—other	$ 36,929	$ 66,689

XML

Contracts in Progress and Advance Billings on Contracts - Components of Contracts in Progress and Advance Billings on Contracts (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Contractors [Abstract]
Costs incurred less costs of revenue recognized	$ 119,688	$ 112,819
Revenues recognized less billings to customers	199,450	323,010
Contracts in Progress	319,138	435,829
Billings to customers less revenue recognized	42,637	265,618
Costs incurred less costs of revenue recognized	149,849	(100,845)
Advance Billings on Contracts	$ 192,486	$ 164,773

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Property, Plant and Equipment - Summary of Property Plant Equipment by Asset Category (Detail) - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
Property Plant And Equipment [Line Items]
Property, Plant and Equipment		$ 2,586,179	$ 2,467,352
Less accumulated depreciation		(898,878)	(856,493)
Property, plant and equipment, net	[1]	1,687,301	1,610,859
Marine Vessels [Member]
Property Plant And Equipment [Line Items]
Property, Plant and Equipment		1,789,942	1,391,556
Construction Equipment [Member]
Property Plant And Equipment [Line Items]
Property, Plant and Equipment		474,128	478,175
Building [Member]
Property Plant And Equipment [Line Items]
Property, Plant and Equipment		152,584	155,292
All other [Member]
Property Plant And Equipment [Line Items]
Property, Plant and Equipment		148,805	143,580
Construction in Progress [Member]
Property Plant And Equipment [Line Items]
Property, Plant and Equipment		$ 20,720	$ 298,749

[1] Our marine vessels are included in the country in which they were located as of year-end.

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Property, Plant and Equipment - Additional Information (Detail) - USD ($) $ in Millions	1 Months Ended		12 Months Ended
	Jun. 30, 2014	Apr. 30, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Property Plant And Equipment [Abstract]
Interest incurred			$ 75	$ 74	$ 85
Interest capitalized			14	23	24
Depreciation expense			$ 90	$ 100	93
Proceeds from Assets Sale	$ 14	$ 32			25
Gain from Assets Sale	11	$ 25			11
Property plant and equipment improvement	$ 1				$ 11

XML

Equity Method Investments - Additional Information (Detail) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($) EquityMethodInvestee	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Schedule Of Equity Method Investments [Line Items]
Number of equity method investees are listed on stock exchange | EquityMethodInvestee		0
Other non-operating income (expense), net		$ (1,067)	$ 1,986	$ 7,002
THHE Fabricators Sdn. Bhd [Member]
Schedule Of Equity Method Investments [Line Items]
Decrease in investments in unconsolidated affiliates		12,000
Other non-operating income (expense), net		$ 5,000
THHE Fabricators Sdn. Bhd [Member] | ASA Segment [Member]
Schedule Of Equity Method Investments [Line Items]
Decrease in investments in unconsolidated affiliates	$ 12,000
Other non-operating income (expense), net	$ 5,000

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Summary of Balance Sheet Information Under The Equity Method Investment (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Equity Method Investment Summarized Financial Information [Abstract]
Current Assets	$ 74,430	$ 133,171
Noncurrent Assets	124,862	189,536
Total Assets	199,292	322,707
Current Liabilities	91,268	176,165
Noncurrent Liabilities	86,963	112,162
Total Liabilities	$ 178,231	$ 288,327

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Summary of Income Statement Information Under The Equity Method Investment (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Equity Method Investment Summarized Financial Information Income Statement [Abstract]
Revenues	$ 111,847	$ 107,795	$ 294,408
Cost of operations	87,335	105,465	275,015
Gross Profit	24,512	2,330	19,393
Net Income (loss)	$ (8,609)	$ (38,245)	$ (28,773)

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Debt - Additional Information (Detail)			1 Months Ended		3 Months Ended								12 Months Ended
	May 13, 2016 USD ($)	May 12, 2016	Jan. 31, 2017 USD ($)	Apr. 30, 2014 USD ($) $ / EquityUnits shares	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016 USD ($) $ / shares	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Apr. 30, 2016 USD ($)	Apr. 18, 2016 USD ($)	Feb. 29, 2016 USD ($)	Oct. 31, 2015 USD ($)	Sep. 30, 2010
Debt Instrument [Line Items]
Unamortized debt issuance costs									$ 13,573,000				$ 13,573,000	$ 20,000,000
Excess cash flow													50.00%
Aggregate principal amount of unreimbursed drawings and advances under line of credit facility									6.4				6.4
Units issued | shares				11,500,000
Tangible units interest rate percentage				6.25%
Unit price per share | $ / EquityUnits				25
Initial principal amount per amortizing note | $ / EquityUnits				4.1266
Issuance of tangible equity units															$ 240,044,000
Maximum settlement rate per tangible equity unit | $ / shares									$ 3.5562				$ 3.5562
Dilutive common shares issuable under common stock purchase contracts | shares													40,900,000
Conversion price per share | $ / shares									$ 0.0703				$ 0.0703
Bank guarantees issued									$ 359,000,000				$ 359,000,000	118,000,000
Bonds issued related to JRMSA general agreement of indemnity									79,000,000				79,000,000	54,000,000
Subsequent Event [Member]
Debt Instrument [Line Items]
Line of Credit facility maximum amount outstanding			$ 525,000,000
Increase in bank guarantees overall capacity			$ 150,000,000
Notes Payable Current [Member]
Debt Instrument [Line Items]
Tangible equity units, aggregate principal amount									$ 9,000,000				$ 9,000,000
Senior Amortizing Note Due April 1, 2017
Debt Instrument [Line Items]
Debt instrument maturity date				Apr. 01, 2017
Amortizing note interest rate percentage				7.75%
Financial Letter of Credit [Member]
Debt Instrument [Line Items]
Letter of credit fee									4.50%				4.50%
Minimum [Member]
Debt Instrument [Line Items]
Aggregate principal amount of unreimbursed drawings and advances under line of credit facility									1.75				1.75
Dilutive common shares issuable under common stock purchase contracts | shares													33,400,000
Conversion price per share | $ / shares									$ 0.0861				$ 0.0861
Dilutive common shares issuable under common stock purchase contracts, per unit | $ / shares									$ 2.9030				$ 2.9030
After March 31, 2016 But Before April 16, 2017
Debt Instrument [Line Items]
Aggregate amount																		$ 25,000,000
Prior to April 16, 2017 [Member]
Debt Instrument [Line Items]
Dividends to MDR stockholders									$ 50,000,000				$ 50,000,000
After April 16, 2017 [Member]
Debt Instrument [Line Items]
Dividends to MDR stockholders									150,000,000				$ 150,000,000
Senior Notes [Member]
Debt Instrument [Line Items]
Issue of second-lien seven-year senior secured notes				$ 500,000,000
Tangible equity units, aggregate principal amount				48,000,000
Debt instrument interest rate													8.00%
Debt instrument maturity date													May 01, 2021
Issuance of tangible equity units													$ 240,000,000
Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Letter of credit, first lien	$ 450,000,000			400,000,000					$ 450,000,000				$ 450,000,000	520,000,000					$ 520,000,000
Debt instrument maturity year													2017
Minimum fixed charge coverage ratio												1.15%
Maximum Leverage Ratio									4.50%	4.50%	4.50%	4.50%
Maximum leverage ratio, there after									3.50%				3.50%
Debt instrument covenant maximum capital expenditures													$ 250,000,000	125,000,000
Debt instrument covenant maximum capital expenditures thereafter													$ 375,000,000
Line of credit facility, description													extend the maturity date of the LC Facility commitments to April 22, 2019, unless the Term Loan has not been repaid or refinanced by January 15, 2019, in which case the LC Facility commitments will expire on January 15, 2019;
Line of credit, extended maturity date													Apr. 22, 2019
Line of credit, expiration date													Jan. 15, 2019
Line of Credit facility maximum amount outstanding													$ 442,000,000	384,000,000
Cash collateralize letter of credit permitted to deposit, Amount									$ 300,000,000				300,000,000
Cash collateralized letters of credit									175,000,000				175,000,000
Letter of credit supported by Cash collateral									$ 16,000,000				$ 16,000,000	102,000,000
Commitment fee on the unused portion of credit agreement													0.50%
Letter of Credit Facility [Member] | Middle Eastern Bank [Member]
Debt Instrument [Line Items]
Letter of credit, first lien																$ 200,000,000
Line of Credit facility maximum amount outstanding													$ 375,000,000
Letter of Credit Facility [Member] | Maximum [Member]
Debt Instrument [Line Items]
Secured leverage ratio									2.00%	2.00%	2.00%	2.00%
Secured leverage ratio thereafter													1.50%
Letter of Credit Facility [Member] | Scenario Forecast [Member]
Debt Instrument [Line Items]
Maximum Leverage Ratio					4.00%	4.00%	4.50%	4.50%
Letter of Credit Facility [Member] | Scenario Forecast [Member] | Maximum [Member]
Debt Instrument [Line Items]
Secured leverage ratio					2.00%	2.00%	2.00%	2.00%
Term Loan [Member]
Debt Instrument [Line Items]
Letter of credit, first lien				300,000,000
Debt instrument maturity year													2019
Increased applicable margin payable on term loan		3.00%
Prepayment of Term Loan under credit agreement	75,000,000
Term Loan amortization amount													$ 750,000,000
Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Reinvestment period													365 days
Term Loan [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Base rate and applicable margin													7.25%
Term Loan [Member] | Maximum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin													6.25%
Term Loan [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Base rate and applicable margin													1.00%
Term Loan [Member] | Minimum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin													2.00%
Tangible Equity Units
Debt Instrument [Line Items]
Issue of tangible equity units				$ 288,000,000
DLV 2000 [Member]
Debt Instrument [Line Items]
Increase decrease in indebtedness	150,000,000																$ 20,000,000
DLV 2000 [Member] | Maximum [Member]
Debt Instrument [Line Items]
Covenant acquisition limit	150,000,000
Prepayment or purchase of junior priority debt covenant limit	$ 100,000,000
Performance Stand By Letters Of Credit
Debt Instrument [Line Items]
Letter of credit fee									2.25%				2.25%
North Ocean 105 [Member] | North Ocean Construction Financing [Member]
Debt Instrument [Line Items]
Debt instrument maturity date													Jun. 30, 2017
Amortizing note interest rate percentage									4.00%				4.00%
Dividend declared														$ 5,000,000
Converted notes payable									$ 5,000,000				$ 5,000,000
North Ocean 105 [Member] | Secured Debt [Member] | North Ocean Construction Financing [Member]
Debt Instrument [Line Items]
Percentage of interest acquired in subsidiary																				75.00%
Ownership percentage in Oceanteam ASA's																				25.00%

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Debt - Summary of Long-Term Debt Obligations (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Long-term borrowing	$ 752,520	$ 843,883
Less: Amounts due within one year	48,125	24,882
Long-term debt	704,395	819,001
Senior Notes [Member]
Debt Instrument [Line Items]
Long-term borrowing	493,461	491,890
Term Loan [Member]
Debt Instrument [Line Items]
Long-term borrowing	212,070	289,979
Amortizing Notes [Member]
Debt Instrument [Line Items]
Long-term borrowing	7,932	21,205
Other, Including Capital Lease Obligation [Member]
Debt Instrument [Line Items]
Long-term borrowing	7,180	2,546
North Ocean 105 Construction Financing [Member]
Debt Instrument [Line Items]
Long-term borrowing	$ 31,877	$ 38,263

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Debt - Maturities of Long-Term Debt During Five Years (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
2017	$ 49,820
2018	3,427
2019	212,846
2021	500,000
Total Debt	766,093
Debt Issuance Costs	(13,573)	$ (20,000)
Total Debt - Net of Issuance Costs	$ 752,520	$ 843,883

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Debt - Summary of Redemption Prices Expressed as Percentage (Detail) - Senior Notes [Member]	12 Months Ended
	Dec. 31, 2016
2017 [Member]
Debt Instrument Redemption [Line Items]
Redemption prices expressed as percentage	104.00%
2018 [Member]
Debt Instrument Redemption [Line Items]
Redemption prices expressed as percentage	102.00%
2019 and thereafter [Member]
Debt Instrument Redemption [Line Items]
Redemption prices expressed as percentage	100.00%

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Pension and Postretirement Benefits - Obligations and Funded Status (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Change in plan assets:
Fair value of plan assets at beginning of year	$ 532,403
Fair value of plan assets at end of year	517,213	$ 532,403
Amounts recognized in balance sheet consist of:
Pension liability	(19,471)	(24,066)
Domestic Plans [Member]
Change in benefit obligation:
Benefit obligation at beginning of year	519,199	556,632
Interest cost	21,102	21,613	$ 26,972
Actuarial loss (gain)	2,641	(21,754)
Benefits paid	(37,586)	(37,292)
Benefit obligation at end of year	505,356	519,199	556,632
Change in plan assets:
Fair value of plan assets at beginning of year	494,146	551,821
Actual return on plan assets	26,891	(21,889)
Company contributions	1,510	1,506
Benefits paid	(37,586)	(37,292)
Fair value of plan assets at end of year	484,961	494,146	551,821
Funded status	(20,395)	(25,053)
Amounts recognized in balance sheet consist of:
Accrued pension liability—current	(1,382)	(1,409)
Pension liability	(19,013)	(23,644)
Accrued benefit liability	(20,395)	(25,053)
Net (Liability) Asset	(20,395)	(25,053)
Plans with accumulated benefit obligation in excess of plan assets
Projected benefit obligation	505,356	519,199
Accumulated benefit obligation	505,356	519,199
Fair value of plan assets	484,961	494,146
TCN Plan [Member]
Change in benefit obligation:
Benefit obligation at beginning of year	38,265	43,985
Interest cost	1,351	1,626	1,900
Actuarial loss (gain)	(3,172)	(4,095)
Benefits paid	(5,227)	(3,251)
Benefit obligation at end of year	31,217	38,265	43,985
Change in plan assets:
Fair value of plan assets at beginning of year	38,257	42,106
Actual return on plan assets	(778)	(598)
Benefits paid	(5,227)	(3,251)
Fair value of plan assets at end of year	32,252	38,257	$ 42,106
Funded status	1,035	(8)
Amounts recognized in balance sheet consist of:
Other Assets	1,035
Pension liability		(8)
Accrued benefit liability		(8)
Net (Liability) Asset	1,035	(8)
Plans with accumulated benefit obligation in excess of plan assets
Projected benefit obligation	31,217	38,265
Accumulated benefit obligation	31,217	38,265
Fair value of plan assets	$ 32,252	$ 38,257

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Pension and Postretirement Benefits - Weighted Average Assumptions used to Determine Net Periodic Benefit Obligations and Net Periodic Benefit Cost (Detail)	Dec. 31, 2016	Dec. 31, 2015
Domestic Plans [Member]
Weighted average assumptions used to determine net periodic benefit obligations at December 31:
Discount rate	4.10%	4.20%
TCN Plan [Member]
Weighted average assumptions used to determine net periodic benefit obligations at December 31:
Discount rate	4.10%	4.00%

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Pension and Postretirement Benefits - Net Periodic Benefit Cost (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Domestic Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 21,102	$ 21,613	$ 26,972
Expected return on plan assets	(20,006)	(26,707)	(27,501)
Actuarial loss (gain)	(4,244)	26,842	(8,728)
Net periodic benefit cost (gain)	$ (3,148)	$ 21,748	$ (9,257)
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	4.20%	4.00%	4.80%
Expected return on plan assets	4.20%	5.00%	5.00%
TCN Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 1,351	$ 1,626	$ 1,900
Expected return on plan assets	(1,587)	(2,840)	(2,961)
Actuarial loss (gain)	(807)	(657)	6,027
Net periodic benefit cost (gain)	$ (1,043)	$ (1,871)	$ 4,966
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	4.00%	4.00%	4.80%
Expected return on plan assets	4.70%	6.90%	6.90%

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Pension and Postretirement Benefits - Asset Allocations by Asset Category (Detail)	Dec. 31, 2016	Dec. 31, 2015
Domestic Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted average asset allocations, by asset category	100.00%	100.00%
TCN Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted average asset allocations, by asset category	100.00%	100.00%
Fixed Income [Member] | Domestic Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted average asset allocations, by asset category	85.00%	85.00%
Fixed Income [Member] | TCN Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted average asset allocations, by asset category	67.00%	49.00%
Equity Securities [Member] | Domestic Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted average asset allocations, by asset category	15.00%	15.00%
Equity Securities [Member] | TCN Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted average asset allocations, by asset category	33.00%	51.00%

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Pension and Postretirement Benefits - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
TCN Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer contributions, percentage match of participants' contributions	50.00%
Employer contributions, percentage unmatched of participants' contributions	3.00%
TCN Plan [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan matching percent of compensation	6.00%
TCN Plan [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Plan assets held in cash in cash equivalents		$ 14
Domestic Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Employer contributions, percentage match of participants' contributions	50.00%
Employer contributions, percentage unmatched of participants' contributions	3.00%
Domestic Plans [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan matching percent of compensation	6.00%

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Pension and Postretirement Benefits - Total Investments Plans Measured at Fair Value (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 517,213	$ 532,403
Fixed Income [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	420,240	421,987
Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	82,442	85,077
Cash and Accrued Items [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	14,531	25,339
Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	264,244	170,528
Level 1 [Member] | Fixed Income [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	167,271	60,128
Level 1 [Member] | Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	82,442	85,065
Level 1 [Member] | Cash and Accrued Items [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	14,531	25,335
Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	247,882	356,123
Level 2 [Member] | Fixed Income [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	247,882	356,107
Level 2 [Member] | Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		12
Level 2 [Member] | Cash and Accrued Items [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		4
Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	5,087	5,752
Level 3 [Member] | Fixed Income [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 5,087	$ 5,752	$ 5,013

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Pension and Postretirement Benefits - Changes in Level Three Fixed Income Instrument Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair value of plan assets at beginning of year	$ 532,403
Fair value of plan assets at end of year	517,213	$ 532,403
Fixed Income [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair value of plan assets at beginning of year	421,987
Fair value of plan assets at end of year	420,240	421,987
Level 3 [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair value of plan assets at beginning of year	5,752
Fair value of plan assets at end of year	5,087	5,752
Level 3 [Member] | Fixed Income [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair value of plan assets at beginning of year	5,752	5,013
Purchases, net	107	1,269
Total unrealized loss	(772)	(530)
Fair value of plan assets at end of year	$ 5,087	$ 5,752

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Pension and Postretirement Benefits - Expected Employer Contributions to Trusts of Defined Benefit Plans (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Domestic Plans [Member]
Expected benefit payments:
2017	$ 37,148
2018	36,929
2019	36,620
2020	36,228
2021	35,876
2022-2026	169,531
TCN Plan [Member]
Expected benefit payments:
2017	5,803
2018	1,304
2019	1,571
2020	1,799
2021	1,483
2022-2026	$ 9,309

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Pension and Postretirement Benefits - Summary of Contributions Under Defined Contribution Plans (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Thrift Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Contributions	$ 4,176	$ 3,840	$ 3,879
Global Thrift Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Contributions	$ 998	$ 1,095	$ 1,236

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Derivative Financial Instruments - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Net gain (loss) on derivative financial instruments	$ (25,082,000)	$ (64,277,000)
Net deferred losses expected to be reclassified from AOCI over next 12 months	(11,000,000)
Notional value of outstanding derivative contracts	$ 332,000,000
Derivative contracts, maturity date	May 31, 2018
Fair value of derivative contracts	$ 7,000,000
EPCI projects [Member]
Derivative [Line Items]
Notional value of outstanding derivative contracts	$ 158,000,000

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Derivative Financial Instruments - Derivative Financial Instruments (Detail) - Derivatives Designated as Hedges [Member] - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Derivatives Fair Value [Line Items]
Asset derivatives fair value	$ 2,631	$ 1,883
Liability derivatives fair value	9,365	30,667
Accounts receivable-other [Member]
Derivatives Fair Value [Line Items]
Asset derivatives fair value	2,631	1,668
Other assets [Member]
Derivatives Fair Value [Line Items]
Asset derivatives fair value		215
Other liabilities [Member]
Derivatives Fair Value [Line Items]
Liability derivatives fair value	4	4,018
Accrued liabilities [Member]
Derivatives Fair Value [Line Items]
Liability derivatives fair value	$ 9,361	$ 26,649

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Derivative Financial Instruments - Effects of Derivative Instruments on Consolidated Financial Statements (Detail) - Derivatives Designated as Hedges [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Derivative Instruments Gain Loss [Line Items]
Amount of gain (loss) recognized in other comprehensive income (loss)	$ 4,004	$ (57,459)	$ (65,503)
Cost of operations [Member]
Derivative Instruments Gain Loss [Line Items]
Reclassified from AOCI	34,556	76,034	26,418
Gain (loss) on foreign currency, net [Member]
Derivative Instruments Gain Loss [Line Items]
Ineffective portion and amount excluded from effectiveness testing gain (loss) recognized	$ (1,461)	$ 6,238	$ 6,910

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Fair Value Measurements - Schedule of Financial Instruments Outstanding Measured at Fair Value on Recurring and Nonrecurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Recurring
Forward contracts	$ (7,000)
Carrying Amount [Member]
Recurring
Forward contracts	(6,734)	$ (28,784)
Non-recurring
Debt	(752,520)	(843,883)
Fair value [Member]
Recurring
Forward contracts	(6,734)	(28,784)
Non-recurring
Debt	(777,072)	(777,634)
Level 2 [Member]
Recurring
Forward contracts	(6,734)	(28,784)
Non-recurring
Debt	(728,072)	(707,492)
Level 3 [Member]
Non-recurring
Debt	$ (49,000)	$ (70,142)

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Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended					12 Months Ended
	Jun. 30, 2014	Dec. 31, 2016	Sep. 30, 2016	Mar. 31, 2016	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Non-cash impairment charges						$ 4,000	$ 55,000	$ 7,000		$ 38,000
Carrying value of assets		$ 3,222,230					3,222,230	3,387,076
Property plant and equipment, fair value						$ 14,000
Loss (gain) on asset disposals					$ 3,000		$ (859)	$ 1,443	$ (46,201)
Property plant and equipment improvement	$ 1,000								11,000
Intangible assets impairment charges									$ 2,000
Marine Assets [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Non-cash impairment charges			$ 12,000
Carrying value of assets			22,000
Estimated fair value of assets			$ 10,000
AEA [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Non-cash impairment charges				$ 32,000
AEA [Member] | Marine Assets [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Non-cash impairment charges		$ 11,000
ASA [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Non-cash impairment charges					$ 7,000					$ 38,000
Property plant and equipment improvement	$ 11,000

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Stock-based Compensation - Total Stock-Based Compensation Expense Recognized (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expenses	$ 22,680	$ 16,593	$ 16,516
Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expenses	15,746	14,395	14,417
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expenses	46	770	1,747
Performance Shares and Performance Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expenses	$ 6,888	$ 1,428	$ 352

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Stock-Based Compensation - Total Gross Unrecognized Estimated Compensation Expense and Expected Weighted-Average Periods (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized estimated compensation expense for equity awards	$ 17,861
RSUs and RSAs [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized estimated compensation expense for equity awards	$ 17,603
Weighted-average period for expense recognition	1 year 9 months 18 days
Performance Shares and Performance Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized estimated compensation expense for equity awards	$ 258
Weighted-average period for expense recognition	3 months 18 days

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Stock-Based Compensation - Additional Information (Detail) - USD ($)	1 Months Ended			12 Months Ended
	Feb. 29, 2016	Mar. 31, 2015	May 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock options, granted				0	0	0
Tax benefits realized related to RSUs and RSAs				$ 0	$ 0	$ 0
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options, exercised				0
Total intrinsic value of stock options exercised					300,000	900,000
Fair value of shares vested				$ 1,000,000	$ 3,000,000	$ 4,000,000
Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock issued	1,553,134	1,774,770
Weighted-average vesting period	1 year 9 months 18 days	1 year 9 months 18 days
2014 McDermott International, Inc. Long-Term Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Additional shares approved for issuance			6,600,000
2009 McDermott International, Inc. Long-Term Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares authorized for issuance				9,000,000
Options to purchase shares, maximum expiration term				7 years

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Stock-Based Compensation - Activity for Stock Option (Detail) shares in Thousands	12 Months Ended
	Dec. 31, 2016 $ / shares shares
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Option Shares, Outstanding at beginning of period | shares	2,896
Number of Option Shares, Cancelled/expired/forfeited | shares	(721)
Number of Option Shares, Outstanding at end of period | shares	2,175
Weighted-Average Exercise Price, Outstanding at beginning of period | $ / shares	$ 12.76
Weighted-Average Exercise Price, Cancelled/expired/forfeited | $ / shares	8.65
Weighted-Average Exercise Price, Outstanding at end of period | $ / shares	$ 14.13
Weighted-Average Remaining Contractual Term, Outstanding at end of period	1 year 11 months 9 days

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Stock-Based Compensation - Nonvested RSUs and RSAs and Changes (Detail) - RSUs and RSAs [Member] shares in Thousands	12 Months Ended
	Dec. 31, 2016 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Nonvested at beginning of period | shares	6,689
Number of Shares, Granted | shares	3,876
Number of Shares, Vested | shares	(3,524)
Number of Shares, Cancelled/forfeited | shares	(868)
Number of Shares, Nonvested at end of period | shares	6,173
Weighted Average Grant Date Fair Value, Nonvested at beginning of period | $ / shares	$ 5.15
Weighted-Average Grant Date Fair Value, Granted | $ / shares	3.28
Weighted-Average Grant Date Fair Value, Vested | $ / shares	5.78
Weighted-Average Grant Date Fair Value, Cancelled/forfeited | $ / shares	3.86
Weighted Average Grant Date Fair Value, Nonvested at end of period | $ / shares	$ 3.80

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Stock-Based Compensation - Nonvested Performance Shares and Performance Unit Awards and Changes (Detail) - Performance Shares [Member] shares in Thousands	12 Months Ended
	Dec. 31, 2016 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Nonvested at beginning of period | shares	2,590
Number of Shares, Granted | shares	1,582
Number of Shares, Cancelled/forfeited | shares	(711)
Number of Shares, Nonvested at end of period | shares	3,461
Weighted Average Grant Date Fair Value, Nonvested at beginning of period | $ / shares	$ 6.71
Weighted-Average Grant Date Fair Value, Granted | $ / shares	3.22
Weighted Average Grant Date Fair Value, Cancelled/forfeited | $ / shares	10.22
Weighted Average Grant Date Fair Value, Nonvested at end of period | $ / shares	$ 4.39

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Income Taxes - Provision for Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other than U.S.:
Current	$ 43,944	$ 45,752	$ 21,619
Deferred	(2,018)	6,211	(1,546)
Total provision for income taxes	$ 41,926	$ 51,963	$ 20,073

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Income Taxes - Geographic Source of Income Before Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
U.S.	$ (124,154)	$ (99,738)	$ (35,782)
Other than U.S.	206,469	164,348	(1,691)
Income before provision for income taxes	$ 82,315	$ 64,610	$ (37,473)

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Income Taxes - Reconciliation of Panama Statutory Federal Tax Rate to Consolidated Effective Tax Rate (Detail)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Panama federal statutory rate	25.00%	25.00%	25.00%
Non-Panama operations	(14.00%)	29.00%	9.00%
Valuation allowance for deferred tax assets	24.00%	10.00%	(105.00%)
Audit settlements and reserves	14.00%	9.00%	17.00%
Other (primarily tax on unremitted earnings)	2.00%	7.00%
Effective tax rate attributable to continuing operations	51.00%	80.00%	(54.00%)

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Income Taxes - Significant Components of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets:
Valuation allowance for deferred tax assets	$ (335,000)
Deferred tax assets	21,116	$ 18,822
Deferred tax liabilities:
Net deferred tax liability	(3,584)	(6,279)
Deferred tax assets and liabilities in the accompanying Consolidated Balance Sheets include:
Deferred tax assets	21,116	18,822
Deferred tax liabilities	24,700	25,101
Net deferred tax liability	(3,584)	(6,279)
Reportable Legal Entities [Member]
Deferred tax assets:
Pension liability	9,732	12,033
Accrued liabilities for incentive compensation	22,208	21,640
Net operating loss carryforward	349,916	325,636
State net operating loss carryforward	18,308	24,367
Long-term contracts		4,312
Other	1,861	2,060
Total deferred tax assets	402,025	390,048
Valuation allowance for deferred tax assets	(334,991)	(336,146)
Deferred tax assets	67,034	53,902
Deferred tax liabilities:
Property, plant and equipment	37,883	34,419
Prepaid drydock	1,367	7,639
Long-term contracts	10,989
Investments in joint ventures and affiliated companies	17,044	14,960
Unrealized exchange gains and other	3,335	3,163
Total deferred tax liabilities	70,618	60,181
Deferred tax assets and liabilities in the accompanying Consolidated Balance Sheets include:
Deferred tax assets	$ 67,034	$ 53,902

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Loss Carryforwards [Line Items]
Valuation allowance for deferred tax assets	$ 335.0
Foreign net operating loss carryforwards	373.0
U.S federal net operating loss carryforwards	745.0
Taxes on earnings	21.0
Undistributed earnings of subsidiaries	236.0
Unrecognized deferred income tax liabilities	0.2
Liabilities recorded for payment of tax-related interest and penalties	20.0	$ 16.0	$ 15.0
Malaysia [Member]
Operating Loss Carryforwards [Line Items]
Reduction in income tax expense related to tax holiday	$ 0.2
Income tax holiday, effective date	Which is effective through December 31, 2020
Income tax holiday period	5 years
Income tax holiday, description	We operate under a tax holiday in Malaysia, our new Asia Pacific headquarters. This tax holiday is effective through December 31, 2020, and may be extended for an additional five years if we satisfy certain requirements.
Foreign Country [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, valuation allowance	$ 76.0
Foreign Country [Member] | Minimum [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration year	2017
Foreign Country [Member] | Maximum [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration year	2019
Domestic Country [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, valuation allowance	$ 261.0
Domestic Country [Member] | Minimum [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration year	2030
Domestic Country [Member] | Maximum [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration year	2036
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, valuation allowance	$ 18.0
State net operating loss carryforward	$ 355.0
State and Local Jurisdiction [Member] | Minimum [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration year	2017
State and Local Jurisdiction [Member] | Maximum [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, expiration year	2030
Additional Paid-in Capital [Member]
Operating Loss Carryforwards [Line Items]
U.S federal net operating loss carryforwards	$ 17.0
Expire in the years 2017 to 2019 [Member]
Operating Loss Carryforwards [Line Items]
Foreign net operating loss carryforwards	$ 22.0

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Income Taxes - Reconciliation of Unrecognized Tax Benefits (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Balance at beginning of period	$ 36,353	$ 34,106	$ 40,613
Increases based on tax positions taken in the current year	2,328	4,720	3,479
Increases based on tax positions taken in prior years	7,741	4,710	3,195
Decreases based on tax positions taken in prior years	(5,090)	(2,836)	(863)
Decreases due to lapse of applicable statute of limitation	(310)	(4,347)	(12,318)
Balance at end of period	$ 41,022	$ 36,353	$ 34,106

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Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended																12 Months Ended
	Dec. 31, 2016	[1]	Sep. 30, 2016	[2]	Jun. 30, 2016	[3]	Mar. 31, 2016	[4]	Dec. 31, 2015	[5]	Sep. 30, 2015	[6]	Jun. 30, 2015	[7]	Mar. 31, 2015	[8]	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Net income (loss) attributable to McDermott International, Inc.	$ (476)		$ 16,108		$ 20,657		$ (2,172)		$ (18,668)		$ 3,666		$ 11,526		$ (14,507)		$ 34,117	$ (17,983)	$ (75,994)
Weighted average common stock (basic)																	240,359,363	238,240,763	237,229,086
Effect of dilutive securities:
Tangible equity units																	40,824,938
Stock options, restricted stock and restricted stock units																	2,999,938	40,900,000	30,700,000
Potential dilutive common stock																	284,184,239	238,240,763	237,229,086
Net income (loss) attributable to McDermott International, Inc.
Basic:	$ 0.00	[9]	$ 0.07	[9]	$ 0.09	[9]	$ (0.01)	[9]	$ (0.08)	[9]	$ 0.02	[9]	$ 0.05	[9]	$ (0.06)	[9]	$ 0.14	$ (0.08)	$ (0.32)
Diluted:	$ 0.00	[9]	$ 0.06	[9]	$ 0.07	[9]	$ (0.01)	[9]	$ (0.08)	[9]	$ 0.01	[9]	$ 0.04	[9]	$ (0.06)	[9]	$ 0.12	$ (0.08)	$ (0.32)

[1] Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600. Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

[2] Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

[3] Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

[4] Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment, partially offset by impairment losses on the Agile vessel.

[5] Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

[6] Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.

[7] Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

[8] Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

[9] May not tie to the Consolidated Statements of Operations due to rounding.

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Earnings Per Share - Additional Information (Detail) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Line Items]
Antidilutive securities excluded from earnings per share computation, shares	2,200,000	2,900,000	3,100,000
Antidilutive securities included from diluted weighted average shares computation, shares	2,999,938	40,900,000	30,700,000
Restricted Stock Units and Restricted Stock Awards [Member]
Earnings Per Share [Line Items]
Antidilutive securities included from diluted weighted average shares computation, shares		2,400,000

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Stockholder's Equity - Changes in the Number of Ordinary Shares Outstanding and Treasury Shares Held by the Company (Details) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Shares Outstanding [Abstract]
Beginning balance	239,016,924	237,809,823
Common stock issued	3,304,808	1,672,923
Purchase of common stock	(933,455)	(465,822)
Ending balance	241,388,277	239,016,924
Shares Held as Treasury Shares [Abstract]
Beginning balance	7,824,204	7,400,027
Purchase of common stock	933,455	465,822
Retirement of common stock	(455,655)	(41,645)
Ending balance	8,302,004	7,824,204
Common stock, shares issued	249,690,281	246,841,128

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Stockholder's Equity - Components of Accumulated Other Comprehensive Income (Loss) included in Stockholders' Equity (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Stockholders Equity Note [Abstract]
Foreign currency translation adjustments ("FCTA")	$ (42,082)	$ (29,925)
Net unrealized gain on investments	269	247
Net gain (loss) on derivative financial instruments	(25,082)	(64,277)
Accumulated other comprehensive loss	$ (66,895)	$ (93,955)

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Stockholder's Equity - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accumulated Other Comprehensive Income Loss [Line Items]
Adjustment decreasing FCTA with an offsetting reduction of Loss on foreign currency, net to correct amounts			$ 7,000
Cash flow hedges loss recorded in AOCI				$ (39,148)	$ (18,480)	$ 37,537
Decrease in noncontrolling interest due to acquisition				17,182		32,943
Other non-operating income (expense), net				(1,067)	$ 1,986	$ 7,002
THHE Fabricators Sdn. Bhd [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Percentage of interest acquired in subsidiary							30.00%
Decrease in investments in unconsolidated affiliates				12,000
Other non-operating income (expense), net				5,000
Berlian McDermott Sdn, Bhd, [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Percentage of interest acquired in subsidiary	30.00%
Fair value of asset surrendered	$ 17,000
Decrease in noncontrolling interest due to acquisition				$ 18,000
Berlian McDermott Sdn, Bhd, [Member] | TH Heavy Engineering Berhad [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Noncontrolling interest acquired by noncontrolling owners							30.00%
DLV 2000 [Member] | Foreign Exchange Forward [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Cash flow hedges loss recorded in AOCI		$ 20,000

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Stockholder's Equity - Components of Accumulated Other Comprehensive Income (Loss) Reclassified (Detail) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		$ 1,546,721	$ 1,539,114	$ 1,440,344
Other comprehensive income (loss), net of tax		27,013	3,773	(50,187)
Ending Balance		1,595,468	1,546,721	1,539,114
Foreign currency translation adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		(29,925)	(15,212)	(2,562)
Other comprehensive income (loss) before reclassification		(12,157)	(12,470)	(9,250)
Amounts reclassified from AOCI			(2,243)	(3,400)
Other comprehensive income (loss), net of tax		(12,157)	(14,713)	(12,650)
Ending Balance		(42,082)	(29,925)	(15,212)
Unrealized holding gain (loss) on investments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		247	241	238
Other comprehensive income (loss) before reclassification		22	6	3
Other comprehensive income (loss), net of tax		22	6	3
Ending Balance		269	247	241
Gain (loss) on derivatives[Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	[1]	(64,277)	(82,837)	(45,386)
Other comprehensive income (loss) before reclassification	[1]	4,004	(57,459)	(65,503)
Amounts reclassified from AOCI	[1],[2]	35,191	76,019	28,052
Other comprehensive income (loss), net of tax	[1]	39,195	18,560	(37,451)
Ending Balance	[1]	(25,082)	(64,277)	(82,837)
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		(93,955)	(97,808)	(47,710)
Other comprehensive income (loss) before reclassification		(8,131)	(69,923)	(74,750)
Amounts reclassified from AOCI		35,191	73,776	24,652
Other comprehensive income (loss), net of tax		27,060	3,853	(50,098)
Ending Balance		$ (66,895)	$ (93,955)	$ (97,808)

[1] Refer to Note 12, Derivative Financial Instruments, for additional details

[2] Reclassified to cost of operations and gain (loss) on foreign currency, net

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2016	Dec. 31, 2013
Commitments And Contingencies Disclosure [Line Items]
Liquidated damages exposure	$ 16
Total rental expense	36	$ 40	$ 107
Maximum [Member]
Commitments And Contingencies Disclosure [Line Items]
Liabilities of liquidated damages	1
Morgan City fabrication facility [Member]
Commitments And Contingencies Disclosure [Line Items]
Potential environmental liabilities					$ 6
Environmental loss contingencies, incurred				$ 4
Reversal of environmental liability	$ (1)

XML

Commitments and Contingencies - Future Minimum Payments Required under Operating Leases that have Initial or Remaining Non-cancellable Lease Terms in Excess of One Year (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2017	$ 27,864
2018	23,185
2019	19,076
2020	19,208
2021	14,425
Thereafter	$ 122,922

XML

Segment Reporting - Additional Information (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) Segment	Dec. 31, 2015 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | Segment	3
Number of operating segments | Segment	3
Receivables from unconsolidated affiliates, current and non-current | $	$ 17,000
Receivables from unconsolidated affiliates | $	$ 13,292	$ 12,816

XML

Segment Reporting - Information about Operations in Different Segments (Detail) - USD ($) $ in Thousands		3 Months Ended																12 Months Ended
		Dec. 31, 2016	[1]	Sep. 30, 2016	[2]	Jun. 30, 2016	[3]	Mar. 31, 2016	[4]	Dec. 31, 2015	[5]	Sep. 30, 2015	[6]	Jun. 30, 2015	[7]	Mar. 31, 2015	[8]	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Segment Reporting Information [Line Items]
Revenues		$ 641,781		$ 558,543		$ 706,627		$ 729,032		$ 667,418		$ 805,857		$ 1,046,537		$ 550,463		$ 2,635,983	[9]	$ 3,070,275	[9]	$ 2,300,889	[9]
Operating income (loss)	[10]																	142,253		112,682		16,402
Interest expense, net																		(58,871)		(50,058)		(60,877)
Other non-operating income (expense), net																		(1,067)		1,986		7,002
Income (loss) before provision for income taxes																		82,315		64,610		(37,473)
Capital expenditures	[11]																	228,079		102,851		321,187
Depreciation and amortization																		89,882		100,334		93,185
Drydock amortization																		12,795		17,947		19,719
Operating Segments [Member]
Segment Reporting Information [Line Items]
Operating income (loss)	[10]																	358,493		323,502		73,136
Operating Segments [Member] | AEA [Member]
Segment Reporting Information [Line Items]
Revenues	[9]																	285,988		478,800		567,608
Operating income (loss)	[10]																	51,129		52,918		(65,565)
Capital expenditures	[11]																	16,667		13,715		53,431
Depreciation and amortization																		26,924		43,006		34,494
Drydock amortization																		9,905		12,554		11,453
Operating Segments [Member] | MEA [Member]
Segment Reporting Information [Line Items]
Revenues	[9]																	1,241,591		1,134,555		795,666
Operating income (loss)	[10]																	209,401		146,866		47,863
Capital expenditures	[11]																	18,564		28,328		99,974
Depreciation and amortization																		24,268		30,567		31,876
Drydock amortization																		1,975		2,089		2,011
Operating Segments [Member] | ASA [Member]
Segment Reporting Information [Line Items]
Revenues	[9]																	1,108,404		1,456,920		937,615
Operating income (loss)	[10]																	97,963		123,718		90,838
Capital expenditures	[11]																	190,260		60,220		154,735
Depreciation and amortization																		30,314		16,880		19,020
Drydock amortization																		915		3,304		6,255
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Operating income (loss)	[10]																	(216,240)		(210,820)		(56,734)
Capital expenditures	[11]																	2,588		588		13,047
Depreciation and amortization																		$ 8,376		$ 9,881		$ 7,795

[1] Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600. Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

[2] Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

[3] Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

[4] Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment, partially offset by impairment losses on the Agile vessel.

[5] Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

[6] Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.

[7] Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

[8] Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

[9] Intercompany transactions were not significant during 2016, 2015 and 2014.

[10] The 2016 and 2015 Corporate and Other operating results include $55 million and $7 million of impairment, respectively. The 2014 Corporate and Other operating results include $11 million of improvements to the cancellation cost estimate included in the $38 million vessel impairment charge recognized in 2013. See Note 13, Fair Value Measurements, for further discussion.

[11] Total capital expenditures represent expenditures for which cash payments were made during the period. Capital expenditures for 2016, 2015 and 2014 include $4 million, $14 million and $27 million of cash payments for accrued capital expenditures outstanding as of December 31, 2015, 2014 and 2013, respectively.

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Segment Reporting - Information about Operations in Different Segments (Parenthetical) (Detail) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended	12 Months Ended
		Jun. 30, 2014	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment Reporting Information [Line Items]
Asset Impairment Charges			$ 4,000	$ 55,000	$ 7,000		$ 38,000
Property plant and equipment improvement		$ 1,000				$ 11,000
Capital expenditures	[1]			228,079	102,851	321,187
Accrued Capital Expenditures of 2016 [Member]
Segment Reporting Information [Line Items]
Capital expenditures				$ 4,000
Accrued Capital Expenditures of 2015 [Member]
Segment Reporting Information [Line Items]
Capital expenditures					$ 14,000
Accrued Capital Expenditures of 2014 [Member]
Segment Reporting Information [Line Items]
Capital expenditures						$ 27,000

[1] Total capital expenditures represent expenditures for which cash payments were made during the period. Capital expenditures for 2016, 2015 and 2014 include $4 million, $14 million and $27 million of cash payments for accrued capital expenditures outstanding as of December 31, 2015, 2014 and 2013, respectively.

XML

Segment Reporting - Significant Impact of Customers on Company Segments (Detail)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Percentage of consolidated revenues	100.00%	100.00%	100.00%
Customer Concentration Risk [Member] | Asia [Member] | Inpex Operations Australia Pty Ltd [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Percentage of consolidated revenues	33.00%	36.00%	25.00%
Customer Concentration Risk [Member] | Middle East [Member] | Saudi Aramco [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Percentage of consolidated revenues	26.00%	28.00%	27.00%
Customer Concentration Risk [Member] | Middle East [Member] | RasGas Company Limited [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Percentage of consolidated revenues	12.00%

XML

Segment Reporting - Information about Service Lines and Operations in Different Geographic Areas (Detail) - USD ($) $ in Thousands	3 Months Ended																12 Months Ended
	Dec. 31, 2016	[1]	Sep. 30, 2016	[2]	Jun. 30, 2016	[3]	Mar. 31, 2016	[4]	Dec. 31, 2015	[5]	Sep. 30, 2015	[6]	Jun. 30, 2015	[7]	Mar. 31, 2015	[8]	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues	$ 641,781		$ 558,543		$ 706,627		$ 729,032		$ 667,418		$ 805,857		$ 1,046,537		$ 550,463		$ 2,635,983	[9]	$ 3,070,275	[9]	$ 2,300,889	[9]
Installation Operations [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	1,074,069		1,256,412		1,041,525
Procurement Activities [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	879,222		1,123,329		677,734
Project Services and Engineering Operations [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	356,781		416,906		314,776
Fabrication Operations [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	325,911		273,628		266,854
Australia [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	881,812		1,157,723		614,164
Saudi Arabia [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	767,119		900,483		616,659
Qatar [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	419,963		46,873
Mexico [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	112,484		247,859		130,642
Russia [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	108,392
United States [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	95,996		32,858		148,606
Trinidad [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	67,757
India [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	56,027
United Arab Emirates [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	54,392		185,606		57,249
Malaysia [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	22,637				98,004
Indonesia [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	21,726		54,288		150,205
Brunei [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																			237,337
Brazil [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	6,449		183,656		290,561
Azerbaijan [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																					111,382
Other countries [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Revenues																	$ 21,229		$ 23,592		$ 83,417

[1] Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600. Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

[2] Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

[3] Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

[4] Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment, partially offset by impairment losses on the Agile vessel.

[5] Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

[6] Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.

[7] Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

[8] Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

[9] Intercompany transactions were not significant during 2016, 2015 and 2014.

XML

Segment Reporting - Information about Segment Assets and Property, Plant and Equipment by Country (Detail) - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Total assets		$ 3,222,230	$ 3,387,076
Net Property, Plant and Equipment	[1]	1,687,301	1,610,859
Australia [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	626,605
Mexico [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	603,185	96,090
United Arab Emirates [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	318,822	341,502
United States [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	27,482	561,990
Saudi Arabia [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	22,608	4,522
Indonesia [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	73,213	521,922
India [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	10,666	307
Malaysia [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	2,457	49,609
Brazil [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	170	31,765
Other countries [Member]
Segment Reporting Information [Line Items]
Net Property, Plant and Equipment	[1]	2,093	3,152
Operating Segments [Member] | AEA [Member]
Segment Reporting Information [Line Items]
Total assets		727,328	896,822
Operating Segments [Member] | MEA [Member]
Segment Reporting Information [Line Items]
Total assets		907,936	971,170
Operating Segments [Member] | ASA [Member]
Segment Reporting Information [Line Items]
Total assets		976,470	774,365
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Total assets		$ 610,496	$ 744,719

[1] Our marine vessels are included in the country in which they were located as of year-end.

XML

Segment Reporting - Information about Unconsolidated Affiliates (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Other Significant Reconciling Item [Line Items]
Equity in Loss of Unconsolidated Affiliates	$ (4,090)	$ (21,486)	$ (7,848)
Investments in Unconsolidated Affiliates	17,023	26,551
Operating Segments [Member] | AEA [Member]
Segment Reporting Other Significant Reconciling Item [Line Items]
Equity in Loss of Unconsolidated Affiliates	(5,082)	(6,255)	4,829
Investments in Unconsolidated Affiliates	2,449	1,540
Operating Segments [Member] | MEA [Member]
Segment Reporting Other Significant Reconciling Item [Line Items]
Equity in Loss of Unconsolidated Affiliates		(94)	(2,668)
Operating Segments [Member] | ASA [Member]
Segment Reporting Other Significant Reconciling Item [Line Items]
Equity in Loss of Unconsolidated Affiliates	1,167	(15,137)	$ (10,009)
Investments in Unconsolidated Affiliates	14,064	24,327
Corporate and Other [Member]
Segment Reporting Other Significant Reconciling Item [Line Items]
Equity in Loss of Unconsolidated Affiliates	(175)
Investments in Unconsolidated Affiliates	$ 510	$ 684

XML

Quarterly Financial Data (Unaudited) - Selected Unaudited Quarterly Financial Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended																12 Months Ended
	Dec. 31, 2016	[1]	Sep. 30, 2016	[2]	Jun. 30, 2016	[3]	Mar. 31, 2016	[4]	Dec. 31, 2015	[5]	Sep. 30, 2015	[6]	Jun. 30, 2015	[7]	Mar. 31, 2015	[8]	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
Revenues	$ 641,781		$ 558,543		$ 706,627		$ 729,032		$ 667,418		$ 805,857		$ 1,046,537		$ 550,463		$ 2,635,983	[9]	$ 3,070,275	[9]	$ 2,300,889	[9]
Gross Profit	59,139		103,044		111,185		112,999		98,076		84,896		121,015		75,004
Net income (loss)	546		16,392		21,805		(2,444)		(18,015)		7,534		13,690		(12,048)		36,299		(8,839)		(65,394)
Net income (loss) attributable to non-controlling interest	1,022		284		1,148		(272)		653		3,868		2,164		2,459		2,182		9,144		10,600
Net income (loss) attributable to McDermott International, Inc.	$ (476)		$ 16,108		$ 20,657		$ (2,172)		$ (18,668)		$ 3,666		$ 11,526		$ (14,507)		$ 34,117		$ (17,983)		$ (75,994)
Income (loss) per share
Basic	$ 0.00	[10]	$ 0.07	[10]	$ 0.09	[10]	$ (0.01)	[10]	$ (0.08)	[10]	$ 0.02	[10]	$ 0.05	[10]	$ (0.06)	[10]	$ 0.14		$ (0.08)		$ (0.32)
Diluted	$ 0.00	[10]	$ 0.06	[10]	$ 0.07	[10]	$ (0.01)	[10]	$ (0.08)	[10]	$ 0.01	[10]	$ 0.04	[10]	$ (0.06)	[10]	$ 0.12		$ (0.08)		$ (0.32)

[1] Net loss for the quarter ended December 31, 2016 was primarily due to increase in our estimated costs at completion on our Ichthys project in Australia and an impairment charge on the Intermac 600. Those were partially offset by productivity improvements and associated cost savings, primarily in our MEA segment.

[2] Net income for the quarter ended September 30, 2016 was influenced by productivity improvements and associated cost savings, primarily in the MEA and ASA segments, partially offset by impairment losses on certain marine assets.

[3] Net income for the quarter ended June 30, 2016 was influenced by productivity improvements and associated cost savings in the MEA and ASA segments.

[4] Net loss for the quarter ended March 31, 2016 was influenced by successful execution and close-out improvements in the AEA segment and productivity improvements and associated cost savings, primarily in the ASA segment, partially offset by impairment losses on the Agile vessel.

[5] Net loss for the quarter ended December 31, 2015 was influenced by improved productivity in our MEA segment offset by a $26 million fourth quarter non-cash MTM actuarial loss on our pension benefit plans.

[6] Net income for the quarter ended September 30, 2015 was influenced by improved productivity in our MEA segment.

[7] Net income for the quarter ended June 30, 2015 was influenced by improved productivity and increased activity in the ASA and MEA segments partially offset by an increase in restructuring expense.

[8] Net loss for the quarter ended March 31, 2015 benefited from positive changes in estimate primarily related to cost savings.

[9] Intercompany transactions were not significant during 2016, 2015 and 2014.

[10] May not tie to the Consolidated Statements of Operations due to rounding.

XML

Quarterly Financial Data (Unaudited) - Selected Unaudited Quarterly Financial Information (Parenthetical) (Detail) $ in Millions	3 Months Ended
	Dec. 31, 2015 USD ($)
MEA [Member]
Quarterly Financial Information [Line Items]
Actuarial loss (gain)	$ 26

XML

Subsequent Events - Additional Information (Detail) - USD ($) $ in Millions	1 Months Ended				12 Months Ended
	Feb. 28, 2017	Jan. 31, 2017	Jun. 30, 2014	Apr. 30, 2014	Dec. 31, 2016	Dec. 31, 2014
Subsequent Event [Line Items]
Proceeds from sale of vessel, cash consideration			$ 14	$ 32		$ 25
Subsequent Event [Member] | Amazon Pipelay and Construction Vessel [Member]
Subsequent Event [Line Items]
Purchase of vessel, cash consideration		$ 52
Proceeds from sale of vessel, cash consideration		$ 52
Bareboat charter agreement, term		11 years
McDermott International Management [Member]
Subsequent Event [Line Items]
Description of loan agreement					JRM Mexico’s obligations in connection with equipment financing are guaranteed by McDermott International Management, S. de RL, one of our indirectly 100% owned subsidiaries
Scenario Forecast [Member] | JRM Mexico [Member]
Subsequent Event [Line Items]
Percentage of ownership in the subsidiary	100.00%
Purchase agreement period	364 days
Sale of committed revolving receivable purchase agreement	$ 50
Loan agreement for equipment financing, term	21 months
Equipment financing amount	$ 48
Loan agreement fixed interest rate	5.75%
Scenario Forecast [Member] | McDermott International Management [Member]
Subsequent Event [Line Items]
Percentage of ownership in the subsidiary	100.00%