10-K/A 1 d96314e10-ka.txt AMENDMENT NO. 1 TO FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission File Number 1-8430 McDERMOTT INTERNATIONAL, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) REPUBLIC OF PANAMA 72-0593134 -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1450 POYDRAS STREET NEW ORLEANS, LOUISIANA 70112-6050 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (504) 587-5400 -------------- Securities Registered Pursuant to Section 12(b) of the Act:
Name of each Exchange Title of each class on which registered ------------------- --------------------- Common Stock, $1.00 par value New York Stock Exchange Rights to Purchase Preferred Stock New York Stock Exchange (Currently Traded with Common Stock)
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $759,209,727 as of January 29, 2001. The number of shares outstanding of the Company's Common Stock at January 31, 2002 was 61,957,155. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the Company's 2002 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. McDERMOTT INTERNATIONAL, INC. INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
Page Report of Independent Accountants 3 Financial Statement Schedule Covered by Reports of Independent Accountants: I Condensed Financial Information of Registrant 4 II Valuation and Qualifying Accounts 11 All schedules other than the above have been omitted because they are not required or the information is included in the Consolidated Financial Statements or Notes thereto. Signature of Registrant 12
2 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of McDermott International, Inc. We have audited the consolidated financial statements of McDermott International, Inc. (the "Company") as of December 31, 2001 and 2000, and for the years ended December 31, 2001 and 2000, and the nine-month period ended December 31, 1999, and have issued our report thereon dated February 22, 2002, except as to the subsequent events described in Note 22 which is as of March 18, 2002. Our report includes an emphasis of matter paragraph referring to Notes 1 and 20 of the consolidated financial statements which discusses certain asbestos-related claims against the Company's subsidiary, The Babcock & Wilcox Company ("B&W"), B&W's related voluntary petition with the U.S. Bankruptcy Court to reorganize under Chapter 11 of the U.S. Bankruptcy Code, the outcome of litigation associated with certain assets transferred to B&W's parent during fiscal year 1999, and certain liquidity matters resulting from the filing. Our audit also included Schedule I - Condensed Financial Information of Registrant and Schedule II - Valuation and Qualifying Accounts. In our opinion, these financial statement schedules presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP New Orleans, Louisiana February 22, 2002, except for Note 4, as to which the date is April 5, 2002 3 Schedule I McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS
ASSETS December 31, 2001 2000 ----------- ----------- (In thousands) Current Assets: Cash and cash equivalents $ 49 $ 46 Accounts receivable - trade, net 59 75 Accounts receivable - other 149 567 Accounts receivable from subsidiaries 46,256 16,474 Accounts receivable from The Babcock & Wilcox Company 1,727 973 Other currents assets 1,483 863 ----------- ----------- Total Current Assets 49,723 18,998 ----------- ----------- Investments in Subsidiaries and Other Investees, at Equity 793,920 811,152 ----------- ----------- Notes Receivable from Subsidiaries 5,833 17,159 ----------- ----------- Property, Plant and Equipment, at Cost: Buildings -- 1,378 Machinery and equipment 61 538 ----------- ----------- 61 1,916 Less accumulated depreciation 61 1,916 ----------- ----------- Net Property, Plant and Equipment -- -- ----------- ----------- Investments in Debt Securities 29,779 28,672 ----------- ----------- Accounts Receivable from The Babcock & Wilcox Company 565 565 ----------- ----------- Other Assets 21,195 32,835 ----------- ----------- TOTAL $ 901,015 $ 909,381 =========== ===========
See accompanying notes to condensed financial information. 4 Continued
LIABILITIES AND STOCKHOLDERS' EQUITY December 31, 2001 2000 ----------- ----------- (In thousands) Current Liabilities: Accounts payable $ 119 $ 824 Accounts payable to The Babcock & Wilcox Company 4,964 4,802 Accounts payable to subsidiaries 53,588 49,220 Accrued liabilities - other 32,671 38,288 Income taxes 1,659 1,659 ----------- ----------- Total Current Liabilities 93,001 94,793 ----------- ----------- Notes Payable to Subsidiaries 37,031 36,845 ----------- ----------- Other Liabilities 873 1,140 ----------- ----------- Commitments and Contingencies Stockholders' Equity: Common stock 63,733 62,582 Capital in excess of par value 1,077,148 1,062,511 Accumulated deficit (250,924) (230,902) Treasury stock (62,736) (62,736) Accumulated other comprehensive loss (57,111) (54,852) ----------- ----------- Total Stockholders' Equity 770,110 776,603 ----------- ----------- TOTAL $ 901,015 $ 909,381 =========== ===========
5 Schedule I McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF INCOME (LOSS)
Nine-Month Year Ended Period Ended December 31, December 31, 2001 2000 1999 -------- -------- ------------ (In thousands) Costs and Expenses: Cost of operations $ 4,710 $ 5,300 $ 1,233 Selling, general and administrative expenses 18,264 2,245 3,781 -------- -------- -------- 22,974 7,545 5,014 -------- -------- -------- Gain (Loss) on Asset Disposals-net -- (517) 1 -------- -------- -------- Operating Loss before Equity in Income of Investees (22,974) (8,062) (5,013) -------- -------- -------- Equity in Income (Loss) of Subsidiaries and Other Investees 7,209 (7,243) 43,027 -------- -------- -------- Operating Income (Loss) (15,765) (15,305) 38,014 -------- -------- -------- Other Income (Expense): Interest income 2,113 2,811 2,192 Interest expense (4,740) (6,486) (9,932) Other - net (1,800) (5,442) (29,834) -------- -------- -------- (4,427) (9,117) (37,574) -------- -------- -------- Income (Loss) before Benefit from Income Taxes (20,192) (24,422) 440 Benefit from Income Taxes (170) (2,340) -- -------- -------- -------- Net Income (Loss) $(20,022) $(22,082) $ 440 ======== ======== ========
See accompanying notes to condensed financial information. 6 Schedule I MCDERMOTT INTERNATIONAL, INC (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
Nine-Month Year Ended Period Ended December 31, December 31, 2001 2000 1999 -------- -------- ------------ (In thousands) Net Income (Loss) $(20,022) $(22,082) $ 440 -------- -------- -------- Other Comprehensive Income (Loss): Equity in other comprehensive income (loss) of subsidiaries and other investees (2,272) (8,386) (13,928) Foreign currency translation adjustments -- -- -- Minimum pension liability adjustments 19 18 63 Reclassification adjustment for gains (losses) included in net income (6) 497 (470) -------- -------- -------- Other Comprehensive Loss (2,259) (7,871) (14,335) -------- -------- -------- Comprehensive Loss (22,281) (29,953) (13,895) ======== ======== ========
See accompanying notes to condensed financial information. 7 Schedule I McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS
Nine-Month Year Ended Period Ended December 31, December 31, 2001 2000 1999 --------- --------- ------------ (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (20,022) $ (22,082) $ 440 --------- --------- --------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,931 1,450 1,131 Equity in income or loss of subsidiaries and other investees, less dividends 19,691 7,243 (32,227) Gain on asset disposals-net -- -- (1) Other 7,984 9,029 4,986 Changes in assets and liabilities: Accounts and notes receivable (30,102) 1,507 11,161 Accounts payable 4,011 (135,077) 77,747 Income taxes -- (1) (1) Other, net 393 9,581 31,348 --------- --------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (16,114) (128,350) 94,584 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from asset disposals -- -- 1 Purchases of available-for-sale securities (101,301) (10,473) (6,493) Maturities of available-for-sale securities 7,000 10,325 6,600 Sales of available-for-sale securities 93,451 1,247 -- Decrease (increase) in loans to subsidiaries 11,326 122,710 (87,248) --------- --------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 10,476 123,809 (87,140) --------- --------- ---------
8 Continued
Nine-Month Year Ended Period Ended December 31, December 31, 2001 2000 1999 --------- --------- ------------ (In thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock $ 1,000 $ 47 $ 1,538 Dividends paid -- (8,972) (8,889) Purchase of McDermott International, Inc. stock -- (5) -- Other 4,641 4,526 (476) --------- --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 5,641 (4,404) (7,827) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3 (8,945) (383) --------- --------- --------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 46 8,991 9,374 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49 $ 46 $ 8,991 ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, including intercompany interest (net of amount capitalized) $ 5,275 $ 6,453 $ 9,865 Income taxes, net of refunds $ 3 $ 361 $ 1 ========= ========= ========= SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Settlement of intercompany balances with a subsidiary $ -- $ 932,935 $ -- ========= ========= =========
See accompanying notes to condensed financial information. 9 Schedule I McDERMOTT INTERNATIONAL, INC. (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL INFORMATION DECEMBER 31, 2001 NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements have been prepared to present the unconsolidated financial position, results of operations and cash flows of McDermott International, Inc. (Parent Company Only). Investments in subsidiaries and other investees are stated at cost plus equity in undistributed earnings from date of acquisition. These Parent Company Only financial statements should be read in conjunction with McDermott International, Inc.'s consolidated financial statements and independent accountants' reports thereon. NOTE 2 - CONTINGENCIES McDermott International, Inc. is contingently liable under standby letters of credit totaling $55,595,000 at December 31, 2001, all of which were issued in the normal course of business. McDermott International, Inc. has guaranteed the indebtedness of certain of its subsidiaries and other investees. At December 31, 2001, these guarantees included a $1,000,000 line of credit, of which $75,000 is outstanding, and $98,040,000 of standby letters of credit issued by certain subsidiaries and other investees. At December 31, 2001, McDermott International, Inc. had pledged all of the fair value of its investments in debt securities to secure payments under and in connection with certain reinsurance agreements. McDermott International, Inc. has agreed to indemnify our two surety companies for obligations of various of its subsidiaries, including B&W and several of its subsidiaries, under surety bonds issued to meet bid bond and performance bond requirements imposed by their customers. As of December 31, 2001, the aggregate outstanding amount of surety bonds that were guaranteed by McDermott International, Inc. and issued in connection with the business operations of its subsidiaries was approximately $169,000,000, of which $150,000,000 related to the business operations of B&W and its subsidiaries. NOTE 3 - DIVIDENDS RECEIVED McDermott International, Inc. received dividends from its consolidated subsidiaries of $26,900,000, $487,562,000 and $10,800,000 for the years ended December 31, 2001 and 2000 and the nine-month period ended December 31, 1999, respectively. Also during the year ended December 31, 2000, McDermott International, Inc. received a capital contribution from one of its consolidated subsidiaries of $445,373,000. NOTE 4 - SUBSEQUENT EVENT On March 4, 2002, MII received a cash dividend from Creole Insurance Company, Ltd. of $20,000,000 and on March 12, 2002, MII received a cash dividend from J. Ray McDermott, S. A. ("JRM") of $80,000,000. On March 27, 2002, the presiding judge in Federal District Court for the Eastern District of Louisiana announced in open court a finding that one of JRM's subsidiaries was liable to Texaco, specifically finding that Texaco had failed to sustain its burden of proof against all named defendants except JRM's subsidiary, and alternatively, that JRM's highly extraordinary negligence served as a superceding cause of the loss. The finding was memorialized in a written order dated April 5, 2002, which found against JRM's subsidiary on the claims of Texaco's builder's risk insurers in addition to the claims of Texaco. The judge has neither entered a final judgment nor issued a written opinion on this matter. We intend to seek reconsideration of this order and believe that the order is unsupported under the applicable law and facts. The matter has recently been transferred to a new judge and no trial date has yet been set for damages and certain insurance issues. Alleged damages sought approximate $250,000,000. We believe that the claims against JRM are governed by contractual provisions which require arbitration and waive the recovery of consequential damages against them. We plan to vigorously pursue any appeals process and related arbitration, and we do not believe that a material loss with respect to these matters is likely. In addition, we are evaluating our insurance coverage in the event of any liability. However, the ultimate outcome of the proceedings is uncertain, and an adverse ruling in either proceeding could have a material adverse impact on our consolidated financial position, results of operations and cash flow. 10 Schedule II McDERMOTT INTERNATIONAL, INC. VALUATION AND QUALIFYING ACCOUNTS
Additions ------------------------- Balance at Charged to Charged to Balance at Beginning Costs and Other End Description of Period Expense(2) Accounts Deductions(3) of Period ----------- ---------- ---------- ---------- ------------- ---------- (In thousands) Estimated Drydock Liability(1): Year Ended December 31, 2001 $26,016 $ 14,178 $ -- $(4,023) $36,171 Year Ended December 31, 2000 $21,753 $ 12,173 $ -- $(7,910) $26,016 Nine Months Ended December 31, 1999 $22,813 $ 2,565 $ -- $(3,625) $21,753
(1) Estimated drydock liability is reported within accrued liabilities-other and other liabilities on the balance sheet. (2) Net of reductions and other adjustments, all of which are charged to costs and expenses. (3) Reductions in the estimates to actual costs incurred. 11 SIGNATURE OF THE REGISTRANT Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. McDERMOTT INTERNATIONAL, INC. /s/ Francis S. Kalman ----------------------------- By: Francis S. Kalman Executive Vice President and Chief Financial Officer (Principal Financial Officer) April 25, 2002 12 EXHIBIT INDEX
Exhibit Number ------- 23.1 Consent of Independent Accountants 99 Supplementary Financial Information on Panamanian Securities Regulations
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