<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1995
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 No. 1-4095
MCDERMOTT INCORPORATED
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(Exact Name of registrant as specified in its charter)
DELAWARE 74-1032246
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(State of Incorporation) (I.R.S. Employer Identification)
1450 Poydras Street, New Orleans, Louisiana 70112-6050
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (504) 587-4411
--------------
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock, par value $1 per share, outstanding as of
July 31, 1995 was 3,600.
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M c D E R M O T T I N C O R P O R A T E D
I N D E X - F O R M 10 - Q
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet
June 30, 1995 and March 31, 1995 4
Condensed Consolidated Statement of Income (Loss)
Three Months Ended June 30, 1995 and 1994 6
Condensed Consolidated Statement of Cash Flows
Three Months Ended June 30, 1995 and 1994 7
Notes to Condensed Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II - OTHER INFORMATION
---------------------------
Item 6 - Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
2
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PART I
McDERMOTT INCORPORATED
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
3
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McDERMOTT INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
ASSETS
<TABLE>
<CAPTION>
6/30/95 3/31/95
------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 35,001 $ 21,014
Short-term investments 137,772 130,195
Accounts receivable-trade 260,396 233,005
Accounts receivable-other 55,836 54,655
Accounts receivable from affiliates 24,057 19,493
Insurance recoverable-current 134,160 111,188
Contracts in progress 234,820 223,262
Inventories 66,344 61,714
Deferred income taxes 66,849 74,643
Other current assets 7,945 6,840
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Total Current Assets 1,023,180 936,009
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Property, Plant and Equipment, at Cost: 711,314 705,489
Less accumulated depreciation 410,214 402,500
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Net Property, Plant and Equipment 301,100 302,989
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Investments - 231,701
----------------------------------------------------------------------------------------------------------------
Insurance Recoverable 694,623 750,219
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Investment in McDermott International, Inc. 604,617 605,242
----------------------------------------------------------------------------------------------------------------
Excess of Cost Over Fair Value of Net Assets
of Purchased Businesses Less Accumulated
Amortization of $92,612,000 at June 30, 1995
and $90,923,000 at March 31, 1995 134,622 136,311
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Prepaid Pension Costs 264,081 248,718
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Other Assets 186,096 175,240
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TOTAL $ 3,208,319 $ 3,386,429
================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
6/30/95 3/31/95
------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
Current Liabilities:
Notes payable and current maturities of long-term debt $ 136,632 $ 296,718
Accounts payable 112,193 132,799
Accounts payable to affiliates 72,629 51,789
Environmental and products liabilities-current 156,551 133,280
Accrued employee benefits 74,844 83,078
Accrued interest payable 20,512 23,456
Accrued liabilities - other 136,849 105,304
Advanced billings on contracts 121,554 117,584
U.S. and foreign income taxes 14,633 13,581
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Total Current Liabilities 846,397 957,589
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Long-Term Debt 423,110 423,150
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Accumulated Postretirement Benefit Obligation 373,048 371,707
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Environmental and Products Liabilities 849,451 913,939
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Other Liabilities 116,736 128,258
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Contingencies
----------------------------------------------------------------------------------------------------------------
Redeemable Preferred Stocks:
Series A $2.20 cumulative convertible, $1.00 par value;
at redemption value 88,089 88,089
Series B $2.60 cumulative, $1.00 par value;
at redemption value 91,162 91,162
----------------------------------------------------------------------------------------------------------------
Total Redeemable Preferred Stocks 179,251 179,251
----------------------------------------------------------------------------------------------------------------
Stockholder's Equity:
Common stock, par value $1.00 per share, 3,700 shares
authorized and issued, 3,600 shares outstanding 4 4
Capital in excess of par value 620,981 620,981
Deficit (190,430) (193,341)
Minimum pension liability (39) (39)
Cumulative foreign exchange translation adjustments (10,190) (15,070)
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Total Stockholder's Equity 420,326 412,535
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TOTAL $ 3,208,319 $ 3,386,429
================================================================================================================
</TABLE>
5
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McDERMOTT INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
JUNE 30, 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/95 6/30/94
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
Revenues $ 505,610 $ 568,692
----------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of operations (excluding depreciation
and amortization) 463,796 507,652
Depreciation and amortization 11,229 21,863
Selling, general and
administrative expenses 36,546 39,575
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511,571 569,090
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Operating Income before Equity in Income
of Investees (5,961) (398)
Equity in Income of Investees 33,921 2,497
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Operating Income 27,960 2,099
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Other Income (Expense):
Interest income 5,921 2,458
Interest expense (14,840) (9,348)
Other-net (3,130) (3,474)
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(12,049) (10,364)
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Income (Loss) before Provision for Income Taxes and
Cumulative Effect of Accounting Change 15,911 (8,265)
Provision for Income Taxes 9,370 733
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Income (Loss) before Cumulative Effect of
Accounting Change 6,541 (8,998)
Cumulative Effect of Accounting Change - (512)
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Net Income (Loss) $ 6,541 $ (9,510)
================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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McDERMOTT INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
JUNE 30, 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/95 6/30/94
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 6,541 $ (9,510)
----------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 11,229 21,863
Provision for deferred taxes (15,438) 20,766
Equity in income of investees, less dividends 12,199 73
Other 208 1,099
Changes in assets and liabilities:
Accounts receivable (40,788) (5,642)
Net contracts in progress and advance billings (6,631) (29,764)
Accounts payable (529) (32,824)
Accrued interest (2,944) (6,139)
Accrued liabilities 31,334 (3,580)
Income taxes 640 (31,963)
Other, net (23,958) (13,593)
Proceeds from insurance for products liabilities claims 27,100 28,094
Payments of products liabilities claims (36,604) (31,450)
----------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (37,641) (92,570)
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (8,136) (13,117)
Net sales (purchases) of short-term and long-term
investments 223,043 (392)
Other 1,633 269
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 216,540 (13,240)
----------------------------------------------------------------------------------------------------------------
</TABLE>
7
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CONTINUED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/95 6/30/94
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowing $ (10,086) $ 69,027
Short-term borrowing from an affiliate - 34,150
Payment of long-term debt (150,007) (34)
Repurchase of preferred stock - (16,753)
Dividends paid (3,447) (3,792)
Other (744) (163)
----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (164,284) 82,435
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EFFECTS OF EXCHANGE RATE CHANGES ON CASH (628) 121
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 13,987 (23,254)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,014 47,364
----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 35,001 $ 24,110
================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 17,785 $ 15,487
Income taxes (net of refunds) $ 19,788 $ 11,703
================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
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McDERMOTT INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statement information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Such adjustments are of
a normal recurring nature except for a gain resulting from the sale of two
power purchase contracts ($17,908,000, net of tax of $12,704,000) during the
three months ended June 30, 1995; a reduction in accrued interest expense
($3,705,000, net of tax of $1,995,000) due to the settlement of an outstanding
tax issue with the IRS and the cumulative effect of the accounting change for
the adoption of Statement of Financial Standards No. 112, "Employers'
Accounting for Postemployment Benefits" during the three months ended June 30,
1994. Operating results for the three month period ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the year ended
March 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in McDermott Incorporated's annual
report on Form 10-K for the year ended March 31, 1995.
Unless the context otherwise requires, hereinafter, the "Delaware Company" will
be used to mean McDermott Incorporated and its consolidated subsidiaries
(including Babcock & Wilcox Investment Company and its principal subsidiary,
The Babcock & Wilcox Company), and "International" will be used to mean
McDermott International, Inc., a Panamanian Corporation. International is the
parent company of the Delaware Company.
9
<PAGE> 10
NOTE 2 - PRODUCTS LIABILITY
At June 30, 1995, the estimated liability for pending and future non-employee
products liability asbestos claims was $959,344,000 (of which less than
$190,000,000 had been asserted) and estimated insurance recoveries were
$828,783,000. Estimated liabilities for pending and future non-employee
products liability asbestos claims are derived from the Delaware Company's
claims history and constitute management's best estimate of such future costs.
Estimated insurance recoveries are based upon analysis of insurers providing
coverage of the estimated liabilities. Inherent in the estimate of such
liabilities and recoveries are expected trends in claim severity and frequency
and other factors, including recoverability from insurers, which may vary
significantly as claims are filed and settled. Accordingly, the ultimate loss
may differ materially from amounts provided in the consolidated financial
statements.
NOTE 3 - INVENTORIES
Consolidated inventories at June 30, 1995 and March 31, 1995 are summarized
below:
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
----------- -----------
(In thousands)
<S> <C> <C>
Raw Materials and Supplies $ 38,949 $ 36,579
Work in Progress 18,543 15,341
Finished Goods 8,852 9,794
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$ 66,344 $ 61,714
================================================================================================================
</TABLE>
NOTE 4 - SALE OF POWER PURCHASE CONTRACTS
During the June 1995 quarter, the Delaware Company's Babcock-Ultrapower West
Enfield and Babcock-Ultrapower Jonesboro 50% owned partnerships sold two power
purchase contracts back to the local utility which had previously entered into
agreements with the partnerships to purchase power, and recognized a gain of
$61,324,000. The Delaware Company's equity in the earnings of these
partnerships was $32,840,000 for the three months ended June 30, 1995.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
During the three months ended June 30, 1995, the Delaware Company's Canadian
operations contributed 47% to total revenues and $11,109,000 to operating
income. The operating income reflects activity on contracts performed at its
Cambridge, Ontario location (which is included in the B&W Operations business
unit below), principally for the supply of replacement recirculating steam
generators to domestic utilities and work for two government owned utilities
located in the Far East.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1995 VS. THREE MONTHS ENDED
JUNE 30, 1994
Beginning with the June 1995 quarter, management's discussion of revenues and
operating income is discussed on a business unit basis as follows: B&W
Operations business unit (includes the operations of the Babcock & Wilcox Power
Generation and Government Groups) and Engineering, Construction and Industrial
Operations business unit (includes the Delaware Company's Engineering and
Construction Group, and Shipbuilding and Industrial Group). Other business
unit revenues include eliminations between business units. Other business unit
income (loss) includes certain expenses, primarily employee benefit and
insurance programs, and marketing and legal costs, that are not allocated to
the business units. For the three months ended June 30, 1994, Other revenues
and business unit income (loss) includes the results of the marine construction
services business that was sold to International on January 31, 1995 and other
businesses disposed of during fiscal year 1995. Prior year information has been
reclassified to conform with the June 1995 quarter presentation.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/95 6/30/94
-------- --------
(In thousands)
<S> <C> <C>
REVENUES:
---------
B&W Operations $ 317,602 $ 290,625
Engineering, Construction and
Industrial Operations 199,182 212,308
Other (including Transfer Eliminations) (11,174) 65,759
----------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 505,610 $ 568,692
================================================================================================================
</TABLE>
11
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/95 6/30/94
-------- --------
(In thousands)
<S> <C> <C>
OPERATING INCOME
Business Unit Income (Loss): $ 4,668 $ 10,536
B&W Operations
Engineering, Construction and
Industrial Operations (4,540) (3,732)
Other 671 (611)
----------------------------------------------------------------------------------------------------------------
TOTAL BUSINESS UNIT INCOME 799 6,193
----------------------------------------------------------------------------------------------------------------
Equity in Income (Loss) of Investees:
B&W Operations 33,740 2,513
Engineering, Construction and
Industrial Operations 181 (16)
----------------------------------------------------------------------------------------------------------------
TOTAL EQUITY IN INCOME OF INVESTEES 33,921 2,497
----------------------------------------------------------------------------------------------------------------
Corporate G&A Expense (6,760) (6,591)
----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME $ 27,960 $ 2,099
================================================================================================================
</TABLE>
B&W Operations' revenues increased $26,977,000 to $317,602,000 primarily due to
higher revenues from the Power Generation Group's contracts on fossil fuel
steam systems for foreign customers and replacement nuclear steam generators
for domestic customers at its Cambridge, Ontario location, and on plant
enhancement projects. These increases were partially offset by lower revenues
from domestic fabrication of fossil fuel steam and environmental control
systems. In addition, the Government Group's defense and space-related
products (other than nuclear fuel assemblies and reactor components) had higher
revenues that were offset by lower revenues from nuclear fuel assemblies and
reactor components for the U.S. Government.
Engineering, Construction and Industrial Operations' revenues decreased
$13,126,000 to $199,182,000 primarily due to lower revenues from the
Shipbuilding and Industrial Group's shipyard activities and lower revenues in
the U.S. from the Engineering and Construction Group's activities relating to
the construction, repair and alteration of utility and industrial
12
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boilers. There were also lower revenues from engineering services in Canada.
These decreases were partially offset by higher revenues from the Group's
maintenance and construction activities in Canada.
Other revenues decreased $76,933,000 primarily due to the inclusion in the prior
year of revenues of $61,620,000 related to the marine construction services
business sold to International on January 31, 1995.
B&W Operations' business unit income decreased $5,868,000 to $4,668,000
primarily due to lower volume and margins from its Power Generation Group's
domestic fabrication of fossil fuel steam and environmental control systems.
This decrease was partially offset by higher volume and margins from
replacement nuclear steam generators. In addition, there were lower volume and
margins from the Government Group's nuclear fuel assemblies and reactor
components for the U.S. Government.
Engineering, Construction and Industrial Operations' business unit loss
increased $808,000 to $4,540,000 primarily due to lower volume and margins in
the U.S. from the Engineering and Construction Group's activities relating to
the construction, repair and alteration of utility and industrial boilers.
These decreases were partially offset by improved margins from the engineering
services in Canada. In addition, there were improved margins from the
Shipbuilding and Industrial Group's shipyard operations.
Other business unit loss in the prior period includes $654,000 related to the
marine construction services business sold to International on January 31,
1995 and losses of other businesses that were also disposed of during fiscal
year 1995.
B&W Operations' equity in income of investees increased $31,227,000 to
$33,740,000 primarily due to the sale of power purchase contracts back to a
local utility. (See Note 4 to the condensed
consolidated financial statements.)
Interest income increased $3,463,000 to $5,921,000 primarily due to increased
investments in government obligations and other investments.
13
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Interest expense increased $5,492,000 to $14,840,000 primarily due to changes
in debt obligations and interest rates prevailing thereon, and to a reduction
in accrued interest on proposed tax deficiencies that was recorded in the prior
period.
Other-net expense decreased $344,000 to $3,130,000. This decrease was
primarily due foreign currency transaction gains in the current period and
losses on the sale of investments in the prior period. This decrease was
partially offset by higher bank fees and discounts on the sale of certain
accounts receivable.
The provision for income taxes increased $8,637,000 to $9,370,000, while income
(loss) before the provision for income taxes and cumulative effect of
accounting change increased $24,176,000 to income of $15,911,000 from a loss of
$8,265,000. The increase in the provision for income taxes is primarily due to
an increase in income.
Net income (loss) increased $16,051,000 to income of $6,541,000 from a loss of
$9,510,000 reflecting the cumulative effect of the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits," of $512,000 in the prior year, in addition to the
other items mentioned above.
Backlog
<TABLE>
<CAPTION>
6/30/95 3/31/95
---------- ----------
(In thousands)
<S> <C> <C>
Business Unit Backlog:
B&W Operations $ 1,981,806 $ 1,947,226
Engineering, Construction and
Industrial Operations 520,519 619,973
Other (including Transfer Eliminations) (99,850) (102,533)
----------------------------------------------------------------------------------------------------------------
Total Backlog $ 2,402,475 $ 2,464,666
================================================================================================================
</TABLE>
B&W Operations' backlog at June 30, 1995 was $1,981,806,000 compared to
$1,947,226,000 at March 31, 1995. B&W Operations' foreign markets for
industrial and utility boilers are expected to remain strong as well as the
U.S. market for replacement nuclear steam generators. Domestic utility markets
remain weak. At June 30, 1995, this business unit's backlog with the U.S.
Government was $758,909,000 (of which $90,994,000 had not been
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funded). U.S. Government budget reductions have negatively affected this
business unit's government operations.
Engineering, Construction and Industrial Operations' backlog at June 30, 1995
was $520,519,000 compared to $619,973,000 at March 31, 1995. The current
competitive economic environment in the U.S. has negatively affected demand for
its construction activities.
Liquidity and Capital Resources
During the three months ended June 30, 1995, the Delaware Company's cash and
cash equivalents increased $13,987,000 to $35,001,000 and total debt decreased
$160,126,000 to $559,742,000 primarily through net sales of investments of
$223,043,000. During this period, the Delaware Company used cash of
$37,641,000 in operating activities, $150,007,000 for the repayment of
long-term debt and $3,447,000 for cash dividends on the Delaware Company's
preferred stocks. Also during July 1995, the Delaware Company sold $76,000,000
of its short-term investments to repay outstanding short-term debt. Increases
in accounts receivable and accrued liabilities are primarily due to the
decrease in the amount of qualified accounts receivable sold under the terms of
an agreement with a U.S. bank (see discussion below).
Pursuant to an agreement with a majority of its principal insurers, the
Delaware Company negotiates and settles products liability asbestos claims from
non-employees and bills these amounts to the appropriate insurers. As a result
of collection delays inherent in this process, reimbursement is usually delayed
for three months or more. The number of claims had declined moderately since
fiscal year 1990, but have increased during the second half of fiscal year 1995
and the first quarter of fiscal year 1996. Management believes, based on
information currently available, that the recent increase represents an
acceleration in the timing of the receipt of these claims, but does not
represent an increase in its total estimated liability. The average amount of
these claims (historical average of approximately $5,000 per claim over the
last three years) has continued to rise. Claims paid during the quarter ended
June 30, 1995 were $36,604,000, of which $32,624,000 has been recovered or is
due from insurers. At June 30, 1995, Accounts receivable-other includes
receivables of $40,449,000 that are due from insurers for reimbursement of
settled claims. Estimated liabilities for
15
<PAGE> 16
pending and future non-employee products liability asbestos claims are derived
from the Delaware Company's claims history and constitute management's best
estimate of such future costs. Estimated insurance recoveries are based upon
analysis of insurers providing coverage of the estimated liabilities. Inherent
in the estimate of such liabilities and recoveries are expected trends in claim
severity and frequency and other factors, including recoverability from
insurers, which may vary significantly as claims are filed and settled.
Accordingly, the ultimate loss may differ materially from amounts provided in
the consolidated financial statements. Settlement of the liability is expected
to occur over approximately the next 25 years. The collection delays, and the
amount of claims paid for which insurance recovery is not probable, have not
had a material adverse effect upon the Delaware Company's liquidity, and
management believes, based on information currently available, that they will
not have a material adverse effect on liquidity in the future.
The Delaware Company's expenditures for property, plant and equipment decreased
$4,981,000 to $8,136,000 for the three months ended June 30, 1995 as compared
with the same period last year (which included expenditures of approximately
$2,140,000 related to the portion of its marine construction business sold to
International), the majority of which were incurred to maintain existing
facilities.
At June 30 and March 31, 1995, The Babcock & Wilcox Company had sold, with
limited recourse, an undivided interest in a designated pool of qualified
accounts receivable of approximately $132,000,000 and $175,000,000,
respectively, under the terms of an agreement with a U.S. Bank. During July
1995, The Babcock & Wilcox Company remitted collections on receivables of
approximately $43,000,000 which were owed to the bank on June 30, 1995. The
maximum sales limit available under the agreement which expires on December 31,
1997, was also reduced during July 1995 to $175,000,000.
At June 30 and March 31, 1995, the Delaware Company had available to it various
uncommitted short-term lines of credit from banks totalling $249,192,000 and
$227,903,000, respectively. Borrowings outstanding against these lines of
credit at June 30 and March 31, 1995 were $75,997,000 and $33,220,000,
respectively. In addition, The Babcock & Wilcox Company has available to it a
$128,000,000 unsecured and committed revolving line of credit facility. It is
a condition to borrowing under the revolving credit
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facility that the borrower's consolidated net tangible assets exceed a certain
level. There were no borrowings against this facility at June 30 or March 31,
1995. Delta Catalytic Corporation had available from a certain Canadian bank,
an unsecured and committed revolving credit facility of $14,599,000 which
expires on May 31, 1997. At June 30 and March 31, 1995 borrowings outstanding
against this facility were $10,950,000 and $7,420,000, respectively.
The Delaware Company maintains an investment portfolio of government
obligations and other investments which is classified as available for sale
under SFAS No. 115. The fair value of short-term investments at June 30, 1995
was $137,772,000 (amortized cost $137,980,000).
The Delaware Company is restricted, as a result of covenants in certain
agreements, in its ability to transfer funds to International and its
subsidiaries through cash dividends or through unsecured loans or investments.
At June 30, 1995, substantially all of the net assets of the Delaware Company
were subject to such restrictions. The most restrictive of these covenants
with respect to the payment of dividends by the Delaware Company would prohibit
the payment of dividends other than current dividends on existing preferred
stock.
Effective February 1, 1989, the Delaware Company and a subsidiary of
International, McDermott International Investments Co., Inc. ("MIICO"), entered
into a reverse repurchase agreement whereby either party acting as a "buyer"
would purchase for cash certain U. S. Government obligations owned by the other
party acting as a "seller", and, at the date of purchase, the "seller" would
agree to repurchase the same securities at a set price (including accrued
interest) at a future specified date. No amounts were outstanding under this
agreement at June 30 or March 31, 1995.
The Delaware Company and MIICO are parties to an agreement pursuant to which
the Delaware Company may borrow up to $150,000,000 from MIICO at interest rates
computed at the applicable federal rate determined by the IRS. There were no
borrowings against this agreement at June 30 or March 31, 1995.
Working capital increased $198,363,000 from a deficit of $21,580,000 at March
31, 1995 to $176,783,000 at June 30, 1995. During the remainder of fiscal
1996, the Delaware
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<PAGE> 18
Company expects to obtain funds to meet capital expenditure, working capital
and debt maturity requirements from operating activities, its short-term
investment portfolio, and additional borrowings from existing lines of credit.
Leasing agreements for equipment, which are short-term in nature, are not
expected to impact the Delaware Company's liquidity nor capital resources.
The Delaware Company's quarterly dividends of $0.55 per share on the Series A
$2.20 Cumulative Convertible Preferred Stock and $0.65 per share on the Series
B $2.60 Cumulative Preferred Stock were the same in June 1995 and 1994.
The Delaware Company has provided a valuation allowance for deferred tax assets
which cannot be realized through carrybacks and future reversals of existing
taxable temporary differences. Management believes that remaining deferred tax
assets in all other tax jurisdictions are realizable through carrybacks and
future reversals of existing taxable temporary differences and, if necessary,
the implementation of tax planning strategies involving sales and
sale/leasebacks of appreciated assets. A major uncertainty that affects the
ultimate realization of deferred tax assets is the possibility of declines in
value of appreciated assets involved in identified tax planning strategies.
This factor has been considered in determining the valuation allowance.
Management will continue to assess the adequacy of the valuation allowance on a
quarterly basis.
18
<PAGE> 19
PART II
McDERMOTT INCORPORATED
OTHER INFORMATION
No information is applicable to Part II for the current quarter, except as
noted below:
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
There were no current reports on Form 8-K filed during the three
months ended June 30, 1995.
Signatures
19
<PAGE> 20
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.
McDERMOTT INCORPORATED
(REGISTRANT)
Date: 8/14/95 By: s/Daniel R. Gaubert
(SIGNATURE)
Daniel R. Gaubert
Vice President, Finance
and Controller
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCDERMOTT
INCORPORATED'S JUNE 30, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 35,001
<SECURITIES> 137,772
<RECEIVABLES> 268,266
<ALLOWANCES> 7,869
<INVENTORY> 301,164
<CURRENT-ASSETS> 1,023,180
<PP&E> 711,314
<DEPRECIATION> 410,214
<TOTAL-ASSETS> 3,208,319
<CURRENT-LIABILITIES> 846,397
<BONDS> 423,110
<COMMON> 4
179,251
0
<OTHER-SE> 420,322
<TOTAL-LIABILITY-AND-EQUITY> 3,208,319
<SALES> 505,610
<TOTAL-REVENUES> 505,610
<CGS> 511,571
<TOTAL-COSTS> 511,571
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,840
<INCOME-PRETAX> 15,911
<INCOME-TAX> 9,370
<INCOME-CONTINUING> 6,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,541
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
