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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, 1996
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 or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
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 26, 1996 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
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet
June 30, 1996 and March 31, 1996 4
Condensed Consolidated Statement of Income (Loss)
Three Months Ended June 30, 1996 and 1995 6
Condensed Consolidated Statement of Cash Flows
Three Months Ended June 30, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 19
SIGNATURES 20
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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, 1996
ASSETS
<TABLE>
<CAPTION>
6/30/96 3/31/96
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(Unaudited)
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,977 $ 22,886
Accounts receivable-trade 264,141 257,094
Accounts receivable-other 97,781 82,145
Accounts receivable from affiliates 19,421 38,698
Insurance recoverable-current 119,160 116,280
Contracts in progress 275,228 275,488
Inventories 67,772 69,739
Deferred income taxes 72,288 82,381
Other current assets 11,104 8,355
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Total Current Assets 946,872 953,066
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Property, Plant and Equipment, at Cost: 645,724 667,156
Less accumulated depreciation 373,483 388,111
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Net Property, Plant and Equipment 272,241 279,045
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Insurance Recoverable 570,104 606,963
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Investment in McDermott International, Inc. 599,717 600,292
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Excess of Cost Over Fair Value of Net Assets
of Purchased Businesses Less Accumulated
Amortization of $99,583,000 at June 30, 1996
and $97,814,000 at March 31, 1996 127,924 135,877
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Prepaid Pension Costs 259,517 256,802
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Other Assets 199,945 187,735
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TOTAL $ 2,976,320 $ 3,019,780
=============================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
6/30/96 3/31/96
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(Unaudited)
(In thousands)
<S> <C> <C>
Current Liabilities:
Notes payable and current maturities of long-term debt $ 236,056 $ 109,626
Note payable to International - 65,363
Accounts payable 110,046 145,779
Accounts payable to affiliates 23,905 4,410
Environmental and products liabilities-current 159,931 159,824
Accrued employee benefits 63,100 72,173
Advance billings on contracts 168,093 149,245
Other current liabilities 134,481 154,560
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Total Current Liabilities 895,612 860,980
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Long-Term Debt 403,789 423,882
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Accumulated Postretirement Benefit Obligation 376,079 377,457
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Environmental and Products Liabilities 683,063 721,740
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Other Liabilities 91,303 89,501
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Contingencies
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Redeemable Preferred Stocks:
Series A $2.20 cumulative convertible, $1.00 par value;
at redemption value 88,087 88,087
Series B $2.60 cumulative, $1.00 par value;
at redemption value 85,214 85,214
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Total Redeemable Preferred Stocks 173,301 173,301
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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 625,841 625,841
Deficit (254,484) (234,838)
Currency translation adjustments (18,188) (18,088)
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Total Stockholder's Equity 353,173 372,919
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TOTAL $ 2,976,320 $ 3,019,780
=============================================================================================================
</TABLE>
5
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McDERMOTT INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
JUNE 30, 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/96 6/30/95
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(Unaudited)
(In thousands)
<S> <C> <C>
Revenues $ 482,510 $ 505,610
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Costs and Expenses:
Cost of operations (excluding depreciation and
amortization) 448,365 463,796
Depreciation and amortization 11,653 11,229
Selling, general and administrative expenses 33,028 36,546
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493,046 511,571
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Operating Loss before Equity in Income
of Investees (10,536) (5,961)
Equity in Income of Investees 4,340 33,921
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Operating Income (Loss) (6,196) 27,960
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Other Income (Expense):
Interest income 1,506 5,921
Interest expense (13,116) (14,840)
Other-net (1,190) (3,130)
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(12,800) (12,049)
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Income (Loss) before Provision for (Benefit from)
Income Taxes (18,996) 15,911
Provision for (Benefit from) Income Taxes (2,673) 9,370
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Net Income (Loss) $ (16,323) $ 6,541
=============================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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McDERMOTT INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
JUNE 30, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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<CAPTION>
THREE MONTHS ENDED
6/30/96 6/30/95
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(Unaudited)
(In thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (16,323) $ 6,541
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Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 11,653 11,229
Provision for (benefit from) deferred taxes 8,089 (15,438)
Equity in income of investees, less dividends (3,111) 12,199
Other (308) 208
Changes in assets and liabilities:
Accounts receivable (4,370) (40,788)
Net contracts in progress and advance billings 14,447 (6,631)
Accounts payable (13,710) (529)
Accrued and other current liabilities (18,056) 24,484
Other, net (12,676) (19,412)
Proceeds from insurance for products liabilities claims 34,462 27,100
Payments of products liabilities claims (37,368) (36,604)
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NET CASH USED IN OPERATING ACTIVITIES (37,271) (37,641)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,372) (8,136)
Purchases of investments - (412,521)
Sales and maturities of investments - 635,564
Other 2,198 1,633
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,174) 216,540
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</TABLE>
7
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CONTINUED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6/30/96 6/30/95
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(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowing $ 106,292 $ (10,086)
Payment of note payable to International (65,363) -
Payment of long-term debt (7) (150,007)
Dividends paid (3,323) (3,447)
Other (107) (744)
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NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 37,492 (164,284)
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EFFECTS OF EXCHANGE RATE CHANGES ON CASH 44 (628)
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,909) 13,987
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,886 21,014
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,977 $ 35,001
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 10,756 $ 17,785
Income taxes (net of refunds) $ 621 $ 19,788
=============================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
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McDERMOTT INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - BASIS OF PRESENTATION
McDermott Incorporated is a majority owned subsidiary of McDermott
International, Inc. ("International").
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) included in
the three months ended June 30, 1995. Operating results for the three months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1997. 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, 1996.
NOTE 2 - PRODUCTS LIABILITY
At June 30, 1996, the estimated liability for pending and future non-employee
products liability asbestos claims was $806,618,000 (of which less than
$215,000,000 had been asserted) and estimated insurance recoveries were
$689,264,000. Estimated liabilities for pending and future non-employee
products liability asbestos claims are derived from McDermott Incorporated'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, changes in
estimates could result in a material adjustment to operating results for any
fiscal
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quarter or year and the ultimate loss may differ materially from amounts
provided in the consolidated financial statements.
NOTE 3 - INVENTORIES
Consolidated inventories at June 30, 1996 and March 31, 1996 are summarized
below:
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<CAPTION>
June 30, March 31,
1996 1996
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(Unaudited)
(In thousands)
<S> <C> <C>
Materials and Supplies $ 41,068 $ 39,604
Work in Progress 12,138 17,305
Finished Goods 14,566 12,830
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$ 67,772 $ 69,739
===========================================================================================================
</TABLE>
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
A significant portion of McDermott Incorporated's revenues and operating
results are derived from its foreign operations, which are primarily located in
Canada. As a result, McDermott Incorporated's operations and financial results
are affected by international factors, such as changes in foreign currency
exchange rates. McDermott Incorporated attempts to minimize its exposure to
changes in foreign currency exchange rates by attempting to match foreign
currency contract receipts with like foreign currency disbursements. To the
extent that it is unable to match the foreign currency receipts and
disbursements related to its contracts, its practice of entering into forward
exchange contracts to hedge foreign currency transactions reduces the impact of
foreign exchange rate movements on operating results
During the three months ended June 30, 1996 and 1995, McDermott Incorporated's
Canadian operations contributed 36% and 47%, respectively, to total revenues
and a loss of $4,028,000 and income of $11,109,000, respectively. These
results reflect 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 government owned utilities located in the
Middle and Far East, and contracts performed by McDermott Engineers &
Constructors (Canada) Ltd. ("MECL") which is based in Calgary, Alberta, Canada.
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
McDermott Incorporated's Engineering and Construction Group, and Shipbuilding
and Industrial Group). Other business unit revenues include combining
adjustments and eliminations resulting from inter-group contracts. Other
business unit income (loss) includes certain retiree benefit and legal costs
which are not allocated to the business units, as well as the impact of
combining adjustments on margins of inter-group contracts. Business unit
revenues and income (loss) for the three months ended June 30, 1995 have been
restated to reflect the reclassification of certain operations to B&W
Operations from the Engineering, Construction and Industrial Operations
business unit, and
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the allocation of certain expenses to the B&W Operations and the Engineering,
Construction and Industrial Operations business units from Other to conform
with the presentation at June 30, 1996.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 VS. THREE MONTHS ENDED
JUNE 30, 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED
6 /30/96 6/30/95
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(Unaudited)
(In thousands)
<S> <C> <C>
REVENUES
B&W Operations $ 345,290 $ 377,554
Engineering, Construction and Industrial Operations 146,735 130,176
Other (including Transfer Eliminations) (9,515) (2,120)
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TOTAL REVENUES $ 482,510 $ 505,610
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OPERATING INCOME (LOSS)
Business Unit Income (Loss):
B&W Operations $ 1,742 $ 3,454
Engineering, Construction and Industrial Operations (6,385) (4,064)
Other 776 1,409
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TOTAL BUSINESS UNIT INCOME (LOSS) (3,867) 799
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Equity in Income of Investees:
B&W Operations 3,465 33,815
Engineering, Construction and Industrial Operations 875 106
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TOTAL EQUITY IN INCOME OF INVESTEES 4,340 33,921
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Corporate G&A Expense (6,669) (6,760)
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TOTAL OPERATING INCOME (LOSS) $ (6,196) $ 27,960
=============================================================================================================
</TABLE>
B&W Operations' revenues decreased $32,264,000 to $345,290,000 primarily due to
lower volume from fabrication and erection of fossil fuel steam and
environmental control systems, and from replacement nuclear steam generators
for domestic customers manufactured at B&W's Cambridge, Ontario location.
12
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Engineering, Construction and Industrial Operations' revenues increased
$16,559,000 to $146,735,000 primarily due to higher volume from engineering,
procurement and construction of a cogeneration plant performed by MECL, and
activities in its shipyard operations.
B&W Operations' business unit income decreased $1,712,000 to $1,742,000
primarily due to lower volume on replacement nuclear steam generators for
domestic customers and on fabrication and erection of fossil fuel steam and
environmental control systems, and lower margins on plant enhancement projects.
These decreases were partially offset by improved margins on the repair and
alteration of existing fossil fuel steam systems and lower sales and marketing
expenses.
Engineering, Construction and Industrial Operations' business unit loss
increased $2,321,000 to $6,385,000 primarily due to contract cost overruns on
the engineering, procurement and construction contract for a cogeneration
plant. This was partially offset by higher volume and margins from activities
in this unit's shipyard operations.
B&W Operations' equity in income of investees decreased $30,350,000 to
$3,465,000. This represents the results of approximately 10 active joint
ventures. The decrease is almost entirely due to a nonrecurring equity income
gain of $30,612,000 resulting from the sale of power purchase contracts back to
a utility in June 1995.
Interest income decreased $4,415,000 to $1,506,000 primarily due to decreases
in investments in government obligations and other investments.
Interest expense decreased $1,724,000 to $13,116,000 primarily due to changes
in debt obligations and interest rates prevailing thereon.
Other-net expense decreased $1,940,000 to $1,190,000 primarily due to lower
bank fees and discounts on the sale of certain accounts receivable.
The provision for (benefit from) income taxes decreased $12,043,000 to a
benefit of $2,673,000 from a provision of $9,370,000, while income (loss)
before the provision for (benefit from) income taxes decreased $34,907,000 to a
loss of $18,996,000 from income of $15,911,000. The decrease in the provision
for (benefit from) income taxes is primarily due to the decrease in income.
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Net income (loss) decreased $22,864,000 to a loss of $16,323,000 from income of
$6,541,000 reflecting the items mentioned above.
Backlog
<TABLE>
<CAPTION>
6/30/96 3/31/96
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(Unaudited)
(In thousands)
<S> <C> <C>
Business Unit Backlog:
B&W Operations $ 2,292,803 $ 2,164,507
Engineering and Industrial Operations 356,176 315,669
Other (including Transfer Eliminations) (6,937) (15,915)
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Total Backlog $ 2,642,042 $ 2,464,261
=============================================================================================================
</TABLE>
In general, McDermott Incorporated's business units are capital intensive and
rely on large contracts for a substantial amount of their revenues.
B&W Operations' backlog at June 30, 1996 was $2,292,803,000 compared to
$2,164,507,000 at March 31, 1996. At June 30, 1996, this business unit's
backlog with the U.S. Government was $730,778,000 (of which $57,339,000 had not
been funded) and includes orders for nuclear fuel assemblies and reactor
components for the U.S. Navy. This business unit's foreign markets for
industrial and utility boilers remain strong and the U.S. market for
replacement nuclear steam generators is expected to continue to make
significant contributions to operating income in the foreseeable future.
However, domestic utility markets remain weak.
Engineering, Construction and Industrial Operations' backlog at June 30, 1996
was $356,176,000, compared to $315,669,000 at March 31, 1996, and includes a
four year backlog for the construction of hopper barges at its domestic
shipyard. At June 30, 1996, this business unit's backlog with the U.S.
Government was $47,982,000 (of which $3,143,000 had not been funded).
Liquidity and Capital Resources
During the three months ended June 30, 1996, McDermott Incorporated's cash and
cash equivalents decreased $2,909,000 to $19,977,000 and total debt increased
$40,974,000
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to $639,845,000 primarily due to short-term borrowings of $106,253,000. During
this period, McDermott Incorporated used cash of $37,271,000 in operating
activities, $65,363,000 for the repayment of short-term borrowing from
McDermott International, $5,372,000 for additions to property, plant and
equipment, and $3,323,000 for cash dividends on McDermott Incorporated's
preferred stocks.
Decreases in net contracts in progress and advance billings were primarily due
to the timing of billings on The Babcock & Wilcox's ("B&W") Canadian contracts.
Accounts payable were lower than at March 31, 1996 resulting from payments made
on certain of B&W's Canadian contracts.
Pursuant to an agreement with a majority of its principal insurers, McDermott
Incorporated 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. While the number of claims received had declined
during the last six months of fiscal year 1996, they have increased during the
June 1996 quarter, but not to the levels experienced from October 1994 to
September 1995. Management is currently investigating and evaluating the basis
for this increase in the number of claims. The average amount of these claims
(historical average of approximately $5,500 per claim over the last three
years) has continued to rise. Claims paid during the three months ended June
30, 1996 were $37,368,000, of which $33,384,000 has been recovered or is due
from insurers. At June 30, 1996, receivables of $62,145,000 were due from
insurers for reimbursement of settled claims including $20,843,000 due from
certain insurers which have refused to reimburse B&W for amounts paid by B&W to
settle claims under applicable policies. B&W has filed a lawsuit against these
insurers seeking reimbursement of these claims and expects to prevail in this
litigation which may continue beyond fiscal year 1997 unless a settlement is
reached. B&W will require that any settlement reimburse B&W for all amounts
billed to date and future payments up to full policy limits. Estimated
liabilities for pending and future non-employee products liability asbestos
claims are derived from McDermott Incorporated'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,
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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 (including the lawsuit mentioned above), and the amount of
claims paid for which insurance recovery is not probable, have not had a
material adverse effect upon McDermott Incorporated's liquidity, and management
believes, based on information currently available, that they will not have a
material adverse effect on liquidity in the future.
Expenditures for property, plant and equipment decreased $2,764,000 to
$5,372,000 for the three months ended June 30, 1996 as compared with the same
period last year. The majority of expenditures were incurred to maintain
existing facilities.
At June 30 and March 31, 1990, B&W had sold, with limited recourse, an
undivided interest in a designated pool of qualified accounts receivable of
approximately $130,000,000 and $107,000,000, respectively, under the terms of
an agreement with a U.S. Bank. The maximum sales limit available under the
agreement, which is renewed annually, is $140,000,000. Depending on the amount
of qualified accounts receivable available for the pool, the amount sold to the
bank can vary (but not to greater than the maximum sales limit available) from
time to time, and B&W expects to reduce the amount of receivables sold by
approximately $40,000,000 by August 15, 1996.
At June 30 and March 31, 1996, McDermott Incorporated had available to it
various uncommitted short-term lines of credit from banks totalling
$284,909,000 and $285,859,000, respectively. Borrowings by McDermott
Incorporated against these lines of credit at June 30 and March 31, 1996 were
$214,606,000 and $58,314,000, respectively. In addition, B&W has available to
it an unsecured and committed revolving line of credit facility of
$150,000,000. It is a condition to borrowing under this revolving credit
facility that the borrower's tangible net worth, debt to capitalization, and
interest coverage as defined in the agreement meet or exceed certain covenant
requirements. At June 30, 1996 there were no borrowings outstanding against
this facility, while at March 31, 1996 there were borrowings of $50,000,000
outstanding.
McDermott Incorporated 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, 1996, substantially all of the net assets of
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McDermott Incorporated were subject to such restrictions. The most restrictive
of these covenants with respect to the payment of dividends by McDermott
Incorporated would prohibit the payment of dividends other than current
dividends on existing preferred stock.
McDermott Incorporated and a subsidiary of McDermott International, McDermott
International Investments Co., Inc., ("MIICO") are parties to an agreement
pursuant to which McDermott Incorporated 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, 1996.
At March 31, 1996, McDermott Incorporated had borrowed $65,363,000 against this
agreement.
Working capital decreased $40,826,000 from $92,086,000 at March 31, 1996. On
July 31, 1996 received a $50,000,000 capital contribution from International.
During the remainder of fiscal 1997, McDermott Incorporated expects to obtain
funds to meet capital expenditure, working capital and debt maturity
requirements from operating activities and additional borrowings from existing
lines of credit. Leasing agreements for equipment, which are short-term in
nature, are not expected to impact McDermott Incorporated's liquidity nor
capital resources.
McDermott Incorporated'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 1996 and 1995.
McDermott Incorporated 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 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.
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New Accounting Standards
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," effective
for fiscal years beginning after December 1996. SFAS No. 125 established
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities. This statement also provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. McDermott Incorporated has
not yet finalized its review of the impact of this statement, but it is not
expected to have a material impact on the consolidated financial statements.
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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, 1996.
Signatures
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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
August 6, 1996 /s/Daniel R. Gaubert
---------------------------------------
By: Daniel R. Gaubert
Vice President, Finance and Controller
(Principal Accounting Officer)
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
<S> <C>
27 Financial Data Schedule
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCDERMOTT
INCORPORATED'S JUNE 30, 1996 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-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 19,977
<SECURITIES> 514
<RECEIVABLES> 305,247
<ALLOWANCES> 41,105
<INVENTORY> 343,000
<CURRENT-ASSETS> 946,872
<PP&E> 645,724
<DEPRECIATION> 373,483
<TOTAL-ASSETS> 2,976,320
<CURRENT-LIABILITIES> 895,612
<BONDS> 403,789
<COMMON> 4
173,301
0
<OTHER-SE> 353,169
<TOTAL-LIABILITY-AND-EQUITY> 2,976,320
<SALES> 482,510
<TOTAL-REVENUES> 482,510
<CGS> 493,046
<TOTAL-COSTS> 493,046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,116
<INCOME-PRETAX> (18,996)
<INCOME-TAX> (2,673)
<INCOME-CONTINUING> (16,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,323)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
