<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - K/A-1
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from _____________________ to ____________________
Commission File Number 1-8430
McDERMOTT INTERNATIONAL, INC.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 72-0593134
- - - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1450 POYDRAS STREET
NEW ORLEANS, LOUISIANA 70112-6050
- - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code (504) 587-5400
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $1.00 par value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
(Currently Traded with Common Stock)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
/ /
The aggregate market value of voting stock held by non-affiliates of the
registrant was $1,119,910,148 as of April 28, 1994.
The number of shares outstanding of the Company's Common Stock at April 28,
1994 was 53,544,467.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the 1994 Annual Meeting of Shareholders is incorporated
by reference into Part III of this report.
<PAGE> 2
McDERMOTT INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors 2
Financial Statement Schedules Covered by Report of Independent Auditors:
I Investments 3
III Condensed Financial Information of Registrant 4
IX Short-Term Borrowings 10
X Supplementary Income Statement Information 11
Signature of Registrant 12
Exhibit 10 - Material Contracts
(a) Supplemental Executive Retirement Plan, as amended
(i) 1992 Senior Management Stock Option Plan
Exhibit 24 - Consent of Independent Auditors
Exhibit 28 - Additional Exhibits
(1) Supplementary Financial Information on Panamanian
Securities Regulations
(2) McDermott - ETPM West, Inc.
Combined Financial Statements for the
Fiscal Year Ended March 31, 1994
(3) Heerema Offshore Construction Group, Inc. -
McDermott International, Inc. Joint Venture
Combined Financial Statements 1993
</TABLE>
All schedules other than the above have been omitted because they are not
required or the information is included in the Consolidated Financial
Statements or Notes thereto.
1
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
McDermott International, Inc.
We have audited the consolidated financial statements of McDermott
International, Inc. as of March 31, 1994 and 1993, and for each of the three
years in the period ended March 31, 1994, and have issued our report thereon
dated May 9, 1994 which contained an explanatory paragraph regarding estimated
future costs for non-employee products liability asbestos claims described in
Note 1 to the consolidated financial statements. Our audits also included the
financial statement schedules listed in the Index of Financial Statement
Schedules and Exhibits in this Form 10-K/A-1. These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein. The
ultimate loss from non-employee products liability asbestos claims as explained
in our report on the basic financial statements may differ materially from the
amount provided in the financial statement schedules.
ERNST & YOUNG
New Orleans, Louisiana
May 9, 1994
2
<PAGE> 4
SCHEDULE I
McDERMOTT INTERNATIONAL, INC.
INVESTMENTS
FOR THE FISCAL YEAR ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL MARKET CARRIED
ISSUER AMOUNT COST VALUE AMOUNT
<S> <C> <C> <C> <C>
Investments:
Government obligations $ 397,300,000 $ 395,574,000 $ 393,331,000 $ 395,556,000
Other investments 339,016,000 319,460,000 317,705,000 319,575,000
- - - -----------------------------------------------------------------------------------------------------------------------
$ 736,316,000 $ 715,034,000 $ 711,036,000 $ 715,131,000
- - - -----------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 5
Schedule III
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
BALANCE SHEET
MARCH 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS
- - - ------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,413 $ 2,868
Accounts receivable - trade 13,819 40,283
Accounts receivable - other 31,526 25,786
Accounts receivable from subsidiaries 718,646 765,624
Contracts in progress 56,377 37,725
Other current assets 955 976
- - - ---------------------------------------------------------------------------------------------------------------
Total Current Assets 823,736 873,262
- - - ---------------------------------------------------------------------------------------------------------------
Investments in Subsidiaries and
Other Investees, at Equity 851,469 761,416
- - - ---------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, at Cost:
Buildings 11,486 11,622
Machinery and equipment 73,345 73,625
Property under construction 567 201
- - - ---------------------------------------------------------------------------------------------------------------
85,398 85,448
Less accumulated depreciation 67,954 66,573
- - - ---------------------------------------------------------------------------------------------------------------
Net Property, Plant and Equipment 17,444 18,875
- - - ---------------------------------------------------------------------------------------------------------------
Notes Receivable from Subsidiaries and Other
Investees 251,510 214,437
- - - ---------------------------------------------------------------------------------------------------------------
Other Assets 8,307 8,019
- - - ---------------------------------------------------------------------------------------------------------------
TOTAL $ 1,952,466 $ 1,876,009
- - - ---------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed financial information.
4
<PAGE> 6
Schedule III
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
BALANCE SHEET
MARCH 31, 1994 AND 1993
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - ------------------------------------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 35,970 $ 15,774
Accounts payable 21,873 37,975
Accounts payable to subsidiaries 1,126,486 1,121,802
Accrued liabilities - other 73,277 70,978
Advance billings on contracts 32,037 28,356
Income taxes 29,832 30,292
- - - -------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,319,475 1,305,177
- - - -------------------------------------------------------------------------------------------------------------
Long-Term Debt 73,800 90,400
- - - -------------------------------------------------------------------------------------------------------------
Other Liabilities 16,933 20,014
- - - -------------------------------------------------------------------------------------------------------------
Contingencies
- - - -------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock 2,875 --
Common stock 53,444 52,212
Capital in excess of par value 730,987 568,329
Deficit (196,216) (126,264)
Minimum pension liability (931) (74)
Cumulative foreign exchange
translation adjustments (47,901) (33,785)
- - - -------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 542,258 460,418
- - - -------------------------------------------------------------------------------------------------------------
TOTAL $ 1,952,466 $ 1,876,009
- - - -------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
Schedule III
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
STATEMENT OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Revenues $ 32,635 $ 201,339 $ 173,109
- - - ----------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of operations 29,571 188,879 170,893
Depreciation and amortization 5,422 3,319 4,480
Selling, general and administrative expenses 27,402 20,066 29,027
- - - ----------------------------------------------------------------------------------------------------------------------
62,395 212,264 204,400
- - - ----------------------------------------------------------------------------------------------------------------------
(29,760) (10,925) (31,291)
Equity in Income of Subsidiaries
and Other Investees 107,942 62,141 83,681
- - - ----------------------------------------------------------------------------------------------------------------------
Operating Income 78,182 51,216 52,390
- - - ----------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 19,003 21,693 23,598
Interest expense (10,473) (10,461) (8,572)
Other - net (292) 17,004 12,525
- - - ----------------------------------------------------------------------------------------------------------------------
8,238 28,236 27,551
- - - ----------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before
Provision for Income Taxes, Extraordinary
Items, and Cumulative Effect of
Accounting Changes 86,420 79,452 79,941
- - - ----------------------------------------------------------------------------------------------------------------------
Provision for (Benefit from) Income Taxes (3,536) 12,129 (596)
- - - ----------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before
Extraordinary Items and Cumulative Effect
of Accounting Changes 89,956 67,323 80,537
- - - ----------------------------------------------------------------------------------------------------------------------
Loss from Discontinued Operations -- -- (3,368)
- - - ----------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Items and
Cumulative Effect of Accounting Changes 89,956 67,323 77,169
Extraordinary Items -- (10,431) --
Cumulative Effect of Accounting Changes (100,750) (245,624) --
- - - ----------------------------------------------------------------------------------------------------------------------
Net Income (Loss) (10,794) (188,732) 77,169
- - - ----------------------------------------------------------------------------------------------------------------------
Retained Earnings, Beginning of Year (126,264) 114,204 82,919
Deduct Cash Dividends:
Common Stock 53,074 51,736 45,884
Preferred Stock 6,084 -- --
- - - ----------------------------------------------------------------------------------------------------------------------
Retained Earnings (Deficit), End of Year $ (196,216) $ (126,264) $ 114,204
- - - ----------------------------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed financial information.
6
<PAGE> 8
Schedule III
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In thousands)
<S> <<C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (10,794) $ (188,732) $ 77,169
- - - ----------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 5,422 3,319 4,480
Equity in income of subsidiaries
and other investees, less dividends (101,787) (36,438) (4,515)
Provision for deferred taxes (2,997) 1,278 2,837
Cumulative effect of accounting changes 100,750 245,624 --
Extraordinary items -- 10,431 --
Other (346) 1,167 2,048
Changes in assets and liabilities:
Net contracts in progress and advance
billings (14,940) (11,981) (11,398)
Accounts and notes receivable 88,034 (53,471) (167,691)
Accounts payable (11,559) 85,088 85,263
Income taxes (757) 4,780 (21,638)
Other, net 5,142 (1,196) (562)
- - - ----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 56,168 59,869 (34,007)
- - - ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and disposal of assets 368 11,102 2,727
Purchases of property, plant and equipment (2,120) (13,005) (2,045)
Acquisition of minority interest -- -- (10,267)
Investments in subsidiaries (100,069) -- --
Loan to subsidiary (58,040) -- --
Other -- 2,122 315
- - - ----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (159,861) 219 (9,270)
- - - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 9
CONTINUED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt $ (15,000) $ (14,258) $ (13,616)
Increase (decrease) in short-term borrowing 18,596 (284) (1,851)
Issuance of common stock 16,441 8,034 102,963
Issuance of preferred stock 140,066 -- --
Dividends paid (56,773) (51,528) (44,075)
- - - ----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 103,330 (58,036) 43,421
- - - ----------------------------------------------------------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (92) -- 4
- - - ----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (455) 2,052 148
- - - ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 2,868 816 668
- - - ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END
OF YEAR $ 2,413 $ 2,868 $ 816
- - - ----------------------------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including intercompany
interest (net of amount capitalized) $ 10,989 $ 12,702 $ 14,230
Income taxes $ 371 $ 5,878 $ 8,533
- - - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed financial information.
8
<PAGE> 10
Schedule III
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL INFORMATION
FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1994
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared to present the
unconsolidated financial position, results of operations and cash flows of
McDermott International, Inc. (Parent Company Only). Investments in
subsidiaries and other investees are stated at cost plus equity in
undistributed earnings from date of acquisition. These Parent Company Only
financial statements should be read in conjunction with McDermott
International, Inc.'s consolidated financial statements.
NOTE 2 - LONG-TERM DEBT
Long-term debt consists of: 1994 1993
---- ----
(In thousands)
10.375% Note payable due 1998 (Secured) $ 90,400 $ 105,400
Less: Amounts due within one year 16,600 15,000
--------- ----------
$ 73,800 $ 90,400
========= ==========
Maturities of long-term debt during the five fiscal years subsequent to March
31, 1994 are as follows: 1995 - $16,600,000; 1996 - $18,500,000; 1997 -
$20,500,000; 1998 - $22,600,000; 1999 - $12,200,000.
NOTE 3 - CONTINGENCIES
McDermott International, Inc. is contingently liable under standby letters of
credit totaling $7,200,000 at March 31, 1994 issued in the normal course of
business.
McDermott International, Inc. has guaranteed the indebtedness of certain of its
subsidiaries and other investees. At March 31, 1994, these guarantees included
$17,215,000 of loans to and $16,897,000 of standby letters of credit issued by
certain subsidiaries and other investees.
NOTE 4 - DIVIDENDS RECEIVED
McDermott International, Inc. received dividends from its consolidated
subsidiaries of $138,438,000 (including $132,283,000 of investments),
$25,703,000 and $75,798,000 for the years ended March 31, 1994, March 31, 1993
and March 31, 1992, respectively.
9
<PAGE> 11
SCHEDULE IX
McDERMOTT INTERNATIONAL, INC.
SHORT-TERM BORROWINGS
FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
AT END OF INTEREST DURING THE DURING THE DURING THE
PERIOD RATE PERIOD (1) PERIOD (2) PERIOD (3)
<S> <C> <C> <C> <C> <C>
Notes payable to banks and other financial institutions:
1994:
Banks $ 37,512,000 4.70% $ 64,853,000 $ 52,052,000 4.57%
Other Financial
Institutions $ -- -- $ -- $ 4,843,000 3.54%
All Categories $ 37,512,000 4.70% $ 64,853,000 $ 56,895,000 4.48%
- - - ------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------
1993:
Banks $ 775,000 9.00% $ 119,426,000 $ 40,006,000 5.55%
Other Financial
Institutions $ -- -- $ 189,568,000 $ 61,260,000 3.40%
All Categories $ 775,000 9.00% $ 194,568,000 $ 101,266,000 4.25%
- - - ------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------
1992:
Banks $ 10,556,000 11.64% $ 71,969,000 $ 46,659,000 9.14%
Other Financial
Institutions $ -- -- $ 293,422,000 $ 254,020,000 5.29%
All
Categories $ 10,556,000 11.64% $ 357,472,000 $ 300,679,000 5.88%
- - - ------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The maximum amount outstanding during the period represents the maximum
amount at any month end.
(2) The average amount outstanding during the period was computed by
dividing the sum of the daily outstanding balances by the number of
calendar days in the year.
(3) The weighted average interest rates during the period were computed by
dividing the actual interest incurred on the short- term borrowings by
the average amount outstanding during the period.
10
<PAGE> 12
SCHEDULE IX
McDERMOTT INTERNATIONAL, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE FISCAL YEARS ENDED MARCH 31, 1994
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $ 89,327 $ 115,477 $ 106,997
- - - ----------------------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 13
SIGNATURE OF THE REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
McDERMOTT INTERNATONAL, INC.
(REGISTRANT)
By:/s/ DANIEL R. GAUBERT
Daniel R. Gaubert
Vice President and Controller
June 23, 1994
12
<PAGE> 1
EXHIBIT 10(a)
McDERMOTT INTERNATIONAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Amended and Restated
November 8, 1993
<PAGE> 2
SECTION 1
DEFINITIONS: PARTICIPATION: OTHER EMPLOYERS
1.1 DEFINITIONS
The following words and phrases shall have the meaning stated below
unless a different meaning is plainly required by the context:
(1) "Actuarial equivalent" or "equivalent actuarial value" means
equality in value of the aggregate amounts expected to be
received under similar or different forms of payment, based
upon actuarial assumptions as provided in this Plan or as
adopted from time to time by the Committee.
(2) "Affiliate" or "Affiliated Company" means a company which is
not a Subsidiary but in which 20% or more of the voting stock
is owned, directly or indirectly, by the Company.
(3) "Compensation" means the base salary earned by a Participant
in respect of services with one or more Employers (regardless
of when such salary is actually paid), and awards determined
by the committee designated under the Company's Variable
Supplemental Compensation Plan are allocable to such
Participant (regardless of when such awards are actually
paid), but shall exclude all the other bonuses, any severance
pay, retirement or other income under this or any other
pension, profit sharing, thrift saving or similar plans, stock
awards of stock options, other allowances and other additional
remuneration in any form.
(4) "Committee" means a Committee consisting of the Chief
Executive Officer, the Chief Financial Officer, the Chief
Administrative Officer and the Corporate Secretary of the
Company or such other committee appointed by the Board of
2
<PAGE> 3
Directors of the Company, which Committee shall administer the
Plan pursuant to the provisions of Section 4 hereof. Said
Committee shall serve under the direction and at the pleasure
of the Board of Directors of the Company and shall be
designated the "SERP Committee."
(5) "Company" means McDermott International, Inc., a Panama
Corporation, and its successor or successors.
(6) "Disability" means a mental or physical condition which, in
the opinion of the Committee, is likely to be continuous and
permanent such that the Participant is wholly prevented from
engaging in any occupation for wage or profit. A Participant
will not be considered disabled for purposes of the Plan, if
in the opinion of the Committee, the disability is a result
of:
(a) excessive and habitual use by the participant of
drugs or narcotics, except on the prescription of a
duly licensed physician or surgeon;
(b) injury or disease sustained by the participant while
willfully and illegally participating in fights,
riots, civil insurrections or while committing a
felony;
(c) injury or disease sustained by the participant while
serving in any armed forces;
(d) injury or disease sustained by the participant which
was diagnosed or discovered subsequent to the date
his employment was terminated; or
(e) injury or disease sustained by the participant (other
than a loaned employee) while working for anyone
other than the Employer and arising out of such
employment.
3
<PAGE> 4
The Committee before approving the disability of a Participant
hereunder shall require satisfactory proof, which may be
evidence satisfactory to the Committee that the Participant is
entitled to disability insurance benefits under the Social
Security Act or may be in the form of a certificate from a
duly licensed physician selected by the Committee, that the
Participant has become disabled as provided herein. A
Participant will not be considered disabled for purposes of
the Plan until the date the Employer considers the Participant
to have been dropped from its employment rolls.
(7) "Employee" means any officer (other than a person acting only
as a director) of an Employer.
(8) "Employer" means, collectively or distributively as the
context may indicate, the Company and any Subsidiary or
Affiliated Company which has adopted this Plan in accordance
with Section 1.3 hereof.
(9) "Final Average Monthly Compensation" means the Participant's
average monthly rate of compensation for a thirty-six month
period which shall consist of the three years during which the
Participant's Compensation was highest during the last ten
years of the Participant's employment by an Employer prior to
retirement. Such three years need not be consecutive. Each
year shall consist of the twelve month period beginning on the
month and day equivalent to the month and day of retirement
and ending on the month and day equivalent to the day before
the
4
<PAGE> 5
month and day of retirement. The Participant's average
monthly rate of Compensation will be determined by dividing
the total Compensation attributable to such thirty-six month
period, as determined in accordance with rules established by
the Committee, by thirty-six. Compensation attributable to a
particular year shall not include base salary earned (or
Variable Supplemental Compensation awards determined to be
paid) for periods prior to or following such year, regardless
of whether payment of such amounts occurs during such year.
(10) "Monthly Retirement Plan Offset" means:
(a) If payment(s) under any other retirement or pension
plan(s) or similar fund(s) or program(s) (including
the Retirement and Restoration of Retirement Income
Plans of McDermott Incorporated and The Babcock &
Wilcox Company, and similar plans) maintained by the
Employers, any Subsidiary or Affiliated Company or
any other previous employer is made monthly for life
only, or monthly under a joint and survivor form of
payment or in monthly installments over a period
equal to or greater than ten (10) years, to the
Participant, or to his spouse or other joint
pensioner or beneficiary, the "Monthly Retirement
Plan Offset" shall be equal to such payments when and
as they are made; or
(b) If payment(s) under said other retirement or pension
plan(s), or other similar fund(s) or program(s), is
made in a lump sum or in any method of payment
5
<PAGE> 6
other than monthly payment for life only, monthly
joint and survivor payments or monthly installments
over a period equal to or greater than ten (10)
years, to the Participant or to his spouse or other
joint pensioner or beneficiary, the "Monthly
Retirement Plan Offset" shall be an actuarial
equivalent amount, as determined by the Committee
based upon the interest and mortality assumptions
used under the plan(s) maintained by the Employers or
any Subsidiary or as may be determined from time to
time by the Committee under Section 1.1(1) hereof
with respect to such plan(s) or fund(s) or program(s)
maintained by any other previous employer.
However, if any such Participant shall have contributed to the
source of payment(s) or fund(s) out of which said retirement
or pension payment(s) shall be paid or is payable, then the
"Monthly Retirement Plan Offset" shall not include any portion
of said amount attributable to the Participant's own
contributions. The term "Monthly Retirement Plan Offset",
with respect to the Profit Sharing and Stock Bonus Retirement
Plan of McDermott Incorporated and Hudson Engineering
Corporation's Profit Sharing Trust Plan (which plans were
terminated on August 31, 1988) shall mean the Monthly Profit
Sharing and Stock Bonus Retirement Plan Offset determined
under Section 1.1(A)(29) of the Retirement Plan for Employees
of McDermott Incorporated and Subsidiary and Affiliated
Companies. If any Participant shall become entitled to or
shall be paid any pension or retirement income payment(s) or
payment(s) of similar kind, under any plan in respect of which
the Employer, any Subsidiary or Affiliate or any previous
employer shall have
6
<PAGE> 7
directly or indirectly contributed by reason of any law of the
United States or of any state thereof or of any foreign
country, then the total amount paid or payable to him in
respect of any such allowance or payments shall be considered
a retirement or pension plan maintained by the Employer, any
Subsidiary or Affiliate or any other previous employer for
purposes of this Plan. United States Social Security
payment(s), Workmen's Compensation and similar benefits,
shall, however, not be included in "Monthly Retirement Plan
Offset".
7
<PAGE> 8
(11) "Number of Years of Credited Service" means:
(a) For those Participants covered by Section 2.1(A), the
total period of an Employee's Service computed in
completed years until he attains age 60, or if
earlier, his retirement under Section 2.2. hereof,
provided that Service prior to an Employees attaining
age 35 shall not be counted for purposes of the Plan.
If an Employee has a period of Service upon his
attaining age 60 of less than a completed year, there
shall be added to his Number of Years of Credited
Service a fraction, the numerator of which shall be
the number of his months of Service for said period,
computed in completed months and the denominator of
which shall be 12.
(b) For those Participants covered by Section 2.1(B), the
total period of an Employee's Service computed in
completed years until he attains age 65, or if
earlier, his retirement under Section 2.2. hereof,
provided that Service prior to an Employees attaining
age 35 shall not be counted for purposes of the Plan.
If an Employee has a period of Service upon his
attaining age 65 of less than a completed year, there
shall be added to his Number of Years of Credited
Service a fraction, the numerator of which shall be
the number of his months of Service for said period,
computed in completed months and the denominator of
which shall be 12.
(c) For those Participants covered by Section 2.1(C), the
total period of an
8
<PAGE> 9
Employee's Service computed in completed years until
he attains age 65, or if earlier, his retirement
under Section 2.2. hereof, provided that Service
prior to an Employees attaining age 45 shall not be
counted for purposes of the Plan. If an Employee has
a period of Service upon his attaining age 65 of less
than a completed year, there shall be added to his
Number of Years of Credited Service a fraction, the
numerator of which shall be the number of his months
of Service for said period, computed in completed
months and the denominator of which shall be 12.
(12) "Participant" means any Employee of an Employer who under
Section 1.2 has been selected to participate in the Plan.
(13) "Plan" means the McDermott International, Inc. Supplemental
Executive Retirement Plan as set forth in this document and as
it may hereafter be amended from time to time.
(14) "Retirement Date" means:
(a) For those Participants covered by Section 2.1(A), the
first day of the month coincident with or next
following the date a Participant attains age 60.
(b) For those Participants covered by Section 2.1(B), the
first day of the month coincident with or next
following the date a Participant attains age 65.
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<PAGE> 10
(c) For those Participants covered by Section 2.1(C), the
first day of the month coincident with or next
following the date a Participant attains age 65.
(15) "Subsidiary" means a company in which more than 50% of the
voting stock is owned, directly or indirectly, by the Company.
(16) "Service" means that period of employment with an Employer, or
with any Subsidiary or Affiliate, including any predecessor,
from the Employee's date of hire to the date of termination of
his service. Transfer of employment among the Employers and
other Subsidiaries or Affiliates shall not be deemed an
interruption of employment for purposes of the Plan, and no
period of Service rendered for a given Employer shall count as
Service for more than one Employer. Employment with any
person, firm or corporation to which the Employee was
transferred and loaned for such employment by an Employer will
be included in the Employee's Service in the same manner as if
such employment had been with an Employer. Any Employee who
is absent from active employment due to accident or illness
and during such absence remains on the payroll shall be deemed
to be in employment during such absence. Any voluntary
termination and any other absence from active employment not
deemed a leave of absence shall terminate an Employee's
Service as of the date the Employer considers the Employee to
have been dropped from its employment rolls. A period of
authorized leave of absence granted by the Employer or absence
for the purpose of military service pursuant to the
requirement of law or by enlistment for not longer than the
minimum period
10
<PAGE> 11
required by law, shall be counted as service if the Employee
resumes his employment with an Employer at the end of such
leave of absence or within the period prescribed by law for
the exercise of his reemployment rights.
(17) The masculine pronoun whenever used includes the feminine
pronoun, and nouns stated in the singular shall include the
plural whenever appropriate.
(18) "Effective Change in Control" means an event or series of
events by which (A) any "person" or "group" (as such terms are
used in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, (the "Exchange Act")) is or becomes
(other than pursuant to a transaction or agreement previously
approved by the Company's Board of Directors (the "Board") the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, except that a person shall be deemed to be the
"beneficial owner" of all shares that any such person has the
right to acquire pursuant to any agreement or arrangement or
upon exercise of conversion rights, warrants, options or
otherwise, without regard to the sixty day period referred to
in such Rule), directly or indirectly, of securities
representing 50% or more of the combined voting power of the
Company's then outstanding voting securities, excluding for
these purposes the Company's Series A Participating Preferred
Stock; or (B) during any period of two consecutive years (not
including any period prior to the effective date of this
provision of the Plan), individuals who at the beginning of
such period constituted the Board and any new directors, whose
election by the Board or nomination for election by the
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<PAGE> 12
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the Company's directors then still in
office who either were the Company's directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason
(other than pursuant to a transaction which would have
qualified as a transaction described in (A) above but for the
prior approval of such transaction by the Board) to constitute
a majority thereof.
1.2 PARTICIPATION
Each Employee shall become a Participant as of the date the Committee
selects the Employee for participation in the Plan. Any Employee who
continues in the employment of the Employers beyond his Retirement
Date shall no longer qualify as a Participant under this Plan and,
except as otherwise provided in Section 2.4(D), he and his spouse
shall not be entitled to any benefits whatsoever under this Plan.
Also, if a Participant remains in the employment of the Employers but
has a change in his employment status so that he no longer qualifies
as an Employee as defined herein, such person shall no longer qualify
as a Participant under this Plan and, except as otherwise provided in
Section 2.4(D), he and his spouse shall not be entitled to any
benefits whatsoever under this Plan unless he has a subsequent change
in his employment status so that he qualifies as an Employee hereunder
and the Committee selects him for participation in the Plan."
1.3 - OTHER EMPLOYERS
Any Subsidiary or Affiliate may adopt this Plan by proper action of
its board of directors, provided, however, that the administrative
powers and control of the Company, as
12
<PAGE> 13
provided in the Plan shall not be deemed diminished under the Plan by
reason of the participation of any other Employers in the Plan. The
administrative powers and control granted in Section 4 of the Plan to
the Company with respect to the administration of the Plan by the
Committee and other matters shall apply only with respect to the
Company and not to any other Employer. Each Employer shall have the
obligation to pay the retirement benefits under this Plan for its own
Employees and no other Employer shall have such obligation, and any
failure by a particular Employer to live up to its obligation under
the Plan shall have no effect on any other Employer.
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SECTION 2
AMOUNT AND PAYMENT OF RETIREMENT INCOME
2.1 - RETIREMENT - AMOUNT OF RETIREMENT INCOME
(A) Except as to those Participants described in Section 2.1(B),
each Participant who joined the Plan prior to April 1, 1989,
other than a Participant to whom the provisions of Section 2.2
or 2.4 apply, who retires on his Retirement Date shall be
entitled to receive a monthly retirement benefit equal to:
(1) 2% of his Final Average Monthly Compensation
multiplied by his Number of Years of Credited Service
after attaining age 35; plus
(2) 2% of his Final Average Monthly Compensation
multiplied by his Number of Years of Credited Service
after attaining age 55; less
(3) the amount, if any, of the Participants's Monthly
Retirement Plan Offset; provided, however, that in
any event, the monthly retirement income payable to a
Participant (prior to giving effect to the
Participant's Monthly Retirement Plan Offset) shall
not exceed 60% of his Final Average Monthly
Compensation.
(B) Each Participant who joined the Plan prior to April 1, 1989
and was actively employed by any Employer on March 31, 1989,
that is offered in writing, in the sole discretion of the
Committee or the Board of Directors, the opportunity to delay
his Retirement Date under the Plan until the age of 65 and who
then accepts and
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<PAGE> 15
consents to such offer in writing, shall be entitled to
a monthly retirement benefit equal to:
(1) 2% of his Final Average Monthly Compensation
multiplied by his Number of Years of Credited Service
after attaining age 35; plus
(2) 2% of his Final Average Monthly Compensation
multiplied by his Number of Years of Credited Service
after attaining age 55; less
(3) The amount, if any, of the Participant's Monthly
Retirement Plan Offset; provided, however, that in
any event, the monthly retirement income payable to a
Participant (prior to giving effect to the
Participant's Monthly Retirement Plan Offset) shall
not exceed 65% of his Final Average Monthly
Compensation.
(C) Each Participant who joins the Plan on or after April 1, 1989,
other than a Participant to whom the provisions of Section 2.2
or 2.4 apply, who retires on his Retirement Date shall be
entitled to receive a monthly retirement benefit equal to:
(1) 3% of his Final Average Monthly Compensation
multiplied by his Number of Years of Credited Service
after attaining age 45; less
15
<PAGE> 16
(2) the amount, if any, of the participant's Monthly
Retirement Plan Offset; provided, however, that in
any event, the monthly retirement income payable to a
Participant (prior to giving effect to the
Participant's Monthly Retirement Plan Offset) shall
not exceed 60% of his Final Average Monthly
Compensation.
2.2 - EARLY RETIREMENT - AMOUNT OF RETIREMENT INCOME
A Participant who retires prior to his Retirement Date with the
consent of the Employer (which consent may be withheld in the
Employer's sole discretion) shall be entitled to receive a monthly
retirement income as determined in accordance with the applicable
provision of Section 2.1 hereof based upon the Participant's Number of
Years of Credited Service as determined on his early retirement date
and Final Average Monthly Compensation as determined on his early
retirement date, or as to a Participant covered by Section 2.1(B) on
the date he attains age 60, whichever is greater.
2.3 - PAYMENT OF RETIREMENT INCOME
The monthly retirement income under Section 2.1 and 2.2 hereof will be
payable on the first day of each month. The first payment will be
made on the Participant's Retirement Date, or upon his retirement
under Section 2.2 hereof, whichever is earlier, and the last payment
will be the payment due next preceding the retired Participant's
death, provided, however, that following a retired Participant's
death, one-half of the retired Participant's monthly retirement income
shall be paid to his spouse if she shall have been married to the
Participant on the date of his retirement under Section 2.1 or Section
2.2, whichever
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<PAGE> 17
is applicable, and shall have survived him, for her lifetime.
2.4 - BENEFITS OTHER THAN ON RETIREMENT
(A) Benefit Payable in the Event of Death on or Prior
to Retirement Date: If the service of a Participant is
terminated by reason of his death on or prior to his
Retirement Date, his surviving spouse shall be entitled to
receive for her remaining lifetime a monthly income equal to
the monthly retirement income to which the Participant would
have been entitled under Section 2.1 if he had retired on his
Retirement Date and if his Compensation for the one year
period prior to his death had continued without change to his
Retirement Date; provided, however, that on the deceased
Participant's Retirement Date, the amount of monthly income
payable to his surviving spouse shall be reduced to one-half
of said monthly income.
(B) Benefits Payable in the Event of Disability: In the event an
Employee becomes disabled while a Participant in the Plan, he
shall be entitled to receive a monthly retirement income equal
to the amount of monthly retirement income to which he would
have been entitled on his Retirement Date, computed as for
retirement in accordance with Section 2.1 hereof, as if his
employment had not been terminated but had continued
uninterrupted from the date of disability to his Retirement
Date and as if his Compensation for the one year period prior
to his disability had continued without change to his
Retirement Date. The monthly retirement income under this
Section 2.4(B) will be payable commencing on the first day of
each month coincident with or next following said
Participant's disability as determined
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<PAGE> 18
under Section 1.1(5) hereof. The last payment will be as
follows:
(1) if the Participant recovers from his disability prior
to his Retirement Date, the last payment shall be the
payment due next preceding the date of such recovery;
or
(2) if the Participant attains his Retirement Date while
still disabled, the last payment will be the payment
next preceding the Participant's death, provided,
however, that following a Participant's death,
one-half of the Participant's monthly retirement
income shall be paid to his spouse if she shall have
been married to the Participant on his Retirement
Date and shall have survived him, for her lifetime.
(C) Benefit Payable in the Event of Death of Disabled
Participant prior to Retirement Date: If a disabled
Participant dies prior to his Retirement Date, his surviving
spouse shall be entitled to receive for her remaining lifetime
a monthly income equal to the monthly retirement income to
which the Participant would have been entitled under Section
2.1 if he had retired on his Retirement Date and if his
Compensation for the one year period prior to his disability
had continued without change to his Retirement Date; provided,
however, that on the deceased Participant's Retirement Date,
the amount of monthly income payable to his surviving spouse
shall be reduced to one-half of said monthly income.
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<PAGE> 19
(D) (1) Benefits on Termination of Service: In the event
that a Participant who has attained age 60 on or
before December 31, 1993 terminates employment on or
after December 31, 1993 for reasons other than his
death, disability, or retirement under Section 2.2
hereof, he shall be entitled to receive a monthly
retirement income as determined in accordance with
the applicable provision of Section 2.1 hereof, based
upon the Participant's Number of Years of Credited
Service and Final Average Monthly Compensation as
determined on December 31, 1993. The monthly
retirement payment under this paragraph will be
payable commencing on the Participant's Retirement
Date as determined under Section 1.1(14) hereof, and
the last payment will be the payment due next
preceding the terminated Participant's death,
provided, however that following a terminated
Participant's death, one-half of the retired
Participant's monthly retirement income shall be paid
to his spouse if she shall have been married to the
Participant on the date his monthly retirement
payments commenced, and shall have survived him, for
her lifetime. If a Participant should die after
termination of employment and before monthly
retirement income payments commence, no benefits
whatsoever shall be payable under this Plan.
(2) Except as to those Participants described in
paragraph (1) above, in the event that a Participant
terminates employment for any reason other than his
death, disability or retirement under Section 2.2
hereof, he, and his spouse, shall not be entitled to
any benefits whatsoever under this Plan.
19
<PAGE> 20
(3) Notwithstanding any other provision of this Plan to
the contrary, in the event a Participant's employment
is terminated for any reason whatsoever after the
date of an Effective Change in Control but prior to
his Retirement Date, such Participant (or his
surviving spouse, if any) shall be entitled to
receive the greater of (i) the benefits to which such
Participant or surviving spouse may be entitled to
under any other provisions of this Plan or (ii) the
Deferred Vested Benefit provided below. The Deferred
Vested Benefit with respect to such a Participant
shall be non-forfeitable and shall be determined in
accordance with Section 2.1 hereof based on such
Participant's Number of Years of Credit Service and
Final Average Monthly Compensation as determined as
of the date of the Effective Change in Control. Such
Deferred Vested Benefit shall be paid in accordance
with the provisions of Section 2.3 hereof, commencing
on such former Participant's Retirement Date and he
shall be considered a Participant for purposes of
determining such Retirement Date. In the event of
the death of such former Participant prior to his
Retirement Date, such date of death shall be deemed
to be his Retirement Date for purposes of determining
any spousal benefits under Section 2.3 hereof."
2.5 INCREASE IN BENEFITS
In the event a Participant, or his surviving spouse, is receiving
benefits under Sections 2.1, 2.2 or 2.4 (A) through (C) hereof and the
Retirement Plan for Employees of McDermott Incorporated and Subsidiary
and Affiliated Companies provides for an increase
20
<PAGE> 21
in pension payments after retirement as a result of cost of living or
similar adjustments, then the benefits payable under Sections 2.1, 2.2
or 2.4 (A) through (C) hereof shall be similarly increased based upon
the same cost of living or similar adjustments as set forth in such
retirement plan.
2.6 LUMP SUM ELECTION
Notwithstanding anything to the contrary which may be contained in the
Plan, a Participant retiring under Section 2.1 or 2.2 after attaining
the age of 60 or terminating employment with a vested interest under
Section 2.4(D)(1) shall have the right, with the consent of the
Committee, to elect a lump sum distribution equal to the present value
of the monthly income amounts that would otherwise be received under
the Plan. If a Participant retires at age 65, such Participant must
have requested, in writing, the consent of the Committee to make such
election at least twelve (12) months but not more than eighteen (18)
months prior to such Participant's 65th birthday. If a Participant
should die after reaching age 60 and before retiring, the spouse shall
also have the right, with the written consent of the Committee, to
elect a lump sum distribution.
The amount of the lump sum distribution to be paid to any Participant
shall be calculated using the following criteria:
(A) The form of benefit (e.g., joint and 50% survivor)
shall be the same as that elected by the Participant
under the ERISA qualified plan applicable to the
Participant;
21
<PAGE> 22
(B) The UP-84 Mortality Table; and
(C) The Immediate Annuity Interest Rate published by the
Pension Benefit Guaranty Corporation as in effect on
the date of the Participant's retirement.
Payment hereunder shall be made within thirty days of the date of the
Participant's retirement; provided, however that if the payment of a
lump sum distribution hereunder would cause the Applicable Employee
Remuneration (as defined in Section 162(m)(4) of the Internal Revenue
Code of 1986, as amended) to exceed the limitation of Section
162(m)(1) of the Code, then in its sole discretion the Committee may
defer such payment. Deferred payment hereunder shall be made within
thirty days of the first day of the fiscal year of the Employer next
following the Participant's retirement date.
A deferred lump sum distribution shall earn interest from the
Participant's date of retirement until paid, compounded daily, at the
minimum commercial lending rate charged from time to time by Morgan
Guaranty Trust Company of New York for loans in New York City. If a
Participant should die after retiring and prior to the payment of a
deferred lump sum distribution, such distribution shall be payable to
his spouse at the time it would have been paid to the Participant, if
she shall have been married to him on his Retirement Date and shall
have survived him. Any payment made under this Section 2.6 shall be
in complete satisfaction of any amounts which may be due to any
Participant or his surviving spouse or any other person claiming under
either of them pursuant to any other provisions of the Plan."
22
<PAGE> 23
SECTION 3
SPECIAL PROVISIONS REGARDING PAYMENT OF BENEFITS
3.1 BENEFITS APPLICABLE TO PARTICIPANT WHO HAS
BEEN OR IS EMPLOYED BY TWO OR MORE EMPLOYERS
In the event that a Participant or his surviving spouse is entitled to
benefits under the Plan and such Participant has been or is employed
by any two or more Employers, his retirement benefit shall be computed
by applying the benefit formulas as if all the Employers were a single
Employer, provided there is a proper allocation (taking into account
the Credited Service and Compensation applicable to each Employer) of
the costs of the resulting benefits among the Employers by which such
Participant has been or is employed.
3.2 PARTICIPANTS TO FURNISH REQUIRED INFORMATION
Each Participant will furnish to the Committee such information as the
Committee considers necessary or desirable for purposes of
administering the Plan, and the provisions of the Plan respecting any
payments thereunder are conditional upon the Participant's furnishing
promptly such true, full and complete information as the Committee
may request.
Each Participant will submit proof of his age to the Committee at such
time as required by the Committee. The Committee will, if such proof
of age is not submitted as required, use as conclusive evidence
thereof, such information as is deemed by it to be reliable,
regardless of the source of such information. Any adjustment required
by reason of lack of proof or the misstatement of the age of persons
entitled to benefits hereunder, by the
23
<PAGE> 24
Participant or otherwise, will be in such manner as the Committee deems
equitable.
Any notice or information which, according to the terms of the Plan or
the rules of the Committee, must be filed with the Committee, shall be
deemed so filed at the time that it is actually received by the
Committee.
The Employers, the Committee, and any person or persons involved in
the administration of the Plan shall be entitled to rely upon any
certification, statement, or representation made or evidence furnished
by a Participant with respect to his age or other facts required to be
determined under any of the provisions of the Plan, and shall not be
liable on account of the payment of any monies or the doing of any act
or failure to act in reliance thereon. Any such certification,
statement, representation, or evidence, upon being duly made or
furnished, shall be conclusively binding upon the person furnishing
same; but it shall not be binding upon the Employers, the Committee,
or any other person or persons involved in the administration of the
Plan, and nothing herein contained shall be construed to prevent any
of such parties from contesting any such certification, statement,
representation, or evidence or to relieve the Participant from the
duty of submitting satisfactory proof of any such fact.
3.3 BENEFITS NOT ASSIGNABLE
Except for any indebtedness of a Participant to an Employer, no
benefits or rights shall exist under the Plan which are subject in any
manner to voluntary or involuntary anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and
24
<PAGE> 25
any attempt so to anticipate, alienate, transfer, assign, pledge,
encumber or charge the same shall be void; nor shall any such benefit
or right be in any manner liable for or subject to the debts,
contracts, liabilities, engagements, torts or other obligations of the
person entitled to such benefit or right, except as specifically
provided in the Plan; nor shall any benefit or right under the Plan
constitute an asset of a Participant or of any person entitled to
benefits under the Plan in case of the bankruptcy, receivership or
divorce of said person; and any such benefit or right shall be payable
only directly to the Participant or to his surviving spouse.
If a Participant or any other person entitled to benefits under this
Plan becomes bankrupt or makes an assignment for the benefit of
creditors or in any way suffers a lien or judgment against his
personal assets, or in any way attempts to anticipate, alienate, sell,
assign, pledge, encumber or charge a benefit or right, except as
specifically provided in the Plan, then such benefit or right in the
discretion of the Committee may cease and terminate.
3.4 CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN
The establishment and maintenance of the Plan will not be construed as
conferring any legal rights upon any Participant to the continuation
of his employment with an Employer, nor will the Plan interfere with
the right of an Employer to discipline, lay off or discharge any
Participant. The adoption and maintenance of the Plan shall not be
deemed to constitute a contract between the Employer and any Employee
or to be a consideration for, inducement to, or condition of
employment of any person.
25
<PAGE> 26
3.5 ABANDONMENT OF BENEFITS
Each Participant and other person entitled to benefits hereunder shall
file with the Committee from time to time, in writing, his post office
address and each change of post office address, and any check
representing payment hereunder and any communication addressed to a
Participant, a retired Participant, or a surviving spouse at his or
her last address filed with the Committee (or, if no such address has
been filed, then at his last address as indicated on the records of
the Employer) shall be binding on such person for all purposes of the
Plan, and the Committee shall not be obliged to search for or
ascertain the location of any such person.
If the Committee, for any reason, is in doubt as to whether retirement
income payments are being received by the person entitled thereto, it
may, by registered mail addressed to the person concerned at his
address last known to the Committee, notify such person that all
unmailed and future retirement income payments shall be henceforth
withheld until he provides the Committee with evidence of his
continued life and his proper mailing address. Further, his right to
any retirement income whatsoever including, without limitation,
payments withheld as provided in the preceding sentence and payment
checks returned or not cashed shall, at the option of the Committee,
be cancelled forever if, at the expiration of three years from the
date of such mailing, he shall not have provided the Committee with
evidence of his continued life and his proper mailing address.
3.6 WRITTEN COMMUNICATIONS REQUIRED
Any notice, request, instruction, or other communication to be given
or made hereunder shall be in writing and either personally delivered
to the addressee or deposited in the
26
<PAGE> 27
United States mail fully postpaid and properly addressed to such
addressee at the last address for notice shown on the Committee's
records (or if no address has been filed with the Committee, then at
the last address for such addresses as indicated on the records of the
Employer).
3.7 DISHONESTY
If dishonest conduct injurious to the Employer committed by a
Participant is determined by the Committee during the lifetime of the
Participant and within one year after his retirement, the Committee
may terminate the Participant's interest and benefits under this Plan.
The dishonest conduct injurious to an Employer committed by a
Participant shall be determined and decided by the Committee only
after a full investigation of such alleged dishonest conduct and an
opportunity has been given the Participant or his representative to
appear before the Committee to present his case. The decision made by
the Committee in such cases shall be final and binding on all
Participants and other persons affected by such decision.
27
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SECTION 4
ADMINISTRATION
4.1 ADMINISTRATION BY COMMITTEE
The Plan will be administered by the Committee which shall appoint one
of its members as a Chairman and may appoint a secretary, who may, but
need not, be a member of the Committee and the Committee may employ
such agents, clerical and other services, legal counsel, accountants
and actuaries as may be required for the purpose of administering the
Plan. A majority of the members of the Committee shall constitute a
quorum for the transaction of business and shall have full power to
act hereunder. The Committee may act either at a meeting at which a
quorum is present or by a writing subscribed by at least a majority of
the members then serving. Any written memorandum signed by the
secretary or any member of the Committee who has been authorized to
act on behalf of the Committee shall have the same force and effect as
a formal resolution adopted in an open meeting. Minutes of all
meetings of the Committee and a record of any action taken by the
Committee shall be kept in written form by the secretary appointed by
the Committee.
4.2 RULES AND REGULATIONS OF COMMITTEE
The Committee shall have the authority to make such rules and
regulations and to take such action as may be necessary to carry out
the provisions of the Plan and will, subject to the provisions of the
Plan, decide any questions arising in the administration,
interpretation and application of the Plan, which decisions shall be
conclusive and binding on all parties. The Committee may delegate any
part of its authority and duties as it deems expedient.
28
<PAGE> 29
4.3 POWERS OF COMMITTEE
In order to effectuate the purposes of the Plan, the Committee shall
have the power to construe the Plan and to make equitable adjustments
for any mistakes or errors made in the administration of the Plan, and
all such actions or determinations made by the Committee in good faith
shall not be subject to review by anyone.
4.4 LIABILITY OF COMMITTEE
No member of the Committee shall be liable for any loss unless
resulting from his own fraud, bad faith or intentional wrongdoing and
no member shall be personally liable upon or with respect to any
agreement, act, transaction or omission executed, committed or
suffered to be committed by the Committee or by himself as a member of
the Committee or by any other member, agent, representative or
employee of the Committee. The Committee and any individual member of
the Committee and any agent thereof shall be fully protected in
relying upon the advice of consultant(s) or advisor(s) employed by the
Company or the Committee, including but without any limitation, any
attorney insofar as legal matters are concerned, any accountant
insofar as accounting matters are concerned and any actuary insofar as
actuarial matters are concerned.
4.5 INDEMNIFICATION
The Company agrees to hold harmless and indemnify the members of the
Committee and all directors, officers, and employees of the Company
and of any Subsidiary or Affiliate which has adopted this Plan against
any and all claims and causes of action whomsoever, and any losses
therefrom, including without limitation costs of defense and
attorneys'
29
<PAGE> 30
fees, based upon or arising out of any act or omission relating to or
in connection with this Plan, its interpretation or administration,
other than losses resulting from the fraud, bad faith or intentional
wrongdoing of the party asserting the right to indemnification.
4.6 APPLICABLE LAW
The Plan will be construed and enforced according to the laws of the
State of Louisiana, and all provisions of the Plan will be
administered according to the laws of the said state.
30
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SECTION 5
GENERAL PROVISIONS
5.1 AMENDMENT AND DISCONTINUANCE
The Plan may be amended from time to time in any respect whatever, by
resolution of the Board of Directors of the Company specifying such
amendment and amendments may be made retroactively which, in the
judgment of the Committee, is necessary or advisable provided that
such retroactive amendment does not deprive a retired or disabled
Participant, or his spouse, without his or her consent, of a right to
receive benefits hereunder.
The participation in the Plan of Employers other than the Company
shall not limit the power of the Company under the foregoing
provision, and amendments by the Company shall be binding upon all
other Employers to the extent accepted by such Employers. Acceptance
by each such Employer shall be presumed. However the discontinuance
of the Plan shall not affect the rights of retired or disabled
Participants (or their spouses) who are receiving benefits under this
Plan on the date of such discontinuance.
5.2 SOURCE OF BENEFITS
All benefits payable to Participants of the Company under this Plan
shall be paid from the general assets of the Company and all benefits
payable to Participants of any Subsidiary or Affiliate which has
adopted this Plan shall be paid from the general assets of such
Subsidiary or Affiliate. Benefits shall not be paid from any special
or separate fund and no special or separate fund shall be established,
or other segregation of assets made to make payment of benefits to
eligible Participants or their surviving spouses hereunder. No
31
<PAGE> 32
Participant or surviving spouse or any other person shall have, under
any circumstances, any interest whatever in any particular property or
assets of the Company or any Subsidiary or Affiliate by virtue of this
Plan.
5.3 BINDING ON COMPANY, EMPLOYEES AND THEIR SUCCESSORS
This Plan shall be binding upon and inure to the benefit of the
Company and to the Subsidiaries and Affiliated Companies which have
adopted this Plan, their successors and assigns and the Participant
and his heirs, executors, administrators, tutors, and legal
representatives.
IN WITNESS WHEREOF, McDermott Incorporated has caused this instrument
to be executed by its duly authorized officers on this 8th day of
November, 1993.
ATTEST: McDERMOTT INTERNATIONAL, INC.
/s/ JAMIE H. MERINGER By: /s/ R. E. HOWSON
Jamie H. Meringer R. E. Howson
Assistant Secretary Chairman of the Board
and Chief Executive Officer
32
<PAGE> 1
EXHIBIT 10(i)
MCDERMOTT INTERNATIONAL, INC.
1992 SENIOR MANAGEMENT STOCK OPTION PLAN
ARTICLE I. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN
McDermott International, Inc., a Panamanian corporation (hereinafter referred
to as "International"), hereby establishes an incentive compensation plan to be
known as the "McDermott International, Inc. Senior Management Stock Option
Plan" (hereinafter referred to as the "Plan"), as set forth in this document.
The Plan permits the grant of Options (as hereinafter defined) to senior
managers of the Company (as hereinafter defined).
Upon approval by the Board of Directors (as hereinafter defined), the plan
shall become effective as of February 12, 1992 (the "Effective Date"), and
shall remain in effect as provided in Section 1.3 herein.
1.2 PURPOSE OF THE PLAN
The purpose of the Plan is to promote the success, and enhance the value, of
the Company by linking the personal interests of Participants (as hereinafter
defined) to those of International's shareholders and by providing Participants
with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants.
1.3 DURATION OF THE PLAN
The Plan shall commence on the Effective Date, as described in Section 1.1
herein, and shall remain in effect, subject to the right of the Board of
Directors to terminate the Plan at any time pursuant to Article X herein, until
all Shares (as hereinafter defined) subject to Awards (as hereinafter defined)
granted under it shall have been purchased or acquired according to the Plan's
provisions. However, in no event may an Award be granted under the Plan on or
after February 12, 2002.
ARTICLE II. DEFINITIONS
2.1 DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below and,
<PAGE> 2
when the meaning is intended, the initial letter of the word is capitalized:
(a) "Award" means a grant under the Plan of Options.
(b) "Beneficial Owner" shall have the meaning ascribed to such
term in Section 13(d) of the Securities Exchange Act of 1934
and the rules thereunder, without regard, however, to the
60-day period referred to in such Section.
(c) "Board" or "Board of Directors" means the Board of Directors
of International.
(d) "Change in Control" of International shall be deemed to have
occurred if the conditions set forth in any one or more of the
following paragraphs shall have been satisfied:
(1) Any person, as described in Section 3(a)(9) of the
Securities Exchange Act of 1934, (other than a person
in control of International on the Effective Date, or
other than a trustee or other fiduciary holding
securities under an Employee benefit plan of
International, or a corporation owned directly or
indirectly by the stockholders of International in
substantially the same proportions as their ownership
of Shares of voting securities of International), is
or becomes the Beneficial Owner, directly or
indirectly, of voting securities of International
representing 30 percent or more of the combined
voting power of International's then outstanding
securities, excluding for these purposes the Series A
Participating Preferred Stock of International; or
(2) During any period of two consecutive years (not
including any period prior to the execution of the
Plan), individuals who at the beginning of such
period constitute the Board (and any new Director,
whose election by the Board or nomination for
election by International's stockholders was approved
by a vote of at least two-thirds of the Directors
then still in office who either were Directors at the
beginning of the period or whose election or
nomination for election was previously so approved),
cease for any reason to constitute a majority
thereof; or
(3) The stockholders of International approve: (a) a plan
of complete liquidation of International; or (b) an
agreement for the sale or disposition of all or
substantially all International's assets; or (c) a
merger or consolidation of International with any
other corporation, other than a merger or
consolidation which would result in the voting
securities of International outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity), at least
50.1 percent of the combined voting securities of
International (or such surviving entity) outstanding
immediately after such merger or consolidation.
However, in no event shall a Change in Control be deemed to have occurred, with
respect to a Participant, if that
<PAGE> 3
Participant is part of a purchasing group which consummates the
Change-in-Control transaction. A Participant shall be deemed "part of a
purchasing group" for purposes of the preceding sentence if the Participant is
an equity participant, has been identified as a potential equity participant or
has agreed to become an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than 3 percent of the shares of
voting securities of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group which is otherwise not deemed
to be significant, as determined prior to the Change in Control by a majority
of the disinterested Directors).
(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(f) "Company" means McDermott International, Inc., a Panamanian
corporation (or any successor thereto) and its subsidiaries and
affiliates.
(g) "Director" means any individual who is a member of the Board of
Directors of International.
(h) "Employee" means any part-time or full-time Employee of the Company.
Directors who are not otherwise employed by International shall not be
considered Employees under the Plan.
(i) "Fair Market Value" shall mean the fair market value of a Share of
common stock, as determined in accordance with procedures established
by the Plan Administration Committee.
(j) "Insider" shall mean an Employee of the Company included in the
definition of Officer under Section 16 of the Securities Exchange Act
of 1934 and the rules promulgated thereunder or other Employees
designated as Officers by the Board.
(k) "Officer" means an Employee of the Company included in the definition
of Officer under Section 16 of the Securities Exchange Act of 1934 and
the rules promulgated thereunder or other Employees designated as
Officers by the Board.
(l) "Option" means a nonqualified Option to purchase Shares, granted under
Article VI herein. The Options granted are not intended to qualify as
"incentive stock options" as defined in Section 422 of the Code.
(m) "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Plan
Administration Committee.
(n) "Participant" means an Employee of the Company who has outstanding an
Award granted under the Plan.
(o) "Plan Administration Committee" means a Committee of Insiders
designated by the Board to oversee the Plan (as specified in Article
III).
(p) "Qualified Domestic Relations Order" shall mean a valid and effective
domestic relations order, as determined by the Plan Administration
Committee.
<PAGE> 4
(q) "Reorganization" means a merger, consolidation, sale of all or
substantially all of the Company's assets; or other corporate
Reorganization in which the Company is not the surviving corporation
(other than any such transaction the effect of which is merely to
change the jurisdiction of incorporation of the Company); or any
merger in which the Company is the surviving corporation but the
holders of its Shares receive cash or securities of another
corporation or different securities of the surviving corporation; or a
dissolution or liquidation of the Company.
(r) "Shares" means the Shares of common stock, $1 par value, of
International.
<PAGE> 5
ARTICLE III. ADMINISTRATION
3.1 PLAN ADMINISTRATION
The Plan shall be administered by the Plan Administration Committee of
International, each member of which shall serve at the discretion of the Board
of Directors. The Plan Administration Committee may delegate its authorities
as identified hereunder, except that they may not be delegated to any member of
management who participates in or is eligible to participate in this Plan.
3.2 AUTHORITY OF THE PLAN ADMINISTRATION COMMITTEE
The Plan Administration Committee shall have full power, except as limited by
law or by the articles of incorporation or bylaws of International, and subject
to the provisions herein, to determine the terms and conditions of Awards in a
manner consistent with the Plan; to construe and interpret the Plan and any
agreement or instrument entered into under the Plan; to establish, amend, or
waive rules and regulations for the Plan's administration; and (subject to the
provisions of Article X herein) to amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Plan Administration Committee as provided in the Plan.
Further, the Plan Administration Committee shall make all other determinations
which may be necessary or advisable for the administration of the Plan.
3.3 DECISIONS BINDING
All determinations and decisions made by the Plan Administration Committee
pursuant to the provisions of the Plan and all related orders or resolutions of
the Board of Directors shall be final, conclusive, and binding on all persons,
including the Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
ARTICLE IV. SHARES SUBJECT TO THE PROGRAM
4.1 NUMBER OF SHARES
Subject to adjustment as provided in Section 4.3 herein, the total number of
Shares available for grant under the Plan shall be determined by the Board
from time to time. These Shares may be either authorized but unissued Shares
of common stock of International, or from Shares reacquired by International,
including Shares purchased in the open market.
<PAGE> 6
4.2 LAPSED AWARDS
If any unexercised Option granted under this Plan is cancelled, terminates,
expires, or lapses for any reason, any Shares subject to such Award again shall
be available for the grant of an Award under the Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES
In the event of any merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, Share combination, or other change in
the corporate structure of the Company affecting the Shares, such adjustment
shall be made in the number and class of Shares which may be delivered under
the Plan, and in the number and class of and/or price of Shares subject to
outstanding Awards, as may be determined to be appropriate and equitable by the
Plan Administration Committee, in its sole discretion, to prevent dilution or
enlargement of rights; and provided that the number of Shares subject to any
Award shall always be a whole number.
ARTICLE V. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY
Persons eligible to participate in this Plan include select senior management
Employees as determined at the discretion of the Plan Administration Committee.
Officers will not be granted Options under this Plan. Officer is defined in
Section 2.1 herein and includes all individuals eligible to receive grants
under International's 1992 Officer Stock Incentive Program. If, as a result of
a change in employment, a Participant becomes an Officer, the Officer
Participant will no longer be eligible to receive Awards under the Plan.
5.2 ACTUAL PARTICIPATION
Subject to the provisions of the Plan, the Plan Administration Committee may,
from time to time, at its sole discretion, select from senior management
Employees of the Company those to whom Awards shall be granted and shall
determine the amount of each Award. No Employee shall have any right to be
granted an Award under the Plan. The receipt of an Award in any given year
does not guarantee that any Award will be made in any succeeding year.
<PAGE> 7
ARTICLE VI. STOCK OPTIONS
6.1 OPTION GRANTS
Subject to the terms and provisions of the Plan, Options may be granted to
eligible Employees at any time, and from time to time, as shall be determined
by the Plan Administration Committee. The Plan Administration Committee shall
have discretion in determining the number of Shares subject to Options granted
to each Participant.
6.2 OPTION AGREEMENT
Each Option grant shall be evidenced by an Option agreement that shall specify
the Option Price, the duration of the Option, the number of Shares to which the
Option pertains, the exercisability provisions of the Option, payment terms,
and such other provisions as the Plan Administration Committee shall determine.
6.3 OPTION PRICE
The Option Price for each grant of an Option shall be determined by the Plan
Administration Committee; provided that, notwithstanding any other provision of
the Plan, the Option Price shall not be less than the Fair Market Value of such
Share on the date the Option is granted.
6.4 DURATION OF OPTIONS
Each Option shall expire at such time as the Plan Administration Committee
shall determine at the time of grant; provided, however, that no Option shall
be exercisable later than ten years following the anniversary date of its
grant.
6.5 EXERCISE OF OPTIONS
Options granted under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Plan Administration
Committee shall in each instance approve, which need not be the same for each
grant or for each Participant.
Options shall be exercised by the delivery of a written notice of exercise to
the Plan Administration Committee, setting forth the number of Shares with
respect to which the Option is to be exercised.
<PAGE> 8
6.6 PAYMENT
The method of payment of the Option Price related to any Option exercised shall
be determined at the discretion of the Plan Administration Committee. However,
without limitation, payment in the form of previously acquired Shares will be
permitted at the discretion of the Plan Administration Committee.
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY
The Plan Administration Committee shall impose such restrictions on any Shares
acquired pursuant to the exercise of an Option under the Plan as it may deem
advisable, including, without limitation, restrictions under applicable federal
securities laws, under the requirements of any stock exchange or market upon
which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT
In the event the employment of a Participant is terminated, the exercisability
and duration of outstanding Options granted to that Participant shall be
determined at the discretion of the Plan Administration Committee and the
procedures shall be specified in the Option agreement.
6.9 NONTRANSFERABILITY OF OPTIONS
No Option granted under the Plan may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution or pursuant to a Qualified Domestic Relations Order.
ARTICLE VII. BENEFICIARY DESIGNATION
7.1 BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives
any or all of such benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by the Plan
Administration Committee, and will be effective only when filed by the
Participant in writing with the Plan Administration Committee during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate. In the event that any question arises as to any beneficiary
designation, the Plan Administration Committee may, in its sole discretion,
elect to pay any benefits remaining at the Participant's death to the
Participant's estate.
<PAGE> 9
ARTICLE VIII. RIGHTS OF PARTICIPANTS
8.1 EMPLOYMENT
Nothing in the Plan shall interfere with or limit in any way the right of the
Company to terminate any Participant's service to the Company at any time, nor
confer upon any Participant any right to continue service as an Employee of the
Company.
8.2 PARTICIPATION
No Employee shall have the right to be selected to receive an Award under the
Plan, or, having been so selected, to be selected to receive a future Award.
ARTICLE IX. REORGANIZATION OR CHANGE IN CONTROL
9.1 REORGANIZATION
If, in the event of a Reorganization, provision has not been made for
substitution of new stock Options by the surviving corporation for and having a
value equal to the Options held under the Plan at the date of such
Reorganization, the owner of such Options shall receive within 30 days after
such Reorganization in full satisfaction of such unexpired Options, cash
representing the excess, if any, of the value of stock subject to such Option,
valued with reference to the highest sale price at which the common stock of
International is traded as reported for consolidated trading for issues listed
on the New York Stock Exchange (or if not so listed, then as reported on any
other national securities exchange) during the 30 days preceding the date on
which the Reorganization is consummated, over the applicable Option purchase
price for such stock, without regard to the exercise dates provided in such
Options under Section 6.5 of the Plan.
9.2 CHANGE IN CONTROL
In the event of a Change in Control, notwithstanding any other provision of the
Plan to the contrary, all outstanding Options granted under the Plan shall
immediately become exercisable.
<PAGE> 10
ARTICLE X. AMENDMENT, MODIFICATION, AND TERMINATION
10.1 AMENDMENT, MODIFICATION, AND TERMINATION
With the approval of the Board, at any time, and from time to time, the Plan
Administration Committee may terminate, amend, or modify the Plan and any Award
agreement outstanding hereunder.
10.2 AWARDS PREVIOUSLY GRANTED
Notwithstanding Section 10.1, no termination, amendment, or modification of the
Plan or of any Award agreement, shall in any manner adversely affect any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
ARTICLE XI. WITHHOLDING
11.1 TAX WITHHOLDING
The Company shall have the power and the right to deduct or withhold, or
require Participants to remit to the Company, amounts sufficient to satisfy
federal, state, and local taxes (including the Participants' FICA obligations)
required by law to be withheld with respect to any grant, exercise, or payment
made under or as a result of the Plan. The Plan Administration Committee, in
its sole discretion, shall promulgate rules governing methods by which such
requirements are to be satisfied.
ARTICLE XII. MISCELLANEOUS
12.1 GENDER AND NUMBER
Except as otherwise indicated by the context, any masculine term used herein
also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.
13.2 SEVERABILITY
In the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
<PAGE> 11
13.3 REQUIREMENTS OF LAW
The granting of Awards and the issuance of Shares under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
<PAGE> 1
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 2-83692, No. 33-16680, No. 33-51892, No. 33-51894 and No.
33-63832) of McDermott International, Inc. and the Registration Statement (Form
S-3 No. 33-54940) of McDermott Incorporated and in the related Prospectuses of
our report dated May 9, 1994 with respect to the combined financial statements
of McDermott-ETPM West, Inc. included in this Annual Report (Form 10-K/A-1) for
the year ended March 31, 1994.
ERNST & YOUNG
New Orleans, Louisiana
June 22, 1994
<PAGE> 1
Exhibit 28(1)
McDERMOTT INTERNATIONAL, INC.
ADDITIONAL EXHIBITS
SUPPLEMENTARY FINANCIAL INFORMATION
PREPARED IN ACCORDANCE WITH AND SOLELY FOR THE PURPOSE OF
COMPLYING WITH CERTAIN PANAMANIAN SECURITIES REGULATIONS
<TABLE>
<CAPTION>
F.Y.E.
3/31/94
-------
(Unaudited)
(In thousands)
<S> <C>
ARTICLE 29
----------
RULE #9 - INVESTMENTS IN SUBSIDIARIES AND OTHER
- - - -----------------------------------------------
INVESTEES AT EQUITY
-------------------
Head Office (Parent Company) $ 851,469
Subsidiaries and Affiliates --
Eliminations/Other (723,463)
---------------
McDERMOTT INTERNATIONAL, INC. $ 128,006
===============
RULE #25C - PARENT COMPANY ACCOUNTS PAYABLE TO
- - - ----------------------------------------------
SUBSIDIARIES
------------
Head Office (Parent Company) $ 1,126,486
Eliminations/Other (1,126,486)
---------------
McDERMOTT INTERNATIONAL, INC. $ -0-
===============
ARTICLE 30
----------
(c) - OPERATING EXPENSES BY SEGMENT
- - - -----------------------------------
Power Generation Systems and Equipment $ 1,564,265
Marine Construction Services 1,408,103
Eliminations (6,791)
---------------
McDERMOTT INTERNATIONAL, INC. $ 2,965,577
===============
RULE #40 - OPERATING REVENUES
- - - -----------------------------
Head Office (Parent Company) $ 32,635
Subsidiaries and Affiliates 3,018,784
Eliminations/Other 8,493
---------------
McDERMOTT INTERNATIONAL, INC. $ 3,059,912
===============
RULE #41 - OPERATING EXPENSES
- - - -----------------------------
Head Office (Parent Company) $ 62,395
Subsidiaries and Affiliates 2,949,090
Eliminations/Other 8,493
---------------
McDERMOTT INTERNATIONAL, INC. $ 3,019,978
===============
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
F.Y.E.
3/31/94
-------
(Unaudited)
(In thousands)
<S> <C> <C>
ARTICLE 30 - Continued
----------
RULE #43 - DIVIDENDS RECEIVED
- - - -----------------------------
Head Office (Parent Company)
from Subsidiaries and Affiliates $ 138,438
Subsidiaries and Affiliates
from Other Corporations 65,214
Eliminations/Other (138,438)
---------------
McDERMOTT INTERNATIONAL, INC. $ 65,214
===============
RULE #44 - INTEREST INCOME
- - - --------------------------
Head Office (Parent Company):
from Subsidiaries and Affiliates $ 18,701
from Other Corporations 302
Subsidiaries and Affiliates
from Other Corporations 38,449
Eliminations (18,701)
---------------
McDERMOTT INTERNATIONAL, INC. $ 38,751
===============
RULE #46 - OTHER MISCELLANEOUS REVENUES
- - - ---------------------------------------
Gain on Asset Disposals during 1994 - Net $ 4,369
Foreign Currency Transaction Losses - Net (2,260)
Bank Fees and Discounts on Sale
of Receivables (8,699)
Other Items - Net 2,225
---------------
McDERMOTT INTERNATIONAL, INC. $ (4,365)
===============
RULE #51 - INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY
- - - -------------------------------------------------------------
(Unaudited)
(In thousands)
Balance at 3/31/93 $ 76,996
Additional Investments 1,108
Equity Income 119,860
Dividends Received (65,214)
Other Changes (4,744)
-------------
Balance at 3/31/94 $ 128,006
=============
</TABLE>
<PAGE> 1
EXHIBIT 28 (2)
McDERMOTT-ETPM WEST, INC.
COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED MARCH 31, 1994 AND 1993
<PAGE> 2
McDERMOTT-ETPM WEST, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT AUDITORS 3
COMBINED BALANCE SHEET - MARCH 31, 1994 AND 1993 4
COMBINED STATEMENT OF INCOME FOR THE FISCAL YEARS
ENDED MARCH 31, 1994 AND 1993 5
COMBINED STATEMENT OF CASH FLOWS FOR THE FISCAL YEARS
ENDED MARCH 31, 1994 AND 1993 6
COMBINED STATEMENT OF COMMON STOCK AND OTHER EQUITY -
MARCH 31, 1994 AND 1993 7
NOTES TO COMBINED FINANCIAL STATEMENTS 8
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
McDermott International, Inc.
We have audited the accompanying combined balance sheet of McDermott - ETPM
West, Inc. as of March 31, 1994 and 1993, and the related combined statements
of income, common stock and other equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of McDermott - ETPM
West, Inc. at March 31, 1994 and 1993, and the combined results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG
New Orleans, Louisiana
May 9, 1994
3
<PAGE> 4
McDERMOTT-ETPM WEST, INC.
COMBINED BALANCE SHEET
MARCH 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
---- ----
(In thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 136,885 $ 101,325
Accounts receivable - trade 26,404 81,814
Accounts receivable - affiliates 4,685 845
Accounts receivable - other 3,355 5,134
Contracts in progress 981 16,214
Prepaid expenses 549 343
- - - -------------------------------------------------------------------------------------------------------
Total Current Assets 172,859 205,675
- - - -------------------------------------------------------------------------------------------------------
Machinery and Equipment, at Cost: 5,740 4,578
Less accumulated depreciation 1,964 773
- - - -------------------------------------------------------------------------------------------------------
Net Machinery and Equipment 3,776 3,805
- - - -------------------------------------------------------------------------------------------------------
Other Assets 109 146
- - - -------------------------------------------------------------------------------------------------------
TOTAL $ 176,744 $ 209,626
- - - -------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 59,674 $ 92,604
Accounts payable - affiliates 77 18,380
Advance billings on contracts 20,684 43,088
Accrued liabilities - other 36,178 19,310
Income taxes payable 4,047 2,264
- - - -------------------------------------------------------------------------------------------------------
Total Current Liabilities 120,660 175,646
- - - -------------------------------------------------------------------------------------------------------
Other Liabilities 8,362 9,563
- - - -------------------------------------------------------------------------------------------------------
Common Stock and Other Equity:
Common stock (par value $1.00 per share, authorized
1,000,000 shares; outstanding 10,000 shares) 10 10
Retained earnings and other venture capital 65,641 37,647
Cumulative foreign exchange translation adjustments (17,929) (13,240)
- - - -------------------------------------------------------------------------------------------------------
Total Common Stock and Other Equity 47,722 24,417
- - - -------------------------------------------------------------------------------------------------------
TOTAL $ 176,744 $ 209,626
- - - -------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE> 5
McDERMOTT-ETPM WEST, INC.
COMBINED STATEMENT OF INCOME
FOR THE TWO FISCAL YEARS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Revenues $ 382,934 $ 532,477
- - - ----------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of operations 298,967 432,163
Depreciation 1,191 567
Selling, general and administrative expenses 36,110 45,763
- - - ----------------------------------------------------------------------------------------------------
336,268 478,493
- - - ----------------------------------------------------------------------------------------------------
Operating Income 46,666 53,984
- - - ----------------------------------------------------------------------------------------------------
Other Income:
Interest income 8,609 7,907
Foreign currency transactions gains (net) 3,879 15,919
- - - ----------------------------------------------------------------------------------------------------
12,488 23,826
- - - ----------------------------------------------------------------------------------------------------
Income before Provision for Income Taxes 59,154 77,810
Provision for Income Taxes 4,252 3,003
- - - ----------------------------------------------------------------------------------------------------
Net Income $ 54,902 $ 74,807
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE> 6
McDERMOTT-ETPM WEST, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE TWO FISCAL YEARS ENDED MARCH 31,1994 AND 1993
INCREASE IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1994 1993
---- ----
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 54,902 $ 74,807
- - - ----------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,191 567
Changes in assets and liabilities:
Net contracts in progress and advance billings (7,171) (18,546)
Accounts receivable 53,349 42,942
Accounts payable (51,233) 3,154
Other, net 18,513 (3,855)
- - - ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 69,551 99,069
- - - ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,162) (1,566)
- - - ----------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,162) (1,566)
- - - ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid in advance of shareholder approval (26,908) --
- - - ----------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (26,908) --
- - - ----------------------------------------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (5,921) (24,448)
- - - ----------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 35,560 73,055
- - - ----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 101,325 28,270
- - - ----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 136,885 $ 101,325
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
6
<PAGE> 7
McDERMOTT-ETPM WEST, INC.
COMBINED STATEMENT OF COMMON STOCK AND OTHER EQUITY
MARCH 31, 1994
(In thousands)
<TABLE>
<CAPTION>
Retained Earnings Foreign
Common and Other Currency
Stock Venture Capital Translation Total
----- --------------- ----------- -----
<S> <C> <C> <C> <C>
Balance April 1, 1992 $ 10 $ (37,160) $ 2,312 $ (34,838)
Net income -- 74,807 -- 74,807
Cumulative foreign
exchange translation
adjustments -- -- (15,552) (15,552)
- - - ------------------------------------------------------------------------------------------------------------------
Balance March 31,
1993 10 37,647 (13,240) 24,417
- - - ------------------------------------------------------------------------------------------------------------------
Net income -- 54,902 -- 54,902
Dividends paid in advance
of shareholder approval -- (26,908) -- (26,908)
Cumulative foreign
exchange translation
adjustments -- -- (4,689) (4,689)
- - - ------------------------------------------------------------------------------------------------------------------
Balance March 31,
1994 $ 10 $ 65,641 $ (17,929) $ 47,722
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
7
<PAGE> 8
McDERMOTT-ETPM WEST, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED MARCH 31, 1994 AND 1993
NOTE 1 - GENERAL
McDermott-ETPM West, Inc. is a joint venture between McDermott International,
Inc. and ETPM, S.A. which provides general marine construction services to the
petroleum industry in the North Sea, West Africa and South America. McDermott
International and ETPM, S.A. own 49.9% and 50.1% of McDermott-ETPM West, Inc.,
respectively. McDermott-ETPM West, Inc., a Panamanian corporation, charters
one semi-submersible lay barge and one combination derrick-pipelaying barge
from McDermott International and two combination derrick-pipelaying barges from
ETPM, S.A. McDermott International and ETPM, S.A. also provide fabrication
facilities located in Warri, Nigeria and Tchenque, Gabon, respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The combined financial statements are presented in U.S. dollars in accordance
with accounting principles generally accepted in the United States. The
combined financial statements combine financial information of McDermott-ETPM
West, Inc. and its subsidiaries, and other entities of both McDermott
International, Inc. and ETPM S.A., which perform contracts on behalf of
McDermott-ETPM West, Inc. All significant intercompany transactions and
accounts have been eliminated.
Unless the context otherwise requires, hereinafter the "Joint Venture" will be
used to mean the combined enterprise.
Cash and Cash Equivalents
Cash equivalents are highly liquid investments, with maturities of three months
or less when purchased. The carrying amounts reported in the balance sheet for
cash and cash equivalents approximate their fair value.
Contracts and Revenue Recognition
Contract revenues on long-term contracts are recognized on a percentage of
completion method. Under this method revenues and costs are recognized based
on the percentage that costs to date bear to total estimated costs. Revenues
that exceed amounts invoiced to customers under the terms of the contracts are
included in Contracts in Progress. Billings that exceed revenues recognized
under percentage of completion are included in Advance Billings on Contracts.
Most long-term contracts have provisions for progress payments. Contract price
and cost estimates are reviewed periodically as the work progresses and
adjustments proportionate to the percentage of completion are reflected in
income in the period when such estimates are revised. There are no unbilled
revenues which will not be billed. Provisions are made currently for all known
or anticipated losses. Claims for extra work or changes in scope of work are
included in contract revenues when collection is probable.
Retainages on contracts are included in Accounts receivable - trade. There
were no such amounts at March 31, 1994, while $1,899,000 (all of which was
collected during fiscal year 1994) was included at March 31, 1993.
8
<PAGE> 9
Depreciation, Maintenance and Repairs and Drydocking Expenses
Machinery and equipment is depreciated on the straight-line method, using
estimated useful lives of four to seven years. Maintenance, repairs and
renewals which do not materially prolong the useful life of an asset are
expensed as incurred ($13,896,000 and $12,317,000 during fiscal years 1994 and
1993, respectively), except for drydocking costs for the marine fleet and
refurbishment costs for the main work barges, both of which are chartered from
the stockholders. Drydocking costs are estimated and accrued over the period
of time between drydockings, and are charged to operations currently.
Refurbishment costs for the main work barges are estimated and accrued during
working periods and charged to operations currently.
Foreign Currency Translation
Assets and liabilities are translated into U.S. Dollars at current exchange
rates and income statement items are translated at average exchange rates for
the year. Adjustments resulting from the translation of foreign currency
financial statements are recorded in a separate component of equity.
Forward Exchange Contracts
The Joint Venture enters into forward exchange contracts primarily as hedges
relating to identifiable currency positions. These financial instruments are
designed to minimize exposure and reduce risk from exchange rate fluctuations
in the regular course of business. Gains and losses on forward exchange
contracts which hedge exposures on firm foreign currency commitments are
deferred and recognized as adjustments of the bases of those assets. Gains and
losses on forward exchange contracts which hedge foreign currency assets and
liabilities are recognized in income as incurred. Such amounts effectively
offset gains and losses on the foreign currency assets or liabilities that are
hedged.
At March 31, 1994 and 1993, respectively, the Joint Venture has forward
exchange contracts to purchase $31,987,000 and $10,959,000 in other currencies
(primarily Dutch Guilders) with French Francs, and to sell $106,463,000 and
$155,942,000 in other currencies (primarily U.S. Dollars, British Pounds,
Norwegian Kroner and Irish Pounds) for French Francs. The 1994 forward
exchange contracts have various maturities, all of which occur during fiscal
years 1995 and 1996.
The fair values of forward exchange contracts are estimated by obtaining quotes
from brokers. At March 31, 1994 and 1993, the net fair value of the contracts
was approximately $74,507,000 and $144,223,000, respectively.
NOTE 3 - INCOME TAXES
All income has been earned outside of Panama and McDermott-ETPM West, Inc.
along with the other entities included in the Joint Venture are not subject to
income tax in Panama on income earned outside of Panama. Substantially all
income taxes provided are based on the deemed profits of contracts performed in
various taxing jurisdictions.
9
<PAGE> 10
In the countries in which Joint Venture operations are conducted through an ad
hoc joint venture between McDermott International, Inc. and ETPM S.A. or
through a registered partnership between a McDermott and ETPM entity, the
respective McDermott and ETPM entities are responsible for taxes based on their
proportionate share of contract revenues and costs; therefore, no taxes are
reflected in these statements. Therefore, there is no expected relationship
between the provision for income taxes and income before provision for income
taxes.
NOTE 4 - CONTINGENCIES AND COMMITMENTS
The Joint Venture is a defendant in numerous legal proceedings. Management
believes that the outcome of these proceedings will not have a material adverse
effect on the combined financial position of the Joint Venture.
Commitments for capital expenditures amounted to approximately $2,604,000 at
March 31, 1994, all of which relates to fiscal year 1995.
The stockholders of the Joint Venture are contingently liable under standby
letters of credit totalling approximately $53,557,000 at March 31, 1994, issued
in the normal course of business.
NOTE 5 - FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK
The Joint Venture's customers are primarily in the petroleum industry in the
North Sea and West Africa. This customer base is diversified between both
public and private industry customers, in numerous European and West African
countries. The management of the Joint Venture believes this diversification
minimizes any potential credit risk. Receivables are generally not
collateralized.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Joint Venture has material transactions with McDermott International, Inc.
and ETPM, S.A. occurring in the normal course of operations. Under the joint
venture agreement, marine equipment and fabrication facilities are chartered
into the Joint Venture from both stockholders. The charter expense for fiscal
years 1994 and 1993 was $26,361,000 and $25,578,000, respectively.
In addition, ETPM, S.A. provides general and administrative services to the
Joint Venture. In fiscal years 1994 and 1993, the amounts of these services
were approximately $35,854,000 and $44,162,000, respectively.
10
<PAGE> 1
EXHIBIT 28(3)
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
JOINT VENTURE
<PAGE> 2
CONTENTS
<TABLE>
<S> <C>
AUDITORS' REPORT Page 2
COMBINED BALANCE SHEET Page 4
COMBINED STATEMENTS OF INCOME Page 6
COMBINED STATEMENTS OF PARTNERS' EQUITY Page 7
COMBINED STATEMENTS OF CASHFLOWS Page 8
NOTES TO THE COMBINED FINANCIAL STATEMENTS Page 10
</TABLE>
1
<PAGE> 3
AUDITOR'S REPORT
To the Partners of the
Heerema Offshore Construction Group Inc. and McDermott International Inc.
Joint Venture
Geneva
We have audited the accompanying combined balance sheet of the Heerema Offshore
Construction Group Inc. - McDermott International Inc. Joint Venture as of
December 31, 1993 and 1992 and the related combined statements of operations
partners' equity and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Joint Venture's management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 the management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion the combined financial statements, referred to above, present
fairly, in all material respects, the financial position of the Heerema
Offshore Construction Group Inc. - McDermott International Inc. Joint Venture
at December 31, 1993 and 1992 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles in the United States of
America.
2
<PAGE> 4
AUDITOR'S REPORT (continued)
As explained in Note 2.2 the Joint Venture changed its policy in 1991 with
respect to charter rent as charged by the two Joint Venture Partners for the
four semi submersible crane vessels. The full charter rent is now taken into
consideration for the purpose of revenue recognition and the calculation of
loss provision. In prior years certain elements of this charter rent were
considered period cost.
KPMG Klynveld
The Hague, April 22, 1994
3
<PAGE> 5
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
JOINT VENTURE
COMBINED BALANCE SHEET
DECEMBER 31, 1993 AND 1992
ASSETS
<TABLE>
<CAPTION>
1993 1992
-------------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents DFL 204,841 DFL 142,168
Accounts receivable 122,821 154,296
Contracts in progress 39,010 56,256
Inventories 5,095 6,437
Other current assets 13,225 18,738
------------------- -----------------
TOTAL CURRENT ASSETS 384,992 377,895
------------------- -----------------
Fixed Assets at Cost 278,787 270,733
Less Accumulated Depreciation (133,991) (86,224)
------------------- -----------------
NET FIXED ASSETS 144,796 184,509
------------------- -----------------
TOTAL DFL 529,788 DFL 562,404
=================== =================
</TABLE>
(The accompanying notes are an integral part of these financial statements)
4
<PAGE> 6
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
JOINT VENTURE
COMBINED BALANCE SHEET
DECEMBER 31, 1993 AND 1992
LIABILITIES & PARTNERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
------------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Current Liabilities:
Notes payable and current
maturities of long-term debt DFL 53,830 DFL 61,388
Accounts payable 72,315 71,776
Advance billings on contracts 72,986 58,232
Accrued survey costs 21,664 54,669
Accrued liabilities - other 39,727 37,461
------------------- -----------------
TOTAL CURRENT LIABILITIES 260,522 283,526
------------------- -----------------
Pension Liability 3,576 2,322
------------------- -----------------
Long-Term Debt 61,860 99,446
------------------- -----------------
Partners' Equity:
Capital contributions 100,204 256,204
Accumulated profits (losses) 103,626 (79,094)
------------------- -----------------
TOTAL PARTNERS' EQUITY 203,830 177,110
------------------- -----------------
TOTAL DFL 529,788 DFL 562,404
=================== =================
</TABLE>
(The accompanying notes are an integral part of these financial statements)
5
<PAGE> 7
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
JOINT VENTURE
COMBINED STATEMENT OF INCOME (LOSS)
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues DFL 944,753 DFL 963,402 DFL 502,419
--------------- ------------- ---------------
Costs and Expenses:
Costs of operations 592,963 627,631 526,470
Depreciation 55,219 74,260 15,111
General and administrative expenses 56,427 41,372 36,444
--------------- ------------- ---------------
704,609 743,263 578,025
--------------- ------------- ---------------
OPERATING INCOME (LOSS) 240,144 220,139 (75,606)
--------------- ------------- ---------------
Other Income (Expense):
Interest income 7,955 4,028 1,607
Interest expense (7,188) (23,824) (7,802)
Foreign currency transaction gains (losses) (4,411) (757) 138
--------------- ------------- ---------------
(3,644) (20,553) (6,057)
--------------- ------------- ---------------
Income (Loss) before Income Taxes and
Cumulative Effect of Accounting Change 236,500 199,586 (81,663)
Income Taxes (3,780) -- --
--------------- ------------- ---------------
Income (Loss) before Cumulative Effect
of Accounting Change 232,720 199,586 (81,663)
Cumulative Effect of Accounting Change -- -- (10,738)
--------------- ------------- ---------------
NET INCOME (LOSS) DFL 232,720 DFL 199,586 DFL (92,401)
=============== ============= ===============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
6
<PAGE> 8
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
JOINT VENTURE
COMBINED STATEMENT OF PARTNERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
CONTRIBUTIONS PROFITS/(LOSSES) TOTAL
------------- ---------------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
Balance
January 1, 1991 DFL 25,102 DFL (93,140) DFL (68,038)
Capital Contribution 1991 128,000 -- 128,000
Net Loss 1991 -- (46,200) (46,200)
--------------- --------------- ---------------
Balance
December 31, 1991 153,102 (139,340) 13,762
Capital Repayment (25,000) -- (25,000)
Net Profit 1992 -- 99,793 99,793
--------------- --------------- ---------------
Balance
December 31, 1992 128,102 (39,547) 88,555
Capital Repayment (78,000) -- (78,000)
Distribution of Profits -- (25,000) (25,000)
Net Profit 1993 -- 116,360 116,360
BALANCE
--------------- --------------- ---------------
DECEMBER 31, 1993 DFL 50,102 DFL 51,813 DFL 101,915
=============== =============== ===============
MCDERMOTT INTERNATIONAL INC.
Balance
January 1, 1991 DFL 25,102 DFL (93,140) DFL (68,038)
Capital Contribution 1991 128,000 -- 128,000
Net Loss 1991 -- (46,200) (46,200)
--------------- --------------- ---------------
Balance
December 31, 1991 153,102 (139,340) 13,762
Capital Repayment (25,000) -- (25,000)
Net Profit 1992 -- 99,793 99,793
--------------- --------------- ---------------
Balance
December 31, 1992 128,102 (39,547) 88,555
Capital Repayment (78,000) -- (78,000)
Distribution of Profits -- (25,000) (25,000)
Net Profit 1993 -- 116,360 116,360
--------------- --------------- ---------------
BALANCE
DECEMBER 31, 1993 DFL 50,102 DFL 51,813 DFL 101,915
=============== =============== ===============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
7
<PAGE> 9
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
JOINT VENTURE
COMBINED STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) DFL 232,720 DFL 199,586 DFL (92,401)
------------- -------------- --------------
Adjustments to reconcile net income (loss) to net
cash provided (used in) operating activities:
Depreciation 55,219 74,260 15,111
Changes in assets and liabilities:
Accounts receivable 31,475 (66,211) (71,243)
Net contracts in progress and advance
billings 12,103 62,994 (62,352)
Accounts payable 539 7,636 (142,301)
Other, net (2,733) 52,945 10,794
------------- -------------- --------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 329,323 331,210 (342,392)
------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in fixed assets (15,506) (35,425) (212,492)
------------- -------------- --------------
TOTAL CASH USED IN INVESTING
ACTIVITIES (15,506) (35,425) (212,492)
------------- -------------- --------------
</TABLE>
8
<PAGE> 10
CONTINUED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital (repayments) contributions DFL (156,000) DFL (50,000) DFL 256,000
Distribution of profits (50,000) -- --
Repayment of long-term debt (63,419) (78,552) (4,315)
Issuance of long term debt 27,732 49,261 166,176
Increase (decrease) in short-term borrowing (9,457) (79,684) 107,947
------------- -------------- --------------
TOTAL CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (251,144) (158,975) 525,808
------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 62,673 136,810 (29,076)
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 142,168 5,358 34,434
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR DFL 204,841 DFL 142,168 DFL 5,358
============= ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid During the Year DFL 11,207 DFL 22,604 DFL 4,878
============= ============== ==============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
9
<PAGE> 11
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE
THREE YEARS ENDED DECEMBER 31, 1993
1. GENERAL
The Heerema Offshore Construction Group Inc. - McDermott
International, Inc. Joint venture ("Joint Venture") is engaged
in the world wide offshore heavy lift market. The Joint
Venture is 50% owned by both Heerema Offshore Construction
Group, Inc. and McDermott International, Inc. ("Partners").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PRESENTATION
The combined financial statements are presented in Dutch
Guilders in accordance with accounting principles generally
accepted in the United States of America. The combined
financial statements include the accounts of HeereMac v.o.f.,
a Dutch partnership, Panama Offshore Chartering Company Inc.
and its wholly owned subsidiaries, all incorporated in Panama,
HeereMac Far East Pty. Ltd, a company incorporated in
Singapore, and Heerema McDermott Pty. Ltd, a company
incorporated in Australia. All significant intercompany
transactions and accounts have been eliminated. Certain
amounts previously reported have been reclassified to conform
with the presentation at December 31, 1993.
Unless the context otherwise requires, hereinafter the "Joint
Venture" will be used to mean the combined enterprise.
2.2 CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Beginning in fiscal 1991, the Joint Venture changed its
accounting policy with respect to charter rent as charged by
the Joint Venture Partners for the four semi-submersible
derrick barges. In prior years, certain elements of the
charter rent were considered period costs, whereas beginning
January 1, 1991, the full charter rent is used to determine
percentage of completion and calculation of
10
<PAGE> 12
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
loss provisions. Management believes that this change is preferable
because it provides a better matching of contract costs with related
revenues in reporting periodic income and more accurately reflects the
concentrative effort of the Joint Venture.
The cumulative effect of the accounting change as of January 1, 1991
was Dfl. 10.7 million. Other than the cumulative effect, the
accounting change resulted in a reduction of profit of approximately
Dfl. 25 million in 1991.
2.3 FOREIGN CURRENCY TRANSLATION
Assets, liabilities, revenues and expenses that are denominated in
currencies other than Dutch Guilders are measured and recorded in
Dutch Guilders at exchange rates prevailing at the dates the
transactions are recognized. At December 31, 1993, balances
denominated in currencies other than Dutch Guilders are adjusted to
reflect the current exchange rate. Resulting foreign currency
transactions gains and losses are reported in income (loss) for the
period.
2.4 CONTRACTS AND REVENUE RECOGNITION
Revenues on contracts are recognized on a percentage of completion
method. Under this method, revenues and costs are recognized based on
the percentage that costs to date bear to total estimated costs.
Revenues that exceed amounts invoiced to customers under the terms of
the contracts are included in Contracts in Progress. Billings that
exceed revenues recognized under percentage of completion are included
in Advance Billings on Contracts.
Most long-term contracts have provisions for progress payments.
Contract price and cost estimates are reviewed periodically as the
work progresses and adjustments proportionate to the percentage of
completion are reflected in income in the period when such estimates
are revised. Claims for extra work or changes in scope of work are
included in contract revenues when collection is probable. Provisions
are currently made for all known or anticipated losses.
There are no unbilled revenues which will not be billed.
11
<PAGE> 13
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
At December 31, 1993 and 1992, provisions for losses were Dfl. 44.3
million and Dfl. 24.4 million, respectively.
2.5 INVENTORIES
Inventories are primarily composed of barge supplies and are stated at
lower of average cost or market.
2.6 FIXED ASSETS
Fixed assets are stated at cost. Modifications to leased equipment
which enhance their usefulness and which remain the property of the
Joint Venture are capitalized. Depreciation is calculated on a
straight-line basis using estimated useful lives of 3 to 8 years.
2.7 SURVEY ACCRUAL
Maintenance, repairs and renewals which do not materially prolong the
useful life of an asset are expensed as incurred. Provisions for
major repairs arising from periodic surveys are based on the
proportional allocation of the estimated total costs of periodic
surveys per vessel over the expected operating period between surveys.
2.8 CASH EQUIVALENTS
Cash equivalents are highly liquid investments, with maturities of
three months or less when purchased.
2.9 FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The Joint Venture enters into forward exchange contracts with
international financial institutions primarily relating to
identifiable foreign currency exposures with respect to offshore
contracts. In the case that the Joint Venture enters into forward
exchange contracts relating to identifiable foreign currency exposures
with respect to offshore contracts, the foreign currency positions are
valued at contract rate. The Joint Venture's risk in these
transactions is the cost of replacing at current market rates, these
contracts in the event of default by the financial institution. The
Joint Venture believes that risk of such losses is remote.
12
<PAGE> 14
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
3. INCOME TAXES
The Joint Venture operates through various entities in various
countries under different tax jurisdictions. The Joint Venture applies
the provision of SFAS109.
Under Dutch fiscal legislation the Joint Venture's entity HeereMac
v.o.f. as a "Vennootschap Onder Firma (V.O.F.) is not directly liable
for taxes. Taxation of income arising from this entity both in the
Netherlands and abroad is for the account of both Partners. Panama
Offshore Chartering Company, Inc. and its wholly owned subsidiaries
incurred no worldwide income tax in 1993, 1992 and 1991.
Heerema-McDermott Australia Pty. Ltd. is directly liable for
Australian income taxes. In 1992 and 1991, this company incurred no
Australian income taxes. A provision for income taxes of Dfl. 4
million (Aus$. 3 million) was posted in 1993.
HeereMac Far East Pty. Ltd. is directly liable for Singapore income
taxes. In 1993 this company incurred no income taxes.
4. RELATED PARTY TRANSACTIONS
The Joint Venture has material transactions with the Partners and
their subsidiaries occurring in the normal course of operations.
Transactions which are included in the Joint Venture's revenues
include the sales of installation and engineering services (Dfl. 71.3
million, Dfl. 93 million and Dfl. 67.5 in fiscal years 1993, 1992 and
1991 respectively). Other transactions include the leasing of four
semi-submersible heavy lift installation vessels (Dfl. 114.6 million,
Dfl. 114.9 million, and Dfl. 114.6 million in fiscal years 1993, 1992
and 1991, respectively) and other equipment rentals (Dfl. 25.5
million, Dfl. 28.8 million and Dfl. 55.7 million in fiscal years 1993,
1992 and 1991, respectively), vessel crews and engineering personnel
expenses (Dfl. 82.0 million, Dfl. 72.4 million, and Dfl. 65.6 million
in fiscal years 1993, 1992 and 1991, respectively), vessel and
equipment related operational expenses (Dfl. 23.5 million, Dfl. 20.9
million and Dfl. 34.3 million in fiscal years 1993, 1992, and 1991,
respectively), and contracted general and administrative support
expenses (Dfl. 7.2 million, Dfl. 8.1 million and Dfl. 9.4 million in
fiscal years 1993, 1992 and 1991, respectively).
13
<PAGE> 15
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
Included in other current assets are amounts of Dfl. 1.1 million and
Dfl. 3.3 million at December 31, 1993 and 1992, respectively, which
will be compensated by the Partners, primarily relating to Joint
Venture survey costs on marine vessels.
Included in accounts payable are Dfl. 30.8 million and Dfl. 22.2
million at December 31, 1993 and 1992, respectively, with related
parties. There are no notes payable and current maturities of long
term debt at December 31, 1993 (December 31, 1992: Dfl. 4.6 million).
At December 31, 1993 there was no long term debt (net of current
maturities) with related parties (December 31, 1992: Dfl. 27.7
million). Interest paid to related parties amounted to Dfl. 1.4
million in 1993 and Dfl. 9.7 million in 1992.
In 1993, a repayment of capital was made by the Joint Venture
amounting to Dfl. 103 million per partner. By virtue of a resolution
by the Executive Committee on 25th June 1993, each of the Partners
made a capital contribution to the amount of Dfl. 25 million (Dfl. 25
million repayment of capital per partner in 1992, and Dfl. 128 million
contribution per partner in 1991). In 1993 distribution out of
Accumulated Profits was made by the Joint Venture amounting to Dfl. 25
million per partner.
On the increase of capitalization the Partners shall have the right,
pro rata, based upon their then current respective interests in the
Joint Venture, to participate in such increase in the capitalization.
The profit, gains and losses of the Joint Venture shall be allocated
among the Partners in accordance with the percentages of
participation.
14
<PAGE> 16
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
5. LONG TERM DEBT AND SHORT TERM BORROWINGS
Long term debt consists of:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Floating rate (Interest at AIBOR and .875%) 46,500 54,250
note due in installments by 1999
8.75% note due 1994 22,652 45,967
Subordinated floating rate (Interest at AIBOR and
.875%) note due 1999 with a related party -- 32,354
Floating rate (Interest at AIBOR and 8.75%)
note due in installments by 1999 27,732 --
Less: amounts due within one year 35,024 33,125
Total long-term debt 61,860 99,446
</TABLE>
The Joint Venture's floating rate note due 1999 is secured by a first
mortgage on certain marine equipment. The 8.75% note due 1995 is
secured by a guarantee from Heerema Offshore Construction Group, Inc.
The subordinated floating rate related party loan due 1999 was repaid
during 1993 and replaced by a second floating rate loan with a third
party due 1999 and secured by a second mortgage on certain marine
equipment.
Maturities of long-term debt during the five years subsequent to
December 31, 1993 are as follows: 1994: Dfl. 35,024,000., 1995: Dfl.
12,372,000., 1996: Dfl. 12,372,000., 1997: Dfl. 12,372,000, 1998: Dfl.
12,372,000.
At December 31, 1993, the Joint Venture had lines of credit and bank
guarantees available amounting in total to Dfl 170 million (Dfl. 170
million in 1992) guaranteed by the partners. Amounts drawn on this
facility bear interest at prevailing market rates. Borrowings against
these facilities were Dfl. 18,806,000 at December 31, 1993 (Dfl.
28,263,000 in 1992). The Joint Venture has bank guarantees drawn on
this facility of Dfl. 88 million at
15
<PAGE> 17
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
December 31, 1993 (Dfl. 73 million in 1992) in relation to projects.
(See note 7.)
6. PENSION LIABILITY
The Joint Venture has defined benefits pension plans covering most of
its full-time employees. The pension scheme is fully insured by a
third party life insurance company in the Netherlands. Premiums
charged by the insurance company and expensed by the Joint Venture are
calculated by determining the actuarial present value of future
benefits to be provided based upon current compensation levels.
Further, at the time of granting compensation increases, the Joint
Venture accrues as pension provision the increase in its actuarial
present value of future benefits. Such amounts will be funded through
enhanced future premiums. The discount rate used to calculate the
actuarial present value of future benefits was 5% in 1993 and 7% in
1992. Pension cost paid by the Joint Venture amounted to Dfl. 3.3
million in 1993 and Dfl. 2.8 million in 1992.
7. CONTINGENCIES AND COMMITMENTS
The Joint Venture has the usual liability of a contractor for
completion of contracts and the warranty of its work. In relation to
this liability bank guarantees and performance bonds are issued in the
normal line of business. Bank guarantees outstanding at year end
amounted to Dfl. 89.1 million (Dfl. 73 million in 1992). Due to the
short term nature of the guarantees, the fair value is considered to
be nil. Management is not aware of any material exposure related
thereto which has not been provided for in the accompanying
statements.
Certain marine equipment (primarily anchor handling tugs and cargo
barges) have been pledged as collateral to secure certain floating
rate long-term debt (See note 5).
Future minimum lease payments and leased property relate to the lease
of derrick barges and the lease of office space and cars. The leases
of derrick
16
<PAGE> 18
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
barges are operating leases from related parties under the terms of a
bare boat charter agreement which will expire at December 31, 2008.
The leases of office space and cars are operating leases which will
expire in 1998. The future minimum annual lease payments amount to
Dfl. 116 million for each of the succeeding five fiscal years.
8. FIXED ASSETS
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
At cost:
Anchor handling tugs 39,360 39,360
Cargo barges 59,861 59,616
Modifications of derrick barges 14,045 14,045
Offshore ancillary equipment 154,419 149,207
Onshore office equipment 11,102 8,505
-------- -------
278,787 270,733
Less accumulated depreciation (133,991) (86,224)
-------- -------
144,796 184,509
</TABLE>
Effective 1 January 1992, the Joint Venture changed its estimates of
the remaining useful economic lives of certain offshore equipment.
Depreciation lives of equipment acquired from the Partners in October
1991, that previously averaged 5 years, were decreased to an average
of 3 years. These changes were made to better reflect the estimated
periods during which such assets will remain in service. The change
had the effect of increasing depreciation expense(s) by Dfl. 10
million in 1992. Pipelay equipment with a net book value of Dfl. 27
million was fully written off in 1992. Drilling equipment with a net
book value of Dfl. 15 million was fully written off in 1993. These
assets are not expected to be used again in the near future.
17
<PAGE> 19
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
9. ACCOUNTS RECEIVABLE
Included in accounts receivable are Dfl. 83.2 million and Dfl. 83.2
million at December 31, 1993 and 1992, respectively, with related
parties. Accounts receivable are stated at net realizable value after
deduction of a provision for uncollectability of Dfl. 235,000 for
accounts receivable - trade (1992: nil), and Dfl. 650,000 for accounts
receivable from related parties (1992: nil). Included in accounts
receivable are amounts representing retainages on contracts with third
parties of Dfl.- 17,000 (1992: Dfl. 4.5 million) and with related
parties of Dfl. 4.9 million (1992 :Dfl. 85,000).
10. FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
At year end, the Company had forward exchange contracts to sell (1992:
none) of:
USD. 25 million at 1.926 (expire date 1st February 1994)
USD. 10 million at 1.900 (expire date 25th October 1994)
The fair values of forward exchange contracts are estimated by
obtaining quotes from brokers. At December 31, 1993, the net fair
value of the contracts was approximately Dfl. 68.2 million.
Financial instruments which potentially subject the Joint Venture to
concentrations of credit risk are primarily cash and cash equivalents
and accounts receivable. The Joint Venture has not experienced any
significant losses related to any of the short-term instruments it has
used for excess cash balances, nor from receivables from individual
customers or groups of customers.
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Joint Venture
in estimating its fair value disclosures for financial instruments.
18
<PAGE> 20
COMBINED FINANCIAL STATEMENTS 1993
HEEREMA OFFSHORE CONSTRUCTION GROUP INC.
MCDERMOTT INTERNATIONAL INC.
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Long and short term debt: The carrying amount reported in the balance
sheet of the 8.75% loan due 1995 approximates its fair value. For
floating rate debt instruments the carrying value is considered to
approximate the fair value.
19
<PAGE> 21
(KPMG LOGO) KLYNVELD ACCOUNTANTS
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 2-83692, No. 33-16680, No. 33-51892, No. 33-51894 and No.
33-63832) of McDermott International, Inc. and the Registration Statement (Form
S-3 No. 33-54940) of McDermott Incorporated and in the related prospectuses of
our report dated April 22, 1994 with respect to the combined financial
statements of Heerema Offshore Construction Group Inc. - McDermott
International, Inc. Joint Venture included in this Annual Report (Form 10-K/A
No. 1) for the year ended March 31, 1994.
The Hague
June 20, 1994
/s/ KPMG KLYNVELD
Ref.: P.A.G. Peters
<PAGE> 22
(KPMG LOGO) KLYNVELD ACCOUNTANTS
Office address Mail address Telephone 31 (70)338 2222
Churchillplein 6 P.O. Box 29761 Telex 33170 kpmgh nl
2517 JW The Hague 2502 LT The Hague Telefax 31 (70)350 3191
The Netherlands The Netherlands
To the Partners of the
Heerema Offshore Construction Group Inc. and
McDermott International, Inc. Joint Venture
5, Rue Pedro Meylan
1208 GENEVA
Switzerland
The Hague, June 20, 1994
Dear Sirs,
We hereby give our consent that the following auditors' report is included in
the combined financial statements 1993 of the Heerema Offshore Construction
Group Inc.- McDermott International Inc. Joint Venture, a copy of which we have
attached initialled for identification purposes.
"We have audited the accompanying combined balance sheet of the Heerema Offshore
Construction Group Inc. - McDermott International Inc. Joint Venture as of
December 31, 1993 and 1992, and the related combined statements of operations,
partners' equity, and cash flows for each of three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Joint Venture's management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 also includes
assessing the accounting principles used and significant estimates made by
the management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion the combined financial statements, referred to above, present
fairly, in all material respects, the financial position of the Heerema
Offshore Construction Group Inc.- McDermott International Inc. Joint Venture at
December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles in the United States
of America.
<PAGE> 23
(KPMG LOGO) KLYNVELD ACCOUNTANTS
As explained in Note 2.2 the Joint Venture changed its accounting policy in
1991 with respect to charter rent as charged by the two Joint Venture Partners
for the four semi submersible crane vessels. The full charter rent is now taken
into consideration for the purpose of revenue recognition and the calculation
of loss provision. In prior years certain elements of this charter rent were
considered period cost.
KPMG Klynveld
The Hague, April 22, 1994"
It should be understood that these financial statements and our opinion thereon
cannot be made public without our prior written consent.
Should you have any questions or need for further information please do not
hesitate to contact us.
Yours sincerely,
/s/ KPMG KLYNVELD
Ref.: P.A.G. Peters
