<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
McDermott International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
McDermott International, Inc.
- --------------------------------------------------------------------------------
R. E. Howson 1450 Poydras Street
Chairman of the Board and P.O. Box 61961
Chief Executive Officer New Orleans, Louisiana, 70161-1961
(504) 587-5682
July 5, 1995
Dear Stockholder:
You are cordially invited to the Company's Annual Meeting of Stockholders to
be held on Tuesday, August 8, 1995, in the La Salle Ballroom of the Hotel
Inter-Continental, 444 St. Charles Avenue, New Orleans, Louisiana, commencing
at 9:30 a.m. local time. We look forward to greeting personally as many of our
stockholders as possible at the meeting.
We hope you will join us at this year's meeting; but, whether or not you
personally plan to attend, please take a few minutes now to sign, date and
return your Proxy in the enclosed postage-paid envelope. Regardless of the
number of shares you may own, your vote is important.
Thank you for your continued interest in our Company.
Very truly yours,
R. E. HOWSON
<PAGE>
McDERMOTT INTERNATIONAL, INC.
1450 POYDRAS STREET
P.O. BOX 61961
NEW ORLEANS, LOUISIANA 70112-1961
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 8, 1995
----------------
To the Stockholders of
McDERMOTT INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
McDermott International, Inc., a Panama corporation (the "Company"), for the
fiscal year ended March 31, 1995 will be held in the La Salle Ballroom of the
Hotel Inter-Continental, 444 St. Charles Avenue, New Orleans, Louisiana, on
Tuesday, August 8, 1995, at 9:30 a.m. local time, for the following purposes:
(1) To elect five Directors;
(2) To consider and act upon a proposal to retain Ernst & Young LLP as
the Company's independent auditors for the fiscal year ending March
31, 1996; and
(3) To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on June 29, 1995 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting and at any adjournment or adjournments thereof.
Stockholders are urged to sign the enclosed Proxy and return it promptly to
the Company in the enclosed envelope, which requires no postage if mailed in
the United States.
By Order of the Board of Directors,
LAWRENCE R. PURTELL
Secretary
Dated: July 5, 1995
<PAGE>
McDERMOTT INTERNATIONAL, INC.
1450 POYDRAS STREET
P.O. BOX 61961
NEW ORLEANS, LOUISIANA 70112-1961
----------------
PROXY STATEMENT
----------------
The accompanying Proxy is solicited by the Board of Directors of McDermott
International, Inc. (the "Company"), which will bear all expenses incurred in
connection with such solicitation. It is expected that solicitation of Proxies
will be primarily by mail. Morrow & Co., Inc. has been engaged to assist in the
solicitation of Proxies for a fee of $6,500, plus out-of-pocket expenses. In
addition to solicitation by mail and by such proxy soliciting firm, officers
and regular employees of the Company may solicit Proxies by personal interview,
telephone and facsimile transmission, for which they will receive no additional
compensation. Brokerage houses, banks and other custodians, nominees and
fiduciaries will be reimbursed for their customary out-of-pocket and reasonable
expenses incurred in forwarding proxy materials to their clients who are
beneficial owners of shares. Any Proxy may be revoked at any time prior to its
exercise by written notice to the Secretary of the Company, by submission of
another Proxy having a later date or by voting in person at the meeting. This
Proxy Statement is first being mailed to stockholders on or about July 5, 1995.
VOTING AT MEETING
Only holders of record of the Company's Common Stock, par value $1.00 per
share (the "Common Stock"), at the close of business on June 29, 1995 (the
"Record Date"), will be entitled to notice of, and to vote at, the Annual
Meeting. There were outstanding on the Record Date 54,246,100 shares of the
Common Stock, each of which is entitled to one vote per share. On the Record
Date, 100,000 shares of Common Stock were held by McDermott Incorporated, a
publicly traded subsidiary of the Company ("McDermott"), with its address at
1450 Poydras Street, New Orleans, Louisiana 70160-0035. The Company has been
informed by McDermott that it will not vote its shares of Common Stock at the
meeting. A majority of the outstanding shares present in person or by proxy
will constitute a quorum at the meeting. Abstentions and broker non-votes are
counted for the purpose of determining whether a quorum is present but are not
counted for any other purposes.
ELECTION OF DIRECTORS
(ITEM 1)
At the Annual Meeting, four Directors are to be elected to Class I of the
Board of Directors, each to hold office until the Company's 1998 Annual Meeting
and until his successor is elected and qualified. Also, one current Director
has been redesignated from Class I to Class II by the Board of Directors and is
to be elected as a Class II Director to hold office until the Company's 1996
Annual Meeting and his successor is
<PAGE>
elected and qualified. The persons named as proxies in the enclosed Proxy have
been designated by the Board of Directors and, unless otherwise directed,
intend to vote for the election of the nominees named below. If any nominee
named below should become unavailable for election, the shares will be voted
for such substitute nominee as may be proposed by the Board of Directors. No
circumstances are now known, however, that would prevent any of the nominees
from serving. Set forth below under "Continuing Class II Directors" and
"Continuing Class III Directors" are the names of the other Directors of the
Company currently in office. Class II Directors will serve until the Company's
Annual Meeting of Stockholders in 1996 and Class III Directors will serve until
the Company's Annual Meeting of Stockholders in 1997.
All Directors have been elected previously as directors of the Company by the
stockholders, except for Messrs. Hattox and Johnstone. Mr. Hattox, upon the
recommendation of the Directors Nominating Committee, was elected by the Board
of Directors to Class I, effective June 14, 1993. Upon the recommendation of
such committee, Mr. Johnstone is a first time nominee to the Company's Board of
Directors. Together with the other Class I Nominees, Messrs. Hattox and
Johnstone are now standing for election as Class I Directors. Mr. Bookout,
previously elected as a Class I Director, has been redesignated by the Board of
Directors as a Class II Director and now stands for election as such to serve
until the Company's 1996 Annual Meeting of Stockholders.
The information appearing below with respect to the business experience of
each Director and other directorships held, has been furnished by each such
Director as of June 20, 1995.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
CLASS I NOMINEES
<S> <C> <C>
Thomas D. Barrow.................................................. 70 1985
Oil and gas exploration; he is Chairman of GX Technology (formerly
GeoQuest Technology Corporation).
Philip J. Burguieres.............................................. 51 1990
Chairman of the Board since December 1992 and President and Chief
Executive Officer since April 1991 of Weatherford International
Incorporated (a supplier of products, equipment and services to
the worldwide petroleum industry). From January 1990 until
November 1990, he was Chairman of the Board, President and Chief
Executive Officer of Panhandle Eastern Corporation (a natural gas
transmission company); and prior to that, he was Chairman of the
Board, President and Chief Executive Officer of Cameron Iron
Works, Inc. (a manufacturer of oil tools, ball valves and forged
products). He is also a director of Texas Commerce Bancshares,
Inc. and Cabot Oil & Gas Corporation.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Brock A. Hattox.................................................. 47 1993
Executive Vice President and Chief Financial Officer of the
Company, and Executive Vice President and Chief Financial
Officer, and President of the Engineering and Construction
Group, of McDermott since February 1995. Prior to assuming these
positions, he was Senior Vice President and Chief Financial
Officer of the Company and McDermott from March 1991; and prior
to that, Vice President, Controller and Planning of the Eaton
Corporation (a manufacturer of engineered products for
automotive, industrial, commercial and defense markets). He is
also a director of McDermott and J. Ray McDermott, S.A., a
publicly traded subsidiary of the Company ("J. Ray McDermott").
John W. Johnstone, Jr............................................ 62 --
Chairman of the Board since 1988 and Chief Executive Officer
since 1987 of Olin Corporation, (a manufacturer and supplier of
chemicals, metals, defense related products and services, and
ammunition), prior to which he has held various management and
executive positions with such company since 1979. He is also a
director of American Brands, Inc. and Phoenix Home Mutual Life
Insurance Company.
CLASS II NOMINEE
John F. Bookout.................................................. 72 1988
Until his retirement in June 1988, Mr. Bookout was President and
Chief Executive Officer of Shell Oil Company. He is also a
director of The Investment Company of America and J. Ray
McDermott.
CONTINUING CLASS II DIRECTORS
Theodore H. Black................................................ 66 1993
Until his retirement in October 1993, Mr. Black was Chairman of
the Board and Chief Executive Officer of Ingersoll-Rand Company
(a manufacturer of heavy equipment) from 1988. He is also a
director of CPC International, Inc., General Public Utilities
Corporation and Ingersoll-Rand Company.
J. Howard Macdonald.............................................. 67 1985
Chairman and Chief Executive Officer of NatWest Investment Bank
from January 1989 to April 1991. He is also a director of J. Ray
McDermott, The BOC Group plc and The Weir Group plc.
William McCollam, Jr............................................. 70 1990
Energy management consultant, and President Emeritus of Edison
Electric Institute (a electric utility company association)
since May 1990. From April 1978 to May 1990, he was President of
Edison Electric Institute.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
John A. Morgan................................................... 64 1983*
Partner in Morgan Lewis Githens & Ahn (investment banking) since
1982. He is also a director of Masco Corporation, MascoTech,
Inc., FlightSafety International, Inc. and Trimas Corporation.
CONTINUING CLASS III DIRECTORS
James L. Dutt.................................................... 70 1983*
Chairman of the Board of Stratxx Ltd. (management consultants)
since 1986, and former Chairman of the Board and Chief Executive
Officer of Beatrice Companies, Inc.
Robert E. Howson................................................. 63 1981
Chairman of the Board and Chief Executive Officer of the Company
and McDermott since August 1988 and Chairman of the Board and
Chief Executive Officer of J. Ray McDermott since January 31,
1995. Previously President and Chief Operating Officer of the
Company and McDermott from August 1987. He is also a director of
McDermott,
J. Ray McDermott, The Louisiana Land and Exploration Company and
Whitney Holding Corporation.
James A. Hunt.................................................... 64 1983*
President, James A. Hunt, Inc. (investment banking) since January
1990. Prior to assuming this position, he was a partner in Kalb,
Voorhis & Co. (investment banking) from 1967 until December
1989.
John N. Turner................................................... 66 1993
Partner, Miller Thomson (barristers & solicitors), Toronto,
Canada since 1990. Prior to assuming this position, he was
Leader of Opposition of the Parliament of Canada from 1984. He
is also a director of E-L Financial Corporation, The Loewen
Group Inc. and Noranda Forest Inc.
</TABLE>
- --------
* Each of Messrs. Dutt, Hunt and Morgan served as a director of McDermott (the
former parent corporation of the Company) from 1982, 1974 and 1973,
respectively, until he was elected a Director of the Company.
BOARD OF DIRECTORS AND ITS COMMITTEES
General Information. The Board of Directors of the Company has several
standing committees, including an Audit Committee, a Directors Nominating
Committee and a Compensation Committee.
Audit Committee. The Audit Committee is currently composed of Messrs.
Macdonald (Chairman), Barrow, Black, Burguieres, Hunt and McCollam. During the
last fiscal year, the Audit Committee met three
4
<PAGE>
times. The functions of the Audit Committee include reviewing the accounting
principles and practices employed by the Company and, to the extent the Audit
Committee deems appropriate, by the Company's subsidiaries; meeting with the
Company's independent auditors to review their report on their examination of
the Company's accounts, their comments on the internal controls and audit
procedures of the Company and the action taken by management with regard to
such comments; approving professional services, including non-audit services,
rendered by such independent auditors; and recommending annually to the Board
of Directors the appointment of the Company's independent auditors.
Compensation Committee. The Compensation Committee is currently composed of
Messrs. Black (Chairman), Bookout, Hunt and Macdonald. During the last fiscal
year, the Compensation Committee met three times. The Compensation Committee
determines the salaries of all of the Company's officers elected to their
positions by the Board, and also reviews and makes recommendations regarding
the salaries of officers of the Company's subsidiaries; and administers and
makes awards under the Company's 1994 Variable Supplemental Compensation Plan
and 1992 Officer Stock Incentive Program.
Directors Nominating Committee. The Directors Nominating Committee is
currently composed of Messrs. Hunt (Chairman), Dutt, McCollam, Morgan and
Turner. During the last fiscal year, the Directors Nominating Committee met
three times. The function of the Directors Nominating Committee is to recommend
nominees for election to the Company's Board of Directors. The Directors
Nominating Committee will consider nominees recommended by stockholders for
election as directors. Any such recommendation, together with the nominee's
qualifications and consent to be considered as a nominee, should be sent to the
Secretary of the Company.
DIRECTORS' ATTENDANCE AND COMPENSATION
Directors' Attendance and Fees. During the fiscal year ended March 31, 1995,
there were eight meetings of the Board of Directors of the Company. Each
incumbent Director attended 75% or more of the aggregate of the meetings of the
Board and of the committees on which he served. Each Director who is not an
employee of the Company or any of its subsidiaries receives an annual stipend
of $28,000 plus a fee of $2,500 for each Board meeting attended and a fee of
$1,000 for each telephonic Board meeting in which such Director participates.
The Chairman of the Audit Committee receives an annual fee of $3,000 and each
other member of the Audit Committee receives an annual fee of $2,000. Each
member also receives a fee of $1,650 for each committee meeting attended.
The Chairman of each of the Compensation Committee, the Directors Nominating
Committee and other committees of the Board receives an annual fee of $2,500
and each other member of such committees receives an annual fee of $1,750,
provided that they are not employees of the Company or any of its subsidiaries.
Each such member also receives a fee of $1,650 for each committee meeting
attended.
5
<PAGE>
Retirement Plan and Health Care. The Company maintains an unfunded retirement
plan in which all Directors who are not employees of the Company or any of its
subsidiaries participate. The Retirement Plan for Non-Management Directors of
McDermott International, Inc. provides an annual benefit equal to the greater
of (1) 50% of the final average three years of compensation received by the
Director from the Company or (2) the annual stipend (excluding meeting and
committee fees and expenses) which the Company paid non-management Directors
immediately preceding the last annual meeting held prior to the Director's
retirement. Benefits are payable quarterly, commencing upon the Mandatory
Retirement Date or Disability (as such terms are defined in such plan). The
number of quarterly payments due equals the number of months of service as a
Director. A death benefit is also provided in the event that the Director dies
prior to the last quarterly payment due under the plan. The Directors also
participate in the Company's health care plan under the same terms and
conditions applicable to employees.
Director Stock Program. The Company has a 1992 Director Stock Program, which
is administered by a committee comprised of those members of the Board of
Directors that are employees of the Company (the "Committee"). Under the
program, the Committee may grant to Directors who are not employees of the
Company or any of its subsidiaries stock options and rights to purchase
restricted stock in an aggregate of up to 50,000 shares of Common Stock.
Pursuant to the program, each eligible Director is granted options to
purchase at fair market value 900, 300 and 300 shares of Common Stock on the
first day of the first, second and third years, respectively, of such
Director's term. The options are granted at no less than 100% of the fair
market value on the date of grant. Generally, options become exercisable in
full six months after the date of grant, and remain exercisable for not more
than ten years and one day after the date of grant. Also pursuant to the
program, each eligible Director is granted rights to purchase 450, 150 and 150
shares of Common Stock, which are subject to transfer restrictions and
forfeiture under certain circumstances, on the first day of the first, second
and third years, respectively, of such Director's term at a purchase price per
share equal to the par value of the Common Stock ($1.00 per share). The
restrictions and forfeiture provisions generally lapse on all shares of
restricted stock purchased under grants made during a Director's term at the
end of such term. In the event of a change in control of the Company, all such
restrictions and forfeiture provisions shall lapse and the exercisability of
any outstanding options will be accelerated.
During the last fiscal year, options to acquire 4,800 shares of Common Stock
and rights to purchase 2,400 shares of restricted stock were granted under the
1992 Director Stock Program.
6
<PAGE>
EXECUTIVE OFFICERS
Set forth below is the age, positions held with the Company and certain
subsidiaries, and certain business experience information for each of the
Company's executive officers who are not Directors.
Walter E. Boomer, 56, President, Babcock & Wilcox Power Generation Group, of
Babcock & Wilcox Investment Company and The Babcock & Wilcox Company and
Executive Vice President of the Company since February 1995. During the past
five years and before assuming his present position, Mr. Boomer was Senior Vice
President and Chief Project Management Officer of the Company from August 1994;
and prior to that, he was a General of the U. S. Marine Corps from 1986.
Daniel R. Gaubert, 46, Vice President, Finance, and Controller of the Company
and McDermott since February 1995. During the past five years and before
assuming his present position, he was Vice President and Controller of the
Company and McDermott from February 1992; Corporate Controller of the Company
and McDermott from July 1991; and prior to that, Group Controller, Power
Generation Group, of Babcock & Wilcox Investment Company and The Babcock &
Wilcox Company.
Lawrence R. Purtell, 48, Senior Vice President and General Counsel and
Corporate Secretary of the Company and McDermott since May 1993 and Senior Vice
President and General Counsel and Corporate Secretary of J. Ray McDermott since
January 31, 1995. Before assuming his present positions, Mr. Purtell was Vice
President, General Counsel and Secretary of Carrier Corporation, a United
Technologies Corporation subsidiary, from December 1992; and prior to that, he
was Corporate Secretary and Associate General Counsel of United Technologies
Corporation from June 1989.
Joe J. Stewart, 57, President, Babcock & Wilcox Government Group, of Babcock
& Wilcox Investment Company and The Babcock & Wilcox Company, and Executive
Vice President and Chief Project Management Officer of the Company since
February 1995. Before assuming his present position, Mr. Stewart was President
and Chief Operating Officer of Babcock & Wilcox Investment Company and The
Babcock & Wilcox Company from February 1993; and prior to that, Executive Vice
President and Group Executive, Power Generation Group, of Babcock & Wilcox
Investment Company and The Babcock & Wilcox Company from August 1990.
James J. Wildasin, 60, President, Chief Operating Officer and a director of
J. Ray McDermott since January 31, 1995. Prior to assuming his present
position, Mr. Wildasin was President and Chief Operating Officer of the
Company's Marine Construction Services Business from February 1993; Vice
President and Group Executive, North Sea, Middle East and West Africa
Operations of the Company from February 1992; Vice President and Group
Executive, North Sea, Middle East and West Africa Operations of the Company
from July 1991; Vice President and General Manager, London Engineering of the
Company from March 1991; and prior to that, President and Co-Chief Executive
Officer of McDermott-ETPM, Inc.
7
<PAGE>
Edgar Allen Womack, Jr., 52, Senior Vice President and Chief Technical
Officer of the Company and McDermott since February 1993. Before assuming his
present position, Mr. Womack was Senior Vice President, Research and
Development and Contract Research Divisions, of Babcock & Wilcox Investment
Company and The Babcock & Wilcox Company from August 1991; and prior to that,
Vice President, Research and Development and Contract Research Divisions, of
Babcock & Wilcox Investment Company and The Babcock & Wilcox Company.
Richard E. Woolbert, 61, Executive Vice President and Chief Administrative
Officer of the Company and McDermott since February 1995. Before assuming his
present position, Mr. Woolbert was Senior Vice President and Chief
Administrative Officer of the Company and McDermott from August 1991; and prior
to that, Vice President and Chief Administrative Officer of the Company and
McDermott from November 1988.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each Director or nominee as a Director, each Named
Executive Officer, as defined in "COMPENSATION OF EXECUTIVE OFFICERS", and all
Directors and executive officers of the Company as a group, as of June 20,
1995, except as otherwise noted.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAMES OWNED
----- ------------
<S> <C>
Thomas D. Barrow(1)(2)............................................. 23,475
Theodore H. Black(2)............................................... 6,875
John F. Bookout(2)................................................. 4,475
Philip J. Burguieres(2)............................................ 4,475
James L. Dutt(2)................................................... 4,825
Brock A. Hattox(3)(4).............................................. 98,999
Robert E. Howson(3)(4)............................................. 486,556
James A. Hunt(2)................................................... 3,975
John W. Johnstone, Jr.............................................. 0
J. Howard Macdonald(2)............................................. 2,925
William McCollam, Jr.(2)........................................... 4,925
John A. Morgan(2).................................................. 4,925
Joe J. Stewart(3)(4)............................................... 132,927
John N. Turner(2).................................................. 1,875
James J. Wildasin(3)(4)............................................ 80,592
Richard E. Woolbert(3)(4).......................................... 116,268
All Directors and executive officers as a group (20 persons)....... 1,176,371
</TABLE>
- --------
(1) Does not include 5,000 shares as to which Mr. Barrow disclaims beneficial
ownership.
8
<PAGE>
(2) With respect to Mr. Dutt, includes 2,550 shares of Common Stock; with
respect to Mr. Hunt, includes 2,250 shares of Common Stock; with respect to
each of Messrs. Macdonald, McCollam and Morgan, includes 1,950 shares of
Common Stock; with respect to each of Messrs. Barrow, Bookout and
Burguieres, includes 1,650 shares of Common Stock; with respect to each of
Messrs. Black and Turner, includes 1,250 shares of Common Stock; all of
which shares are issuable upon the exercise of certain stock options,
currently exercisable, granted under the Company's 1992 Director Stock
Program. With respect to Mr. Dutt, includes 1,275 shares of Common Stock;
with respect to Mr. Hunt, includes 1,125 shares of Common Stock; with
respect to each of Messrs. Macdonald, McCollam and Morgan, includes 975
shares of Common Stock; with respect to each of Messrs. Barrow, Bookout and
Burguieres, includes 825 shares of Common Stock; with respect to each of
Messrs. Black and Turner, includes 625 shares of Common Stock; all of which
were acquired as restricted stock awards under the Company's 1992 Director
Stock Program.
(3) With respect to Messrs. Hattox, Howson, Stewart, Wildasin and Woolbert,
includes 60,377, 275,776, 76,226, 45,334 and 71,194 shares, respectively,
of Common Stock that are issuable upon the exercise of certain stock
options, currently exercisable, granted under the Company's 1983 and 1987
Long-Term Performance Incentive Compensation Programs or 1992 Officer Stock
Incentive Program. With respect to Messrs. Hattox, Howson, Stewart,
Wildasin and Woolbert, includes 37,790, 201,500, 55,820, 33,220 and 39,130
shares, respectively, of Common Stock that were acquired as restricted
stock awards under the Company's 1987 Long-Term Performance Incentive
Compensation Program or 1992 Officer Stock Incentive Program.
(4) With respect to Messrs. Hattox, Howson, Stewart, Wildasin and Woolbert,
includes the equivalent of 832, 780, 881, 1,267 and 909 shares of Common
Stock, respectively, held for such individuals' accounts in The Thrift Plan
for Employees of McDermott Incorporated and Participating Subsidiary and
Affiliated Companies (the "McDermott Thrift Plan") as of April 30, 1995.
As of June 20, 1995, Mr. Woolbert also beneficially owned, through the
McDermott Thrift Plan, the equivalent of 171 shares of McDermott's Series A
$2.20 Cumulative Convertible Preferred Stock ("McDermott Series A") and 164.673
shares of McDermott's Series B $2.60 Cumulative Preferred Stock ("McDermott
Series B"). As of such date, all Directors and executive officers as a group
beneficially owned the equivalent of 175 shares of McDermott Series A and
168.673 shares of McDermott Series B.
As of June 20, 1995, Messrs. Hattox, Howson, Wildasin and Woolbert also
beneficially owned 1,000, 7,490, 8,210 (excluding any shares held in the
McDermott Thrift Plan) and 2,160 shares of J. Ray McDermott's Common Stock,
$.01 par value per share ("JRM Common Stock"), all of which shares, other than
the 1,000 shares owned by Mr. Hattox, were acquired on June 20, 1995 as
restricted stock awards under J. Ray McDermott's Executive Long-Term Incentive
Compensation Plan. As of such date, all Directors and executive officers as a
group beneficially owned 21,690 shares of JRM Common Stock. While certain
executive officers of the Company have been granted options to acquire JRM
Common Stock, none of these options are exercisable within 60 days of June 20,
1995, and under Rule 13d-3 of the Securities Exchange Act of
9
<PAGE>
1934, as amended (the "Exchange Act"), such officers are not deemed to
beneficially own the underlying shares of JRM Common Stock.
Total shares beneficially owned in all cases constituted less than one
percent of the outstanding shares of the applicable security, except that the
1,176,371 shares of Common Stock beneficially owned by all Directors and
executive officers as a group constituted approximately 2.16% of the
outstanding Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to the
Company to beneficially own 5% or more of any class of voting stock of the
Company as of June 20, 1995:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP(1) OF CLASS
- -------------- ------------------------------ ------------ --------
<S> <C> <C> <C>
Common Stock.......... FMR Corp. 5,344,505(2) 9.85%
82 Devonshire Street
Boston, MA 02109-3614
Common Stock.......... Delaware Management Company, Inc. 4,806,230(3) 8.86%
1818 Market Street
Philadelphia, PA 19103
Common Stock.......... Norwest Corporation 4,359,808(4) 8.03%
Sixth and Marquette
Minneapolis, MN 55479-1026
Common Stock.......... Scudder, Stevens & Clark, Inc. 3,563,850(5) 6.57%
Two International Place
Boston, MA 02110-4103
Common Stock.......... Loomis Sayles & Company, L.P. 2,791,525(6) 5.15%
One Financial Center
Boston, MA 02111
</TABLE>
- --------
(1) Sole voting and investment power unless otherwise noted.
(2) As reported on a Schedule 13-G dated February 13, 1995.
(3) As reported on a Schedule 13-G dated February 15, 1995.
(4) As reported on a Schedule 13-G dated January 31, 1995.
(5) As reported on a Schedule 13-G dated April 13, 1995.
(6) As reported on a Schedule 13-G dated February 13, 1995.
10
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
TO OUR STOCKHOLDERS
The Compensation Committee is comprised of four independent, non-employee
directors who have no "interlocking" relationships with the Company. The
Compensation Committee exists to develop executive compensation policies that
support the Company's strategic business objectives and values. The duties of
this Committee include:
. Review and approval of the design of executive compensation programs and all
salary arrangements that Company executives receive;
. Assessment of the effectiveness of the programs in light of compensation
policies;
. Evaluation of executive performance; and
. Assistance in succession planning.
COMPENSATION PHILOSOPHY
The Compensation Committee adheres to an executive compensation philosophy
which supports the Company's business strategies. These strategies are to:
. Generate profits;
. Maximize stockholder value over the long term;
. Strengthen cash flow; and
. Provide products and services of the highest value.
The Compensation Committee's philosophy for executive compensation has not
changed. It is to:
. Emphasize at-risk compensation, while balancing short-term and long-term
compensation to support the Company's business and financial strategic
goals.
. Reflect positive, as well as negative, Company and individual performance in
pay.
. Encourage equity-based compensation to reinforce management's focus on
stockholder value.
. Provide adequate, fair, and competitive pay opportunities which will
attract, retain, and develop executive talent.
Company executives participate in a comprehensive compensation program which
is built around this four-pronged philosophy. The key components of this
program include base salary, annual cash incentives, long-term incentives
(stock options and restricted stock), and benefits.
11
<PAGE>
Each of these components is reviewed by the Compensation Committee as
described previously. To ensure the Company's pay is comparable to median
market practices, competitive market data is collected from multiple external
sources. The data collected is both on an industry-specific basis and an
overall industrial basis. The industry-specific comparison is collected using a
group of companies who tend to have national and international business
operations and similar sales volumes, market capitalizations, employment
levels, and lines of business. The Compensation Committee reviews and approves
the selection of companies used for this purpose and attempts to mirror the
peer group reflected in the performance graph. However, the comparator groups
are not identical because the market data used by the Company is much broader
based than the companies included in the performance graph peer group. This
market information is reviewed annually by the members of the Compensation
Committee. The same market basis is used for assessing all components of
Company executives' pay.
When setting compensation levels, the Compensation Committee considers each
component of an executive's pay. Certain quantitative formulas have been
adopted for the individual compensation plans themselves (e.g., incentive
plans). However, specific weights are not used in setting each component of pay
relative to another. Instead, the Compensation Committee uses a combination of
the results of the performance-based compensation determiners (mathematical
formulas) and discretion, depending on the particular component involved.
Each of the components of pay is discussed in greater detail below.
BASE SALARY
Salaries reflect an individual's level of responsibility, prior experience,
breadth of knowledge, personal contributions, position within the Company's
executive structure, and market pay practices. Overall, salaries are targeted
at the median of market practice.
A qualitative assessment of performance is considered when making annual
adjustments. Many factors are taken into account, including individual
performance, both past and present. The factors used in making this evaluation
may vary by position.
Mr. Howson received a 10 percent increase in base salary for fiscal year 1995
($77,520). This increase was made in connection with the signing of Mr.
Howson's employment agreement and reflects the Compensation Committee's
evaluation of Company financial performance and Mr. Howson's individual
contributions, both short-term and long-term. In addition, his base salary was
reviewed in light of competitive data for chief executive officers for relevant
companies (see earlier discussion regarding type of companies considered). Mr.
Howson's salary is near the median of these peers. Other executives' base pay
increased in recognition of the factors described previously.
ANNUAL INCENTIVES
The Company established a Variable Supplemental Compensation Plan in 1987 to
support its short-term financial focus. In 1994, the Company's Board adopted
the 1994 Variable Supplemental Compensation Plan, effective for fiscal years
beginning after March 31, 1994, which was submitted to, and received the
approval
12
<PAGE>
of, the Company's stockholders. Payments under the plan are intended to comply
with the deductibility requirements set forth under Section 162(m) of the
Internal Revenue Code of 1986 (the "Code"). Through this plan, executives
receive pay linked to, and determined by, annual performance. For fiscal year
1995, the plan was tied to cash flow return on capital. The plan is formula
driven and self-funded, based on a minimum level of cash flow return on capital
to be achieved each year. Executives' opportunities under the plan are
expressed as a targeted percent of base salary. These targets, like base
salary, are set at approximately the median market levels, as indicated by the
group of similar companies. The Compensation Committee believes the goals
associated with target bonus payments are achievable yet require considerable
effort on the part of each executive. Executives only receive payments under
the plan if the minimum level of performance is reached.
Mr. Howson's fiscal year 1995 bonus payment was $294,977, which represents 38
percent of his base salary in effect at the beginning of fiscal year 1995
(versus a 70% target). This reflects the Company's audited performance relative
to cash flow return on capital. Mr. Howson's payout is less than the targeted
amount and was calculated in light of Company performance which exceeded the
minimum required level but did not exceed the previous year's performance.
Other executives' bonuses decreased in comparison with fiscal year 1994 for the
same reasons.
LONG-TERM INCENTIVES
The 1992 Officer Stock Incentive Program provides executives with long-term,
equity-based opportunities. This program provides performance-based
compensation. However, future amendments may be necessary to ensure continued
compliance with Section 162(m) of the Code. Amendments, and stockholders'
approval of amendments, are not necessary at this time due to transition rules
provided by the Internal Revenue Service. Like base salary, the Compensation
Committee considers multiple factors when determining award sizes. Weightings
between the factors (listed below) are informal, not quantitative.
. Various financial performance criteria (which may include returns on capital
and assets, profitability, and stockholder return);
. Level of responsibility;
. Prior experience;
. Historical award data; and
. Market practices among similar companies.
Stock Options. At the Company, stock options are granted at prices equal to
fair market value on the date of grant. Executives do not realize value unless
the stock price rises above the price on the date of grant. This, in turn,
creates value for stockholders (a primary focus at the Company). In addition,
stock options encourage accumulation of stock ownership among executives.
13
<PAGE>
Mr. Howson was granted options to acquire 385,450 shares of Common Stock in
fiscal year 1995. These stock options were granted in two separate awards:
325,000 at a per share exercise price of $25.125 and 60,450 at a per share
exercise price of $25.50. The 325,000 stock options were granted to Mr. Howson
at the signing of his new employment agreement and represent two years of long-
term incentive grants, based on his total annual long-term incentive
opportunity. This grant was made in light of the fact that Mr. Howson will not
receive annual grants of stock options and restricted stock in the last two
years of his employment. Any grants of options will be limited to recognition
of extraordinary achievements. The remaining 60,450 stock options were granted
as determined under the 1992 Officer Stock Incentive Program, in light of
actual performance. Both stock option grants were priced at market value on the
date of grant.
Mr. Howson also received a grant of options to acquire JRM Common Stock in
recognition of the services he renders as Chairman and Chief Executive Officer
of J. Ray McDermott, a publicly traded subsidiary of the Company. The award was
for options to acquire 23,770 shares of JRM Common Stock at a per share
exercise price of $22.625 (market value on the date of grant).
Restricted Stock. Restricted stock is also granted to certain executives to
reinforce the importance of stock ownership and to focus executives on creating
stockholder value. One-half of each grant vests with performance; the other
one-half vests at the end of five years. Performance vesting allows
restrictions to lapse between the third and tenth anniversary of the date of
grant. The specific vesting dates are determined based upon the Company's
average return on capital versus a group of peer companies.
The peer companies are selected by the Compensation Committee based upon
industry relevance and market capitalization, as well as other factors. This
group has remained fairly constant for the past six years, mirroring as closely
as possible the companies used in determining market pay levels. For awards
made in or after fiscal year 1994, the peer group is the same as those
companies represented in the performance graph.
Shares are forfeited in the event of a termination not caused by death,
disability, retirement or a change in control. Executives receive voting and
dividend rights at the time of the grant.
For fiscal year 1995, Mr. Howson received awards of 69,520 restricted shares
of Common Stock. Mr. Howson received 50,000 restricted shares of Common Stock
in connection with the signing of his employment agreement, and an award of
19,520 restricted shares of Common Stock as determined by the 1992 Officer
Stock Incentive Program and actual performance. Mr. Howson is also eligible to
receive shares of restricted stock in 1996. However, under the terms of his new
employment agreement, he will not receive grants of restricted stock in the
last two years of employment. Mr. Howson also received 7,490 restricted shares
of JRM Common Stock for fiscal year 1995 in recognition of the services he
renders as Chairman and Chief Executive Officer of this subsidiary.
14
<PAGE>
CONCLUSION
These programs have been designed to support the Company and the
stockholders, while remaining fair and equitable to the Company's management
team. We monitor these programs and their effectiveness on an ongoing basis;
this responsibility remains a critical part of our charter.
Theodore H. Black, Chairman
John F. Bookout
James A. Hunt
J. Howard Macdonald
15
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total stockholder return
on the Common Stock for the last five fiscal years with the cumulative total
return of the S&P 500 Index and a peer group index, which reflects the
Company's two primary business segments, composed of CBI Industries, Inc.,
Cooper Industries, Inc., Dresser Industries, Fluor Corporation, Foster Wheeler
Corporation, Halliburton Company, Offshore Pipelines, Inc. (through the date of
its merger with J. Ray McDermott), Raytheon Company, Schlumberger Ltd., Stone &
Webster Inc., Trinity Industries, United Dominion Industries, Westinghouse
Electric Corporation, and Zurn Industries, Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
MCDERMOTT INTERNATIONAL, INC; S&P 500; AND PEER GROUP
* Assumes $100 invested on March 31, 1990 in McDermott International, Inc.
common stock; S&P 500; and the Peer Group and the reinvestment of dividends
as they are paid.
<TABLE>
<CAPTION>
3/31/90 3/31/91 3/31/92 3/31/93 3/31/94 3/31/95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
McDermott International,
Inc.................... $100.00 $ 99.76 $ 92.94 $122.67 $ 92.79 $132.02
S&P..................... $100.00 $114.37 $126.94 $146.22 $148.38 $171.44
Peer Group.............. $100.00 $106.39 $ 93.64 $102.43 $100.18 $111.07
</TABLE>
16
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation of the
Company's Chief Executive Officer and four highest paid executive officers
(collectively, the "Named Executive Officers") for 1995, 1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
-------------------------- ----------------------------------
AWARDS
------------------------
SECURITIES
OTHER UNDERLYING PAYOUTS ALL
FISCAL ANNUAL RESTRICTED STOCK LTIP OTHER
NAME PRINCIPAL POSITION YEAR SALARY BONUS COMP. STOCK(2) OPTIONS PAYOUTS COMP.(6)
- ---- ------------------ ------ -------- -------- -------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
R.E. Howson......... Chairman & Chief 1995 $814,301 $294,977 $ 48,630 $1,870,833(3) 385,450(4) $ 0 $27,078
Executive Officer 1994 $729,210 $325,264 $ 41,496 $ 567,025 65,820 $ 0 $29,652
1993 $665,420 $600,279 $ 21,166 $ 522,493 59,410 $ 0 $29,442
B.A. Hattox......... Executive VP & 1995 $326,335 $ 83,440 $ 10,549 $ 199,241 15,870 $ 0 $ 5,424
Chief Financial 1994 $306,325 $ 92,008 $ 5,126 $ 178,756 18,860 $ 0 $27,980(8)
Officer 1993 $285,275 $171,239 $ 5,683 $ 252,512 17,400 $ 0 $53,056(8)
J.J. Stewart........ Executive VP & 1995 $364,995 $ 93,868 $ 10,772 $ 172,358 15,870 $ 0 $ 9,162
Chief Project 1994 $344,615 $119,849 $ 4,487 $ 217,838 24,060 $ 0 $ 9,913
Management 1993 $301,870 $224,724 $ 1,186 $ 301,517 20,770 $ 0 $ 8,382
Officer
J.J. Wildasin....... President & Chief 1995 $364,021 $110,285 $354,564(7) $ 190,883 22,540(5) $ 0 $13,615
Operating Officer, 1994 $333,684 $103,508 $281,427(7) $ 182,919 20,200 $ 0 $13,043
J. Ray McDermott 1993 $253,339 $189,054 $200,181(7) $ 273,611 14,160 $ 0 $10,486
R. E. Woolbert...... Executive VP & 1995 $301,685 $ 76,948 $ 4,335 $ 191,674 14,400(4) $ 0 $ 9,905
Chief Adminis- 1994 $280,085 $ 84,848 $ 13,569 $ 163,262 17,230 $ 0 $10,605
trative Officer 1993 $258,440 $156,441 $ 4,329 $ 152,460 15,750 $ 0 $ 8,861
</TABLE>
- --------
(1) Includes amounts earned in the fiscal year, whether or not deferred.
(2) Restricted stock awards in Common Stock, JRM Common Stock or both, as
applicable, for fiscal year 1995 are valued at the closing price on the
date of grant. All such awards, other than the 50,000 restricted shares of
Common Stock awarded to Mr. Howson under his employment agreement as
described in footnote 3, were made in June 1995. The total number of shares
of Common Stock held as of March 31, 1995 and the aggregate market value at
such date (based upon the closing market price on that date of $27.375 per
share) is as follows: Mr. Howson held 201,430 shares valued at $5,312,716;
Mr. Hattox held 35,760 shares valued at $943,170; Mr. Stewart held 55,800
shares valued at $1,471,725; Mr. Wildasin held 33,220 shares valued at
$876,178; Mr. Woolbert held 39,110 shares valued at $1,031,526. As of March
31, 1995, none of the Named Executive Officers had been awarded, and
therefore, none of them held, any restricted shares of JRM Common Stock.
Dividends are paid on restricted shares at the same
17
<PAGE>
time and at the same rate as dividends paid to stockholders of unrestricted
shares. Grants of restricted stock generally vest fifty percent in five
years with the remaining fifty percent vesting in three to ten years based
on performance. In the event of a change of control of the Company, the
Compensation Committee may cause all restrictions to lapse.
(3) Includes 50,000 restricted shares of Common Stock awarded under his
employment agreement that will vest less than three years from the date of
grant if the Board of Directors approves a successor to Mr. Howson during
such time.
(4) Excludes 23,770 and 3,780 options to purchase JRM Common Stock granted to
Messrs. Howson and Woolbert, respectively.
(5) Represents options to purchase JRM Common Stock; Mr. Wildasin did not
receive options to acquire Common Stock during fiscal year 1995.
(6) Amounts shown for 1995 relate to company matching contributions to the
McDermott Thrift Plan for each of the Named Executive Officers in the
amount of $4,500, and the value of insurance premiums paid by the Company
for Messrs. Howson, Hattox, Stewart, Wildasin and Woolbert in the amounts
of $22,578, $910, $4,662, $9,115 and $5,405, respectively.
(7) Includes commodities, services, housing, utilities, expenses and tax
equalization associated with Mr. Wildasin's international assignment.
(8) Includes $20,000 and $46,000 for the fiscal year 1993 and 1994,
respectively, representing amounts paid to Mr. Hattox as a signing bonus.
18
<PAGE>
OPTION GRANT TABLE
Options generally vest in equal installments of one-third beginning on the
first anniversary of the date of grant through the third anniversary of the
date of grant and expire ten years from the date of grant. In general, vesting
is contingent on continuing employment with the Company. In the event of a
change in control of the Company, the Compensation Committee may accelerate the
exercisability of any outstanding options. The following table provides
information about option grants to the Named Executive Officers during fiscal
year 1995. The Company did not grant any stock appreciation rights to its
executive officers during fiscal year 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(4)
------------------------------------------- --------------------------
NUMBER OF
SECURITIES % OF TOTAL 5% 10%
UNDERLYING OPTIONS ----------- -------------
OPTIONS GRANTED TO EXERCISE EXPIRATION DOLLAR
NAME GRANTED EMPLOYEES(2) PRICE(3) DATE GAINS DOLLAR GAINS
- ---- ---------- ------------ -------- ---------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
R.E. Howson
Common Stock........... 325,000 40.18 $25.125 08/09/04 $ 5,136,625 $ 13,014,625
Common Stock........... 60,450 7.47 25.500 02/06/05 969,425 2,456,714
JRM Common Stock....... 23,770 9.76 22.625 03/14/05 338,366 857,027
B.A. Hattox
Common Stock........... 15,870 1.96 25.500 02/06/05 254,555 644,956
J.J. Stewart
Common Stock........... 15,870 1.96 25.500 02/06/05 254,555 644,956
J.J. Wildasin
JRM Common Stock....... 22,540 9.26 22.625 03/14/05 320,857 812,680
R.E. Woolbert
Common Stock........... 14,400 1.78 25.500 02/06/05 230,976 585,216
JRM Common Stock....... 3,780 1.55 22.625 03/14/05 53,808 136,288
All Stockholders (1)
Common Stock........... -- -- 25.500 -- 868,173,013 2,200,120,870
JRM Common Stock....... -- -- 22.625 -- 549,931,574 1,393,634,581
Named Executive Officers' gains as a % of all stockholder's gains
for
the Company........................................................ .76% .79%
JRM................................................................ .13% .13%
</TABLE>
- --------
(1) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 54,059,598 and 38,649,349 outstanding shares of the
common stock of the Company and JRM, respectively, on March 31, 1995.
19
<PAGE>
(2) Based on 808,930 and 243,530 options granted to all employees of the
Company and JRM, respectively, during the fiscal year ended March 31, 1995.
(3) Fair market value on date of grant.
(4) At a five percent and ten percent annual rate of appreciation, the stock
price would be approximately $41.54 and $66.14 per share of Common Stock,
respectively, and approximately $36.86 and $58.68 per share of JRM Common
Stock, respectively, if the assumed annual rates of stock price
appreciation shown were to be achieved over a ten year option term.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information concerning the exercise of stock
options during fiscal year 1995 by each of the Named Executive Officers and the
value at March 31, 1995 of unexercised options held by such individuals. The
value of unexercised options reflects the increase in market value of Common
Stock and JRM Common Stock from the date of grant through March 31, 1995 (when
the fair market value of Common Stock and JRM Common Stock was $27.1875 and
$22.625, respectively, per share). The value actually realized upon exercise of
the options by the Named Executive Officers will depend on the value of Common
Stock and JRM Common Stock at the time of exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
TOTAL VALUE OF
NUMBER OF TOTAL NUMBER OF UNEXERCISED, IN-THE-MONEY
SHARES UNEXERCISED OPTIONS HELD OPTIONS HELD AT FISCAL
ACQUIRED AT FISCAL YEAR-END YEAR-END
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R.E. Howson
Common Stock........... 0 $ 0 275,776 449,134 $1,560,169 $976,018
JRM Common Stock....... 0 $ 0 0 23,770 $ 0 $103,994
B.A. Hattox
Common Stock........... 0 $ 0 60,377 34,243 $ 180,098 $ 85,585
J.J. Stewart
Common Stock........... 0 $ 0 76,226 38,834 $ 384,548 $100,137
J.J. Wildasin
Common Stock........... 0 $ 0 45,334 18,186 $ 241,769 $ 57,760
JRM Common Stock....... 0 $ 0 0 22,540 $ 0 $ 98,613
R.E. Woolbert
Common Stock........... 0 $ 0 71,194 31,136 $ 432,140 $ 77,851
JRM Common Stock....... 0 $ 0 0 3,780 $ 0 $ 16,538
</TABLE>
20
<PAGE>
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement (the "Agreement") with Mr.
Howson effective as of September 1, 1994, whereby he will continue to serve as
Chairman of the Board and Chief Executive Officer of the Company through August
31, 1998, subject to earlier termination as described below. The Agreement
provides Mr. Howson with an annual base salary of $852,000, subject to increase
by the Compensation Committee in accordance with Company practices based upon
Mr. Howson's performance. In addition, Mr. Howson was granted the right to
purchase 50,000 restricted shares of Common Stock for $1.00 per share and
options to purchase 325,000 shares of Common Stock, both of which will vest at
the earlier of (i) such time as the Board approves a successor to Mr. Howson or
(ii) the expiration of the Agreement. He is also entitled to receive an annual
cash bonus (if any, as determined by the Compensation Committee based upon the
achievement of certain pre-established performance goals) and to participate in
all plans, policies and programs maintained or provided by the Company for its
officers, except that Mr. Howson only will be entitled to receive stock option
and restricted stock grants under the Company's 1992 Officer Stock Incentive
Program for fiscal years 1995 and 1996. The Agreement also provides for the
vesting of all of Mr. Howson's unvested stock options (other than the 325,000
stock options described above) on September 1, 1996, the accelerated vesting of
Mr. Howson's restricted stock grants upon his attainment of age 65 at the
discretion of the Board of Directors, and amendments to the Company's
Supplemental Executive Retirement Plan for purposes of determining Mr. Howson's
retirement benefit under such plan, including increasing Mr. Howson's maximum
benefit thereunder to 73% of his final 3-year average cash compensation (based
upon his highest three years, consecutive or nonconsecutive, of base salary and
bonus during the last ten years of his employment).
The Agreement may be terminated prior to August 31, 1998 under certain
circumstances, including death, disability and voluntary retirement. However,
in the event of termination due to a change in control of the Company or
"excuse by the Board", as defined in the Agreement, Mr. Howson will continue to
receive his annual base salary and other benefits and rights under the
Agreement during the remaining term thereof. In the event of termination by the
Board for reasons other than a change in control or "excuse by the Board" prior
to attainment of age 65, Mr. Howson's severance benefits will be the greater of
the benefits due under the Agreement through age 65 or one year of benefits
under the Agreement; and for such termination after age 65 and prior to the end
of the Agreement's term, Mr. Howson's severance benefits will be the greater of
the remaining benefits due under the Agreement or one additional year of
benefits that he would receive pursuant to the Agreement's terms. Upon such
termination, all shares of restricted stock and options to purchase Common
Stock awarded to Mr. Howson will vest.
Under the Agreement, Mr. Howson may not associate himself with any business
or entity which is in competition with the Company or induce any employee of
the Company to accept employment with any competitor of the Company during the
term of the Agreement, and for the greater of 24 months following the
expiration of the Agreement or any other period during which amounts are paid
to him under the Agreement.
21
<PAGE>
ANNUAL CASH INCENTIVE PLANS
The Company has a Variable Supplemental Compensation Plan based on the
achievement of certain performance standards for managerial and other key
employees, including officers, of the Company and its
consolidated subsidiaries (other than J. Ray McDermott and its subsidiaries).
Likewise, J. Ray McDermott has adopted a Short-Term Incentive Compensation Plan
for its and its subsidiaries' managerial and other key employees, including
officers. Under each plan, the aggregate amount available for award in respect
of the 1996 fiscal year shall equal the sum of 1% of that portion of Cash Flow
for such year as would produce a Cash Flow Return on Capital of no more than
16% plus 6% of Cash Flow in excess of such portion. Cash Flow Return on Capital
is defined as Cash Flow divided by Capital (as those terms are defined in the
plans). Except on a selected basis, no awards will be made in respect of a
fiscal year during which Cash Flow Return on Capital does not equal or exceed
16%. If an award is made during a fiscal year when the Cash Flow Return on
Capital requirement is not achieved, then the award, generally, will be equal
only to one-half of established guideline amounts. Allocations of awards to
eligible employees are made at the discretion of the Compensation Committee,
based upon a percentage of salary. For fiscal year 1996, the Chief Executive
Officer of the Company may receive a maximum award of 70% of his salary under
the Company's plan.
Awards are payable to the recipients within 30 days of the Compensation
Committee's determination, unless deferred by such recipients. Awards may be
deferred until termination of employment other than by retirement or for up to
15 years after retirement. In case of deferral, awards accrue interest,
compounded daily, at the minimum commercial lending rate of a designated bank,
until paid. Each plan is unfunded and no assets will be segregated to secure
payment of awards.
RETIREMENT PLANS
Pension Plans. The Company maintains several funded retirement plans covering
substantially all regular full-time employees, except certain non-resident
alien employees who are not citizens of a European Community country or who do
not earn income in the United States, Canada or the United Kingdom. All
officers who are employees of the Company or certain of its subsidiaries,
including McDermott, are covered under The Retirement Plan for Employees of
McDermott Incorporated (the "McDermott Retirement Plan"). Officers who are
employed by The Babcock & Wilcox Company ("B&W") or certain of its subsidiaries
or affiliates are covered under The Employee Retirement Plan of The Babcock &
Wilcox Company (the "B&W Retirement Plan"). Effective April 1, 1995, officers
who are employed by J. Ray McDermott Holdings, Inc. or certain of its
subsidiaries or affiliates, including J. Ray McDermott, are covered under The
Retirement Plan of Employees of J. Ray McDermott Holdings, Inc. (the "J. Ray
McDermott Retirement Plan"). Employees do not contribute to any of the three
plans and company contributions are determined on an actuarial basis. In order
to comply with the limitations prescribed by the Employee Retirement Income
Security Act of 1974, as amended, pension benefits will be paid directly by the
applicable company or a subsidiary under the terms of the unfunded excess
benefit plans maintained by them (the "Excess Plans") when such benefits are
limited by Section 415(b) or 401(a)(17) of the Code.
The following table shows the annual benefit payable under the McDermott
Retirement Plan and the J. Ray McDermott Retirement Plan at age 65 (the normal
retirement age) to employees retiring in 1995 in
22
<PAGE>
accordance with the lifetime only method of payment and before profit sharing
plan offsets. Benefits are based on the formula of a specified percentage
(dependent on years of service) of average annual basic earnings (exclusive of
bonus and allowances) during the five consecutive years out of the ten years
prior to retirement in which such earnings were highest ("Final Average
Earnings") less a specified percentage of anticipated social security benefits.
Final Average Earnings and credited service under the McDermott Retirement Plan
at December 31, 1994 for Messrs. Howson and Hattox were $659,852 and 23 years
and $290,625 and 4 years, respectively. Effective April 1, 1995, the J. Ray
McDermott Retirement Plan assumed the liabilities attributable to the benefits
accrued under the McDermott Retirement Plan in respect of certain former
employees of the Company, including Mr. Wildasin. Accordingly, as of April 1,
1995 Mr. Wildasin had no entitlement to any benefit from the McDermott
Retirement Plan. As of such date, Mr. Wildasin had Final Average Earnings of
$226,446 and six years of credited service under the J. Ray McDermott
Retirement Plan. Unless elected otherwise by the employee, payment will be made
in the form of a joint and survivor annuity of equivalent actuarial value to
the amount shown below.
MCDERMOTT RETIREMENT PLAN
J. RAY MCDERMOTT RETIREMENT PLAN
<TABLE>
<CAPTION>
FINAL ANNUAL BENEFITS AT AGE 65 FOR YEARS OF SERVICE INDICATED
AVERAGE -------------------------------------------------------------
EARNINGS 10 15 20 25 30 35 40
- -------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000 $14,267 $ 21,400 $ 28,533 $ 36,623 $ 45,885 $ 53,913 $ 61,631
125,000 18,433 27,650 36,867 46,087 57,731 67,821 77,524
150,000 22,600 33,900 45,200 56,500 69,576 81,730 93,417
200,000 30,933 46,400 61,867 77,333 93,266 109,548 125,202
250,000 39,267 58,900 78,533 98,167 117,800 137,433 157,067
300,000 47,600 71,400 95,200 119,000 142,800 166,600 190,400
400,000 64,267 96,400 128,533 160,667 192,800 224,933 257,067
500,000 80,933 121,400 161,867 202,333 242,800 283,267 323,733
550,000 89,267 133,900 178,533 223,167 267,800 312,433 357,067
600,000 97,600 146,400 195,200 244,000 292,800 341,600 390,400
</TABLE>
23
<PAGE>
The following table shows the annual benefit payable under the B&W Retirement
Plan at age 65 (the normal retirement age) to employees retiring in 1995 in
accordance with the lifetime only method of payment. Benefits are based on the
formula of a specified percentage (dependent on the level of wages subject to
social security taxes during the employee's career) of average annual earnings
(inclusive of bonuses) during the five consecutive years out of the ten years
prior to retirement in which such earnings were highest ("B&W Final Average
Earnings"). B&W Final Average Earnings and credited service under the B&W
Retirement Plan at December 31, 1994 for Messrs. Stewart and Woolbert were
$426,345 and 23 years, and $336,886 and 39 years, respectively. Unless elected
otherwise by the employee, payment will be made in the form of a joint and
survivor annuity of equivalent actuarial value to the amount shown below.
BABCOCK & WILCOX RETIREMENT PLAN
<TABLE>
<CAPTION>
B&W
FINAL ANNUAL BENEFITS AT AGE 65 FOR YEARS OF SERVICE INDICATED
AVERAGE -------------------------------------------------------------
EARNINGS 10 15 20 25 30 35 40
- -------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000 $11,855 $ 17,783 $ 23,710 $ 29,638 $ 35,565 $ 41,493 $ 47,420
125,000 14,980 22,470 29,960 37,450 44,940 52,430 59,920
150,000 18,105 27,158 36,210 45,263 54,315 63,368 72,420
200,000 24,355 36,533 48,710 60,888 73,065 85,243 97,420
250,000 30,605 45,908 61,210 76,513 91,815 107,118 122,420
300,000 36,855 55,283 73,710 92,138 110,565 128,993 147,420
400,000 49,355 74,033 98,710 123,388 148,065 172,743 197,420
500,000 61,855 92,783 123,710 154,638 185,565 216,493 247,420
550,000 68,105 102,158 136,210 170,263 204,315 238,368 272,420
600,000 74,355 111,533 148,710 185,888 223,065 260,243 297,420
</TABLE>
Supplemental Executive Retirement Plan. An unfunded supplemental retirement
plan called the Supplemental Executive Retirement Plan (the "SERP") was
established in June 1980 by McDermott and was amended to become a plan of the
Company in September 1989. In March 1995, J. Ray McDermott became a
participating employer in SERP. The SERP covers certain officers of the Company
and other designated companies, including McDermott, J. Ray McDermott and B&W.
Generally, benefits are based upon a specified percentage (determined by age,
years of service and date of initial participation in the SERP) of final 3-year
average cash compensation (salary plus supplemental compensation for the
highest three out of the last ten years of service) or 3-year average cash
compensation prior to SERP scheduled retirement date, whichever is greater.
Except for the benefit payable to Mr. Howson, the maximum benefit shall not
exceed 60-65% (dependent upon date of initial participation in the SERP) of
such 3-year average cash compensation. Under Mr. Howson's employment agreement,
the maximum benefit payable to Mr. Howson is 73% of his final 3-year average
cash compensation as described under "Employment Agreement" above. Payments
under the SERP will be reduced by an amount equal to pension benefits payable
under any other
24
<PAGE>
retirement plan maintained by the Company, any of its subsidiary companies or
any previous employer. A death benefit is also provided under the SERP. Before
giving effect to such reductions, the approximate annual benefit payable under
the SERP to Messrs. Hattox, Howson, Stewart, Wildasin and Woolbert at
retirement age as stated in the SERP is 60%, 73%, 60%, 31.75% and 65%,
respectively, of each such person's final 3-year average cash compensation.
A trust (assets of the trust constitute corporate assets) has been
established which is designed to ensure the payment of benefits arising under
the SERP, the Excess Plans and certain other contracts and arrangements
(collectively, the "Plans") in the event of an effective change in control of
the Company. Although the Company would retain primary responsibility for such
payments, the trust would provide for payments to designated participants, in
the form of lump sum distributions, if certain events occur following an
effective change in control of the Company, including but not limited to
failure by the Company to make such payments and termination of a participant's
employment under certain specified circumstances. In addition, with respect to
benefits which otherwise would have been paid in the form of an annuity, the
trust provides for certain lump sum equalization payments which, when added to
the basic lump sum payments described above, would be sufficient, after payment
of all applicable taxes, to enable each active participant receiving a lump sum
distribution to purchase an annuity which would provide such participant with
the same net after-tax stream of annuity benefits that such participant would
have realized had he retired as of the date of the lump sum distribution and
commenced to receive annuity payments at that time under the terms of the
applicable Plan, based on salary and service factors at the time of the
effective change in control. With respect to designated participants who retire
prior to an effective change in control and who receive a basic lump sum
distribution under the circumstances described above, the trust provides for
similar lump sum equalization payments, based on salary and service factors at
the time of actual retirement.
CERTAIN TRANSACTIONS
In connection with the merger of Offshore Pipelines, Inc. into a merger
subsidiary of J. Ray McDermott, a publicly traded subsidiary of the Company, on
January 31, 1995, J. Ray McDermott paid to Morgan Lewis Githens & Ahn, an
investment banking firm of which John A. Morgan is a partner, an investment
advisory and consulting fee of $500,000.
Mr. Dutt is Chairman of Stratxx Ltd., which provides consulting services to
the Company and its subsidiary and affiliated companies in the field of
strategic resource development and planning. Fees for such services paid to
Stratxx Ltd. by the Company during the fiscal year ended March 31, 1995 were
$60,000.
25
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own 10% or more of the Company's voting
stock, to file reports of ownership and changes in ownership of the Company's
equity securities with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Directors, executive officers and 10% or more holders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no forms were required, the Company
believes that its Directors, executive officers and greater than 10% or more
beneficial owners complied with all Section 16(a) filing requirements during
the most recent fiscal year.
APPROVAL OF
INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING MARCH 31, 1996
(ITEM 2)
Upon the recommendation of the Audit Committee, the Board of Directors has
approved the retention of Ernst & Young LLP ("Ernst & Young") to serve as
independent auditors to audit the accounts of the Company for the fiscal year
ending March 31, 1996. Although not required to do so, the Board of Directors
considers it advisable that such retention be submitted to the stockholders for
their approval. Ernst & Young served as independent auditors of the Company and
its subsidiaries during the fiscal year ended March 31, 1995. During such
fiscal year, Ernst & Young performed audit and tax services for the Company and
its subsidiaries for which they have received or will receive, in the
aggregate, approximately $4,400,000 in fees.
Representatives of Ernst & Young will be present at the Annual Meeting and
will have an opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
The vote of a majority of the outstanding shares of Common Stock represented
in person or by proxy at the meeting or any adjournment or adjournments thereof
is required to approve this proposal. Unless otherwise directed, the persons
named in the enclosed Proxy intend to vote for approval of the retention of
Ernst & Young. If the stockholders do not approve the proposal to retain Ernst
& Young, the Board of Directors will retain other independent auditors. The
Board of Directors recommends that the stockholders vote "FOR" the retention of
Ernst & Young as the Company's independent auditors.
26
<PAGE>
STOCKHOLDERS' PROPOSALS AND OTHER MATTERS
No business other than that set forth in the accompanying Notice of Annual
Meeting of Stockholders is expected to come before the meeting, but should any
other matters requiring a vote arise, including a question of adjourning the
meeting, the persons named as proxies in the enclosed Proxy will vote thereon
according to their judgment in the best interests of the Company. All shares
represented by valid Proxies will be voted in accordance with the choice made
by the stockholder with respect to each specific proposal listed thereon. If a
choice is not made with respect to such proposal, the Proxy will be voted for
(i) the election of Directors as described under "ELECTION OF DIRECTORS" and
(ii) the retention of Ernst & Young as the Company's independent auditors for
the fiscal year ending March 31, 1996.
Proposals by stockholders intended to be presented at the 1996 Annual Meeting
must be received by the Corporate Secretary of the Company no later than March
6, 1996, in order to be qualified for inclusion in the Company's Proxy
Statement and form of proxy for such meeting. Concurrently therewith,
proponents shall provide the Company in writing with his or her name, address,
the number of shares of Common Stock held of record or beneficially, the date
or dates upon which such Common Stock was acquired and documentary support for
a claim of beneficial ownership.
By Order of the Board of Directors,
LAWRENCE R. PURTELL
Secretary
Dated: July 5, 1995
27
<PAGE>
Please mark your 1317
[x] votes as in this
example.
IMPORTANT--PLEASE MARK APPROPRIATE BOXES ONLY IN BLUE OR BLACK INK AS
SHOWN:
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. To approve the [_] [_] [_]
Directors intention of Ernst &
(See reverse) Young LLP as independent
For, exempt vote withheld from auditors for the fiscal
the following nominee(s): year ending March 31,
1996 (the Directors
favor a vote "FOR"):
- ------------------------------
3. Upon such other matters as many properly
come before the meeting.
(Signature(s) should agree with
name(s) on stock certificates as
specified hereon. Executors,
administrators, trustees, etc.,
should indicate when signing.
-----------------------------------
-----------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
McDERMOTT INTERNATIONAL, INC.
Solicited by the Board of Directors
The undersigned stockholder(s) of McDermott International, Inc., a Panama
corporation, hereby appoint R. E. Howson, L. R. Purtell and R. E. Woolbert, and
each of them, attorneys, agents and proxies of the undersigned, with full power
of substitution to each of them to vote all the shares of Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of the
Company for the fiscal year ended March 31, 1995 to be held in the La Salle
Ballroom of the Hotel Inter-Continental, 444 St. Charles Avenue, New Orleans,
Louisiana, on Tuesday, August 8, 1995, and 9:30 a.m. local time and at any
adjournment(s) of such meeting, with all powers which the undersigned would
possess if personally present.
The undersigned acknowledges receipt of the Annual Report for the fiscal year
ended March 31, 1995 and the Notice of Annual Meeting of Stockholders and Proxy
Statement of the Company for the above-mentioned Annual Meeting of Stockholders.
Every properly signed Proxy will be voted in accordance with the specifications
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND IN THE MANNER FAVORED BY THE DIRECTORS AS INDICATED ON
THE REVERSE SIDE.
Election of Directors:
Class I Nominees: Thomas D. Barrow, Philip J. Burguieres, Brock A. Hattox and
John W. Johnstone, Jr.
Class II Nominees: John F. Bookout
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE.
